Abstract

I study the effect of universal service regulation on the roll-out of new mobile telecommunications technologies by oligopolistic service providers. To this end, I develop a non-stationary dynamic game of entry and technology upgrade under regulation, which I estimate using new panel data on mobile technology availability in Brazilian municipalities.

I find that the regulation accelerated the introduction of 3G technology to a set of mostly rural municipalities by just under two years, on average, and reduced firms’ aggregate profits by 14.6%. Due to its asymmetric nature, the regulation can act as a commitment device and deter entry and technology upgrade, and the probability it does so is non-negligible.

A subsidy auction leads to a similar acceleration of 3G introduction and reduces the regulatory cost by 57%, likely increasing aggregate welfare.

Please note, all our research seminars can be found on the CJBS website: CJBS Research Seminars