Rational Regulatory Policy for the Digital Economy: Theory and EU Policy Options

Telecommunications is a key element of the ICT sector which has been shaped by strong innovation dynamics since the 1990s. Market dynamics in selected OECD telecommunications markets are analyzed. We present new ideas about efficient regulation, emphasizing the need to adopt a broader international perspective. Analytical innovations also include the discussion of an adequately-modified Hitch-Sweezy oligopoly model. Moreover, we suggest differentiated two-part tariffs as an ideal welfare-maximizing approach in both wholesale and end-product markets. From a theoretical point-of-view, the need to avoid regulatory uncertainty is also emphasized. Theoretical progress is contrasted with regulations in the EU and the US. The EU offers a broad range of different regulatory approaches where the link between framework regulation and national regulation is rather complex. The internationalization of telecommunications requires a broader cooperation among regulators in the OECD.Digital Economy, Regulatory Policy, European Union

Competition Policy In Network Industries: An Introduction

We discuss issues of the application of antitrust law and regulatory rules to network industries. In assessing the application of antitrust in network industries, we analyze a number of relevant features of network industries and the way in which antitrust law and regulatory rules can affect them. These relevant features include (among others) network effects, market structure, market share and profits inequality, choice of technical standards, relationship between the number of active firms and social benefits, existence of market power, leveraging of market power in complementary markets, and innovation races. We find that there are often significant differences on the effects of application of antitrust law in network and non-network industries.networks, network effects, public policy, antitrust, telecommunications, technical standards

Competition Policy in Network Industries: An Introduction

The author discusses issues of the application of antitrust law and regulatory rules to network industries. In assessing the application of antitrust in network industries, we analyze a number of relevant features of network industries and the way in which antitrust law and regulatory rules can affect them. These relevant features include (among others) network effects, market structure, market share and profits inequality, choice of technical standards, relationship between the number of active firms and social benefits, existence of market power, leveraging of market power in complementary markets, and innovation races. The author finds that there are often significant differences on the effects of application of antitrust law in network and non-network industries.

Pricing Innovation: State of the Art and Automotive Applications

The paper aims at elaborating on pricing and business models for forthcoming innovative ITS devices, limiting its scope in particular to in-vehicle driving assistance systems and suggesting the various possible innovation and pricing strategies with theoretical discussions. The methodology is based on a comprehensive literature review of the major contributions made by the fields of managerial economics and management sciences to the study of pricing strategies and practices and, in particular, the pricing of innovative goods or services, in order to identify the strengths and weaknesses of the various schools of thought. The paper also gathers and analyzes the available data on two innovative navigation and safety devices for cars, namely ABS (Anti-Lock Braking System) and navigation systems, in order to put forward an initial interpretation.It concludes that there is no formula or even a vague method for determining "acceptable" price levels or "trigger points". There are two options, i.e. disruptive innovation which is by essence very risky and incremental innovation with each major model renewal.Innovation; pricing; automobile; intelligent transportation system

Competition Policy and Innovation

L'article analyse les complémentarités et les tensions entre la concurrence et l'innovation tant du point de vue des instruments d'analyse que du point de vue des politiques économiques.competition for the market; patent thicket; pools

Telecommunication reforms, access regulation, and Internet adoption in Latin America

The authors review the stylized facts on regulatory reform in telecommunications and its effects on telecommunications development and Internet penetration in Latin America. Relying on data from the International Telecommunication Union, the Information for Development Program (InfoDev), and the World Bank for 1990-99, the authors then test econometrically the determinants of the differences in Internet penetration rates across Latin America. The results show that effective implementation of the reform agenda in telecommunications regulation could accelerate adoption of the Internet in Latin America-even though it is only part of the solution (income levels, income distribution, and access to primary infrastructure are the main determinants of growth in Internet connections and use). Regulation will work by cutting costs. Cost cutting will require that regulators in the region take a much closer look at the design of interconnection rules and at the tradeoffs that emerge from the complex issues involved. It will also require a commitment to developing analytical instruments, such as cost models, to sort out many of the problems. Appropriate cost models will generate benchmarks that are much more consistent with the local issues and with the local cost of capital than international benchmarks will ever be for countries in unstable macroeconomic situations. Cost cutting will require an equally strong commitment to imposing regulatory accounting systems that reduce the information asymmetrics that incumbents use to reduce the risks of entry. All these changes will ultimately require a stronger commitment by competition agencies, since in many countries a failure to negotiate interconnection agreements will raise competition issues just as often as it will raise regulatory questions.Rural Communications,Information Technology,Telecommunications Infrastructure,Knowledge Economy,Health Monitoring&Evaluation,Knowledge Economy,Information Technology,Health Monitoring&Evaluation,Rural Communications,Education for the Knowledge Economy

Network Externalities and Critical Mass in the Mobile Telephone Network: a Panel Data Estimation

This paper develops a simple demand model with network externalities which allow us to identify the shape of the network externalities function in the mobile telephone market and to estimate the critical mass. If the mobile telephone network exhibits positive network externalities, we expect that the demand curve is not downward sloping everywhere but it has an increasing part, the critical mass of the installed base of subscribers. Once the critical mass is reached, the growth of the network is self-sustaining. We use a panel data of the 30 OEDC Countries from 1989 to 2006 for estimating the relationship between price of 3-minute cellular call and the installed base of subscribers; we find strong network externalities effects in mobile telephone market which drive the demand curve for this network good to be an inverted U function. Moreover, given that the concavity of the demand curve depends on the extent of network externalities, the idea is to identify some variables which could affect the intensity of network effects in the mobile telephone market, because the more concave the demand curve is, sooner the critical mass is reached for any price. This may have important implications for producers in terms of initial investment and marketing strategies which they have to do to attain the critical mass.Network Externalities, Mobile Telecommunication, Critical Mass

Estimation of network externalities and critical mass in the mobile telephone market: a panel data analysis of the OECD countries

Network Externalities, Mobile Telecommunication, Critical Mass

Prospects for the hydrogen transition based on the network economic approach : Insights from the electricity and gas experience in Europe

This paper aims to investigate the transition to a new energy system based on hydrogen in the European liberalized framework. After analyzing the literature on the hydrogen infrastructure needs in Europe, we estimate the size and scope of the transition challenge.We take the theoretical framework of network economics to analyze early hydrogen infrastructure needs. Therefore, several concepts are applied to hydrogen economics such as demand club effects, scale economies on large infrastructures, scope economies, and positive socio-economical externalities. On the examples of the electric and natural gas industry formation in Europe, we argue for public intervention in order to create conditions to reach more rapidly the critical size of the network and to prompt network externalities allowing for the market diffusion of and, thus, an effective transition to the new energy system.Economics of regulation ; network economics ; technological change ; energy economics ; hydrogen ; electricity ; natural gas