Abstract This paper compares two specific types of competition schemes (i.e., service-based competition and facility-based competition) by focusing on a firm's incentive to invest in network infrastructure. We show that when monopoly rent is large, facility-based competition makes the initial introduction of infrastructure earlier than service-based competition. However, when not only monopoly rent but the degree of uncertainty are small, service-based competition makes the initial introduction of infrastructure earlier than facility-based competition. The result indicates the relationship between the timing of infrastructure builiding and the degree of competitiveness in a product market. Other policy implications are also discussed
