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  Haucap-competition.PDF

Justus Haucap Ruhr-University of Bochum Justus Haucap - Increasing Competition 2 Issues to be Addressed • Mobile Number Portability • Interconnection • Mobile Termination • Other Issues – MVNOs, – International Roaming, – Spectrum Allocation – Price Discrimination Justus Haucap - Increasing Competition 3 Mobile Number Portability • Markets with Switching Costs: – Consumers are locked-in – firms are reluctant to lower prices for captured customers – price competition appears to be less intense – Switching costs may facilitate collusion, as lowering prices becomes less attractive for firms – Customers are valuable for firms – competition for new customers becomes more intense – AND: With MNP entrants have to offer less attractive price packages – Hence: While overall price effect not necessarily clear, idea that MNP may foster competition – BUT: MNP is mandatory under EU Universal Service Directive Justus Haucap - Increasing Competition 4 Benefits of MNP Type Applies tor Benefit Example 1A Users who switch operator whether or not there is MNP Avoided Cost of Number Change less cost of porting Informing users, Printing business cards, etc. 1B Users who only switch operators when there is MNP Benefits of moving to a new operator less cost of porting and loss or profits to operators Benefits from lower prices, better service, etc. 2 All users Potentially more intense competition Lower prices 3 Callers Avoided costs of updating records, finding changed numbers Costs of calling directory services, etc. Justus Haucap - Increasing Competition 5 Costs of MNP • Costs: – Set-up Costs – Porting Costs (per number) – Additional Conveyance Costs • Further Potential Cost: – Loss of Tariff Transparency • Further Potential Benefit: – Increased Investment in Number Value • NOTE: Empirical Studies (ex ante) show that benefits are likely to exceed costs Justus Haucap - Increasing Competition 6 Charging for MNP • High Charges Increase Switching Costs (Again) • BUT: Not Charging is inefficient, as MNP is not a public good – While type-2-benefit is a public benefit, type-1-benefit is a private benefit • Note: MNP tends to have decreasing average costs due to high set-up costs – Idea: Set charges at Incremental Cost (LRIC) – BUT: MNP-Technology not given – AND: May be considered ex post hold-up with negative impact for future investment Justus Haucap - Increasing Competition 7 Experience in Western Europe • Actual porting behaviour varies dramatically – Germany vs. Finland – In most countries around 2-5% of customer base ports per annum • Donor network usually allowed to charge for MNP • But: Charges mostly laid on receiving operator (not directly on customers) • Small operators tend to win, large ones to loose (but not always) • If price competition is already intense, additional competitive benefit from MNP relatively low (switching costs may be overestimated) Justus Haucap - Increasing Competition 8 Mobile Interconnection • Network interconnection is essential for competition, especially for new entrants • Duty to provide interconnection • Risk of collusion via interconnection fees?

Score: 1007678.9 - https://www.itu.int/ITU-D/fina...nia-04/haucap2-competition.pdf

  ITU Normal.dot

ITU Normal.dot Annex 1 ITU EXECUTIVE-LEVEL TRAINING FOR HEADS OF REGULATORY AUTHORITIES: STRATEGIC IMPACT OF COST MODELING ON ICT DEVELOPMENT ITU Headquarters Geneva, Switzerland 10-11 November, 2008 Provisional Programme Monday 10 November 2008 08.30 – 09.00 Delegate registration 09.00 – 09.15 Opening Ceremony 09.15 – 10.15 Session 1: Introduction to the economics of competition, competition law and regulation • Why does competition create benefits for the economy and citizens alike? • Methods to determine static and dynamic welfare effects of competition; • How to ensure a competitive environment? • General concepts of competition law and merger control (abuse of market power, cartels); • Markets with high and persistent entry barriers, regulation. 10.15 – 10.30 Coffee break 10.30 – 11.30 Follow up session 1: Introduction to the economics of competition, competition law and regulation 11.30– 12.00 Discussion and questions 12.00 – 14.00 Lunch 14.00 -15.30 Session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies • Markets relevant for regulation; • 3-Criteria-Test, contestable markets; • Defining markets correctly: commodities and services included in the market, geographical extension; • Proper use of the Small but Significant and Non-transitory Increase in Price Test (SSNIP-Test); • Analyze competitive structure of markets, Significant Market Power (SMP), instruments to designate SMP; • Description of possible remedies for certain types of imperfect competition: transparency, non discrimination, regulatory accounting, access obligations, price controls. 15.30 – 15.45 Coffee break 15.45 – 16.30 Follow up session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies 16.30 – 17.00 Discussion and questions Tuesday 11 November 2008 09.00 – 10.00 Session 3: Regulatory accounting and cost models • Principles of regulatory accounting and accounting separation; strategic role of regulatory accounts for monitoring pricing; • Cost modeling concepts: from FDHC (fully distributed historic costs) to FLRIC (forward looking long run incremental costs), Cost models (COSITU and World Bank models) • Overcoming data collection challenges - 1 - 10.00 – 10.15 Coffee break 10.15 – 11.30 Follow up session 3: Regulatory accounting and accounting separation in detail 11.30– 12.00 Discussion and questions 12.00 – 14.00 Lunch 14.00 -15.30 Session 4: Price controls and its relation to cost modeling, accounting and regulation • Types of price controls, price controls and creation of competition; • Price controls and investment incentives, • How to use regulatory accounts to determine regulated prices; which information is critical for the calculation of correct price ceilings?

Score: 991516.3 - https://www.itu.int/ITU-D/fina...v08/pdf/programme_2pages_E.pdf

  PowerPoint Presentation

Objectives of economic oversight • minimize the risk that airports could engage in anti- competitive practices or abuse any dominant position they may have • ensure non-discrimination and transparency in the application of charges • ascertain that investments in capacity meet current and future demand in a cost-effective manner • protect the interests of passengers and other end-users Possible forms of economic oversight from a light-handed approach to a more robust approach: • application of competition law • fallback regulation • institutional requirements • price cap regulation (“incentive-based regulation”) • rate of return regulation (“cost of service regulation”) Application of competition law • Laws (including regulations and policies) to foster or maintain competition in markets by prohibiting anti- competitive practices. – respond to complaints, – monitor market behaviours, – prosecute offenders, – adjudicate liability, and – impose sanctions upon parties adjudged to have violated the law.  Deterrent effect on anti-competitive behaviours. (...) More robust types of institutional requirements • Joint ownership, or mixed enterprise, as a means of ensuring information flow, consultation and consensus in the establishment of airport charges and development plans; – However: potential anti-competitive issues involved regarding airline competition and barriers to entry where joint ownership means airlines have a large say in investment plans and in the management of the airport Rate of return regulation* • To address the issue of excessive profits in enterprises with monopoly characteristics. – obtain approval for the level of charges and investments, the objective being to align the airport’s rate of return on capital at the level prevailing in a competitive market. *: or cost of service or cost plus regulation Best practices for economic oversight • transparent • efficient • cost-effective manner • keeping regulatory interventions at a minimum and as required • costs and benefits analysis related to the particular form of economic oversight Selecting appropriate forms of oversight • States should first consider the scope and degree of competition. • Where competition or the threat of it is sufficiently strong, the application of competition law is likely to be adequate. Operation and administration of economic oversight is not cost-free • In moving from a light-handed to a more robust form, the cost of economic oversight turns higher • State should search the spectrum of options for protecting public interests at an acceptable level and at a minimum regulatory cost Implementation of economic oversight • Surveys on status of implementation of ICAO’s policies on charges • Of 79 States that responded (representing 86% of world traffic), 61% confirmed they have implemented economic oversight for airports Source: ICAO survey Slide Number 1 ICAO’s Guidance material on Economic Oversight of Airports is in Doc 9562Chapter I – Part C Economic oversight Objectives of economic oversight Possible forms of economic oversight Application of competition law Fallback regulation Institutional requirements Light-handed types of institutional requirements More robust types of institutional requirements Rate of return regulation* Best practices for economic oversight Selecting appropriate forms of oversight Operation and administration of economic oversight is not cost-free Implementation of economic oversight Slide Number 16

Score: 990936.9 - https://www.icao.int/WACAF/Doc...onomic%20Oversight%20Short.pdf

  ITU Normal.dot

Striking the right balance requires regulators to be kept informed of current cost modeling and pricing methodologies, their impact and implications for the national competitive environment as well as the skills required by staff. (...) The training will focus on: Telecommunication liberalization process – overview and importance; Competition and dominance in the market; Theoretical framework on costing; Overview of different costing methodologies and cost models; Implications of different cost models on national competitive environment and skills required by staff; Selecting the best approach in accordance with the national context; The importance of the data collection process and the key role of the regulator; The establishment of a “Cost modeling Team” in charge of the development of the cost model, collection of data and implementation of the model; Enforcement and the role of the regulator; Legal and regulatory framework requirements to implement cost models and mandate data collection. (...) • General concepts of competition law and merger control (abuse of market power, cartels); • Markets with high and persistent entry barriers, regulation. 10.15 – 10.30 Coffee break 10.30 – 11.30 Follow up session 1: Introduction to the economics of competition, competition law and regulation 11.30– 12.00 Discussion and questions 12.00 – 14.00 Lunch 14.00 -15.30 Session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies • Markets relevant for regulation; • 3-Criteria-Test, contestable markets; • Defining markets correctly: commodities and services included in the market, geographical extension; • Proper use of the Small but Significant and Non-transitory Increase in Price Test (SSNIP-Test); • Analyze competitive structure of markets, Significant Market Power (SMP), instruments to designate SMP; • Description of possible remedies for certain types of imperfect competition: transparency, non discrimination, regulatory accounting, access obligations, price controls. 15.30 – 15.45 Coffee break 15.45 – 16.30 Follow up session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies 16.30 – 17.00 Discussion and questions Tuesday 11 November 2008 09.00 – 10.00 Session 3: Regulatory accounting and cost models • Principles of regulatory accounting and accounting separation; strategic role of regulatory accounts for monitoring pricing; • Cost modeling concepts: from FDHC (fully distributed historic costs) to FLRIC (forward looking long run incremental costs), Cost models (COSITU and World Bank models) • Overcoming data collection challenges - 3 - 10.00 – 10.15 Coffee break 10.15 – 11.30 Follow up session 3: Regulatory accounting and accounting separation in detail 11.30– 12.00 Discussion and questions 12.00 – 14.00 Lunch 14.00 -15.30 Session 4: Price controls and its relation to cost modeling, accounting and regulation • Types of price controls, price controls and creation of competition; • Price controls and investment incentives, • How to use regulatory accounts to determine regulated prices; which information is critical for the calculation of correct price ceilings?

Score: 990899.6 - https://www.itu.int/ITU-D/fina...ov08/pdf/InvitationEnglish.pdf

  M5.P65

Control of essential facilities can give an incumbent numerous advantages over new entrants, particu- larly in the absence of strong pro-competitive regulation. For example, an incumbent can use its control over essential facilities to increase a competitor’s costs, and make its services less attractive to customers. The competitors' costs can be increased by increased prices of essential facili- ties. (...) Some incumbents have engaged in anti-competitive practices by which competitive services (e.g. mobile telephone services or Internet access services) are priced below costs and effectively subsidized by monopoly or less- competitive services, such as international services.

Score: 987632 - https://www.itu.int/ITU-D/treg...dev_handbook/5_Competition.pdf

  - 3 - RECOMMENDATION

If market forces cannot assure the fulfilment of the universal service goal, this goal should preferably and to an utmost extent be supported through direct funding - from public budgets or through funds raised in a special universal service fund, to which all market participants should contribute. b) If direct funding is not chosen or these funds do not cover sufficiently the costs incurred by operators, these costs should be funded by other means in order to minimize their impact on competition. In a competitive market, internal transfers from profitable to non-profitable telecommunication services are not a suitable means of financing universal service obligations because they distort competition. c) The cost calculation of the obligations of universal service should be made according to the method adopted by the Study Group 1 in its Report on Question 7/1 - Universal Access/Service. d) If affordable prices for universal access and/or other obligations (i.e. quality requirements) are imposed, then additional costs arising from the service provision should be funded on an equitable basis. Any charges related to the sharing of the costs of universal service obligations shall be unbundled and identified separately.

Score: 986905.4 - https://www.itu.int/ITU-D/stud...002/Recommendations/REC14E.doc

  INTERNATIONAL TELECOMMUNICATION UNION

By timing, we mean the gradual and orderly development of the scope, costing and funding of universal service. As a guide, and in order to simplify the notion of timing in a monopoly and a competitive environment, the following table contains a matrix of concepts and solutions. Developed countries Developing countries Concept Monopoly Recent competition Mature competition Monopoly Recent competition Mature competition Definition of service US US US UA UA/US US Obligation to provide service Incumbent provider Sector Sector Incumbent Sector Sector Costing method FDC LRIC LRIC FDC FDC/LRIC LRIC Accounting system Historical costs Current costs Current costs Historical costs Historical/current costs Current costs FDC: Fully distributed costs UA: Universal access US: Universal service LRIC: Long-run incremental costs As an illustration, we shall define recent competition as competition introduced over the last 0 to 5 years and mature competition as competition which has been in place for longer than that. (...) For these reasons, and given that the consideration of externalities, positive and negative alike, is highly open to discretion and extremely difficult to audit in a competitive environment, we suggest that they be excluded from the universal service cost calculation. • Shall be included all the costs, direct and indirect, of the functions, elements, facilities and assets required to provide services in an area.

Score: 985326.4 - https://www.itu.int/ITU-D/stud...yQuestions/Question_7/012e.doc

  Microsoft Word - haucap ejle mobile telephony.doc

Section 5 summarizes the paper and offers concluding remarks. 2 2. Competition in Mobile Telephone Markets 2.1 Price Competition with Fixed and Common Costs In all markets, competition and the resulting prices strongly depend on the competing firms' cost structures. (...) While the resulting price level will not correspond to incremental costs, it is important to note that the fiction of competition with prices set at incremental costs cannot be upheld in an industry that is fixed and common cost intensive. (...) That no further market entry occurs may alternatively be an expression of a competitive market equilibrium. If an additional entrant's fixed costs are not covered by the expected net revenues (i.e., revenues minus imputable variable costs), the market may be in a competitive equilibrium.

Score: 983519.4 - https://www.itu.int/ITU-D/fina...nia-04/haucap-mob-tel-econ.pdf

  Workshop on Tariff Policies, Tariff Models and Methodologies for the

Workshop on Tariff Policies, Tariff Models and Methodologies for the   عربي   |   中文   |   Español   |   Français   |   Русский     Advanced Search   Home : ITU-D : Financing Strategies     ITU Executive-level Training for Heads of Regulatory Authorities: Strategic Impact of Cost modeling on ICT development Geneva, Switzerland, 10-11 November 2008                           Download the agenda                                                   عربي | 中文 | English | Español | Français | Русский Provisional Programme Monday 10 November 2008 08:30 - 09:00 Registration 09:00 - 09:15 Opening Ceremony Session 1: Introduction to the economics of competition, competition law  and regulation 09:15 - 10:15 Why does competition create benefits for the economy and citizens alike? Methods to determine static and dynamic welfare effects of competition; How to ensure a competitive environment? General concepts of competition law and merger control (abuse of market power, cartels); Markets with high and persistent entry barriers, regulation.  10:15 - 10:30 Coffee break 10:30 - 11:30 Follow up session 1: Introduction to the economics of competition, competition law and regulation 11:30 - 12:00 Discussion and questions 12 :00 - 14:00 Lunch Session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies 14 :00 - 15:30 Markets relevant for regulation; 3-Criteria-Test, contestable markets; Defining markets correctly: commodities and services included in the market, geographical extension; Proper use of Small but Significant and Non-transitory Increase in Price Test (SSNIP-Test); Analyze competitive structure of market, Significant Market Power (SMP), instruments to designate SMP; Description of possible remedies for certain types of imperfect competition: transparency, non discrimination, regulatory accounting, access obligations, price controls.  15:30 - 15:45 Coffee break 15:45 - 16:30 Follow up session 2: Basic concepts of regulation, structure and purpose of market reviews, remedies 16:30 - 17:00 Discussion and questions Tuesday 11 November 2008 Session 3: Regulatory accounting and cost models 09:00 - 10:00 Principles of regulatory accounting and accounting separation; strategic role of regulatory accounts for monitoring pricing; Cost modeling concepts: from FDHC (fully distributed historic costs) to FLRIC (forward looking long run incremental costs), Cost models (COSITU and World Bank models); Overcoming data collection challenges;  10:00 - 10:15 Coffee break 10:15 - 11:30 Follow up session 3: Regulatory accounting and accounting separation in detail 11:30 - 12:00 Discussion and questions 12 :00 - 14:00 Lunch Session 4 : Price controls and its relation to cost modeling, accounting and regulation 14:00 - 15h30 Types of price controls, price controls and creation of competition; Price controls and investment incentives; How to use regulatory accounts to determine regulated prices; which information is critical for the calculation of correct price ceilings?

Score: 983473.9 - https://www.itu.int/ITU-D/fina..._Geneva_10-11Nov08/agenda.html

  Microsoft Word - Kim Paper on Economic Theory and Practice1.doc

The subject matter of this paper and my presentations during the workshop is as follows: Competition in telecommunication sector with respect to network externalities and game theory Regulatory impact analysis and cost & benefit analysis Competition indicator; and Case studies of other countries for their competition policy and regulation. (...) If a firm can benefit free from an investment of another company, it has incentive to freeload. 10 2. Regulatory Impact: Cost and Benefits Analysis, Competition Indicators 2.1. (...) Pro- competition behavior of consumers can be indicated by easy access to information, no or low switching costs (including number portability).

Score: 983359.2 - https://www.itu.int/ITU-D/treg...20Theory%20and%20Practices.pdf