Competition and Regulation Issues in Telecommunications

The telecommunications industry has been transformed by increasingly vigorous competition in an environment of rapid change. As new technologies grow and as competitors enter and expand, firms often seek access to the networks of their competitors. The rules for connecting networks can be critical for the networks success and can have significant effects on investment. In fact, the most complex questions facing regulators are frequently focused on the conditions of access of one network to another’s network. One reason these problems are severe is that, as long as subscribers are only connected to one network, that network has a monopoly over calls that terminate with its subscribers, even if different networks might have competed to obtain that subscriber. The scope for competition depends on the economies of scale and scope, as well as the technologies used. When there is scope for competition, many countries mandate access in one form or another. Governments differ, however, in the principles used to determine the financial terms of access. Access prices should reflect the mechanisms that might be used to recover fixed costs, even when access prices are based on costs. Consideration should be given to whether price discrimination by the incumbent should be allowed. At times, access charges may be set above the retail price. This document comprises proceedings in the original languages of a Roundtable on Competition