Strategic Investment Decisions in Regulated Markets (eBook)

Dr. Christian Wernick ist wissenschaftlicher Mitarbeiter von Prof. Dr. Dres. h.c. Arnold Picot am Institut für Information, Organisation und Management der Ludwig-Maximilians-Universität München.

Foreword 6
Preface 8
Contents 10
List of Figures 14
List of Tables 15
Abbreviations 16
1 Introduction 20
1.1 Characteristics of Broadband 21
1.1.1 Technical Characteristics 22
1.1.2 Economic Characteristics 24
1.2 Research Questions 27
1.3 Research Approach 29
1.4 Structure and Further Proceedings 33
2 Liberalisation and Regulation in Telecommunication Markets 35
2.1 European Telecommunications Regulation until the 2002 Framework 35
2.2 Telecommunications Regulation in Germany and the UK 38
2.3 Theories of Regulation 42
2.4 The 2002 Regulatory Framework for Electronic Communications 44
2.5 The Process of Market Regulation 46
2.6 Actors Involved in the Process of Market Regulation 53
2.6.1 The European Commission 54
2.6.2 The European Regulators Group 56
2.6.3 National Regulatory Authorities 57
2.6.4 National Competition Authorities 57
2.7 Interim Conclusion 58
3 Theoretical Approaches on Strategic Investment Decisions in Regulated Markets 59
3.1 Research on Broadband 59
3.1.1 Unbundling and Wholesale Regulation 60
3.1.2 Comparative Research 66
3.1.3 Assessment of Existing Literature 69
3.2 Theoretical Approaches on Strategic Investment Decisions in Telecommunications 70
3.2.1 Financial Approaches 73
3.2.1.1 Traditional Investment Calculation Methods 73
3.2.1.2 Real Options 74
3.2.1.3 Contributions 76
3.2.2 Strategic Approaches 77
3.2.3 Neoclassical Approaches 79
3.2.4 Institutional Approaches 81
3.2.4.1 Property Rights Theory 83
3.2.4.2 Transaction Cost Theory 85
3.2.4.3 Principal Agent Theory 88
3.2.4.4 Contributions 90
3.3 Interim Conclusion 92
4 Development of a Framework 96
4.1 The Analysis of Institutions 96
4.2 Institutional Conditions in a Regulated Environment 99
4.2.1 The Institutional Part of the Integrative Framework 100
4.2.2 Characteristics of Political Markets 102
4.3 Economic Markets in a Regulated Environment 104
4.3.1 Retail, Wholesale and Supply Markets 104
4.3.2 Market Entry in Regulated Wholesale and Retail Markets 107
4.4 The Level of the Firms 108
4.5 The Analytical Framework 109
4.6 The Application of the Framework 112
5 Explorative Case Studies on Strategic Investment Decisions and Regulation in European Broadband 117
5.1 Institutional Structures 119
5.1.1 The Institutional Stances of European Regulators 122
5.1.1.1 National Regulatory Authorities and National Competition Authorities 122
5.1.1.2 National Regulatory Authorities and the European Regulators Group 124
5.1.1.3 National Regulatory Authorities and the European Commission 125
5.1.1.4 National Regulatory and Political Authorities 127
5.1.2 The Stances of National Regulatory Authorities in Germany and the UK 129
5.1.2.1 The Stance of Ofcom 129
5.1.2.2 The Stance of the Bundesnetzagentur 134
5.1.3 The Independency of National Regulatory Authorities 140
5.1.4 Consequences of Institutional Structures on Strategic Investment Decisions 145
5.1.4.1 The Calculability of the Regulatory Environment 148
5.1.4.2 The Transparency of Regulatory Processes 149
5.1.4.3 The Duration of Regulatory Processes 150
5.1.4.4 The Consideration of National Particularities 151
5.1.5 Findings on Institutional Structures 152
5.2 Business Regulator Relationships 152
5.2.1 The Rise of the Regulatory Departments 153
5.2.1.1 The Development of a Strategic Perception of Regulation 154
5.2.1.2 Business Regulator Relationships in Germany 157
5.2.1.3 Business Regulator Relationships in the UK 158
5.2.1.4 Business Regulator Relationships on the European Level 161
5.2.2 The Role of Lobbying Associations 162
5.2.3 Business Regulator Relationships and Strategic Investment Decisions 165
5.2.4 Findings on Business Regulator Relationships 168
5.3 Regulatory Intervention in Broadband Markets 168
5.3.1 Supplier Structures and Access Regulation 168
5.3.1.1 Competition Structures in German and UK Broadband Markets 169
5.3.1.2 Particularities of German and UK Broadband Markets 173
5.3.2 Investments in German and UK Broadband Markets 177
5.3.2.1 Overall Investments in the UK Telecommunications Market 178
5.3.2.2 Overall Investments in the German Telecommunications Market 179
5.3.3 Regulation and Investment in Next Generation Networks in Germany 182
5.3.3.1 The Political Debate on Regulatory Holidays in Germany 182
5.3.3.2 The Strategy of DTAG with Regard to the Regulatory Environment 186
5.3.3.3 Potential Consequences of Regulatory Holidays 188
5.3.4 Regulation and Investment in Next Generation Networks in the UK 190
5.3.4.1 BT’s 21st Century Network and the Strategic Review 190
5.3.4.2 The Strategy of BT with Regard to the Regulatory Environment 191
5.3.5 Findings on Regulatory Intervention in Broadband Markets 194
6 Findings on Strategic Investment Decisions and Regulation in European Broadband 195
6.1 The Relationship between Regulation and Investment in Broadband 195
6.2 Ten Theses on Regulation and Strategic Investment Decisions in Broadband 201
6.3 Theoretical Contributions and Assessment 204
6.3.1 Contributions on the Institutional Structures of Broadband Markets 205
6.3.2 Contributions on Business Regulator Relationships 207
6.3.3 Contributions on Different Perceptions of Regulation 209
6.3.4 Assessment in Relation to Existing Literature 212
6.4 Policy Recommendations 213
7 Conclusion and Outlook 217
Appendix 220
References 222
Index 242

1.3 Research Approach (p. 10)

A detailed definition of the case study has been provided by Yin (2003): "A case study is an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident. The case study inquiry copes with the technically distinctive situation in which there will be many more variables of interest than data points, and as one result relies on multiple sources of evidence, with data needing to converge in a triangulating fashion."

Case studies are thus characterised by the use of data from various sources, including archives, interviews, surveys and observation to develop a holistic analysis. Their aim is to answer "how" and "why" questions. Their results can be qualitative, quantitative or a hybrid of both of them.

Regarding the data for my case studies, I have collected material from different sources, combining existing literature, official documents by public authorities (such as the European Commission, the European Regulators Group, Bundesnetzagentur, the German monopoly commission and Ofcom) as well as documents by supranational research institutes (such as OECD and ITU). Finally, I conducted seventeen semi-structured interviews with twenty two market experts to gain a deeper understanding of causal relationships in the broadband markets of Germany and the UK.

However, when researchers mix different kinds of data, they have to be aware of problems related to triangulation. Originating in navigation and military strategy where multiple reference points are used to locate an object’s exact position triangulation describes the process of combining different selection procedures, data collections, test arrangements and different techniques of measurements in order to compensate for the weaknesses of particular methods. Oppermann (2000) points out that scientists using triangulation have to be very thorough in their research design. Blaikie (1991) postulates that all measurement should be of the same kind and based on a common ontology and epistemology. Generally it seems appropriate to follow the estimation of Fielding/Fielding (1986):

"We should combine theories and methods carefully and purposefully with the intention of adding breadth and depth to our analysis but not for the purpose of pursuing "objective" truth."

Thus, the emphasis lies in its use as data and investigator triangulation and not in its use as multi-method and multi-theory approach. Therefore, triangulation may enable us to improve the accuracy of our judgments by collecting different kinds of data to gain purchase on the same phenomenon.

The problem of triangulation is considered by the use of an integrative framework with a strong theoretical background. This procedure assures that different kind of data are analysed in the same way, and in particular with respect to a common ontology and epistemology. When using case studies, researchers have to pay attention to certain disadvantages related to this approach, especially with regard to the generalisability of the results obtained from one particular case. Yin (2003) points at three usual prejudices against case study analysis:

Perhaps the greatest concern has been over the lack of rigor of case study research. Too many times, the case study investigator has been sloppy, has not followed systematic procedures, or has allowed equivocal evidence or biased views to influence the direction of the findings and conclusion.[...]