In later section _________. Some Concluding remarks The issue

In more recent years, regulatory authorities in the Europeantelecommunications sector have favoured the “ladder of investment” approachproposed by Martin Cave (2006). This can be defined as a regulatory approach on one-way access, which ensures thatservice-based entry and facility-based entry are complements in promotingcompetition (Bourreau, Doan and Manant, 2010). As previously mentioned,once entrants rely on the incumbents infrastructure to provide their servicesdue to access regulation, there is no longer incentive for them to buildalternative infrastructure (Bourreau, Doan and Manant, 2010). Martin Caveproposed the ladder of investment (LOI) regulatory approach to the Europeancommission in 2001 with the intention of tackling this issue.  The idea behind the LOI approach was to allow potentialentrants different levels of access to the incumbents network. Initially a firmwould acquire access at a level that requires little investment to providetheir services (Bourreau, Doan and Manant, 2010). As the entrant begins todevelop and grow, in order to be granted the next level of access they mustinvest in a pre-determined amount of network elements.

This allows them toclimb up the investment ladder and acquire access to the next level. TheEuropean Telecommunications Network Operators (ETNO), have challenged the LOIapproach arguing that it lacks empirical evidence and actually delaysinvestment by new entrants.  The LOI approach has generally been discussed in terms ofasymmetric markets where the infrastructure is owned and controlled by theincumbent. In this paper we will focus more on telecommunications as asymmetric market where both the incumbent and the entrant have the opportunityto be the first mover in new access infrastructure. The LOI approach can stillbe applied in this context and this will be discussed in a later section_________. Some ConcludingremarksThe issue of incentivising innovation without reducingcompetition is a reoccurring theme. Despite the different approaches attemptedby European regulators none have effectively solved this issue. Local loopunbundling allowed for increased competition and in an industry where theinfrastructure cost is extremely high the importance of access regulationcannot be undermined; however, while it achieves the short-term goal of increasingconsumer choice, it ignores the long-term welfare gains that consumers wouldexperience if firms undertook more investment and innovation.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

 The LOI approach was a step in the rightdirection as it acknowledged the flaws of policymakers approach, however, inits rawest form it only incentivised investment from new entrants who are thesmallest firms in the industry and the least likely to invest in newtechnologies such as next generation access networks. It also fails to addressincumbent’s lack of investment incentives approaching telecommunications as anasymmetric market. Section 3In this section we will use game theory to analyse theincentives of both incumbents and entrants to invest in next generation accessnetworks under access regulation. This will help give a potential explanationas to why previous EU regulatory polices have been ineffective and find waysthat they can be improved. We find that access regulation where MC

Such an investmentprovides the investing firm with the opportunity to make more attractive offersto its customers. One of the main issues for regulators is incentivising bothentrants and incumbents to invest in new technologies which require large civilengineering works. The incumbent faces sunk costs of capital and labour as theyhave built an entire network using the old technology and ULL in the EU meansthat the entrants have access to this technology at marginal cost and are ableto profit without investing in a new network with improved technology.  We make the assumption that existinginvestments depreciate up to a certain point meaning that from an ex-ante perspectiveboth incumbent and entrant are on a level playing field.

As a result, theinvesting firm will be able to successfully migrate customers from the oldtechnology to the new technology. The firm that has favourable conditions whenusing the old technology is likely to suffer from cannibalization effects if anew investment is made. In the original discussion Inderst & Peitz discuss theoptions of linear access price regulation and no regulation at all. It can beargued that no regulation is an unlikely option for EU policy makers due to thepotential monopoly it could create and the impact this would have on consumers.

Reflecting this, I have changed the game so that both policy options involveregulation, however, in one case MC=Access charge while in the other caseMC