Friday, September 16, 2016

Competition and Investment are Rival Goods in the Telecom Market

As regulators in the European Community have found, there is a tension between policies that promote competition and policies that promote investment in facilities.

It is impossible to argue that the wholesale regime in EC countries has not dramatically boosted competition. It has done so.

In France, Orange in late 2013 had about 41 percent market share.  In Germany, Deutsche Telekom in 2013 had about 33 percent mobile market share.  

In the United Kingdom, BT, the former incumbent, had about 27 percent market share before its acquisition of EE, and now has 31 percent market share.  

But EC regulators also are grappling with a perceived slowness to upgrade to next-generation networks. Service providers always argue the very policies that make wholesale attractive are the very rules that make aggressive investment less attractive.

Basically, policies that support one objective nearly automatically work to undermine the other objective.

If regulators want both, there is a balancing act to be undertaken.

The same process is at work in the U.S. special access market. A proposed Federal Communications Commission policy to re-regulate prices will boost competition, but limit investment.

That will help small business buyers of special access, non-facilities-based mobile service providers and non-facilities-based competitive local exchange carriers.

But those same rules will discourage additional investment in legacy special access, especially in rural areas.

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