Access Pricing, Competition, and Incentives to Migrate from "Old" to "New" Technology

Posted by D. Daniel Sokol

Marc Bourreau (Telecom ParisTech and CREST-LEI, Paris), Carlo Cambini (Polytechnic University of Turin) and Pinar Dogan (Harvard University) explain Access Pricing, Competition, and Incentives to Migrate from "Old" to "New" Technology.

ABSTRACT: In this paper, we analyze the incentives of an incumbent and an entrant to migrate from an "old" technology to a "new" technology, and discuss how the terms of wholesale access affect this migration. We show that a higher access charge on the legacy network pushes the entrant firm to invest more, but has an ambiguous effect on the incumbent's investments, due to two conflicting effects: the wholesale revenue effect, and the business migration effect. If both the old and the new infrastructures are subject to ex-ante access regulation, we also find that the two access charges are positively correlated.