Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/146317 
Year of Publication: 
2015
Series/Report no.: 
2015 Regional Conference of the International Telecommunications Society (ITS): "The Intelligent World: Realizing Hopes, Overcoming Challenges", Los Angeles, USA, 25th-28th October, 2015
Publisher: 
International Telecommunications Society (ITS), Calgary
Abstract: 
This paper models competition between two firms, which provide broadband In-ternet access in regional markets with different population densities. The firms, an incumbent and an entrant, differ in two ways. First, consumers bear costs when switching to the entrant. Second, the entrant faces a make-or-buy decision in each region and can choose between service-based and facility-based entry. The usual trade-off between static and dynamic efficiency does not apply in the sense that higher access fees might yield both, lower retail prices and higher total coverage. This holds despite a strategic effect in the entrant's investment decision. While investment lowers marginal costs in regions with facility-based entry, it intensifies competition in all regions. We show that the cost-reducing potential of investments dominates the strategic effect: Higher access fees increase facility-based competition, decrease retail prices and increase total demand.
Subjects: 
Broadband access markets
facility- and service-based entry
investments
economies of density
switching costs
JEL: 
D43
L13
L51
L96
Document Type: 
Conference Paper

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