Investment and welfare implications of the ownership structure of overlapping networks

We analyze the impact of the ownership structure of cable television …rms on the incentives to upgrade the cable networks to o¤er telecommunication services. First, we show that dual ownership of a local telephone network and a cable network, compared with separate ownership, may increase or decrease incentives to invest in upgrading the cable television network. Coordination economies bene…t dual ownership, and business-stealing bene…ts separate ownership. Second, we perform a welfare analysis of the investment decision and third, a welfare analysis of the ownership structure. Key Words: Cable Networks, Local Access, Competition JEL Classi…cation: L43, L96 We thank D. Waterman and two anonymous referees for useful comments. Brito also thanks the Portuguese Competition Authority where some of this research was done. The opinions expressed in this article re‡ect only the authors’views, and in no way bind the institutions to which they are a¢ liated. yDCSA, Faculdade de Ciências e Tecnologia da Universidade Nova de Lisboa, Quinta da Torre, 2829-516 Caparica, Portugal. e-mail: [email protected] zAdC, Rua Laura Alves, n4, 6, 1050-188 Lisboa, Portugal, e-mail: [email protected]