Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries

Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries In this article, we examine the rationales offered by telecommunications regulators worldwide for pursuing mandatory unbundling. We begin by defining mandatory unbundling, with brief descriptions of different wholesale forms and different retail products. Next, we examine four major rationales for regulatory intervention of this kind: (1) competition in the form of lower prices and greater innovation in retail markets is desirable, (2) competition in retail markets cannot be achieved with mandatory unbundling, (3) mandatory unbundling enables future facilities-based investment (‘stepping-stone’ or ‘ladder of investment’ hypothesis), and (4) competition in wholesale access markets is desirable. We proceed by testing empirically the major rationales in the United States, the United Kingdom, New Zealand, Canada, and Germany. For each case study, we review the mandatory unbundling experience with respect to retail pricing, investment, entry barriers, and wholesale competition. We review the lessons learned from the unbundling experience. We also identify which rationales were incorrect in theory and which rationales were correct in theory yet were not satisfied in practice. For the second category of rationales, we attempt to provide alternative explanations for the failure of mandatory unbundling to achieve its goals. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Competition Law & Economics Oxford University Press

Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries

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Publisher
Oxford University Press
Copyright
© Oxford University Press 2005, all rights reserved. For Permissions, please email: journals.permissions@oupjournals.org
ISSN
1744-6414
eISSN
1744-6422
D.O.I.
10.1093/joclec/nhi005
Publisher site
See Article on Publisher Site

Abstract

In this article, we examine the rationales offered by telecommunications regulators worldwide for pursuing mandatory unbundling. We begin by defining mandatory unbundling, with brief descriptions of different wholesale forms and different retail products. Next, we examine four major rationales for regulatory intervention of this kind: (1) competition in the form of lower prices and greater innovation in retail markets is desirable, (2) competition in retail markets cannot be achieved with mandatory unbundling, (3) mandatory unbundling enables future facilities-based investment (‘stepping-stone’ or ‘ladder of investment’ hypothesis), and (4) competition in wholesale access markets is desirable. We proceed by testing empirically the major rationales in the United States, the United Kingdom, New Zealand, Canada, and Germany. For each case study, we review the mandatory unbundling experience with respect to retail pricing, investment, entry barriers, and wholesale competition. We review the lessons learned from the unbundling experience. We also identify which rationales were incorrect in theory and which rationales were correct in theory yet were not satisfied in practice. For the second category of rationales, we attempt to provide alternative explanations for the failure of mandatory unbundling to achieve its goals.

Journal

Journal of Competition Law & EconomicsOxford University Press

Published: Jan 1, 2005

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