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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. Hori, Keiichi & Mizuno, Keizo, 2006. "Access pricing and investment with stochastically growing demand," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 795-808, July.
  2. Gans, Joshua S, 2001. "Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities," Journal of Regulatory Economics, Springer, vol. 20(2), pages 167-89, September.
  3. Keiichi Hori & Keizo Mizuno, 2004. "Network Investment and Competition with Access-to-Bypass," Econometric Society 2004 Australasian Meetings 138, Econometric Society.
  4. Joshua S. Gans & Stephen P. King, 2004. "Access Holidays and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 89-100, 03.
  5. Simon, Leo K. & Stinchcombe, Maxwell B., 1987. "Extensive From Games in Continuous Time: Pure Strategies," Department of Economics, Working Paper Series qt03x115sh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. 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.
  7. Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, vol. 49(1), pages 173-199, January.
  8. Bijl, P.W.J. de & Peitz, M., 2004. "Unbundling the Local Loop: One-Way Access and Imperfect Competition," Discussion Paper 2004-025, Tilburg University, Tilburg Law and Economic Center.
  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, vol. 27(10-11), pages 659-675, November.
  11. 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.
  12. Hoppe, Heidrun C. & Lehmann-Grube, Ulrich, 2005. "Innovation timing games: a general framework with applications," Journal of Economic Theory, Elsevier, vol. 121(1), pages 30-50, March.
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Citations

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Cited by:
  1. 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).
  2. 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.
  3. Calzada, Joan & Martínez, Fernando, 2012. "Broadband prices in the European Union: Competition and commercial strategies," 23rd European Regional ITS Conference, Vienna 2012 60382, International Telecommunications Society (ITS).
  4. João Vareda & Steffen Hoernig, 2007. "The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?," Working Papers 29, Portuguese Competition Authority.
  5. Vareda, João, 2010. "Access regulation under asymmetric information about the entrant's efficiency," Information Economics and Policy, Elsevier, vol. 22(2), pages 192-199, May.
  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. Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the “Ladder of Investment†Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.

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