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Regulation and Investment in Network Industries: Evidence from European Telecoms

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Author Info
Michal Grajek (ESMT European School of Management and Technology)
Lars-Hendrik Röller (ESMT European School of Management and Technology)

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Abstract

We provide evidence of an inherent trade-off between access regulation and investment incentives in telecommunications by using a comprehensive data set covering 70+ fixed-line operators in 20 countries over 10 years. Our econometric model accommodates: different investment incentives for incumbents and entrants; a strategic interaction of entrants’ and incumbents’ investments; and endogenous regulation. We find access regulation to negatively affect both total industry and individual carrier investment. Thus promoting market entry by means of regulated access undermines incentives to invest in facilities-based competition. Moreover, we find evidence of a regulatory commitment problem: higher incumbents’ investments encourage provision of regulated access.

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Publisher Info
Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-09-004.

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Length: 32 pages
Date of creation: 15 Jun 2009
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Handle: RePEc:esm:wpaper:esmt-09-004

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Related research
Keywords: telecommunications; access regulation; unbundling; investment;

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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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. Li, Wei & Xu, Lixin Colin, 2004. "The Impact of Privatization and Competition in the Telecommunications Sector around the World," Journal of Law & Economics, University of Chicago Press, vol. 47(2), pages 395-430, October.
  2. Guenther Filler & Martin Odening & Ostap Okhrin & Wei Xu, 2009. "On the Systemic Nature of Weather Risk," SFB 649 Discussion Papers SFB649DP2009-002, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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  3. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, 06. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-12-2.

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