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Geographical Cross-Collateralization, Universal Coverage, and Co-Investment Policy

Author

Listed:
  • Bouckaert, Jan

    (University of Antwerp)

  • Stennek, Johan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

We argue that geographical cross-collateralization – a firm’s ability to pledge incomes earned in more populated areas as “collateral” for the loans needed to finance investments in less populated areas – plays an important role for ensuring universal coverage of next generation communication networks. Our main result is that when firms are capital-constrained, co-investments in urban areas enhance geographical cross-collateralization and thus contribute to universal service through increased coverage for rural consumers. Co-investment may, in addition, introduce retail competition to the benefits of sub-urban consumers. The catch is that urban consumers may suffer from lower infrastructure competition. Co-investment policy therefore may raise tradeoffs between consumers in different (relevant) geographical markets.

Suggested Citation

  • Bouckaert, Jan & Stennek, Johan, 2024. "Geographical Cross-Collateralization, Universal Coverage, and Co-Investment Policy," Working Papers in Economics 847, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0847
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    More about this item

    Keywords

    joint venture; universal service; cross-collateralization; cross subsidization;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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