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Access Regulation, Entry, and Investment in Telecommunications

  • Fabio Manenti
  • Antonio Scialà

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.

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Paper provided by European University Institute in its series RSCAS Working Papers with number 2011/37.

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Date of creation: 24 Jun 2011
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Handle: RePEc:rsc:rsceui:2011/37
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Web page: http://www.eui.eu/RSCAS/

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  1. M. Bourreau & P. Dogan, . "Build or Buy Strategies in the Local Loop," Working Paper 33647, Harvard University OpenScholar.
  2. Avenali, Alessandro & Matteucci, Giorgio & Reverberi, Pierfrancesco, 2010. "Dynamic access pricing and investment in alternative infrastructures," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 167-175, March.
  3. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
  4. M. Bourreau & P. Dogan, . "Unbundling the Local Loop," Working Paper 33648, Harvard University OpenScholar.
  5. Duarte Brito & Pedro Pereira & João Vareda, 2008. "Can Two-Part Tariffs Promote Efficient Investment on Next Generation Networks?," Working Papers 34, Portuguese Competition Authority.
  6. Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
  7. Cave, Martin & Vogelsang, Ingo, 0. "How access pricing and entry interact," Telecommunications Policy, Elsevier, vol. 27(10-11), pages 717-727, November.
  8. M. Bourreau & P. Dogan & M. Manant, . "A critical review of the ladder of investment approach," Working Paper 33654, Harvard University OpenScholar.
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