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Investments and Network Competition

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Author Info
Tommaso M. Valletti () (Imperial College London, CEPR)
Carlo Cambini () (Politecnico di Torino)

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Abstract

We analyze the impact of two-way access charges on the incentives to invest in networks with different levels of quality. When quality has an impact on all calls initiated by customers (destined both on-net and off-net), we obtain a result of ``tacit collusion" even in a symmetric model with two-part pricing. Firms tend to underinvest in quality, and this is exacerbated if they can negotiate reciprocal termination charges above cost. When the quality of off-net calls depends on the interaction between the quality of the two networks, no network has an incentive to jump ahead of its rival by investing more. Ordering information: This article can be ordered from https://pubs3.rand.org/cgi-bin/rje/pdf.cgi.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 2 (Summer)
Pages: 446-468
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Handle: RePEc:rje:randje:v:36:y:2005:2:p:446-468

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Related research
Keywords: Monopolization; Horizontal Anticompetitive Practices Telecommunications interconnection; investment quality; telecommunication; two-way access charges;

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Find related papers by JEL classification:
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June. [Downloadable!] (restricted)
    Other versions:
  2. de Bijl,Paul & Peitz,Martin, 2008. "Regulation and Entry into Telecommunications Markets," Cambridge Books, Cambridge University Press, number 9780521066631.
    Other versions:
  3. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring. [Downloadable!] (restricted)
  4. Armstrong, M., 1996. "Network Interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton. [Downloadable!]
  5. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany. [Downloadable!]
  6. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February. [Downloadable!] (restricted)
  7. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May. [Downloadable!] (restricted)
  8. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February. [Downloadable!] (restricted)
  9. Economides, Nicholas, 1999. "Quality choice and vertical integration," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 903-914, August. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Edmond Baranes, 2006. "Bundling and Collusion on Communications Markets," Working Papers 06-17, NET Institute, revised Oct 2006. [Downloadable!]
  2. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June. [Downloadable!]
  3. Bijl, P.W.J. de & Peitz, M., 2004. "Dynamic Regulation and Entry in Telecommunications Markets: A Policy Framework," Discussion Paper 2004-010, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  4. Hurkens, Sjaak & Jeon, Doh-Shin, 2009. "Mobile Termination and Mobile Penetration," IDEI Working Papers 575, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  5. Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs," Working Papers 07-11, NET Institute, revised Sep 2007. [Downloadable!]
  6. Stennek, Johan & Tangerås, Thomas P., 2007. "Competition vs. Regulation in Mobile Telecommunications," CEPR Discussion Papers 6073, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Edmond Baranes & Laurent Flochel, 2008. "Competition in telecommunication networks with call externalities," Journal of Regulatory Economics, Springer, vol. 34(1), pages 53-74, August. [Downloadable!] (restricted)
  8. Elisabetta Iossa & Francesca Stroffolini, 2008. "Vertical Integration and Costly Demand Information in Regulated Network Industries," CEDI Discussion Paper Series 08-03, Centre for Economic Development and Institutions(CEDI), Brunel University. [Downloadable!]
  9. Felix Höffler, 2009. "Mobile termination and collusion, revisited," Journal of Regulatory Economics, Springer, vol. 35(3), pages 246-274, June. [Downloadable!] (restricted)
  10. Jay Pil Choi & Byung-Cheol Kim, 2008. "Net Neutrality and Investment Incentives," Working Papers 08-03, NET Institute, revised Sep 2008. [Downloadable!]
    Other versions:
  11. Calzada, Joan & Valletti, Tommaso, 2005. "Network Competition and Entry Deterrence," CEPR Discussion Papers 5381, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Yu-Shan Lo, . "Market Shares, Consumer Ignorance and the Reciprocal Termination Charges," Discussion Papers 09/19, Department of Economics, University of York. [Downloadable!]
  13. Pekka Sääskilahti, 2006. "STRATEGIC R&D AND NETWORK COMPATIBILITY †," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(8), pages 711-733, November. [Downloadable!] (restricted)
  14. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, EconWPA. [Downloadable!]
  15. David Gilo & Yossi Spiegel, 2003. "Network Interconnection With Competitive Transit," Working Papers 03-05, NET Institute, revised Dec 2003. [Downloadable!]
  16. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April. [Downloadable!] (restricted)
    Other versions:
  17. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany. [Downloadable!]
  18. Johan Stennek & Thomas TangerŒs, 2008. "Competition vs. Regulation in Mobile Telecommunications," Working Papers 08-09, NET Institute, revised Sep 2008. [Downloadable!]
  19. Cambini, Carlo & Valletti, Tommaso, 2005. "Information Exchange and Competition in Communications Networks," CEPR Discussion Papers 5031, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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This page was last updated on 2010-2-28.

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