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How does vertical industry structure affect investment in infrastructure quality?

Author

Listed:
  • Alessandro Avenali

    (Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma)

  • Giorgio Matteucci

    (Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma)

  • Pierfrancesco Reverberi

    (Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma)

Abstract

If the access network is an economic bottleneck, then the regulator may consider vertical separation of the telecommunications incumbent. There is the concern that separation dilutes quality-enhancing network investment, and social welfare. We show that, despite some loss of operational coordination and potential hold-up problems, vertical separation may raise investment and welfare compared with integration. While structural more than functional separation raises investment, it is functional more than structural separation that raises welfare (due to investment cost). The results obtained shed light on the effects of different forms of separation on the incentive to build-out Next Generation Access networks (NGAs).

Suggested Citation

  • Alessandro Avenali & Giorgio Matteucci & Pierfrancesco Reverberi, 2010. "How does vertical industry structure affect investment in infrastructure quality?," DIS Technical Reports 2010-08, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  • Handle: RePEc:aeg:wpaper:2010-8
    as

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    File URL: http://www.dis.uniroma1.it/~bibdis/RePEc/aeg/wpaper/2010-08.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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