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Procompetitive infrastructure sector regulation and diffusion of innovation: The case of broadband networks

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  • Gruber, Harald
  • Koutroumpis, Pantelis
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    Abstract

    The paper assesses the scope for competition inducing infrastructure regulation in furthering the diffusion of innovation. The paper uses data on the adoption of broadband services comprising a global panel of 167 countries. The effects of different regulatory provisions are assessed. The result of this paper allows qualifying different elements of the regulatory debate on the consequences of access requirements, including mandatory unbundling. First, it suggests that interplatform competition is generally not leading to acceleration in broadband diffusion. Second, with respect to intra-platform competition, this has been analyzed at two different levels: full unbundling and retail competition. In the first case the competitor is investing in network infrastructure to be able to induce some degree of service differentiation. With retail competition the scope for service differentiation is much more limited and hence competition is most likely centered on price. While both lead to faster diffusion, the results consistently show that the effect from retail competition is proportionally about twice as strong compared to unbundling. Moreover, the analysis of the time profile of the effects show that this impact on diffusion first increases until the third or fourth year after introduction, but then dissipates away. Also here one can argue that retail differentiation leads to more intense price competition and therefore faster diffusion. Different robustness checks for the results are provided. --

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    Bibliographic Info

    Paper provided by International Telecommunications Society (ITS) in its series 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues with number 52161.

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    Date of creation: 2011
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    Handle: RePEc:zbw:itse11:52161

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    Web page: http://www.itseurope.org/

    Related research

    Keywords: Broadband; regulation; innovation; service competition; platform competition; local loop unbundling;

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    1. Mark Armstrong & David Sappington, 2005. "Regulation, Competition and Liberalization," Industrial Organization 0505011, EconWPA, revised 07 Oct 2005.
    2. Röller, Lars-Hendrik & Waverman, Leonard, 2000. "Telecommunications Infrastructure And Economic Development: A Simultaneous Approach," CEPR Discussion Papers 2399, C.E.P.R. Discussion Papers.
    3. Bouckaert J. & van Dijk Th. & Verboven F., 2010. "Access regulation, competition, and broadband penetration: an international study," Working Papers 2010020, University of Antwerp, Faculty of Applied Economics.
    4. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September.
    5. Czernich, Nina & Falck, Oliver & Kretschmer, Tobias & Wößmann, Ludger, 2011. "Broadband Infrastructure and Economic Growth," Munich Reprints in Economics 20033, University of Munich, Department of Economics.
    6. 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.
    7. Gary Madden & Michael Simpson, 1997. "Residential broadband subscription demand: an econometric analysis of Australian choice experiment data," Applied Economics, Taylor & Francis Journals, vol. 29(8), pages 1073-1078.
    8. Mario Denni & Harald Gruber, 2006. "The diffusion of broadband telecommunications: the role of competition," Departmental Working Papers of Economics - University 'Roma Tre' 0060, Department of Economics - University Roma Tre.
    9. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
    10. Bourreau, Marc & Dogan, Pinar, 2004. "Service-based vs. facility-based competition in local access networks," Information Economics and Policy, Elsevier, vol. 16(2), pages 287-306, June.
    11. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
    12. Bohlin, Anders & Gruber, Harald & Koutroumpis, Pantelis, 2010. "Diffusion of new technology generations in mobile communications," Information Economics and Policy, Elsevier, vol. 22(1), pages 51-60, March.
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