Empirical Evidence of Network Externality of Thailands Telephone System
by
Pipat Lueprasitsakul
School of Public Administration, National Institute of Development Administration.
Introduction
Telecommunications infrastructure is a crucial element for economic development, especially for developing countries. However, telephone service in developing countries is typically characterized by a supply that does not meet demand. This means that the telephone service may not be available in some areas, or that there may be delays in getting a telephone. In terms of telephone usage, it means that telephone calls may not go through during
peak hours because of congestion. As the Maitland Commission (1984) noted, telecommunication is a missing link in much of the developing world.
During 1980s, the problem of telephone shortage in developing countries had been modestly reduced
because of changes in telecommunications technology and policy. Hudson (1995) found that the average growth of the telephone line capacity per 100 population in developing countries between 1980-1990 was many times higher
than the average growth of their per capita GNP. However, the average level of telephone line capacity per 100 population for the low-income and the lower middle-income economies was relatively low, i.e., 0.5 lines per 100 population and 5 lines per 100 population respectively. Thus, there is still a significant gap in the access to telecommunications between the industrialized and the developing countries.
In the case of Thailand, the provision of domestic telephone service was undertaken by a state-owned
monopoly-the Telephone Organization of Thailand (henceforth, TOT). The enterprise failed to cope with the soaring demand for telephones during the 1980s. The requests for telephone service took many years to fill, and the service was available only in densely populated areas. The government took many measures through a number of National
Economic and Social Development Plans (NESDP) to alleviate the telephone shortage problem. During the 5th plan (1982-1986), meeting the market demand for telephone was already a national policy goal. The level of investment budgeted for network facilities increased four fold. During the 6th plan (1987-1991), the export boom in the late 1980s and the early 1990s pushed the telephone demand up to an unprecedented level. It was apparent that the telephone supply became a bottleneck of economic growth. The National Economic and Social Development Board (1987) proposed that the role of the private sector in national development should be enhanced both in production and in provision of infrastructure of services hitherto provided by the government and that the state should encourage private sector participation in investing and operating public communications services. For example, joint investments, leasing and partial or total takeovers will be allowed. Therefore, during the 7th plan (1992-1996) the government allowed the private sector to participate in telecommunications development through a number of build-transferoperate (BTO) projects.
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