Introduction

Information and communication technology (ICT) as well as the significance of a growing digital communication network have generated enormous economic impulses. While hardware investment is important in this respect, there is an even more crucial role of software; organizing value-added based on software requires standardization and modularization, thus causing rationalization effects as a side-impact thereof. Software solutions are more flexible than hardware-based problem solving. Falling relative prices of hardware — reflecting high technological progress — and the benefits from global network effects in the software industry (which also benefits from massive scale effects) can be expected to serve as the major driving forces of productivity increases and economic growth in the 21st century. While sollware markets have specific problems from the perspective of competition policy, the telecommunications markets also pose special problems. Traditionally viewed as natural monopolies, the view of economist and policy makers changed in the late 20th century. In fixed network telecommunications, there is not a serious problem with competition provided there is full competition from cable TV networks as is the case in the US, the Netherlands, and — to a lesser extent- in the UK. Under the pressure of the European Commission, EU countries opened up fixed network telecommunications markets in 1998. The UK had already started liberalization in 1984 as did the US. The challenge for EU countries is to achieved sustained competition. Regulation serves several goals, and dependng on the regulatory policy chosen there could be positive effects or negative effects on Schumpeterian dynamics. The dynamic perspective of electronic communications regulations should not be neglected over the traditional emphasis on static efficiency aspects.