Effects of regulation on investment behaviour in network industries: The European telecommunications industry

Lars-Hendrik Röller, European School of Management and Technology, Berlin, discusses the impact of regulation in the telecommunications sector on investments in the ICT infrastructure of established and new network operators. New research results indicate that the intensity of regulation in an international comparison has considerable effects on the private-sector investments in the ICT infrastructure. Regulation that does not allow the established network operator to achieve sufficient profits from network investments lowers investment activity. A change in the regulation framework and German regulation practice could lead to considerable private-sector investments in new broad-band ICT infrastructure, which would both create short-term aggregate demand as well as lay the foundations in the long term for dynamic growth.