Regulation and investment in network industries: Evidence from European telecoms

Michal Grajek and Lars-Hendrik Röller

No 2009-039, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We provide evidence of an inherent trade-off between access regulation and investment incentives in telecommunications by using a comprehensive data set covering 70+ fixed-line operators in 20 countries over 10 years. Our econometric model accommodates: different investment incentives for incumbents and entrants; a strategic interaction of entrants' and incumbents' investments; and endogenous regulation. We find access regulation to negatively affect both total industry and individual carrier investment. Thus promoting market entry by means of regulated access undermines incentives to invest in facilities-based competition. Moreover, we find evidence of a regulatory commitment problem: higher incumbents' investments encourage provision of regulated access.

Keywords: Telecommunications; access regulation; unbundling; investment (search for similar items in EconPapers)
JEL-codes: C51 L59 L96 (search for similar items in EconPapers)
Date: 2009
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Related works:
Journal Article: Regulation and Investment in Network Industries: Evidence from European Telecoms (2012)
Working Paper: Regulation and investment in network industries: Evidence from European telecoms (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2009-039

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