Economic replicability tests for next-generation access networks

Laure Jaunaux and Marc Lebourges

24th European Regional ITS Conference, Florence 2013 from International Telecommunications Society (ITS)

Abstract: This paper discusses the relevant cost standard for the economic replicability test for Next-Generation Access (NGA) networks, described in the Recommendation on Costing and Non-discrimination adopted by the European Commission. We demonstrate that a cost standard that implies fully fixed and variable cost recovery for the access seeker would be incompatible with the economics of NGA networks and that such a test would deter NGA investment. We show that to reconcile investment and competition, the wholesale price must be a two-part tariff and the economic replicability test should only be based on variable wholesale prices. We underline that during a transition phase, until competitors have secured access to NGA infrastructure, a temporary second test called the 'competition migration test' should be added to ensure incumbent NGA retail prices do not foreclose copper-based efficient entrants. The tests we propose surpass the limits of the 'ladder of investment' theory by including the business migration effect developed by Bourreau et al. (2012).

Keywords: Margin squeeze; Regulation; Next-generation access networks (search for similar items in EconPapers)
JEL-codes: L51 L96 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:itse13:88501

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