Can Access Price Indexation Promote Efficient Investment in Next Generation Networks?

49 Pages Posted: 5 Nov 2011

See all articles by David Henriques

David Henriques

London School of Economics & Political Science (LSE); Ofcom - UK Regulator and Competition Authority

Date Written: October 30, 2011

Abstract

The existing literature on access price and investment has pointed out that networks underinvest under a regime of mandatory access provision with a fixed access price per end-user. In this paper we propose a new access pricing rule, the indexation approach, i.e., the access price, per end-user, that network i pays to network j is function of the investment levels set by both networks. We show that the indexation can enhance economic efficiency beyond what is achieved with a fixed access price. In particular, the access price indexation can simultaneously induce lower retail prices and higher investment and social welfare as compared to both the fixed access pricing and the regulatory holidays. Furthermore, we show that the indexation can implement the socially efficient investment, which would be impossible to obtain under a fixed access pricing. Our results contradict the notion that investment efficiency must be sacrificed for gains in pricing efficiency.

Keywords: Access pricing, Internet, Investments, Next Generation Networks, Regulation

JEL Classification: L43, L51, L96

Suggested Citation

Henriques, David, Can Access Price Indexation Promote Efficient Investment in Next Generation Networks? (October 30, 2011). Available at SSRN: https://ssrn.com/abstract=1955209 or http://dx.doi.org/10.2139/ssrn.1955209

David Henriques (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ofcom - UK Regulator and Competition Authority ( email )

2a Southwark Bridge Road
London, SE1 9HA
United Kingdom

HOME PAGE: http://dthenriques.orgfree.com

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