The Unbundling of Network Elements

With the advent of the Internet, the emphasis of communication policies has moved from the regulation of telephone networks to the unbundling regulation to enforce sharing of network elements. Since unbundling is often impeded by the renegotiation by incumbents over the control of essential facilities, it would be advisable to separate the company that owns local loop (LoopCo). Recently the number of subscribers of DSL in Japan has grown phenomenally due to the unbundling regulation. This suggests that unbundling can accelerate the proliferation of broadband, but this lesson cannot be easily generalized to other countries, because the success depends on the special conditions such as extremely low pricing of entrants and strategic mistakes of NTT that neglected DSL. If the unbundling regulation succeeds in increasing competition, the telecommunications industry in the narrow sense will shrink, making the universal services of telephone network increasingly difficult. 1 Senior Fellow, RIETI. I would like to thank Hidenori Fuke, Hirokazu Takizawa, and Kotaro Tsuru for helpful comments on the draft of this article. I also wishes to thank the participants of the seminars held at RIETI. The opinion stated in this article is not related to the organization I belong.