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Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks

Author

Listed:
  • Duarte Brito

    (Universidade Nova de Lisboa)

  • Pedro Pereira

    (Autoridade da Concorrência)

  • João Vareda

    (Autoridade da Concorrência)

Abstract

We analyze the incentives of a telecommunications incumbent to invest and give access to a downstream entrant to a next generation network, NGN. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a NGN that improves the quality of the retail services. Access to the old network is regulated, but access to the NGN is not. If the innovation is drastic, the incumbent always invests in the NGN, but does not give access to the entrant. If the innovation is non-drastic and if the access price to the old network is low, the incumbent voluntarily gives access to the NGN. If the innovation is non-drastic, there is no monotonic relation between the access price to the old network and the incumbent's incentives to invest. A regulatory moratorium emerges as socially optimal, if the innovation is large but non-drastic. We also analyze the case where both firms can invest in the deployment of a NGN.

Suggested Citation

  • Duarte Brito & Pedro Pereira & João Vareda, 2008. "Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks," Working Papers 35, Portuguese Competition Authority.
    • Handle: RePEc:pca:wpaper:35
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    Cited by:

    1. is not listed on IDEAS
    2. Inderst Roman & Peitz Martin, 2012. "Market Asymmetries and Investments in Next Generation Access Networks," Review of Network Economics, De Gruyter, vol. 11(1), pages 1-27, March.
    3. Zongo, Amara, 2020. "The Impact of Restrictive Measures on Bilateral FDI in OECD Countries," MPRA Paper 101929, University Library of Munich, Germany.
    4. João Vareda, 2011. "Quality upgrades and bypass under mandatory access," Journal of Regulatory Economics, Springer, vol. 40(2), pages 177-197, October.

    More about this item

    Keywords

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    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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