Telstra competitors slam Sol's tip to incoming US President Obama

Stephen Withers
Tuesday, 20 January 2009 12:31

Opinion and Analysis

It's interesting the way the term "competition" means different things to different people.

One of the few things I seem to remember from economics lectures is that a competitive market involves substantial numbers of buyers and sellers. The inability of any one player to affect outcomes means prices are set in the market and total utility is maximised.

And it's that maximisation that is the intellectual justification for those who favour free markets. (Unless, of course, an industry is making a loss, in which case it may be a good thing to inject public money. To be fair, pure free marketers talk of "creative destruction" in which resources previously used by a loss-making company are freed up to be redeployed by new or more successful businesses.)

But if there are only a few sellers in a market, you end up with less of the product or service being supplied, and at higher prices - thus reducing the total utility.

Does that sound a bit like the broadband market to you? Telstra does seem to have a tendency to offer lower speeds, smaller quotas and higher prices than other providers.

But then the product isn't uniform, particularly when we're talking about wireless broadband. And if the various sellers aren't actually offering an identical product, how can we talk of competition?

If your knowledge of economics is better than mine, feel free to set me straight in our forum.