Public policy targets in EU broadband markets: The role of technological neutrality

The European Commission has recently sought to substantially revise how it regulates the telecommunication industry, with a key goal being to incentivise investment in high-speed broadband networks. Ambitious goals to incentivise investment in high-speed broadband networks have been set across the European Union, initially in the ‘Digital Agenda for Europe’ and more recently in its ‘Gigabit strategy’. These goals reflect the view of many that there are widespread and significant socio-economic benefits associated with broadband. Our analysis explores the consequence of target setting at a European level, in terms of encouraging investment and picking which technology should be adopted within the context of technological neutrality. We demonstrate that while public policy targets might implicitly favour specific technologies, especially when gigabit targets are defined, the technological choices that occur within individual Member States are shaped by the complex and dynamic interaction between a series of path dependencies that may vary significantly across as well as within Member States. Adopting an ecosystem perspective, we propose a conceptual framework that identifies the key factors associated with technological neutrality and informs a rational decision-making process.     

Net neutrality: A progress report

This paper is intended as an introduction to the debate on net neutrality and as a progress report on the growing body of academic literature on this issue. Different non-net neutrality scenarios are discussed and structured along the two dimensions of network and pricing regime. With this approach, the consensus on the benefits of a deviation from the status quo as well as the concerns that are unique to certain non-net neutrality scenarios can be identified. Moreover, a framework for policy decisions is derived and it is discussed how the concept of neutrality extends to other parts of the Internet ecosystem.     

Surplus extraction by network providers: Implications for net neutrality and innovation

This paper looks at surplus extraction by network providers who control the medium of information transfer between application developers and consumers, and addresses the following questions: is net neutrality beneficial to society? and does providing network providers flexibility in pricing stunt innovation in the long run? To answer the first question, it looks at a market consisting of a monopoly network provider and two application providers with non-substitutable products, using a simple single period model. It shows that net neutrality is necessary to ensure maximal benefit to the society. To answer the second question, the paper shows that a monopoly network provider, if allowed complete flexibility in pricing, does not necessarily stunt innovation. Looking at a market that consists of one network provider and one application provider, and using a simple multi-period model, it shows that given maximum flexibility the network provider not only encourages innovation when the potential benefits are sufficiently high but also maximizes surplus. This paper takes the view that the topic of net neutrality is not only controversial but also complicated, and suggests that policy makers use a balanced approach based on sound analysis.     

DOES ORGANIZATIONAL FORM AFFECT INVESTMENT DECISIONS?*

I investigate whether organizational changes affect investment decisions using evidence from the hospital industry in the United States. During the 1990s, hospitals and physicians have reorganized the way they trade with each other, vertically consolidating the provision of healthcare services. I provide empirical evidence that hospitals adopting the new organizational forms add more healthcare services over time than hospitals that are independent of their physicians. I also find that when the average percentage of county population covered by each HMO increases, the differences in investment behavior between vertically consolidated and independent hospitals become larger.     

Telephone number distribution: a snapshot at the beginning of 2000

The United States is depleting its stock of telephone numbers for assignment to telecommunications carriers. If current trends continue the industry could run out of numbers as soon as 2015. There is little empirical examination of this problem in the economics literature. This analysis examines the distribution of telephone numbers across the United States and quantifies the effects of several key factors. The authors examine the effects that population density, competition for local telephone service, wireless telephone service provision and rate exchange area consolidation have on telephone number assignment.     

The Digital Divide and Other Economic Considerations for Network Neutrality

In its 2016 Broadband Report, the Federal Communications Commission (FCC) recognizes that a rural/urban digital divide remains prevalent—especially with respect to broadband adoption. It also highlights several policies that the FCC has undertaken purportedly to reduce the divide, including the 2015 Open Internet Order (OIO)—in which the stated intent is to enforce “network neutrality.” However, long before the OIO, studies have raised concerns that network neutrality policies will discourage investment by internet service providers (ISPs) in broadband infrastructure, to the detriment of broadband accessibility, and may increase average consumer costs—both of which would only further exacerbate the digital divide. In this paper, we provide a holistic analysis of the effects of net neutrality on the digital divide; in doing so, we draw from recent economic research on this issue. Our goal is to present a range of economic considerations that should be taken into account when evaluating the overall impact of the OIO, with particular attention to its impact on the digital divide.     

Book Reviews

In light of the changes occurring in the European Common Market in 1992, it is particularly timely to review two books that contrast new product development practices in the United States with those in Europe and other countries. Both books are based on academics' research but are intended to provide practical insights for practitioners. The first review is of a book that summarizes an extensive study of the world auto industry. This book, which does offer many practical lessons, compares industry practices in the United States, Europe and Japan. The second review, by Chris Panton, examines a book that contrasts product development practices in American and British firms. Our reviewer finds that this book primarily offers an effective summary of conventional wisdom but fewer practical insights.     

Technical Note: New Depreciation Rules from the Job Creation and Worker Assistance Act of 2002 and their Impact on Capital Investment

United States President George W. Bush recently signed an economic stimulus bill into law entitled the Job Creation and Worker Assistance Act. The law issues a number of directives aimed at increasing corporate capital expenditures in hopes of revitalizing a sagging economy. In this article, we focus on the increased amount of depreciation allowed in the first year following a qualifying capital investment. Specifically, an “additional” 30% of depreciation is allowed in the first year for ail personal property assets (20-year asset classes or less). This is clearly a significant change. Here, we derive “new” depreciation tables for personal property classes with the adjusted rule, both for MACRS and AMACRS, and illustrate the impact on capital investment decisions.     

Effects of trade and agricultural policies on the structure of the U.S. tomato industry

Over the last few decades, accelerated growth of Mexican tomato imports to the United States has caused several trade disputes with U.S. growers. A data-driven approach was used to analyze trade flows in the tomato industry from 1970 to 2015 and all structural changes to policy interventions implemented during the same period were linked. Tests for endogenous breakpoints reveal that NAFTA and trade pricing policies are two of the main factors that caused structural changes in the tomato industry in 1992 and 1999. While U.S. agricultural policies sought to protect domestic tomato producers, they did not stop Mexican tomatoes from taking an important share of the U.S. market. Mexican imports to the United States, especially post-NAFTA, have a high explanatory power for U.S. domestic production.     

Learning to time capacity expansions: an empirical analysis of the worldwide petrochemical industry, 1975–95

This paper examines how firms may learn to better time their capacity expansion decisions through their own and their rivals' past experiences. A review of the literature shows that there may be several reasons for firms to bunch their capacity additions or ‘hop on an investment bandwagon.’ These reasons include coordinating through maintaining market shares, information effects, and decision‐making biases. Given the substantial evidence of organizational learning, firms may be expected to improve their timing skills of capacity additions through their previous capacity expansion experience. Hypotheses are developed both for proprietary learning and learning at the industry level, and for forgetting. These hypotheses are tested on a database consisting of 72 companies operating in the petrochemicals industry in the United States, Europe, and Japan from 1975 to 1995. The results indicate that learning in timing capacity expansion decisions comes primarily from within firms through an accumulation of their poor outcomes. However, this timing skill is far more apparent in greenfield than incremental expansion decisions. Copyright © 2003 John Wiley & Sons, Ltd.     

企业 R&D 投入与企业绩效关联度分析——基于中美上市工业企业的实证研究

技术创新主要源自于具有导向性的研究和开发活动，是影响企业竞争力和可持续发展至关重要的因素。本文以中美范围内工业制造行业的 209家上市工业企业为样本，结合企业 2009~2015 年相关数据，实证分析了R&D投入与企业绩效的关系。研究结果表明研发支出和企业经济绩效之间具有非线性关系，可用倒U型曲线来描述，R&D 投入具有动态边际效应，研发投入为销售额的4％时，企业相应的经济效益达到最优水平。最后，本文建议企业应该加大R&D投入力度，同时注重研发投入的最佳阈值，以获得最大的产出效益，提高企业技术创新的竞争能力。     

DOES ELECTRICITY RESTRUCTURING WORK? EVIDENCE FROM THE U.S. NUCLEAR ENERGY INDUSTRY*

This paper examines whether electricity restructuring improves the efficiency of U.S. nuclear power generation. Using a panel dataset consisting of the full sample of 73 investor‐owned nuclear plants in the United States from 1992 to 1998, I estimate the plant‐level cross‐sectional and longitudinal efficiency changes associated with restructuring. Special attention is given to the potential policy endogeneity bias and different modeling strategies are presented to cope with the issue. Overall, I find a striking positive relationship between restructuring and cost reduction, and increased plant utilization.     

Agency and representation in internet governance

This special issue offers a new perspective on decision-making in internet governance, bringing together theoretical contributions and empirical knowledge on authority and influence in underexplored policy settings, from the Congress of the United States to RightsCon, a leading summit on human rights in the digital era. The articles included here shed light on specific groups underrepresented in existing research (such as civil society groups, expert activists, technical community) and on the interactions between these groups and traditional, powerful actors such as governments and industry. These contributions raise new questions, such as: is agency possible without representation in the digital space? Who can represent? Are deficiencies in technology governance affecting the representation model of our political systems more broadly? How do representation and agency manifest themselves across time and space?     

Lessons from broadband development in Canada,Japan, Korea and the United States

Broadband network development does not always track closely a nations overall wealth and economic strength. The International Telecommunication Union reported that in 2005 the five top nations for broadband network market penetration were: Korea, Hong Kong, the Netherlands, Denmark and Canada. The ITU ranked the United States sixteenth in broadband penetration.Aside from the obvious geographical and demographic advantages accruing to small nations with large urban populations, broadband development thrives when it becomes a national priority. Both developed and developing nations have stimulated capital expenditures for infrastructure in ways United States public and private sector stakeholders have yet to embrace. Such investments have accrued ample dividends including the lowest broadband access costs in the world. For example, the ITU reports that in 2002 Japanese consumers paid $0.09 per 100 kilobits per second of broadband access compared to $3.53 in the United States.Economic policies do not completely explain why some nations offer faster, better cheaper and more convenient broadband services while other nations do not. This paper will examine best practices in broadband network development with an eye toward determining the optimal mix of legislative, regulatory and investment initiatives. The paper will track development in Canada, Japan and Korea as these nations have achieved success despite significantly different geographical, political and marketplace conditions. The paper also notes the institutional and regulatory policies that have hampered broadband development in the United States.The paper also will examine why incumbent local exchange and cable television operators recently have begun aggressively to pursue broadband market opportunities. The paper will analyze incumbents’ rationales for limited capital investment in broadband with an eye toward determining the credibility of excuses based on regulatory risk and uncertainty. The paper concludes with suggestions how national governments might expedite broadband infrastructure development.     

The reluctant regulator: The Rural Utilities Service and American broadband policy

Drawing on the increasing body of literature on policy stakeholders and the ever-growing acknowledgement that communication policy is crafted by more than just parliamentarians and formal communication regulators this paper examines the role that another set of regulators plays in communication policy: agriculture regulators. Based on a study of the United States Department of Agriculture's Rural Utilities Service (RUS), this paper explores alternative agents of communication policy. More specifically, through document analysis we examine the way in which the Rural Utilities Service has shaped rural broadband policy in the United States over the last three decades. The implications for this research are wide, as it brings another policy actor into the policy making melee, and pushes communication policy scholars to consider the role that non-traditional communication regulators play in the communication policy making process.     

Investigating the intertwining impact of wholesale access pricing and the commitment to net neutrality principle on European next-generation access networks private investment plans: An options-game application for capturing market players' competitive interactions

Whilst the deployment of next generation access networks (NGANs) is undoubtedly beneficial to the economy, new legal developments in the United States (US) regarding the issue of net neutrality (NN) pose a new challenge not only to policy makers but to telecommunication providers as well, that could justify a fresh approach when assessing NGANs investments. In particular, the Federal Communications Commission (FCC) subverted extant NN rules in the US and if the European Union (EU) decides to follow a similar deregulatory path in the future it could change the way telecommunications providers on both sides of the Atlantic lay down their optical-fibre network infrastructure investment plans. For instance, if traffic prioritization is allowed then diversification of revenue sources can be achieved by charging customers for privileged data delivery to their premises. Currently, NGANs roll-out throughout EU is an ongoing process in a setting whereby access regulation in the form of network element unbundling is already imposed. As a result, these legal developments form a new context within which it makes sense to assess the role of NGANs wholesale access pricing in tandem with the degree of commitment to NN rules so as to i) determine their combinatorial impact on private telecommunications operators' financial figures and ii) capture their competitive interactions. Towards this end, an important aspect of particular value to market players (i.e. incumbents and competitive providers – CPs), and policy makers (i.e. National Regulatory Authorities – NRAs) that this article aims to examine is how to employ the option-game (OG) analysis, that reflects the intersection of game theory (GT) and real options (ROs), to model the competitive interactions between participants in a particular competition game set-up by means of deriving possible Nash-equilibrium (NE) outcomes within a regulatory setting part of which is the commitment or non-commitment to the NN principle. This, hybrid, evaluation tool is applied on top of a conventional discounted cash flow (DCF) techno-economic analysis assessment of an NGAN investment opportunity.     

Analysing the C-Band spectrum auctions for 5G in Europe: Achieving efficiency and fair decisions in radio spectrum management

This paper offers a detailed analysis of selected regulatory parameters used as instruments to promote efficiency with fairness for all stakeholders (in the legal sense of equity) in 5G spectrum auctions. Data were collected from sixteen auctions for the C-band that took place in the Member States of the European Union (EU) and in the United Kingdom (UK) between 2017 and 2020 for the introduction of the fifth generation (5G) of mobile communication technology. The selected instruments of intervention are: spectrum packaging, spectrum caps, set-asides, geographical scope of the license, license duration, various forms of license obligations, reserve prices and auction format.Significant differences were observed in national approaches to spectrum packaging, license obligations and reserve prices for efficiency purposes. Our analysis also shows that European national regulators are paying increasing attention to concerns over fairness of decisions on spectrum, or equity, especially by creating opportunities for local private networks to access the spectrum and by imposing requirements on network operators to guarantee more uniform population coverage of newly created 5G networks.     

中国数字经济规模测算研究——基于国际比较的视角

伴随着信息技术的快速发展及其与经济运行方式的不断融合,数字经济已被视为经济增长的“新引擎”,在世界上多数国家的发展战略中占据重要位置,数字经济规模测算研究是当前国内外统计机构与研究学者面临的亟待解决的问题。本文在系统梳理信息经济、互联网经济、数字经济演变历程的基础上,提炼数字经济的内涵与形成要素,构建数字经济规模核算框架,界定数字经济核算范围,确定数字经济产品,筛选数字经济产业,对2007—2017年中国数字经济增加值与总产出等指标进行测算,并将测算结果与美国和澳大利亚进行比较。测算结果表明:2017年,中国数字经济增加值53028.85亿元,占国内生产总值的6.46%;数字经济总产出147574.05亿元,占国内总产出的6.53%。基于国际比较的视角,2017年,中国数字经济增加值约为美国的58.12%;数字经济增加值占GDP比重低于美国0.44个百分点;2016年,中国数字经济增加值约为美国的52.77%,占GDP比重低于美国0.77个百分点,略高于澳大利亚0.03个百分点。近年来,中国数字经济增加值年均实际增长率明显高于美国和澳大利亚。2008—2017年,中国数字经济增加值年均实际增长率达14.43%,明显高于国内生产总值年均实际增长率8.27%,数字经济推动经济增长的作用明显。本文深化了数字经济规模核算框架研究,系统监测了中国数字经济的发展规模与结构,为进一步完善中国数字经济统计核算体系和提出促进数字经济高质量发展的战略措施提供参考依据。     

The effect of national culture on the choice between licensing and direct foreign investment

This paper argues that national differences in levels of trust impact perceptions of transactions costs and thereby influence the desirability of internalization and the choice of foreign market entry mode. The paper tests this framework on industry level data from the United States Commerce Department's Benchmark Survey of operations of U.S. -based manufacturing multinational corporations in 1977 and 1982, and shows that cultural differences in trust do influence perceptions of transaction costs and the preference for direct foreign investment across countries.