The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?
We analyze the impact of mandatory access on the infrastructure investments of two competing communications networks, and show that for low (high) access charges firms wait (preempt each other). Contrary to previous results, under preemption a higher access charge can delay first investment. While first-best investment cannot be achieved with a fi?xed access tariff, simple instruments such as banning access in the future, or granting access holidays right after investment, can improve efficiency. The former forces investment when it would happen too late, while the latter allows for lower access charges in order to delay the second investment when it would happen too early.
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