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Geographically differentiated NGA deployment

  • Tselekounis, Markos
  • Xylogianni, Eirini
  • Varoutas, Dimitris
  • Martakos, Drakoulis

This paper studies the incentives of an unregulated monopolist to undertake the socially optimal investment in NGA networks when it takes into account the fact that the NGA deployment is a two-dimensional investment decision concerning both the quality (or equivalently, technology) and the geographic coverage. It is found that both the privately and the socially optimal investment decisions result in a geographically differentiated NGA deployment implying that different quality NGA networks are deployed in different geographic areas. In particular, NGA networks of higher (lower) quality are deployed in the more (less) densely populated geographic areas. Although such geographically differentiated NGA investment leads the monopolist to provide a nationwide NGA deployment, it is found that the monopolist underinvests compared to the socially optimal levels of both technology and geographic coverage. In addition, since the objectives of the Europe 2020 Strategy concern both the NGA technology and the NGA coverage, this paper shows that the first objective of providing all Europeans with access to much higher internet speeds of above 30 Mbps is feasible when the demand for NGA-based services is significantly elastic, whereas the second objective of providing internet connection speeds of 100 Mbps to 50% or more of European households is not a feasible goal.

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File URL: http://econstor.eu/bitstream/10419/88533/1/774553839.pdf
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Paper provided by International Telecommunications Society (ITS) in its series 24th European Regional ITS Conference, Florence 2013 with number 88533.

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Date of creation: 2013
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Handle: RePEc:zbw:itse13:88533
Contact details of provider: Web page: http://www.itseurope.org/

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  1. BOUCKAERT, Jan & VAN DIJK, Theon & VERBOVEN, Frank, 2010. "Access regulation, competition, and broadband penetration: An international study," Working Papers 2010020, University of Antwerp, Faculty of Applied Economics.
  2. Tilman Klumpp & Xuejuan Su, 2010. "Open Access and Dynamic Efficiency," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 64-96, May.
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  5. M. Bourreau & C. Cambini & P. Dogan, . "Access Pricing, Competition, and Incentives to Migrate From "Old" to "New" Technology," Working Paper 36919, Harvard University OpenScholar.
  6. Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
  7. Paula Sarmento & António Brandão, 2006. "Access Pricing: A Comparison Between Full Deregulation and Two Alternative Instruments of Access Price Regulation, Cost-Based and Retail-Minus," CEF.UP Working Papers 0603, Universidade do Porto, Faculdade de Economia do Porto.
  8. Charalampopoulos, George & Katsianis, Dimitris & Varoutas, Dimitris, 2011. "The option to expand to a next generation access network infrastructure and the role of regulation in a discrete time setting: A real options approach," Telecommunications Policy, Elsevier, vol. 35(9), pages 895-906.
  9. Martin CAVE & Antoine FOURNIER & Natalia SHUTOVA, 2012. "The Price of Copper and the Transition to Fibre," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(85), pages 147-168, 1st quart.
  10. Tselekounis, Markos & Varoutas, Dimitris, 2013. "Investments in next generation access infrastructures under regulatory uncertainty," Telecommunications Policy, Elsevier, vol. 37(10), pages 879-892.
  11. Christian Bender, 2011. "How to provide access to next generation networks? The effect of risk allocation on investment and cooperation incentives," MAGKS Papers on Economics 201149, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  12. Bourreau, Marc & Lupi, Paolo & Manenti, Fabio M., 2014. "Old technology upgrades, innovation, and competition in vertically differentiated markets," Information Economics and Policy, Elsevier, vol. 29(C), pages 10-31.
  13. Alexandrov, Alexei & Deb, Joyee, 2012. "Price discrimination and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 615-623.
  14. Brito, Duarte & Pereira, Pedro & Vareda, João, 2012. "Incentives to invest and to give access to non-regulated new technologies," Information Economics and Policy, Elsevier, vol. 24(3), pages 197-211.
  15. 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.
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