The Prerequisites to Competition: Two Proposals to Reform Universal Service and Interconnection

"Regulation and Competition in Telecommunications - an International Comparison"

1. Reforming Interconnection

1.1 The Importance of Interconnection

In 1982, AT&T was split up by the American government. In Japan, the Ministry of Posts and Telecommunication is now considering a similar policy towards NTT. In both cases, the companies have strenuously resisted a massive government intervention pursued in the name of deregulation. But in the future, divestiture may not be state-imposed at all, but rather company-initiated, and it may be in the telecommunications companies' own interest to split themselves up. AT&T did so in September 1995 in a second and voluntary divestiture.

All this is part of the logic of transformation in telecommunications, in which service competition leads to infrastructure competition, which in turn leads to interconnection, unbundling, systems integration, and eventually radical corporate restructuring.

In Europe, of liberalization of unfrastructure is currently the priority. In the U.S. this is also the case for local service, in the new legislation, before the Fcc and in the state utitlity commissions.

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But the issues are moving beyond liberalization to interconnection and universal service.

With liberalization of entry, multiple networks emerge. They must become linked with each other through various interconnection arrangements. Interconnection, in turn, is fairly meaningless without multiple physical interfaces. If an incumbent network offers an entrant interconnection at a far-off point, little is resolved. Thus, interconnection and unbundling of network functionalities into "modules" go hand-in-hand.

The tension between the integrative and pluralistic forces is most pronounced on the front where they intersect: the rules of interconnection of the multiple hardware and software sub networks and their access into the integrated whole. As various discrete networks grow, they must inter operate in terms of technical standards, protocols, and boundaries. In the networks of networks, the interconnection of networks becomes critical. This...