Public Utilities - Term Paper Example

Public Utilities 325 Term Paper Public Utilities: Privatization of Telecommunications Sector Introduction Telecommunications has been one of the rapidly growing sectors in countries all over the world. This sector provides significant contribution to the Gross Domestic Product of many nations (Li and Xu, 2002). Moreover, the sector contributes to other businesses by reducing their transaction costs and thus creating positive externalities. Thus telecommunication sector is considered to be of much economic and technological importance (Li and Xu, 2004).

There had been significant changes in this sector transforming from a state owned, state operated a monopolistically behaved sector to a private owned and liberalized one since the 1980s with the privatization of British Telecom and the introduction of competition in the US long distance services (Wallsten, 2001). Based on the theoretical perspectives on privatization, it has been argued that the privatization of telecommunication sector will result in increasing the sector’s efficiency and overall performance.

The empirical studies show the results varying in different countries.Given this background, this essay critically evaluates the privatization process of telecommunications all over the world and its impact. This essay is organized as follows. Section 2 discusses the privatization process of telecommunication sector all over the world. Section 3 discusses the theoretical arguments behind privatization. Section 4 discusses the empirical studies son the telecommunications privatization. Section 5 discusses the country experiences in this regard.

Section 6 concludes the essay.2. The Privatization ProcessDue to the importance of telecommunications sector as a vital part of the national infrastructure in each country, the policy makers in this sector are supposed to ensure the availability of telephone to all upon demand, accessibility to the basic services to all people at affordable prices as well as to protect and defend a country’s security interests (Maitra, 2006). Moreover, being a technology intensive sector, the policy makers need to ensure that the country is making use of the most advanced technology in this sector to make use of all the available opportunities in the technology field.

The three main challenges in this sector in front of the policy makers in the 1950s and the 1960s in all countries were the fast technological change, the poor performance of the state owned sector including long waiting times for accessing services and limited financial resources for availing new technologies that facilitate the growth in this sector (Maitra, 2006). Consequently, the three options before the policy makers were to privatize the sector, introduction of competition and provision of creating independent regulatory agencies.

Thus as a part of the worldwide move towards liberalization in this sector, privatization process started with the privatization of British Telecom in UK, which was previously owned by the government and the introduction of competition in the UK long distance telephone services. The antitrust action of the US government, breakup of the US monopoly AT$T into seven regional operating companies and AT$T as the main long distance operator and the equipment manufacturer led to the starting of privatization process in the sector in 1984.

With the passing of the US Telecommunication Act in 1996, the regulation of the sector occurred aimed at further liberalization and deregulation of the sector (Todeva and John, 2001). In parallel to these developments in US, nations like UK and Australia also started privatizing their government monopolies British Telecom and Telestra respectively in the 1980s. An agreement on the global telecommunication market liberalization was signed by the World Trade Organization in 1997 and deregulation and privatization measures came into effect in the European Union on January 1, 1998 (Todeva and John, 2001).

The main changes as a part of the privatization process include the privatization of national carriers, licensing of new competitors and the allowance of new services (Li and Xu, 2002). Either new regulations were introduced or existing regulations were modified in around 150 nations. There was a huge increase in the private telecommunication operators from 2 percent in 1990 to 42 percent in 1998 in 167 nations all over the world (Li and Xu, 2002).The following figure shows 123 nations recognizing the significance of establishing a regulatory authority to foster competition in the sector at the end of 2003.

Figure1: Regulatory Agencies and Status of Regulatory Reforms Source: Maitra(2006)3. Theoretical Perspectives Privatization is defined as the shift from public to private sector through government policies like elimination of public programmes, transfer of public assets to private ownership, government financing private services and deregulation of entry into publicly monopolized activities (Maitra, 2006). Two different views are there in economics for privatization, one as reassignment of property rights and the other as fine tuning a three sector economy.

In the first case, the competition and privatization will not go hand in hand and hence there are views favouring both according to this school. This school treats property ownership as the centre of political economy and no role for organizational characteristics as well as economic incentives unrelated to property rights. Based on the second view, privatization is viewed as a relocation of economic functions and not as property rights.Based on the standard economic theory, the best functioning occurs for competitive markets.

The neoclassical theory states that in the presence of market failure, the intervention of state can be helpful through the activities of allocation, redistribution and regulation (Nemec et al, 2003).The two main issues associated with the delivery of services in this sector include the natural monopoly issue and the network character of this sector. In the case of network industries, due to their special features, economic regulation is established as an alternative to competition and antitrust law in many of these industries (Economides, 2004).

The complementarity of network industries to each other and the increasing returns to scale in consumption effects of these industries called network effects are tow distinguishing features of network industries. Due to the network effects of these industries, contrary to the law of demand for traditional industries, the willingness to pay for last unit will be higher here(Economides,1996; Brenan,2000). According to economic theory, competition and antitrust law are supposed to maximize allocative, productive and dynamic efficiency (Economides, 2004).

However, in the case of network industries, due to their special features, economic regulation is established as an alternative to competition and antitrust law in many of these industries(Economides, 2004). The complimentarity of network industries to each other and the increasing returns to scale in consumption effects of these industries called network effects are tow distinguishing features of network industries. Due to the network effects of these industries, contrary to the law of demand for traditional industries, the willingness to pay for last unit will be higher here(Economides,1996; Brenan,2000).

The following are the main special features of the network industries that arise due to the network effects. The first is the possibility of making money from both sides of a network. Second is the existence of externalities in the market which means incomplete internalization of benefits by the market. Third is the high speed market penetration in network industries compared to the other industries. Fourth is the very high market share and profit inequality for markets with strong network effects.

Fifth is the possibility of maximisation of social surplus by monopoly. Sixth is that it is not necessary for the existence of anti competitive acts to create market inequality due to the natural existence of market inequalities. Seventh is that free entry does not lead to perfect competition. Eight is the possibility of antitrust interventions to be counterproductive in these industries. Ninth is the very high competition for the firm which has the most dominant position and with maximum benefits.

Tenth is the dependence of the network industries on past decisions of consumers (Economides, 2004).Due to the above mentioned special features of the network industries, a firm with dominant position can use its dominance to push a firm to lower ranks with very low profits and in extreme cases closing down of the firms .This is mainly due to the high inequality of market shares, profits and prices here (Klein and Gray, 1997). Hence it is argued that technical standards are important to leverage market power across markets (Economides, 2004).

However, it is argued that due to the possibility of vertical integration in network industries, many anticompetitive issues like bundling of components, contract or manipulation of technical standards may arise (Economides, 2004). The manipulation of technical standards may arise to achieve market power in network industries through a number of ways as argued in the economic literature (Klein and Gray, 1997). Several remedies are suggested in the literature to stop the illegal practices in the network industries and to prevent their recurrence and to retain any damage due to the illegal practices without affecting the efficient production and competition in the market (Economides, 2004).

This is because antitrust intervention can produce larger damages when applied to industries with faster technological change. In order to prevent competition being undermined and to restrict anticompetitive behaviour, many countries have implemented laws restricting such practices. Based on the recent theories like motivation theories, it has been argued that the state regulation in the telecommunication sector need not provide the expected outcomes (Zajicek, 1999). These theories argued that instead of positive outcomes, the regulation hindered the efficiency and effectiveness of services delivery in this sector.

This has been based on the argument of regulation affecting prices, which in turn makes prices as ineffective indicators of the relative importance of the services produced by the telecommunication sector. Based on all these, the perspectives towards ate regulation have changed a lot in the telecommunication sector.The different forms of privatization include privatizing a state monopoly, breaking up before selling, keeping in public ownership while allowing other private firms to compete with it and partial privatization includes continuance of fiancé but not operation, continuance of ownership ,but not management and selling of some voter stock and not surrender control (Maitra,2006).

The theoretical studies suggest different channels through which liberalization changes affecting market structure and ownership affect a firm’s performance. One channel is that a publicly owned firm which is directly under bureaucratic control will be controlled by politicians whose objective need not be profit maximization always. Their objectives can be many other self centred ones including redistribution to favoured interest groups subsidizing loss making public enterprises, excessive wage and employment in the public sector etc (Lopez-de-Silanes, Shleifer, and Vishny, 1997; Shleifer and Vishny, 1994, 1998; Noll, 1999 etc).

This was clearly seen in the telecommunication sector all over the world before the 1980s with the higher employment per unit output even after adjusting for lower productivity of workers in poor nations.On the other hand, privately owned firms where the control rights and cash flow rights are transferred to private owners are supposed to have high productivity and output allocation if there is no government intervention (Li and Xu,2002).The reality is that there will be constant government intervention in the private firms generally but less than the public firms.

Based on the arguments of a group, the transaction costs of government intervention in decision making will be higher through privatization (Sappington And Stiglitz, 1987). There is no guarantee that privatization ensures no excessive employment and no subsidization of the loss firms by the politicians, it is clear that both are easier under public ownership.The monitoring of managerial efforts is another channel through which privatization affects a firm’s performance. In the case of public firms, the managers will have fewer incentives to reduce costs due to their inability to capture cost savings directly.

Hence, the incentives for monitoring enterprise management will be lesser for the public firm managers (Vickers and Yarrow, 1991).On the other hand, the private firm managers will have more incentives for cost reduction and innovation since they can capture cost savings directly. Through more efficient monitoring of the enterprise management, the private firms are thus expected to have higher total factor productivity.Privatization provides more opportunities for public listing of share ownership in stock markets for the telecommunications sector which in turn provides benefits like accessibility to better information sources for the shareholders to monitor the managerial performance and the access to funds from domestic and international investors.

These opportunities will be less under public ownership especially for the telecommunications sector. These in turn will improve efficiency in the telecommunications sector (Li and Xu, 2002).The critics of privatization process however argue that in the presence of economies of scale and scope as well as externalities, privatization can lead to worsened performance since there will be no proper regulation to internalize the externalities and the profit maximizing objectives will be promoted at the expense of non profit objectives like universal access (Li and Xu, 2002).

In spite of these arguments, it is now seen that the rapid technological developments have reduced the economies of scale and scope as well as the externalities in the telecommunications sector .Moereover, it is argued that the regulators can make the private owners to fulfil the aim of universal access which will be fulfilled due to strong incentives for this. Hence, it has been shown that the private owners in the telecommunication sector have been the better universal service providers than public owners.

However, it has been shown in studies that the working of privatization will be best in places where competition limits the market power of the incumbents and hence a complimentarity between privatization and competition than in the public owned firms (Yarrow, 1986).Based on the new theory of regulation, the infrastructure regulation is a principal agent problem. Due to the presence of information asymmetries, the regulator can observe the investment level in a regulated firm but not the actual costs of realizing the investment, which is the private information of the firm.

It allows the firm to realize an information rent, which is decreasing function of the marginal cost of the firm. Here social welfare maximization in an incentive compatible way is considered as the objective of the regulators.In the above theoretical model, the results show the marginal return of investment as the determinant of the investment’s decision and expected information rent as the main determinant of investment returns (Gentzoglanis, 2003).The privatization and introduction of competition will result in reduction of incumbent’s production and the expected information rent.

Since the loss of information rent is a decreasing function of the investment, the incumbent may raise the investment when the entry of firm occurs and at the same time it can reduce investment also in some cases and the social welfare depends on the investment level of the new entrant. In case of the investment level of the entrant greater than the reduction level of the incumbent, the net effect is positive (Gentzoglanis, 2003).The theoretical arguments show that the impact of privatization in telecommunications sector is mainly an empirical question and hence the next section discusses the empirical studies in this regard.4. Empirical Evidence In the study by Bortolotti et al (2001), the impact of privatization on the financial and operating performance of telecommunications firms in industrial nations from 1984to 1997 is examined.

The results showed rise in profitability, output and sales efficiency. Similar results were seen in the study by Megginson et al (1994) which showed rise in profitability and efficiency for privatized firms in industrialized nations’ telecommunications sector for the period 1961 to 1990.In the study by Dewenter and Malatasta (1997), on the other hand the profitability proxied by returns on sales showed significant rise while that proxied by earnings before interest and taxes to sales reduced significantly from 1981 to 1993 for 63 privatized firms.

In the empirical study by Li and Xu (2002), based on panel data set covering nations all over the world from 1981 to 1998 obtained significant contribution of privatization on labour shedding, output growth, network expansion, labour productivity and total factor productivity while the nature of privatization is obtained as the main issue in this study. The complimentarity effect between privatization and competition was obtained in this study both gaining benefits from each other.In the study by Nemec et al (2003) on the impact of privatization on telecommunication sector in the two transition nations in Central Europe-Czech and Slovakian Republics obtained liberalization rather than privatization is helpful in getting the consumer better off .

The study obtained privatization as increasing the access to the consumer in both the nations. In both the nations, however, the European principles and regulation for the sector were to be obeyed rather than independently taking the decisions.Most of these studies were based on industrial nations. In the study by Rose and Banerjee (2000) based on the panel data for 23 Latin American nations from 1986 to 1995 obtained significant positive impact of privatization on network expansion and technical efficiency.

Privatization was obtained to have negative impact on unmet demand even after controlling for tariff rebalancing. Thus the study showed significant efficiency gains due to privatization separate from the effects of tariff rebalancing. The study showed supply led growth and network expansion favoured by the privatization process in the sample selected.In the study by Torera et al (2001) for Peru on the impact of privatization of telecommunications sector on the welfare of consumers showed significant rise in welfare in the post privatization period.

The study also showed significant rise in efficiency, access and quality of service in this period. However, the study showed significant fall in the consumer surplus of households since 1998 which has been attributed to two factors, rise in tariffs and permanent rise in the price of monthly fix rent.Wallsten (2001) based on a study regarding the impact of privatization in telecommunications sector in 23 developing nations obtained the exclusivity periods n to the private firms resulting in a significant rise in revenues and at the same time a cost o the government in terms of reduction in i8ncumbent’s investment in telecommunications network.

Thus the study demanded the need for identifying the details and nature of privatization process along with the analysis of its implications.Morales (2002) examined empirically the impact of privatization in telecommunication sector in the Latin American nations. The study showed higher growth for all the performance indicators in the sector like connection fees, waiting time for connection etc. Moreover, it is obtained to have increased access to the common man as shown by the study. However, whether the improvements obtained were merely due to privatization or nay other factors was not clear in this study.

This needs a detailed analysis.The study by Gentzoglanis (2003) based on data for seven MENA nations from 1997 to 2001 obtained rise in investment after privatization in the telecommunications sector and demanded the need for speeding up the process of liberalization and privatization in the MENA region.The study by Ghaleb (2003) empirically examined the labour implications of privatization in the telecommunication sector in Lebanon. The evidence supported the creation of jobs in the sector following the privatization of the sector in the medium term .

One main drawback associated with the over compensation for these new jobs is obtained as the forcing of skilled employees to opt for early retirement .However, the study suggested many alternative solutions for this drawback by the government. Overall the study suggested the privatization as beneficial to the consumer and the whole Lebanese economy.In the study by Snoussi and Sdiri (2004) on the impact of liberalization of telecommunication sector in a sample of 109 Tunisian firms, based on logit model obtained significant impact on the innovation of Tunisian firms.

This was true of all the firms in the analysis irrespective of the type of firms and the operator. In this study, however, the impact of privatization as such is not shown while it is examined as a part of the liberalization process.Compare infobase Ltd (2004) examined the experience of the impact of telecommunication sector in Tanzania since 1993.The study showed inadequate telecommunication services in the country before the reform process and low number of users .With the privatization process and the establishment of a supporting institutional framework in Tanzania, the telecommunication infrastructure expanded and accessibility to these services also increased without a rise in the price.

The study by Abey Singhe and Paul (2005) examined the impact of privatization on technological capability in Sri Lankan Telecom, the main provider of telecommunication in Sri Lanka. This study is based on literature review and value chain concept. The interview with the telecom authorities was done for examining the technological capability before and after privatization. The study showed tremendous progress in technological capability after privatization. The indicators of performance in the telecommunication sector like revenue, operating efficiency, connectivity, service quality, network expansion and capital investment have all significantly improved after privatization as shown by the study.

The study however, showed that this improvement cannot be attributed to privatization alone. Rather it has been due to the regulatory conditions changes and the worldwide improvements in the telecommunication sector together with the privatization in Sri Lanka.The empirical studies thus show an overall positive impact of privatization process in most nations’ telecommunication sector. However, they show the need for examining the nature of privatization process and its details to get a clear picture in this regard.

These studies show wide differences in the results based on whether regulations existed in a nation versus no regulations existed. Moreover, in many studies it is not clear whether the positive impact has been due to the privatization alone or due to some other factors. The next section examines the country experiences in this regard.5. Country Experiences In UK, the telecommunications sector before the early 1980s was considered to be the natural monopolies while based on the view that technological advance shave weakened the argument limiting the new entry in the industry, the privatization process started with the price capping to reduce the monopoly power (Dnes, 1995).

The dependence of social life on the UK shows its importance in the country. The identification of tele communications as one of the most important sectors in the country has increased the importance of the sector in the nation. The introduction of competition in the utility markets gave a pro competition look to the regulatory bodies. The event study based on the data for British Telecom from 1981 to 1994 by Dnes (1995) showed uniform responses to different events with the company earning normal market return and no clear pattern favouring or opposing the commercial interests of the company.

While some events favoured the company, some other events favoured its competitor Mercury and some favouring consumers.The power for European Commission to handle the cartels and abuse of market dominance was given by Articles 81 and 82 of the European Commission Treaty. Before this treaty itself, in UK the first legislation was implemented through the establishment of Monopolies Commission by the Monopoly and Restrictive Policy Act to investigate anticompetitive behaviour. Several changes were implemented to this Act later on in 1965, 1973 and 1980 for strengthening the competition law.

Office of Fair Trading (OFT) was established within the government for investigating competition within markets (Parker, 2000).As a part of the efforts to make the UK legislation consistent with the European Commission Law, in 1992 a white paper outlining changes were published but the changes were not put into practice. Thus till 1997, the UK competitive law remained unchanged. In November 1998, with the government change in UK, new competition Act was approved. There were changed including the setting up of Competition Commission in 1999 and a new prohibition based policy to outlaw anticompetitive behaviour from March 2000.

The new Competition Act was more or less consistent with the European principles of competition. One main change under the Act was the setting up of Appeal Tribunal within the Commission for considering appeals against the infringement of Chapters 1 and 2 of the Competition Act 1998.In chapter1 of the Act, restrictive practices are dealt with while chapter 2 deals with the abuse of dominant position (Parker, 2000).Chapter 1 of the Act sets a general prohibition against the cartel agreements replacing registration of the agreements under 1956 Restrictive Trade Practices Act.

Price fixing, output restrictions, investment restrictions, collusive tendering etc which affect competition come under the prohibition mentioned in Chapter 1 of the Act.Chapter 2 of the Act deals with the prohibition related to a business conduct leading to abuse of dominant position in the market place. Any part of the UK is included in the definition of market while the ability to act independently of competitors and customers is meant by dominance following the EU case law (OFT, 1999; Parker2000).

An alternative framework is given by Section 18(1) of the Competition Act introducing a prohibition on ‘any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market if it may affect trade within the UK’ (OFT, 1999; Parker2000).Since the Competition Act needs to be consistent with the European law the definition of relevant market serves a major role in the assessment of competition done under chapter2(OFT,2001).Based on the European Court Law, dominance is defined based on market share of a firm which needs the relevant market to be defined(OFT,2001).

Hence the definition of relevant market becomes important under Chapter 2 of the Competition Act 1998 also. Moreover, based on the economic theory it is argued that firms in a properly defined relevant market may not engage in abuse of dominant position (OFT, 2001).One common test based on European Commission and OFT guidelines to define a relevant market based on competitive constraints existing between products and areas is the Small but Significant Non Transitory Increase in Price (SSNIP) test or hypothetical monopoly test (OFT 1999a; OFT, 2001).

Based on this test, a relevant market is defined as the “smallest set of products worth monopolising” (OFT, 2001, p15).The geographical market dimension and the product market dimension form the two dimensions of relevant market based on this definition. Based on the definition above, the set of products defined in geographical and product market terms need to be worth monopolising as it can raise profitably the prices by 5 to 10 percent if it is a relevant market. Otherwise the set of products need to be expanded to include those in next geographical area and other products and SSNIP test needs to be done again(OFT,2001).

The profitability of the 5 -10% rise in prices depend on the cost savings from the lower production volumes .The lost sales quantity also needs to be assessed again here based on demand side substitutes and supply side substitutes. However there are many challenges to this test especially in the case of mergers. In South Africa, telecommunication sector is one of the fastest growing sectors which contribute to 10 percent of GDP together with the transport and storage sectors there(South Africa,2010:1).

The three main companies operating in the industry are Telcom, Neotel and Vodacom. These companies have undergone many transformations and policy changes in the recent years that have contributed to their success. Telkom is the largest fixed line operator in South Africa with government as the largest share holder while Neotel, started in 2006 in the public sector is the South Africa’s second largest national fixed line operator. Vodacom in the private sector is both of their main competitors, which have become successful as international company.

All these companies have undergone many transformations and changes in the recent years including the changes in the regulatory environment (Telcom, 2007:1). The privatization process started in South Africa in 1997 with the shares of Telcom being sold to private operators and valid for 3 years following section 4 of the Telecommunications Act. The privatization strategy here was that of incumbent monopoly coupled with periods of exclusivity and restrictions on liberalization. Reports showed that privatization has failed to achieve its objectives due to the lack of proper regulation, resulting in higher price of services and the consequent rise in disconnection of services by the consumers.

In India, the move towards liberalization of telecommunication sector started with the onset of the Balance of Payments crisis in 1991. However, reports show that the state monopoly Department of Telecommunications was not be able to the needed degree of privatization due to resistance form many workers and due to the influence of vested groups (Maitra, 2006)Similar situation was seen in China with the collusion between powerful groups and thus the Ministry of Posts and Telecommunications, a state monopoly facing serious threats from other ministries.

In Russia also, telecommunications is still a state owned monopoly.In Sri Lanka and Bangladesh, the government implemented similar policies of privatization while the initial conditions were different in both nations (Juichi etal, 2005). In Bangladesh, the sector was mainly a government monopoly and political factors prevented the entry of new firms at the time of initiation of the privatization process. In Sri Lanka the atmosphere was favourable for private investment at the time of initiation of privatization process.

The business efficiency and quality of telecommunications increased significantly after privatization in Sri Lanka. There was also considerable rise in pre tax rate, access to universal service and high customer satisfaction. However, in Bangladesh the condition was not good after privatization with severe complaints from the customers. Thus the two country experiences show the need for favourable initial conditions for having a positive impact of privatization process.6. ConclusionIn this essay, the privatization of telecommunications sector and its impact is discussed in detail.

Since telecommunications sector is a very critical part of national infrastructure in each country, the different methods through which its efficiency can be improved has important policy implications.Theoretically, it has been argued that privatization has been aimed at improving the efficiency, productivity, profitability etc in the telecommunications sector since the public monopolies will be regulated by politicians who have many privileged interests not favouring the commercial interests of firms.

Moreover, there will be less incentives for public managers than the private managers to monitor the enterprise management and hence can affect the efficiency adversely.On the other hand, based on the presence of economies of scale and scope as well as externalities it has been argued about the adverse effect of privatization on the performance of the sector in case of improper regulation. However, this argument has been rejected in many recent studies. Further, there are ambiguous theoretical predictions on the impact of privatization on firm investment.

Due to the theoretical ambiguities it is mainly an empirical question.The empirical studies however show mixed results in this regard. Though most studies showed results favouring privatization, some studies showed negative results on consumer surplus and profitability depending on other conditions existing in the particular nations. The results showed differences depending on the regulatory conditions existing in nation at the time of privatization. Privatization alone cannot contribute to the improvement in the sector as shown by these studies.

Rather the initial conditions existing at the time of the privatization, the nature of regulations existing, etc together contribute to the improvements in the sector.The country experiences showed that the impact of privatization in telecommunications sector is mainly country specific depending on the initial conditions and regulatory policies existing in the nations. While nations like Sri Lanka with initial favourable conditions at the time of privatization and regulatory policies, showed positive impact of privatization, Bangladesh showed poor impact of the same type of privatization policies in the telecommunications sector.

Moreover, without proper regulation, the experiences showed poor performance of the sector as in the case of South Africa.Overall it can be concluded that a uniform impact of privatization process in the telecommunication sector cannot be predicted in spite of the favourable theoretical predictions. The initial conditions existing at the time of privatization process, the nature of privatization, the regulatory practices existing in a nation all determine the impact of privatization process in a nation.

There are many differences existing between the impact of privatization in countries depending on whether regulations exist and no regulations exist in the telecommunication sector. In the countries where favourable regulatory conditions existed at the time of liberalization like Sri Lanka, the privatization experienced tremendous success while other nations like Bangladesh could not obtain such achievements. Moreover, the significant progress made in the performance indicators in the sector cannot be attributed to the privatization process alone as shown from the discussion above.

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