Tag Archives: telecom carrier

Facebook Is Doing Good From Social Welfare Aspect (Blog 21)

While internet giants like Facebook Inc. and Google Inc. states that they are trying to provide convenience and connecting billions more people to the internet, telecom operators such as Digicel Group view them as a problem. In WSJ article Is Facebook Friend or Foe for Telecom Operators, the authors put the conflict between internet giants and telecom operators on the table. On the one hand, those Internet giants (Facebook Inc. and Google Inc. specially ) are taking advantage and profiting handsomely at telecom operators’ expense, as telecom operators spend huge amount of money building infrastructure but internet companies offer apps that let users circumvent network operators make phone calls and send text messages free. On the other hand, Facebook says it can help get more people online without additional construction which benefit telecom operators.

I have two concerns from this article: First, what a role should telecom carriers play? Should it be a public server whose main goal is providing convenience for the public, or should it a be a profit-drive company. Second, What effects does those internet giants have.

For the first question, Well, though the fact is that in the U.S most telecom operators are private-owned companies whose goal is pursuing profit, I personally think that the primary job of telecom carriers should be providing service to the public instead of simply making money. In fact most countries do put providing service to public as the first job for their telecom carriers. If we look up the list of telecom operators, we will find out that actually many telecom carriers are government-owned(at least government hold most shares) or public owned (public stock) entities all over the world, such as China Mobile (primarily owned by Chinese government), Bridge Alliance(primarily owned by Singapore government) and MTN Group(public stock and government employees pension fund in South Africa). The reason of having government-owned telecom carriers is just like public transportation system: the cost of building networks or frustrations is so high that few private-company can afford it, thus government subsidies to run the system for the public welfare. Even in the U.S where most telecom frustrations are built and run by private companies, those telecom carriers are still state-regulated monopolies, which promise the maximum welfare of users. By the way, the recently net neutrality regulation is another policy to weaken telecom carriers’ power to keep users’ benefits.

After clarifying that the main goal of telecom operators should be providing convenience for public, we could say that Facebook Inc. is doing a good thing, though at the cost of telecom carriers’ profit. One way to measure social welfare is to sum up all the utility surplus. For example: I want to pay 10 dollars to a telecom carrier per month to buy a 200 minutes phone call package, now I only need to pay 5 dollars to the telecom carrier per month for a data traffic package, through the traffic I could download a Facebook app from internet which allow me to make 200 mins phone call free. In this way, I gain 5 dollars utility surplus that contribute to the social welfare. Same thing applies to millions of users. Thus the social welfare increases enormously. On the other hand, though the supply side(i.e: telecom carriers) lose 5 dollars utility surplus on its every clients, (yes, which makes the total social welfare increase zero), additional clients are attracted by those apps. Since Telecom carriers get more clients, what they lose in utility surplus is actually less than 5 dollars per clients. Thus from social welfare aspect, those internet giants are doing good.