Tuesday, January 19, 2010

Monopoly: An Age old Dilemma

This is an article that I recently wrote for banglalink's internal newsletter, "The Roar". It was published in the 4th issue (December 09). People working in banglalink are likely to relate to the article more, but others can enjoy, too.


Monopoly: An Age old Dilemma


The first time I heard about Monopoly was when I got the board game as a birthday gift. I absolutely loved the game; I remember spending long hours buying and selling properties and having lots of fun in the process. However, it wasn’t until I studied micro economics in university that I realized the true meaning of monopolization. That, too, was merely theoretical knowledge involving some graphs and fancy facts. If we consult wikipedia for the definition of monopoly, we can easily figure out that Monopoly is rarely a favorable situation for the consumer:

“A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it”. In summary, having one company providing a particular product or service can’t be beneficial for the mass because the monopoly company will have absolute authority over the pricing and distributing of that particular product or service. However, innovators and or inaugurators are often granted certain number of years to practice a “state approved monopoly” whereby no competitors can enter the market.


Examples? Citycell in Bangladesh—they introduced mobile communication in Bangladesh as a new technology. The earliest CDMA models were big huge and ugly, and bore resemblance with obnoxious weaponry carried by uninvited dark street companions. Still, mobile phones were a symbol of status. It is an urban legend now that merely bringing out a cell phone from the pocket would grant people access to the important places like the secretariat in those times.


That was not too long ago. In less than a decade, things have changed dramatically. GrameenPhone came in with the GSM technology, which lowered down the entry price to around ten thousand taka from the insanely and atrociously expensive Citycell lines that could cost individuals one lac or even more. But GP was not too generous. Still consumers had to pay Tk 6.9 per minute to make a call to his dear and near ones, and fixed line connectivity was very difficult to attain. SIMs would die every 21 days unless the customer paid 300 taka to get a scratch card; regardless of need. There were regional charges, monthly fees, few recharge options—mobile technology was still exclusive to the solvent urban populace.


It was still a monopolistic scenario. The player changed, but the game did not. Citycell struggled and went in to hiatus. Aktel and Sheba kept on fighting for existence. People called it oligopoly, but actually GP was dominating the industry with 62% market share.


Then came banglalink. Sheba was a troubled company, but banglalink quickly turned things around and became the 2nd largest operator of the country in record time. En-route to reaching that landmark, banglalink exercised competitive pressure on GP and took away a large portion of their loyal customer base. Today, with six highly competitive and competent operators, Bangladesh boasts a scenario which can easily be compared with an economics book definition of perfect competition. The industry dynamics is now far, far away from being a monopoly or even an oligopoly. Consumers are highly benefited from the extremely low call rates. India’s “so called” low rates have been proven highly deceitful, while in Bangladesh if an operator advertises Tk 0.25/min, it is truly Tk 0.25/minute, plus government imposed value added tax. There is no other hidden cost whatsoever.

We can call this an industry evolution and revolution for the consumers.


While the telecom business is still growing, the organizations are also evolving internally. We, the tigers and tigresses of banglalink have also experienced a revolution. Anyone who has recently visited the ground floor cafeteria has enjoyed his or her meal and could clearly feel the traces of stiff competition. Like any other Bangladeshi, I am sure none of us misses the British colonial age and the old aristocratic ways.

Monopoly is never good. Never.