Competition and Regulation in Telecommunications: Theory and Application to Switzerland

In 1998, the Swiss telecommunications industry was liberalized. Liberalization resulted in significant price reductions and in an increased pace of innovation. However, it did not evolve without frictions. The Swiss Telecommunications Act of 1998 contains several regulatory provisions in order to address problems that arise with competition in the telecommunications sector. Among these problems are the need to provide universal service, the presence of (potential) natural monopoly segments in telecommunications networks, and network externalities. They raise difficult issues of regulation and antitrust. To explore these issues, this study develops a number of game-theoretic models of telecommunications competition in different competitive environments, taking positive network externalities into account.