Dscusson Paper No. 5-048 Facly- and Servce-based Compeon and Invesmen n Fxed Broadband Neworks: Lessons from a Decade of Access Regulaons n he European Unon Member Saes Wolfgang Brglauer laus Gugler and Adhurm Haxhmusa
Ds cusson Paper No. 5-048 Facly- and Servce-based Compeon and Invesmen n Fxed Broadband Neworks: Lessons from a Decade of Access Regulaons n he European Unon Member Saes Wolfgang Brglauer laus Gugler and Adhurm Haxhmusa Download hs ZEW Dscusson Paper from our fp server: hp://fp.zew.de/pub/zew-docs/dp/dp5048.pdf De Ds cusson Pape rs de nen ener mög lchs schnellen Ver breung von neueren For schungsarbeen des ZEW. De Be räge le gen n alle nger Veranworung der Auo ren und sel len nch no wendgerwese de Me nung des ZEW dar. Dscusson Papers are nen ded o make resuls of ZEW research promp ly ava lable o oher economss n order o encou ra ge dscusson and sug gesons for rev sons. The au hors are sole ly responsble for he con ens whch do no neces sarly repre sen he opnon of he ZEW.
Facly- and Servce-based Compeon and Invesmen n Fxed Broadband Neworks: Lessons from a Decade of Access Regulaons n he European Unon Member Saes Wolfgang Brglauer* laus Gugler** Adhurm Haxhmusa** May 205 *) (Correspondng auhor) Cenre for European Economc Research (ZEW Mannhem) e-mal: brglauer@zew.de phone: +49 (0) 62 235-279 P.O. Box 03443 68034 Mannhem Germany. **) Venna Unversy of Economcs and Busness (WU) Research Insue for Regulaory Economcs Venna Ausra e-mal: klaus.gugler@wu.ac.a adhurm.haxhmusa@wu.ac.a. eywords Invesmen dynamcs regulaon servce-based compeon facly-based compeon sraegc effecs JEL L43 L52 L96
Absrac Ths paper employs frm-level panel daa of 57 ncumben and enran frms for 23 European counres n he decade from 2003 o 202. We examne he mpac of servce- and facly-based compeon on frm-level nvesmen as well as he sraegc effecs underlyng nfrasrucure nvesmen decsons. A he same me we explcly model he srucural dynamcs of broadband nvesmen by means of a flexble acceleraor model. The emprcal specfcaon employs dynamc panel esmaon echnques whch allows us o accoun for varous sources of endogeney. We fnd ha facly-based compeon exers a posve and sgnfcan mpac on boh ncumbens and enrans mplyng ha ncumbens and enrans nvesmen decsons are sraegc complemens. Moreover we fnd ha nermodal compeon n erms of fxed-moble subsuon exers dfferen effecs a he frm level. Fnally we show ha servce-based compeon appears o have no sgnfcan mpac on he nvesmen decson of ncumbens and enrans. However wh respec o he laer phase of marke lberalzaon servce-based compeon exers a negave mpac on enrans nvesmen. Our resuls hus also provde relevan polcy gudance on he role of servce-based compeon n regulang emergng hgh-speed broadband nfrasrucure.
. Inroducon Followng he lberalzaon of elecronc communcaons markes n 997/998 he European Commsson (EC) ssued several gudelnes o nroduce compeon n hose markes by means of mandaed wholesale access oblgaons. Typcally hese oblgaons were asymmercally mposed on formerly sae-owned ncumben operaors who were deemed o have sgnfcan marke power relaed o he possesson of monopoly-lke legacy nfrasrucure. In parcular he EC n s Drecve 2887/2000 has foreseen mandaed wholesale access o he local loop (European Parlamen & Councl 2000) and hus enabled new marke operaors ( enrans ) o offer real narrowband voce and broadband servces drecly o cusomers. Servce-based compeon ha hnges drecly upon a se of pre-defned access regulaons and cosorened wholesale access charges n parcular allows he enran o offer compeve real servces whou geng engaged n mely cosly and rsky roll-ou of own access nework nfrasrucure f access oblgaons are effecvely mplemened by he naonal regulaory auhores (NRAs). In he early sages of marke lberalzaon servce-based compeon massvely ncreased prce compeon and hus had an mmedae and posve welfare effec n erms of sac effcency. The EC also emphaszed n s Drecve 2002/9/EC ha mandaed access should no reduce he ncenves of enrans o nves n alernave nfrasrucure (European Parlamen & Councl 2002). The laer n urn would be essenal o foser compeon n he long-run n erms of dynamc effcency. Moreover nfrasrucure- (or: facly-) based compeon nvolves a much lower degree of ndusry mcromanagemen and hence lower admnsrave coss. However he EC has never explcly mandaed he enran o sar nvesng n s own access nework afer a ceran perod of me wh a formal requremen o ener facly-based compeon. Consequenly he decson o nves n own facles s up o he enran conngen ner ala on regulaory nvesmen condons. As a resul wrelne communcaons markes are sll characerzed by wo dfferen ypes of enrans hose who reman servcebased compeors and hose who gradually self-deploy nework nfrasrucure and hus also ener facly-based compeon becomng a leas parly ndependen nework []
operaors. The laer developmen adheres o he so-called ladder of nvesmen (LoI) hypohess (Cave & Vogelsang 2003; Cave 2006). Accordng o hs hypohess regulaory-nduced servce-based compeon serves as a seppng sone for enrans o engage progressvely n backward negraon and ulmaely o self-deploy access nfrasrucure. The former however sll represens by far he predomnan group of enrans. 2 One of he mos conroversal quesons s whch mode of compeon s preferable n order o lower prces and o acheve hgh nvesmen a he same me. Ths ssue becomes even more mporan n vew of he deploymen of fber-based nex (or second) generaon communcaons nfrasrucure; n parcular s holy debaed wheher emergng communcaons nfrasrucure should be subjeced o a smlar se of secor-specfc access regulaons and wheher servce-based compeon s essenal n a smlar way as n he begnnng of lberalzaon of frs-generaon broadband neworks or f raher dmnshes ex ane nvesmen ncenves. 3 Infrasrucure-based operaors argue ha servce-based compeon va mandaory access regulaons resrcs her ably o generae suffcen revenues and would hus be dermenal o ex ane nvesmen ncenves and nework nnovaons. Conversely for NRAs and servcebased enrans a poenal hrea of new and possbly more nense monopoly areas arses n he course of he deploymen of new fber-based nfrasrucure whch enals he need o have agan an approprae access regulaon n place. Ulzng he experence of a decade of regulang frs-generaon broadband neworks our paper nends o draw lessons from he mpac of boh modes of compeon on nvesmen n fxed broadband markes. In addon we examne he mpac of wreless ( nermodal ) compeon from moble neworks on nvesmen Hence n he U.S. he LoI hypohess s known as he seppng sone hypohess. 2 In prncple here mgh be a connuum beween pure servce-based compeon and facly-based compeon (Guhre 2006). However n broadband/elecommuncaons markes one has bascally observed he followng caegores of operaors durng he enre perod of marke lberalzaon: ) ncumben frms ha were subjec o secor-specfc and asymmerc ex ane regulaons mposed on legacy nfrasrucure and ) enran frms eher wh own access nfrasrucure such as cable TV neworks ( nfrasrucure or facly-based operaors ) or whou ( servce-based operaors relyng on wholesale access oblgaons). 3 The reader s referred o Telecommuncaons Polcy specal ssue publshed n 203 (Volume 37(0)) whch collecs conroversal papers on he opc Regulaory approaches and nvesmen n new communcaons nfrasrucure. [2]
acves of fxed broadband operaors. In answerng hs we employ an unbalanced panel daa se of 57 operaors from 23 European Unon (EU) member saes for he years from 2003 o 202. The perod of analyss hus covers he begnnng of servcebased compeon n broadband markes up o he early phase of ranson o nex generaon nfrasrucure deploymen ha has been naed only a few years ago n mos EU member saes. We herefore explo nformaon over a whole decade of marke lberalzaon and regulaon nvolvng all relevan sources of compeon n order o have a sound bass o derve relable recommendaons for fuure (de-)regulaory polces o be mposed on new communcaons nfrasrucure. Our emprcal specfcaon ncorporaes: ) generalzed mehods of momens (GMM) and bas-correced fxed effecs esmaors o accoun for he endogeney bas due o he dynamc specfcaon of he nvesmen equaon omed varables and reverse causaly paerns; ) sraegc frm-level effecs regardng nvesmen decsons and fnally ) he srucural dynamcs of adjusmen coss n erms of a dynamc nvesmen acceleraor model. The remander of he paper s organzed as follows: Secon 2 revews he relaed and recen emprcal leraure. Secon 3 oulnes our basc hypoheses. Secon 4 descrbes he daa se underlyng our emprcal nvesgaon. Secon 5 presens he emprcal baselne specfcaon and our denfcaon sraegy. Secon 6 descrbes and nerpres he man resuls of he emprcal analyss. Secon 7 summarzes and comples mporan assessmens for fuure regulaory polces. 2. Emprcal evdence In hs secon we revew he mos relaed and recen conrbuons from he emprcal leraure. In dong hs we buld on he well-ced survey by Cambn and Jang (2009) who revew he older leraure on nvesmen and regulaon. The auhors conclude ha he majory of he conrbuons fnd ha servce-based compeon n erms of dfferen forms of cos-based access regulaons dscouraged boh ncumbens and enrans from nvesng n fxed neworks. In he followng we also consder emprcal sudes ha [3]
employ measures of broadband peneraon whch s oupu-relaed and hence mgh provde a beer proxy for consumer welfare. Bouckaer e al. (200) examne he deermnans of broadband peneraon based on daa for 20 OECD counres for he years from 2003 o 2008. The auhors fnd ha nfrasrucure-based compeon has a posve mpac on broadband peneraon whereas servce-based compeon s an mpedmen o peneraon. The auhors argue ha her fndngs sugges ha he LoI hypohess does no provde suffcen jusfcaon for mposng comprehensve broadband access regulaons. Grajek and Röller (20) emprcally esmae he relaonshp beween regulaon and nvesmen as regards elecommuncaons nvesmen of ncumben and enran operaors usng daa for EU member saes for he years from 997 o 2006. Usng a formal regulaory ndex he auhors fnd ha access regulaon reduces boh ndvdual frm and oal ndusry nvesmen. Moreover he auhors fnd ha ncumbens nves more n response o nvesmen ncreases of enrans ndcang ha nvesmens are sraegc complemens alhough he complemenary s no sgnfcan he oher way around.e. from he ncumbens o enrans. Bacache e al. (204) examne he ncenves embedded n he EU regulaory framework on mgraon from old o new fber-based access nfrasrucures usng daa from 5 EU member saes for 7 semesers over he perod from July 2002 o July 200. The auhors relae he number of access lnes based on new access echnologes o he number of unbundlng and bsream lnes. Whereas he auhors fnd some suppor for he LoI hypohess for he mgraon from bsream access o local loop unbundlng a he lower rungs of he ladder wh lower nvesmen requremens here s no emprcal suppor for he hypohess ha mandaory local loop unbundlng fosers enrans o nves n new and much more cos nensve access nfrasrucures. Nardoo e al. (205) fnd smlar resuls usng broadband peneraon daa from December 2005 o December 2009 for he whole of he U. The auhors fnd suppor for a shor ladder leadng from resale o bsream access and unbundlng bu no o self-deployed enrans access nfrasrucure. Crandall e al. (203) s a recen OECD based sudy ha ulzes counry level daa for he years from 200 o 200. The auhors fnd ha unbundlng oblgaons have almos no sgnfcan mpac on broadband peneraon n he shor run bu a sgnfcanly negave mpac on peneraon n he long [4]
run. Fnally Brglauer e al. (203) are he frs o nvesgae he deermnans of fberbased nfrasrucure deploymen usng daa for he years from 2005 o 20. Ther emprcal specfcaon ncorporaes real nvesmen daa for he EU27 saes. The auhors fnd ha he more effecve wholesale broadband access regulaon and hence servce-based compeon s he more negave s he mpac on fber deploymen. Inermodal compeon from moble neworks exers a non-lnear mpac on aggregae nvesmen n erms of an nvered U-shape relaonshp. Summarzng he recen emprcal analyss on wholesale access regulaons and nvesmen seems o prove he resuls n Cambn and Jang (2009) accordng o whch servce-based compeon and relaed broadband access regulaons end o be eher sascally unrelaed or negavely relaed o nvesmen ncenves. Furhermore here s evdence ha nfrasrucure-based compeon exers a posve mpac on nvesmen a he aggregae level. To he bes of he auhors knowledge here s no emprcal work ha employs frm-level nvesmen daa ncorporaes he srucural dynamcs of broadband nvesmen and smulaneously akes no accoun boh modes of compeon as well as he relevan sources of endogeney. Ths paper nends o fll hs gap and denfy he causal effecs of servce-based and facly-based compeon on broadband nvesmen durng he relevan perod of broadband marke lberalzaon and regulaon. 3. Hypoheses Ths secon denfes he man deermnans of broadband nvesmens n Europe n he decade from 2003 o 202 and ses ou correspondng hypoheses whch are algned o he man modes of compeon n broadband markes: Servce-based compeon (Secon 3.) and facly-based compeon (Secon 3.3). Moreover we explcly oulne he dynamcs of broadband nvesmen n erms of a flexble acceleraor nvesmen model (Secon 3.4). [5]
3.2. Servce-based compeon A he begnnng of marke lberalzaon EU member saes nroduced asymmerc (one-way) access regulaons mposed on he ncumben operaors whch enabled servce-based compeon a cos-orened access charges drecly se by NRAs. The EU regulaory framework bascally provdes hree dfferen knds of wholesale access oblgaons namely: ) resale ) bsream and ) unbundlng. Smple resale means ha he enran sells he servces of he ncumben wh no echncal scope of produc dfferenaon. In hs case he enran s hardly confroned wh fxed and sunk coss. In he case of bsream he enran has o buld s own backbone nework whch enables hm o dfferenae he qualy characerscs of s real servces o some exen. In he case of unbundlng he enran operaes much more ndependenly snce ges physcal access o he ncumben s local loop copper lnes. In vew of hese mul-level wholesale access remedes he LoI hypohess has been consdered as a gudng prncple n he EU regulaory framework ool o promoe boh prce compeon and broadband nvesmen (ERG 2005) and hence o resolve he classcal rade-off beween dynamc and sac effcency. An enran ha gradually nvess movng from rung o rung (from smple resale o bsream and hen o unbundlng and fnally o self-deployed nfrasrucure) adds value o s servces and operaes more and more ndependenly; servce-based enrans wll frs acqure more nformaon and esablsh a cusomer base and herefore hey wll be ulmaely able o nves n her own nfrasrucure whch hen resuls n facly-based compeon represenng he op of he ladder (Brglauer & Gugler 203). Ideally facly-based and servce-based compeon resul n lower real prces and ncreased produc varey whch may also lead o an ncrease n oal demand for broadband servces. Ths demand ncreasng effec mgh also ncrease nvesmen ncenves by ncumbens (Foros 2004; oakorp 2006). Moreover n he case of excessve capaces when more downsream compeon decreases real prces whch n urn may be assocaed wh an ncrease n oal demand could be he case ha he regulaed ncumben s almos one-o-one compensaed for foregone monopoly profs. From hs pon of vew raher han beng subsue compeon modes servce- and facly-based compeon [6]
would complemen each oher and here would be no ner-emporal rade-off beween sac and dynamc effcency. However several oher effecs predc ha more nense servce-based compeon deeroraes nvesmen ncenves of ncumben and/or enran operaors: frs he ncumben wll only be able o make monopoly profs unl asymmerc access regulaon s nroduced whch enables marke enrance a cos-orened access charges. Ths s because rens earned from wholesale access a cos-orened prces are lower han monopoly rens from sellng nfrasrucure drecly o real cusomers. Ths effec ges renforced n case rsks are shfed from enrans o ncumbens whch s ypcally he case under sandard cos-based access regmes (Pndyck 2007; Valle 2003). Guhre (2006) and Bourreau and Dogan (2006) emphasze ha he ex ane regulaed ncumben s exposed o a consderable rsk whle he enran has nvesmen flexbly n erms of explong new echnologes. Innovaons such as xdsl echnologes enable he enran o offer new producs or hgher qualy servces whou facng he rsk due o demand unceranes. Thus open access polces enable servcebased enrans o avod nvesmen n unsuccessful echnologes afer geng suffcen nformaon from he marke. Guhre (2006) crczes ha regulaory access oblgaons ypcally do no ncorporae he opon value of wa and see sraeges ha servcebased enrans oban. Overall favourable access regulaons consue subsanal opporuny coss for enrans nvesmen and may hus pospone or hnder her nfrasrucure nvesmen. Summarzng servce-based compeon exers a posve mpac on enrans nvesmen ncenves only f mullayer access nduces furher nvesmen acves and domnaes enrans opporuny coss (represenng he benef from cheap access). Wh respec o he nvesmen ncenves of he ncumben he ne effec s ndeermnae o he exen ha servce-based compeon smulaneously capures negave nvesmen ncenves relaed o (sandard cos-based) access regulaons as well as he demand expandng effec accordng o whch oal revenues ncrease wh he level of servce-based compeon. [7]
3.3. Facly-based compeon In hs secon we add anoher dmenson of compeon semmng from alernave wrelne broadband operaors namely he enran s own self-deployed access lnes whch represen facly-based compeon ha does no depend on any knd of asymmerc wholesale access regulaons. The enran by nvesng n facly-based access nfrasrucure enjoys addonal benefs referrng o enrepreneural ndependency or beer qualy of servce and avods payng he access charge o he ncumben. In realy however besdes ncumbens only operaors wh access o nfrasrucure elemens pror o marke lberalzaon subsanally nvesed n deployng access neworks. Mos noably hese neworks refer o coax-cable broadband nfrasrucure wh pror cable TV neworks or muncpal ules wh pror duc nfrasrucure. In urn servce-based compeon dd no nduce any subsanal selfdeployed access nfrasrucure on he sde of pure servce-based enrans as evdenced n he emprcal leraure (Bacache e al. (204); Boukaer e al. (200); Nardoo e al. (205)). Accordng o Vogelsang (203 p. 22) hs can be nerpreed as he naural oucome of he economcs of fxed broadband access. Bender and Goez (20) provde a heorecal explanaon why enrans ulmaely refran from self-deployng access nfrasrucure. The auhors model compeon beween he ncumben and an enran who faces a make-or-buy decson as regards he upsream level. The auhors argue ha servce-based enrans have n prncple an ncenve o nves n vew of possble cos savngs bu are also confroned wh a sraegc effec: lower coss enable lower real prces however hese mgh mply aggressve prcng and nvesmen reacons from he ncumben n order o lm consumer mgraon o he enrans real servces. Wrelne facly-based compeon semmng from enran operaors herenafer refers o access neworks of cable operaors complemened by some muncpal nvesmen acves whch s dsncvely dfferen from acves of servce-based enrans relyng on access regulaons. Regardng he relaonshp beween faclybased compeon and nvesmen here s no clear predcon a he mcro-level as shown n Sacco and Schmuzler (20) n general. Raher he relaonshp depends on he defnon of compeve nensy and he olgopoly framework and consequenly [8]
nvesmens can be ncreasng or decreasng funcons of compeon. However s well-known from he pre-empon leraure ha a poenal nfrasrucure provder has an ncenve o pre-emp anoher nfrasrucure provder by beng he frs and hus reducng he rvals profably and ncenves o nves. As a consequence nfrasrucure provders mgh ge engaged n a race o nves frs and earn he rens f here s a frsmover advanage. Such a pre-empon race s of parcular relevance for nvesmen upgrades n elecommuncaons (Gans 200; Guhre 2006; Vareda & Hoerng 200; Grajek & Röller 20) where nfrasrucure duplcaon s only possble n areas wh hgh populaon densy whereas n all oher areas due o he economcs of fxed broadband access nfrasrucure nvesmen s only profable f a all for one operaor. Ths opens up he poenal for a long-lasng frs-mover advanage whch hus fosers ex ane nvesmen ncenves. In addon as shown n Bourreau e al. (202 p. 79) n case enran operaors benef from suffcenly large nvesmen spllovers nvesmen decsons become sraegc complemens. The auhors argue ha enrans oal nvesmen coss may be lower n areas where he ncumben operaor has already ncurred subsanal admnsrave and conracual coss. Fnally Hor and Mzuno (2006) show ha an ncenve for pre-empon exss n an open access regulaory framework wh unceran demand. Agan boh feaures appear o be characersc for deploymen of broadband nfrasrucure. Summarzng ncumbens and enrans nfrasrucure nvesmen decsons muually renforce each oher.e. nvesmen decsons are sraegc complemens f ) he operaors engage n pre-empon sraeges and race for he frs-mover advanage n erms of aggressve prce compeon a he real level and nfrasrucure nvesmen ) nvesmen spllover effecs are suffcenly large or ) f operaors are subjec o an open access framework wh suffcenly hgh access charges and unceran demand. As regards he role of facly-based compeon from (nermodal) moble neworks here s no clear predcon concernng he funconal relaonshp and he ne mpac on frmlevel nvesmen. [9]
3.4. Invesmen dynamcs: a flexble acceleraor model Below we presen a flexble acceleraor nvesmen model usng a neoclasscal producon funcon wh consan reurns o scale and no subsuon beween npu facors. Thus only akes no accoun quany varables whle prce varables are no ncluded (Chrnko 993). The frs dervave and cross parals of he producon funcon are posve and he second dervaves are negave. Ths mples ha he margnal producs are posve a decreasng raes and are posvely relaed o oher npu facors employed. Thus ncreasng he oupu level would requre an ncrease n npus followng he objecve of cos mnmzaon and dependng on he adjusmen cos (Esner 978). The man and mos mporan assumpon of hs model s abou he frm s desred level of capal expressed n erms of a fxed capal o oupu rao. We denoe he desred level of capal of he frm a me by he oupu level by YY and he capal o oupu rao by αα. Based on he noon of opmal capal accumulaon he opmal level of capal s proporonally relaed o he level of oupu: * () = α Y where and YY represen he desred level of capal and he oupu level of he frm n he prevous perod of me respecvely. Consequenly a hgh capal o oupu rao s assocaed wh hgh nvesmen expendures and vce versa. In he smple acceleraor nvesmen model αα s consan. If he adjusmen s mmedae and gnorng deprecaon nvesmen would be smply he dfference n he desred capal socks n perod and : (2) I = ( ) = α( Y Y ) α Y where II represens curren nvesmen n perod for frm. However he older leraure (Esner 978) as well as recen and elecommuncaons relaed evdence (Brglauer e al. 203; Grajek & Röller 20) sugges ha s unlkely ha frms fully adjus her capal sock due o a change n he oupu level n he curren perod of me (n our case whn one year). Acceleraor nvesmen models where changes n he [0]
level of capal requre longer me o move oward a new equlbrum mpled by a change n he level of oupu are referred o as flexble acceleraor nvesmen models. Furhermore s assumed ha changes n he capal sock from year o year follow an adjusmen process by a proporon of he dfference beween he acual and desred level of capal: (3) = ( )( ) Nex we nroduce replacemen nvesmen.e. he rae of he capal deprecaon n he flexble acceleraor mechansm. As a resul he capal sock s expressed as he sum of he prevous capal sock and he level of curren nvesmen mnus he deprecaon of he prevous level of he capal sock (Jorgenson & Seber 968): (4) δ = + I where δδ represens he consan rae of deprecaon. From equaon (4) we solve for II and oban: (5) I δ = ( ) From he flexble acceleraor mechansm n equaon (3) we now solve for and oban: = ) (6) ( + To complee he flexble acceleraor nvesmen model we nser equaon (6) no equaon (5) and oban: (7) I = ( ) ( δ ) + []
Fnally we negrae he capal o oupu rao and he nvesmen dynamcs as capured by he lagged dependen varable o oban he dynamc flexble acceleraor nvesmen model: 4 (8) I = I + α( ) Y α( δ )( ) Y Summarzng f broadband nvesmen s subjec o a paral adjusmen process we expec ha he coeffcen esmae of he lagged dependen varable les n he nerval [0; ] where he lower lm ndcaes ha adjusmen akes place nsananeously and he upper lm ndcaes complee perssence.e. here s no convergence owards an opmal desred long-run broadband nfrasrucure sock. Furhermore wh αα > 0 and 0 < δδ < we expec ha he coeffcen esmae of he (lagged) oupu varable s posve (negave). 4. Daa and varables Our daa se covers 23 EU member saes and 57 frms ncludng 2 ncumbens and 36 enrans for he years from 2003 o 202. Our panel daa se s unbalanced snce daa avalably regardng he sar and end of he me perod vares by frms and counres. We use he followng man daa sources: EU progress repors provde counry level daa on oal broadband lnes.e. regulaed wholesale lnes enrans own lnes and ncumbens own lnes; Worldscope provdes frm-level daa regardng capal expendures (CAPEX) angble fxed asses sales and cash flow. Our sample comprses 57 dfferen frms 5 whch vary wdely n her sze. 6 Hence we dvde CAPEX sales and cash flows by he one perod-lagged angble fxed asses. The lagged angble fxed asses are used n order o elmnae he possbly of endogeney 4 The reader s referred o he Appendx for a dealed dervaon of he acceleraor model. 5 The Orbs daabase enables he denfcaon of frms ha operae n wrelne elecommuncaons markes wh NACE code number 600. For he resulng ls of operaors we verfed whch frms are regsered on he Sock Exchange Markes based on he Inernaonal Secures Idenfcaon Number (ISIN) whch hen enabled us o ge he frm-level daa from he Worldscope daabase. 6 There s a bg dfference no only beween he ncumbens and enrans bu also whn ncumbens and enrans. For example he mean of CAPEX of he Ausran ncumben A Telecom Ausra s 689 mllon whle he mean of CAPEX of he Mala ncumben GO PLC s 8 mllon. On he oher hand he mean of CAPEX of he enran German Freene AG s 80 mllon whle he mean of CAPEX of he Polsh enran Telesrada SA s 47 housand. [2]
beween CAPEX and angble fxed asses snce ncreasng CAPEX may ncrease angble fxed asses of he curren perod. In addon we use several oher daa sources for our conrol varables: he World Bank (The World Developmen Indcaors) for daa on GDP per capa and he Inernaonal Telecommuncaons Unon (World Telecommuncaon/ICT Indcaors Daabase) for daa on he number of personal compuers n use per capa and fxed-o-moble subsuon. Fnally he European Cenral Bank and MarkeLne provde daa on he long erm neres rae and populaon densy respecvely. 4.. Dependen varable Our dependen varable cccccccccc_ccaa represens frm level CAPEX dvded by he lagged angble fxed asses n he elecommuncaons ndusry n erms of propery plan and equpmen. Ths conans mos noably nvesmen n backbone and access neworks. Noe ha whereas mos of he ncumbens are acve n boh fxed and moble broadband markes he enrans ncluded n our sample are manly offerng fxed broadband servces only. 4.2. Independen varables Based on our hypoheses we dvde our explanaory varables no he followng hree groups: ) servce-based compeon ) facly-based compeon and ) conrol varables. The laer caegory conans varables relaed o our dynamc nvesmen acceleraor model as well as demand and cos conrols. Frs servce-based compeon aasscc s measured by dvdng he number of regulaed lnes (ncludng unbundlng bsream and smple resale lnes) by he sum of he regulaed lnes and ncumben s real lnes hus showng he share of ncumben s lnes made avalable hrough he regulaed wholesale marke. Hence hs varable capures he marke effec of regulaory-nduced servce-based compeon. The varable aasscc ncorporaes boh he wholesale and real marke snce ncumben s real lnes represen he lnes whch he ncumben uses nernally o delver s servces o he cusomers n he real marke. [3]
Facly-based compeon ffsscc s drecly relaed o wrelne nfrasrucure nvesmen of boh he ncumben and enrans and measured n physcal uns. Therefore we employ wo dfferen varables whch enables he esmaon of sraegc effecs regardng he ncumben s and enrans nvesmen decsons. Frs faclybased compeon s obaned as he share of he enrans own lnes relaed o he oal number of real broadband lnes ffsscc_ccee. Enrans own lnes show he number of broadband lnes ha are drecly conneced o enrans self-deployed nfrasrucure by usng oher echnologes han DSL (e.g. cable fbre WLL bu excludng WF). Mos noably enrans own lnes represen real nvesmens of cable operaors and muncpales. Second wrelne facly-based compeon s measured by he varable ffsscc_eecc whch s obaned as he share of he ncumben s real lnes relaed o oal number of real broadband lnes. Fnally he varable ffffaa measures nermodal wreless compeon n erms of he exen of fxed-o-moble compeon by relang he oal number of moble lnes o a counry s oal number of fxed landlnes. Regardng he group of conrol varables we frs refer o he varables relaed o our dynamc nvesmen acceleraor model. Wh respec o he desred level of capal sock ( ) here are dfferen heores ha assume ha he desred level of capal sock s proporonal o dfferen ndcaors of busness acvy. Accordng o he capacy ulzaon heory he level of CAPEX s posvely relaed o he capal o oupu rao (Jorgenson & Seber 968). Accordng o Esner (978) applyng sales as a man observable (proxy) varable of oupu (YY) he capal sock s expeced o change wh changes n sales and hus CAPEX are aken as a dsrbued lag funcon of curren and pas sales. Accordngly we nclude he sales o angble fxed asses rao aaccssccaa_ccaa and he one perod lagged sales o angble fxed asses rao. Moreover we nroduce an addonal frm level varable namely he cash flow o angble fxed asses rao ccffsscccc_ccaa. Fazzar e al. (988) examne he effecs of asymmerc nformaon on access o exernal funds and hus on he frms nvesmen level. The auhors conclude ha frms ha are fnancally consraned are more sensve o he avalably of nernal funds such as cash flow. There s a large leraure ha nvesgaes he relaonshp beween nvesmen and cash flow akng no accoun dfferen facors ha mgh explan hs relaonshp ncludng credworhness sze and ownershp srucure (Bond [4]
e al. 2003; Gugler 2003; aplan & Zngales 997; Vermeulen 2002). So dfferen coeffcen esmaes for he varable ccffsscccc_ccaa n he ncumbens and enrans equaons pon o dfferen levels of cash consrans. Fnally we employ addonal counry-level conrol varables o capure demand and cos sde nvesmen deermnans: ) GDP per capa ggggcc_cccc capures he ncome effecs a he counry level; ) he number of personal compuers n use per capa ccccffcc_cccc reflecs he mporance of he nformaon echnologes for he populaon (assumng ha each compuer has an nerne connecon) and also sands proxy for he overall broadband marke sze; ) he long-erm neres rae ss_ s expeced o capure he cos of capal for long-erm elecommuncaons nvesmen; v) populaon densy cccccc_ggcceeaa shows dfferen cos srucures due o varyng populaon denses across counres. All descrpve sascs as well as varable defnons expeced sgns and sources are lsed below n Table and Table 2 respecvely. Table : Descrpve sascs Varable Observaons Mean Sd. devaon Mn Max Frm level (Incumbens) capex_as 98 0.820 0.0676 0.036 0.3244 sales_as 98.364 0.5036 0.497 2.709 cflow_as 98 0.399 0.372 0.65 0.754 Frm level (Enrans) capex_as 244 0.436.6948 0.0007 26.3725 sales_as 302 2.2836 7.2654 0.0730 05.4997 cflow_as 300 0.5877 3.428-26.839 0.0706 Counry level sbc 26 0.2566 0.75 0.0002 0.6952 fbc_nc 28 0.493 0.33 0 0.9438 fbc_en 25 0.302 0.837 0.0029 0.763 fms 230 4.6050 0.8296 0.872 5.9 gdp_pc 230 2787 385 2349 4383 comp_pc 230 0.4730 0.2744 0.055.2329 l_r 230 4.652 2.22 0.57 22.5 pop_dens 230 82.397 254.559 7.369 280.74 [5]
Table 2: Varable descrpons and sources Varable (expeced sgn) capex_as sbc (+/- ncumben; +/- enran) fbc_en (+) fbc_nc (+) sales_as (+) Lag: sales_as (-) cflow_as (+) fms (+/-) gdp_pc (+) comp_pc (+) l_r (-) pop_dens (+) Descrpon Dependen varable Frm capal expendures dvded by lagged angble fxed asses (propery plan and equpmen) capal expendures o angble fxed asses rao. Frm capal expendures are measured n Euros. Man explanaory varables Regulaed lnes (ncludng unbundlng bsream and smple resale lnes) dvded by he sum of regulaed lnes and ncumben s real lnes. The share of he enrans own lnes relaed o oal number of real broadband lnes. The share of he ncumben s real lnes relaed o oal number of real broadband lnes. Frm sales dvded by lagged angble fxed asses (propery plan and equpmen) - sales o angble fxed asses rao. Frm sales represen gross sales and oher operang revenue less dscouns reurns and allowances 7. Frm sales are measured n Euros. Conrol varables Frm cash flow dvded by lagged angble fxed asses (propery plan and equpmen) cash flow o angble fxed asses rao. Frm cash flows are measured n Euros. Rao of moble lnes o fxed landlnes. Gross domesc produc per capa n Euro. The number of personal compuers n use normalzed o populaon. Harmonzed long-erm neres raes among he EU Member Saes. The raes were accessed as secondary marke yelds of governmen bonds wh a remanng maury of en years. A counry s populaon densy n persons per square klomere. Source Worldscope EU Dgal Agenda Scoreboard EU Dgal Agenda Scoreboard EU Dgal Agenda Scoreboard Worldscope Worldscope World Telecommuncaon/ ICT Indcaors Daabase The World Bank - The World Developmen Indcaors World Telecommuncaon/ ICT Indcaors Daabase EU Dgal Agenda Scoreboard MarkeLne 7 I excludes: non-operang ncome neres ncome neres capalzed equy n earnngs of unconsoldaed subsdares renal ncome dvdend ncome foregn exchange adjusmen gan on deb rered sale of land or naural resources sale of plan and equpmen sale of nvesmen sales from dsconnued operaons secury ransacons general and servce axes value-added axes ec. [6]
5. Economerc modellng Frs we descrbe our emprcal baselne specfcaon n secon 5. and hen our esmaon and denfcaon sraegy n secon 5.2. 5.. Economerc specfcaon Our baselne specfcaon refers o a dynamc reduced-form model n whch nvesmen expressed n moneary erms s specfed for he operaor n EU member sae j and year as follows: (9) capex _ as = g + b capex _ as + b sbc 3 j + b gdp _ pc 8 0 + b fbc 4 j j + b sales _ as + b cflow_ as + b comp _ pc 9 5 j + b sales _ as + b fms + b l _ r 0 2 6 j j + + b fms 2 j + b pop _ dens 7 j + η + j + ψ where ββ 0 = ββ = αα( ) and ββ 2 = αα( δδ)( ) accordng o he dynamc acceleraor model (equaon (8)). ββ 0 represens he coeffcen of he lagged dependen varable. ββ measures he nvesmen-oupu sensvy whch depends on he adjusmen process. Noe ha he dfference beween ββ and ββ 2 s ha ββ 2 also capures he rae of replacemen nvesmen. Our baselne specfcaon ncludes he regulaory-nduced servce-based compeon varable aasscc jj and he facly-based compeon varable ffsscc jj as he man compeon varables of neres. The laer varable measures he conemporaneous sock of nfrasrucure of he ncumbens (ffsscc_eecc jj ) and he enrans (ffsscc_ccee jj ). In order o denfy frm-level causal effecs and sraegc neracons we esmae equaon (9) separaely for ncumbens and enrans. The varables ffffaa jj 2 and ffffaa jj capure a poenal non-lnear nfluence from nermodal wreless compeon. Based on our dynamc nvesmen acceleraor model we nclude aaccssccaa_ccaa and aaccssccaa_ccaa as well as he lagged dependen varable cccccccccc_ccaa. In addon we nclude ccffsscccc_ccaa o conrol for frm-specfc fnancal consrans whle he counry level varables ggggcc_cccc jj ccccffcc_cccc jj ss_ jj and cccccc_ggcceeaa jj represen our [7]
demand and cos conrols. Fnally γγ represens he nercep φφ frm-specfc fxed effecs ηη me-specfc effecs and ψψ represens he error erm. 5.2. Esmaon and denfcaon sraegy In esmang he baselne specfcaon n equaon (9) we are confroned wh several sources of endogeney: frs here mgh be poenal endogeney n erms of reverse causaly underlyng our regulaon and compeon varables whch are parly drven by he level of nvesmen. However he causal lnk beween an ncrease of he level of nvesmen and he number of (regulaed) broadband lnes whn a perod of me wll be mgaed snce swchng he broadband operaor s subjec o nera due o long-erm conracs wh consumers (ypcally up o wo years). Nowhsandng hs we nclude he lagged value of he varable aasscc jj whch furher mgaes poenal endogeney n case here s no seral correlaon n he orgnal error erm. However we also have o ake no accoun endogeney due o unobserved heerogeney and he presence of he lagged dependen varable as a rgh-hand sde varable (Nckell 98). Dynamc GMM panel daa esmaon echnques represen he mos promnen canddae esmaor ha allows us o smulaneously consder all he aforemenoned sources of endogeney underlyng our man explanaory varables relaed o compeon n broadband markes as well as sales and cash flow a he frm level. Arellano and Bover (995) and Blundell and Bond (998) show by Mone Carlo analyss ha her general mehod of momens sysem esmaor (GMM-SYS) has a smaller bas han he general mehod of momens dfference esmaor (GMM-DIFF) nally developed by Arellano and Bond (99) for fne samples. In addon Bruno (2005a 2005b) developed a bas-correced LSDV esmaor (LSDVC) for unbalanced and dynamc panel daa whch however requres ha all oher rgh-hand sde varables are srcly exogenous. Alhough s reasonable o consder dynamc auoregressve models such as n equaon (9) as dynamcally complee (Wooldrdge 2002 pp. 299-300) he underlyng assumpon s sll resrcve and herefore we consder LSDVC esmaons o es he robusness of our GMM-SYS esmaon resuls. [8]
6. Dscusson of he man resuls Table 3 and Table 4 below show he man esmaon resuls based on he specfcaon n equaon (9) for he ncumbens and enrans. All sandard errors repored are robus o arbrary forms of heeroscedascy and auocorrelaon n he ψψ s for GMM and boosrapped for LSDVC models. 8 The key denfyng assumpon underlyng he GMM esmaor s ha he error erms n he orgnal specfcaon ψψ s are serally uncorrelaed. For all GMM models repored n Table 3 and Table 4 he Arellano-Bond AR(2) and AR(3) ess for zero auocorrelaon n he frs-dfferenced errors do no rejec a order wo and hree a convenonal levels respecvely. Ths mples mos mporanly ha here s no evdence for seral correlaon n he orgnal error. Also he Hansen-Sargan ess do no rejec he over-denfyng resrcons a he convenonal levels n all GMM models. All explanaory varables excep cos and demand conrols are specfed as endogenous n all GMM specfcaons. In order o avod an over fng bas n case of oo many nsrumens employed n GMM models we resrc he maxmum number of lagged nsrumens o keep he oal number of nsrumens close o he number of groups. Fnally Table 3 and Table 4 show regresson resuls for alernave esmaors (GMM-SYS vs. LSDVC) and for alernave selecons of conrol varables. All he man varables of neres appear o be robus wh respec o hese alernave model specfcaons. 90 Frs as regards he coeffcen of he lagged dependen varable cccccccccc_ccaa Table 3 and Table 4 show hghly sgnfcan and subsanal esmaes n all regressons ndcang ha he dynamc baselne specfcaon s adequae. As expeced he coeffcen s beween 0 and. The GMM coeffcen esmaes for he ncumben equaon le n he nerval of [0.434; 0.456] whch s above he range of he correspondng GMM esmaes for he enran equaon [0.329; 0.389]. Ths ndcaes ha here are adjusmen coss underlyng NGA deploymen whch are apparenly more 8 Saa 3. s used o esmae he regressons. 9 Ths also apples when we furher reduce he number of nsrumens by usng he collapse opon of STATA s xabond2 command (resuls are avalable upon reques from he auhors). 0 Due o he varaon n he enrans frm sze we also checked for poenal oulers by excludng % of he larges observaons. Esmaon resuls reman robus and are avalable upon reques from he auhors. [9]
pronounced for he ncumbens. A possble explanaon for hs s ha nvesmen daa for he ncumben also conan nvesmen n moble nework nfrasrucure whch nvolves comparavely hgh nvesmen requremens and complex echncal nework plannng as well as nsuonal rgdes due o lmed specrum lcences. Anoher explanaon would be ha ncumbens are smply larger and more dversfed (acve n all lnes of busnesses n he elecommuncaons secor) gvng rse o smooher nvesmen profles han for enrans. Second he coeffcen of he varable aaccssccaa_ccaa s sgnfcanly posve whereas he coeffcen esmae of he lagged sales varable aaccssccaa_ccaa s sgnfcanly negave n all model specfcaons n Table 3 and Table 4. In conjuncon wh he coeffcen esmae of he lagged dependen varable cccccccccc_ccaa hs represens srong supporve evdence for our dynamc flexble nvesmen acceleraor model as oulned n secon 3.4. Addonally we can dsngush beween shor- and long-run effecs. An ncrease n aaccssccaa_ccaa by 0% ncreases he ncumbens cccccccccc_ccaa by up o 2.6% n he shor-run and by 4.6% n he long-run. An ncrease n aaccssccaa_ccaa by 0% ncreases he enrans cccccccccc aaaa by up o 0.% n he shor-run and by 0.4% n he longrun. The low level of he coeffcen esmae of he varables aaccssccaa_ccaa and aaccssccaa_ccaa for he enrans s manly arbued o her low capal o oupu rao (αα~0.008). The cash flow varable ccffsscccc_ccaa shows posve and sgnfcan coeffcen esmaes for he enrans' equaon n boh GMM and LSDVC regressons. Ths ndcaes ha enrans mgh face dffcules o borrow money exernally on he fnancal markes due o her smaller average sze ownershp srucure or credworhness. The posve and sgnfcan coeffcen esmae shows ha mperfec capal markes lead enrans o ncrease her nvesmen level when nernal funds ge hgher. An ncrease n ccffsscccc_ccaa by 0% ncreases he enrans cccccccccc_ccaa by up o 0.23% n he shor-run and by 0.35% n he long-run. Thrd as regards facly-based compeon n erms of he conemporaneous nfrasrucure sock ffsscc jj he correspondng varables of he ncumben and enran Shor-run coeffcen (ββ + ββ 2 ) for aaccssccaa_ccaa analogous for he oher coeffcens and varables; long-run coeffcen ββ +ββ 2 for aaccssccaa_ccaa analogous for he oher coeffcens and varables. ββ 0 [20]
operaors (ffsscc_eecc jj and ffsscc_ccee jj ) exhb sgnfcan and posve coeffcen esmaes hroughou all regressons. Ths suggess ha frms nvesmen decsons are sraegc complemens and nvesmen decsons renforce each oher as hypoheszed n secon 3.3. Ths effec s more pronounced wh respec o he enrans equaon. Hence f regulaory polces broadly undersood encompassng any secor-specfc regulaons exer a srong drec mpac on nvesmen of he ncumben operaors here s also a subsanal ndrec mpac on he nvesmen acves of enrans. An ncrease n ffsscc_ccee jj by 0 percenage pons would lead o an ncrease n ncumbens cccccccccc_ccaa by up o.8 percenage pons n he shor-run and by 3. percenage pons n he longrun. On he oher hand an ncrease n ffsscc_eecc jj by 0 percenage pons would lead o an ncrease n enrans cccccccccc_ccaa by up o 2.4 pons n he shor-run and by 3.7 percenage pons n he long-run. Fourh facly-based nermodal compeon n erms of fxed-moble subsuon 2 s capured by he varables ffffaa jj and ffffaa jj. Whereas he coeffcen esmaes of he ncumben regressons exhb a clear non-lnear paern n erms of an nvered U- shape relaon he respecve coeffcen esmaes are nsgnfcan for he enrans regressons. I hus appears ha ncumben are more affeced by nermodal compeon han enrans. If we consder he resuls for he ncumben s specfcaon n regressons () o (3) n Table 3 we fnd ha a fxed-moble rao of around 4.3 s opmal for broadband nvesmen of ncumbens. Accordng o Table he mean value of he varable ffffaa jj s around 4.6 and hence above he opmum value of ffffaa jj ha represens he maxmum of he nvered U-shape relaonshp. As a consequence nermodal compeon from moble neworks exered a posve mpac on nvesmen ncenves of ncumben operaors on average. Fnally he marke effec of servce-based compeon as measured by he varable aasscc jj whch hnges on relevan wholesale broadband access regulaons appears o have no sgnfcan mpac on he nvesmen decsons of ncumbens and enrans on average.e. durng he overall perod of analyss. Whereas regresson (3) n Table 4 repors a negavely sgnfcan coeffcen esmaes for he enran s equaon all oher coeffcen esmaes are nsgnfcan. The laer mgh be he oucome of he [2]
opposng effecs as denfed n secon 3.. However he mpac of servce-based compeon mgh also depend on he dfferen phases of marke lberalzaon. Mos noably can be assumed ha servce-based compeon promoed compeon and nvesmen n he early phase of lberalzaon when nfrasrucure-based compeon has been hardly esablshed. In urn wh ncreasng levels of nfrasrucure-based compeon he nvesmen promong role of servce-based compeon mgh have decreased. Moreover enrans who enjoy favourable access condons n erms of a broadly esablshed wholesale access regme wh low rsks wll no self-deploy hghcos nense access nfrasrucure. Table 5 repors GMM regresson esmaes for ncumbens (regressons ()-(2)) and enrans (regressons (3)-(4)) where we addonally ncluded an neracon erm _aasscc jj _ggddffffdd03_07 whch capures he dfferenal mpac of servce-based compeon n he frs phase of lberalzaon.e. for he years from 2003 o 2007. 2 The dummy varable akes on he value for he years from 2003 o 2007 and he value 0 else. Indeed we now fnd a neural effec of servce-based compeon as regards enrans nvesmen n he early phase and a sgnfcanly negave mpac for he lae phase of lberalzaon.e. for he years from 2008 o 202. The mpac of servce-based compeon remans nsgnfcan for he enre perod of analyss for ncumbens. Noe also ha all oher coeffcen esmaes repored n Table 5 reman robus n vew of he before-menoned resuls. 2 In defnng he neracon erm we equally spl our perod of observaon. Esmaon resuls however are robus owards dfferen specfcaons of lberalzaon phases (resuls are avalable from he auhors upon reques). [22]
Table 3: Regresson resuls for ncumbens equaon () (2) (3) (4) Dependen varable: capex_as GMM SYS GMM SYS GMM SYS LSDVC capex_as - 0.434** 0.439* 0.456** 0.479*** (0.029) (0.054) (0.028) (0.000) sbc j- 0.47 0.24 0.068-0.003 (0.350) (0.5) (0.292) (0.946) fbc_en j 0.83** 0.75* 0.43* 0.2* (0.020) (0.063) (0.078) (0.069) sales_as 0.79*** 0.78*** 0.48*** 0.26*** (0.00) (0.00) (0.000) (0.000) sales_as - -0.079* -0.080* -0.069* -0.057** (0.083) (0.084) (0.094) (0.024) cflow_as -0.080-0.079-0.039 0.097* (0.526) (0.550) (0.66) (0.077) fms j- 0.56** 0.54** 0.57** 0.022 (0.026) (0.027) (0.022) (0.753) fms 2 j- -0.08** -0.08** -0.08** -0.002 (0.029) (0.030) (0.023) (0.757) gdp_pc j -.53e-0.49e-0 3.93e-2 (0.420) (0.45) (0.980) l_r j -0.00-0.000-0.000 (0.840) (0.879) (0.869) pop_dens j -2.28e-06 0.000 (0.942) (0.532) comp_pc j -.80e-07.96e-08 (0.88) (0.98) Consan -0.48** -0.407** -0.377** (0.07) (0.09) (0.02) AR() es p-value 0.066 0.070 0.055 AR(2) es p-value 0.550 0.537 0.54 Hansen-Sargan-es p-value 0.940 0.972 0.798 R-sq.: whn 0.524 #Insrumens 30 30 30 #Observaons 70 70 70 70 Regressons ()-(3) employ he wo-sep GMM sysem esmaor. Regresson () represens he full specfcaon whle n regressons (2) and (3) we gradually reduce he number of conrol varables. In regresson (4) we esmae he full specfcaon usng he LSDVC esmaor. Snce year dummes were jonly nsgnfcan we dd no nclude hem. Regressons ()-(4) nclude frm fxed effecs whch we do no repor for he sake of brevy. p-values for he AR() and AR(2) ess and he Hansen-Sargan es of over denfyng resrcons are repored. p-values for esmaed coeffcens are repored n parenheses and are robus o heeroscedascy n GMM esmaes. In regressons ()-(3) he lagged dependen varable capex_as - and he man explanaory varables fbc_en j sales_as cflow_as and sbc j- are nsrumened by a maxmum number of - 4 lags. LSDVC sandard errors are boosrapped based on 00 eraons wh bas correcon for esmaes up o order O(/T). * p < 0.; ** p < 0.05; *** p < 0.0 [23]
Table 4: Regresson resuls for enrans equaon () (2) (3) (4) Dependen varable: capex_as GMM SYS GMM SYS GMM SYS LSDVC capex_as - 0.344*** 0.329*** 0.389*** 0.534*** (0.000) (0.000) (0.000) (0.000) sbc j- -0.03-0.093-0.52** 0.028 (0.383) (0.87) (0.05) (0.842) fbc_nc j 0.242*** 0.230*** 0.46** 0.26** (0.004) (0.009) (0.03) (0.028) sales_as 0.005*** 0.005*** 0.004** 0.004*** (0.008) (0.009) (0.07) (0.000) sales_as - -0.004** -0.004** -0.005** -0.005*** (0.032) (0.029) (0.02) (0.000) cflow_as 0.023* 0.024** 0.024** 0.035*** (0.059) (0.049) (0.043) (0.000) fms j- -0.039-0.600-0.052 0.32 (0.790) (0.558) (0.649) (0.39) fms 2 j- 0.008 0.00 0.009-0.035 (0.584) (0.43) (0.472) (0.32) gdp_pc j 6.34e-09 3.80e-09-8.25e-09 (0.549) (0.577) (0.935) l_r j 0.008 0.004-0.002 (0.273) (0.460) (0.847) pop_dens j 0.000-0.007 (0.965) (0.86) comp_pc j 2.34e-07-6.90e-08 (0.876) (0.979) Consan -0.023 0.058 0.43 (0.955) (0.76) (0.542) AR() es p-value 0.47 0.368 0.250 AR(2) es p-value 0.072 0.054 0.043 AR(3) es p-value 0.949 0.893 0.80 Hansen-Sargan es p-value 0.935 0.940 0.833 R-sq.: whn 0.584 #Insrumens 48 48 48 #Observaons 77 77 77 77 Regressons ()-(3) employ he wo-sep GMM sysem esmaor. Regresson () represens he full specfcaon whle n regressons (2) and (3) we gradually reduce he number of conrol varables. In regresson (4) we esmae he full specfcaon usng he LSDVC esmaor. Snce year dummes were jonly nsgnfcan we dd no nclude hem. Regressons ()-(4) nclude frm fxed effecs whch we do no repor for he sake of brevy. p-values for he AR() and AR(2) ess and he Hansen-Sargan es of over denfyng resrcons are repored. p-values for esmaed coeffcens are repored n parenheses and are robus o heeroscedascy n GMM esmaes. In regressons ()-(3) he lagged dependen varable capex_as - and he man explanaory varables fbc_en j sales_as cflow_as and sbc - are nsrumened by a maxmum number of - 5 lags sarng from - 3 due o a sgnfcan value of he AR(2) es herefore we also repor he AR(3) es p-value for regressons ()-(3). LSDVC sandard errors are boosrapped based on 00 eraons wh bas correcon for esmaes up o order O(/T). * p < 0.; ** p < 0.05; *** p < 0.0. [24]
Table 5: Regresson resuls for dfferen phases of lberalzaon () (2) (3) (4) Dependen varable: Incumben Enrans capex_as GMM SYS GMM SYS GMM SYS GMM SYS capex_as - 0.448** 0.469** 0.407*** 0.394*** (0.045) (0.035) (0.000) (0.000) sbc j- 0.64 0.06-0.79* -0.60* (0.324) (0.33) (0.077) (0.058) _sbc j- _dummy03_07-0.08-0.029 0.99*** 0.6*** (0.673) (0.465) (0.002) (0.000) fbc_en j 0.73** 0.24* (0.026) (0.087) fbc_nc j 0.80** 0.65* (0.026) (0.072) sales_as 0.88*** 0.65*** 0.005** 0.005** (0.000) (0.000) (0.020) (0.08) sales_as - -0.085-0.08* -0.006** -0.006*** (0.06) (0.087) (0.0) (0.008) cflow_as -0.04-0.072 0.028*** 0.027*** (0.435) (0.43) (0.00) (0.003) fms j- 0.60* 0.53* -0.6 0.000 (0.058) (0.067) (0.80) (0.998) fms 2 j- -0.08* -0.07* 0.02* 0.002 (0.087) (0.092) (0.093) (0.89) gdp_pc j.38e-0.45e-09 (0.46) (0.320) l_r j 0.00 0.006 (0.773) (0.355) pop_dens j 0.000-0.000 (0.686) (0.460) comp_pc j -3.95e-07.57e-06 (0.74) (0.282) Consan -0.426** -0.368* 0.336 0.030 0.032 (0.054) 0.297 0.924 AR() es p-value 0.08 0.053 0.34 0.55 AR(2) es p-value 0.532 0.463 0.035 0.037 AR(3) es p-value 0.45 0.59 Hansen-Sargan es p-value 0.994 0.988 0.992 0.990 #Insrumens 29 29 57 55 #Observaons 70 70 77 77 Regressons ()-(4) employ he wo-sep GMM sysem esmaor. Regressons () and (3) represen he full specfcaon whle n regressons (2) and (4) we reduce he number of conrol varables. Snce year dummes were jonly nsgnfcan we dd no nclude hem. Regressons ()-(4) nclude frm fxed effecs whch we do no repor for he sake of brevy. p-values for he AR() AR(2) and AR(3) ess and he Hansen-Sargan es of over denfyng resrcons are repored. p-values for esmaed coeffcens are repored n parenheses and are robus o heeroscedascy n GMM esmaes. In regressons ()-(4) he lagged dependen varable capex_as - and he man explanaory varables fbc_en j sales_as cflow_as and sbc j- are nsrumened by maxmum number of - 4 lags. In regressons (3) - (4) he lagged dependen varable capex_as - and he man explanaory varables fbc_en j sales_as cflow_as and sbc j- are nsrumened by maxmum number of - 5 lags sarng from - 3 due o a sgnfcan value of he AR(2) es herefore we also repor he AR(3) es p-value for regressons (3)-(4). * p < 0.; ** p < 0.05; *** p < 0.0. [25]
7. Summary and conclusons Ths paper nends o assess he mpac of he man modes of compeon on nvesmen n broadband markes ulzng frm level daa for European ncumben and enran operaors n he decade from 2003 o 202. The perod of analyss hus represens he phase of frs-generaon broadband compeon and regulaon. The economerc specfcaon conrols for varous sources of endogeney and accommodaes separae frm-level nvesmen specfcaons for (regulaed) ncumben and (unregulaed) enran operaors. The laer allows o es wheher nvesmen decsons are sraegc complemens or subsues. Fnally nvesmen dynamcs are explcly modelled n erms of a flexble acceleraor model. We frs fnd ha frm-level nvesmen acves are subjec o adjusmen coss whch are more pronounced for he ncumben operaors. Second we fnd ha nermodal compeon n erms of fxed-moble subsuon exered a non-lnear mpac on ncumbens nvesmen n erms of an nvered U-shape. Ths s parly n lne wh prevous sudes (e.g. Brglauer e al. 203) bu ndcaes ha he overall mpac on aggregae nvesmen depends on he operaor ype. In urn wreless compeon had no sgnfcan mpac on enran s nvesmen durng he perod of analyss. Thrd wrelne facly-based compeon exered a posve and subsanal mpac on nvesmen for boh ypes of operaors and clearly ouperforms servce-based compeon whch had no sgnfcan mpac for he average ncumben and enran operaor durng he overall perod of analyss. The role of facly-based compeon appears o be even sronger as regards mgraon owards new fber-based nfrasrucure whch consues more symmerc marke srucures wh new and addonal marke players (Bourreau e al. 200 p. 693). Fourh NRAs have o consder ha nvesmen relaed polcy decsons wll exer a drec and ndrec mpac snce frms nvesmen decsons are sraegc complemens whch renforce he mpac of an erroneous decson. NRAs clamng ha servce-based compeon based on mandaory broadband access regulaons reman necessary n he fuure shall hus bear he burden of provng convncngly ha asymmerc marke nervenonsm can be expeced o be welfare enhancng. [26]
Fnally as regards he lae phase of marke lberalzaon servce-based compeon exered a sgnfcanly negave mpac on enrans nvesmen acves. Hence daa from a decade of broadband access regulaon are a odds wh one of he man gudng regulaory prncples of he EU regulaory framework accordng o whch servce-based compeon also promoes nvesmen n erms of nfrasrucure compeon n he long-erm. Ths also cass doub on fuure regulaory access polces whch connue o foresee mul-layer access oblgaons and servce-based compeon as a gudng prncple for emergng fbre-based access neworks (European Commsson 200 recal 3). The hgher he emphass on dynamc effcency s he more he regulaory froner s shfed owards sofer regulaon or symmerc regulaon n erms of an ndusry coordnang role and enablng cooperaon models (Vogelsang 203 p. 25). [27]
Acknowledgemens The auhors are graeful o he specal ssue gues edors as well as o wo anonymous referees for hghly valuable and nsghful commens. Appendx The dynamc flexble acceleraor model By laggng equaon (5) we oban: I = ) 2 ( δ (A.) Solvng for 2 we oban: I 2 = (A.2) δ By laggng equaon (6) we oban: = ( ) + 2 (A.3) Nex we nser equaon () n equaon (7) and oban: α ( δ (A.4) I = + ) Y ( ) In he equaon (A.4) we nser equaon (A.3) and oban: I [ ) + ] + [ ( ] α ( δ (A.5) = ) Y ( ) ( 2 ) + 2 Nex we reformulae equaon (A.5) and oban: I 2 = ( ) Y ( δ )( ) ( δ ) 2 + ( ) + 2 α (A.6) Now we combne equaon () and (A.6) and nser he resulng expresson n equaon (A.2) and oban: [28]
2 2 + + = I Y Y I ) ( ) ( ) )( ( ) ( δ δ δ α α (A.7) Nex we reformulae equaon (A.7) and oban: 2 2 + + + = I Y Y I ) ( ) )( ( ) ( δ α α (A.8) Agan we nser equaon (A.3) n he equaon (A.8) and oban: ( ) [ ] 2 2 2 ) ( ) )( ( ) ( + + + + = I Y Y I δ α α (A.9) Nex we reformulae equaon (A.9) and oban: 2 2 2 2 + + + = I Y Y I ) ( ) ( ) )( ( ) ( δ α α (A.20) Fnally we reformulae equaon (A.20) and oban our dynamc flexble acceleraor nvesmen model: + = Y Y I I ) )( ( ) ( δ α α (A.2) [29]
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