^{Democracy & Technology Blog} Anarchy beats regulation

The Economist’s special report on mobile phone service in developing countries notes that in Africa cellphone service has been more successful in war torn countries than in nations who practice heavy regulation.

There is clear evidence that liberalisation drives adoption (see chart 3). The most vivid illustration comes from a comparison between two African countries: Ethiopia and Somalia. Ethiopia is one of the few remaining countries where mobile telecoms remains a government-run monopoly. By the end of 2008 the country had a “mobile teledensity” of 3.5% (ie, 3.5 mobile phones per 100 people), compared with 40% for Africa as a whole. By contrast, in war-torn Somalia, a similarly poor country with no functioning government and a completely unregulated telecoms market, more than a dozen operators have sprung up to meet demand, and mobile teledensity is 7.9%. Even warlords want their phones to work, notes Mr Ibrahim, so they leave networks alone: Celtel launched its networks in Sierra Leone and the Democratic Republic of Congo during civil wars, and both prospered. (chart omitted.)

Admittedly Ethiopia and Somalia are on opposite extremes of the regulatory spectrum. Does the 40% average African teledensity owe more to the quality of regulation in other nations or to regulatory restraint and the absence of civil war? This question is not addressed in the report. However, there is ample evidence from all over the world that free markets are more efficient than regulated markets.