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Abstract: Broadband Investment and the Threat of Regulation: Preventing Monopoly Exploitation or Infrastructure Construction?
Abstract
Broadband Investment and the Threat of Regulation: Preventing Monopoly Exploitation or Infrastructure Construction?
The Review of Network Economics
Vol. 6, Issue 3 - September 2007, pp 342 - 354
Authors
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Ulrich Blum
Halle Institute for Economic Research
Christian Growitsch
Scientific Institute for Infrastructure and Communication Services WIK
Niels Krap
Halle Institute for Economic Research
E-mail: [email protected] |
Abstract
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Recently, investments in new generation networks in Germany have been curtailed, since potential investors required this new network be unregulated. To develop a regulator's strategy that allows investments to occur but prevents monopolistic prices, we model an investor's decision problem under a threat of regulation. We show that the mere threat of a regulator's intervention may prevent supernormal profits without actual price regulation. The regulator, on the other hand, can influence both the investment decision and the investor's price via her signals on regulation probability and price.
Keywords: Regulation, investment, telecommunication, network industries, next generation networks.
JEL Codes: L43, L51, L96
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