How does vertical industry structure affect investment in infrastructure quality?

Alessandro Avenali (), Giorgio Matteucci () and Pierfrancesco Reverberi ()
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Alessandro Avenali: Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma
Giorgio Matteucci: Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma
Pierfrancesco Reverberi: Dipartimento di Informatica e Sistemistica "Antonio Ruberti" Sapienza, Universita' di Roma

No 2010-08, DIS Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"

Abstract: If the access network is an economic bottleneck, then the regulator may consider vertical separation of the telecommunications incumbent. There is the concern that separation dilutes quality-enhancing network investment, and social welfare. We show that, despite some loss of operational coordination and potential hold-up problems, vertical separation may raise investment and welfare compared with integration. While structural more than functional separation raises investment, it is functional more than structural separation that raises welfare (due to investment cost). The results obtained shed light on the effects of different forms of separation on the incentive to build-out Next Generation Access networks (NGAs).

Keywords: Industry Infrastructure; Network; Regulation (search for similar items in EconPapers)
Date: 2010-09
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