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 How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

nachricht Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT

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: Significantly more productivity in USP lasers

In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.

Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...

Im Focus: Shape matters when light meets atom

Mapping the interaction of a single atom with a single photon may inform design of quantum devices

Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

Im Focus: MADMAX: Max Planck Institute for Physics takes up axion research

The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.

The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

Closing the carbon loop

08.12.2016 | Life Sciences

Applicability of dynamic facilitation theory to binary hard disk systems

08.12.2016 | Physics and Astronomy

Scientists track chemical and structural evolution of catalytic nanoparticles in 3-D

08.12.2016 | Materials Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>