Comparison of investment regimes with cost-based access pricing rules

This paper examines a network owner's incentive for access innovation (i.e., the reduction of access cost) and compares two investment regimes (cooperation and noncooperation) under cost-based access pricing rules. When the access pricing rule is based on access cost, it brings about a spillover effect. It is then shown that when the spillover effect is large (small), a cooperative investment regime achieves a lower (higher) access cost than a noncooperative investment regime. In addition, when a regulator adopts an incremental access cost rule that requires the access charge to equal the access cost, a cooperative investment regime achieves greater social welfare than a noncooperative investment regime.