2010) 'Business Separation in Telecommunications: Lessons from the U.S. Experience

Structural and functional separation of telecommunications operators is being considered in many parts of the world following the U.K. adoption of Openreach. The attractiveness of separation is understandable, but separation in practice rarely if ever lives up to its promises. We examine experiences with business separation in the United States to draw lessons about impacts. We consider the separation of local and long distance, separation between telecommunications and information services, and separation between wholesale networks and retail services. These experiences show that business separation lowers efficiency and delays innovation, that adapting separation rules to an ever changing industry is costly and creates controversies, that rivals try to gain strategic advantage through the regulatory process, and that behavioral rules are generally more effective in facilitating competition and innovation than structural rules.