Facility- and service-based competition and investment in fixed broadband networks: Lessons from a decade of access regulations in the European Union member states

Wolfgang Briglauer, Klaus Gugler and Adhurim Haxhimusa

Telecommunications Policy, 2016, vol. 40, issue 8, 729-742

Abstract: This paper employs firm-level panel data of 57 incumbent and entrant firms for 23 European countries in the decade from 2003 to 2012. We examine the impact of service- and facility-based competition on firm-level investment as well as the strategic effects underlying infrastructure investment decisions. At the same time we explicitly model the structural dynamics of broadband investment by means of a flexible accelerator model. The empirical specification employs dynamic panel estimation techniques which allow us to account for various sources of endogeneity. We find that facility-based competition exerts a positive and significant impact on both incumbents and entrants implying that incumbents’ and entrants’ investment decisions are strategic complements. Moreover, we find that intermodal competition in terms of fixed-mobile substitution exerts different effects at the firm level. Finally, we show that service-based competition appears to have no significant impact on the investment decision of incumbents and entrants. However, with respect to the later phase of market liberalization, service-based competition exerts a negative impact on entrants’ investment. Our results thus also provide relevant policy guidance on the role of service-based competition in regulating emerging high-speed broadband infrastructure.

Keywords: Investment dynamics; Regulation; Service-based competition; Facility-based competition; Strategic effects (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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DOI: 10.1016/j.telpol.2015.07.015

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