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

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Author Info
Hoernig, Steffen
Pita Barros, Pedro Luis
Valletti, Tommaso

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Abstract

Universal service objectives are pervasive in telecommunications, and have gained new relevance after liberalization and 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 consider various policy instruments, such as constraints on pricing and coverage. It is shown that these are not competitively neutral and may have far-reaching strategic effects. Equilibrium coverage of both incumbent and entrant may be lower than without regulation, and firms may even (noncooperatively) leave each others' markets to lessen competitive pressure in their remaining markets. 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2789.

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Date of creation: May 2001
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Handle: RePEc:cpr:ceprdp:2789

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Related research
Keywords: Competition; Coverage Constraint; Uniform Pricing Constraint; Universal Service;

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Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

References listed on IDEAS
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  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. [Downloadable!] (restricted)
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  4. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Blackwell Publishing, vol. 41(4), pages 335-59, December. [Downloadable!] (restricted)
    Other versions:
  5. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November. [Downloadable!] (restricted)
  6. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
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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. Ramiro Losada, 2004. "Should Network Operators Be Allowed To Build Joint Facilities?," Economics Working Papers we043914, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  2. Hoernig, Steffen, 2005. "Should Uniform Pricing Contraints be Imposed on Entrants?," CEPR Discussion Papers 5052, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Poudou, J.C. & Roland, M. & Thomas, L., 2007. "Universal Service Obligations and Competition with Asymmetric Information," Cahiers du LASER (LASER Working Papers) 2007.22, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1. [Downloadable!]
  4. Ramiro Losada, 2004. "On The Definition Of Affordable Prices Under Universal Service Obligations," Economics Working Papers we044015, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  5. Hoernig, Steffen H. & Valletti, Tommaso M., 2002. "The Interplay Between Regulation and Competitions: The Case of Universal Service Obligations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. repec:mop:credwp:07.01.67 is not listed on IDEAS
  7. Georg Götz, 2009. "Competition, Regulation, and Broadband Access to the Internet," MAGKS Papers on Economics 200924, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  8. Manuel Willington & Fabián Basso, 2006. "Regulación, Cobertura y Competencia en el Mercado de la Banda Ancha," ILADES-Georgetown University Working Papers inv177, Ilades-Georgetown University, School of Economics and Bussines. [Downloadable!]
  9. Hoerning, Steffen, 2002. "Should Uniform Pricing Constraints be Imposed on Entrants?," FEUNL Working Paper Series wp417, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  10. Levine, Paul L & Rickman, Neil & Tzavara, Dionisia, 2002. "Market Entry and Roll-out With Product Differentiation," CEPR Discussion Papers 3237, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Jérome VICENTE (LEREPS-GRES) & Godefroy DANG NGUYEN (ENST-Bretagne - LUSSI & ICI-UBO), 2005. "Some remarks on Internet-based territorial planning: the role of local public institutions on the diffusion of broadband access (In French)," Cahiers du GRES 2005-23, Groupement de Recherches Economiques et Sociales. [Downloadable!]
  12. Jaag, Christian, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," MPRA Paper 6121, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  13. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February. [Downloadable!] (restricted)
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