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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

No 15-048, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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 allows 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)
JEL-codes: L43 L52 L96 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-eur, nep-ict, nep-net and nep-reg
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https://www.econstor.eu/bitstream/10419/112761/1/832562270.pdf (application/pdf)

Related works:
Journal Article: Facility- and service-based competition and investment in fixed broadband networks: Lessons from a decade of access regulations in the European Union member states (2016) Downloads
Working Paper: Facility- and Service-based Competition and Investment in Fixed Broadband Networks: Lessons from a Decade of Access Regulations in the European Union Member States (2015) Downloads
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