Geographic Access Rules and Investment

We analyze competition between vertically integrated infrastructure operators that provide access in different geographical areas. A regulator may impose a uniform access price, set local access rates, or deregulate access locally. We analyze the impact of these alternative regulatory regimes on network investments. While cost-based access leads to both suboptimal rollout and duplication, uniform access prices bring too much duplication. Deregulation in competitive areas can spur investment and lead to social optimum, or call for continued regulatory intervention, depending on the resulting wholesale equilibrium.