Regionally Differentiated Regulatory and Investment Incentives in the Telecommunications Sector

A new approach to regulation in the telecommunications sector has been under discussion in Europe for several years: namely a move away from a national viewpoint and towards a sub-national approach, whereby areas subject to fierce competition are deregulated. Several arguments in favour of and against regionally differentiated regulation are exchanged in the debate. However, no empirical evidence is available to date on how the competitive situation in the deregulated areas is likely to develop after deregulation. An analysis of the location deregulation of the broadband access market for wholesale customers in the United Kingdom, which was the first European country to introduce local deregulation in 2008, shows that infrastructure-based competition tended to develop positively in the deregulated areas. Both the incumbent network operator British Telecom, as well as its competitors continued to increase their infrastructure investment after the deregulation of an area.