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Implications of regulation for entry and investment in the local loop

Author

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  • Christodoulou, Kostis
  • Vlahos, Kiriakos

Abstract

A number of countries around the world are trying to promote competition at the local loop as demand for higher bandwidth to the home increases. Different technologies (xDSL, cable modems, and wireless local loop) offer alternative solutions and the issue for regulators is to design a framework that promotes competition and investment. Regulators can promote competition in a number of ways, but two "pure" strategies are services and infrastructure competition. This paper models the regulator and incumbent-entrant interactions explicitly in order to understand how the structure of the voice services might evolve under different regulatory frameworks. Our analysis suggests that a "mix" of infrastructure and service competition like the one promoted in Netherlands, stimulates investment by incumbents and entrants alike and offers better consumer benefits. The message for policy makers is that the introduction of "sunset clauses" provides new entrants with strong incentives to invest while allowing them to enter in service competition and to acquire important knowledge about their new market.

Suggested Citation

  • Christodoulou, Kostis & Vlahos, Kiriakos, 0. "Implications of regulation for entry and investment in the local loop," Telecommunications Policy, Elsevier, vol. 25(10-11), pages 743-757, October.
    • Handle: RePEc:eee:telpol:v:25:y::i:10-11:p:743-757
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    Citations

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    Cited by:

    1. Vong, Sokha & Lee, Duk Hee & Zo, Hangjung, 2012. "Cambodia mobile telecommunication market: Opportunities and challenges," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72493, International Telecommunications Society (ITS).
    2. Zongo, Amara, 2020. "The Impact of Restrictive Measures on Bilateral FDI in OECD Countries," MPRA Paper 101929, University Library of Munich, Germany.
    3. Daniel Montolio & Elisa Trujillo, 2012. "What drives investment in telecommunications? The role of regulation, firms’ internationalization and market knowledge," Working Papers 2012/1, Institut d'Economia de Barcelona (IEB).
    4. Keizo Mizuno & Ichiro Yoshino, 2015. "Overusing a bypass under cost-based access regulation: underinvestment with spillovers," Journal of Regulatory Economics, Springer, vol. 47(1), pages 29-57, February.
    5. Daniel Montolio & Elisa Trujillo, 2012. "What drives investment in telecommunications? The role of regulation, firms’ internationalization and market knowledge," Working Papers 2012/1, Institut d'Economia de Barcelona (IEB).
    6. Choi, Sujin, 2011. "Facilities to service based competition, not service to facilities based, for broadband penetration: A comparative study between the United States and South Korea," Telecommunications Policy, Elsevier, vol. 35(9), pages 804-817.
    7. Daeho Lee & Junseok Hwang, 2011. "The Effect of Network Neutrality on the Incentive to Discriminate, Invest and Innovate: A Literature Review," TEMEP Discussion Papers 201184, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2011.
    8. Baranes, Edmond & Bourreau, Marc, 2005. "An Economist's Guide to Local Loop Unbundling," MPRA Paper 2440, University Library of Munich, Germany.
    9. Ragoobar, Tricia & Whalley, Jason & Harle, David, 2011. "Public and private intervention for next-generation access deployment: Possibilities for three European countries," Telecommunications Policy, Elsevier, vol. 35(9), pages 827-841.

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