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THE EFFECTS OF DEREGULATION OF TELECOMMUNICATION IN NIGERIAN
ECONOMY
ABSTRACT
This research work is based on the effect of Deregulation of
telecommunication Industry inNigeria In 1992 through the promulgation of
Nigeria communication commission (NCC)Decree No. 75 of 1992 introducing private
participation in the provision of telecommunication service in Nigeria thus
ending the state owned (NITEL) monopoly of the sector and ushering in
competition.
The objectives of the research project is to examine low
Deregulation in expected to enhance efficiency of the Telecommunication
industry in Nigeria in two ways.
First is through the curtailment of the inefficiency that
arises as result of regulation and isolation of forms from actual and potential
competition.
Secondly rents accruing to rent seeking group benefiting from
regulation would be dissipated by a mere competitive market environment.
The objective were addressed by asking relevant question in
the questionnaires and formulating various relevant hypotheses in line with the
set objective the data collected were analyzed using simple % and frequency
distributing the hypotheses were tested by using chi-square statistical method.
The research finding shows that most of the NITEL staff are
experienced graduate. It also indicates that deregulation of the
telecommunication sector will improve the organization performance, motivation,
profit and competitive market environment.
It was recommended that, in order for Nigeria to be able to
boost their bargaining position there are a number of factor that need to be
taken into account.
As technology advance and there is greater convergence of
telecommunication computer networking and broadcasting services and industries
developing countries that are attempting to liberalize their market will be
faced with newer, more powerful competitor. It is important to understand the
underlying meaning of the convergence. If linearization is undertaken to
enhance the infrastructural capacity provided by the telecommunication sector
as is more often the case than not tem unless there is a strong regulation
framework and technical and financial assistance, the incumbent operator may
not be able to compete successfully in the market.
The rapid and phenomenal growth of the internet and mobile
data service have created new channel for distribution of content (voice, data
and video).
Finally the falling cost of technology and its rapid pace of
change means constantly having to keep up to date and having an efficient
decision making structure to adapt to these changes and take advantage of new
technologies.
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF
STUDY
At the end of the Uruguay Round of Negotiation in 1994, 63
countries had made commitments to open up their telecommunications markets. On
February 5 1997, an agreement was signed by 69 countries (the Basic
Telecommunications Agreement, BTA), under the WTO to progressively open up
their te1ecom markets to foreign investment and competition and to abide by a
common set of rules and to ensure fair play. The agreement was supposed to have
reduced the cost of international calls by as much as 80% and was a major
break-through because the countries involved accounted for 92% of the global
telecom revenues. The areas covered under the agreement include all basic
telecom services including voice, data, fax, radio and satellite - based services.
More than forty countries made reference to or included in their commitments,
the reference paper on regulatory principles, a framework document for
regulating the dominant carrier in each country, obliging them to give new
entrants access to the established network at non-discriminatory prices. While
new entrants would rely on established networks initially, there would be no
barriers to entry. Time scales for implementation were different from different
countries depending on how developed they were.
In addition, there is an annex on telecommunications and a
references paper that talk about the te1ecom sector. The Annex on
telecommunication is of particular significance for electronic commerce and was
drafted during the Uruguay Round by negotiators realizing that, despite Article
VIII, telecom service providers were In a unique position in having the
potential to undermine commitments undertaken In schedule In any service sector
in which telecommunications were essential to doing business. The Annex defends
all users of telecommunications services.
Article IV of the GATS seeks to increase participation by
developing countries in services. It is applicable to publicly available basic
networks and services regardless of whether these arc supplied" by a monopoly
or through competition. It requires governments to ensure that other members'
suppliers are afforded reasonable and non discriminatory access to and use of
public telecom transport networks and services for the supply of services
include in it's schedule The reference paper on telecommunication is was to
ensure competition in the supply of telecom services.
The telecommunications industry in Nigeria witnessed the
deregulation of telecommunications services in 1992 through the promulgation of
Nigerian Communication Commission (NCC) Decree, No. 75 of 1992, introducing
private participation in the provision of telecommunications services in
Nigeria, thus ending the state-owned NITEL's monopoly of the sector and
ushering in competition.
Deregulation is expected to enhance efficiency in two ways.
First is through the curtailment of the inefficiency that arises as a result of
regulation and isolation of firms from actual and potential competition.
Secondly, rents accruing to rent-seeking groups benefiting from regulation
would be dissipated by a more competitive market environment. While much has
been written about the experience of developed economies with deregulation and
privatization of public utilities (Oniki et al, 1992; Imai, 1994; Wellenius and
Stern, 1994),there have been few studies on the experience of developing
countries especially those in Africa.
In the main, this study examines the impetus for reform, what
happened in the wake of commercialization and deregulation, and the changes in
the economic environment. The
telecommunication sector is the most rapidly growing and technologically
dynamic sector and the pressure to move t he sector out or it's traditional
public utility monopoly status is being exerted all over the world and is
ultimately irresistible.
1.1 SIGNIFICANCE OF
THE STUDY
Telecommunications infrastructure lies at the heart of the information
economy. Countries lacking modern telecommunications infrastructure cannot
compete effectively in the global economy. Until the early 1980s, the
telecommunications sector was viewed as the quintessential public utility.
Economies of scale, combined with political sensitivity, created large entry
barriers and externalities, beginning from the 1980s, however, policy makers
gradually began to recognize that telecommunications systems are as essential
infrastructure for economic development. As the economy broadens and becomes
critically dependent on vastly expanded flows of information,
telecommunications acquires strategic importance for economic growth and
development. Rapid innovations in telecommunications andinformation technology
arc lowering costs, creating new services and changing U1C cost structure of
many industries. Driven by unrelenting technological and market forces,
telecommunications has become one of the world's most dynamic sectors Wellenius
and Stern, 1994; Saunders et al, 1994).
In response to the need to overcome persistent shortfall in
telecommunications investments and performance, telecommunications
restructuring has assumed a global dimension and the wave of telecommunication
reforms that began in the 1980s in a few highly developed economies quickly
spread to several developing countries. By 1993, major reforms had been
undertaken in at least 15 developing counties and a comparable number were In
preparation [Wellenius and Stern, 1994). The impact of these new policy initiatives
has been profound, hut if the new pragmatism in telecommunications policy is to
succeed, policy initiatives will need to be broadened and deepened.
1.2 STATEMENT OF
PROBLEM
Prior to commercialization, NITEL operated as a very
inefficient. monopoly grappling with lack of clear policy direction, counter
productive bureaucratic red tape and a myriad of other problems. These problems
led to sub-optimal performance in all spheres of its 'operations, from
inadequate infrastructure to very low quality customers services, Up to 1991,
access to telephone services was limited to about 20% of the population and
area of coverage. As at December 1991,
there were about 450,000 direct exchange lines giving an average penetration
level of about 1 line per 250 inhabitants as against international
telecommunications union recommendation of 1 line per 100 persons for
developing nations. There were over 500,000 waiting applicants nationwide,
while telex subscriber figures stood at 7,985.
These figures reflects poor capacity utilization since
installed telephone and telex capacities were over 500,000 and 15,000
respectively. The quality of services was also poor and constant congestion of
switching equipment led to long dial tone delays and very low call completion rates.
On average, the call completion rates for local, long distance and incoming
international calls were as low as 40, 40 and 45 respectively, as against the
expected 60 and 50% for local and international calls (Nwafor, 1997).
Furthermore, an efficient billing system was lacking and in
fact it was suspected that about 20%) of subscribes did not receive bills,
while only 7% of amounts generated were being collected. These factors
culminated in consistent. operating losses and low returns on investment as showed
in it's audited accounts, which recorded persistent losses.
1.3 AIMS AND
OBJECTIVES
The main objective of the study IS to ascertain the
quantitative and qualitative evidence concerning the efficiency and welfare
improving effects of deregulation of thetelecommunications sector in Nigeria.
the specific objectives of the study are:
· To analyse the
production structure of Nigerian telecommunications and estimate the total
factor productivity growth.
· To decompose
total factor productivity growth into scale economies and deregulation effects
with a view to estimating efficiency gains due to deregulation.
· To assess the
regulatory changes in the sector in the wake of commercialization.
· To analyse the
options for evolving a viable telecommunications sector in Nigeria.
1.4 STATEMENT OF
HYPOTHESIS
HYPOTHESIS 1
Ho: The deregulation
of the telecommunication industry does not significantly influence the
efficiency of the industry negatively.
HI: The
deregulation of the telecommunication industry does significantly influence the
efficiency of the industry negatively.
HYPOTHESIS 2
Ho: The
deregulation of telecommunication industry does not discourage competition.
H1: The deregulation
of telecommunication industry docs discourage competition.
HYPOTHESIS 3
H0: The
deregulation of telecommunication industry does not result to exploitation of
consumers.
HI: The
deregulation of telecommunication industry does results to exploitation of
consumers.
1.5 RESEARCH
METHODOLOGY
Data to be used in this study would be secondary and partly
primary data. Primary data will be derived from questionnaires, while tile
secondary data would constitute publications from the Nigerian communications
commission (NCC), the ministry of communications and alsounpublished write-ups.
The qualitative data analysis will he through chi-square
technique to evaluate the desirabilityof deregulation in the telecommunication
industry in Nigeria.
.
1.6 SCOPE AND
LIMITATION OF STUDY
Since it's inception a little over a century ago, Nigeria's
telecommunications system has progressed through various stages of development
from the primitive communications equipment in it's colonial days to "the
enormous variety of technologies available today. The process of Nigeria's
telecommunications development and its progress, problems andprospects are
examined and discussed from it's emergence to the expansion and modernizat.ion
efforts of the 1990s.
This research work will be limited in coverage to the
Nigerian telecommunications limited(NITEL). The business environment will
include the employees, customers, competitors, theregulatory body etc. the
research work will endeavour to make both the descriptive and empirical
analysis of the desirability of deregulation In the telecommunication industry
with special emphasis being placed on NITEL.
1.7 PLAN OF THE STUDY
Chapter one will give a background of the study, it also
contains the objectives, significance of the study as well as the scope and limitations
of the study.
Chapter two which is the literature review and conceptual
framework would review a conceptualization of issues relating to the study.
Chapter three would show the research methodology used in the
study.
Chapter four would show the presentation and analysis of data
here, results of research findings will be analyzed, interpreted and
summarized."
Chapter five will include summary of findings, which will
lead naturally to it's conclusion. The conclusion will thus be used as basis for
making recommendations regarding the use of the information provided by the
study.
REFERENCES
1. Abdukadir, A
(19961: Telecommunication
Development in
Nigeria". NITEL Journal, Vol. 17: 30 - 32.
2. Attah, M.
E. Current
Trends and Future Development in
Telecommunications in Nigeria Presented at the 1988Annual
Conference of the Nigerian Association of Radio Science, Lagos.
3. Cook, P &
Kirkpatrick,
Privatization in less Developed
Eds. (1988): Countries. New
York,
4. Galal, A &
B. Navriyal
"Regulating Telecommunication in
(1995):
Developing
Countries: Outcomes,
Incentives 'and Commitment". Policy Research Working
Paper, 1520. Washington D. C.: TheWorld
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