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Copper to fibre migration: Regulated access fees incentivising migration

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  • Eltges, Fabian
  • Fourberg, Niklas
  • Wiewiorra, Lukas

Abstract

To shed more light on consumer-sided demand migration, we adapt Chen & Riordan's (2007) Spokes Model of spatial competition to a duopolistic-multi-product firm setting in which both firms simultaneously offer fibre and copper products comparable to Brito & Tselekounis (2017). Our model will be designed as a 2x2-product Spokes Model where two operators, an Incumbent and an Entrant, offer each a fibre and a copper based end customer internet product, with the Entrant paying an access fee for the latter one. Deriving operators' profits given demand shifts induced by asymmetric pricing strategies, we find that both operators experience trade-offs in the wholesale access fees, with the trade-off of the Incumbent being more binding as he has the higher interest in keeping demand in the copper network high. We characterise the relation of fibre take-up and welfare by finding out that fibre take-up and welfare both increase simultaneously in the copper wholesale access fee up to a critical threshold. Beyond this threshold, additional take-up will be paid by loss of total welfare.

Suggested Citation

  • Eltges, Fabian & Fourberg, Niklas & Wiewiorra, Lukas, 2021. "Copper to fibre migration: Regulated access fees incentivising migration," WIK Working Papers 3, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH, Bad Honnef.
    • Handle: RePEc:zbw:wikwps:3
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    References listed on IDEAS

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    1. Bourreau, Marc & Cambini, Carlo & Doğan, Pınar, 2012. "Access pricing, competition, and incentives to migrate from “old” to “new” technology," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 713-723.
    2. Flacher, David & Jennequin, Hugues, 2012. "Access regulation and geographic deployment of a new generation infrastructure," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72537, International Telecommunications Society (ITS).
    3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    4. François Jeanjean & Julienne Liang, 2012. "Role of access charges in the migration from copper to FTTH," International Journal of Management and Network Economics, Inderscience Enterprises Ltd, vol. 2(3), pages 298-317.
    5. Duarte Brito & Markos Tselekounis, 2017. "On the Impact of Input Prices on an Entrant’s Profit Under Multi-Product Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(1), pages 105-125, February.
    6. Neumann, Karl-Heinz & Plückebaum, Thomas & Schäfer, Saskja & Eltges, Fabian, 2020. "Copper switch-off, fibre take-up and ULL tariffs in France," Study Series, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH, number 251544.
    7. Tenbrock, Sebastian & Knips, Julian & Wernick, Christian, 2020. "Status quo der Abschaltung der Kupfernetzinfrastruktur in der EU," WIK Discussion Papers 459, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    8. Tselekounis, Markos & Orfanou, Georgia & Varoutas, Dimitris, 2014. "Coexistence of copper and fiber unbundling: Access charges and investment incentives," 25th European Regional ITS Conference, Brussels 2014 101400, International Telecommunications Society (ITS).
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