Reconsidering ex ante regulation in the Dutch electronic communications market

In this study we address the economic performance of ex ante regulation of the telecommunications industry and compare this regulatory framework to alternative approaches that respond better to the developments in the sector. The focus is on the Dutch market with two fixed networks with national coverage and a potentially converging mobile market. The economic effects of the ex ante regulatory approach are mixed. On the one hand it promoted lower retail prices for the benefit of consumers. On the other hand, the notion of a 'ladder of investment' – the transition from service-based competition to infrastructure competition – did not fully materialize. A central conclusion is that regulation needs to focus less on static efficiency, that is, competition, in favor of dynamic efficiency, namely investments and innovations. This shift in emphasis would be more in line with social welfare as the ultimate objective of regulation. It would require regulation to create more room for market forces (deregulation) and therefore to diverse and new business models. Deregulation, however may need to be complemented with ex post supervision and a reconsidered form of access regulation as a backstop option.