Fixed internet access regulatory framework and its influence on firm's strategic decision making

Regulation undoubtedly plays a crucial role in the telecom industry. It is especially evident in the Internet fixed access regulation where regulatory authorities and telecom operators face with complex technological solutions as well as sophisticated costing methodologies in order to satisfy their own and customers' needs. Regulation is explained under Institutional theory as a formal way of analyzing institutional context. The purpose of this paper is to present formal ways of regulatory regime expressed as Local Loop Unbundling (LLU) price and countries' formal framework showed as Worldwide Government Indicators (WGI) which are compared with companies' decisions regarding to technological choices and Incumbent's performance. Different costing methodologies used in defining wholesale and retail prices of regulated products will also be described. Results of the first part of empirical analysis based on companies from 13 European countries from period 2010-2014 show that LLU price has significant role in strategical decision making whether to invest in new/other technologies or to use existing incumbent's infrastructure based on copper network. The higher the price of LLU, the lower the percentage of customer base on incumbent's cooper network. In some European countries it is evident that incumbent has a significant power on the market, even though we are witnesses of imposed regulatory regime for a many years. One of the reasons for this can be inadequate regulatory quality and situation in the country as a whole. The second part of empirical analysis investigates influence of WGI on incumbent's market share.