Unbundling the Incumbent and Deployment of High-Speed Internet: Evidence from France

In this paper, we study the impact of competition on the legacy copper network on the deployment of high-speed broadband. We first develop a theoretical model, which shows that the relation between the number of competitors and investment in a quality-improving technology can be positive if the quality of the new technology is high enough, and is negative otherwise. We test these theoretical predictions using data on broadband deployments in France in more than 36,000 local municipalities. First, using panel data over the period 2011-2014, we estimate a model of entry into local markets by alternative operators using local loop unbundling (LLU). Second, using cross-sectional data for the year 2015, we estimate how the number of LLU entrants impacts the deployment of high-speed broadband, controlling for the endogeneity of LLU entry. We find that a higher number of LLU competitors implies lower incentives to deploy and expand coverage of fast broadband, with speed of 30Mbps or more. By contrast, a higher number of local competitors has a positive effect on the incentive to deploy super-fast broadband, with speed of 100Mbps or more, but has no significant effect on the incentive to expand coverage of this technology.