Abstract
In this paper, we investigate firms’ decisions on the extent of a quality upgrade for advanced-technology services when other approaches to infrastructure sharing, especially co-investment, are alternative modes to launch new advanced services. In addition to considering various types of agreements, we incorporate the issue of firm asymmetry, where firms’ cost structures vary in investment quality. Our analysis reveals that co-investment promotes higher consumer welfare than the fully-distributed-cost regulation in spite of lower investment in the quality upgrade. However, compared to the stand-alone investment, co-investment brings about a welfare-undermining compromise over quality upgrade when infrastructure sharing induces a considerable amount of incremental cost of sharing facilities and operation. Therefore, in contrast to what telecommunications firms usually claim, co-investment may not be an appropriate way to stimulate the advanced-technology deployment in some situations. The regulator therefore should closely monitor the co-investment negotiation on the grounds of tacit collusion, especially when firms have cost asymmetry in the advanced-technology deployment.
KEYWORDS: Infrastructure sharing, cost asymmetry, investment quality, quality upgrade, co-investment, broadband and telecommunications.
JEL Classification Codes: L51, L96
KEYWORDS: Infrastructure sharing, cost asymmetry, investment quality, quality upgrade, co-investment, broadband and telecommunications.
JEL Classification Codes: L51, L96
| Original language | English |
|---|---|
| Publication status | Published - 2021 |