Speeding Up the Internet: Regulation and Investment in European Fibre Optic Infrastructure

In this paper we study how the coexistence of access regulations for legacy (copper)and fibre networks shapes the incentives to invest in network infrastructure. To this end, we develop a theoretical model explaining investment incentives by incumbent telecom operators and heterogeneous entrants and test its main predictions using panel data from 27 EU member states over the last decade. Our theoretical model extends the existing literature by, among other things, allowing for heterogeneous entrants in internet access markets, as we consider both other telecom and cable TV operators as entrants. In the empirical part, we use a novel data set including information on physical fibre network investments, legacy network access regulation and recently imposed fibre access regulations. Our main finding is that more stringent access regulations for both the legacy and the fibre networks harm investments by incumbent telecom operators, but, in line with our theoretical model, do not affect cable TV operators.

Briglauer, Wolfgang, Carlo Cambini and Michal Grajek (2017), Speeding Up the Internet: Regulation and Investment in European Fibre Optic Infrastructure, ZEW Discussion Paper No. 17-028, Mannheim.