How does vertical industry structure affect investment in infrastructure quality?
AbstractIf the access network is an economic bottleneck, then the regulator may consider vertical separation of the telecommunications incumbent. There is the concern that separation dilutes quality-enhancing network investment, and social welfare. We show that, despite some loss of operational coordination and potential hold-up problems, vertical separation may raise investment and welfare compared with integration. While structural more than functional separation raises investment, it is functional more than structural separation that raises welfare (due to investment cost). The results obtained shed light on the effects of different forms of separation on the incentive to build-out Next Generation Access networks (NGAs).
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Bibliographic InfoPaper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIS Technical Reports with number 2010-08.
Date of creation: Sep 2010
Date of revision:
Industry Infrastructure; Network; Regulation;
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