Efficient contracts for government intervention in promoting next generation communications networks

• Main Authors: Briglauer, Wolfgang, Holzleitner, Christian
• Format: Others
• Language: en
• Published: Forschungsinstitut für Regulierungsökonomie, WU Vienna University of Economics and Business 2012
• Subjects: RVK QR 760; contract theory / principal-agent theory / public utilities / next generation telecommunications networks / subsidies / Next Generation Network / öffentliche Dienstleistung / Infrastruktur / Kontrakttheorie / Agency-Theorie
• Online Access: http://epub.wu.ac.at/3641/1/briglauer_holzleitner_efficient_contracts.pdf

Although the future socio-economic benefits of a new fibre-based ("next generation access", NGA) telecommunications infrastructure seem to be uncontroversial, most countries have to date only undertaken NGA investments on a small scale. Accordingly, a universal NGA coverage appears to be a rather unrealistic objective without government intervention. Indeed, many governments have already initiated diverse subsidy programs in order to stimulate NGA infrastructure deployment. We contend, however, that the current contract practice of fixing ex ante targets for network expansion is inefficient given the uncertainty about future returns on NGA infrastructure-based services and the public authorities' incomplete information about the capital costs of the network provider. This paper puts forward to delegate the choice of the network expansion to the NGA provider. Simple linear profit-sharing contracts can be designed to control the NGA provider's incentives and to put in balance the public objectives of network expansion and limitation of public expenditure. (author's abstract) === Series: Working Papers / Research Institute for Regulatory Economics