10 focusing on the details of competition their sample size shrinks to 43 countries during the period 1990-1998. They find that privatization and competition positively affect performance regardless how they are measured, and that if they work together the gains are even bigger. Regarding the details of reforms, they find that privatizing by offering public shares positively contributes to the performance of the mobile sector. Additionally, they find that granting exclusivity periods reduces the gains from privatization. Wallsten (2004) uses data on 32 privatized telecom firms representing 28 countries and finds that exclusivity periods are associated with significant increases in the firm’s sale price and significant decreases in the incumbent’s investment in telecom network and in the number of payphones, mobile subscribers, and international outgoing minutes.

The research on regulation points to a number of fundamental questions to be asked by reformers. The importance of sequencing is one of the key ones. Using panel data for 200 countries from 1985-1999, Wallsten (2003) finds that establishing an IRA before the privatization takes place improves telecom investment and penetration. Then with a sample of 33 countries he shows that investors are willing to pay more for firms if a regulatory reform took place prior to privatization. Somewhat surprisingly, he finds that privatization and IRA are negatively correlated with the number of mainlines. Another important contribution is the debate on the relevance of the independence of the regulators. Wallsten (2003) suggests that too much independence may be harmful if politics capture consumers’ preferences, as it weakens the relationship between consumers and government and strengthen the relationship between private firms and government. In other words, it might be easier for telecom firms to influence the regulator than for consumers.

A final issue to be considered is the endogeneity of reforms. To illustrate its relevance, Gual and Trillas (2004) first estimate two policy indexes (one for openness and one for the existence of an IRA) and then analyze their impact on performance. They find that pro-entry policies and the creation of an independence agency have positive effects on network penetration and negative effects on productivity. However, after accounting for endogeneity, results are not very robust statistically.

Interestingly, even though there is “political” or conceptual consensus about the importance of institutions and governance for sector performance, a very limited number of studies have included such variables in the analysis. As mentioned before, Wallsten (1999) includes the expropriation risk as a governance control. More recently, Gutiérrez (2003) explicitly recognizes the importance of governance when assessing sector performance. He uses a governance index as an explanatory variable to analyze the effects of telecom reforms on performance in 22 Latin American countries during the period 1980-1997. However, the components of his governance index refer more to particular characteristics of reform policies in the sector than to governance structures per se. After taking into account the endogeneization of policy variables, he finds that regulatory procedures influence network expansion and efficiency.