Title: Can access regulation promote broadband investment and consumer welfare?

Authors: Alessandro Avenali; Giorgio Matteucci; Pierfrancesco Reverberi

Addresses: Dipartimento di Ingegneria informatica automatica e gestionale Antonio Ruberti, Sapienza Università di Roma, Via Ariosto 25, 00185 Roma, Italy ' Dipartimento di Ingegneria informatica automatica e gestionale Antonio Ruberti, Sapienza Università di Roma, Via Ariosto 25, 00185 Roma, Italy ' Dipartimento di Ingegneria informatica automatica e gestionale Antonio Ruberti, Sapienza Università di Roma, Via Ariosto 25, 00185 Roma, Italy

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.

Keywords: access price regulation; broadband investment; consumer welfare; vertical integration; vertical separation; regulatory commitment; switching costs; value added; investment incentives; network quality.

DOI: 10.1504/IJTPM.2015.072795

International Journal of Technology, Policy and Management, 2015 Vol.15 No.4, pp.357 - 377

Received: 19 Nov 2014
Accepted: 10 Apr 2015
Published online: 03 Nov 2015 *

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