Next generation access networks and Smart Grid services - an applied model

The smart grid spreading requires a specific and integrated communication infrastructure at the residential level. Namely, Distribution Network Operators, as private firms, are expected to provide new services to this market. They could provide it through two communication networks, which could be perfect substitutes or complements, with respect to the smart grid service considered. We focus here on smart services such as dynamic tarifs or residential load shedding. With regard to specific networks conditions, DNOs should use their Broadband over Power Lines network and private firm the optical fiber network. We aim to determine the impacts of a cost-efficiency differentiation on the industrial organization, when comparing different cases likely to be observed (private or mixed duopoly). Thus, relying on a standard price model on the Hotelling line, we examine the relationship between the industrial organization and the degree of cost differentiation in a mixed duopoly in which a welfare-maximizing public enterprise competes against a profit-maximizing private firm. We then consider Ramsey-Boiteux pricing to fulfill balanced profit conditions for the regulated firm. We show that several industrial competition structures are implied by this efficiency criteria. Also, cost efficiency gap between the two .rms lead to different situations in terms of welfare and in terms of surplus distribution, providing insights on the fitting regulation scheme implied by costs conditions.