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http://ssrn.com/abstract=1471960
 
 

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Vertical Separation of Telecommunications Networks: Evidence from Five Countries


Robert W. Crandall


Brookings Institution; AEI-Brookings Joint Center for Regulatory Studies

Jeffrey A. Eisenach


American Enterprise Institute

Robert E. Litan


Ewing Marion Kauffman Foundation; AEI-Brookings Joint Center for Regulatory Studies

September 2009

Federal Communications Law Journal, Forthcoming

Abstract:     
The widespread adoption of mandatory unbundling in telecommunications markets has led to growing interest in mandatory “functional separation” i.e., separation of upstream network operations from downstream retail operations. Since 2002, vertical separation has been implemented in five OECD countries: Australia, Italy, New Zealand, Sweden, and the United Kingdom. In 2008, the International Telecommunications Union noted “a tremendous amount of interest” in functional separation around the world; and, in April 2009, the European Parliament held its second reading on a new regulatory framework that embraces functional separation as an “exceptional measure.” While the U.S. does not currently require unbundling of broadband telecommunications networks, at least one influential group is advocating both unbundling and vertical separation for U.S. network operators. In this context, this study examines mandatory vertical separation in telecommunications markets from both a theoretical and an empirical perspective. The theoretical case against vertical separation is very strong, predicting in particular that mandated separation will discourage innovation and investment in new technologies. The empirical evidence tends to confirm these predictions, suggesting that overall, vertical separation is likely to impose significant costs without measurably increasing broadband penetration.

Number of Pages in PDF File: 38

Keywords: telecommunications, unbundling, broadband, technology, innovation

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Date posted: September 13, 2009 ; Last revised: April 6, 2012

Suggested Citation

Crandall, Robert W. and Eisenach, Jeffrey A. and Litan, Robert E., Vertical Separation of Telecommunications Networks: Evidence from Five Countries (September 2009). Federal Communications Law Journal, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1471960

Contact Information

Robert Crandall
Brookings Institution ( email )
1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6291 (Phone)
202-797-6181 (Fax)
AEI-Brookings Joint Center for Regulatory Studies
1150 17th Street, N.W.
Washington, DC 20036
United States
Jeffrey A. Eisenach (Contact Author)
American Enterprise Institute ( email )
1150 17th Street, N.W.
Washington, DC 20036
United States
Robert E. Litan
Ewing Marion Kauffman Foundation ( email )
4801 Rockhill Road
Kansas City, MO 64110
United States
AEI-Brookings Joint Center for Regulatory Studies
1150 17th Street, N.W.
Washington, DC 20036
United States
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