The paper 'Effects of Government Policies on Profitability of Telecommunications Companies in Australia' is a great example of a Macro and Microeconomics Case Study. Government policies play an important role in influencing the performance of businesses. The frameworks and rules established by governments are aimed at ensuring that businesses compete effectively with each other. According to Trehan and Trehan (2010), government policies can create both favorable and unfavorable conditions for businesses. Furthermore, the policies can encourage investments and at the same time discourage foreign and local competitions. Policies provide an opportunity for governments to intervene and influence business activities in order to protect and promote local markets and this plays an important role in increasing profits.
Support policies like tax incentives, preferential loans, subsidies, and government contracts facilitate the development of domestic companies, and this assists in improving the economy of a country. The policies make sure that businesses provide their customers with efficient services thereby protecting them from exploitation. Therefore, government policies are essential in regulating the operations of businesses. This paper is going to explore the effects of government policies on the profitability of telecommunication companies in Australia.
The paper will also determine the extent to which price regulation, customer protection, and licensing policies affect the profitability of telecommunication companies in Australia. Additionally, the paper will explore the relationship between these policies. Price Regulation Policies According to Troshani and Hill (2008), price control policies are aimed at eliminating predatory pricing. This ensures that the prices are more satisfactory to the customers and at the same time, the policies make sure that the telecommunication companies obtain a guaranteed profit level.
The operators are thus forced to improve their efficiencies and processes in order to attract more customers hence retain their profit levels. Campbell (2007) affirms that the price control policies in Australia are aimed at preventing telecommunication companies from taking advantage of their market power. The policies are focused on promoting growth and fair competition in the communications industry. Brown, Hossain, and Nguyen (2004) assert that Price control policies are key factors that characterize telecommunication companies in Australia. According to their studies, price controls are aimed at protecting customers against monopolies as well as to promote equitable competitions.
Moreover, the regulations are aimed at encouraging companies to achieve efficiencies in their operations. Price control policies can lead to an improvement in the society’ s general welfare and reduce the extra profits gained by telecommunication companies (Block, 1995). Bourreau and Dogan (2006) note that price control policies alter Australian telecommunications industry profits. Price regulations are set with the aim of encouraging companies to come up with innovative ways of generating profits. Furthermore, the policies have been established in order to ensure that the companies attain maximum market growth.
However, the policies create imperfections in the telecommunications industry and this has negative effects on the industry profits. Kiessling and Blondeel (2010) note that the objective of price regulation policies in the telecommunication industry is to increase allocative efficiency so as to prevent excessive prices which might be set by dominant operators. In addition, price regulation policies promote increased technical efficiency and this leads to a restructuring of local and long-distance tariffs. According to Albarran, Olmsted, and Wirth (2005), price control policies assist in making sure that tariff prices reflect the cost of providing telecommunication service hence this prevents inefficient entry in relation to the long-distance market and at the same time, it places a barrier to the industry ability to generate huge profits.
Gentzoglanis (2010) states that telecommunication retail price policies can create investment problems as firms may find it difficult to generate sufficient returns. The policies create difficulties for telecommunication companies towards earning excessive revenues. According to Trewin (2006), retail price control is aimed at ensuring that no telecommunication company misuses its market power to exploit its customers.
This ensures that investors in the telecommunications industry earn justifiable returns from their investments. However, the policies can lead to the development of inefficient markets making companies generate insufficient revenues and this can make them collapse.
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