How EU sector-specific regulations and competition affect migration from old to new communications infrastructure: recent evidence from EU27 member states

In a time of rapidly increasing global digitalization, providers of communications networks find themselves confronted with huge growth in broadband-intense demand and hence must address the need to expand high-performance fiber optic networks. However, since deployment of fiber access networks is subject to high risk for operators, a core question faced by regulatory institutions is how to optimally design the regulatory framework to incentivize investment. This work employs recent EU27 panel data and examines the role of regulatory policies and competition controlling for relevant supply and demand side factors and the investment dynamics. The results indicate that relevant forms of previous broadband access regulation have a negative impact on investment in new fiber infrastructure. Furthermore, infrastructure-based competition from mobile operators and the replacement effect stemming from the incumbents’ existing infrastructure exert a negative impact on investment incentives. Finally, there is clear evidence of adjustment costs underlying the fiber deployment process. Copyright Springer Science+Business Media New York 2015