Carlo Cambini

Competitive Tendering and Optimal Size in the Regional Bus Transportation Industry: An Example from Italy

When defining how to implement tendering procedures for the regional bus transportation industry, one of the main problems local authorities have to face is setting the area size to be assigned as franchised monopoly. Copyright 2003 CIRIEC.

Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?

We construct a comprehensive panel data of 92 publicly traded European utilities over the period 1994-2005 in order to study the relationship between capital structure, regulated prices, and firm value, and examine if and how this interaction is affected by ownership structure and regulatory independence. We show that regulated firms in our sample tend to have a higher leverage if they are privately-controlled and if they are regulated by an independent regulatory agency. Moreover, we find that the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa, and it also has a positive and significant effect on their market values. Our results are consistent with the theory that privately-controlled firms use leverage strategically to shield themselves against regulatory opportunism.

Information Exchange and Competition in Communications Networks

We develop a model of information exchange between calling parties. We characterize the equilibrium when two interconnected networks compete by charging both for outgoing and incoming calls. We show that networks have reduced incentives to use off-net price discrimination to induce a connectivity breakdown when calls originated and received are complements in the information exchange. This breakdown disappears if operators are allowed to negotiate reciprocal access charges. We also study the relationship between sending and receiving retail charges as a function of the level of access charges. We identify circumstances where private negotiations over access charges induce first-best retail prices.

Network Competition with Price Discrimination: Bill-and-Keep is not so bad after all

Abstract We study the impact of access charges on the incentives to invest in competing telecommunications networks of different quality. High access charges soften competition in the investment stage and can be used to sustain higher profits under competition with two-part tariffs and termination-based price discrimination. Below-cost charges (such as “bill-and-keep” arrangements) have a positive impact on investments.

Technology Investment and Alternative Regulatory Regimes with Demand Uncertainty

A vertically integrated incumbent and an OLO (Other Licensed Operator) compete in the market for broadband access. The incumbent has the option to invest in building a Next Generation Network that covers all urban areas with similar demand structures. The investment return in terms of demand increase is uncertain. We compare the impact of different access regulation regimes – full regulation, partial regulation (only the copper network is regulated), risk sharing – on investment incentives and social welfare. We find that, when the alternative for the OLO is using the copper network rather than leaving the market entirely, exclusion of the OLO does not necessarily happen in equilibrium even when the incumbent is better in offering value-added services. Risk sharing emerges as the most preferable regime both from a consumer and a social welfare perspective for a large range of parameters.

Corporatization and Firm Performance: Evidence from Publicly Provided Local Utilities

This study investigates the effects of the corporatization process – i.e., the transformation of a municipal firm into a limited liability company – on the production costs of local public services whose ownership is maintained by the local government. Theoretical analysis predicts that, even without privatization, corporatization is a potentially effective way to improve efficiency (Shleifer and Vishny, 1994; Stiglitz, 2000). We explore this issue by using information on a typical local utility, such as the bus service provided by public transit systems in Italy, which experienced a reform of the governance towards the corporatization structure during the ’90s. The results on a sample of 33 local bus companies over the period 1993-2002 show that, even if public ownership persists, the transformation of a municipal enterprise into an autonomous company – corresponding to the first stage of the corporatization of local utilities in Italy – or into a limited liability company exerts a reducing impact on production costs.

Access charges and quality choice in competing networks

Abstract We study the impact of reciprocal access charges on the incentives to invest in networks of higher quality. We show how private and social preferences always diverge once investments are endogenized. Private negotiations never lead to charges being set at their marginal cost. Whether or not marginal cost charges have good dynamic properties depends on the way investments in quality impact on traffic generated on the networks.

Investment and Capital Structure of Partially Private Regulated Firms

We develop a model that examines the capital structure and investment decisions of regulated firms in a setting that incorporates two key institutional features of the public utilities sector in many countries: firms are partially owned by the state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt, and are allowed to charge higher prices when they are more privatized and when the regulator is more independent and more pro-firm.

Capital Structure and Regulation: Does Ownership Matter?

We construct a comprehensive panel data of 96 publicly traded European utilities over the period 1994-2005 in order to study the relationship between the capital structure of regulated firms, regulated prices, and investments, and examine if and how this interaction is affected by ownership structure. We show that firms in our sample increase their leverage after becoming regulated by an independent regulatory agency, but only if they are privately controlled. Moreover, we find that the leverage of these firms has a positive and significant effect on regulated prices, but not vice versa, and it also has a positive and significant effect on their investment levels. Our results are consistent with the theory that privately-controlled firms use leverage strategically to shield themselves against regulatory opportunism.

Competition between vertically integrated networks

Abstract Using the Laffont et al. (Rand Journal of Economics 1998;29(1):1) framework, a model of competition between vertically integrated telecommunications networks in a deregulated environment is developed. Two local operators compete in linear and non linear tariffs (i.e. two-part tariffs) in the subscribers market. In addition, they are integrated downstream in a potentially competitive sector (i.e. long distance sector) where they face competition of other firms which require (one-way) access to local networks. The purpose of the paper is to introduce a ‘downstream’ competition in the usual framework of network competition and to focus on how the one-way access charges are set in an oligopolistic market. In a mature phase of the industry, the presence of competition in both local and long distance sectors leads to lower local and long distance tariffs. The strategic role of the two-way and one-way access charges is pointed out, with particular reference to the effect that the reciprocal (two-way) access charge has on competition in the complementary sector. Finally, in case of competition in two-part tariffs, the paper investigates: (i) the asymmetric case in which only one network is integrated; (ii) the entry process when the two local networks have different coverage. The results show how the level of the two-way and one-way access charges affects the ‘level playing field’ between networks.