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Access prices indexed to geographical coverage of innovative telecom services

Henriques, David (2020) Access prices indexed to geographical coverage of innovative telecom services. Journal of Industry, Competition and Trade. ISSN 1573-7012

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Identification Number: 10.1007/s10842-020-00347-z

Abstract

The literature on access prices and investment has suggested that firms under-invest when subject to an access provision obligation combined with a fixed access price per consumer. In this paper, I study an access price per consumer for an innovative service such as super- fast broadband provided by a regulated firm that is a function of its geographical coverage (indexation approach). The indexation approach can enhance economic efficiency beyond what is achieved with a fixed access price under a set of standard assumptions. In particular, it can simultaneously induce the firms to set lower retail prices, lead to wider geographi- cal coverage of innovative services and higher social welfare level compared with a fixed access price. Moreover, in the model, the indexation may be used to achieve approximately the Ramsey outcome, or the first-best coverage level. I address how a regulator can set the access price indexation optimally, based on the coverage cost plus an incentive. I highlight the potential role of indexation as a tool to reduce the need for public subsidies and the associated tax distortions when compared with a fixed access price.

Item Type: Article
Official URL: https://www.springer.com/journal/10842
Additional Information: © 2020 The Author
Divisions: Media and Communications
Subjects: H Social Sciences > HD Industries. Land use. Labor
K Law > K Law (General)
H Social Sciences > HB Economic Theory
JEL classification: L - Industrial Organization > L4 - Antitrust Issues and Policies > L43 - Legal Monopolies and Regulation or Deregulation
L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications
Date Deposited: 06 Aug 2020 09:36
Last Modified: 20 Oct 2020 07:43
URI: http://eprints.lse.ac.uk/id/eprint/106100

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