Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing Countries: Panel Data Applications

Abstract

Since the USA Telecommunications Act of 1996, the regulatory frameworks, have led to the requirement of different policy practices in many countries across the world in order to establish sustainable competition in whole telecommunication markets. These regulatory reforms are the privatization of the telecom historical integrated monopoly (the incumbent), the independency of the regulatory authority, the obligation of transparency of the access price and agreements & the unbundling, the separation and the access pricing policies. This paper suggests an empirical investigation on both the individual, and the global impacts of these different regulatory policy practices on broadband deployment. To this end, we construct a panel data covering 107 developed and developing countries over the period of eight years from 2004 to 2011. Using the Instrumental variables (IV) & the Generalized Method of Moments (GMM) with fixed effects and robust to heteroskedastic and autocorrelated errors, we show that the relationship between regulation and broadband investment is an inverted U shape in developed world while it takes a U form in developing countries. This means that in developed countries, a less restrictive regulatory policy spurs broadband deployment while more stringent policy discourages innovation in telecom industry. However, in the developing countries, the regulation has a strict negative impact on broadband deployment.