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Local Loop Unbundling: One-Way Access and Imperfect Competition

Local Loop Unbundling: One-Way Access and Imperfect Competition

de Bijl, Paul and Peitz, Martin, "Local Loop Unbundling: One-Way Access and Imperfect Competition" (December 2004). International University in Germany Working Paper No. 27/2004.

Abstract:

    This paper analyzes one-way access and, in particular, local loop unbundling (LLU) in telecommunications markets. At present, LLU seems most promising as a means for entrants to offer broadband internet access. As voice telephony can be implemented by using the 'internet protocol' when consumers have broadband access, LLU may, in the end, spur competition in markets for voice telephony as well. Thus LLU is an important way to stimulate competition in the broadly defined market for fixed telecommunications. In this paper we explore situations of one-way access in which the entrant, the firm without the essential input, has market power. We first review the nature of LLU when there is full consumer participation. Next, we explore the case of partial participation, where the entrant can attract further participation. In the first case, unbundling requirements are neutral to competition. This result breaks down under partial consumer participation. Hence, regulation of unbundling requirements should be particularly concerned with market segments such as broadband access in which partial participation seems to be a key feature.
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Facts on voip

  • Voice over IP traffic might be deployed on any IP network, including ones lacking a connection to the rest of the Internet, for instance on a private building-wide LAN.
  • VoIP phone calls (even international) are widely regarded as free. While there is a cost for their Internet service, using VoIP over this service usually does not involve any extra charges, so the users view the calls as free.
  • Voice over Internet Protocol (also called VoIP, IP Telephony, Internet telephony, and Digital Phone) is the routing of voice conversations over the Internet or any other IP-based network. The voice data flows over a general-purpose packet-switched network, instead of traditional dedicated, circuit-switched voice transmission lines.

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