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on Regulation |
| By: | Briglauer, Wolfgang; Cambini, Carlo; Gugler, Klaus; Stocker, Volker |
| Abstract: | Network neutrality regulations are intended to preserve the Internet as a non-discriminatory, public network and an open platform for innovation. Whereas the U.S. recently reversed its regulations, thus returning to a less strict regime, the EU has maintained its course and recently revised implementation guidelines for its strict and rather interventionist net neutrality regulations. To this day, there exist only a few U.S.-focused empirical investigations on the impact of network neutrality regulations, based on rather broad measures of investment activities. Our paper provides the first estimation results on the causal impact of net neutrality regulations on new high-speed (fiber-optic cable-based) infrastructure investment by Internet service providers (ISPs) and on related consumer subscription to fiber-based broadband connection services. We use a comprehensive OECD panel data set for 32 countries for the period from 2003 to 2019 and various panel estimation techniques, including instrumental variables estimation. Our empirical analysis is based on theoretical underpinnings derived from a simplified model in a two-sided market framework. Based on our theoretical analysis, we derive testable propositions for monopolistic and duopolistic ISPs. We find empirical evidence that net neutrality regulations exert a direct negative impact on fiber investments and an indirect negative impact on fiber subscriptions. Our results, which are in line with our theoretical propositions, strongly suggest that policymakers should refrain from imposing strict net neutrality regulations. |
| Keywords: | Net neutrality,high-speed broadband,investment,consumer subscriptions,OECD panel data |
| JEL: | L52 L96 L98 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238012&r= |
| By: | Baranes, Edmond; Vuong, Cuong Hung |
| Abstract: | This paper investigates the impacts of the current roaming rules on domestic competition and welfare. We consider a model for two countries in which each country has two operators that compete in the retail market for access services and also in the wholesale market for roaming. We first derive equilibrium prices in the two markets when operators are not subjected to regulatory restrictions. We then introduce Roaming Like At Home (RLAH) obligation and show how retail tariffs and wholesale roaming charges can be sensitive to this regulatory regime. Since introducing a fair use clause in roaming regulation can be a tool to avoid permanent roaming, we study different cases depending on whether RLAH is acompagnied by a fair use safeguard or not. We emphazise the most interesting results, considering the role played by cost and demand asymmetries between operators and countries. |
| Keywords: | International roaming,mobile telecommunications,roaming like at home,fair use policy,interconnection |
| JEL: | L13 L51 L96 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238008&r= |
| By: | Pollitt, M .G. |
| Abstract: | The UK left the European single market in energy on 31 December 2020, having been a leading light in its promotion. It entered into a new energy relationship with the EU-27 as outlined in the EU-UK Trade and Cooperation Agreement (TCA) on 1 January 2021. This paper discusses what has happened to the UK energy sector since the Brexit referendum of June 2016. Since our previous paper on this topic in 2017, there has been a significant clarification in the impact of Brexit on the energy sector in the UK. We outline what the TCA says about energy. We then discuss the current and potential future effects of Brexit on the UK electricity and gas systems in turn. We observe that the likely economic welfare impacts on electricity are larger than the impacts on gas, but the overall microeconomic impact appears likely to be modest (but negative). We offer a number of concluding observations. |
| Keywords: | Brexit, Trade and Cooperation Agreement, market coupling |
| JEL: | L94 |
| Date: | 2021–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2161&r= |
| By: | Ivaldi, Marc; Aimene, Louise; Jeanjean, Francois; Liang, Julienne |
| Abstract: | In this paper, we formulate and estimate a structural model of demand to analyse the equilibrium effect of the RAN sharing by using cross-country panel data in 28 EU countries in years 2010-2020. Based on model estimates, our simulation analysis in Spain firstly provides a quantitative assessment of the impact of RAN sharing on mobile operators. We find that prices decrease for mobile operators involved in RAN sharing agreement due to cost reductions. In a competitive environment where operators compete, MNOs not involved in RAN sharing also lower their prices in a Nash equilibrium. We further evaluate the consumer welfare consequence of the presence of RAN sharing, and find that the RAN sharing enhanced the consumer surplus by generating lower prices for all mobile operators. |
| Keywords: | Mobile telecommunications,network sharing,competition,consumer welfare |
| JEL: | L40 L96 L11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238031&r= |
| By: | Prado, Tiago S. |
| Abstract: | In this conceptual paper, I propose a framework for measuring the market power of digital platforms. The rise of big technology companies that act both as intermediary platforms and providers of services and goods in several markets has heightened concerns about potential economic harms brought by the concentrated structure of the digital economy. However, the operationalization of market power in the platform economy and the procedures to define which digital platforms and markets should be targeted by pro-competitive remedies, either under a competition policy framework or under a regulatory regime, remain highly contested. I demonstrate that large technology platforms can leverage their market power across markets in the digital economy to make their end users unlikely to switch to smaller competitors, even when they offer better services. Based on this analysis, I argue that market-specific approaches, such as the commonly used Significant Market Power (SMP) framework, would have limited impact in promoting competition in digital markets. I then propose a new set of tools aimed to identify the market power of digital platforms in two-sided markets and suggest some policy alternatives to harness the potential of pro-competitive remedies in the digital economy. |
| Keywords: | digital platform,digital economy,market power,competition policy,regulation |
| JEL: | L12 L13 L41 L44 L51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238048&r= |
| By: | Lu Zhang; Lennart Stangenberg (RUG); Sjors van Wickeren (EUR) |
| Abstract: | Do energy labels contain extra information that buyers cannot observe themselves? Which labeling scheme is more effective: a voluntary or a mandatory one? In this paper we examine the information value of voluntary and mandatory energy labels using administrative data on all transactions in the Dutch residential housing market. Employing a combination of hedonic price models, matching and a sharp Regression Discontinuity Design (RDD), we show that voluntary labels introduced in the period 2008-2014 contain limited information value. The information value of mandatory labels that are adopted since 2015 is less clear-cut. We observe that better-labeled dwellings were transacted with significant price premiums before obtaining labels. This implies that at least part of the premiums cannot be attributed to mandatory labels. |
| JEL: | R38 R58 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:413&r= |
| By: | Elinder, Mikael (Department of Economics, Uppsala University); Hu, Xiao (Department of Forest Economics and Center for Environmental and Resource Economics (CERE)); Liang, Che-Yuan (Institute for Housing and Urban Research (IBF) and Department of Economics) |
| Abstract: | Water is an increasingly scarce resource. It is often distributed such that consumers do not face any marginal cost of consumption, creating a common pool problem. For instance, tenants in multi-family buildings can often consume both hot and cold water at zero marginal cost. Using high-frequency data over many years, we analyze how the introduction of apartment-level metering and billing (IMB) affects hot water consumption. We find that introducing a marginal cost, reflecting the market price, decreases consumption drastically by 26%. Hence, price interventions can curb free-riding behavior and help the conservation of cheap but precious resources. Our results also show that heavy water users in the top consumption quartile account for 72% of the reduction. Moreover, cost-benefit calculations indicate that IMB for hot water is a cost-effective policy tool for reducing water and energy consumption. |
| Keywords: | esidential water consumption; Water conservation; Common pool problem; Free-riding; Individual metering and billing |
| JEL: | D12 Q21 Q25 Q28 |
| Date: | 2021–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1402&r= |
| By: | Cherry, Barbara A. |
| Abstract: | In the U.S., network neutrality policy has been on a trajectory of escalating political instability since the early 2000's. As explained in Cherry (2020), this trajectory can be understood as a microcosm of the more general trajectory of political dysfunction under U.S. governance that coincides with the era of deregulatory policymaking. Under U.S. governance, adversarial legalism - that is, lawyer-dominated litigation - has evolved as a means of policymaking in the U.S., the role of which has intensified with the rise of divided government and party polarization. The federal Telecommunications Act of 1996 was enacted during the waning period of bipartisan negotiation of the 1990's, and its implementation has been left to a heightened period of adversarial legalism under hyperpartisanship between the Republican and Democratic political parties. As a result, the instability of U.S. network neutrality policy is reflective of the current phase of hyperpartisanship within a process of adversarial legalism. [...] This paper expands upon my prior research regarding U.S. deregulatory telecommunications policies (Cherry, 1999, 2003, 2006, 2010, 2015, 2020) to discuss the importance of the I-VOIP litigation, in both the U.S. and the international community. Under U.S. law, its importance arises from legal flaws in the 8th Circuit Court ruling in Charter Advanced Services v. MPUC and the resultant legal confusion as to the scope of federal preemption of state law. It is also the manifestation of yet another step in the trajectory of political instability and flawed legal analyses in U.S. telecommunications policy, distorting the economic and technical evolution of U.S. telecommunications markets. The consequences, however, will not be confined to the U.S. but will likely diffuse to international markets as well. Moreover, understanding these developments in the U.S. can serve as a case study for identifying how political instability in other nations may be distorting telecommunications regulation, markets and technology. International regimes, in turn, may require further evolution in recognition of nations' political instability on global telecommunications. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238015&r= |
| By: | Sharat Ganapati; Rebecca McKibbin |
| Abstract: | There is wide dispersion in pharmaceutical prices across countries with comparable quality standards. Under monopoly, off-patent and generic drug prices are at least four times higher in the United States than in comparable English-speaking high income countries. With five or more competitors, off-patent drug prices are similar or lower. Our analysis shows that differential US markups are largely driven by the market power of drug suppliers and not due to wholesale intermediaries or pharmacies. Furthermore, we show that the traditional mechanism of reducing market power – free entry – is limited because implied entry costs are substantially higher in the US. |
| JEL: | F14 I11 L44 L65 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29206&r= |
| By: | Tenbrock, Sebastian; Wernick, Christian |
| Abstract: | In Europe, alternative network operators have rolled out own FTTH networks in numerous regions. They often realise first mover advantages and thus dispose (at least for some time) of superior infrastructures. In comparison to copper infrastructures of incumbent operators, most alternative networks are not subject to access regulation (as long as they are not subsidised by state-aid programs or the network operator is deemed as SMP operator). Against this backdrop, the decision to offer wholesale products to third parties represents a business decision depending on various factors. The objective of this paper is to investigate the state of development of the market for alternative FTTH wholesale services in five European countries (Austria, Denmark, Germany, Sweden, and Switzerland). It aims to identify drivers and barriers and to identify common patterns in the countries under observation. Furthermore, we give some recommendations on policy measures which might help to remove existing barriers and further wholesale on alternative networks. We apply a case study approach, which builds on primary and secondary research including interviews with market experts from business and policy. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238056&r= |
| By: | Sears, James M. |
| Keywords: | Resource/Energy Economics and Policy, Environmental Economics and Policy, Institutional and Behavioral Economics |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea21:312833&r= |
| By: | Verfaillie, Bryan; Van der Wee, Marlies; Verbrugge, Sofie |
| Abstract: | Digital platforms are omnipresent in our society. For example, streaming movies via Netflix, interacting with friends through social media, or using Deliveroo to order your meal. Digital platforms and digital marketplaces caused a big impact on the value creation process within different application domains. Actual digital ecosystems have appeared and the value propositions of traditional players within different domains got challenged by new and more integrated offers. Within this setting, also smaller-scale initiatives try to find their position. Local initiatives such as energy management platforms to link residents with (renewable) energy suppliers, or community platforms to link neighbours and city or village initiatives, especially in "online-only" times are appearing fast. Although the number of both successful and failed cases is constantly growing, systematic understanding of the reasons behind this, is still lacking. This paper wants to add to this understanding by analysing digital platform initiatives from different points of view. The overall research question tackled in this paper is to determine critical characteristics that can impact the success of the digital, multi-sided platform business model. To achieve this, a conceptual framework that allows to analyse and compare platforms is presented. The framework is then applied on different existing platform solutions, in a broad range of application domains, to identify specific design choices and compare the different platforms. Overall, more general insights in the role of network effects, pricing strategy, and other key features that impact the risk of failure, are obtained. The analyses indicate that positive network effects are predominantly present which is important for the growth of the user base. Pricing schemes indicate that general customers do not want to spend a lot of money to use a platform. Therefore, they usually can use it for free. Advertisers play a crucial role in the revenue stream for a platform but too much ads can irritate the end user. Platforms also tend to use third parties for services which reduces the time to market and lowers the investment risk. Platforms immediately benefit from other technological advantages like scalability. Due to the low homing-costs for users, there is room for competition in each domain but of course platforms try to differentiate their offer from their competitors. |
| Keywords: | Digital Platforms,Multi-Sided Platforms,Network Effects,Pricing,Multi-Homing Cost |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238059&r= |
| By: | Aslan, Fatma; Haouel, Chourouk; Nemeslaki, Andras; Somogyi, Robert |
| Abstract: | We investigate the effect of direct network externalities on the long- run dynamics of two-sided platforms. Two-sided platforms have been widespread in the economy, acting as intermediaries connecting two dis- tinct groups of agents. A defining characteristic of the two-sidedness is the existence of indirect network externalities between the two sides. How- ever, direct externalities can also be important in one or both sides of the market. For instance, direct externalities include review systems where buyers on the platform benefit from other buyers' ratings and comments. We find that considering direct externalities changes the dynamics quali- tatively. For example, instead of saddle path dynamics, they can lead to unstable node dynamics and the collapse of a platform. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238006&r= |
| By: | Ueda, Masashi |
| Abstract: | In recent years, mergers between communications companies have been progressing especially in mobile carriers' market. Regulatory authorities are worried about increasing consolidations and less competition, and have decided to impose conditions on the mergers or even disapprove them. In many cases, just before the generation change, the competitively inferior operators sell their business and exit the market because of the cost of acquiring spectrum. The concern of the regulators is cases such as Ireland and Austria, where ARPU rose because the competitive environment became milder due to mergers between MNOs. On the other hand, in Germany, where measures to promote competition after the merger (reallocating part of the new company's spectrum to other companies, leasing out 20% to 30% of its capacity, etc.) were effective, ARPU did not increase. On the other hand, when a window for new spectrum acquisition opens, new entrants may join the market. In the fifth generation (5G), Dish in the US, 1&1 Drillisch in Germany, and Rakuten in Japan took advantage of the opportunity to enter the market. In the case of Drillisch and Rakuten, they acquired spectrum and/or licenses in 2019 with the expectation of migrating existing customers from MVNOs to MNOs. (...) |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238058&r= |
| By: | Basak, Debasmita |
| Abstract: | We consider a vertically related market where one quantity setting and another price setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that when bargaining is decentralised, the price setting firm produces a higher output and earns a higher profit than the quantity setting firm. And, when bargaining is centralised, both firms produce the same output whereas the profit is higher under the price setting firm than the quantity setting firm. |
| Keywords: | Bargaining; Bertrand; Cournot; Two-part tariffs; Vertical pricing; Welfare |
| JEL: | L13 L2 L22 |
| Date: | 2021–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109588&r= |
| By: | Cadman, Richard; Curram, Stephan; Exelby, David |
| Abstract: | European regulators of electronic communications markets are under an obligation to pursue widespread access to, and take up of, very high capacity networks, defined as being gigabit capable. Whilst there is an existing body of literature about the relationship between individual regulations and their effect on investment, less research has been conducted that places investment decisions within the market-wide broadband system. This paper seeks to address that gap by developing a generic System Dynamics model and understanding the path specific countries have taken through that model. The paper highlights a number of drivers of investment, organised around the three elements of the net present value equation: capital, net cash flow and cost of capital. It then develops a high level model before identifying the path to investment found in Ireland and Spain. The paper concludes that determinants of investment in VHCNs are path dependent and thus there is no universal strategy that will work for all countries. Competition is always an important determinant but how firms respond to competition is a function of local circumstances and legacies. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238013&r= |
| By: | Kulenkampff, Gabriele; Ockenfels, Martin; Plückebaum, Thomas; Zoz, Konrad; Zuloaga, Gonzalo |
| Abstract: | According to the EU policy, a future-proof broadband supply for all European households is to be achieved by 2025. There is already a wide range of fibre deployment in Europe. However, the expansion of fibre-based access networks in Europe to date has taken place mainly in large cities. In other areas, the expansion is sluggish or non-existent. As a result, a digital divide between urban and rural areas in Europe is arising. The spatial disparity in fibre roll-out is often justified by market stake holders with significant regional cost differences. In the absence of private-sector investment, government subsidy programmes are often used to improve broadband coverage. Thus, politicians have to deal with the question about the level of investment required and the spatial distribution of subsidy needs. In this paper, we will therefore investigate the question of how significant the heterogeneity in the costs of Very High Capacity (VHC) networks in Germany actually is and whether and how the costs for Very High Capacity (VHC) networks differ between urban and rural regions. In the first part of the paper, we will analyse the regional cost differences of access network areas on the basis of bottom-up calculated investment figures. In the second part of the paper, we establish statistical estimation models that explain these regional cost differences. For this purpose, we use publicly available data. As a reference value for regionally differentiated costs of Very High Capacity (VHC) access networks, we use the results of a detailed bottom-up modelling of an FTTH network carried out for the whole of Germany. The model uses georeferenced household and business location data and optimizes the access network routes along the street network in a bottom-up manner. This model allows us to determine regionally differentiated FTTH investment at the level of access areas. By matching this data with the EU-wide standardized EUROSTAT urban/rural typology classification (predominantly urban, intermediate and predominantly rural), we determine whether and to which extent significant regional cost differences can be found in Germany applying these classifications. One focus is on determining the spread of investment requirements, especially among rural areas. Based on our experience, these areas exhibit the lowest economic viability of a network roll-out and, thus, the highest need for funding. By using statistical indicators, we analyse the suitability of the EUROSTAT classification as a differentiation criterion for regional cost differences. Here, we are particularly interested in whether the areas defined as rural form a sufficiently homogeneous group, and whether they show comparable levels of required investment. Our findings confirm that the differentiation criterion used, namely EUROSTAT urban/rural typology classification, is not satisfactory in measuring regional cost differences. It cannot sufficiently account for a large share of observable differences in fibre-based access network costs. Since it is desirable to answer questions regarding the required funding for selected regions based on publicly available data, we apply regression models to identify alternative influencing factors on the basis of publicly available data, in order to better explain observable regional cost differences. Here, we find that a handful of geographical factors are capable of explaining 95% of the geographical differences in fibre investment requirements, the most relevant being the number of connection lines, the number of households per kilometre of road in built-up areas, the main road length per built-up area and the share of built-up area in relation to overall area. In the last part of the analysis, we examine whether the derived results are also meaningful in a political and regulatory context. Discussions about the necessity of promoting high-speed networks usually take place at the level of local authorities. Therefore, in a final step, we address the question whether the statistical relationships derived from the regression model at the level of access areas also apply at a higher aggregated, i.e. NUTS3, level. In summary, we show that for Germany, classifications based on subscriber density exhibit a significant spread in the investment costs of Very High Capacity (VHC) access networks, which is most pronounced in rural clusters. Statistical analyses using regression models can improve the result if geographical elements of the settlement structure are considered in the analysis. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238033&r= |
| By: | Soo Jin Kim; Pallavi Pal |
| Abstract: | This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side affects not only the side involving differentiation but also the other side due to cross-side network externalities, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among all the choice variables for the platform, enabling the platform to strategically use quality differentiation to raise its profits. |
| Keywords: | multi-sided market, quality differentiation, platform business strategies |
| JEL: | D43 L11 L42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9267&r= |
| By: | Matinmikko-Blue, Marja; Yrjölä, Seppo; Ahokangas, Petri; Hämmäinen, Heikki |
| Abstract: | Local 5G networks have gained increasing attention in the recent years, allowing different stakeholders to establish local and often private networks within a specific facility, such as a factory. These local networks can serve a variety of user groups with versatile needs. The deployment of the local 5G networks is fully dependent on spectrum availability in the given location, which in turn depends on the underlaying regulations and varies for the different stakeholders involved and between countries. The link between emerging new business opportunities and the spectrum availability considering different stakeholders is of great interest from strategic management viewpoint. This paper presents an analysis of recent 5G spectrum awarding decisions considering how they connect with emerging local 5G networks from different stakeholder viewpoints. The analysis reveals how different countries have prepared for the new business opportunity arising from local 5G networks in their spectrum awarding decisions. The analysis also quantifies the spectrum availability for establishing local 5G networks considering different stakeholder perspectives. The findings indicate that the variety of approaches taken by the regulators in their spectrum decisions keeps increasing and new local spectrum licenses are emerging especially in the latest spectrum awards. The identified diverging approaches in different countries impact the business opportunities within the country as well as for export of solutions, which in turn can influence the competitiveness of countries differently. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238039&r= |
| By: | Ali, Umair (Arizona State University); Herbst, Chris M. (Arizona State University); Makridis, Christos A. (Arizona State University) |
| Abstract: | Minimum quality regulations are often justified in the child care market because of the presence of information frictions between parents and providers. However, regulations can also have unintended consequences for the quantity and quality of services provided. In this paper, we merge new data on states' child care regulations for maximum classroom group sizes and child-to-staff ratios with the universe of online job postings to study the impact of regulations on the demand for and characteristics of child care labor. Our identification strategy exploits the unprecedented variation in regulatory reform during the COVID-19 pandemic, relying on changes both within states over time and across children's age groups. We find robust evidence that these regulations reduce the number of child care job postings and encourage providers to substitute away from higher-skilled postings, thereby increasing the number of positions that are out-of-compliance with state law. Furthermore, we show that regulations adversely affect mothers' labor force participation. In sum, the results imply that child care regulations may reduce the demand for child care labor, while simultaneously altering the composition of the workforce. |
| Keywords: | child care, COVID-19, employment, state regulation, women |
| JEL: | H75 J21 I28 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14684&r= |