Can access regulation promote broadband investment and consumer welfare?
by Alessandro Avenali; Giorgio Matteucci; Pierfrancesco Reverberi
International Journal of Technology, Policy and Management (IJTPM), Vol. 15, No. 4, 2015

Abstract: A facility-based firm invests in network quality and sells wholesale local access to two competing downstream firms, which offer vertically differentiated value-added services. We show that, contrary to common wisdom, access price regulation may simultaneously improve consumer welfare and foster investment incentives compared with regulatory forbearance. This result is robust to a number of different model specifications: (i) the bottleneck owner is vertically integrated, and: (a) the regulator can commit before the investment stage, or: (b) there are first-mover advantages, such as consumer switching costs; (ii) the bottleneck owner is vertically separated. We also show that, under access price regulation, consumer welfare and network quality may be higher under vertical separation than under vertical integration.

Online publication date: Tue, 03-Nov-2015

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