Broadband investment and welfare under functional and ownership separation

Alessandro Avenali, Giorgio Matteucci and Pierfrancesco Reverberi

Information Economics and Policy, 2014, vol. 28, issue C, 70-82

Abstract: We study how the vertical industry structure affects investment in network quality and social welfare, with a focus on the prospective deployment of high-speed broadband access networks (the so-called NGA). We model pros and cons of vertical separation, namely, pro-competitive effects and loss of some efficiencies of vertical integration, and distinguish functional separation from ownership separation. Our findings challenge the presumption that (compared with vertical integration) vertical separation reduces investment incentives and involves a trade-off between promoting consumer surplus and ensuring investment. While investment is higher under ownership rather than functional separation, the latter may yield the highest social welfare among vertical industry structures. Furthermore, the incumbent may voluntarily opt for functional separation, but in some of these cases, prohibiting separation improves welfare.

Keywords: Vertical integration; Vertical separation; Access pricing; Quality investment; High-speed broadband (search for similar items in EconPapers)
JEL-codes: L13 L22 L51 L96 O31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:28:y:2014:i:c:p:70-82

DOI: 10.1016/j.infoecopol.2014.07.003

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