Content

Margit Vanberg, Conclusions in:

Margit Vanberg

Competition and Cooperation Among Internet Service Providers, page 142 - 143

A Network Economic Analysis

1. Edition 2009, ISBN print: 978-3-8329-4163-5, ISBN online: 978-3-8452-1290-6 https://doi.org/10.5771/9783845212906

Series: Freiburger Studien zur Netzökonomie, vol. 14

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142 connections to end-users. In the case of FTTC projects, for instance, the network upgrade consists of building fiber-optic cable closer to the customer premises. The incumbent draws a fiber-optic cable through the existing ductworks between the MDF site and the street cabinet. For this, the incumbent relies on ductworks and ducts that are part of the existing monopolistic bottleneck network infrastructure. It must be argued, that the extent of the monopolistic bottleneck network area is not increased by this investment of the incumbent, in the sense that entrants should be granted access to the new fiber cable. As long as both firms have the same opportunities for attracting customers in the retail market, the investment into additional fiber can be expected both of new entrants as well as of the incumbent. The prerequisite, that both have equal opportunities in the retail market presupposes that no entry barriers hinder competitors from entering the new market. Focusing again on long-run cost asymmetries between the incumbent and the competitors, it remains necessary that competitors are granted access to the ductworks and the ducts between the street cabinet and the main distribution frame as well as to the copper cable from the street cabinet to the customer premises for them to operate on the same cost function as the incumbent (Blankart et al., 2007: 14). Using these assets, the entrant can invest into fiber cable between the MDF site and the street cabinet at same costs as the incumbent. In the case of FTTH projects, competitors need equal access to the cable ducts which connect the end-user premises with the MDF site and to in-house cables. They can then draw their own fiber-optic cable to the enduser’s premises. To summarize, the extent of the monopolistic bottleneck network area will decrease in an NGN environment. When the metallic local loop is (partly) replaced with fiber-optic cables, then this is an investment, which can be undertaken by either the incumbent or its competitors. The ductworks and the cable ducts which connect end-user sites with higher-level network infrastructure remain monopolistic bottlenecks to which competitors must be granted equal access. Incumbents will face new regulation in that they must open their network infrastructure at points which were previously not regulated. 8.4 Conclusions This chapter clarified the importance of regulation in the Internet periphery for effective competition in Internet core markets by referring to the theory of marketpower leveraging. The principles of disaggregated regulation were presented. It was argued that minimally invasive regulation begins with a clear demarcation of the monopolistic bottleneck network area. The extent of the monopolistic bottleneck in local communications infrastructure was analyzed from the perspective of a regulator wanting to ensure non-discriminatory terms and conditions in broadband Internet access services. It was argued that in current PSTN networks competitors need to be able to co-locate their own transmission technology at the MDF site of the incumbent and need access to the bare copper cable leading to the end-user. In the future 143 NGN environment, access to the copper cable needs to be granted only at the street cabinet of the incumbent. However, competitors will need access to the ducts and ductworks that connect the street cabinet and the main distribution frame where the new fibre cables are connected to higher network levels. Chapter 9 will reflect this normative analysis of regulatory requirements in the local communications infrastructure against current regulatory practices in the U.S. and in Europe.

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Zusammenfassung

Die Konvergenz der Netztechnologien, die dem Internet, der Telekommunikation und dem Kabelfernsehen zu Grunde liegen, wird die Regulierung dieser Märkte grundlegend verändern. In den sogenannten Next Generation Networks werden auch Sprache und Fernsehinhalte über die IP-Technologie des Internets transportiert. Mit den Methoden der angewandten Mikroökonomie untersucht die vorliegende Arbeit, ob eine ex-ante sektorspezifische Regulierung auf den Märkten für Internetdienste wettbewerbsökonomisch begründet ist. Im Mittelpunkt der Analyse stehen die Größen- und Verbundvorteile, die beim Aufbau von Netzinfrastrukturen entstehen, sowie die Netzexternalitäten, die im Internet eine bedeutende Rolle spielen. Die Autorin kommt zu dem Ergebnis, dass in den Kernmärkten der Internet Service Provider keine monopolistischen Engpassbereiche vorliegen, welche eine sektor-spezifische Regulierung notwendig machen würden. Der funktionsfähige Wettbewerb zwischen den ISP setzt jedoch regulierten, diskriminierungsfreien Zugang zu den verbleibenden monopolistischen Engpassbereichen im vorgelagerten Markt für lokale Netzinfrastruktur voraus. Die Untersuchung zeigt den notwendigen Regulierungsumfang in der Internet-Peripherie auf und vergleicht diesen mit der aktuellen Regulierungspraxis auf den Telekommunikationsmärkten in den Vereinigten Staaten und in Europa. Sie richtet sich sowohl an die Praxis (Netzbetreiber, Regulierer und Kartellämter) als auch an die Wissenschaft.