Munich Personal RePEc Archive

A Regulatory Framework for New and Emerging Markets

Baake, Pio and Kamecke, Ulrich and Wey, Christian (2005): A Regulatory Framework for New and Emerging Markets. Published in: International Journal of Digital Economics No. 60 (December 2005): pp. 123-146.

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The future of the information society crucially depends on investments in upgrading existing infrastructures and building new networks. Traditional cost-based regulation, which focuses on issues of static efficiency and service-based competition necessarily has negative effects on innovation incentives and the emergence of infrastructure-based competition in the highly dynamic telecommunications industry. This paper presents a regulatory framework for new infrastructures, which makes ex ante regulation contingent to the tendency towards effective competitive structures. Unlike the standard Significant Market Power-test (SMP), this approach takes a longer term perspective and therefore secures operators' investment incentives. The proposal has several desirable incentive effects. Firstly, it counters incentives to free-ride on investments by potential competitors, and secondly, it makes preemptive and other predatory practices by the investing firm less attractive. As a result, our proposal of contingent regulation in emerging markets promotes infrastructure-based competition in telecommunications.

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