Co-Investment in the Sharing of Telecommunications Infrastructures

Abstract

This paper studies the effects of infrastructure sharing agreements on telecommunications markets. Using a theoretical two stage game model with an investment stage and a competition stage where firms compete “à la Cournot”, I find that, infrastructure sharing agreements increase investment at industry level. Indeed, the sharing of infrastructures reduces costs of investment for involved operators and encourages them to invest more. This holds except if involved operators are much less efficient than their competitors (i.e., they have much higher marginal costs before investment). Furthermore, infrastructure sharing agreements generally increase both investments and consumer surplus, except if involved operators are much less efficient than their competitors or if they have very different level of efficiency. The infrastructure sharing agreement is even more effective when the most efficient operators are involved.