The momentum for network separation: a guide for regulators
NGAs (Next Generation Access Networks) are a challenge to regulators and operators insofar as they require large investments, there is 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 the mandatory vertical separation of telecommunication firms, without jeopardizing incentives to innovation, investment and welfare. We provide a provocative but simple test for the adequacy of network separation as a regulatory remedy. We propose a decision tree procedure with four steps in order to assess whether network separation is an adequate regulatory response:  “Is there significant market power in the market for the provision of access services under NGAs?”;  “Are there few vertical complementarities between services along the supply chain?”;  “Is functional separation a better regulatory tool than any other alternative?”; and  “Is structural separation superior to functional separation?”. A positive answer to the first three questions implies that the regulator should consider functional network separation, whilst the fourth is needed for the structural alternative.
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- Kirsch, Fabian & Hirschhausen, Christian von, 2008. "Regulation of NGN: Structural Separation, Access Regulation, or No Regulation at All?," MPRA Paper 8822, University Library of Munich, Germany.
- 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.
- Cave, Martin, 2006. "Six Degrees of Separation : Operational Separation as a Remedy in European Telecommunications Regulation," MPRA Paper 3572, University Library of Munich, Germany.
- 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.
- P.W.J. De Bijl, 2005. "Structural Separation and Access in Telecommunications Markets," Competition and Regulation in Network Industries, Intersentia, vol. 6(2), pages 95-115, June.
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