Cost-based Access Research Articles

Impact of Medicare Part D on coverage, access, and disparities among new jersey seniors.

The authors used a population-based survey of New Jersey residents to assess outcomes associated with implementation of the Medicare Part D program. Between 2001 and 2009, there was a 24% increase in prescription drug coverage among elderly individuals, but also an increase in cost-related access problems. Compared with the pre-Part D period, seniors reporting access problems post-Part D were less likely to be uninsured and more likely to be publicly insured. Cost-related access disparities among elderly Blacks and Hispanics relative to elderly Whites persisted from 2001 to 2009, and were partly driven by ongoing disparities related to low income. Such cost-based access problems 3 years into implementation implies that they are not transitory and may reflect inadequate subsidy levels alongside the importance of physician advice about prescriptions in ensuring low-cost medication options for vulnerable patients. Finally, the findings, may also reflect success in enrolling high-need seniors into Part D.

The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure A Survey

Our survey reviews the theoretical and empirical literature on all alternative policies to promote the deployment of new fiber-based communications infrastructure. Since such investment is expected to induce substantial positive externalities, dynamic efficiency becomes a particularly important policy goal. The available policies refer to i) different kinds of ex ante sector-specific regulations including cost-based access regulations as well as softer regulations such as regulatory holidays or geographically differentiated regulations, ii) deregulatory approaches based on effective competition law implementation and competitive market structures including allowance of co-investment models, and iii) public subsidies to cover non-profitable (“white”) areas. Our survey identifies the most significant research gaps, finding that numerous studies related to the impact of access regulations exist, whereas only a much smaller branch of literature addresses the impact of competition policies, and even fewer studies analyze the impact of public subsidies on new communications deployment. Moreover, our work allows for a generic framework for policy recommendations that identifies the comparative advantages of the individual policy options for different market structures and for varying degrees of externalities. We find that public subsidies are the dominant policy alternative in white areas, whereas access regulations can be the preferred policy in white or “grey” areas, where only monopoly structure or co-investment models lead to private investment. Deregulatory policies might be preferable in grey areas, if there is sufficient pressure from competitive outside options and if competition law is strong. Finally, deregulatory policies including soft regulation are the dominant policy in “black” areas, where several independent infrastructure operators exist.

Overusing a bypass under cost-based access regulation: underinvestment with spillovers

We explain how underinvestment in infrastructure upgrades is aggravated under access regulation with a cost-based access charge. When a cost-based access charge is imposed on an incumbent, the incumbent has a weak incentive to invest in infrastructure upgrades due to insufficient rewards for the investment. Then, the incumbent’s underinvestment induces the overuse of a bypass by an entrant that chooses productively efficient technology, when the degree of spillover is large, the production cost of the bypass is low, and the incumbent’s investment cost is high. The overuse of a bypass decreases the incumbent’s profits, which further reduces the incumbent’s incentive for investment. Thus, the overuse of a bypass generates a vicious cycle of underinvestment in infrastructure upgrades.

The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure A Survey

Our survey reviews the theoretical and empirical literature on all alternative policies to promote the deployment of new fiber-based communications infrastructure. Since such investment is expected to induce substantial positive externalities, dynamic efficiency becomes a particularly important policy goal. The available policies refer to i) different kinds of ex ante sector-specific regulations including cost-based access regulations as well as softer regulations such as regulatory holidays or geographically differentiated regulations, ii) deregulatory approaches based on effective competition law implementation and competitive market structures including allowance of co-investment models, and iii) public subsidies to cover non-profitable ('white') areas. Our survey identifies the most significant research gaps, finding that numerous studies related to the impact of access regulations exist, whereas only a much smaller branch of literature addresses the impact of competition policies, and even fewer studies analyze the impact of public subsidies on new communications deployment. Moreover, our work allows for a generic framework for policy recommendations that identifies the comparative advantages of the individual policy options for different market structures and for varying degrees of externalities. We find that public subsidies are the dominant policy alternative in white areas, whereas access regulations can be the preferred policy in white or 'grey' areas, where only monopoly structure or co-investment models lead to private investment. Deregulatory policies might be preferable in grey areas, if there is sufficient pressure from competitive outside options and if competition law is strong. Finally, deregulatory policies including soft regulation are the dominant policy in 'black' areas, where several independent infrastructure operators exist.

The deployment and penetration of high-speed fiber networks and services: Why are EU member states lagging behind?

One of the most controversial regulatory issues in Europe (and elsewhere) is whether the emerging next-generation access (NGA) infrastructure should be subjected to cost-based access regulation or whether at least a temporary removal of ex ante obligations (“regulatory holidays”) should be granted. Likewise, the role of NGA-specific state aid policies is increasingly capturing the attention of policy makers and the academic literature.In answering the questions raised above, we examine the previous and foreseeable EU regulatory framework and show that currently it does not provide sufficient incentives for NGA deployment and hence for increased penetration of NGA services. On the basis of an international comparison and by means of a diffusion analysis with recent NGA data, we argue that deregulatory and/or state-aid-driven approaches targeted at the demand (subscribers) and supply side (coverage) are more promising.

Real options and cost-based access pricing: Model and methodology

This paper proposes a model and methodology for valuing the option to delay network investment decisions and calculating cost-based access prices. It argues that an option value multiple must be applied to the investment cost component of each network element in order to account for the value of the delay option that is extinguished at the time of investment. Option value multiples are calculated for the investment decision in three main network elements, each representing a different part of the Brazilian fixed telecommunications network, subject to different technological and demand uncertainties. After applying the markup factors, network costs must be assigned to network services on the basis of how much each service uses each network element.

The impact of infrastructure and service-based competition on the deployment of next generation access networks: Recent evidence from the European member states

This work identifies the most important determinants of next generation access (NGA) network deployment, using data from the EU27 member states for the years 2005–2011. Our results indicate that the more service-based competition is pronounced the more negative is the impact on NGA deployment, while competitive pressure from broadband cable and mobile affects NGA deployment in an inverted U-shaped manner. We further find that there are severe adjustment costs and stickiness towards the desired long-term level of NGA infrastructure. It appears that the approach of the European Commission to force service-based competition via cost-based access regulation will not elicit the huge new investment needed for a comprehensive NGA roll-out.

Valuing Real Options for Network Investment Decisions and Cost-Based Access Pricing

In this article, we propose a model and methodology for valuing the option to delay network investment decisions and calculating cost-based access prices. We model the value of the option to invest in each network element as a function of two stochastic variables: the flow of total variable profit from the service provided by the network element and the cost of new investment in that network element. We calculate the option value multiple to be applied to the investment cost component of three main network elements, conduct sensitivity analyses, and highlight key findings.

A Framework for Integrating, Exploring, and Searching Location-Based Web Data

This article presents the adaptation of a general search computing framework for exploratory search over Web data as suggested by the specificity of location-based data services. The result is a conceptual model of geographic entities, the spatial functions operating on them, and a special-purpose exploratory interface that lets users search combinations of georeferenced objects directly on a map. Such modifications help the general framework provide ranked extraction of relevant objects and their combinations, custom ranking functions, and cost-based access to location-based services.

Cost-based access regulation and collusion in a differentiated duopoly

This paper revisits the conventional doctrine that “it is easier to collude among equals”, applied in the context of vertically related markets. In a differentiated duopoly model, we study how cost-based access price regulation may hinder the sustainability of tacit collusion.

Level Playing Fields in Regulated Network Industries: Cost-Based Access Pricing, Depreciation, and Capacity Choice

We investigate cost-based access pricing in regulated network industries. Building on recent progress in the accounting literature, we show that a regulator must choose a particular depreciation schedule, namely, relative replacement cost depreciation in order to prevent the network provider from playing manipulative games with the cost-based access price. We then show that the network provider is put at a strategic disadvantage if the regulator sets the access price equal to long-run incremental costs and the downstream market is symmetric. This result may be understood by looking at strategic interaction in the downstream market where both firms are better off if they behave “softly”. If the regulator sets a low access price, he commits the downstream competitor to price aggressively. Then, the entire burden of softening competition must be borne by the network provider. Finally, since consumer prices are decreasing in the access price, we conclude that the regulator faces a tradeoff between low consumer prices and a level playing field on the downstream market.

Foreclosing Competition through Access Charges and Price Discrimination

This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist in the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.

Foreclosing Competition through Access Charges and Price Discrimination

This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist on the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough.

Comparison of investment regimes with cost-based access pricing rules

This paper examines a network owner’s incentive for access innovation (i.e., the reduction of access cost) and compares two investment regimes (cooperation and noncooperation) under cost-based access pricing rules. When the access pricing rule is based on access cost, it brings about a spillover effect. It is then shown that when the spillover effect is large (small), a cooperative investment regime achieves a lower (higher) access cost than a noncooperative investment regime. In addition, when a regulator adopts an incremental access cost rule that requires the access charge to equal the access cost, a cooperative investment regime achieves greater social welfare than a noncooperative investment regime.

Bill-and-keep vs. cost-based access pricing revisited

We study network competition with two-part tariffs and termination-based price discrimination in the presence of call externalities. We show that both the collusive and the welfare-maximizing access charges fall below marginal cost. Moreover, bill-and-keep arrangements are welfare improving compared with cost-based access pricing.

Asymmetric access price regulation in telecommunications markets

In liberalized telecommunications markets, the incumbent typically enjoys several advantages over any entrant. Regulation in such asymmetric markets stimulates competition in the short and the long term if retail prices are low and the entrant's profits are high so that entry is encouraged. I show that asymmetric access price regulation with a cost-based access price for the incumbent and an access markup for the entrant is more successful than cost-based access price regulation applied to incumbent and entrant. This is a robust prediction with respect to the pricing strategies considered. Such asymmetric access price regulation is in accordance with European legislation.

Network Competition in Nonlinear Pricing

Previous research, assuming linear pricing, has argued that telecommunications networks may use a high access charge as an instrument of collusion. I show that this conclusion is difficult to maintain when operators compete in nonlinear pricing: (i) As long as subscription demand is inelastic, profits can remain independent of the access charge, even when customers are heterogeneous and networks engage in second-degree price discrimination. (ii) When demand for subscriptions is elastic, networks may increase profits by agreeing on an access charge below marginal cost (relative to cost-based access pricing). Welfare is typically increased by setting the access charge above marginal cost.

The transition to competition in telecommunication services

The focus of Europe is now on detailed implementation rather than policy determination. Even so, there are still relevant lessons to be learned from the US experience. The author believes that there are three main preconditions for a competitive market: non-discriminatory interconnection and cost-based access charges; an open and public regulatory process; and clear definition of regulatory authority. This Comment discusses each of these items and their relevance for Europe.