We study how the vertical industry structure affects investment in network quality and social welfare, with a focus on the prospective deployment of high-speed broadband access networks (the so-called NGA). We model pros and cons of vertical separation, namely, procompetitive effects and loss of some efficiencies of vertical integration, and distinguish functional separation from ownership separation. Our findings challenge the presumption that (compared with vertical integration) vertical separation reduces investment incentives and involves a trade-off between promoting consumer surplus and ensuring investment. While investment is higher under ownership rather than functional separation, the latter may yield the highest social welfare among vertical industry structures. Furthermore, the incumbent may voluntarily opt for functional separation, but in some of these cases, prohibiting separation improves welfare. (C) 2014 Elsevier B.V. All rights reserved.
Broadband investment and welfare under functional and ownership separation / Avenali, Alessandro; Matteucci, Giorgio; Reverberi, Pierfrancesco. - In: INFORMATION ECONOMICS AND POLICY. - ISSN 0167-6245. - 28:(2014), pp. 70-82. [10.1016/j.infoecopol.2014.07.003]
Broadband investment and welfare under functional and ownership separation
AVENALI, Alessandro;MATTEUCCI, Giorgio;REVERBERI, Pierfrancesco
2014
Abstract
We study how the vertical industry structure affects investment in network quality and social welfare, with a focus on the prospective deployment of high-speed broadband access networks (the so-called NGA). We model pros and cons of vertical separation, namely, procompetitive effects and loss of some efficiencies of vertical integration, and distinguish functional separation from ownership separation. Our findings challenge the presumption that (compared with vertical integration) vertical separation reduces investment incentives and involves a trade-off between promoting consumer surplus and ensuring investment. While investment is higher under ownership rather than functional separation, the latter may yield the highest social welfare among vertical industry structures. Furthermore, the incumbent may voluntarily opt for functional separation, but in some of these cases, prohibiting separation improves welfare. (C) 2014 Elsevier B.V. All rights reserved.File | Dimensione | Formato | |
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