Competition and investment in telecommunications: Does competition have the same impact on investment by private and state-owned firms?

The liberalization of telecommunications is largely based on the premise that increasing competition will encourage investment. The hypothesis that liberalization promotes investment has received the most empirical support in recent research. However, a key question that has been largely ignored in the literature is whether competition has the same impact on investment by private and state-owned firms. We conduct an empirical study of the infrastructure investment of 20 incumbent telecommunications operators in OECD countries between 1994 and 2008, and we conclude that greater competitive pressure fosters infrastructure investment by state-owned incumbents but reduces investment by private incumbents.