Entry may increase network providers' profit

Authors:
Øystein Foros;Hans Jarle Kind;Jan Yngve Sand
Affiliations:
Norwegian School of Economics and Business Administration, Bergen, Norway;Norwegian School of Economics and Business Administration, Bergen, Norway;Department of Economics and Management, NFH, University of Tromso, N-9037 Tromso, Norway
Venue:
Telecommunications Policy
Year:
2009

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Abstract

In this paper the incentives for platform sponsors to open up their networks for independent rivals is analyzed. It is shown that open access may increase the platform sponsors' profit levels and enhance quality improving investments. In addition, it is shown that a commitment to allow entry reduces the difference between ex ante and ex post compatibility incentives.