Network economics and regulation: urbanization, telecommunications, and Internet
PhD thesis written by Alexandre Guimard under the direction of Laurent Benzoni, submitted and supported at the CRED on June 13, 2016.
Alexandre Guimard joined TERA Consultants in 2014. He holds a PhD in Economic Sciences from ENS Paris-Saclay of the University Paris-Saclay and pursues research for the Law and Economics Research Centre of the Sorbonne University.
As a consultant, Alexandre is involved in several missions in litigation, concentration and damage assessment. He published articles in international peer-reviewed journals. He is the co-writer, with Adrien Karsenty, of the article « The effect of ad blockers on the Internet economics”. They presented their article during the 8th “Future of Law and Economics” annual workshop in Rotterdam (March 2016) and during the 33rd Applied macroeconomic day (JMA, June 2016).
This PhD thesis consists of three chapters. The first chapter deals with urbanization. A brief history and forecast of cities are highlighted. This overview explains current and upcoming issues in cities, such as congestion, air pollution, urban sprawl, etc. Urban sprawl, among other things, accentuates the question of how to finance network infrastructures such as telecommunications networks at the local loop level in sparsely populated areas. Specific urban policies can be transposed to telecommunications. Some lessons are valuable to regulate this sector. The second chapter is focuses on funding new telecommunications networks. Three articles are put forth. In the first one, it is shown that the credible threat of a State-owned network can be an incentive for private players to invest in a next-generation access. This incentive regulation, however, does not suffice. It should be accompanied by dedicated access regulation. In the second article, it is shown that the regulated access price must include a risk premium to compensate the incumbent for the investment risk of asymmetric regulation. The proposed theoretical framework applies to the Qatari fixed market. Finally, in the third article, a new regulatory approach is put forth to address the issue of Net Neutrality, in particular, regulatory holidays of Net Neutrality rules can be relevant. This innovative approach would allow an Internet Service Provider, to sell, for a given time period, additional bandwidth to content and service providers. At the end of the period, additional bandwidth could be re-allocated to the Open Internet that functions under the Best-Effort regime. Hence, it is shown that this regulatory approach could be an incentive for Internet service providers to invest in more bandwidth but it would also guarantee, in the long run, a given level of quality of service for Internet services. The third chapter deals with the effect of ad blocking on the Internet. The proposed theoretical model highlights the opposite effects of ad blocking on telecommunications networks: on the one hand, ad blocking reduces network congestion, on the other hand, ad blocking increases available content diversity over the Internet. In consequence, Internet service providers have an incentive to integrate an ad blocker, which can be welfare enhancing under certain specific conditions.
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