Ingo Vogelsang

Economic Research Institute, Maryland City, Maryland, United States

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Publications (55)32.88 Total impact

  • Karl-Heinz Neumann, Ingo Vogelsang
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    ABSTRACT: In many countries worldwide access networks are in the transition from copper to fiber access. During the transition phase copper and fiber networks are operated in parallel. All regulators facing this situation of technological change have to decide how to price unbundled access to the copper loop in this transition phase. Should they keep the usual forward looking long-run incremental cost standard charge, or should they move to some different approach? The authors propose to price copper access based on the modern equivalent asset (MEA) of fiber access. Since fiber access is superior to copper access, the cost of fiber access (as a basis for pricing copper access) should, however, be corrected by the performance delta between copper and fiber access. Instead of using quality of service (QoS) differences, the authors determine the performance delta based on the market valuation of services provided over the copper and fiber access represented by the end-user prices of services and corrected by cost differences downstream of the access provision. Under this approach an access seeker becomes indifferent (on the margin) between using the copper or the fiber access network and wholesale pricing (or regulation) becomes competitively neutral towards technology choice between copper and fiber access and does not distort the platform competition towards cable. To test its practicability numerical simulations of the approach are performed by means of a quantitative competition model. The model analysis suggests that the approach leads to unique and robust results. Its main conclusion is that the method tends to be conservative relative to the theoretical case of pure vertical product differentiation, meaning that the measured performance delta underestimates the theoretical performance delta.
    Telecommunications Policy 11/2013; 37(10):893–909. · 1.59 Impact Factor
  • Ingo Vogelsang
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    ABSTRACT: Telecommunications policy has come a long way from regulation of vertically integrated monopolies to the current state of competition. As competition becomes self sustainable, will telecommunications policy go away or, if not, what form will it take? We try answering this question in light of the economics literature. In particular, we characterize a regulatory efficiency frontier that is shifted by new technological and market developments, such as convergence of networks, fixed-mobile substitution (and integration) and next generation access networks (NGA). The frontier is also affected by the existing capital stock and other physical characteristics of a country. Locations of countries relative to this frontier are likely determined by considerations of global competitiveness, by their institutional endowment and by their existing telecommunications policies. Global competitiveness plays a particular role because of the sector’s increasing impact on a country’s well-being.Below we give some tentative conjectures for five policy areas. The conjectures will be backed up and amended by the full review of the theoretical and empirical literature. (1) Termination monopoly: The regulatory efficiency frontier appears to be moving (a) towards bill & keep and capacity-based (and bit-based) rather than minute-based termination charges because minutes of use have little relevance in packet-switched IP networks and (b) towards deregulation because of the spread of multi-homing and of voluntary interconnection arrangements. (2) Local bottleneck access: The regulatory efficiency frontier has shifted in three ways. First, deregulation will be efficient in high-density regions, where NGA can be duplicated, or in all regions, once technical and market developments provide sufficient competitive substitutes. Second, depending on the NGA technology chosen (P2P or GPON) bitstream access may replace ULL as the efficient regulatory approach. Third, because investments in NGA networks are increasingly hard to finance the regulatory emphasis shifts from static efficiency towards investment and innovation. This results in a regulatory frontier involving cooperative investment, softer regulation or regulatory holidays. (3) Net neutrality: The regulatory efficiency frontier will likely involve three aspects. First, the more competitive ISPs are the more likely that “violations” of net neutrality will be efficient. Thus, a general policy of net neutrality is likely to be inefficient. Second, the tools of (ex post) competition policies are likely more efficient than ex ante regulation. Third, there will be interactions between net neutrality policy and regulation of wholesale access. (4) Spectrum management: The positive experience with market-based spectrum management and with unassigned free spectrum has led to diverging views about spectrum scarcity, one claiming that spectrum is scarce and therefore has to be economized via tradable property rights, the other claiming that there is enough spectrum and that users can deal with any interference. Our reading of the literature is that each view holds for different parts of the spectrum so that the future regulatory efficiency frontier will include unassigned spectrum as a commons and fully tradable spectrum ownership (or licenses), each for a different part of the spectrum. (5) Universal service: The efficiency frontier in the universal service area clearly depends on the success in the four others. If a country is at the efficiency frontier in all the other areas there may be little need for an additional universal service policy. What determines the endgame in telecommunications policy? Although technical and market developments will dominantly shape the regulatory efficiency frontier, institutional and political economy factors have an additional and mostly slowing effect on policy changes. Nevertheless, we conjecture from the empirical literature that striving for global competitiveness has an accelerating effect counteracting other political influences to the contrary.
    03/2013;
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    Jan Krämer, Ingo Vogelsang
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    ABSTRACT: With the use of a laboratory experiment, we show the effects of co-investments on coverage, competition and price collusion in regulated network industries. On the one hand, co-investments turn out not to be a significant driver of new infrastructure investments beyond the level achieved by access regulation and they seem to facilitate tacit price collusion. On the other hand, co-investments economize on infrastructure investment costs and necessitate communication, which partially offset the aforementioned effects. In fact, communication between the firms on their future coverage, especially outside co-investments, seems to have a positive effect on investments. However, the surprising message of the experiment is that tacit collusion happens under co-investment although there is no reason to believe that it should and although we made almost every effort to prevent it. Our results indicate that regulators should evaluate co-investments with scrutiny as there are definite drawbacks that must be considered. --
    01/2013;
  • Steffen Hoernig, Ingo Vogelsang
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    ABSTRACT: Two-part tariffs, when used at the retail level, increase efficiency by lowering the price of marginal units. The same potential for higher efficiency exists for two-part tariffs at wholesale level for a given market structure, but the fixed part of the wholesale tariff can negatively affect the latter. In a simulated competition model of next-generation telecommunications access networks that has been calibrated with engineering cost data, we show that the latter effects strongly outweigh the former. That is, substituting a cost-based linear wholesale access tariff with revenue-equivalent two-part tariffs reduces the number of access seekers and therefore leads to higher prices and lower welfare and consumer surplus.
    10/2012;
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    ABSTRACT: Our market modelling approach aims at practically determining wholesale pricing policies for the switch from copper to fibre access networks. It asks which market equilibria for incumbents and entrants result from different combinations of copper and fibre wholesale access charges. We first calculate the relevant costs and the cost drivers for a representative European country which we call "Euroland". Network costs are derived for the investor and for competitors who base their business model on purchasing access from the incumbent. The cost modelling results feed into a model of competition between copper and Fibre to the Home (FTTH) with multiple competitors in order to capture aspects of the transition from copper to FTTH. We show the impact of wholesale prices for copper and fibre access on competition, retail prices and investment. The incentives for a switch from copper to fibre are largely preserved by an equal absolute reduction of both copper and fibre access charges and they are increased if the copper access charge is reduced by more than the fibre access charge. We find in a relatively simple calibrated model of competition for broadband service that substantial care must be taken in regulating the prices of inputs which are substitutes. In this calibrated model, small errors in the absolute price difference between these (even when the absolute level of one or the other price is correctly set) can lead to suboptimal outcomes. Our central result is that significant fibre investment can only be expected if the structure and level of wholesale prices is properly balanced.
    06/2012;
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    ABSTRACT: We propose a novel approach to the evaluation of new network technologies that combines an engineering cost model with a differentiated multi-player oligopoly model subject to wholesale access regulation. It is based on Hoernig et al. (2010), 1 which examines the cost differentials and competitive outcomes for different fibre-to-the-home (FTTH) technologies. Its aim is to shed some light on the impact various technology and regulatory choices might be expected to have on prices, market entry, penetration and market shares over time. Understanding these issues should inform policymakers about particular technologies and provide guidance to the dynamic consequences of regulatory choices. The high capital costs and the long asset life of fibre mean that the technology choices made today will dictate the forms of competition and regulation that develop in these markets for years to come.We have developed two partly interlinked modeling approaches to analyze the impact of different architectures and wholesale scenarios on investment, cost, profitability, reach, competition, market shares, pricing and welfare. We have used a steady state cost model that feeds cost functions into a strategic competition model. Figure 1 shows the relation between the models and their primary outputs (grey).
    09/2011;
  • Ingo Vogelsang
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    ABSTRACT: The regulatory incentive mechanism to be discussed in this article may be seen as a contribution to the issue of the optimality of marginal cost pricing. The case for and against marginal cost pricing by public utilities has a somewhat dialectic history. Hotelling (1938) set the stage for the thesis by arguing that in decreasing cost industries, buyers should only pay the marginal costs of serving them. The resulting deficit should simply burden the taxpayers. Coase (1945, 1946) soon vehemently opposed this suggestion. He argued first that marginal cost pricing does not pass the test that consumers’ total willingness to pay exceeds production costs of the good in question; second, that subsidies jeopardize efficient operation of the monopoly supplier; and third, that tax financing of subsidies results in an unjustified redistribution from general taxpayers to the consumers of goods produced under increasing returns. However, Coase’s antithesis did not initially win the profession. This took much longer and resulted in Ramsey prices as the synthesis. Ramsey prices maximize total surplus under a balanced budget constraint for the public utility. Such a balanced budget constraint fulfills several functions. It neutralizes income distributional issues between shareholders of the firm and its customers. The shareholders exactly receive a competitive return, neither more nor less. Without any more specific information, it further allows us to state that consumers in total value the output of the public utility at least at production cost. Third, it puts a (sometimes generous) cap on any inefficiencies in the production of the output. Last, it avoids subsidies and the accompanying distortions.
    01/2011: pages 15-31;
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    Wolfgang Briglauer, Ingo Vogelsang
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    ABSTRACT: The increasing danger of excess capacity in the regulated fixed networks calls into question the established long-standing pricing standards for wholesale services based on forward-looking long-run incremental costs (FL-LRAIC). Within the EU “Regulatory Framework for Electronic Communications and Services”, the FL-LRAIC standard has worked quite well in expanding markets, although even there price-squeeze problems have appeared. In contracting markets the price-squeeze issue, however, becomes paramount and lower prices both at the wholesale and retail levels would be efficient. Because both expansion and contraction could be relevant in the future, this paper suggests an optional approach based on the wholesale price formula p=min{FL-LRAIC, Retail-Minus} with an optional replacement of per-minute charges by capacity-based access charges (CBC). This will generally protect alternative competitors against price-squeeze while at the same time allowing the fixed-network incumbent full downward price flexibility. It also protects alternative competitors and end users against excessively high prices.
    Telecommunications Policy. 01/2011;
  • Ingo Vogelsang
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    ABSTRACT: The dramatic worldwide increase in mobile communication that has led to more than 4 billion users has over the last few years been accompanied in wealthy countries by a significant decline in fixed network subscriptions. Such fixed-to-mobile substitution (FMS) is at the center of this literature survey. Theoretical models explaining FMS are scarce and are inconclusive regarding the balance between substitution and complementarity of the fixed and mobile sectors. Empirical explanations hinge on the interaction of positive cross-elasticities of demand and reductions in mobile relative to fixed communications prices. FMS is also supported by relative declines in mobile network costs, network effects in demand and quality improvements of mobile services. The policy consequences of FMS stem from the potential reductions in market power of operators in fixed-line markets and from the ability of mobile operators to enable universal service. The survey reveals ample opportunity for further empirical and theoretical research in the area of FMS.
    Information Economics and Policy 03/2010; · 0.95 Impact Factor
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    Ingo Vogelsang
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    ABSTRACT: Based on an idiosyncratic reading of the literature I propose intermediate (rather than tight or soft) regulation for balancing investment incentives with allocative efficiency and competition objectives. Intermediate regulation is compatible with incentive regulation and helps lengthening the regulatory commitment period necessary for incentives. However, such commitment for the whole time horizon of infrastructure or innovation investments is impossible. The compatibility of incentive regulation and efficient investment is thus in doubt. Incentive regulation for regular infrastructure investments therefore needs periodic updating based on rate-of-return regulation criteria. Innovative infrastructure investments may warrant regulatory holidays, which should be conditioned on strict criteria.
    02/2010;
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    William Hogan, Juan Rosellón, Ingo Vogelsang
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    ABSTRACT: Electricity transmission pricing and transmission grid expansion have received increasing attention in recent years. There are two disparate approaches to transmission investment: one employs the theory based on long-run financial rights (LTFTR) to transmission (merchant approach), while the other is based on the incentive-regulation hypothesis (regulatory approach). In this paper we consider the elements that could combine the merchant and regulatory approaches in a setting with price-taking electricity generators and loads. The monopoly transmission firm (Transco) is regulated through benchmark or price regulation to provide long-term investment incentives. The two-part tariff approach used can be analyzed analytically only for well-behaved cost and demand functions. We explore a series of simplified transmission grids to argue that in a variety of circumstances those functions could have reasonable economic properties. The results suggest directions for further research to explore the properties of the cost functions and implications for design of practical incentive mechanisms and the integration with merchant investment in organized markets with LTFTRs. KeywordsElectricity transmission-Financial transmission rights-Incentive regulation-Loop-flow problem JEL ClassificationD24-L51-L94
    Journal of Regulatory Economics 01/2010; 38(2):113-143. · 0.84 Impact Factor
  • Ingo Vogelsang
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    ABSTRACT: Unter Netzneutralität können Netzanbieter und Netznutzer durchaus Verschiedenes verstehen und dann aneinander vorbeireden. Dazu zwei Beispiele: Während der ersten Ölkrise in den 70er Jahren hieß es, die Franzosen als Freunde der Araber würden von ihnen niedrigere Preise erwarten als von weniger befreundeten Ländern – und waren doch überrascht, als die Araber von eben ihren Freunden ganz im Gegenteil erwarteten, sie würden mehr zahlen. Zweites Beispiel: 2006 warf der damalige AT&T Chef Whittacre Google vor, es erhalte den Zugang zu den Internet-Kunden umsonst und bereichere sich zu Lasten der Netzbetreiber.
    12/2009: pages 5-14;
  • Günter Knieps, Ingo Vogelsang
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    ABSTRACT: This special issue contributes to the topical field of Internet economics. The articles focus on multi-platform competition, the changing role of telecommunications regulation, issues of net neutrality, and open source software and innovation.
    International Economics and Economic Policy 07/2007; 4(2):101-107.
  • Ingo Vogelsang, Günter Knieps
    International Economics and Economic Policy 02/2007; 4(2):101-107.
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    ABSTRACT: Regulation and consumer class actions can complement, duplicate, or oppose each other, depending, among others, on the leanings of regulatory objective functions towards the industry or consumers. In particular, pro-consumer regulators would like to see consumers benefit from class actions while pro-industry regulators would like to prevent regulated firms from being harmed by them. However, because pro-consumer regulators are already doing their best for consumers and pro-industry regulators their best for firms, they are both usually constrained in their policies. The result is that class actions tend to be less efficient under pro-consumer regulators and more efficient under pro-industry regulators. Copyright Springer Science+Business Media, LLC 2007
    Journal of Regulatory Economics 02/2007; 32(1):87-104. · 0.84 Impact Factor
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    02/2007;
  • Bridger M. Mitchell, Ingo Vogelsang
    Managerial and Decision Economics 01/2007; 16(4):451 - 467.
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    ABSTRACT: Unter diesem Titel hat das ifo Institut in diesem Frühjahr eine Studie veröffentlicht, die zehn Jahre nach der Einführung der sektorspezifischen Regulierung und beträchtlichen Markterfolgen in der Telekommunikation prüfte, ob das ursprüngliche Ziel einer vorübergehenden Regulierung aus den Augen verloren wurde. In der Studie wird festgestellt, dass trotz erheblicher Entwicklung des Wettbewerbs die Mitarbeiterzahl in den meisten europäischen Regulierungsbehörden weiter gestiegen ist, Regulierungsverfahren komplizierter geworden und neue Regulierungsaufgaben und -gebiete hinzugekommen sind. Mit einem Wort: Alle Zeichen deuten auf eine Verfestigung der Regulierung hin. Das Thema stieß auf reges Interesse. Deswegen wurden mehrere Autoren zur Stellungnahme eingeladen. Eine Einführung in die Thematik gibt Hans Schedl, wissenschaftlicher Mitarbeiter des ifo Instituts und Mitautor der Studie.
    Ifo Schnelldienst. 01/2007; 60(21):03-28.
  • Ingo Vogelsang
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    ABSTRACT: 1. Einleitung Es ist eine faszinierende Veranstaltung und ich habe heute schon sehr viel gelernt. Ich möchte hinzufügen, dass ich mir wider Erwarten zum jetzigen Zeitpunkt so etwas wie ein Advocatus Diaboli vorkomme, indem das, was ich Ihnen sagen werde, doch mit Einigem kontrastiert, was wir heute schon gehört haben. Das gilt insbesondere für den Vortrag von Herrn Matson, der sozusagen der Advocatus Dei des heutigen Vortrags sein könnte. Herr Matson geht von einer Schlaffenlandvision aus, in der es keine Knappheit gibt. Ich bin Volkswirt und die Volkswirtschaft wird geradezu dadurch definiert, dass sie versucht darüber nachzudenken, was die Folgen von Knappheit sind. Wenn es also keine Knappheit gibt, dann ist der Volkswirt überflüssig und insofern kontrastiert auch schon mein Vortrag vom Stil her und von den Folien her und ist der Advocatus Diaboli Stil. Das Internet erfreut sich in den USA einer wirtschaftspolitischen Sonderstellung insofern, als es erklärtermaßen einen weitgehend regulierungsfreien Raum darstellt. Forderungen nach einer gesetzlichen Verankerung von Netzneutralität werden als Verletzung dieser Sonderstellung von Neutralitätsgegnern angeprangert, während Befürworter darin einen Garanten der Freiheit des Internet sehen. Im vergangenen Jahr war Netzneutralität das heißeste Thema der amerikanische Telekommunikationspolitik. Vinton Cerf, der „Chief Internet Evangelist“ von Google und einer der Begründer des Internet, meint, dass eine Verletzung der Netzneutralität an die Fundamente des Internet ginge (Cerf, 2006). Demgegenüber wirft AT&T Chef Whittacre Google vor, den Zugang zu den Internet-Kunden umsonst zu erhalten und sich damit zu Lasten der Netzbetreiber zu bereichern (Stern, 2006). An den Kontroversen über Netzneutralität lag es, dass die geplante Revision des Telecommunication Act vom letzten Kongress nicht mehr verabschiedet werden konnte. Während die Demokraten, unterstützt von den großen Internet- und SoftwareAnbietern, vehement die Einbeziehung eines Passus über die Netzneutralität forderten, waren die Republikaner, unterstützt von den Breitbandanbietern, strikt dagegen. Die Fusion von AT&T und BellSouth wurde solange aufgehalten, bis sich AT&T verpflichtete, zwei Jahre lang keine Diskriminierung gegen Anbieter von Content und Anwendungen vorzunehmen. Ist Netzneutralität wirklich ein so wichtiges Problem und dies auch außerhalb der USA? Gibt es angesichts der diametral
    12/2006: pages 219-233;
  • Information Economics and Policy 02/2006; 18(3):241-241. · 0.95 Impact Factor

Publication Stats

487 Citations
32.88 Total Impact Points

Institutions

  • 2004–2013
    • Economic Research Institute
      Maryland City, Maryland, United States
  • 1983–2013
    • Boston University
      • Department of Economics
      Boston, Massachusetts, United States
  • 2010
    • German Institute for Economic Research
      Berlín, Berlin, Germany
  • 2001
    • University of Padova
      Padua, Veneto, Italy