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Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints

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  • Valletti, Tommaso M
  • Hoernig, Steffen
  • Barros, Pedro P

Abstract

Universal service objectives are pervasive in telecommunications, and have gained new relevance after the introduction of competition in many markets. Despite their policy relevance, little work has been done allowing for a thorough discussion of instruments designed to achieve universal service objectives under competition. We intend to fill this gap, and disaggregate the problem into interacting forms of regulatory intervention such as uniform pricing and coverage constraints. It is shown that these are not competitively neutral and may have far-reaching strategic effects. Under uniform pricing, equilibrium coverage of both incumbent and entrant may be lower than without regulation. These effects depend on which measures are imposed at the same time, thus no single measure can be evaluated in isolation. We also point out that different groups of consumers are affected in different ways, making welfare comparisons difficult. Copyright 2002 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 21 (2002)
Issue (Month): 2 (March)
Pages: 169-90

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Handle: RePEc:kap:regeco:v:21:y:2002:i:2:p:169-90

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Web page: http://www.springerlink.com/link.asp?id=100298

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  1. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  2. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
  3. Bagwell, K. & Wolinsky, A., 2000. "Game Theory and Industrial Organization," Discussion Papers 2000_01, Columbia University, Department of Economics.
  4. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-59, December.
  5. repec:fth:coluec:9900-03 is not listed on IDEAS
  6. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November.
  7. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  8. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  9. Rosston, G.R. & Wimmer, B.S., 2000. "The "State" of Universal Service," Papers 99-018, United Nations World Employment Programme-.
  10. Rosston, Gregory L. & Wimmer, Bradley S., 2000. "The 'state' of universal service," Information Economics and Policy, Elsevier, vol. 12(3), pages 261-283, September.
  11. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
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