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<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>April 5, 2009
YOUR LETTERS
</TR><!-- headline one : start --><TR>Prices not down with more competition
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->The belief that more competition will lead to lower prices is no longer true in today's economy.
A classic example is when SingTel entered the pay-TV market. In order to compete for greater viewership, both SingTel and StarHub bid exorbitantly for the rights to screen the English Premier League.
StarHub won, but promptly raised the price of its sports channel to offset the bid price. So SingTel loses - and viewers too!
Also take the case of public transport: When more taxi companies were introduced, the resulting increase in the number of taxis corresponded with a significant reduction in cabbies' earnings.
As a result, taxi fares were increased to 'compensate' for their earning losses. Thus, more competition led to higher taxi fares.
The same is true for shopping malls. To entice shoppers, each new mall is built grander than the last. So rentals have to be high, and only premium brands with higher prices and margins can afford to set up shop in such malls. Smaller shops are forced out.
Similarly, in banking, basic transactions such as deposits and withdrawals are now done using self-service.
Only the VIPs who have high-value accounts are served in person by bank staff for these basic transactions. Also, customers are constantly pressed to buy products that command high premium and high margin.
The same is creeping into health care. Every hospital has to better the other with the latest medical technology.
This translates to higher cost for patients, and patients are often prescribed a battery of - probably unnecessary - expensive tests. So medical bills keep growing every year.
Also, we see more 'neighbourhood' medical and dental clinics opening, yet basic outpatient treatment fees increase rather than decrease.
It is time to re-assess the basic 'market-force' model.
Boon Chuan Whee
YOUR LETTERS
</TR><!-- headline one : start --><TR>Prices not down with more competition
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->The belief that more competition will lead to lower prices is no longer true in today's economy.
A classic example is when SingTel entered the pay-TV market. In order to compete for greater viewership, both SingTel and StarHub bid exorbitantly for the rights to screen the English Premier League.
StarHub won, but promptly raised the price of its sports channel to offset the bid price. So SingTel loses - and viewers too!
Also take the case of public transport: When more taxi companies were introduced, the resulting increase in the number of taxis corresponded with a significant reduction in cabbies' earnings.
As a result, taxi fares were increased to 'compensate' for their earning losses. Thus, more competition led to higher taxi fares.
The same is true for shopping malls. To entice shoppers, each new mall is built grander than the last. So rentals have to be high, and only premium brands with higher prices and margins can afford to set up shop in such malls. Smaller shops are forced out.
Similarly, in banking, basic transactions such as deposits and withdrawals are now done using self-service.
Only the VIPs who have high-value accounts are served in person by bank staff for these basic transactions. Also, customers are constantly pressed to buy products that command high premium and high margin.
The same is creeping into health care. Every hospital has to better the other with the latest medical technology.
This translates to higher cost for patients, and patients are often prescribed a battery of - probably unnecessary - expensive tests. So medical bills keep growing every year.
Also, we see more 'neighbourhood' medical and dental clinics opening, yet basic outpatient treatment fees increase rather than decrease.
It is time to re-assess the basic 'market-force' model.
Boon Chuan Whee
