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Content providers and co-investment in broadband networks

Anna D'Annunzio and Pierfrancesco Reverberi ()
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Pierfrancesco Reverberi: Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"

No 2015-05, DIAG Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"

Abstract: In many countries, Next Generation Access networks (NGA) deployment and penetration rate proceed at a slower pace than expected. We argue that an ex ante contractual arrangement among access Internet Service Providers (ISPs) and Content Providers (CPs), which builds on the complementarity between infrastructure and content, can promote the roll out of NGA. Different from co-investment of ISPs, and from incentive policies based on access regulation, one such contract brings down the investment cost for the telecom industry, promotes end users' demand for improved connectivity, and internalizes investment externalities. We then study how the regulatory regime of the Internet affects firms' investment incentives. Using a simple model, we show that a departure from network neutrality, which allows the access ISP to negotiate with the CP a fee for priority delivery of content, has ambiguous effects on infrastructure investment. The ISP's and the CP's incentives to (co)-invest in NGA depend on the cost of investment and the CP's bargaining power ex post (when investment is sunk).

Keywords: Next Generation Access networks; Investment under uncertainty; Ex-ante and ex-post contracts; Network neutrality; Co-investment (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-net, nep-pay and nep-reg
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