Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks

32 Pages Posted: 28 Oct 2008

See all articles by Duarte Brito

Duarte Brito

New University of Lisbon

Pedro Pereira

Autoridade da Concorrência

João Vareda

New University of Lisbon - Faculdade de Economia; Autoridade da Concorrência

Date Written: October 1, 2008

Abstract

We analyze the incentives of a telecommunications incumbent to invest and give access to a downstream entrant to a next generation network, NGN. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a NGN that improves the quality of the retail services. Access to the old network is regulated, but access to the NGN is not. If the innovation is drastic, the incumbent always invests in the NGN, but does not give access to the entrant. If the innovation is non-drastic and if the access price to the old network is low, the incumbent voluntarily gives access to the NGN. If the innovation is non-drastic, there is no monotonic relation between the access price to the old network and the incumbent's incentives to invest. A regulatory moratorium emerges as socially optimal, if the innovation is large but non-drastic. We also analyze the case where both firms can invest in the deployment of a NGN.

Keywords: Next Generation Networks, Investment, Access, Regulation

JEL Classification: L43, L51, L96, L98

Suggested Citation

Brito, Duarte and Pereira, Pedro and Vareda, João, Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks (October 1, 2008). NET Institute Working Paper No. 08-10, Available at SSRN: https://ssrn.com/abstract=1285759 or http://dx.doi.org/10.2139/ssrn.1285759

Duarte Brito

New University of Lisbon ( email )

1099-085 Lisboa, 1099-085
Portugal

Pedro Pereira

Autoridade da Concorrência ( email )

1050-138 Lisboa
Portugal

João Vareda (Contact Author)

New University of Lisbon - Faculdade de Economia ( email )

Campus de Campolide
1099-085 Lisboa
Portugal
+351 351 21 380 16 00 (Phone)
+351 21 387 09 33 (Fax)

Autoridade da Concorrência ( email )

1050-138 Lisboa
Portugal

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