Access and cooperative investment under asymmetric infrastructure competition

We introduce a model of asymmetric competition where two network operators with different investment costs may build an internet access infrastructure and where a virtual operator provides services through third-party access. We show that the virtual operator requests access from the low cost network operator, because it reduces the geographical area where both network operators build an infrastructure. We also show that potential entry of a virtual operator increases welfare if the access price and the cost asymmetry between the network operators is high enough. Finally, regardless of whether a virtual operator is allowed to enter the market or not, standard access regulation leads to broader infrastructure coverage than co-investment if and only if the profit of a network operator that builds a monopolistic infrastructure is higher than the total profit two network operators that both invest.