Competition schemes and investment in network infrastructure under uncertainty

Abstract

Service-based competition, Facility-based competition, Real options, Preemption, D92, G13, L43, L51,

Incentive Regulation, Investments and Technological Change

“…This is the ladder-of-investment aspect (Cave and Vogelsang, 2003;Cave, 2006). In addition, the entrants may be more likely to invest in new types of bottleneck infrastructure, while the replacement effect of such infrastructure may prevent the incumbent from doing so (Bourreau and Doğan, 2004;Hori and Mizuno, 2009). Low access prices may therefore initially increase both competition for the market and competition in the market.…”

Broadband investment and regulation: A literature review

“…an access charge equal to the difference between the maximizing-welfare retail price cap and the incumbent's marginal cost at each period) generates higher welfare than the ECPR. Hori and Mizuno (2009) Endogenous market structure with two risk-neutral identical firms; two types of facilities; a common exogenous industry shock.…”

“…Hori and Mizuno (2009) examine the choice between service-based competition and facility-based competition by focusing on a firm's incentive to invest in network infrastructure. Their analysis firstly shows that service-based competition leads to delaying the construction of an alternative infrastructure, so long as the entrant accesses an incumbent's network.…”

Access regulation and investment in next generation networks — A ranking of regulatory regimes

“…Next to regulatory holiday we discuss the regimes of LRIC, FDC and risk-sharing. Hori and Mizuno (2009) employ a real options approach to compare investment incentives under service-and facility-based competition. Their results confirm the trade-off between early service based competition and stronger incentives for early investments under facility based competition.…”