Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Access regulation discourages investment by new entrants

14.12.2007
KEY FINDINGS OF REGULATION IN TELECOMS REPORT
INVESTMENT IN TELECOMS SUFFERS AS A RESULT OF EUROPEAN REGULATION, FINDS NEW RESEARCH

The European telecoms sector is suffering from a lack of investment as a result of European regulation to enable market entry, finds new economic research published today by the ESMT European School of Management and Technology, a Berlin-based international business school. The findings are based on a 'dynamic' economic study into the immediate and long-term effects of telecom regulation, which looks at 25 European countries across the old and new Member States over a 10 year time horizon.

The EU Commission has stated that its regulatory objective for Europe is ultimately to see true facilities-based competition emerge based on new infrastructure, rather than the provision of services. It is seeking to establish this through first enabling market entry, where incumbent providers are compelled to allow new entrants to use their infrastructure, in the belief that a 'ladder of investment' will follow. ESMT's research casts doubt on this strategy, concluding that open access regulation is having a detrimental effect on investment in the fixed-line telecoms sector.

Whilst the report finds investment by incumbent providers remains roughly the same as a result of open access regulation, it calculates a very significant lost opportunity for Europe in new entrants' diminished investment.

Figures from the European Commission indicate that new entrants are not averse to investing where they judge it necessary. Indeed, their investment levels relative to their turnover is higher than for incumbents. Nonetheless, ESMT's research finds new entrants' reliance on incumbents' existing networks is depriving Europe of 25.1 per cent of new infrastructure investment they would otherwise make, accumulating over time to 111.5 per cent over five years. This is the equivalent of €18.1 billion, 8.4 percent of total European telecom investment (or the doubling of new entrants' infrastructure).

Professor Lars-Hendrik Röller, President of ESMT and an author of the study commented: "The impact of open access regulation is critical to the development of the information economy and the long-term future of the telecoms industry. Whilst regulation has resulted thus far in lower prices for the consumer and the provision of greater services, services-based competition can only go so far. Optimum consumer choice in terms of price and innovation will only be achieved by new entrants committing to their own infrastructure investment. The Commission already recognises this - but is ironically counting on access regulation to try and achieve its goals. Our research indicates this may in fact be doing considerably more harm than good."

ESMT's findings conflict directly with the economic advice underlining the EU's current policy. The difference in conclusion is accounted for by the dynamic model of the ESMT research. Unlike previous studies of its kind, it looks beyond the immediate, same-year effect of regulation to disentangle short and long-term effects, to calculate the lagged and cumulative impact of regulation on infrastructure investment over time. It also addresses data quality issues, which has undermined previous economic analyses, by using a larger data set (of 180 telecoms players), and disaggregating mobile and fixed-line data.

This combines with a control mechanism which firmly establishes the relationship between regulation and investment levels in a given member state. Establishing which is the 'cause' and which the 'effect' between regulation and investment is difficult. The effectiveness of economic models is therefore often undermined by "endogeneity problems", which can dramatically skew the conclusions. ESMT's research circumvents this issue by simulating regulation based on an analysis of the factors that contribute to it, such as the political complexion of the government, which are themselves unaffected by investment levels.

Professor Röller continued: "It is vital that policy makers are given robust advice, as inaccurate analysis results in major European decisions being made on inadequate grounds. This study strongly refutes the idea that allowing new entrants to eat from the tree of knowledge will somehow create a paradise of new infrastructure investment.

"There is a delicate balance to be struck. Promoting market entry by means of regulated access may well have the desired short-term outcome of lower prices and more consumer choice. However, it at the same time undermines the incentives of entrants to invest in their own infrastructure, placing the long-term goal of facilities-based competition in serious jeopardy.

About ESMT Competition Analysis
ESMT Competition Analysis is an economic consultancy, which provides case-related advice and research on key topics in the field of competition policy and regulation. This includes economic analysis in national and European competition matters and regulatory procedures as well as studies for international organizations on competition policy issues. Located in Berlin, ESMT Competition Analysis is a subsidiary of ESMT European School of Management and Technology.
About ESMT
ESMT European School of Management and Technology was founded in October 2002 on the initiative of 25 leading German companies and associations with the aim of establishing an international management school with a distinctly European focus. ESMT provides executive education and offers an international full-time MBA program, as well as an Executive MBA. ESMT is located in Berlin with further campuses in Munich and Cologne. As a private institution of higher education, ESMT is fully accredited by German authorities.
Contact
Christiane Hach, Tel.: +49 (0)30 21 231-1042, Fax: +49 (0)30 21 231-1069, hach@esmt.org

ESMT European School of Management and Technology, Schlossplatz 1, 10178 Berlin, Germany

Christiane Hach | idw
Further information:
http://www.esmt.org/info/latest

More articles from Business and Finance:

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Strathclyde-led research develops world's highest gain high-power laser amplifier

The world's highest gain high power laser amplifier - by many orders of magnitude - has been developed in research led at the University of Strathclyde.

The researchers demonstrated the feasibility of using plasma to amplify short laser pulses of picojoule-level energy up to 100 millijoules, which is a 'gain'...

Im Focus: Can the immune system be boosted against Staphylococcus aureus by delivery of messenger RNA?

Staphylococcus aureus is a feared pathogen (MRSA, multi-resistant S. aureus) due to frequent resistances against many antibiotics, especially in hospital infections. Researchers at the Paul-Ehrlich-Institut have identified immunological processes that prevent a successful immune response directed against the pathogenic agent. The delivery of bacterial proteins with RNA adjuvant or messenger RNA (mRNA) into immune cells allows the re-direction of the immune response towards an active defense against S. aureus. This could be of significant importance for the development of an effective vaccine. PLOS Pathogens has published these research results online on 25 May 2017.

Staphylococcus aureus (S. aureus) is a bacterium that colonizes by far more than half of the skin and the mucosa of adults, usually without causing infections....

Im Focus: A quantum walk of photons

Physicists from the University of Würzburg are capable of generating identical looking single light particles at the push of a button. Two new studies now demonstrate the potential this method holds.

The quantum computer has fuelled the imagination of scientists for decades: It is based on fundamentally different phenomena than a conventional computer....

Im Focus: Turmoil in sluggish electrons’ existence

An international team of physicists has monitored the scattering behaviour of electrons in a non-conducting material in real-time. Their insights could be beneficial for radiotherapy.

We can refer to electrons in non-conducting materials as ‘sluggish’. Typically, they remain fixed in a location, deep inside an atomic composite. It is hence...

Im Focus: Wafer-thin Magnetic Materials Developed for Future Quantum Technologies

Two-dimensional magnetic structures are regarded as a promising material for new types of data storage, since the magnetic properties of individual molecular building blocks can be investigated and modified. For the first time, researchers have now produced a wafer-thin ferrimagnet, in which molecules with different magnetic centers arrange themselves on a gold surface to form a checkerboard pattern. Scientists at the Swiss Nanoscience Institute at the University of Basel and the Paul Scherrer Institute published their findings in the journal Nature Communications.

Ferrimagnets are composed of two centers which are magnetized at different strengths and point in opposing directions. Two-dimensional, quasi-flat ferrimagnets...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Marine Conservation: IASS Contributes to UN Ocean Conference in New York on 5-9 June

24.05.2017 | Event News

AWK Aachen Machine Tool Colloquium 2017: Internet of Production for Agile Enterprises

23.05.2017 | Event News

Dortmund MST Conference presents Individualized Healthcare Solutions with micro and nanotechnology

22.05.2017 | Event News

 
Latest News

New insights into the ancestors of all complex life

29.05.2017 | Earth Sciences

New photocatalyst speeds up the conversion of carbon dioxide into chemical resources

29.05.2017 | Life Sciences

NASA's SDO sees partial eclipse in space

29.05.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>