Overthe last two decades, the information technology and communications industrieshave seen a tremendous boom fuelled by technological advances. The high returnsthat these industries offer have attracted the attention of the businessessector, which resulted in substantial investment.
However this attention wasnot confined to the business world alone. Economist also interested in learningmore about information technology and telecommunications and their effect oneconomic productivity and growth. Telecommunicationsis the exchange of information in electronic and electricity over longdistances. The composition of the complete telecommunications made for two ormore stations that are in transmitter and receiver devices. Thearrangement with transmitter and receiver has been called transceiver.
It mayalso be used in many telecommunication stations. Telecommunication device areincluding telephone, telegraph, radio, optical fiber, satellite and Internetand also known as telecom. Telecommunications is a universal term used for avariety of information transmission technology such as cell phones, land-lineand broadcast networks. In telecommunications, data is transmitted in the formof an electrical signal known as a carrier wave, modulated into analog ordigital signals to transmit information. Analog modulation such as that used in radio broadcastingis an amplitude modulation. Digital modulation is just an updated form of this.
Thesimplest form of telecommunications takes place between two stations, but it iscommon for multiple transmitting and receiving stations to exchange data amongthem. Telecommunication industry has probably the highest level of directnetwork effects. Direct externalities are related to the number of consumersusing the same service, and indirect externalities stem from the availabilityof supporting services. Apart from network externalities, in telecommunicationcall externalities also exist when user of one network benefits from receivingfree calls from users of other networks. Aworld without telecommunications would not be possible; society has made itselfso used to this type of technology that the world would end up collapsing if itwas taken away. The reason for the tremendous growth of telecommunications isbecause as people and cities throughout the planet grew a better way to relaymessages between one another are needed. The greatest technological advancementthat could have possibly got from this is the creation of phone and theInternet. The phone was a major piece of communication, whereby you couldinstantly communicate with another person that was on the other side of theworld.
Almost every household now has at least one phone. Thetelecommunications services sector slots into the national economy through thefinancial flows it sets up with other economic players. The macroeconomic rolecan be assessed by demand it generates from the rest of the economy. Inaddition, the global effects of this demand for the goods and services neededfor current operation and extension of the telecommunications network. There isthe impact of the spending patterns of the economic players receiving thetelecommunications service especially for the increases in purchasing powerthat everyone enjoys following tariff reductions.
Theexistence of a powerful telecommunications network helps the development of theeconomy. Thecontribution of telecommunications infrastructure to the country’s economicgrowth can be seen from many aspects as a tool for delivering informationefficiently, lower transaction costs, create network externalities, increaseefficiency, productivity living standards and create job opportunities. Telecommunicationinfrastructure can reduce transaction costs and enable more information to be obtainedfaster. There are two effects on low transaction costs resulting frominfrastructure modern telecommunications. Firstly,organizationscan enhance implementation activities and administration more quickly and effectively.Because the information presented in a timely manner can avoid theproblem of information uncertainty and help the organization make decisions anddirectly improve organizational productivity. Secondis the importance of modern telecommunications infrastructure in rural areas. Thedevelopment of telecommunications infrastructure in rural areas could lower thetransaction costs and increase market efficiency and growth in the agriculturesector.
This is because agricultural products can be marketed out of the ruralareas and the agricultural goods market becomes wider. The buyer and seller cancommunicate easily no matter where they are using the moderntelecommunications. Apart from reducing transaction costs indelivering information fast and efficient, modern telecommunicationsinfrastructure can also replace production input functions such as labor in theproduction process. The rapid development of telecommunicationsinfrastructure technology has changed universal life, especially after theexistence of a mobile phone.
Otherthan that, the criteria that make telecommunication infrastructure differentfrom other infrastructure are network externalities. Networkexternalities exist when more and more users enjoy the benefits. Thismeans usage of telephone service by a user gives a benefit to other users with atelephone line. Therefore, telecommunications infrastructure can indirectlygenerate economic growth as a result of network externalities. The investmentgenerated in telecommunications industry is not only for benefited butalso sparked the overwhelming effect of the services and administration ofother sectors such as banking, finance, manufacturing and agriculture. Therefore,if a country has a broad telecommunications network, it will give a big impacton economic growth. However, the contribution of telecommunicationsinfrastructure development in improving the economic growth of a countrydepends on the critical mass of the telecommunications infrastructure.
Thismeans that prior to the development of telecommunication infrastructure of thecountry reached the level of critical mass. In most countries, the firsthistorical figure and developed telecommunication infrastructure isconcentrated in urban areas and ports. This is because both areas have a rapideconomic activity.
Afterthat, the development of telecommunication infrastructure is needed tofacilitate administrative matters, support economic activities and increaseefficiency and productivity. However, the development oftelecommunications infrastructure in rural areas is also needed in order todevelop rural areas alongside urban areas. The development oftelecommunications infrastructure can connect rural areas with cities, increaserural economic activity and increase their contribution to national economicgrowth.
This situation can indirectly improve the living standard of ruralpeople. Hence,the rapid development of telecommunications infrastructure can reduce transportationand transaction costs. It also will increase market information and increasethe efficiency of production of the agriculture, manufacturing and servicessectors. In addition to reducing transaction costs, telecommunicationsinfrastructure also creates job opportunities, narrowing the gap between therural and urban areas and improving the living standards of the population. Themodernization of the telecommunications infrastructure in the era oftechnological developments and the emergence of the Internet makes theacquisition and achievement information is limitless.
Theindustries are able to apply and utilize telecommunications infrastructure inadministrative or production affairs. It also enables the industry to enjoycost-saving which creates job opportunities and raises economic growth. Thesecost savings will be transferred to customers, employees and shareholders. Telecommunications industrydevelopment in MalaysiaThetelecommunications industry in Malaysia has been in existence since 1946 andthe Telecommunication Department of Malaysia is a pioneer company. Thename of the Telekom Malaysia Department was changed to the Company TelekomMalaysia Berhad when it was privatized in 1987. When the Company TelekomMalaysia Berhad was incorporated and listed on the Kuala Lumpur Stock Exchangein 1990, its name was changed again to Telekom Malaysia Berhad. Since theestablishment, Telekom Malaysia Berhad has been offering various servicesincluding fixed line services, international lines such as International DirectDialing, mobile phone service (TMTouch) and Internet services (TMNet).
In1985, the government broke the monopoly status Syarikat Telekom Malaysia Berhadto offer licenses to private telecommunications companies to encouragecompetition in the industry with the progress of information technology.Thesemove has witnessed the entry of eleven private telecommunications companiesnamely Celcom (M) Sendirian Berhad, Malaysian Resources Corporations Berhad,DiGi Telecommunications Limited, Sapura Holdings Limited, Electronic andTelematique (M) Limited, Maxis Communications Limited, Mobikom SendirianBerhad, Time dotCom Berhad, PrismaNet (M) Berhad, MIMOS (Malaysian Institute ofMicroelectronic Systems) Berhad and NTT MSC (Nippon Telegraph and Telephone andMultimedia Super Corridor). However, fierce competition amongtelecommunications companies involved the problem of duplication andinefficient use of resources. Followed by the recession of 1997-1998, it hasled up to now only three companies that still operate in providing mobileservice.
These companies are Celcom (M). Maxis CommunicationsBerhad, and DiGi Telecommunications Sendirian Berhad. At the end of May 2002,Telekom Malaysia Berhad acquired Celcom (M) Limited to expand and expand itsmobile service and coverage. Malaysiatelecommunications industry is experiencing rapid growth especially in mobileservice. The rapid growth of mobile lines is due to the tendencyof customers to prioritize mobile lines over fixed lines. This is because thephysical features of the small, portable, multifunctional mobile phones havemultiple functions at affordable prices, making mobile phones very importantfor their day-to-day business over a fixed line. In addition, the introduction ofsystems that are increasingly popular prepaid customers and the quality ofservices is increasing with the range of products that meet the needs ofcustomers has managed to raise the penetration rate of mobile service.
ConclusionTheeffect of telecommunications development and investment on productivity growthin the telecommunications sector has not been extensively explored unlike itseffect on economic growth. However, findings from this area of inquiry havemajor policy implications as governments especially those from developingcountries grapple over decisions regarding the efficiency effects ofprivatization. Privatizationis positively and significantly associated with growth in teledensity when attemptedto study the effects of privatization and competition on network expansion andefficiency.
Invariably, as teledensity grows due to the increase intelecommunications investment, efficiency improvements are expected to go handin hand. In effect, telecommunications investment may as well deliver requisiteand significant resources in terms of communication technologies and revenues,yet the level of economic growth with its associated distributional impacts maybe suboptimal because of the way governments harness and allocate these resources.Inthis regard we hypothesize that the impact telecommunications operations mayhave on economic growth is a factor of host country-specific factors andpolicies. Revenues that are generated from telecommunications provision cancontribute significantly to economic growth but there are arguments aboutwhether developing countries really benefit from them. The low levels ofeconomic growth in these countries have partly been attributed to thisdevelopment. Indeed, the role of telecommunications infrastructureshould be taken into account in empirical studies pertaining to the economicgrowth of a country.
Telecommunicationsinfrastructure investment affects economic growth similar to otherinfrastructure investment. However, the impact of telecommunicationsinfrastructure on economic growth is greater than other infrastructureinvestments. This is because the benefits derived from investment intelecommunications infrastructure are much higher if the quality oftelecommunications infrastructure services is enhanced due to the developmentof information and information technology era. The investmentcontribution of telecommunications infrastructure to the country’s economicgrowth can be seen from various aspects as efficient delivery of information,providing network externalities, lowering transaction costs, increasingefficiency, productivity, living standards and creating job opportunities.