Scoping for: Competition in Network Industries: Evidence from Mobile Telecommunications in Rwanda

Daniel Björkegren

No 17-10, Working Papers from NET Institute

Abstract: Many modern technologies have network effects, and as a result lead to industries with natural monopolies. How should societies discipline these industries? This is a preliminary paper that analyzes the scope for competition to affect welfare and investment in the Rwandan mobile phone network during a 4.5 year period of dramatic growth. I use transaction data from nearly the entire network of Rwandan mobile phone subscribers at the time. I use the method and estimates of Bjorkegren (2017), which identify network effects based on usage after adoption. The Rwandan government eventually allowed competition; I evaluate what may have happened had competition been introduced at an earlier stage of the network’s growth. Had the monopolist simply charged the eventual competitive prices, welfare would have risen substantially. However, only a fraction of the revenue from building the rural tower network came from calls within rural areas; as a result, had the rest of the network been split among providers, there may have been lowered incentives to invest. A subsequent version of this paper will simulate the effects of competition under different policy regimes.

Keywords: network goods; infrastructure; information technology (search for similar items in EconPapers)
JEL-codes: L51 L96 O18 O33 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2017-10
New Economics Papers: this item is included in nep-com, nep-cta and nep-pay
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