Can access regulation promote broadband investment and consumer welfare?. (2015)

• Record Type: Journal Article
• Authors: Avenali, Alessandro; Matteucci, Giorgio; Reverberi, Pierfrancesco
• Is Part Of: International journal of technology, policy and management. Volume 15:Number 4(2015)
• Page Start: 357
• Page End: 377
• Publication Date: 2015
• Subjects: access price regulation -- broadband investment -- consumer welfare -- vertical integration -- vertical separation -- regulatory commitment -- switching costs -- value added -- investment incentives -- network quality; Technological innovations -- Management -- Periodicals; Technology and state -- Periodicals; 658.51405
• Languages: English
• ISSNs: 1468-4322

Abstract

A facility-based firm invests in network quality and sells wholesale local access to two competing downstream firms, which offer vertically differentiated value-added services. We show that, contrary to common wisdom, access price regulation may simultaneously improve consumer welfare and foster investment incentives compared with regulatory forbearance. This result is robust to a number of different model specifications: (i) the bottleneck owner is vertically integrated, and: (a) the regulator can commit before the investment stage, or: (b) there are first-mover advantages, such as consumer switching costs; (ii) the bottleneck owner is vertically separated. We also show that, under access price regulation, consumer welfare and network quality may be higher under vertical separation than under vertical integration.