In retrospect, telecommunication technology and services have seen incessant renovation and development. The wave of liberalization is also the inexorable trend in the global telecommunications industry, the telecommunications industry in Taiwan can not be excluded itself from the trend. The telecommunications industry in Taiwan has been opened by degrees and sought to establish a fair competitive environment. In the meantime, there are several important changes no matter in facets of regulatory regimes, industrial structure, technology, or market demand, etc. The environment of telecommunications industry became more volatile than the monopoly one's. We extend the opinion of Noam (2006) who observed the long-term upturn and downturn in the American telecommunications industry and concluded that that volatility and cyclicality will be an inherent part of the telecommunication sector in the future. First, in our thesis we explore the cyclical behavior of Taiwan telecommunications industry. As the turning point of the telecommunications industry may be obscure, we adopt a Markov Regime-Switching model with two regimes representing contraction and expansion. This nonlinear, two states, regime-switching model shows that Taiwan telecommunications industry has suffered from the cyclic fluctuation since the liberalization had been followed out. We focus on the mobile phone industry thereafter in this study. Since three telecommunication-related laws passed in 1996, the mobile phone industry is the first industry implemented the liberalization policy. In the process of the mobile phone industry's evolution, the carriers in this industry all experience the rapid growth in the mobile phone penetration rate and the fierce competition. Hence, to identify the main explanatory factors of the mobile phone industry fluctuation and cycles we introduce an 11-variable vector autoregressive (VAR) model. The empirical results confirm that the mobile phone industry' output can be influenced by five factors mainly including the macroeconomic status, demand, network effect, relative equipment import price, and output price, and furthermore, the impetus of the liberalization policy and the progress of the technology also play an important role beyond the five main factors in terms of the separate carriers' analysis.