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 Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

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: Stellar cartography

The Potsdam Echelle Polarimetric and Spectroscopic Instrument (PEPSI) at the Large Binocular Telescope (LBT) in Arizona released its first image of the surface magnetic field of another star. In a paper in the European journal Astronomy & Astrophysics, the PEPSI team presents a Zeeman- Doppler-Image of the surface of the magnetically active star II Pegasi.

A special technique allows astronomers to resolve the surfaces of faraway stars. Those are otherwise only seen as point sources, even in the largest telescopes...

Im Focus: Heading towards a tsunami of light

Researchers at Chalmers University of Technology and the University of Gothenburg, Sweden, have proposed a way to create a completely new source of radiation. Ultra-intense light pulses consist of the motion of a single wave and can be described as a tsunami of light. The strong wave can be used to study interactions between matter and light in a unique way. Their research is now published in the scientific journal Physical Review Letters.

"This source of radiation lets us look at reality through a new angle - it is like twisting a mirror and discovering something completely different," says...

Im Focus: Revealing the secret of the vacuum for the first time

New research group at the University of Jena combines theory and experiment to demonstrate for the first time certain physical processes in a quantum vacuum

For most people, a vacuum is an empty space. Quantum physics, on the other hand, assumes that even in this lowest-energy state, particles and antiparticles...

Im Focus: Sussex scientists one step closer to a clock that could replace GPS and Galileo

Physicists in the EPic Lab at University of Sussex make crucial development in global race to develop a portable atomic clock

Scientists in the Emergent Photonics Lab (EPic Lab) at the University of Sussex have made a breakthrough to a crucial element of an atomic clock - devices...

Im Focus: Sensing shakes

A new way to sense earthquakes could help improve early warning systems

Every year earthquakes worldwide claim hundreds or even thousands of lives. Forewarning allows people to head for safety and a matter of seconds could spell...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

International Modelica Conference with 330 visitors from 21 countries at OTH Regensburg

11.03.2019 | Event News

Selection Completed: 580 Young Scientists from 88 Countries at the Lindau Nobel Laureate Meeting

01.03.2019 | Event News

LightMAT 2019 – 3rd International Conference on Light Materials – Science and Technology

28.02.2019 | Event News

 
Latest News

Levitating objects with light

19.03.2019 | Physics and Astronomy

New technique for in-cell distance determination

19.03.2019 | Life Sciences

Stellar cartography

19.03.2019 | Physics and Astronomy

VideoLinks
Science & Research
Overview of more VideoLinks >>>