The Impact of Different Fibre Access Network Technologies on Cost, Competition and Welfare

32 Pages Posted: 16 Jan 2012  

Steffen Hoernig

Nova School of Business and Economics

Stephan Jay

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste

Karl-Heinz Neumann

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste

Martin Peitz

University of Mannheim - Department of Economics

Thomas Plueckebaum

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste

Ingo Vogelsang

Boston University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: September 24, 2011

Abstract

We propose a novel approach to the evaluation of new network technologies that combines an engineering cost model with a differentiated multi-player oligopoly model subject to wholesale access regulation. It is based on Hoernig et al. (2010), 1 which examines the cost differentials and competitive outcomes for different fibre-to-the-home (FTTH) technologies. Its aim is to shed some light on the impact various technology and regulatory choices might be expected to have on prices, market entry, penetration and market shares over time. Understanding these issues should inform policymakers about particular technologies and provide guidance to the dynamic consequences of regulatory choices. The high capital costs and the long asset life of fibre mean that the technology choices made today will dictate the forms of competition and regulation that develop in these markets for years to come.

We have developed two partly interlinked modeling approaches to analyze the impact of different architectures and wholesale scenarios on investment, cost, profitability, reach, competition, market shares, pricing and welfare. We have used a steady state cost model that feeds cost functions into a strategic competition model. Figure 1 shows the relation between the models and their primary outputs (grey).

Suggested Citation

Hoernig, Steffen and Jay, Stephan and Neumann, Karl-Heinz and Peitz, Martin and Plueckebaum, Thomas and Vogelsang, Ingo, The Impact of Different Fibre Access Network Technologies on Cost, Competition and Welfare (September 24, 2011). TPRC 2011. Available at SSRN: https://ssrn.com/abstract=1985747

Steffen Hoernig (Contact Author)

Nova School of Business and Economics ( email )

Universidade Nova de Lisboa
Campus de Campolide
Lisboa, 1099-032
Portugal
+351-213801600 (Phone)

HOME PAGE: http://docentes.fe.unl.pt/~shoernig/

Stephan Jay

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste ( email )

Rhöndorfer Str. 68
53604 Bad Honnef, 53604
Germany

Karl-Heinz Neumann

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste ( email )

Rhöndorfer Str. 68
53604 Bad Honnef, 53604
Germany

Martin Peitz

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

Thomas Plueckebaum

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste ( email )

Rhöndorfer Str. 68
53604 Bad Honnef, 53604
Germany

Ingo Vogelsang

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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