Chile Broadband Case Question-Answers

Running head: ECONOMICS 1

Chile Broadband Case: Question-Answers

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Institutional Affiliation

ECONOMICS 2

Chile Broadband Case: Question-Answers

The world has become a small village and you can get whatever you may want or speak

to anyone across the world at the comfort of your house, thanks to internet. The emergence of the

internet is intertwined with various issues among competition across the world. Specifically,

Chile is at the verge to shift its internet service from the previous voice telephone due to the

emergence of competition. Chile has the options to deploy open access strategy model and

facilities-based competition model that have both advantages and disadvantages; the best models

will depend on the level of benefits it will have in the market.

Open Access Model

The model allowed the incumbent organization to open access to its network. This model

is associated with some advantages as some people may thwart it due to the disadvantages it has

to the economy. One of the advantages of open access model is that it allows for a continued

provision of services under competition with the competitor. The incumbent firm will be able to

provide its services as other companies will be allowed to access such services. Specifically,

based on the management of rail and truck, a railroad would manage the trucks and the trains but

still allows train companies to access its tracks. Moreover, the incumbent will be able to divest

its monopoly network as an independent company. The idea for this approach is to make it tough

for the monopoly management of network services that favor the incumbent company.

Among the disadvantages of open access model is that it would be unnecessary since they

added nothing to the existing competition. There is an already established competition since no

firm can compete on the same services. For example, railroads may not compete with another.

Facilities-Based Model

ECONOMICS 3

The assumption made in this model is that organizations that have strong bases in

different competing telecommunication technologies can discipline each other. The model

reduces the need for the government regulations making it an advantageous in the market. The

fact that the firms will be able to control each other means that the government will have no need

to pose regulations in the market to control quality and prices. Besides, the government

regulations will have no meaning to monitor the behaviors of the providers of the network and

prevent them from discrimination against access seekers; these are done by individual

companies. On the other hand, the facilities-based model will strengthen incentives for

innovation and future investments. The businesses will be able to expand their management with

no doubt that their services will be opened for competitors; besides, such firms will be flexible in

having varieties of platforms and technologies which are needed in the economy.

However, the facilities-based model is that it has a slow and uneven entry in the market

to prevent the emergence of competitors. Moreover, this model is costly when it comes to the

wasteful duplication of investments especially when the available technology has strong

economies of scale.

Based on the two models described, the Facilities-based model is seen to have elements

of monopoly. This is because, the Facilities-based model has no government regulations and

hence can set the prices of their services on their own, and this may enhance monopoly in the

market.

Therefore, both open access model and Facilities-based model are some of the internet

services facilities that Chile may resolve to deploy based on the advantages it may have on the

economy.

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