Discussion Papers

Ingo Vogelsang

Zur Privatisierung von Telefongesellschaften
Nr. 101 / November 1992

Summary

Three years ago Germany enacted a First Postal Reform which included a separation of regulatory functions from the entrepreneurial functions of the German PTT and an organizational separation of the three sectors telecommunications (DBP Telekom), postal services and banking. Now a Second Postal Reform is hotly debated. This time the Government's intention is to convert the telecommunications sector into a private-law company and subsequently sell part of its shares to the public. The current paper wants to make a nontechnical economic contnbution to this discussion. The author argues, that both institutional economic theory and measurable evidence from privatization experience abroad suggest that such a Second Postal Reform is likely to improve welfare of all relevant groups affected, in particular consumers, the state and the employees of the DBP Telekom.

The economic theory of institutions has elaborated for state-owned enterprises with public-law status that the state is incabable of reliably setting sufficient incentives for productive efficiency and market-oriented behavior. In addition, the state cannot guarantee that it will abstain from intervening in the current and longrun affairs of the DBP Telekom whenever current political issues and longrun specific interests demand such an intervention. All this burdens the domestic and international competitiveness of the DBP Telekom.

The example of British Telecom's privatization shows how reorganization and privatization of a telephone company can be practically achieved and what the ingredients of success for such a policy are. These successes are backed by a number of other privatization case studies recently undertaken by the World Bank.

As a consequence of the current analysis the risks of the Second Postal Reform appear to be small while the resulting potential benefits are large. In contrast, the risks from maintaining the status quo are deemed large and the potential benefits small.

Only German language version available.

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