The Unethical Business in the Telecommunication Industry
Executive summary The report will have a close look on unethical business about telecommunication industry.We know that a lot of times the rights of consumers are not protected.Because of the much unethical behaviour in the industry, consumers often faced the choices between interest and social morality.
In many cases this report has discovered that the unethical behaviours. The essay will also Analysis of each company and provides recommendations for investors. Introduction This report will look at: The unethical behaviour about WorldCom accounting scandal • The Monopolistic competition about china telecom • The overcharging behaviour of AT&T • Recommendations for telecommunication industry • Conclusion Findings WorldCom WorldCom, The America’s second-biggest long distance phone company. From 1999 to 2002, an internal audit had reported that $3. 3 billion in profits were improperly recorded on its books. That is on top of the $3. 8 billion in expenses. And company said it had improperly reported as capital investments.
WorldCom now says it must issue revised financial statements from full year (four quarters) of 2001 and the first quarter of 2002. (Tran, 9 August 2002) After the bankruptcy of company, investors and consumers feel staggered and scare. Because it was the large company, the public think it was been trusted by the public. But the company has abused the public trust through the falsification of financial statements preparation and to deceive the public and lie about the benefits of its products in order to get more revenue. (Arnold, 22 July, 2002)
China Telecom By the end of 2010, the population of Internet users in china has been reach to 23. 3 present of whole world and about 55. 3 percent of Internet users in Asia. However, china’s rate of Internet is the slowest of the world, the average rate of global broadband access is 5. 6Mbps, but in china, the average rate of downlink is only 1. 8Mbps (ranked 71st in the world). We noticed that the broadband market in China is lack of competition, Interesting, the average cost per Mbps is 3 to 4 times the price of UK, US and other developed countries. Hille, November 14, 2011) The price supervision and anti-monopoly bureau at china’s National Development and Reform Commission surprised observers on November 9, 2011 by announcing it was investigating China Telecom and another pharmaceutical company, the state-owned fixed-line carries, for allegedly abusing its dominant market position to limit the competitor entry the broadband business. AT&T June, 2010. AT&T will stop to let the customers signing its unlimited data plans and use new tiered pricing system. Ettinger, June 2, 2010 ) AT&T listed three categories of plans: •Data Plus- $15 per month for 200 MB of data. If the customer is exceeding 200 MB of monthly billing cycles, they can have additional 200 MB of data for $15. According to AT&T’s Statistics, 65% of mobile phone users’ monthly data flow is less than 200 MB •Data Pro- customers spend $25 per month; they can get 2 GB data. If customers exceed 2 GB in this month, they can receive 1 GB data/$10. Currently, 98% of people use less than 2 GB per month in their statistics. The AT&T customers can pay additional $20 per month to let their mobile phones as a modem to offer the broadband for their computes. When the company could not found the new profit growth point, they selected provide the products which harm the interests of consumers to balance the income and expenditure of enterprises, rather than through innovation to create new revenue. Recommendations Accounting scandal Considered the WorldCom case, Association of Chartered Certified Accountants (ACCA) Calls for global professional auditors maintain independent.
They want to see the audit firm limit to provides additional services in order to make accounting fraud, In accordance with industry standards to appoint auditors and requested his independent position and not be limited by clients. Fair competition: Monopolistic competition Monopolistically competitive markets have the following characteristics: • Profit Maximiser: Maximizes profits. • Price Maker: They can decide the price of the product or goods to be sold. Price Discrimination: Usually refers to providers of goods or services to different recipients to provide the same level and same quality of goods or Services, Different interview with the different price. • Single seller: In a Monopolistically competitive markets there are just one or two sellers of the good which produces all outputs. For this reason, the whole market has to serve by a single company, and this biggest company is the same as the whole industry. • High Barriers to Entry: The competitors are unable to entry this market of the monopoly.
We can witness that the triangle part is the Deadweight loss. Antitrust law or Antimonopoly Act Competition law, the most famous competition law is antitrust law, is law that stimulative market competes and adjust anti-competitive behavior. The role of the anti-monopoly law can be divided into four aspects: Maintain a reasonable market structure improve the efficiency of resource allocation. Maintenance and promotion of effective competition in the market, promoting the development of economic and technology. Protecting the legitimate rights and interests of consumers and social public welfare.
Economic democracy Against overcharging In this case, we can witness that the company is trying to limit the consumers use more data by the data cap. But on the other hand, it seems to encouraging consumers to use more data as they like. In this case, DataPro plan, the price of exceed gigabyte is cheaper than the previous. AT&T said that its maximum of 2 gigabyte of data in the plan will just impact the 2 percent users they collected, but the truth is that the almost of data use is increasing every year. Today’s heavy user is tomorrow’s average user.
The unreasonable charge of AT will hamper innovation in new ways, and hinder the healthy growth of economic and broadband industry. AT can introduce an overcharging plan that is totally anti-consumers, further indicates that the wireless market is lack of competition Conclusion The report focuses on the unethical business in telecommunication industry and analysis of three cases about famous company, we know that the WorldCom went bankrupt because the accounting scandal, china telecom loss the confidence of customers because monopolistic conduct.
It will lose the market competitiveness if it loses the support of government. I may suggest AT, the United States has a sound legal system and healthy business environment. With the Strict Sales Surveillance Mechanism, customers can make the best interest for themselves. Bibliography Binger, B & Hoffman, E. : Microeconomics with Calculus, 2nd ed. p 391 Addison-Wesley 1998. Arnold, J. , 22 July, 2002. WorldCom’s star falls to earth. [Online] Available at: http://news. bbc. co. uk/1/hi/business/2066885. stm? lang=en_us&output=json Ettinger, J. , June 2, 2010 . AT&T Tiered Pricing Is Anti-Consumer. [Online] Available at: http://www. freepress. net/press-release/2010/6/2/free-press-att-tiered-pricing-anti-consumer Hille, K. , November 14, 2011. China expected to increase antitrust probes. [Online] Available at: http://www. ft. com/cms/s/0/f21d704c-0c3a-11e1-8ac6-00144feabdc0. html#axzz1eqWYDERm Tran, M. , 9 August 2002. WorldCom accounting scandal. [Online] Available at: http://www. guardian. co. uk/business/2002/aug/09/corporatefraud. worldcom2