The Impact of Privatization of Fixed-line Telecommunications Operators on Network Expansion, Tariffs, and Efficiency -empirical Evidence on Some Worldwide Differences *

The aim of this paper is to empirically highlight some important worldwide differences in the impact of privatization of the fixed-line telecommunications operator on network expansion, tariffs, and efficiency during the 1985-2007 period for a large panel of countries. The countries considered are first regrouped into OECD and non-OECD countries. Then, the non-OECD countries are classified into Latin American and The Caribbean countries and African countries. Finally, the African countries are disaggregated into resource rich, resource scarce coastal, and resource scarce landlocked countries. We find no perceptible effects on network expansion both in the OECD and the non-OECD groups. Privatization has a significant effect on labor efficiency in the OECD countries while in the non-OECD countries it is found to have a significant positive effect on tariffs. In Latin America and The Caribbean and in African resource rich and resource scarce coastal countries, privatization is associated with increases in tariffs that have not translated into network expansion. In Africa resource scarce landlocked countries, there is neither an impact on network deployment nor on prices. Moreover, while privatization has positively affected labor efficiency in Latin America and The Caribbean and African resource scarce coastal countries, the relationship is negative in African resource rich and resource scarce landlocked countries. As to the impact of privatization of the fixed-service on the mobile sector, in African resource rich and resource scarce coastal countries, privatization is strongly associated with higher output in cellular penetration. In contrast, in Latin America and The Caribbean and African resource scarce landlocked countries, privatization and cellular deployment have a negative relationship. December 2009 (Preliminary version, please do not cite without permission of the authors) The views expressed in this paper reflect only the opinions of the authors and not necessarily those of their institutions. The analysis presented here is based on a database that covers the period 1985-2008 and is an extension of some work that has provided the background material used by the authors to contribute to the African Economic Outlook (AEO), 2009 on " Innovation and Information and Communication Technology in Africa " edited by the The African Development Bank, The Development Centre of the OCDE, and The United Nations Economic Commission for Africa. The authors thank the editors of the 2009 AEO for comments on the preliminary work that was based on a 1985-1999 data sample.