Dynamic Access Pricing and Incentives to Invest in Alternative Infrastructures

Area 09 – Ingegneria industriale e dell'informazione

We define a dynamic model to assess whether and when the ‘ladder of investment’ regulatory paradigm induces efficient competitive network investment. We find that a multi-period schedule where access charges rise over time can indeed achieve this goal. However, investment incentives are diluted by setting a sunset clause on regulation. We prove that, absent regulatory commitment, the timedependent schedule may not be robust to late entry. Thus, to preserve investment by early entrants, access charges should depend both on time and the entry period. We illustrate how this alternative schedule complies with the non-discrimination obligation. Then, we show that the principles underlying this schedule can also be effective when entrants’ strategies differ over geographical areas, rather than overtime. Finally, in view of the prospective deployment of next generation access networks, we discuss the potential conflict between promoting infrastructure competition consistent with the ladder paradigm, and ensuring the incumbent’s investment.

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