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


Jerry A. Hausman


Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Gregory Sidak


Criterion Economics, L.L.C.


Journal of Competition Law & Economics, Vol. 1, No. 1, pp. 173-245, 2005

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.

Number of Pages in PDF File: 73

Keywords: antitrust, regulation, telecommunications, competition, unbundling, access pricing, investment, infrastructure

JEL Classification: D4, F00, K2

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Date posted: December 14, 2004 ; Last revised: February 25, 2010

Suggested Citation

Hausman, Jerry A. and Sidak, Gregory, Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries. Journal of Competition Law & Economics, Vol. 1, No. 1, pp. 173-245, 2005. Available at SSRN: http://ssrn.com/abstract=623221 or http://dx.doi.org/10.2139/ssrn.623221

Contact Information

Jerry A. Hausman (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-271a
Cambridge, MA 02142
United States
617-253-3644 (Phone)
617-253-1330 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
J. Gregory Sidak
Criterion Economics, L.L.C. ( email )
1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)
HOME PAGE: http://www.criterioneconomics.com
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