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Governing Telecommunications and the New Information Society in Europe

Edited by Jacint Jordana

European countries have recently been involved in an extremely broad set of regulatory changes to introduce competitive markets into the area of telecommunications. New policies to develop the information society in Europe are also emerging, taking into account the changes in regulations. The contributions included in this book examine several dimensions of these major European issues, including multi-level governance, the instruments used to produce these policy changes, and the European idiosyncrasies of globalisation trends.
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Chapter 3: Barriers to Entry in European Telecommunications Markets

Martin Cave


Martin Cave 1. INTRODUCTION This chapter is concerned with the degree to which barriers to entry are restraining the operation of competitive telecommunications markets in the EU (European Union). The notion that telecommunications is a potentially competitive industry has now gained strong support, after an almost complete reversal of the conventional wisdom 20 years ago that fixed telecommunications (at least) was a natural monopoly. At the same time, the importance of telecommunications as a crucial enabler of the new digital or electronic economy is now widely recognised - notably at the EU’s Lisbon summit in March 2000. Notwithstanding this revolution in the way policymakers and business executives think about the potential for competition in telecommunications, there remain serious difficulties in the design and implementation of a regulatory and policy framework in which the benefits of competition can be realised. Considerable progress has been made in Europe. Thus the Commission’s fifth implementation report on the telecommunications reform package, published in October 1999, reported that over a thousand operators were providing service in member states, but that there was a marked lack of competition in the local access market. These remarks make it clear that concerns about barriers to entry are by no means over. In order to elucidate the interaction between barriers to entry and the regulatory framework, it is useful to go back to the basis on which investment decisions are likely to be made by potential entrants. In standard investment appraisal procedures, entry requires a positive net present value;...

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