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Re: challenge to Mr. Vijay....



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[Topics under debate]: GOOD GOVERNANCE
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> Charu wrote:
>
> > In theory, because the private sector is driven by profit, and the
> > conventional wisdom is that with the low densities phone subscribers
in rural
> > areas, there is not much profit to be made in bringing telecom to
rural areas,
> > so private companies won't do it.
> >
>
>     If there is not much profit to be made in the rural areas then the
private companies will die competing for the consumer's money and that
is how I want them to perish.  This is better than the DoT killing them
with high license fees and pocketing that money!
>
> >
> > This theory may or may not be wrong. In a parallel example of the
> > pre-divestiture [monopoly] bell phone system in the US, for about 70
years,
> > bell, assuming that long distance was used primarily by business,
kept long
> > distance rates high and used the profits to subsidise local [home]
phone
> > service. If rates were kept at a level more reflective of the actual
cost of
> > the service, would the phone user base have grown to the point it
did where
> > they would then use long distance in volumes high enough to cause
the
> > consequent drops in the cost of long distance service? I think it is
debatable
> > either way. The point is that non-free market solutions have in the
past had
> > varying degrees of success in the area of telecomm.
> >
>
>     What you are explaining here is a classical model for
cross-subsidization.  It can also be shown that when companies are
forced to compete they improve upon
> technology over time and thus they would drive down the cost of
infrastructure by applying these new technologies.  The cost savings for
the consumer in the long run
> is enormous because unlike in a monopoly situation you are improving
both quantity and quality.  In a monopoly system there is no drive to
improve quality through the
> application of new technologies and therefore you are stuck with
cross-subsidization.
>
> >
> > In practice, the long tradition of incompetence and corruption in
goi
> > bureacracies does not inspire confidence in the likelihood that they
will
> > deliver what they promise.
> >
>
>     And hence there should be a mechanism to check this "corrupt"
constant of the human equation.  That mechanism is known as
competition.  Because if you give me less
> than what my "money is worth", over time I will choose another
supplier who is less corrupt, thanks to competition.  Hence, in the
presence of competition corruption
> will decline and quality will improve over time - so much for having
to believe in the words of a bureaucrats.
>
> Sincerely,
> Vamsi M.


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