Analyzing the Relationship between Regulation and Investment in the Telecom Sector

This paper analyses the relationship between entry regulation and infrastructure investment in the telecommunication sector. The empirical analysis author's conduct is based on a comprehensive data set covering 180 fixed-line and mobile operators in 25 European countries over 10 years and employs a newly created indicator measuring regulatory intensity in the European countries. Authors carefully treat the endogeneity problem of regulation by applying instrumental variables and find that tough entry regulation (e.g. unbundling) discourages infrastructure investment by entrants but has no effect on incumbents in fixed-line telecommunications. Authors do not find significant impact of entry regulation on investment in mobile telephony.