Implications of regulation for entry and investment in the local loop

Implications of regulation for entry and investment in the local loop A number of countries around the world are trying to promote competition at the local loop as demand for higher bandwidth to the home increases. Different technologies (xDSL, cable modems, and wireless local loop) offer alternative solutions and the issue for regulators is to design a framework that promotes competition and investment. Regulators can promote competition in a number of ways, but two “pure” strategies are services and infrastructure competition. This paper models the regulator and incumbent–entrant interactions explicitly in order to understand how the structure of the voice services might evolve under different regulatory frameworks. Our analysis suggests that a “mix” of infrastructure and service competition like the one promoted in Netherlands, stimulates investment by incumbents and entrants alike and offers better consumer benefits. The message for policy makers is that the introduction of “sunset clauses” provides new entrants with strong incentives to invest while allowing them to enter in service competition and to acquire important knowledge about their new market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Telecommunications Policy Elsevier

Implications of regulation for entry and investment in the local loop

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Publisher
Elsevier
Copyright
Copyright © 2001 Elsevier Science Ltd
ISSN
0308-5961
eISSN
1879-3258
DOI
10.1016/S0308-5961(01)00044-1
Publisher site
See Article on Publisher Site

Abstract

A number of countries around the world are trying to promote competition at the local loop as demand for higher bandwidth to the home increases. Different technologies (xDSL, cable modems, and wireless local loop) offer alternative solutions and the issue for regulators is to design a framework that promotes competition and investment. Regulators can promote competition in a number of ways, but two “pure” strategies are services and infrastructure competition. This paper models the regulator and incumbent–entrant interactions explicitly in order to understand how the structure of the voice services might evolve under different regulatory frameworks. Our analysis suggests that a “mix” of infrastructure and service competition like the one promoted in Netherlands, stimulates investment by incumbents and entrants alike and offers better consumer benefits. The message for policy makers is that the introduction of “sunset clauses” provides new entrants with strong incentives to invest while allowing them to enter in service competition and to acquire important knowledge about their new market.

Journal

Telecommunications PolicyElsevier

Published: Oct 1, 2001

References

  • Computational organization theory
    Carley, K.; Prietula, M.J.
  • The frontier of telecommunications deregulation
    Spiller, P.; Cardilli, C.

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