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Investment under uncertainty and regulation of new access networks

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  • Inderst, Roman
  • Peitz, Martin

Abstract

Contractual and regulatory provisions for access affect incentives to invest in an upgraded network and, in particular, a next-generation access network. Investment decisions are made under uncertainty and have to be made over time. This papers provides a framework for taking uncertainty, risk aversion, and the timing of investment explicitly into account. First, it evaluates various access price policies in a framework in which the incremental value over the legacy network is uncertain. Second, introducing risk aversion, the access price structure turns out to be critical for the risk profile of the investing telecom operator and of the access-seeking alternative operator. Third, some implications of the time structure of access payments are derived.

Suggested Citation

  • Inderst, Roman & Peitz, Martin, 2013. "Investment under uncertainty and regulation of new access networks," ZEW Discussion Papers 13-020, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:13020
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    References listed on IDEAS

    as
    1. Hoernig, Steffen & Cambini, Carlo, 2013. "Cooperative Investment, Uncertainty and Access," CEPR Discussion Papers 9376, C.E.P.R. Discussion Papers.
    2. Guthrie, Graeme, 2012. "Regulated prices and real options," Telecommunications Policy, Elsevier, vol. 36(8), pages 650-663.
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    7. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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