Consumers of telecoms in Bahrain are better off by 74 Million Dinars in 2014 compared with 2008

Mobilk - The Telecommunications Regulatory Authority (“TRA”) released an independent report titled “Consumer Surplus and the Impact of Competition for Telecommunications Services in Bahrain” that was prepared by the expert economic consultancy Berkley Research Group (“BRG”). The report presents BRG’s estimate of the change in consumers’ valuation of mobile and fixed broadband services between 2008 and 2014, as well as an analysis of the factors that are most likely to have impacted this valuation.  

One of BRG’s key findings is that consumers of mobile and fixed broadband services in the Kingdom of Bahrain were at least BD74 Million better-off in 2014 than they were in 2008.  The study confirms the effectiveness of policies and regulatory actions that have been taken to stimulate competition in the sector, which resulted in a significant price reduction for mobile and fixed broadband services during the period of the study.  Moreover, it realizes the achievement of TRA’s mission of developing a competition led market for the provision of innovative communications services, available to all.

According to the study, consumer saving was achieved as a result of the competitive environment shaped by regulatory and legislative developments in the Kingdom of Bahrain’s telecommunications sector between 2008 and 2014, which led to a significant prices reduction of telecommunications services as well as providing variety and quality services.

These developments are in support of Bahrain’s Economic Vision 2030, which launched in 2008 in accordance with the directives of His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince, First Deputy Prime Minister and Chairman of the EDB. TRA has been keen to adhere to the fundamental principles upon which the economic vision of sustainability, competitiveness and fairness in organizational performance and achieve the strategic objectives of Bahrain economic vision.

 

TRA’s General Director, Mr. Mohamed Bubashait noted that, “Measurement of consumer surplus is essential for telecommunications regulators in this sector around the world, as they mainly aim to design and implement regulatory policies that increase consumer saving while promoting investment in new and innovative telecommunications services.”

Mr. Bubashait added, “We are continuing to implement regulatory measures that promote effective competition in the telecommunications sector and we will endeavor to achieve TRA’s vision of creating a communications environment that enriches the social and commercial fabric of the Kingdom, and transform Bahrain into a hub for local and foreign investment.”

Change in consumers’ valuation of mobile and fixed broadband services is calculated based on “consumer surplus”, which is a standard measure used by economists to quantify the difference between a consumer’s valuation of services and its current price. 

The analysis study shows that the total estimated consumer surplus for mobile services and fixed broadband services was BD133 Million in 2008 and BD207 Million in 2014, which is an increase in consumer surplus of BD74 Million; demonstrating that the regulatory framework governing the telecommunications sector at that time was on the right track. 

The study’s findings emphasizes the importance of competition. It suggests that prices could increase by 10% if there were only two mobile operators. Furthermore, BRG’s analysis indicates that if there was only one mobile operator and no regulation, then there would be a loss of about ½ to 2/3rds of consumer surplus, which means that consumers would be significantly worse off.

The study also emphasizes the greatest benefit for consumers in the long-run comes from investment in new services and technologies. Therefore, it is important for regulatory policies and measures to maintain operators’ incentives to invest in new services and technologies.

The approach to estimating the consumer surplus for mobile services and the fixed broadband market in 2008 and 2014 based on a methodology that resulted in conservative estimates. Their estimated consumer surplus for mobile services was BD128 Million in 2008 and BD197 Million in 2014, which is an increase of BD64 Million. In addition, their estimated consumer surplus for the fixed broadband market was BD5 Million in 2008 and BD15 Million in 2014, which is an increase of BD10 Million. 

It is worth mentioning that Bahrain has acquired leading rankings at the regional and global level in the telecommunications sector indicators, according to reports issued by international organizations such as ITU, the World Bank and the United Nations, which is further prove the progression provided by the regulatory environment in the Kingdom.