The impact of alternative public policies on the deployment of new communications infrastructure - a survey

Our survey reviews the theoretical and empirical literature on all alternative policies to promote the deployment of new fiber-based communications infrastructure. Since such investment is expected to induce substantial positive externalities, dynamic efficiency becomes a particularly important policy goal. The available policies refer to i) different kinds of ex ante sector-specific regulations including cost-based access regulations as well as softer regulations such as regulatory holidays or geographically differentiated regulations, ii) deregulatory approaches based on effective competition law implementation and competitive market structures including allowance of co-investment models, and iii) public subsidies to cover non-profitable (“white”) areas. Our survey identifies the most significant research gaps, finding that numerous studies related to the impact of access regulations exist, whereas only a much smaller branch of literature addresses the impact of competition policies, and even fewer studies analyze the impact of public subsidies on new communications deployment. Moreover, our work allows for a generic framework for policy recommendations that identifies the comparative advantages of the individual policy options for different market structures and for varying degrees of externalities. We find that public subsidies are the dominant policy alternative in white areas, whereas access regulations can be the preferred policy in white or “grey” areas, where only monopoly structure or co-investment models lead to private investment. Deregulatory policies might be preferable in grey areas, if there is sufficient pressure from competitive outside options and if competition law is strong. Finally, deregulatory policies including soft regulation are the dominant policy in “black” areas, where several independent infrastructure operators exist

Some insights in regulation and potential profitability of passive fiber infrastructure in Europe

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Regionalizing telecommunications reform in West Africa

In recent years, there has been an increasing recognition that significant welfare gains could be realized through deep forms of regional integration which entail harmonization of legal, regulatory and institutional frameworks. Reforms that reduce cross-border transaction costs and improve the performance of “backbone” infrastructure services are arguably even more important for the creation of an open, unified regional economic space than trade policy reforms narrowly defined. This paper assesses the potential gains from regionalized telecommunications policy in West Africa. To this end, the paper: (i) discusses how regional cooperation can overcome national limits in technical expertise, enhance the capacity of nations credibly to commit to stable regulatory policy, and ultimately facilitate infrastructure investment in the region; (ii) identifies trade-distorting regulations that inhibit opportunities for regional trade and economic development, and so are good candidates for regional trade negotiations to reduce indirect trade barriers; and (iii) describes substantive elements of a harmonized regional regulatory policy that can deliver immediate performance benefits.E-Business,Environmental Economics&Policies,ICT Policy and Strategies,Transport Economics Policy&Planning,Emerging Markets

Scenarios for the development of smart grids in the UK: literature review

Smart grids are expected to play a central role in any transition to a low-carbon energy future, and much research is currently underway on practically every area of smart grids. However, it is evident that even basic aspects such as theoretical and operational definitions, are yet to be agreed upon and be clearly defined. Some aspects (efficient management of supply, including intermittent supply, two-way communication between the producer and user of electricity, use of IT technology to respond to and manage demand, and ensuring safe and secure electricity distribution) are more commonly accepted than others (such as smart meters) in defining what comprises a smart grid. It is clear that smart grid developments enjoy political and financial support both at UK and EU levels, and from the majority of related industries. The reasons for this vary and include the hope that smart grids will facilitate the achievement of carbon reduction targets, create new employment opportunities, and reduce costs relevant to energy generation (fewer power stations) and distribution (fewer losses and better stability). However, smart grid development depends on additional factors, beyond the energy industry. These relate to issues of public acceptability of relevant technologies and associated risks (e.g. data safety, privacy, cyber security), pricing, competition, and regulation; implying the involvement of a wide range of players such as the industry, regulators and consumers. The above constitute a complex set of variables and actors, and interactions between them. In order to best explore ways of possible deployment of smart grids, the use of scenarios is most adequate, as they can incorporate several parameters and variables into a coherent storyline. Scenarios have been previously used in the context of smart grids, but have traditionally focused on factors such as economic growth or policy evolution. Important additional socio-technical aspects of smart grids emerge from the literature review in this report and therefore need to be incorporated in our scenarios. These can be grouped into four (interlinked) main categories: supply side aspects, demand side aspects, policy and regulation, and technical aspects.

Structural Separation Models and the Provision of ‘Dark Fibre’ for Broadband Networks: The Case of CityLink

Fibre broadband networks are widely presumed to become the dominant form of fixed-line broadband access. However, the spectre of fibre firms gaining market power, such has been evidenced in legacy copper-based telecommunications networks, has led some policy-makers to suggest imposing separation mandates (either functional or structural) on the owners of fibre networks yet to be built, in order to militate against the creation of a new set of firms with market power. Whilst conceptually separation of the „dark fibre? data transportation core from network intelligence and retail functions echoes the computer technology-centric view of the internet as a „dumb core? and an „intelligent fringe?, and replicates the separation mandates currently proposed as a means of preventing integrated legacy copper-based providers from foreclosing retail competition, the ensuing structures likely exacerbate the chilling effect of access regulation on network investment observed in most markets where it has been applied. The chilling effects arise because of an investment horizon mismatch (hold-up) between infrastructure operators with large fixed and sunk costs, and retailers (and arguably even end consumers) with freedom to switch between retailers and network infrastructures. The usual resolution to such problems requires customers to make a credible commitment to purchase services via relationship-specific investments or contractual commitments. Whereas access regulation precludes the contractual resolution of the hold-up problem, separation mandates preclude their resolution by consumer-owners vertically integrating upsteam into elements of infrastructure ownership. Consequently, it appears unlikely that the level of investment in separated fibre networks providing dark fibre connections will be optimal. Indeed, under competitive circumstances and high levels of demand uncertainty, there may be no private sector investment forthcoming for dark fibre infrastructures. By examining the business model of CityLink, a firm that since 1995 has been successfully supplying dark fibre in a highly competitive broadband market segment, it is confirmed that long-term financial viability of dark fibre-producing firms is feasible when utilising a mix of both contractual and asset ownership mechanisms that bind end consumers into credible commitments sufficient to justify the firm?s deployment of new network infrastructure capacity. The institutional arrangements that led to the development of this firm?s successful business model draw their inspiration more from the flexible and collaborative commercial interaction of the information technology community rather than the adversarial and prescriptive regulatory environment of the telecommunications industry. It is concluded that if policy-makers wish to encourage the creation of a truly „dark fibre-based? fixed line broadband environment, then in the initial stages of network deployment at least, arrangements similar to those of CityLink are more likely to induce sufficient and timely private sector investments than the rigid and rigorous separation and access regulation arrangements common in the recent history of the telecommunications industry.