UNIVERSITA' CATTOLICA DEL SACRO CUORE - Milano - Istituti

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contrary, in Italy the vast majority of the population, notwithstanding the formal possibility to switch to another Tlc operator, found it preferable to remain with the incumbent. Figure 2. Formal and substantial opening to competition in fixed Tlc calls. Population (%) having choice opportunity among three or more Tlc operators [a] Incumbent market share (%) 5 Olo market share (%) [b] Olo market share (%) for ‘competitionenjoying’ population [c] = [b] / [a] Ita EU Ita EU Ita EU Ita EU Local 85 39 93 90 7 10 8 26 Long-dist. 100 83 76 77 24 23 24 28 International 100 83 60 75 40 25 40 30 Source: elaborations on AGCOM [2002a] We recognize that the data presented above do not capture entirely the complexity of the phenomenon; indeed, it would be rather utopian to extract a serious and exhaustive comment on the liberalization of fixed Tlc by simply relying on a couple of synthetic indexes 11 . It is obvious that such aggregate figures should not be interpreted as ultimate and unquestionable evidence, but merely as some clues that may suggest the existence of critical issues. To put it in clinical terms, the preceding discussion is not the diagnosis of the disease, but the assessment of some symptoms which deserves further investigation. Once the symptoms have been carefully scrutinized, a conclusive analysis can be drawn and, possibly, appropriate remedies suggested. This is exactly what we are going to carry out in the following of the paper. 3. VERTICAL INTEGRATION VS. STRUCTURAL SEPARATION There is no need to remember that in past decades network industries were often characterized by a purely monopolistic structure, in the shape of either public monopoly or private undertaking granted exclusive rights. Under this setting, the 11 We are also prepared to acknowledge that the figures are now quite outdated and thus may not represent the current market trend: again, they still provide the reader with useful insights about the competitive environment that Tlc operators were facing in the recent past.
attention of the regulator 12 was primarily focused on final prices, since the main concern was: on the one hand, to prevent the exploitation of monopoly power at the expenses of final consumers by fixing a ‘fair rate of return’ on the capital invested that the incumbent could not exceed and, on the other hand, to ensure the universal provision of the service at uniform and affordable price. During the last forty years, technological advances have weakened the natural monopoly argument, encouraging many States to proceed towards the creation of competitive Tlc markets. Notwithstanding technical progress, some elements of natural monopoly are still present, hence preserving the scope for some form of public intervention. In the Tlc sector, the role of the Government and other public bodies has often been in the shape of regulation of the conditions for the access and interconnection to the vertically integrated incumbent’s network, rather than in direct ownership or operation of the non competitive (i.e. network-related) activities. In the following, we present the different approaches to Tlc regulation which may be adopted by policy makers. In the first part, the analysis starts from the concept of facility-based competition which inspires the current EU regulatory framework. Under this setting, structural separation has no value added in terms of efficiency, leaving to access regulation and antitrust enforcement the main role of procompetitive policy instruments. Indeed, the industry structure prevailing in the European continent is characterized by vertically integrated incumbents competing with entrant Olo in the downstream Tlc service markets. Integration bring about several advantages but, unfortunately, generates perverse incentives on the part of the incumbent in order to raise structural entry barriers and engage in anticompetitive strategic behaviors: both ex-ante sector-specific regulation and ex-post competition law have to deal with these drawbacks, limiting or eliminating socially costly restrictions of competition. The benefits and limits of this approach are studied under both the theoretical and empirical perspective, presenting relevant real-life case studies which involved allegations by the Competition Authority of anticompetitive conduct on the part of the Italian incumbent, Telecom Italia, and regulatory difficulties incurred by the National Regulatory Authority. Although the time period elapsed since the opening of Tlc markets is too short to draw clear-cut uncontested conclusions, it is nevertheless undeniable that some worrying trends towards ‘re-monopolization’ have emerged 13 . For this reason, in the second part the analysis focuses on alternative regulatory design, namely a structural approach relying on structural separation and inspired by the servicebased competition paradigm. Again, theoretical predictions are confronted with real-life experiences or with the debate arising from disintegration proposals. 12 The term regulator is used in a broad sense, not confined to sector-specific Authorities, but including also ‘political’ regulators such as the Ministry or the Government. 13 FROVA AND PONTAROLLO (eds.) [2004], p. 35, considers the expression ‘re-monopolization’ as not representative of industrial reality, since it implies the existence of a truly competitive market which tends to concentrate (again) in a few-firm oligopoly. 6
Page 1 and 2: UNIVERSITA’ CATTOLICA DEL SACRO C
Page 3 and 4: Structural Separation or Integratio
Page 5 and 6: 1. INDUSTRY CHARACTERISTICS Telecom
Page 7: Figure 1. Dynamics of fixed Tlc inc
Page 11 and 12: access rights to essential faciliti
Page 13 and 14: Regulatory framework for electronic
Page 15 and 16: The first example dates back to the
Page 17 and 18: Authorities. Although the ineffecti
Page 19 and 20: services obsolete (and thus worthle
Page 21 and 22: the upstream activity, it has littl
Page 23 and 24: hence makes little sense, if any at
Page 25 and 26: here is that informational asymmetr
Page 27 and 28: REFERENCES AGCM [2002], ‘Parità
Page 29 and 30: EU new regulatory framework perspec
Page 31: 31. Cappellari L., Earnings dynamic

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