DP9013 Geographic Access Rules and Investments

Author(s): Marc Bourreau, Carlo Cambini, Steffen Hoernig
Publication Date: June 2012
Keyword(s): geographical access regulation, infrastructure investment, Next generation networks
JEL(s): L51, L96
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9013

We analyze competition between vertically integrated infrastructure operators that provide access in different geographical areas. A regulator may impose a uniform access price, set local access rates, or deregulate access locally. We analyze the impact of these alternative regulatory regimes on network investments. While cost-based access leads to both suboptimal rollout and duplication, uniform access prices bring too much duplication. Deregulation in competitive areas can spur investment and lead to social optimum, or call for continued regulatory intervention, depending on the resulting wholesale equilibrium.