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Facilities Competition and Local Network Investment: Theory, Evidence and Policy Implications

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  • Woroch, Glenn A

Abstract

A new approach has emerged in the United States and elsewhere in the world for promoting investment in local communications networks. Competition, especially facilities-based entry, has become a principal means to encourage the efficient amount and timing of investment in local exchange infrastructure and adoption of advanced technologies. Despite the popularity of open entry policies, the logic underlying these policies lacks convincing evidence. Nevertheless, preliminary and incidental studies suggest that facilities-based entry stimulates investment by both incumbents and entrants. The message for policymakers is, first, to remove artificial restrictions on facilities-based entry and on incumbent investment, both as a response to competition and in advance of entry; and, second, to take account of the possibility of a virtuous cycle of investment deriving from incumbent-entrant interaction. These measures promise to supplement the ordinary benefits of facilities competition that will aid in building the next generation advanced communications network. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Woroch, Glenn A, 1998. "Facilities Competition and Local Network Investment: Theory, Evidence and Policy Implications," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 7(4), pages 601-614, December.
    • Handle: RePEc:oup:indcch:v:7:y:1998:i:4:p:601-14
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    Cited by:

    1. Michał Grajek & Lars-Hendrik Röller, 2012. "Regulation and Investment in Network Industries: Evidence from European Telecoms," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 189-216.
    2. Renata Sliwa, 2015. "Facility-based competition — toward more deregulation in telecommunications sector," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 14(2), pages 261-273, June.
    3. Madden, Gary G & Coble-Neal, Grant, 2002. "Internet economics and policy: An Australian perspective," MPRA Paper 10686, University Library of Munich, Germany.
    4. Paleologos, John M. & Polemis, Michael L., 2013. "What drives investment in the telecommunications sector? Some lessons from the OECD countries," Economic Modelling, Elsevier, vol. 31(C), pages 49-57.

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