Papua New Guinea's Institute of National Affairs says the Government's move to route all international phone traffic through state owned Telikom PNG sends a very negative message to investors.
Last week the Government amended the Telecommunications Act meaning companies such as Irish owned Digicel PNG would now have to buy international access off Telikom PNG.
The move has been widely criticised and Digicel's CEO, Kevin O'Sullivan, says they have had hundreds of thousands of text messages supporting their presence in the country.
Paul Barker, the executive director of the Institute of National Affairs says Digicel has become enormously popular very quickly because it has taken phone facilities to areas never before serviced.
He says competition provides the driving force for business enterprises.
"Frankly, the state owned enterprise that has been providing telecommunications has been sitting pretty for a long time, making good profits in recent years, but not having much in the way of an incentive to invest and provide a good service."