Mandated sharing and telecom investment in Latin America and the Caribbean

Abstract

The main objective of this paper is to look at the effects of mandated sharing on investment in the telecommunications sector in Latin America and the Caribbean (LAC). Given the relevance of promoting suitable regulatory conditions to stimulate the huge investments required for the region to close its digital divide, this paper intends to provide inputs for the design of regulatory frameworks, particularly towards finding out the optimal levels of intervention. Our results suggest that sharing obligations have been linked with lower investment intensity in the region. Those results are robust to the addition of control variables which may also have an incidence on investment decisions, and to the treatment of possible endogeneity in the estimates. Further checks provide specific insights about the negative effect of mandated co-location obligations and mandated infrastructure sharing. As for local loop unbundling, it was found to have a negative effect on investment intensity only if introduced jointly with price regulation. As a result of the findings reported in this paper, we suggest that regulatory bodies in LAC should pursue light and flexible approaches in order to promote the much-needed investments. In particular, sharing decisions should be the result of voluntary agreements between those concerned, not because of imposed mandates.