Telcos Investigate

Access Regulation, Financial Structure And Investment In Vertically Integrated Utilities: Evidence From EU Telecoms

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Executive Summary

The authors examine theoretically and empirically the relationship between access regulation, financial structure and investment decisions in network industries, analyzing if financial variables can be used as a strategic device to influence the regulator's price setting decisions. Using a panel of 15 EU Public Telecommunication Operators (PTOs) over the period 1994-2005, they first investigate the determinants of regulated prices (both wholesale and retail), firm financial structure and investment, and then test the relationship between leverage, regulated charges and firm's investment. However, the model suggests that if leverage influences the regulated access charges, then it will also impact competition in the downstream segment.

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