Cost and benefits from infrastructure competition. Estimating welfare effects from broadband access competition

Authors:
Felix Höffler
Affiliations:
Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany
Venue:
Telecommunications Policy
Year:
2007

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Abstract

Competition between parallel infrastructures incorporates opposing welfare effects. The gain from reduced deadweight loss might be outweighed by the inefficient duplication of an existing infrastructure. Using data from broadband Internet access for western Europe 2000-04, this paper investigates which effect prevails empirically. Infrastructure competition between DSL and cable TV had a significant and positive impact on the broadband penetration. However, comparing the additional social surplus attributable to cable competition with the cable investments, it can be concluded that, in the absence of significant positive externalities, infrastructure competition has probably not been welfare enhancing.