Writing the rule book

The row between Bahrain's Telecoms Regulatory Authority and Batelco highlights one of the main challenges facing the telecoms sector in the Gulf - the need to balance free competition with competitiveness - allowing telecoms operators to operate in a genuinely competitive way, while ensuring that the ex-monopoly, state-owned operators don't have a chokehold on the markets.

The region has seen a huge amount of liberalization in the telecoms sector in recent years, or rather, a lot of new licences going up for grabs, but many of the new operators in both voice and data services have yet to make much of a mark against the incumbent operators. Some of the new operators that have large-scale, usually local backing seem to be better positioned to fight for market share, but for many of the smaller ISPs, even getting out of single-digit market share looks difficult.

This is where telecoms regulators need to take a firm stance and to be absolutely clear about how their role in all aspects of the industry, from tariffs to network sharing agreements. The Gulf countries are in a unique situation of being mostly very small markets which are hungry for services and with high rates of mobile penetration coupled with some of the most expensive tariffs in the world. The state-run monopolies have been able to set charges as they liked, and despite often patchy service, particularly for data, the consumers have had no choice but to pay up. Now more competition, consumers have every right to expect prices to fall accordingly, or at least for services and choice to improve.

For the record, while I think that operators in mature markets should be able to set their own tariffs, Batelco's advertising seemed closer to a political attack advert than a service launch - complaining that it would be able to offer the hungry public all these great services if only the TRA would let it. Given how juicy the service bundle looked - unlimited free local calls, 70% off international calls and so on - such a package would likely flatten a smaller competitor and raises questions about how any operator could commercially afford to make such an offer.

That said, the regulators should be setting the rules, not the prices. It would be a lot better to have free, fair competition to bring pricing into line with the rest of the world than have it dictated by state-appointed regulators. Healthy competition will benefit the consumer, and help drive economic development, and may well teach some useful lessons to those operators who are so throwing so money at launching in other countries - woe betide they take the bloated inefficiencies of the old style monopolies and inflict them on less developed nations.

Regulators in the Gulf require a deft touch to guide this market to maturity, and to ensure that not only do new operators have a fair chance to set up profitable operations in their own right, but also to ensure that proper principals of competition are introduced to the markets. Tariff controls may be necessary for now, but they have to be replaced with rules and oversight to let the market decide - all the while keeping an eye out that rival telecoms operators aren't getting too cosy - as Adam Smith put it: "People of the same trade seldom meet together... but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

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