25th European Regional Conference of the International Telecommunications Society (ITS), Brussels, Belgium, 22-25 June 2014
For more than 15 years, Local Loop Unbundling (LLU) has been introduced as a regulatory mean to overcome the bottleneck control over the last mile of copper cable owned by incumbent operators. However, despite its assumed positive effects on market entry and competition intensity, negative effects on network investment incentives and long run overall broadband penetration are expected. In our paper we concentrate on the potential effects of LLU on investment and penetration rates. In contrast to earlier studies, we not only consider the implementation of unbundling, but also include the tariffs of unbundling. Using a large panel, we find that unbundling itself does have a general positive effect on broadband penetration. However, if an interaction between the particular unbundling tariffs is introduced, the per se effect is even increased. Therefore, the overall effect depends strongly on the size of the tariff.