By Charles T.M.J. Dube

SERVICE providers for data and telephone services were becoming innovative in their marketing.
They were coming up with a lot of marketing and promotional packages which were making the consumer a major beneficiary as the charges were becoming very affordable and comparable to other parts of the world.
As a businessman, I was finding it easy to do my business online.
And yet within the last two weeks, the Postal and Telecommunications Regulatory Authority of Zimbabwe (PORTRAZ) descended on network providers, ordering them to stop these promotional packages whose net effect was to reduce charges for the consumer.
The question is, to whose protection or benefit are they so regulating?
Traditionally and on paper, regulatory agencies come in to regulate to protect the public interest, due to market failure.
Market failure emanates from imperfect competition and it is assumed a state actor will be able to intervene to correct market failures emanating from asymmetric information flows, it being taken for granted that the market itself is not capable of self-correcting.
Thus, the regulatory authority produces economic efficiency into the equations as it will be able to superimpose economies of scale such as PORTRAZ has been trying to do through the sharing of infrastructure.
Of course, it should be borne in mind that such regulation does not just happen willy-nilly, but is at times the subject of protracted behind-the-scenes lobbying and jockeying.
And yet since the 1960s, people have begun to question this holy-hand notion to regulatory intervention coming up with different motives as driving forces.
The ‘capture’ theory contends regulation comes in to serve interests of the regulated.
In the oil industry, for instance, where I once worked, the energy authorities came up with a cost-plus pricing formula.
This, in effect, provided protection against market price fluctuations.
In the capture theory, the regulator comes in to protect the interests of the regulated.
This derives from the industry’s control of information, the falls from the rich man’s table, due to repeated interactions and career opportunities for occupational regulations.
In the case of occupation-based regulators, a regulatory authority supposedly intended to assure quality of the services ends up being captured by the same profession to achieve benefits for those who are already in it through entry restrictions.
Occupation-based regulatory authorities, some of which are profession-driven, are all familiar territory and I need not say more.
The regulatory authority thus ends up coming in to protect the interests of the clients through subsidies, entry restrictions or tariffs, import and substitute restrictions and/or price controls.
The Chicago school further suggests the industry itself might be instrumental in creating a regulatory regime primarily designed for its own benefit.
The industry makes this possible through funding politicians and mobilising for their votes.
There will always be conflicting interests between consumers lobbying for regulation of monopolistic industries, while firms will be lobbying for regulation of competitive industries.
Accordingly, the regulatory frame gets reduced to rent-seeking behaviour.
Too much of nit-picking your brains and now back to our story, but perhaps by way of getting back to Ottawa where I once sojourned for some years.
There, Bell Canada connected me to a telephone and never charged me for local calls, which was good enough for me as a student as I could remain a phone call away from fellow students, especially on Thursday nights when all econometrics students went to bed at 6 am.
Friday, they would be working on some hard-crack assignment to resume lectures and handover the assignment at 9am. ( No wonder some international organisations have come up with this requirement that no jobs for those without at least a Masters’ degree, it is all for the tortures of graduate school, and in itself, a form of regulation to self-protect).
Bell Canada made its money from long-distance calls and other telecoms side-facilities, facilitating free local calls as a service to the community.
They understood the concept of marginal cost-pricing instead of the cost-plus concept.
The thing is, our network providers have sunk fixed costs in establishing their networks.
Whether people phone or use more data, their costs will not change.
The higher the usage of their networks, the lower the incremental costs with increased marginal revenue.
This is commonsense which is not too common, particularly to our local bureaucrats and businessmen attuned to super profits.
Whether by accident or design, the service providers had discovered they could make more money through coming up with various promotional packages.
It was good for them and also good for the consumer and for the Zimbabwe Revenue Authority (ZIMRA).
Somewhat, the competition became too hot and do not ask me why PORTRAZ intervened.
Like I have contended, something invariably happens behind the scenes.
One thing for sure though is that it was for the benefit of some or all the service providers and designed to protect somebody from competition, but albeit at a cost to ZIMRA and the consumer.
I do not know about others, but as for me, my contribution to the networks’ revenue base for the last few days has gone down.
What then are we saying?
We are saying that regulation is invariably for the benefit of the regulated and provides protection to defined interest groupings, even though on paper it is for the protection of the public interest.
Be that as it might be, it is important that in so regulating, the public interest be closely interrogated. A case in point could be the recent Statutory Instrument 64.
It goes without saying that it is for the protection of local producers.
And yet we must understand just as has been aptly put, that each time we import, we export jobs.
We lose out on all the multiplier effects that go with local spending and value-addition to our local produce and the enabling and capacitating that the circulating dollar does to our economy. (Those interested in more readings on this subject can check out the works of Posner, Stigler den Hertog, Landes, Breton, Gavin Wright, inter alia).
Charles T.M.J. Dube is a development economist with interests in Policy Studies and International Development.