Unbundling the Incumbent: Evidence from UK Broadband

40 Pages Posted: 5 Oct 2014 Last revised: 21 Mar 2015

Mattia Nardotto

University of Cologne - Department of Economics

Tommaso M. Valletti

Imperial College Business School; University of Rome, Tor Vergata - Department of Financial and Quantitative Economics; Centre for Economic Policy Research (CEPR)

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: August 11, 2014

Abstract

We consider the impact of a regulatory process forcing an incumbent telecom operator to make its local broadband network available to other companies (local loop unbundling, or LLU). Entrants are then able to upgrade their individual lines and offer Internet services directly to customers. Employing a very detailed dataset covering the whole of the UK, we find that, over the course of time, many entrants have begun to take advantage of unbundling. LLU entry only had a positive effect on broadband penetration in the early years, and no longer in the recent years as the market reached maturity. In contrast, LLU entry continues to have a positive impact on the quality of the service provided, as entrants differentiate their products upwards compared to the incumbent. We also assess the impact of competition from an alternative form of technology (cable) which is not subject to regulation, and what we discover is that inter-platform competition has a positive impact on both penetration and quality.

Keywords: regulation, competition, entry, telecommunications, broadband, local loop unbundling

JEL Classification: D22, K23, L43, L51, L96

Suggested Citation

Nardotto, Mattia and Valletti, Tommaso M. and Verboven, Frank, Unbundling the Incumbent: Evidence from UK Broadband (August 11, 2014). CEIS Working Paper No. 331. Available at SSRN: https://ssrn.com/abstract=2505035 or http://dx.doi.org/10.2139/ssrn.2505035

Mattia Nardotto

University of Cologne - Department of Economics ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://sites.google.com/site/mattianardotto/Home

Tommaso M. Valletti (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

University of Rome, Tor Vergata - Department of Financial and Quantitative Economics ( email )

Via Columbia n.2
Roma, 00133
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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