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Access Regulation, Entry and the Investment Ladder in Telecommunications

Author

Listed:
  • Fabio Manenti

    () (Università di Padova)

  • Antonio Sciala'

    () (Universita' Roma Tre)

Abstract

This paper presents a model of competition between an incumbent and an entrant firm in telecommunications. The entrant has the option to enter the market with or without having preliminary invested in its own infrastructure; in case of facility based entry, the entrant has also the option to invest in the provision of enhanced services. In case of resale based entry the entrant needs access to the incumbent network. Unlike the rival, the incumbent has always the option to upgrade the existing network to provide advanced services. We study the impact of access regulation on the type of entry and on firms' investments. Without regulation, we find that the incumbent sets the access charge to prevent resale based entry and this overstimulates rival's investment that may turn out to be socially inefficient. Access regulation may discourage welfare enhancing investments, thus also inducing a socially inefficient outcome. We extend the model to account for negotiated interconnection in case of facilities based entry.

Suggested Citation

  • Fabio Manenti & Antonio Sciala', 2010. "Access Regulation, Entry and the Investment Ladder in Telecommunications," "Marco Fanno" Working Papers 0120, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0120
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    Keywords

    telecommunications; ladder of investment; access regulation; interconnection.;

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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