Technology investment and alternative regulatory regimes with demand uncertainty

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWith the use of a laboratory experiment, we show the effects of co-investments on coverage, competition and price collusion in regulated network industries. On the one hand, co-investments turn out not to be a significant driver of new infrastructure investments beyond the level achieved by access regulation and they seem to facilitate tacit price collusion. On the other hand, co-investments economize on infrastructure investment costs and necessitate communication, which partially offset the aforementioned effects. In fact, communication between the firms on their future coverage, especially outside co-investments, seems to have a positive effect on investments. However, the surprising message of the experiment is that tacit collusion happens under co-investment although there is no reason to believe that it should and although we made almost every effort to prevent it. Our results indicate that regulators should evaluate co-investments with scrutiny as there are definite drawbacks that must be considered.

Section: Introductionsupporting

confidence: 84%

Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence

Kraemer

Vogelsang

2012

“…They then rank market outcomes regarding investment, competition and welfare for the traditional joint venture case, the basic sharing case as well as the traditional regulated monopoly case. Cambini and Silvestri (2012) introduce also uncertainty making similar but more detailed conclusions considering in addition the case where NGN is left unregulated, while the legacy network is continued to be regulated. Nietsche and Wiethaus (2011) consider a similar model under uncertainty comparing the basic sharing case to specific regulation such as LRIC or FDC.…”

Section: A) Certaintymentioning

confidence: 98%

“…For instance, Nietsche Wiethaus 2011, Cambini and Silvestri (2012) and Cambini and Silvestri (2013) compare different exogenous risk sharing agreement options (traditional joint-ventures and basic sharing) to -alternative -traditional NGN regulation options (LRIC, FDC, marginal cost, free market, no access). Unlike Bourreau, Cambini, Hoernig (2013) these authors consider an incumbent with an existing copper network to which all players have non-discriminatory access at marginal cost (regulated).…”

Section: 32mentioning

confidence: 99%

See 1 more Smart Citation

Geographic Regulation and Cooperative Investment in Next Generation Broadband Networks - A Review of Recent Literature and Practical Cases

Balmer¹

2013

Abstract:Alternative telecom operators have continuously invested in their own infrastructure in recent years. After more than a decade since liberalisation, competitive conditions have substantially changed, especially in urban areas. European regulatory authorities have acknowledged this development by starting regional deregulation. Additionally, different forms of cooperative investments in next generation broadband have appeared on the market. The effects of such schemes on competition, investment and welfare crucially depend on the fine details of implementation. For instance, in the case of joint-ventures, it matters how investment costs are shared and how internal and external access prices are determined. In the case of long-term access agreements, it is essential to consider how access tariffs are structured, whether they can adapt to market developments ex-post and whether contracts are signed before or after the investment takes place. Generally, many of these agreements allow some extent of risk sharing, offering the possibility to increase investment incentives when firms are not risk neutral. This article reviews the theoretical and empirical literature on geographic regulation and co-investments in next generation broadband. It is suggested that regulators consider introducing regulated co-investment agreements complementing current regulation or in some cases even substituting for it, in addition to considering geographically segmented access prices.

“…The theoretical literature first suggests that less restrictive access regulations imposed on firstand/or second-generation infrastructure, for instance the permission of risk-sharing models and cooperation models, geographically differentiated access charges or temporary regulatory holidays in conjunction with voluntary access would be beneficial to encourage NGA investment, while strict forms of cost-based access regulation would lead to lower incentives for NGA investment (Nitsche & Wiethaus, 2011;Cambini & Silvestri, 2012;Bourreau, Cambini & Dogan, 2014). This gets reinforced in view of demand uncertainty (Klumpp & Su 2010) and in case that NGANs represent an investment in quality (Vareda, 2010) and a non-drastic innovation (Brito, Pereira & Vareda, 2010).…”

Section: Sector-specific Regulation and Service-based Competitionmentioning

confidence: 99%

The Impact of Regulation and Competition on the Migration from Old to New Communications Infrastructure: Recent Evidence from EU27 Member States

Briglauer¹

2014

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. [vi] AbstractFibre-deployment of next-generation communications networks is currently a major challenge for investing firms as well as for national regulators and is also subject to hot debates at EU level. This work examines the role of regulatory policies and competition controlling for relevant supply and demand side factors. Our econometric model employs dynamic panel data methods that take into account potential endogeneity due to omitted heterogeneity, reverse causality and the dynamic investment specification.Our results indicate that relevant forms of previous broadband access regulations have had a negative impact on investment in new infrastructure. Furthermore, infrastructure-based competition from mobile operators and the replacement effect stemming from the incumbents' existing infrastructure exert a negative impact on ex ante investment incentives. As regards the dynamics of the adjustment process, we find that there are both short-term and long-term effects towards the desired infrastructure level.[1]