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Cost and Benefits from Infrastructure Competition. Estimating Welfare Effects from Broadband Access Competition

Author

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  • Felix Höffler

    () (Max Planck Institute for Research on Collective Goods, Bonn, Germany)

Abstract

Competition between parallel infrastructures incorporates opposing welfare effects. The gain from reduced deadweight loss might be outweighed by the inefficient duplication of an existing infrastructure. Using data from broadband internet access for Western Europe 2000-2004, this paper investigates which effect prevails empirically. Infrastructure competition between DSL and cable TV had a significant and positive impact on the broadband penetration. Comparing the additional social surplus attributable to cable competition with the cable investments, we conclude that infrastructure competition has not been welfare enhancing. A theoretical model is provided, formalizing why the effect of competition on penetration might be limited.

Suggested Citation

  • Felix Höffler, 2005. "Cost and Benefits from Infrastructure Competition. Estimating Welfare Effects from Broadband Access Competition," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2005_1, Max Planck Institute for Research on Collective Goods, revised Jun 2005.
  • Handle: RePEc:mpg:wpaper:2005_01
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    File URL: http://www.coll.mpg.de/pdf_dat/2005_01online.pdf
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    Cited by:

    1. Baranes, Edmond & Bourreau, Marc, 2005. "An Economist's Guide to Local Loop Unbundling," MPRA Paper 2440, University Library of Munich, Germany.

    More about this item

    Keywords

    Infrastructure Competition; Service Competition; Broadband; Internet; Cable TV; DSL;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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