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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


Briglauer, Wolfgang ; Gugler, Klaus ; Haxhimusa, Adhurim


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URL: https://ub-madoc.bib.uni-mannheim.de/39497
URN: urn:nbn:de:bsz:180-madoc-394977
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: ZEW Discussion Papers
Volume: 15-048
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L43 , L52 , L96,
Keywords (English): Investment dynamics , regulation , service-based competition , facility-based competition , strategic effects
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.

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