Date: 2012
Type: Working Paper
Technology Investment and Alternative Regulatory Regimes with Demand Uncertainty
Working Paper, EUI RSCAS, 2012/15, Florence School of Regulation
CAMBINI, Carlo, SILVESTRI, Virginia, Technology Investment and Alternative Regulatory Regimes with Demand Uncertainty, EUI RSCAS, 2012/15, Florence School of Regulation - https://hdl.handle.net/1814/21477
Retrieved from Cadmus, EUI Research Repository
A vertically integrated incumbent and an OLO (Other Licensed Operator) dynamically compete in the market for broadband access. The incumbent has the option to invest in building a Next Generation Network that covers all urban areas with similar demand structures. The investment return in terms of demand increase is uncertain. We compare the impact of different access price regulation regimes - full regulation, partial regulation (only the copper network is regulated), risk sharing - on investment incentives and social welfare. We find that, compared to Foros (2004), the OLO gets better access condition in case of partial regulation and exclusion does not necessarily happen in equilibrium even if the incumbent has more ability than the OLO. Moreover, risk sharing emerges as the most preferable regime both from a consumer and a social welfare perspective for a large range of parameters.
Cadmus permanent link: https://hdl.handle.net/1814/21477
ISSN: 1028-3625
Series/Number: EUI RSCAS; 2012/15; Florence School of Regulation
Keyword(s): Investment Regulation Access pricing New Technology Risk Sharing L51 L96
Published version: http://hdl.handle.net/1814/31179