Does Deregulation of Quality Standards in Telecommunications Improve Social Welfare? A Methodological Note

Abstract

One of the main reasons behind the big difference observed in the per capita number of telephones between developed and developing countries is the high capital cost —a scarce resource in LDC's— of expanding telecommunications infrastructure. A reasonable question to raise in this context is the extent to which that high capital cost of investment could be diminished if international quality standards for telecommunications (which most developing countries comply) are relaxed. The present paper investigates on this issue and proposes a tentative methodology to assess the technical quality-capital cost trade-off generated. Such a method, combined with the appropriate technical studies on "physical" feasibility of quality relaxation, could shed some light on a way to increase telecommunication services in developing countries.