A Critical Review of the 'Ladder of Investment' Approach

Telecom ParisTech Working Paper No. ESS-09-06

28 Pages Posted: 25 Oct 2009 Last revised: 10 Nov 2009

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Pinar Dogan

Harvard University - Harvard Kennedy School (HKS)

Matthieu Manant

Université Paris XI Sud

Date Written: October 23, 2009

Abstract

The "ladder of investment" is a regulatory approach proposed by Martin Cave (2006), which has been widely embraced by national regulatory authorities in the European telecommunications sector. The approach entails providing entrants, successively, with different levels of access - the "rungs" of the investment ladder, while inducing them to climb the ladder by setting an access charge that increases over time or by withdrawing access obligations after some pre-determined date (i.e., by setting sunset clauses). Proponents of the ladder of investment approach claim that such regulatory measures would make service-based entry and facility-based entry complements - albeit they have been traditionally viewed as substitutes - in promoting competition. The regulators, thus, have shown a strong interest in this approach. In this paper, we provide a critical review of the ladder of investment approach by setting out its two underlying assumptions and discussing their validity with references to the related industrial organization literature.

Keywords: Ladder of investment, Facility-based competition, Telecommunications

JEL Classification: L51, L96

Suggested Citation

Bourreau, Marc and Dogan, Pinar and Manant, Matthieu, A Critical Review of the 'Ladder of Investment' Approach (October 23, 2009). Telecom ParisTech Working Paper No. ESS-09-06, Available at SSRN: https://ssrn.com/abstract=1493706 or http://dx.doi.org/10.2139/ssrn.1493706

Marc Bourreau (Contact Author)

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Pinar Dogan

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-6757 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://scholar.harvard.edu/pdogan/home

Matthieu Manant

Université Paris XI Sud ( email )

15, rue Georges Clemenceau
Orsay cedex, 91405
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
762
Abstract Views
2,858
rank
40,969
PlumX Metrics