Regulatory inertia versus ICT dynamics: The case of product innovations

This article conjectures that the legacy industry-specific regulation that has governed the telecommunications sector for a long time is in basic conflict with the dynamics and product innovations that characterize the modern information and communications technology (ICT) sector. Reasons for the failure of legacy regulation to promote product innovations are explained and proposals for alternatives, such as deregulation and regulatory reform are discussed. Both regulation and competition policy are more difficult for ICT than for other sectors. Therefore both, regulation and competition policy may need reforms in order to deal with new problems. The most drastic and most realistic alternative to legacy-type regulation remains deregulation and a move to competition policy. Symmetric regulation, smart regulation, quasi-Coasean approaches and subsidies all have some limited applicability to specific situations, but are all associated with complications that have to be resolved, while competition policy is a comprehensive alternative. Last-mile access and gatekeeper access are analyzed as two main areas of legacy regulation, which are in danger of being exported to other ICT areas. Such exports may negatively affect the dynamics of the ICT industry. Rather than being exported, legacy regulations should be reduced in order to enhance product innovations.     

An assessment of the equality of access and no-regulation approaches to next generation networks

The European Commission believes that for the regulation of next generation fixed telecommunications networks the continuity approach is preferable to the equality of access approach and the no-regulation approach. According to the European Commission, (i) functional separation eliminates discrimination and promotes competition, but should only be used as a measure of last resort because it involves various complex trade-offs, whereas (ii) the no-regulation approach fosters investment, at the cost of sacrificing competition. The article agrees that functional separation involves complex trade-offs but disputes the assertion that functional separation necessarily eliminates discrimination and promotes competition. In addition, the article also establishes conditions under which the no-regulation approach does not reduce competition.     

Maximizing the adoption of fixed number portability within the EU: An empirical analysis

Number portability (NP) is considered by the European Commission as a key measure for promoting competition within the telecom sector especially regarding network access infrastructure. However, NP requires several modifications to the network architecture and to the business processes of each operator that, depending on network size, may result in a significant financial cost. This is true for fixed networks in particular. Given the requirement for such an investment, National Regulatory Authorities (NRAs) desire a clear picture on what to expect, in terms of progress in access competition, when introducing fixed NP in their respective markets. The paper approaches this question by correlating several fixed telephony market indices related to access competition to the degree of success of fixed NP. Relevant analysis based on European Union member states’ data indicates that fixed NP does not significantly contribute to local loop unbundling (LLU) adoption in markets where there are other access technologies available. In these markets, access competition via these other technologies and fixed NP initially achieve similar penetration rates. Consequently, when access competition exceeds a certain threshold and given a reasonable pricing regime then fixed NP is further boosted to include broadband connections based on several broadband technologies/methodologies such as LLU and cable as well as existing narrowband access technologies (e.g. narrowband cable connections). In markets where LLU is the only alternative for access then the rate of Fixed NP adoption is directly correlated with the success of LLU. Consequently, these conclusions are considered within a high-level stepwise approach for NP implementation, which is based on the experience acquired from the respective Greek national project.     

How will telecommunications bundles impact competition and regulatory analysis?

In this article, one makes two points about the impact of bundles on competition and regulatory policy. First, one argues that the growing importance of bundles requires an adjustment in the current framework of relevant product markets for individual services, and that the traditional tools of competition policy, namely the SSNIP test, can be adjusted to deal with these new circumstances. Second, one argues that the technological and behavioral changes, underlying the emergence of bundles, call for a shift of emphasis in regulatory policy from ensuring access to the incumbent’s fixed telecommunications network services to ensuring access to television content.     

The impact of different fibre access network technologies on cost,competition and welfare

Using a novel approach to the evaluation of new network technologies that combines an engineering cost model with a differentiated multi-player oligopoly model with wholesale access regulation this article evaluates the choice among different Fibre-to-the-Home (FTTH) architectures. The cost modelling relies upon an engineering bottom-up approach that feeds into a competition model. For addressing competition the pyramid model was chosen, which is an extension of the Hotelling model to multiple firms/services. The paper solves for price setting Nash equilibria between an incumbent, wholesale-access-based entrants and cable as an additional fully integrated network competitor. Welfare tradeoffs are highlighted with respect to cost differences and QoS differences between the various FTTH architectures and between the modes of regulation. According to the analysis architectures that can be unbundled (and that allow for greater speeds) outperform, from a social welfare perspective, architectures that (realistically) allow only for bitstream access.     

Access regulation, competition, and broadband penetration: An international study

The evolution of broadband penetration has shown substantial differences between OECD countries. This paper empirically investigates to what extent different forms of regulated competition explain these international differences. It distinguishes three modes of competition between broadband internet access providers that result from regulatory policies: (1) inter-platform competition; (2) facilities-based intra-platform competition; and (3) service-based intra-platform competition. In most countries these forms of competition co-exist although their intensity varies from country to country. Intra-platform competition may differ among countries depending on the degree of mandatory access obligations imposed by the regulator on the dominant network firm. Based on a sample of OECD countries, the analysis finds that inter-platform competition has been a main driver of broadband penetration. The two types of intra-platform competition have a considerably smaller effect on the broadband penetration. Linking these findings back to access regulation suggests that the “stepping stone” or “ladder of investment” theories might not provide the justification to impose extensive mandatory access obligations on DSL incumbents.     

The landlocked island: Information access and communications policy in Nepal

This paper examines information access in Nepal, its current limitations, and opportunities for expansion, particularly in rural areas. It argues that government policies and the regulatory environment have failed to create the competition necessary for rapid expansion of information access through information and communication technologies (ICTs), particularly in rural areas. Furthermore, restrictive approaches to licensing and exorbitant fees have hindered the ability of civil society organizations, non-governmental organizations (NGOs), and small and medium enterprises (SMEs) to provide information access at the local level. This has resulted in very limited access to information outside a few urban centers and created some of the world's highest access costs in one of its poorest countries. To successfully address this situation, the newly installed republican government will need to create an environment that promotes competition in less lucrative rural markets while negotiating the demands of existing license holders.     

Unbundling and infrastructure competition for broadband adoption: Implications for NGA regulation

The common idea of open access policy is that it refers to the sharing of particular elements, such as wholesale access networks, backhaul, under-sea cable and internet exchange points in fixed and mobile networks. In broadband networks, the use of open access policy usually refers to the infrastructure parts, which are considered a bottleneck. Many regulators have generally focused open access policy on fixed broadband networks, especially digital subscriber line (DSL) technology, in the last decade. Local loop unbundling (LLU) regulation is one of the main strategies for the regulator to open access to an incumbent’s bottleneck network in order to soften its monopoly power and encourage competition in the DSL broadband market. The OECD countries have different strategies regarding unbundling local loop and infrastructure competition, as the characteristics and infrastructure networks of countries vary. There are currently more choices of next generation network (NGN) technologies to develop. While local loop unbundling may not be applied fully to NGN development (the cost is not sunk, more technologies are available to implement, incentive of investment by operator), it can indicate benefits and drawbacks of open access policy in the past decade that can be adapted to NGN.The empirical results of this study show that during 2002–2008, LLU regulation was one of the strategies used to increase broadband adoption in countries that had difficulty encouraging infrastructure competition. Unbundling regulation can therefore be implemented carefully and differently in each country that has inefficiency that is harmful to consumers in its market from a monopoly incumbent. Infrastructure competition, on the other hand, is introduced as another strategy to increase broadband adoption. The empirical results of this study indicate that infrastructure competition can be used as a strategy when there are already enough infrastructures in the area or country. These results support the idea of using open access and infrastructure competition policy depending on the existing competition of broadband infrastructure in each country.     

Cooperatives in Bolivia: Customer ownership of the local loop

Cooperatives have been used by the inhabitants in rural areas to gain access to telecommunications. In Bolivia and Finland, for example, consumer cooperatives have been for many years the only mechanism to provide local telecommunication services to the whole country. This paper studies the effects of the Bolivian market's structure on the development of competition as well as on universal access and service policies. It argues that some cooperatives after the liberalisation of the market are not helping to develop competition. Cooperatives may have incentives to increase the interconnection charges that they receive from long distance firms to cross-subsidise the prices of local calls. Moreover, as some cooperatives have entered the long distance market, they may try to restrict competition through collusive agreements. Finally, the paper suggests that the excessive price of the cooperatives’ shares may have damaged the possibility of reaching a higher penetration level and greater coverage in rural areas.     

关于网络行业竞争与接入定价的理论分析

网络行业在引入竞争后,很难再保证其普遍服务目标的实现。本文根据进入者进入情况的不同,从理论上分析了针对不同的情况,管制者应如何设立普遍服务基金及制定相庆的接入价格,使得网络行业在保证普遍服务目标实现的同时,又能有效竞争,提高这些行业的经营效率。     

Analysis of fixed broadband access and use in Thailand: Drivers and barriers

The aim of this paper is to analyze the demand for fixed broadband in Thailand. Data were obtained from a national survey in 2010 by the National Broadcasting and Telecommunications Commission (NBTC) of Thailand. The bivariate probit model was employed to examine empirically whether accessibility to fixed telephony infrastructure, socio-economic variables and the area of residence have a systematic link to fixed broadband access in the first stage, and then, specific usage, provided access exists, is estimated. Results of this study show that the variables, together with their potential impact, are as follows: fixed infrastructure, income, gender, level of education, age of consumer and residential area. The impact of these factors varies from service to service (i.e. video download, social network, searching and e-mail). The implications for the NBTC are to encourage competition through the infrastructure and to permit more competition in infrastructure development. This could stimulate the growth of fixed broadband access and use. At the same time, the government could also implement policies to encourage more access and usage, for example income subsidization and training program.     

Race to the top: Does competition in the DSL market matter for fibre penetration?

High speed broadband creates potential productivity gains and has a positive impact on economic growth. Achieving Europe's broadband access objectives will require large scale investment in next generation broadband networks, and it is imperative that an appropriate investment climate is created to encourage fibre network rollout. This study considers whether and how competition in the DSL market affects the incentives of operators to invest in the deployment of high-end fibre optic networks. Most earlier research on the drivers of investment in broadband technology has focused on the effect of mandatory access policies, such as local loop unbundling, or competing infrastructures. We posit that competition in the DSL sector may also influence fibre penetration, possibly to a considerable extent. We find that the relationship between service-based competition and fibre penetration is non-linear: a lack of or severe DSL competition is correlated with a negative effect on fibre penetration, but if a moderate degree of competition is already present in the market, more service-based competition may positively influence fibre penetration. The scale of these effects however varies with the openness of the DSL market: operators' incentives to invest in fibre appear to be more sensitive to changes in DSL competition if there is extensive local loop unbundling.     

The theory of access pricing and its linkage with investment incentives

The paper reviews how the question of access pricing has been fully investigated by the theoretical literature in a static context. On the other hand, there is no developed analysis of the linkage between access pricing and incentives to invest. This paper argues that some useful literature in related areas can be brought to bear on the issue of “races” to build infrastructures, on the relationship between infrastructure and service competition, and on two-way network competition.     

Local competition and the role of regulation: the EU debate and Britain's experience

Competition in local access networks and local loop unbundling have been central in the 1999 review of the EU communications regulatory framework. These issues also figure high on national policy agendas. Competition in local access is thought to stimulate internet penetration and the development of e-commerce and interactive applications, all key elements for the move towards a ‘new economy’. Following an analysis of different ways to promote competition in local access networks and a review of the respective EU debate, this paper then concentrates on the relevant developments in Britain. At a broader level, it explores the interplay between EU debates and British policies and actions and the scope for harmonisation of national regulatory regimes. At a more specific level, the paper assesses the evolution of local access competition and relates this to the role of regulation and the question of facilities- vs. services-based entry. It is argued that the introduction of new market restructuring initiatives, such as local loop unbundling, requires a larger involvement by regulators, particularly in the early stages, rather than just a reliance on general competition rules.     

The impact of intra-platform competition on broadband penetration

There has been an extensive debate about the role of broadband access regulation on market outcomes. This paper estimates the impact that the different modes of competition have had on broadband take-up to date, using a data set for EU27 countries. We find that ULL, which is one of main types of access-based competition in Europe, has had a positive impact on broadband take-up. However, the impact of ULL becomes smaller as its share increases. That is, ULL entry is less effective in areas where ULL take up is already high. Further, there is evidence of a crowding out effect between ULL and inter-platform competition. This means that ULL is less effective in enhancing broadband penetration in the areas where alternative networks already have a significant share of broadband lines.     

Strategic investments under competition for access provision

We examine competition for access provision when symmetric vertically integrated firms invest in infrastructure upgrades. Spillovers through access have two effects (a wholesale-profit effect and a retail-production effect) on infrastructure investment made by vertically integrated firms. When the vertically integrated firms freely set access charges, due to the dominance of the wholesale-profit effect, quality differentials endogenously occur between these firms (asymmetric equilibria). When access charges are regulated, symmetric equilibria occur with multiple equilibrium investments due to the retail-production effect. Because competition for access provision induces a strong incentive for infrastructure investment, it also achieves a higher social welfare than does access regulation.     

Network investment,access and competition

This paper analyzes the role of different contract types and access regulation on innovation and competition in telecommunications in the context of Next Generation Access Networks. Within a standard duopoly model, it is shown that ex-post access contracts lead less often to the duplication of investment, but to a wider roll-out compared to a market in which such contracts cannot be offered. In comparison to such ex-post contracts, ex-ante contracts lead to an even wider roll-out, but to a less frequent duplication of investments. Ex-ante contracts in particular, but also ex-post contracts, can be used to dampen competition.     

Changing competitive dynamics in network industries: An exploration of sun microsystems' open systems strategy

An integral part of competition is to deny rivals access to proprietary technical knowledge. Yet, Sun Microsystems provides rivals easy access to its technical knowledge and encourages them to enter its workstation market. This paper employs theoretical insights on technological systems and network externalities to understand Sun's open systems strategy. The paper also explores the changing nature of competition in network industries–industries characterized by network externalities and built around technological systems.     

Competition aspects of pricing access to networks: What are the issues?

The introduction of competition between service providers in industries with some sort of network—such as telecommunications, but also gas and electricity—has created the regulatory problem of access pricing. Where a service provider requires access to a network owned by another firm, how much should that other firm be allowed to charge for access to its network? The problem arises where no agreement is forthcoming through normal market negotiations. The paper discusses the question of access pricing in telecoms, and the issues involved in actually deriving a price fixing mechanism for access to a network.     

网络竞争与网络产业改革

本文运用博弈分析,论证了在不触动网络垄断的情况下,网络产业的纵向结构分离或开放接入会产生内在的提高下游产品或服务价格的驱动力量,从而对近年来我国网络产业下游产品或服务的价格上涨给出了新的解释。建立有管理的竞争机制,允许绕道、开放用户选择权,是网络产业实现有效竞争并使竞争惠及最终用户的可行途径。