Network Investment, Access and Competition

Inderst, Roman and Peitz, Martin (2012): Network Investment, Access and Competition. Published in: Telecommunications Policy , Vol. 36, No. 5 (June 2012): pp. 407-418.

Abstract

We analyze the role of different contract types and access regulation on innovation and competition in telecommunications in the context of Next Generation Access Networks. Within a standard duopoly model, we show that ex-post access contracts lead less often to the duplication of investment, but to a wider roll-out compared to a market in which such contracts cannot be offered. In comparison to such ex-post contracts, ex-ante contracts lead to an even wider roll-out, but to a less frequent duplication of investments. Ex-ante contracts in particular, but also ex-post contracts, can be used to dampen competition.

• Item Type: MPRA Paper
• Language: English
• Keywords: Telecommunication; NGN, Access surcharge; Investment, Innovation; Contracts between network operators
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory

References

Armstrong, M. (2002), The Theory of Access Pricing and Interconnection, in: M. Cave, S. Majumdar , and I. Vogelsang (eds.), Handbook of Telecommunications Economics, Amsterdam: North Holland.

Armstrong, M., C. Doyle, and J. Vickers (1996), The Access Pricing Problem: A Synthesis, Journal of Industrial Economics 44, 131—150.

Armstrong, M. and J. Vickers (1998), The Access Pricing Problem with Deregulation: A Note, Journal of Industrial Economics 46, 115—121.

Arrow, K. (1962), Economic Welfare and the Allocation of Resources Inventions, in: Nelson, R. (ed.), The Rate and Direction of Inventive Activity, Princeton University Press.

Belleflamme, P. and M. Peitz (2010), Industrial Organization: Markets and Strategies, Cambridge University Press.

Bourreau M., Cambini C., and P. Dogan (2011), Access Pricing, Competition, and Incentives toMigrate from"Old" to "New"Technology,HarvardKennedy School of Government, Working Paper n. 11-029, July, Cambridge (MA).

Bourreau, M., C. Cambini, and S. Hoernig (2011), Ex-ante Regulation and Co-Investment in the Transition to Next Generation Access, forthcoming in Telecommunications Policy.

Bourreau, M. and P. Dogan (2005), Unbundling the Local Loop, European Economic Review 49, 173-199.

Brito, D., P. Pereira, and J. Vareda (2010), Can Two-Part Tariffs Promote Efficient Investment on Next Generation Networks?, International Journal of Industrial Organization 28, 323-333

Cave, M. (2010), Snakes and Ladders: Unbundling in a Next Generation World, Telecommunications Policy 34, 80-85.

Cambini, C. and Y. Jiang (2009), Broadband Investment and Regulation: A Literature Review, Telecommunications Policy 33, 559—574.

Chang, H., H. Koski, and S.K. Majumdar (2003), Regulation and Investment Behaviour in the Telecommunications Sector: Policies and Patterns in US and Europe, Telecommunications Policy 27, 677-699.

De Bijl, P. and M. Peitz (2002), Regulation and Entry into Telecommunications Markets, Cambridge University Press.

De Bijl, P. and M. Peitz (2005), Local Loop Unbundling in Europe: Experience, Prospects and Policy Challenges, Communications and Strategies 57, 33-57.

De Bijl, P and M. Peitz (2006), Local Loop Unbundling: One-Way Access and Imperfect Competition, in: R. Dewenter and J. Haucap (eds.), Access Pricing: Theory and Practice, Elsevier Science, 91-117.

Foros, O. (2004), Strategic Investments with Spillovers, Vertical Integration and Foreclosure in the Broadband Access Market, International Journal of Industrial Organization 22, 1-24.

Gans, J. (2001), Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities, Journal of Regulatory Economics 20, 167-189.

Gans, J., and S. King (2004), Access Holidays and the Timing of Infrastructure Investment, Economic Record 80, 89-100.

Gans, J. and P. Williams (1999), Access Regulation and the Timing of Infrastructure Investment, Economic Record 79, 127-138.

Grossman, S. and O. Hart (1986), The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration, Journal of Political Economy 94, 691-719.

Gual, J. and P. Seabright (2000), The Economics of Local Loop Unbundling, paper prepared for DGCOMP (European Commission), University of Navarra and University of Cambridge.

Guthrie, G. (2006), Regulating Infrastructure: The Impact on Risk and Investment, Journal of Economic Literature 44, 925-972.

Hori, K. and K. Mizuno (2006), Access Pricing and Investment with Stochastically Growing Demand, International Journal of Industrial Organization 24, 795-808.

Inderst, R. and M. Peitz (2011a), Market Asymmetries and Investments in NGA, mimeo.

Inderst, R. and M. Peitz (2011b), Unsicherheit, Investitionen und Regulierung bei NGA, mimeo. Jorde, T.M., J.G. Sidak, and D.J. Teece (2000), Innovation, Investments, and Unbundling, Yale Journal of Regulation 17, 1-37.

Klumpp, T. and X. Su (2010), Open Access and Dynamic Efficiency, American Economic Journal: Microeconomics 2, 64-96. Kotakorpi, K. (2006), Access Price Regulation, Investment and Entry in Telecommunications, International Journal of Industrial Organization 24, 1013-20.

Laffont, J.-J., and J. Tirole (1994), Access Pricing and Competition, European Economic Review 38, 1673-1710.

Laffont, J.-J. und J. Tirole (2000), Competition in Telecommunications. Cambridge MA: MIT Press.

Lewis, T.R. and D.E.M. Sappington (1999), Access Pricing with Unregulated Downstream Competition, Information Economics and Policy 11, 73-100.

Nitsche, R. and L. Wiethaus (2011), Access Regulation and Investment in Next Generation Networks–A Ranking of Regulatory Regimes, International Journal of Industrial Organization 29, 263-272.

Pindyck, R. (2007), Mandatory Unbundling and Irreversible Investment in Telecom Networks, Review of Network Economics 6, 274-298.

Sappington, D. E. (2006), Regulation in Vertically-Related Industries: Myths, Facts, and Policy, Review of Industrial Organization 28, 3-16.

Valletti, T. (2003), The Theory of Access Pricing and Its Linkage with Investment Incentives, Telecommunications Policy 27, 659-75.

Vareda, J. (2009a), Access regulation and the Incumbent Investment in Quality Upgrades and Cost Reduction, mimeo.

Vareda, J. (2009b), Quality Upgrades and Bypass under Mandatory Access,mimeo.

Vareda, J., and S. Hoernig (2010), Racing for Investment under Mandatory Access, The B.E. Journal of Economic Analysis & Policy 10 (1).

Vogelsang, I. (2003), Price Regulation of Access to Telecommunications Networks, Journal of Economic Literature 41, 830-862.