Inconsistent Regulation, Market Structure and Broadband Adoption in the EU: a Dynamic Model

The New Regulatory Framework (NRF) for electronic communications was intended to usher in an era of harmonised regulation across the European Union leading to better choice, price and quality for European consumers. The European Commission has voiced its frustration at the fragmented nature of the implementation of the NRF. In this paper I examine whether the NRF has indeed been introduced in a fragmented manner and whether that fragmentation affects consumers, taking broadband penetration, which is regarded as desirable both socially and economically, as the measure of consumer outcome. I find that a causal relationship exists between public policy, prices of unbundled local loops, market concentration and adoption of broadband. Using a Lagged Dependent Variable model, I find that decreasing concentration in the market structure of broadband access technologies at retail level has a strong effect on the take-up of broadband, with the effect taking time to be fully realised. To enhance consumer adoption of broadband, therefore, policy makers in the EU should seek to improve the opportunity for broadband competition.