broadband strategies handbook.pdf - Khazar University

2010, 494–95). In such cases, a dominant, vertically integrated operator maystrategically discriminate against competitors and stifle competition.Remedies to Anticompetitive Conductby a Vertically Integrated OperatorTo address competitive concerns associated with vertical integration,some regulators have required dominant operators to separate vertically tosome degree through accounting separation, functional separation, or, inextreme cases, structural separation.Accounting SeparationThe least intrusive and most prevalent remedy, accounting separation,makes transparent the vertically integrated operator’s wholesale prices andinternal transfer prices, enabling regulatory authorities to monitor compliancewith nondiscrimination obligations or to ensure that there is no crosssubsidization.Generally, accounting separation requires the verticallyintegrated operator to maintain separate records for its upstream and downstreamcosts and revenues in order to allow the regulator to set wholesaleprices for the regulated upstream services. These records are typically subjectto independent audit and may also be made publicly available. Althoughthe operator must make its costs transparent, under this remedy it is able tocontinue benefiting from the efficiencies of vertical integration.In 2004 the Info-communications Development Authority (IDA) of Singaporeissued accounting separation guidelines to allow monitoring of theICT sector for potential anticompetitive behavior (IDA 2004). These guidelinesestablished two levels of accounting separation: detailed segmentreporting (applicable to dominant service providers and entities they control)and simplified segment reporting (certain other entities). This twotieredapproach is intended to provide the IDA with the necessaryinformation, without unduly burdening operators, to ensure that no dominantprovider is engaging in cross-subsidization or discrimination. Currently,incumbent SingTel is the only operator designated as dominant inany market, and it is subject to detailed accounting separation obligations.Functional SeparationObligations under functional separation range from simply requiring theoperator to establish separate divisions for upstream and downstreamactivities to requiring the operator to separate the wholesale and retail divisionsphysically. This may involve the separation of employees (for example,physical separation of offices and prohibitions on the same employee122 Broadband Strategies Handbook