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Level of Access and Competition in Broadband Markets

Author

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  • Bourreau Marc

    (Telecom Paris Tech)

  • Dogan Pinar

    (Harvard University)

Abstract

We consider an unregulated incumbent who owns a broadband infrastructure and decides on how much access to provide to a potential entrant. The level of access determines the amount of investment the entrant needs to undertake to enter the market, and the intensity of post-entry competition. We show that the equilibrium level of access is higher when the sensitivity of product differentiation to the level of access is lower, and when the investment cost is higher. We also show that the incumbent sets a suboptimally low (high) level of access if the degree of service differentiation is sufficiently high (low).

Suggested Citation

  • Bourreau Marc & Dogan Pinar, 2012. "Level of Access and Competition in Broadband Markets," Review of Network Economics, De Gruyter, vol. 11(1), pages 1-33, March.
    • Handle: RePEc:bpj:rneart:v:11:y:2012:i:1:n:1
    DOI: 10.1515/1446-9022.1339
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    References listed on IDEAS

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    1. Marc Bourreau & Johan Hombert & Jerome Pouyet & Nicolas Schutz, 2011. "Upstream Competition between Vertically Integrated Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 677-713, December.
    2. Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, vol. 49(1), pages 173-199, January.
    3. João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
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    6. Wallsten Scott & Hausladen Stephanie, 2009. "Net Neutrality, Unbundling, and their Effects on International Investment in Next-Generation Networks," Review of Network Economics, De Gruyter, vol. 8(1), pages 1-23, March.
    7. Marc Bourreau & Pinar Dogan, 2006. ""Build-or-Buy" Strategies in the Local Loop," American Economic Review, American Economic Association, vol. 96(2), pages 72-76, May.
    8. Cambini, Carlo & Jiang, Yanyan, 0. "Broadband investment and regulation: A literature review," Telecommunications Policy, Elsevier, vol. 33(10-11), pages 559-574, November.
    9. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    10. Philip Gayle & Dennis Weisman, 2007. "Are input prices irrelevant for make-or-buy decisions?," Journal of Regulatory Economics, Springer, vol. 32(2), pages 195-207, October.
    11. Arya, Anil & Mittendorf, Brian & Sappington, David E.M., 2008. "Outsourcing, vertical integration, and price vs. quantity competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 1-16, January.
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    Citations

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    Cited by:

    1. Marc Bourreau & Pınar Doğan & Romain Lestage, 2014. "Level of access and infrastructure investment in network industries," Journal of Regulatory Economics, Springer, vol. 46(3), pages 237-260, December.
    2. Ricardo GONCALVES & Álvaro NASCIMENTO, 2013. "Next Generation Access Networks: The Post-Investment Conundrum," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(92), pages 91-112, 4th quart.
    3. Renata Sliwa, 2015. "Facility-based competition — toward more deregulation in telecommunications sector," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 14(2), pages 261-273, June.

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