An incumbent telecommunications company is a former monopoly that still has a dominant market share. For example,the incumbent telco in Britain is BT, the former British Telecom.
Incumbent telecoms companies are in a very strong position. Even though their legal monopolies have been removed in almost all countries, they still continue to have considerable monopoly power because the infrastructure they have built over the years results in high barriers to entry. Without regulation there would also be very strong network effects.
The result of this is that incumbent telecoms companies are usually very tightly regulated. This means tighter controls on the prices they can charge customers and other networks (e.g. for incoming calls). Because of the monopoly power incumbents have, many regulators (such as Ofcom in the UK) also require them to provide access to their network to other telcos as regulated wholesale prices. For example, BT is required to:
- allow others to act as resellers of its telephone lines
- provide ADSL lines to customers of other internet service providers, who pay BT's wholesale arm the same rate as other divisions of BT itself.
- allow local loop unbundling
- operate parts of its business on an arms length basis to ensure they do not favour other BT businesses.
All these are done at regulated prices and terms that aim to allow other operators to compete with the incumbent.