Regulatory Federalism and Industrial Policy in Broadband Telecommunications

Daniel Montolio (University of Barcelona)
Francesc Trillas (Autonomous University of Barcelona)

Abstract: We present an analysis on the impact of regulation, industrial policy and jurisdictional allocation on broadband deployment. Although central powers may be more focused and internalize interjurisdictional externalities, decentralized powers may internalize horizontal local policy spillovers and use a diversity of objectives as a commitment device in the presence of sunk investments. They may for example alleviate the collective action problem of the joint use of rights of way and other physical infrastructures. In the empirical exercise we examine whether centralization is necessary to promote new telecommunications markets, in particular the broadband access market. The existing literature mostly says yes, but we do not find support for this claim in our data. Our results show that indicators of national industrial policy are a weakly positive determinant of broadband deployment and that different measures of centralization are either irrelevant or have a negative impact on broadband penetration

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