Can two-part tariffs promote efficient investment on next generation networks?

Research output: Contribution to journalArticlepeer-review

35 Citations (Scopus)

Abstract

We analyze if two-part access tariffs solve the dynamic consistency problem of the regulation of next generation networks. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a next generation network that improves the quality of the retail services. We have three main results. First, we show that if the regulator can commit to a policy, a regulatory moratorium may emerge as socially optimal. Second, we show that if the regulator cannot commit to a policy, it can induce investment only when the investment cost is low. Third, we show that in this case, two-part tariffs involve very large payments from the entrant to the incumbent.

Original languageEnglish
Pages (from-to)323-333
Number of pages11
JournalInternational Journal of Industrial Organization
Volume28
Issue number3
DOIs
Publication statusPublished - May 2010

Keywords

  • Dynamic consistency
  • Investment
  • Next generation networks
  • Regulation

Fingerprint

Dive into the research topics of 'Can two-part tariffs promote efficient investment on next generation networks?'. Together they form a unique fingerprint.

Cite this