Contracting Across Separated Networks in Telecommunications

The issue of separating telecommunications networks - either functionally within a common ownership structure or structurally, under separate ownership - has attracted much recent attention. The paper discusses different forms of separation and the motives for them, and examines the question of how investment can be co-ordinated across the boundary. This issue (in particular the significance of the so-called hold up problem) is examined both theoretically and with respect to case studies of regulated and unregulated sectors. The authors conclude that sophisticated forms of contract or other procedures are likely to be able to overcome problems of co-ordinating investment. Regulators should not on this account stand in the way of voluntary structural separation