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The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?

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Author Info

  • João Vareda

    ()
    (Autoridade da Concorrência)

  • Steffen Hoernig

    ()
    (FEUNL)

Abstract

We analyze the impact of mandatory access on the infrastructure investments of two competing communications networks, and show that for low (high) access charges firms wait (preempt each other). Contrary to previous results, under preemption a higher access charge can delay first investment. While first-best investment cannot be achieved with a fi?xed access tariff, simple instruments such as banning access in the future, or granting access holidays right after investment, can improve efficiency. The former forces investment when it would happen too late, while the latter allows for lower access charges in order to delay the second investment when it would happen too early.

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Bibliographic Info

Paper provided by Portuguese Competition Authority in its series Working Papers with number 29.

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Length: 31 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:pca:wpaper:29

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Keywords: Access pricing; Investments; Preemption; Access ban; Access holidays;

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References

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  1. Bastos Vareda, João Miguel & Hoernig, Steffen, 2007. "The Race for Telecoms Infrastructure Investment with Bypass: Can Access Regulation Achieve the First-best?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6203, C.E.P.R. Discussion Papers.
  2. Keiichi Hori & Keizo Mizuno, 2004. "Network Investment and Competition with Access-to-Bypass," Econometric Society 2004 Australasian Meetings 138, Econometric Society.
  3. 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.
  4. Simon, Leo K & Stinchcombe, Maxwell B, 1989. "Extensive Form Games in Continuous Time: Pure Strategies," Econometrica, Econometric Society, Econometric Society, vol. 57(5), pages 1171-1214, September.
  5. 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.
  6. M. Bourreau & P. Dogan, . "Unbundling the Local Loop," Working Paper 33648, Harvard University OpenScholar.
  7. 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.
  8. Hoppe, Heidrun C. & Lehmann-Grube, Ulrich, 2005. "Innovation timing games: a general framework with applications," Journal of Economic Theory, Elsevier, Elsevier, vol. 121(1), pages 30-50, March.
  9. Dogan, Pinar & Bourreau, Marc, 2005. ""Build or Buy" Strategies in the Local Loop," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp05-060, Harvard University, John F. Kennedy School of Government.
  10. Gans, Joshua S, 2001. "Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities," Journal of Regulatory Economics, Springer, Springer, vol. 20(2), pages 167-89, September.
  11. Michael H. Riordan, 1991. "Regulation and Preemptive Technology Adoption," Papers, Boston University - Industry Studies Programme 0018, Boston University - Industry Studies Programme.
  12. Joshua S. Gans & Stephen P. King, 2004. "Access Holidays and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 80(248), pages 89-100, 03.
  13. Bijl, P.W.J. de & Peitz, M., 2004. "Unbundling the Local Loop: One-Way Access and Imperfect Competition," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2004-025, Tilburg University, Tilburg Law and Economic Center.
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Citations

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Cited by:
  1. Duarte Brito & Pedro Pereira & João Vareda, 2008. "Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks," Working Papers, NET Institute 08-10, NET Institute, revised Oct 2008.
  2. Vareda, João, 2010. "Access regulation under asymmetric information about the entrant's efficiency," Information Economics and Policy, Elsevier, Elsevier, vol. 22(2), pages 192-199, May.
  3. Calzada, Joan & Martínez-Santos, Fernando, 2014. "Broadband prices in the European Union: Competition and commercial strategies," Information Economics and Policy, Elsevier, Elsevier, vol. 27(C), pages 24-38.
  4. João Vareda & Steffen Hoernig, 2007. "The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?," Working Papers, Portuguese Competition Authority 29, Portuguese Competition Authority.
  5. Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the “Ladder of Investment†Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.
  6. Flacher, David & Jennequin, Hugues, 2012. "Access regulation and geographic deployment of a new generation infrastructure," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72537, International Telecommunications Society (ITS).
  7. Vareda, João, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," FEUNL Working Paper Series wp526, Universidade Nova de Lisboa, Faculdade de Economia.
  8. Jaunaux, Laure & Lebourges, Marc, 2013. "Economic replicability tests for next-generation access networks," 24th European Regional ITS Conference, Florence 2013 88501, International Telecommunications Society (ITS).

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