Kathmandu :

It is rare that any government, on its own initiative, tries to block competition. It is the businessmen who lobby the government for protection.

Take the case of cellphone operators in India. With the entry of private operators, rates have come crashing down.

All the government did was to permit competition. The various markets in India were earlier served by two operators who were initially licensed to provide the service. The rates did come down, but the big slide occurred when entry was permitted to even more operators.

As long as the market is served by two companies, generally both companies arrive at similar rates and try not to compete on prices. Consider how RNAC and IA fixed their ticket prices on joint routes. Fares were identical.

However, the picture radically alters when a third party comes in. Prices spiral down. This benefits consumers by saving them money, and more importantly allows new customers, who could not earlier afford the service, to also enjoy it.

This is what happened with cellphones in India. As rates plunged, people who could not earlier afford phones, now could. This is what has made India and China the fastest growing phone markets in the world.

But, in India, the story does not end here. After everyone thought the rates had hit rock bottom, Reliance Infocomm came into the market and knocked the bottom out.

Rates, which were lower than in Nepal, and which could not possibly fall any further, fell by over 70 per cent as the Indians happily watched the ‘cell fights’. As could be expected, the existing cell operators ran to government regulators and the courts in a, up to now, futile attempt to stop Reliance.

Such is the awesome power of competition to improve our standard of living be it by reducing prices or improving the quality of service. That is why Americans are ahead of us. They permitted competition before we did so.

Competition gives the American consumer the cheapest fast food, high quality restaurants, the lowest airfares in the world, phone calls which are approaching zero and an array of consumer goods that is the world’s envy.

As far back as 1991, the International Herald Tribune wrote about the effects of competition amongst airlines in the US:

• the number of airlines competing on typical routes has risen by one-third under deregulation. That is why fares are now 20 per cent below what the government would have set under its old formula.

• deregulation has mostly done just what it was supposed to do, giving most air travellers more flights, more convenient schedules and substantially lower fares.

• there are more convenient options for nearly every traveller.

• the Brookings scholars conclude that travellers are better off, to the tune of tens of billions a year in lower fares and added convenience.

Where competition is permitted, people in Nepal too have seen its benefits. Airlines on domestic routes provide convenient schedules to travellers and are forever trying to lure business away from each other. Compare this situation with RNAC’s monopoly days when people had to queue-up overnight for tickets.

Another example is this newspaper. With the establishment of The Himalayan Times came competition for the existing papers. A quality newspaper was made available at Rs 2 to the readers — half of what others charged.

Moreover The Himalayan Times offered job opportunities and higher salaries to Nepali journalists, besides providing additional tax revenues to the government.

A gain for all the parties involved. So who cried foul? The existing newspapers who quite understandably, did not like this competition. As all of us know, even they have had to improve their standard. Would they have done so in the absence of competition?

Should we be taken in by the self-serving arguments of businessmen who regard government intervention as just another way to smother competition? No. We just have to shrug off their concerns as normal self-interest. Why should it be otherwise?

We have got a taste of the power of competition and we like it. Let us ask our government to allow more of it for the benefit of all of us.

(The writer can be contacted at: everest@mos.com.np)