The Russian Telecommunications Experience: a Positive Outcome of the Competitive Order in the Industry

The assumption that the telecommunications industry has natural monopoly characteristics dominated industrial policy during the twentieth century, supporting the monopolistic structure of telecommunications markets all across the world, and still prevails in many views on the economy of this field. The high level of concentration of telecommunications markets is often considered as a natural way of its development and some claim that this is a necessary condition for innovations in the industry. Meanwhile, the evolution of telecommunications in Russia after the collapse of the Soviet Union has shown quite the opposite. The industry in the country was able to demonstrate a relatively low level of market concentration, at least in some of the areas, to provide a high quality and a large variety of telecommunications services at significantly lower prices, in comparison with western countries, and shows one of the best indicators of network development in the world. While the Russian case poses quandaries for mainstream theories, the phenomenon fits the view of the Austrian school at the market process and exposes the benefits that the competitive order can bring to society.