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Economic replicability tests for next-generation access networks

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  • Jaunaux, Laure
  • Lebourges, Marc
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    Abstract

    This paper discusses the relevant cost standard for the economic replicability test for Next-Generation Access (NGA) networks, described in the Recommendation on Costing and Non-discrimination adopted by the European Commission. We demonstrate that a cost standard that implies fully fixed and variable cost recovery for the access seeker would be incompatible with the economics of NGA networks and that such a test would deter NGA investment. We show that to reconcile investment and competition, the wholesale price must be a two-part tariff and the economic replicability test should only be based on variable wholesale prices. We underline that during a transition phase, until competitors have secured access to NGA infrastructure, a temporary second test called the 'competition migration test' should be added to ensure incumbent NGA retail prices do not foreclose copper-based efficient entrants. The tests we propose surpass the limits of the 'ladder of investment' theory by including the business migration effect developed by Bourreau et al. (2012). --

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    Bibliographic Info

    Paper provided by International Telecommunications Society (ITS) in its series 24th European Regional ITS Conference, Florence 2013 with number 88501.

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    Date of creation: 2013
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    Handle: RePEc:zbw:itse13:88501

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

    Related research

    Keywords: Margin squeeze; Regulation; Next-generation access networks;

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    1. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    2. 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.
    3. Bourreau, Marc & Cambini, Carlo & Dogan, Pinar, 2011. "Access Pricing, Competition, and Incentives to Migrate from "Old" to "New" Technology," Working Paper Series rwp11-029, Harvard University, John F. Kennedy School of Government.
    4. Henry ERGAS & Eric RALPH & Emma LANIGAN, 2010. "Price Squeezes and Imputation Tests on Next Generation Access Networks," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 67-86, 2nd quart.
    5. 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.
    6. Brito, Duarte & Pereira, Pedro & Vareda, João, 2010. "Can two-part tariffs promote efficient investment on next generation networks?," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 323-333, May.
    7. 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, vol. 44(2), pages 179-209, March.
    8. Romain Lestage & David Flacher, 2011. "Access Regulation and Welfare," TEMEP Discussion Papers 201185, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Dec 2011.
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