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Dynamic access pricing and investment in alternative infrastructures

  • Avenali, Alessandro
  • Matteucci, Giorgio
  • Reverberi, Pierfrancesco
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    We analyze the impact of access price regulation on the entrants' investment in network quality. We consider a dynamic framework where developing an alternative infrastructure requires both time and a captive customer base. We show that a multi-period schedule where regulated access charges rise over time is critical to foster efficient infrastructure investment. Nonetheless, a sunset clause on regulation dilutes investment incentives. We also show that, in the absence of regulatory commitment, the time-dependent schedule may not be robust to sequential entry. Hence, to preserve investment by early entrants, access charges should depend both on time and the entry period, in such a way that each entrant is provided with the same dynamic access conditions. The relevance of these issues carries over to the prospective deployment of new access infrastructures, the so-called Next Generation Access networks.

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    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 28 (2010)
    Issue (Month): 2 (March)
    Pages: 167-175

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    Handle: RePEc:eee:indorg:v:28:y:2010:i:2:p:167-175
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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