Wireless Mobile Phone Technology, Deregulation Policy, Competition and Economic welfare in Nigeria’s Telecom Industry: An Analytic model

Abstract

This analytic model is about the Nigerian telecom industry’s structural change caused by the arrival of a new wireless mobile phone technology. Nigeria’s telecom industry transformed from natural monopoly to competitive market as a result of deregulation that occurred in 1999. Under the price regulation using underground or above the ground cable telephone lines, it could run only with the help of government subsidies. This study argues that the arrival of a new telecom technology was the key to success of Nigeria’s deregulation of its telecom industry. An analysis of a simple microeconomic model shows that with the new wireless technology, which requires much lower operation cost, the operator can now make a positive profit and therefore by deregulating the market, entries of new firms and competition takes place in the industry which lowers the final product price in the telecom market. The research, therefore, concludes that availability of wireless mobile phone technology led to deregulation of the industry which brought competition by increasing the number of firms in the industry that engendered fall in product price and increase in output. The study observed that the policy of deregulation is intended to usher in perfect competition but it is far from achieving that now for the industry displays behaviour similar to monopolistic competitive and oligopolistic industries. However, one thing is clear, it will never be a natural monopoly again.