Abstract
The “ladder of investment” is a regulatory approach proposed by Cave (2006), which has been widely embraced by national regulatory authorities in the European telecommunications sector. The approach entails providing entrants, successively, with different levels of access—the “rungs” of the investment ladder, while inducing them to climb the ladder by setting an access charge that increases over time or by withdrawing access obligations after some pre-determined date (i.e., by setting sunset clauses). Proponents of the ladder of investment approach claim that such regulatory measures would make service-based entry and facility-based entry complements—albeit they have been traditionally viewed as substitutes—in promoting competition. The regulators, thus, have shown a strong interest in this approach. The paper provides a critical review of the ladder of investment approach by setting out its two underlying assumptions and discussing their validity with references to the related industrial organization literature.
Highlights
According to the traditional view, service-based entry and facility-based entry are two alternative ways to promote competition in the telecommunications sector
In the previous Section, we focused on the underlying mechanism of the ladder of investment (LOI) approach and assumed away any constraints the regulator might face in its implementation
We do not attempt to contribute to this debate in this paper and will not address whether Cave’s LOI approach is appropriate for such symmetric markets we review the existing formal papers that study this issue
Summary
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