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How to provide access to next generation networks? The effect of risk allocation on investment and cooperation incentives


  • Christian Bender

    () (University of Giessen)


This paper analyzes the incentives to invest in Next Generation Access Networks (NGA) in a framework with horizontal product differentiation with price competition between an investing and an access seeking firm. Given uncertainty about the success of the NGA, I compare regulatory regimes with symmetric and with asymmetric risk allocation to the firms having the opportunity to cooperate and jointly roll-out the NGA. I find that private incentives to cooperate might coincide with the consumer surplus maximizing outcome. Whether the firms realize this socially desirable outcome depends on the outside option, i.e. the implemented access regime. The optimal regulatory policy is not only subject to the probability that the NGA succeed but depends even more on the degree of product differentiation in the retail market. Therefore, the implementation of different access regimes subject to the degree of product differentiation seems favorable. For heterogeneous retail products, an asymmetric risk allocation not only increases the chances of cooperation but lowers the risk of overinvestment. For homogeneous goods, a symmetric risk allocation is superior as it ensures sufficient investment incentives even if competition is very intensive.

Suggested Citation

  • Christian Bender, 2011. "How to provide access to next generation networks? The effect of risk allocation on investment and cooperation incentives," MAGKS Papers on Economics 201149, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:201149

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    References listed on IDEAS

    1. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, January.
    2. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    3. Marc BOURREAU & Carlo CAMBINI & Steffen HOERNIG, 2010. "National FTTH plans in France, Italy and Portugal," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 107-126, 2nd quart.
    4. Ian M. Dobbs, 2004. "Intertemporal price cap regulation under uncertainty," Economic Journal, Royal Economic Society, vol. 114(495), pages 421-440, April.
    5. Bourreau, Marc & Cambini, Carlo & Doğan, Pınar, 2012. "Access pricing, competition, and incentives to migrate from “old” to “new” technology," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 713-723.
    6. Tilman Klumpp & Xuejuan Su, 2010. "Open Access and Dynamic Efficiency," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 64-96, May.
    7. 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.
    8. repec:reg:rpubli:433 is not listed on IDEAS
    9. Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 3851, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    10. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, January.
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    Cited by:

    1. Tselekounis, Markos & Varoutas, Dimitris, 2013. "Investments in next generation access infrastructures under regulatory uncertainty," Telecommunications Policy, Elsevier, vol. 37(10), pages 879-892.
    2. 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.
    3. Cambini, Carlo & Silvestri, Virginia, 2013. "Investment sharing in broadband networks," Telecommunications Policy, Elsevier, vol. 37(10), pages 861-878.
    4. Flacher, David & Jennequin, Hugues, 2014. "Access regulation and geographic deployment of a new generation infrastructure," Telecommunications Policy, Elsevier, vol. 38(8), pages 741-759.
    5. Tselekounis, Markos & Xylogianni, Eirini & Varoutas, Dimitris & Martakos, Drakoulis, 2013. "Geographically differentiated NGA deployment," 24th European Regional ITS Conference, Florence 2013 88533, International Telecommunications Society (ITS).

    More about this item


    Next Generation Access Networks; investment; access regulation; cooperation;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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