Competition Enhancing Regulation and Diffusion of Innovation: The Case of Broadband Networks
49 Pages Posted: 28 Jul 2011
Date Written: July 2011
The paper assesses the scope for competition inducing infrastructure regulation in furthering the diffusion of innovation. The paper uses data on the adoption of broadband services comprising a global panel of 167 countries. The effects of different regulatory provisions are assessed. Inter-firm competition in general and intra-platform competition on the incumbent’s DSL network in particular accelerate adoption of broadband, whereas there is little evidence that inter-platform over different access technologies and intra-platform competition on cable have such effects. Retail competition has about a twice as strong effect than local loop unbundling in furthering diffusion. The effect deriving from service competition is more powerful than the effect of provisions that induce competitors in investing. The diffusion enhancing effect from regulatory access provisions however dissipates after 3-4 years. These results are robust under different hypotheses of reverse causality and taking into account regulatory metrics and variable endogeneity.
Keywords: Broadband, regulation, innovation, service competition, platform competition, local loop unbundling
JEL Classification: L96, L51, O33
Suggested Citation: Suggested Citation