Non-cost-raising Discrimination: a Rationale for Functional Separation in Broadband Open Access
نویسنده
چکیده
I present a vertical differentiation model to assess the quality-wise strategy of an incumbent telecommunications operator under open access regimes. I show that it is always profitable for an incumbent subject to wholesale regulation to degrade wholesale quality in a non-recoverable fashion. The findings are robust to the number of competitors and the price cap level, unlike those predicted by the cost-raising discrimination paradigm. I also show that functional separation, a structural remedy aimed to separate the incumbent's wholesale and retail operations, better aligns supply-side incentives with those of consumers. The analysis suggests that structural remedies exhibit good properties to implement open access regimes.
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