| Local loop unbundling (LLU) is one of the most important and controversial policy instrument currently adopted in many countries to foster the competitive process in local telecommunication markets.; LLU codifies the legal obligation for the incumbent operator to provide, at, cost, part of its local network facilities to its competitors. In consideration of this, some authors hypothesize that the current implementation—especially in the U.S.—will affect innovation and investments for both the incumbents and the new entrants.; The aim of this dissertation is to provide an empirical insight on this debate. More precisely, its scope is focused on the impact of LLU on the investment behaviors of the local incumbents in the United States (ILECs). Unbundling, it is often claimed, would eliminate ILECs' incentives to invest because the resulting advantages could not be “firm-specific.”; The analysis relies on two alternative multivariate linear regression models. In both the cases, it is based on a panel of pooled cross-sectional and two-period times series state-level data for 48 Bell Operating Companies in 1996 and 2000.; The statistical results lead to the conclusion that the U.S. unbundling policies introduced by the Telecommunications Act of 1996 did not produce any effect in terms of investment incentives/disincentives for the incumbent operators.; The explanation put forward is that, if or where local markets are not a natural monopoly, then unbundling would not deter ILECs' investments because inter-modal competition on one side and the threat of potential competition on the other side (both inter-modal and intra-modal) are providing the necessary motivations to invest. Conversely, if or where local markets remain a natural monopoly, then—with or without unbundling—the ILEC would not anyway have the market incentives to start investments able to grant firm-specific competitive advantages. In both the cases, and consistently with the results of this dissertation, unbundling would not affect the incumbent's decisions.; This study is just a first step for a comprehensive assessment of LLU's net social benefits. The need for this information is especially pressing because there are signals of high implementing costs in front of moderate results. |
