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Market Structure and Innovation in the Telecommunications Sector

A debate continues on whether the structural separation of incumbent telecommunications operators would increase competition.

A debate continues on whether the structural separation of incumbent telecommunications operators would increase competition in telecommunications markets leading to a more dynamic industry. John Cubbin and David Currie, the future Chairman of OfCom, and the OECD have both contributed to this debate. More recently (in Issue 4 of this Volume) Professor Martin Cave asked the question ``Is LoopCo the answer?’’. In the light of the regulators’ objectives in the new EU framework to promote efficient investment, this article answers some of Professor Cave’s arguments against structural separation and sets out a framework for analysing the impact of separation on innovation in the sector and in other industries which use telecommunications as a key input. The article draws on work conducted by other academics, notably The Netherlands Bureau for Economic Policy Analysis and Michael Porter.