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Should Uniform Pricing Contraints be Imposed on Entrants?

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  • Hoernig, Steffen

Abstract

This paper analyses the effects of universal service obligations, such as uniform pricing, coverage constraints and price caps, on markets newly opened to competition, e.g. broadband services. We show that the requirement of uniform pricing has strong repercussions on coverage decisions. Imposed on the incumbent only, it may distort his coverage decision downward to avoid duopoly entry. If also imposed on entrants it increases the likelihood that entry leads to independent monopolies rather than competition. A large enough coverage constraint on the incumbent re-establishes incentives for duopoly entry, but may lead to higher prices.

Suggested Citation

  • Hoernig, Steffen, 2005. "Should Uniform Pricing Contraints be Imposed on Entrants?," CEPR Discussion Papers 5052, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5052
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    Cited by:

    1. Götz, Georg, 2013. "Competition, regulation, and broadband access to the internet," Telecommunications Policy, Elsevier, vol. 37(11), pages 1095-1109.
    2. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148657, International Telecommunications Society (ITS).
    3. Steffen Hoernig, 2006. "Should uniform pricing constraints be imposed on entrants?," Journal of Regulatory Economics, Springer, vol. 30(2), pages 199-216, August.
    4. Willington, Manuel & Li Ning, Jorge, 2014. "Regulating a monopoly with universal service obligations: The role of flexible tariff schemes," Telecommunications Policy, Elsevier, vol. 38(1), pages 32-48.
    5. Krämer Jan & Vogelsang Ingo, 2016. "Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence," Review of Network Economics, De Gruyter, vol. 15(1), pages 35-61, March.
    6. Balmer, Roberto E., 2014. "Geographic regulation and cooperative investment in next generation broadband networks," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106889, International Telecommunications Society (ITS).
    7. Bourreau, Marc & Cambini, Carlo & Hoernig, Steffen, 2015. "Geographic access markets and investments," Information Economics and Policy, Elsevier, vol. 31(C), pages 13-21.
    8. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    9. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    10. Hoernig, Steffen & Cambini, Carlo, 2013. "Cooperative Investment, Uncertainty and Access," CEPR Discussion Papers 9376, C.E.P.R. Discussion Papers.
    11. Flacher, David & Jennequin, Hugues, 2012. "Access regulation and geographic deployment of a new generation infrastructure," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72537, International Telecommunications Society (ITS).
    12. Axel Gautier & Xavier Wauthy, 2010. "Price competition under universal service obligations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(3), pages 311-326, September.
    13. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148656, International Telecommunications Society (ITS).
    14. Lestage, Romain & Flacher, David, 2014. "Infrastructure investment and optimal access regulation in the different stages of telecommunications market liberalization," Telecommunications Policy, Elsevier, vol. 38(7), pages 569-579.
    15. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
    16. Balmer, Roberto E., 2015. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 26th European Regional ITS Conference, Madrid 2015 127125, International Telecommunications Society (ITS).
    17. Flacher, David & Jennequin, Hugues, 2014. "Access regulation and geographic deployment of a new generation infrastructure," Telecommunications Policy, Elsevier, vol. 38(8), pages 741-759.
    18. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    19. Hoernig, Steffen & Cambini, Carlo, 2012. "Geographic Access Rules and Investments," CEPR Discussion Papers 9013, C.E.P.R. Discussion Papers.
    20. Balmer, Roberto, 2013. "Geographic Regulation and Cooperative Investment in Next Generation Broadband Networks - A Review of Recent Literature and Practical Cases," MPRA Paper 54080, University Library of Munich, Germany.
    21. Balmer, Roberto E., 2015. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 26th European Regional ITS Conference, Madrid 2015 127124, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    Universal service obligations; Uniform pricing; Coverage constraints; price caps; Entry;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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