Cost and Benefits from Infrastructure Competition. Estimating Welfare Effects from Broadband Access Competition

24 Pages Posted: 5 Jan 2005

See all articles by Felix Höffler

Felix Höffler

WHU - Otto Beisheim School of Management

Date Written: June 2005

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 2000-2004, this paper investigates which effect prevails empirically. Infrastructure competition between DSL and cable TV had a significant and positive impact on the broadband penetration. Comparing the additional social surplus attributable to cable competition with the cable investments, we conclude that infrastructure competition has not been welfare enhancing. A theoretical model is provided, formalizing why the effect of competition on penetration might be limited.

Keywords: Infrastructure Competition, Service Competition, Broadband, Internet, Cable TV, DSL

JEL Classification: L51, L86, L96, L12, K23

Suggested Citation

Höffler, Felix, Cost and Benefits from Infrastructure Competition. Estimating Welfare Effects from Broadband Access Competition (June 2005). MPI Collective Goods Preprint No. 2005/1, Available at SSRN: https://ssrn.com/abstract=643461 or http://dx.doi.org/10.2139/ssrn.643461

Felix Höffler (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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