The German Telecommunications Reform – Where did it come from, Where is it, and Where is it Going?

German telecommunications reform came late because of high institutional constraints, powerful beneficiaries and reasonable functioning of the old system. It finally occurred because (1) the beneficiaries had less to lose, (2) Germany was falling behind, (3) reform was proven to work abroad and (4) the EC exerted pressure. The reform, particularly separation of posts from telecommunications, privatization of Deutsche Telekom and the creation of the RegTP, brought radical changes and the formation of new beneficiaries. The current sector crisis should spur research in the stability of competition in network industries and a reevaluation of the current reforms. Further reforms are required by new EC rules that will provide a more unified framework for the entire telecommunications sector. In the long run, privatization and liberalization will be completed, while some kinds of telecommunications‐specific regulation will continue. Dominant firm regulation of end‐user services is likely to be abolished down the road, while bottleneck regulation may persist. The remaining amount of dominant firm regulation and the pace of deregulation will depend heavily on market boundaries between (a) wireless and fixed networks, (b) high and low capacity subscriber access and (c) high‐density and low‐density networks. Assessing the interaction between market boundaries and market power requires economic research of intermodal competition and market power.