Can Two-Part Tariffs Promote Efficient Investment on Next Generation Networks?

Duarte Brito, Pedro Pereira and João Vareda ()

No 34, Working Papers from Portuguese Competition Authority

Abstract: We analyze if two-part access tariffs solve the dynamic consistency problem of the regulation of Next Generation Networks. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a next generation network that improves the quality of the retail services. We have three main results. First, we show that only if the investment cost is low, the regulator can induce investment when he cannot commit to a policy. Second, we show that in this case, two-part tariffs involve payments from the entrant to the incumbent that may be politically unacceptably high. Third, we show that if the regulator can commit to a policy, a regulatory moratorium may emerge as socially optimal.

Keywords: Next Generation Networks; Investment; Regulation; Dynamic Consistency. (search for similar items in EconPapers)
JEL-codes: L43 L51 L96 L98 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-10
New Economics Papers: this item is included in nep-mic
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Journal Article: Can two-part tariffs promote efficient investment on next generation networks? (2010)
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