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privatisation for NTT, NTT was privatised as a
single entity following a political compromise.
Therefore discussions on structural separation
lingered on after 1985. Once it seemed that the
discussions were settled by the reorganisation of
NTT in 1999 under a holding company structure.
NTT was reorganised into NTT-East, NTT-West,
NTT Communications, and NTTdocomo under
this holding company structure. The reorganisa-
tion is classified as a separated subsidiary form
of structural separation as it does not accompany
ownership unbundling.
It became relatively easier to separate between
local and long-distance businesses because NTT
completed the digitalisation of the telecommuni-
cations network. However, this distinction was
applied only to POTS and the diffusion of the
Internet has blurred the distinction between local
and long-distance services and the framework
has become inconsistent with the development
of the Internet.
In contrast to the POTS market where mature
technologies are deployed, various access tech-
nologies have started to burgeon in the broadband
market where the implementation of structural
separation is not without its problems. We should
objectively estimate the costs and benefits of struc-
tural separation in the broadband market. Before
discussing the costs and benefits of structural
separation in broadband market, I will analyse
the differences in the structure of the broadband
market between the U.S.A and the EU, and Japan.
Remedies should be different depending on the
difference in market structure.
As stated above, although functional separa-
tion is discussed in many countries, structural
separation with ownership unbundling is not
implemented except in the U.S.A. There are two
reasons behind this. One is the existence of a trade
off between the fair competition expected to be
realised by structural separation and the efficiency
accompanying vertical integration. The other is
the indispensability of conduct regulation such
as regulation on interconnection charges even
after the implementation of structural separation.
More important are the changes in the structure
of the telecommunications industry. In the POTS
era, telecommunications services were vertically
integrated from physical to content layers based
on the established circuit switched network tech-
nology that was composed of metallic cables and
exchanges. In the case of broadband that utilises
IP and various access technologies such as ADSL,
FTTx and wireless, the physical network, service
and content layers are horizontally separated. It has
become difficult to decide where to structurally
separate. It is also feared that structural separation
might prevent the development of new technolo-
gies. As a result, the discussions against vertical
integration have retreated behind the scenes and
mergers involving vertical integration such as
between SBC and AT&T or between Verizon
and MCI have been approved (Kamino (2009))
in the U.S.A.
However, the EU is continuing discussions on
structural separation of former state monopolies
and the discussions on structural separation with
ownership unbundling of NTT are still being
pursued in Japan. I submit that structural separa-
tion in the telecommunications industry should be
re-evaluated by taking into account the changes in
industry structure and technological innovation.
THE DIFFUSION OF BROADBAND
AND THE CHANGES IN
MARKET STRUCTURE
The American Broadband Market
One of the characteristics of the broadband market
in the U.S.A. is that facilities based competition
has developed between LECs (Local Exchange
Carriers)' ADSL services and cable modem ser-
vices offered by cable operators. According to
the FCC's statistics (Table 2) that give the market
shares by technology, ADSL is 39.6% and cable
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