Structural and functional separation

Abstract

Functional separation is one of the hottest topics on the regulatory agenda, and is likely to continue to be so for some time, given the prospects of re-monopolisation associated with the increased economies of scope and scale of next generation networks, and given the significant investment levels required to provide broadband access to all users. This article provides a scan of European experience since the UK embarked on the creation of Openreach two years ago. In this paper our main emphasis is with the development of the concepts and the practice of structural and operational separation to achieve pro-competitive regulatory objectives. We are not especially concerned with structural separation as a result of initiatives to realise increased shareholder value and, for that reason, we have provided only a short commentary on the situation with eircom, the Irish incumbent operator. Our conclusion should be no surprise structural and functional separation models are still a work in progress in Europe and the European Commission still has some way to go to fully lay out and codify the approach that it may consider appropriate for the Member States. At present, the initiative is with individual countries, and this in itself raises issues for future harmonisation.