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Level of Access and Competition in Broadband Markets

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  • Bourreau, Marc
  • Dogan, Pinar

Abstract

In this paper, we consider an unregulated incumbent who owns a broadband infrastructure and decides on how much access to provide to a potential entrant. The level of access, i.e., the network elements that are shared in the provision of competing broadband services, not only determines the amount of investment the entrant needs to undertake to enter the market, but also the intensity of post-entry competition. We consider an access scheme that determines an access level and an associated two-part tariff. We show that the equilibrium level of access is higher when the sensitivity of product differentiation to the level of access is lower, and when the marginal investment cost is higher. We also show that the unregulated incumbent sets a suboptimally low (high) level of access if the degree of service differentiation is sufficiently high (low).

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Bibliographic Info

Paper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 4454152.

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Date of creation: 2010
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Publication status: Published in HKS Faculty Research Working Paper Series
Handle: RePEc:hrv:hksfac:4454152

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  1. Marc Bourreau & Johan Hombert & Jerome Pouyet & Nicolas Schutz, 2011. "Upstream Competition between Vertically Integrated Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 677-713, December.
  2. Dogan, Pinar & Bourreau, Marc, 2005. ""Build or Buy" Strategies in the Local Loop," Working Paper Series rwp05-060, Harvard University, John F. Kennedy School of Government.
  3. M. Bourreau & P. Dogan, . "Unbundling the Local Loop," Working Paper 33648, Harvard University OpenScholar.
  4. Arya, Anil & Mittendorf, Brian & Sappington, David E.M., 2008. "Outsourcing, vertical integration, and price vs. quantity competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 1-16, January.
  5. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
  6. Philip Gayle & Dennis Weisman, 2007. "Are input prices irrelevant for make-or-buy decisions?," Journal of Regulatory Economics, Springer, vol. 32(2), pages 195-207, October.
  7. João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
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