Question

1. 5.7 Telstra has, at times, argued that it has little incentive to invest billions of dollars in new telecommunications infrastructure if it is forced by the ACCC to allow its competitors access to it. Similar arguments have been put forward by mining companies when developing railway infrastructure and by gas companies when building gas pipelines. Do you think that regulations preventing monopoly power in the access to infrastructure will inhibit private investment?

Answer 1

Yes, to a certain extent regulating the presence of monopoly may lead to a decrease in investment by the company which has been exercising the monopoly power and has already made huge investments in the sector. This is because with the entry of new companies the existing firm is not able to reap maximum profit. Their profit is now being shared by more number of companies.

Along with that the competitors is being allowed to share the infrastructural facilities which have been developed by the company. That means the other companies are accessing the infrastructure without much effort, easily. This will demotivate the future investments.