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Regulating Network Industries:
Evidence from Rwanda’s Mobile Phone Network
Daniel Björkegren
Brown University
@danbjork
Network effects
Communication: phones, internet, WhatsApp, Facebook, TikTok,
…
Payments: mobile money, M-PESA, WeChat, …
Platforms: Transportation: Uber, Ola, …
How to discipline?
Mobile phone networks in sub-Saharan Africa:
2.5% of GDP (7% indirect, GSMA 2018)
Platform for internet, mobile money, digital credit
Managing Network Industries
Regulation
but rapid
change
Competition
also requires
regulation
Case Study: Rwanda’s Mobile Phone Network
Case Study: Rwanda’s Mobile Phone Network
Use 5.3b transaction
records from over 88% of
mobile phones over 4.5
years
Develop model of
Rwanda’s mobile phone
industry
1. Taxes have spillover effects
48% tax in
Rwanda
To raise $1 from airtime/handset taxes in growing network:
$1.22
Ignoring net effects
Welfare cost: $1.21-1.37 to raise $1 from other taxes in Rwanda (Auriol and Warlters 2012)
$2.95
Including net effects
Telecom taxes: 7% of government revenue in SSA (GSMA 2008)
Regulation
Universal Service Obligations:
2. Remote coverage benefits cities
Benefits dispersed: 78% accrues to individuals whose coverage unaffected
Low revenue towers
Regulation
3. Competition may help or hinder investment
Three effects:
• Lower prices (-)
• Network effects foregone (-)
• Business stealing effect (+)
Competition
Welfare +1% GDP
ROI higher
Effect of Adding a Competitor
Prices -30-50%
Emerging networks
have profound
welfare implications
for the poor
This is a laboratory
for understanding a
network industry
(More needed)
Daniel Björkegren
@danbjork
Competition

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Developing Country Case Study: Economics of Universal Mobile Access in Rwanda

  • 1. Regulating Network Industries: Evidence from Rwanda’s Mobile Phone Network Daniel Björkegren Brown University @danbjork
  • 2. Network effects Communication: phones, internet, WhatsApp, Facebook, TikTok, … Payments: mobile money, M-PESA, WeChat, … Platforms: Transportation: Uber, Ola, …
  • 3. How to discipline? Mobile phone networks in sub-Saharan Africa: 2.5% of GDP (7% indirect, GSMA 2018) Platform for internet, mobile money, digital credit Managing Network Industries Regulation but rapid change Competition also requires regulation
  • 4. Case Study: Rwanda’s Mobile Phone Network
  • 5. Case Study: Rwanda’s Mobile Phone Network Use 5.3b transaction records from over 88% of mobile phones over 4.5 years Develop model of Rwanda’s mobile phone industry
  • 6. 1. Taxes have spillover effects 48% tax in Rwanda To raise $1 from airtime/handset taxes in growing network: $1.22 Ignoring net effects Welfare cost: $1.21-1.37 to raise $1 from other taxes in Rwanda (Auriol and Warlters 2012) $2.95 Including net effects Telecom taxes: 7% of government revenue in SSA (GSMA 2008) Regulation
  • 7. Universal Service Obligations: 2. Remote coverage benefits cities Benefits dispersed: 78% accrues to individuals whose coverage unaffected Low revenue towers Regulation
  • 8. 3. Competition may help or hinder investment Three effects: • Lower prices (-) • Network effects foregone (-) • Business stealing effect (+) Competition
  • 9. Welfare +1% GDP ROI higher Effect of Adding a Competitor Prices -30-50% Emerging networks have profound welfare implications for the poor This is a laboratory for understanding a network industry (More needed) Daniel Björkegren @danbjork Competition

Editor's Notes

  1. Most digital industries have network effects
  2. Growing networks an opportunity to raise funds for important programs
  3. Difficult for communities to finance tower construction themselves
  4. The regulation of emerging networks can have profound welfare implications for the world’s poorest economies. At a lower interconnection rate, incentives to invest would have declined