European Sector Regulation and Investment Incentives for Broadband Communication Networks

Abstract

This paper looks at the broadband telecommunications sector to unravel the relationships between sector regulation and investment behaviour in the European Union. Cost based access pricing regimes, although successful in attracting new entrants, have negatively affected the investment in fixed line infrastructure. New entrants show a low propensity to invest in infrastructure and there is an undue emphasis on a single technological platform. These facts may be compared with the mobile telecommunications sector. There access regulation is much less intrusive, because facility based competition induced a much higher degree of competition, while investment levels have decreased much less and the relative shares of investments by incumbents and new entrants are much more aligned with market shares. In order to restore incentives for investment in the view of expanding broadband access, a review of certain access regulation provisions seem to be necessary, possibly by providing greater incentives to facility based entry via platform competition.