n recent years, competition authorities and telecommunications regulators have indicated an increasing willingness to consider structural separation and divestiture of the local loop as a means of countering what is viewed as serious anti-competitive activity by incumbent operators. The issue of structural separation has gained some prominence in the aftermath of the competition reforms that followed the National Competition Policy Report by the Independent Committee of Inquiry (1993) chaired by Professor Fred Hilmer. The report questioned the exemption of public monopolies from competition laws and favoured structural separation of incumbents as a way of introducing competition in monopoly markets of state-owned utilities. A major plank of the implementation of liberalisation policies in major markets such as energy, transport and telecommunications, has been the tendency to favour the provision of access to essential infrastructure facilities owned by incumbents as a way of achieving competition in the supply of final products. This has meant that incumbent, vertically-integrated operators supply services or facilities as inputs to the production of final services by competitors with which they compete directly with the incumbent. Consequently, by their ownership of essential facilities which they supply to competitors, incumbent operators are in a powerful position in the market and have a considerable incentive to use their market power to frustrate competition. Regulation of the behaviour of incumbents, therefore, is essential for effective competition. Reliance on access regulation alone to promote competition and prevent abuses of market power by incumbents requires extensive intervention and oversight by regulators. This arises from the fact that access regulation does not alter the incentives for uncompetitive behaviour by incumbents. Supplementation of access regulation with structural separation, on the other hand, would remove or greatly reduce the incentives for uncompetitive behaviour such as the denial of access to essential facilities and would be more likely to produce desirable outcomes without the need for extensive involvement of regulators. Because of its desirable effects, structural separation has been implemented as part of the access arrangements in several industries including electricity, gas, rail and airports. In contrast, telecommunications liberalisation has not included structural separation. Steven Dounoukos is a Lawyer and Angus Henderson is a Partner specialising in telecommunications at corporate, communications and technology law firm, Gilbert + Tobin.