Economia e Politica Industriale

, Volume 45, Issue 2, pp 243–278 | Cite as

Dark fiber price regulation in the absence of facilities-based competition

  • Vitor Miguel Ribeiro


Contrary to copper, fiber is a segmented vital input. This means that, even though a National Regulatory Authority may regulate active fiber, the owner of the fiber network infrastructure may distort retail competition and obtain a sufficiently high wholesale revenue through the sale of dark fiber if this is not subject to regulatory intervention. Given the recent trend in favor of access price regulation of dark fiber in Europe, the analysis evaluates which wholesale price control method should be applied considering that the market structure of the telecommunications industry is the monopolistic bottleneck. Three regulatory options are tested against each other: active-minus regulation, cost-based regulation applied to both layers of the segmented vital input and equivalence of inputs. The imposition of active-minus regulation improves investment incentives and social welfare compared to the alternative methods.


Vertical integration Dark fiber Active fiber Wholesale price discrimination Active-minus Equivalence of inputs 

JEL Classification

L11 L13 L51 L96 



The work was supported by ANACOM through Post-Doctoral Grant ref. 02 2014 DAC-AE. The views expressed in the paper are exclusively of the author, thus, not representing the view of ANACOM or BEREC. Vitor Miguel Ribeiro appreciates the valuable comments and discussions provided by two anonymous referees and the suggestions made by the Editor-in-Chief Carlo Cambini. These have drastically improved the quality of the manuscript, hence, my immeasurable gratitude goes to you. Finally, no conflict of interest is declared by the author.

Supplementary material

40812_2017_75_MOESM1_ESM.pdf (415 kb)
Supplementary material 1 (PDF 415 kb)


  1. Arrow, K. (1962). Economic welfare and the allocation of resources for invention. In The rate and direction of inventive activity: Economic and social factors (pp. 609–626). Princeton: Princeton University Press.Google Scholar
  2. Avenali, A., Matteucci, G., & Reverberi, P. (2010). Dynamic access pricing and investment in alternative infrastructures. International Journal of Industrial Organization, 28(2), 167–175.CrossRefGoogle Scholar
  3. Bourreau, M., & Doğan, P. (2004). Service-based vs. facility-based competition in local access networks. Information Economics and Policy, 16(2), 287–306.CrossRefGoogle Scholar
  4. Bourreau, M., & Doğan, P. (2005). Unbundling the local loop. European Economic Review, 49(1), 173–199.CrossRefGoogle Scholar
  5. Bourreau, M., & Doğan, P. (2006). “Build-or-buy” strategies in the local loop. American Economic Review, 96(2), 72–76.CrossRefGoogle Scholar
  6. Bourreau, M., Doğan, P., & Manant, M. (2010). A critical review of the “ ladder of investment” approach. Telecommunications Policy, 34(11), 683–696.CrossRefGoogle Scholar
  7. Bourreau, M., Cambini, C., & Doğan, P. (2012a). Access pricing, competition, and incentives to migrate from “ old” to “ new” technology. International Journal of Industrial Organization, 30(6), 713–723.CrossRefGoogle Scholar
  8. Bourreau, M., Cambini, C., & Hoernig, S. (2012b). Ex-ante regulation and co-investment in the transition to next generation access. Telecommunications Policy, 36(5), 399–406.CrossRefGoogle Scholar
  9. Bourreau, M., Cambini, C., & Doğan, P. (2014a). Access regulation and the transition from copper to fiber networks in telecoms. Journal of Regulatory Economics, 45(3), 233–258.CrossRefGoogle Scholar
  10. Bourreau, M., Lupi, P., & Manenti, F. M. (2014b). Old technology upgrades, innovation, and competition in vertically differentiated markets. Information Economics and Policy, 29, 10–31.CrossRefGoogle Scholar
  11. Bourreau, M., Cambini, C., & Hoernig, S. (2015). Geographic access markets and investments. Information Economics and Policy, 31, 13–21.CrossRefGoogle Scholar
  12. Briglauer, W., Frübing, S., & Vogelsang, I. (2014). The impact of alternative public policies on the deployment of new communications infrastructure—A survey. Review of Network Economics, 13(3), 227–270.CrossRefGoogle Scholar
  13. Briglauer, W. (2015). How EU sector-specific regulations and competition affect migration from old to new communications infrastructure: Recent evidence from EU27 member states. Journal of Regulatory Economics, 48(2), 194–217.CrossRefGoogle Scholar
  14. Briglauer, W., Cambini, C., & Grajek, M. (2015). Why is Europe lagging on next generation access networks. Bruegel Policy Contributions, 14, 1–13.Google Scholar
  15. Brito, D., Pereira, P., & Vareda, J. (2012). Incentives to invest and to give access to non-regulated new technologies. Information Economics and Policy, 24(3), 197–211.CrossRefGoogle Scholar
  16. Brito, D., & Tselekounis, M. (2017). On the impact of input prices on an entrant’s profit under multi-product competition. Review of Industrial Organization, 50(1), 105–125.CrossRefGoogle Scholar
  17. Cave, M. (2006). Encouraging infrastructure competition via the ladder of investment. Telecommunications Policy, 30(3), 223–237.CrossRefGoogle Scholar
  18. Cave, M. (2010). Snakes and ladders: Unbundling in a next generation world. Telecommunications Policy, 34(1), 80–85.CrossRefGoogle Scholar
  19. Cave, M. (2014). The ladder of investment in Europe, in retrospect and prospect. Telecommunications Policy, 38(8), 674–683.CrossRefGoogle Scholar
  20. Cambini, C., & Jiang, Y. (2009). Broadband investment and regulation: A literature review. Telecommunications Policy, 33(10), 559–574.CrossRefGoogle Scholar
  21. Dobbs, I. M. (2015). Ladder pricing—A new form of wholesale price discrimination. International Journal of the Economics and Business, 22(1), 1–21.CrossRefGoogle Scholar
  22. Dertwinkel-Kalt, M., Haucap, J., & Wey, C. (2016). Competitive dual pricing. European Journal of Law and Economics, 41, 537–557.CrossRefGoogle Scholar
  23. EC (European Commission) (2010). European Commission Recommendation on regulated access to Next Generation Access Networks (NGA). Official Journal of the European Communities, L251, 35–48.Google Scholar
  24. EC (European Commission) (2013). European Commission Recommendation on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment. Accessed 15 Jan 2017.
  25. EC (European Commission) (2014). Trends in European broadband markets 2014. Retrieved from:
  26. EC (European Commission) (2016). European Commission Decision concerning Case UK/2016/1849. Retrieved from:
  27. FCC (Federal Communications Commission) (2010). In the matter of schools and libraries universal service. Retrieved from:
  28. FCC (Federal Communications Commission) (2014). In the matter of modernizing the E-rate program for schools and libraries. Retrieved from:
  29. FCC (Federal Communications Commission) (2015). In the matter of protecting and promoting the open Internet. Accessed 15 Jan 2017.
  30. Foros, Ø. (2004). Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market. International Journal of Industrial Organization, 22(1), 1–24.CrossRefGoogle Scholar
  31. Höffler, F., & Kranz, S. (2011). Legal unbundling can be a golden mean between vertical integration and ownership separation. International Journal of Industrial Organization, 29(5), 576–588.CrossRefGoogle Scholar
  32. Inderst, R., & Peitz, M. (2012). Market asymmetries and investments in next generation access networks. Review of Network Economics, 11(1). doi: 10.1515/1446-9022.1323.
  33. Malueg, D. A. (1994). Monopoly output and welfare: The role of curvature of demand function. Journal of Economic Education, 25(3), 235–250.CrossRefGoogle Scholar
  34. OFCOM (Independent Regulator and Competition Authority for the UK Communications Industries) (2015). Review of competition in the provision of leased lines. Retrieved from:
  35. PTS (National Post and Telecom Agency of Sweden) (2008). Dark fiber—Market and state of competition. Retrieved from:
  36. Rey, P., & Tirole, J. (2007). A primer on foreclosure. Handbook of Industrial Organization, 3, 2145–2220.CrossRefGoogle Scholar
  37. Ribeiro, V. M. (2017). Flexibility in the European telecommunications industry. Digital Policy, Regulation and Governance, 19(5), 1–15. doi: 10.1108/DPRG-04-2017-0016.CrossRefGoogle Scholar
  38. Sarmento, P., & Brandão, A. (2007). Access pricing: A comparison between full deregulation and two alternative instruments of access price regulation, cost-based and retail-minus. Telecommunications Policy, 31(5), 236–250.CrossRefGoogle Scholar
  39. Schumpeter, J. (1942). Capitalism, socialism and democracy. New York: Harper Press.Google Scholar
  40. Spence, A. M. (1975). Monopoly, quality, and regulation. Bell Journal of Economics, 6(2), 417–429.CrossRefGoogle Scholar
  41. Tirole, J. (1988). The theory of industrial organization. Cambridge: MIT University Press.Google Scholar
  42. Tselekounis, M., Varoutas, D., & Martakos, D. (2014). A CDS approach to induce facilities-based competition over NGA networks. Telecommunications Policy, 38(3), 311–331.CrossRefGoogle Scholar
  43. Vogelsang, I. (2013). The endgame of telecommunications policy? A survey. Review of Economics, 64(3), 193–270.CrossRefGoogle Scholar
  44. Vogelsang, I. (2015). Will the US and EU telecommunications policies converge? A survey. Economia e Politica Industriale, 42(2), 117–155.CrossRefGoogle Scholar

Copyright information

© Associazione Amici di Economia e Politica Industriale 2017

Authors and Affiliations

  1. 1.ANACOM, Autoridade Nacional de ComunicaçõesLisbonPortugal
  2. 2.Universidade de AveiroAveiroPortugal

Personalised recommendations