IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Access Regulation, Financial Structure and Investment in Vertically Integrated Utilities: Evidence from EU Telecoms

Author Info

  • Carlo Cambini
  • Laura Rondi

Abstract

We examine theoretically and empirically the relationship between access regulation, financial structure and investment decisions in network industries, analyzing if financial variables can be used as a strategic device to influence the regulator’s price setting decisions. Using a panel of 15 EU Public Telecommunication Operators (PTOs) over the period 1994-2005, we first investigate the determinants of regulated prices (both wholesale and retail), firm financial structure and investment, and then test the relationship between leverage, regulated charges and firm’s investment. However, our model suggests that if leverage influences the regulated access charges, then it will also impact competition in the downstream segment. Therefore, we also investigate the impact of the PTO’s leverage on market competition. Our results show that leverage positively affects regulated rates, as well as the PTOs’ investment rate, as predicted by Spiegel and Spulber (1994). Moreover, higher leverage also leads to higher access charges and an increase in leverage is followed by a decrease in the number of competitors and by an increase of the incumbent’s market share. This suggests that the strategic use of debt to discipline the regulator’s lack of commitment within a vertically integrated network industry may somewhat impair or delay competition in the retail segment, but has a favorable counterpart in mitigating the underinvestment problem.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/1814/13010
File Function: Full text
Download Restriction: no
File URL: http://cadmus.eui.eu/dspace/bitstream/1814/13010/1/RSCAS_2009_68.pdf
File Function: Full text
Download Restriction: no

Paper provided by European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) in its series EUI-RSCAS Working Papers with number 68.

as
in new window

Length:
Date of creation: 15 Dec 2009
Date of revision:
Handle: RePEc:erp:euirsc:p0233
Contact details of provider: Postal: Via dei Roccettini, 9 - I-50016 San Domenico di Fiesole
Web page: http://www.eui.eu/RSCAS/
More information through EDIRC

Keywords:

Other versions of this item:

Find related papers by JEL classification:
  • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
  • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2002. "Regulation and Investment," Boston College Working Papers in Economics 549, Boston College Department of Economics.
  2. Bortolotti, Bernardo & Cambini, Carlo & Rondi, Laura & Spiegel, Yossi, 2008. "Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?," CEPR Discussion Papers 7100, C.E.P.R. Discussion Papers.
  3. Armstrong, M. & Vickers, J., 1992. "Price Discrimination, Competition and Regulation," Economics Series Working Papers 99140, University of Oxford, Department of Economics.
  4. Levy, Brian & Spiller, Pablo T, 1994. "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 201-46, October.
  5. Michal Grajek & Lars-Hendrik Röller, 2009. "Regulation and investment in network industries: Evidence from European telecoms," ESMT Research Working Papers ESMT-09-004, ESMT European School of Management and Technology.
  6. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  7. Witold J. Henisz & Bennet A. Zelner, 2001. "The Institutional Environment for Telecommunications Investment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 123-147, 03.
  8. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  10. Gasmi, Farid & Noumba Um, Paul & Virto, Laura Recuero, 2006. "Political accountability and regulatory performance in infrastructure industries : an empirical analysis," Policy Research Working Paper Series 4101, The World Bank.
  11. Lars-Hendrik Röller & Leonard Waverman, 1996. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," CIG Working Papers FS IV 96-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  12. Shane Greenstein & Ryan C. McDevitt, 2009. "The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP," NBER Working Papers 14758, National Bureau of Economic Research, Inc.
  13. Laffont, Jean-Jacques & Tirole, Jean, 1992. "Access Pricing and Competition," IDEI Working Papers 19, Institut d'Économie Industrielle (IDEI), Toulouse.
  14. Ioannis N. Kessides, 2004. "Reforming Infrastructure : Privatization, Regulation, and Competition," World Bank Publications, The World Bank, number 13525, October.
  15. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
  16. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  17. Eugene F. Fama & Kenneth R. French, . "Testing Tradeoff and Pecking Order Predictions about Dividends and Debt.”," CRSP working papers 506, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  18. David Besanko & Daniel F. Spulber, 1992. "Sequential-Equilibrium Investment by Regulated Firms," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 153-170, Summer.
  19. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, June.
  20. Yossef Spiegel & Daniel F. Spulber, 1994. "The Capital Structure of a Regulated Firm," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 424-440, Autumn.
  21. Koutroumpis, Pantelis, 2009. "The economic impact of broadband on growth: A simultaneous approach," Telecommunications Policy, Elsevier, vol. 33(9), pages 471-485, October.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as in new window


Cited by:

  1. Chalmeau, Olivier, 2013. "Determinants of European telecommunication operators systematic risk," 24th European Regional ITS Conference, Florence 2013 88495, International Telecommunications Society (ITS).

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:erp:euirsc:p0233. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valerio PAPPALARDO)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.