Dossier

Unbundling Facing New Challenges

Edmond BARANES & Marc BOURREAU
An Economist's Guide to Local Loop Unbundling
Key words: Unbundling, broadband diffusion, investment and innovation

This guide provides a critical review of the economics literature on the desirability and the effects of unbundling the local loop. Firstly, we discuss recent contributions, which aim to quantify the effect of unbundling regulations on the development of broadband services. Secondly, we review the literature on the potential impact of unbundling on investment and innovation incentives. Finally, we conclude this paper by offering some suggestions for further research.

Paul W.J. de BIJL & Martin PEITZ
Local Loop Unbundling in Europe:
Experience, Prospects and Policy Challenges
Key words: local-loop unbundling, VoIP, telecommunications, regulation.

This paper discusses the development of local loop unbundling in telecommunications markets throughout the European Union. It elaborates on the regulatory framework in Europe and provides an overview of recent experiences in Europe. Different types of unbundling, allowing for different types of entry and services provided by entrants, are discussed. This paper also explores the challenges for policy and regulation that arise because of unbundling and recent, related technological developments in the markets for fixed voice telephony and broadband internet access, particularly the emergence of packet-switched telephony such as VoIP.

Johannes M. BAUER
Unbundling Policy in the United States
Players, Outcomes and Effects
Key words: Unbundling, voice, broadband.
Building on attempts during the 1980s to establish principles of Open Network Architecture (ONA), unbundling obligations became a cornerstone of the framework for local competition devised by the Telecommunications Act of 1996. Several of the regulations developed by the Federal Communications Commission (FCC), including the impairment test to assess whether a network element had to be unbundled, the TELRIC pricing method, the obligation to re-bundle network elements to service platforms and the unbundling provisions for broadband networks were challenged repeatedly in court. In response to multiple defeats of earlier rules, the FCC had to refine its approach and define unbundling obligations more narrowly. Effective as of March 11th, 2005, unbundling obligations will essentially be limited to the local copper loop, dedicated interoffice transportation on routes connecting small markets, and high-capacity loops in small markets. Carriers presently using unbundled network elements that do not qualify under the new rules will have to transition to alternative solutions within 12-18 months. During this period, the FCC has set higher ceiling prices for these unbundled network elements. The Commission affirmed the elimination in 2003 of its unbundling obligations in broadband markets.

Martha GARCIA-MURILLO
International Broadband Deployment: The Impact of Unbundling
Key words: broadband, unbundling, competition.

This paper shows that unbundling an incumbent's infrastructure only results in a substantial improvement in broadband deployment for middle-income countries, but not for their high income counterparts. Our statistical analysis of approximately 100 countries showed that GDP per capita, population, competition and unbundling are all factors that can lead a carrier to provide broadband services in a country. The logit models show that unbundling has a significant positive impact on the availability of broadband services. The OLS analysis indicates that GDP per capita, population size, price, competition, the percentage of dial-up Internet users, and hosts all have positive effects on the number of subscribers. One implication of these results is that if a policy is to be implemented to promote broadband, it should either foster competition through unbundling and/or reduced prices. Efforts to develop local content can also improve broadband adoption.

Byung Woon KIM & Soo Cheon KWEON
Economic Benefits of Carrier Pre-Selection in the LM Telecommunication Market
Key words: Indirect Access, Carrier Selection, Carrier Pre-selection.

Carrier Pre-Selection (CPS) is regulator's telecommunication policy, which allows customers directly connected to the network of one provider to automatically access another company's services when they pick up the phone to make a call. This paper estimates the economic benefits of CPS in the LM telecommunication market. The economic benefits include substitution of LM calls and mobile phone calls, charge system, number of telephone service providers, technical interconnection among service providers, and access charges among networks. The data is based on monthly services from 2000 to 2003 in the South Korean telecommunication market.

Yves PUNIE
The Future of Ambient Intelligence in Europe:The Need for More Everyday Life
Key words: Research, development policy.

Ambient Intelligence (AmI) refers to a vision of the future information society where intelligent interfaces enable people and devices to interact with each other and with the environment. Today, most of the technologies needed for the realisation of this vision are next-generation technologies that are not currently on the market, but are being researched by research institutes and corporate laboratories worldwide. In Europe, the IST Advisory Group (ISTAG) and the FP6 IST programme are strong promoters of the AmI vision. This article gives a short overview of AmI, focuses on its role in everyday life and identifies some of the major challenges and bottlenecks facing the concept. The paper argues that, although people are presented as at the core of the vision, AmI would benefit from a more substantial everyday life perspective that confronts users in their everyday lives with future visions and technologies. Some of the key issues raised by such an approach are identified and discussed.

Edmond BARANES is Professor of Economic Sciences at the University of Montpellier I and has been IDATE's Scientific Consultant since 1 January, 2002. Among other things, he is the Editor for the COMMUNICATIONS & STRATEGIES review, oversees the internal research programme and represents IDATE within academic networks.
He holds a Doctorate in Economic Sciences (University of Paris I Panthéon–Sorbonne) and a Master of Economics (University of Paris I, 1991).
He received a Post graduate diploma (DEA) in Mathematical Economy and Econometrics (1991) and a Master of Econometrics I (1990) from University of Paris.
Current employment: Professor of Economic Sciences at the Université de Montpellier I (since 2001).

Johannes M. BAUER is a professor in the Department of Telecommunication, Information Studies and Media at Michigan State University, where he is also the executive director of the Quello Center for Telecommunication Management and Law.  He joined Michigan State University in 1990 after receiving his doctorate in economics from the Vienna University of Economics and Business Administration in Austria. Dr. Bauer taught and performed research as a visiting professor at the Delft University of Technology in the Netherlands (2000-2001) and in Beijing, China (2002). His research covers a wide range of issues related to the evolution of telecommunications and information industries, particularly the design and effect of public policies on these industries, and business strategies in network industries.  Dr. Bauer is currently working on projects on unlicensed spectrum and knowledge transfer from the academy to policy-makers that are funded by the National Science Foundation and the Ford Foundation.

Marc BOURREAU is assistant professor at the Ecole Nationale Supérieure des Télécommunications (ENST, Paris) and a member of the laboratory of industrial economics (LEI) at the Center for Research in Economics and Statistics (CREST). His main research interests are economic and policy issues relating to broadcasting, telecommunications and the internet. From 1997 to 2000 he served as a regulatory economist in France Telecom’s Directorate for Public Affairs. Mr. Bourreau received a master’s degree in engineering science from ENST. He also holds a doctorate in economics from Université Paris 2 Panthéon-Assas and an “habilitation à diriger des recherches” (qualification as director of studies) from the Université Paris 1 Panthéon-Sorbonne.

Paul de BIJL (1967) is research coordinator of TILEC (Tilburg Law and Economics Center) and a fellow of the CentER for Economic Research, both at Tilburg University. Paul obtained a PhD in Economics from Tilburg University (jointly with the University of Toulouse in 1996, within the framework of the European doctoral program ENTER). Before moving back to Tilburg University he worked as a consultant at Science & Strategy (a consulting firm in strategy and marketing, Utrecht/Amsterdam), a researcher at CPB Netherlands Bureau for Economic Policy Analysis (The Hague), and a policy advisor at the Financial and Economic Policy Directorate of the Ministry of Finance (The Hague). Paul is a fellow of ENCORE (Economics Network for Competition and Regulation). His main research interests are: telecoms and other markets with networks, industrial organization, regulation and competition policy.
pdebijl@uvt.nl

Since joining IDATE in 2001 as a senior consultant, Sophie BISMUT has worked on projects related to regulatory issues and market trends in the telecommunications sector in Western and Eastern and Central Europe. She has also been involved in research and technical assistance programmes for countries in North Africa. She had previously worked for four years at the Trade Directorate of the OECD, where she carried out several research programmes on regulatory reforms and their impact on international market openness in various OECD countries. Sophie Bismut is a graduate of the Institut d’Etudes Politiques of Paris and holds a post graduate degree in economics from the University of Paris Dauphine.

Peter CURWEN is visiting professor of telecommunications strategy at the Strathclyde Business School, Glasgow and also reaearches and publishes on a private basis. He was previously professor of business economics at Sheffield Hallam University. His primary research interest concerns the manner in which a rapidly changing environment affects the structure of the mobile telecommunications industry and its strategic implications for major companies in that sector. He has published three books on telecommunications, including Telecommunications Strategy: Cases, Theory and Applications (Routledge, 2004) with Jason Whalley.

Martha GARCIA-MURILLO is Assistant Professor of Information Studies at Syracuse University. She holds an M.S. in Economics and a Ph.D. in Political Economy and Public Policy from the University of Southern California. She previously worked at USC's Center for Telecommunications Management where she was involved in developing industry sponsored reports in telecommunications and cable. As a regulatory officer at the International Telecommunications Union in Geneva, Switzerland, she wrote the working document for negotiations between Central American countries for the harmonization of telecommunications regulation in the region. Prof. García-Murillo is currently a visiting scholar at the Massachusetts Institute of Technology's Internet and Telecommunications Convergence Center. During her stay she will be analyzing the factors that lead to the international deployment of broadband networks.

Byung Woon KIM is a senior researcher working at the Electronics and Telecommunications Research Institute (ETRI) that is a government funded research institute to guide the fields of information and telecommunications of Korea. He has a Ph. D. in Economics, and has been studying on carrier-related regimes improvement according to the environment variation of service-based competition since 2000 years.

Soo Cheon KWEON is a researcher working at the Electronics and Telecommunications Research Institute (ETRI) that is a government funded research institute to guide the fields of information and telecommunications of Korea. He has completed a Ph. D. course in Accounting, and has been working in Marketing Strategy Research Team where he is engaged in work on the pricing strategy for new revenue model of fixed networks since 2000 years.

Karl Heinz NEUMANN is a graduate of the University of Bonn and holds a Ph.D. in economics. He joined WIK in April 2001 as general manager and director of WIK GmbH and WIK-Consult GmbH, a position he had previously held until 1995. From 1995 to 2001 he worked for RWE Telliance AG as executive director for strategy, regulation and national projects. He has been a member of the company’s management board for the last two years.
He has also acted as a member of the boards and supervisory boards of several national and international telecommunications companies. Besides his telecommunications industry experience, Karl-Heinz Neumann has extensive experience as a consultant for regulatory authorities, governments and telecommunications companies. He has participated in many expert and advisory commissions related to German telecommunication authorities. Dr. Neumann continues to lead WIK-teams in many European regulatory policy consultancy studies.

Martin PEITZ is Professor of Economics and Quantitative Methods at the International University in Germany. Martin Peitz graduated in economics from the University of Bonn in 1992. He received his doctor in economics from Bonn within the European Doctoral Program in 1995. He then became assistant professor at the University of Alicante, Spain, and was tenured in 1999. In 2000 he was awarded the prestigious Heisenberg fellowship by the German Science Foundation (Deutsche Forschungsgemeinschaft).
He held visiting appointments at the universities of Frankfurt and Mannheim. Martin is associate editor of Information Economics & Policy, a research fellow of CESifo, and has published widely in leading economics journals. His recent research includes work on the regulation of media and telecommunications markets, intellectual property rights, and on trust and reputation in markets.
peitz@bigfoot.de

Alain PUISSOCHET joined IDATE in 1991. he is currently Head of Digital Electronics Practice. He developed a major expertise in R&D policies led both by companies and Public Authorities, and led the assessment of large R&D programmes, such as JESSI and ITEA. He is also doing techno-economic analysis on ICT projects. He keeps constant track of new technologies and the development and implementation of. He oversees and produces multi- and mono-client studies on the strategic aspects of new technologies and new equipment, and carries out expert evaluation missions for projects in this domain. He also contributes to several foresight activities. He is particularly interested in technologies and applications concerning the audiovisual world, as well as new terminals (set-top boxes, digital TV, flat panel displays) and their enabling elements (broadband access, domotics networks, components). Alain Puissochet worked for 17 years in the semi-conductor sector and has a great interest in Asian countries. Alain Puissochet is a computer engineer and gained his degree from the French Graduate School of Computing and Mathematical Sciences (ENSIMAG -Grenoble) in 1968

Yves PUNIE holds a Ph.D. in Social Sciences from the Free University of Brussels (VUB). Before joining the Institute for Prospective Technological Studies (IPTS) in 2001, he was interim assistant professor at the VUB and senior researcher at SMIT (Studies on Media, Information and Telecommunications). Yves Punie’s research interests include the social and technological aspects of Ambient Intelligence in everyday life, the future of the media and the media industries, social capital in the knowledge society and privacy, security and identity in the future information society (See http://fiste.jrc.es). His doctoral thesis explored the use and acceptance of ICTs in everyday life, also known as 'domestication of ICTs' (June 2000). IPTS (www.jrc.es) is one of the seven joint research centres of the European Commission DG JRC. Its prime objectives are to monitor and analyse science and technology developments, their cross-sector impact, their inter-relationship with the socio-economic context and their implications for future policy development.
Yves.Punie@cec.eu.int

Ingo VOGELSANG is a Professor of Economics at Boston University. He holds a Dr.rer.pol. from the University of Heidelberg and a post-doctoral degree ("Habilitation“) from the University of Bonn. His publications include sixteen books and many articles in the areas of regulation and restructuring of network industries. He is a co-editor of the Handbook of Telecommunications Economics, an Associate Editor of Information Economics and Policy and on the Editorial Board of several other journals. He has been a consultant to various governments, regulators and international organizations.

Jason WHALLEY is a senior lecturer in the Department of Management Science at the University of Strathclyde. Prior to joining the Department he worked at TNO - Strategy, technology & policy and undertook doctoral research on the internationalisation of the Baby Bells. His research interests include internationalisation, mobile service development and telecommunications policy development in mountainous developing countries.
 jason.whalley@strath.ac.uk