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A Critical Review of the “Ladder of Investment†Approach

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  • Dogan, Pinar
  • Bourreau, Marc
  • Manant, Matthieu

Abstract

The “ladder of investment†is a regulatory approach proposed by Cave (2006), which has been widely embraced by national regulatory authorities in the European telecommunications sector. The approach entails providing entrants, successively, with different levels of access—the “rungs†of the investment ladder, while inducing them to climb the ladder by setting an access charge that increases over time or by withdrawing access obligations after some pre-determined date (i.e., by setting sunset clauses). Proponents of the ladder of investment approach claim that such regulatory measures would make service-based entry and facility-based entry complements—albeit they have been traditionally viewed as substitutes—in promoting competition. The regulators, thus, have shown a strong interest in this approach. The paper provides a critical review of the ladder of investment approach by setting out its two underlying assumptions and discussing their validity with references to the related industrial organization literature.

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Bibliographic Info

Paper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 4777447.

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Date of creation: 2010
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Publication status: Published in Telecommunications Policy
Handle: RePEc:hrv:hksfac:4777447

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  1. Hori, Keiichi & Mizuno, Keizo, 2006. "Access pricing and investment with stochastically growing demand," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(4), pages 795-808, July.
  2. Marc Bourreau & Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2009. "Upstream Competition between Vertically Integrated Firms," PSE Working Papers hal-00440126, HAL.
  3. Vareda, João & Hoernig, Steffen, 2007. "The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?," FEUNL Working Paper Series wp524, Universidade Nova de Lisboa, Faculdade de Economia.
  4. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  5. Distaso, Walter & Lupi, Paolo & Manenti, Fabio M., 2006. "Platform competition and broadband uptake: Theory and empirical evidence from the European union," Information Economics and Policy, Elsevier, Elsevier, vol. 18(1), pages 87-106, March.
  6. Vareda, João, 2007. "Access Regulation under Asymmetric Information about Demand," FEUNL Working Paper Series wp525, Universidade Nova de Lisboa, Faculdade de Economia.
  7. David E. M Sappington, 2005. "On the Irrelevance of Input Prices for Make-or-Buy Decisions," American Economic Review, American Economic Association, American Economic Association, vol. 95(5), pages 1631-1638, December.
  8. Duarte Brito & Pedro Pereira, 2006. "Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?," Working Papers, Portuguese Competition Authority 16, Portuguese Competition Authority.
  9. M. Bourreau & P. Dogan, . "Build or Buy Strategies in the Local Loop," Working Paper 33647, Harvard University OpenScholar.
  10. Valletti, Tommaso M., 0. "The theory of access pricing and its linkage with investment incentives," Telecommunications Policy, Elsevier, Elsevier, vol. 27(10-11), pages 659-675, November.
  11. Philip Gayle & Dennis Weisman, 2007. "Are input prices irrelevant for make-or-buy decisions?," Journal of Regulatory Economics, Springer, Springer, vol. 32(2), pages 195-207, October.
  12. Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, Elsevier, vol. 49(1), pages 173-199, January.
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Citations

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Cited by:
  1. Bourreau, Marc & Cambini, Carlo & Dogan, Pinar, 2011. "Access Pricing, Competition, and Incentives to Migrate From "Old" to "New" Technology," Scholarly Articles 5098425, Harvard Kennedy School of Government.
  2. Howell, Bronwyn, 2012. "Competition and Regulation Policy in Antipodean Government-Funded UltraFast Fibre Broadband Markets," Working Paper Series, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation 2787, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  3. Marc Bourreau & Joeffrey Drouard, 2014. "Progressive entry and the incentives to invest in alternative infrastructures," Post-Print, HAL hal-01016366, HAL.
  4. Naoaki Minamihashi, 2012. "Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks," Working Papers, Bank of Canada 12-26, Bank of Canada.
  5. Maya Bacache & Marc Bourreau & Germain Gaudin, 2014. "Dynamic Entry and Investment in New Infrastructures: Empirical Evidence from the Fixed Broadband Industry," Review of Industrial Organization, Springer, Springer, vol. 44(2), pages 179-209, March.
  6. Briglauer, Wolfgang, 2013. "The impact of regulation and competition on the adoption of fibre-based broadband services: Recent evidence from the European Union member states," 24th European Regional ITS Conference, Florence 2013 88494, International Telecommunications Society (ITS).
  7. Bauer, Johannes M. & Shim, Woohyun, 2012. "Regulation and digital innovation: Theory and evidence," 23rd European Regional ITS Conference, Vienna 2012 60364, International Telecommunications Society (ITS).
  8. Wolfgang Briglauer, 2014. "The impact of regulation and competition on the adoption of fiber-based broadband services: recent evidence from the European union member states," Journal of Regulatory Economics, Springer, Springer, vol. 46(1), pages 51-79, August.

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