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The momentum for network separation: A guide for regulators

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  • Gonçalves, Ricardo
  • Nascimento, Álvaro

Abstract

Next Generation Access Networks (NGAs) are a challenge to regulators and operators insofar as they require large investments, there is a significant uncertainty about the ability to recover costs, and the choice of the appropriate regulatory regime is far from consensual. Regulatory authorities might want to seize the moment and reconsider mandatory vertical separation of telecommunication firms, without jeopardizing incentives to innovation and investment. This paper discusses the main elements of a possible test for the adequacy of network separation as a regulatory remedy. A sequential decision tree procedure with three questions is proposed: (1) "Is there significant market power in the provision of access under NGAs?"; (2) "Are there little vertical complementarities between services along the supply chain?"; and (3) "Is network separation a better regulatory tool than any other alternative?". A positive answer to all the questions implies that the regulator should consider network separation as a regulatory remedy.

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Bibliographic Info

Article provided by Elsevier in its journal Telecommunications Policy.

Volume (Year): 34 (2010)
Issue (Month): 7 (August)
Pages: 355-365

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Handle: RePEc:eee:telpol:v:34:y:2010:i:7:p:355-365

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Keywords: Telecommunications networks Functional separation Structural separation;

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  1. Russell Pittman, 2003. "Vertical Restructuring (or Not) of the Infrastructure Sectors of Transition Economies," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 5-26, March.
  2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  3. Pittman Russell, 2005. "Structural Separation to Create Competition? The Case of Freight Railways," Review of Network Economics, De Gruyter, vol. 4(3), pages 1-16, September.
  4. Fabian KIRSCH & Christian von HIRSCHHAUSEN, 2008. "Regulation of NGN: Structural Separation, Access Regulation, or No Regulation at All?," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(69), pages 63-84, 1st quart.
  5. Cave, Martin, 2006. "Six Degrees of Separation : Operational Separation as a Remedy in European Telecommunications Regulation," MPRA Paper 3572, University Library of Munich, Germany.
  6. Paul de Bijl, 2005. "Structural Separation and Access in Telecommunications Markets," CESifo Working Paper Series 1554, CESifo Group Munich.
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