Geographical Cross-Collateralization, Universal Coverage, and Co-Investment Policy

Jan Bouckaert () and Johan Stennek ()
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Jan Bouckaert: University of Antwerp
Johan Stennek: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden, https://www.gu.se/en/school-business-economics-law/economics

No 847, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: We argue that geographical cross-collateralization – a firm’s ability to pledge incomes earned in more populated areas as “collateral” for the loans needed to finance investments in less populated areas – plays an important role for ensuring universal coverage of next generation communication networks. Our main result is that when firms are capital-constrained, co-investments in urban areas enhance geographical cross-collateralization and thus contribute to universal service through increased coverage for rural consumers. Co-investment may, in addition, introduce retail competition to the benefits of sub-urban consumers. The catch is that urban consumers may suffer from lower infrastructure competition. Co-investment policy therefore may raise tradeoffs between consumers in different (relevant) geographical markets.

Keywords: joint venture; universal service; cross-collateralization; cross subsidization (search for similar items in EconPapers)
JEL-codes: D43 K22 L24 L51 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2024-09-20
New Economics Papers: this item is included in nep-reg and nep-ure
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