Information Technology Reference
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classification of cable modem as an 'information
service', while it kept its unbundling obligation
on LECs. The regulation of the FCC has contrib-
uted to the formation of the specific broadband
market structure in the U.S.A. The development
of the facilities based competition in the broadband
market has made it unnecessary to implement
structural separation. The vertically integrated
structure of LECs and cable operators brought
about efficiency by eliminating the transaction
costs of structural separation.
not to regulate based on market analysis. Therefore
the regulation on LLU differs depending on the
market structure of member states.
The penetration rate of cable was compara-
tively high in some of the member states and
there existed the possibility of facilities based
competition developing between LECs and cable
operators. However, in the case of Germany where
most of the cable network was owned by DT, cable
modem was not widely diffused because DT was
reluctant in the expansion of cable modem for fear
that it might cannibalise its own ADSL.
As the diffusion of broadband in the EU lagged
behind Japan or the U.S.A, and the ADSL offered
by competitors that utilise LEC's LLU was not
developed (Table 3), discussions on structural
separation were more vigorous in the EU.
It was the U.K. that first started discussions
on structural separation as stated in the previous
section. The EU stance on structural separation
has not been settled
7
. The EC proposed in the
process of its '2006 Review of the Regulatory
Framework (EC(2006))' to introduce functional
separation as an exceptional measure when it is
considered that conduct regulation by itself is not
sufficient in securing fair competition (EC
(2007b)). The ERG expressed the view in October
2007 that functional separation may be introduced
after conducting a full cost and benefit analysis
The Broadband Market in the EU
The introduction of competition implemented
by the Full Competition Directive (EC (1996))
was rather late in many of the EU member states
except for the U.K. The progress of competition
in the POTS market lagged behind the U.S.A.
or Japan. When regulatory policy on broadband
was discussed in both countries, the discussion in
the EU was still focused on POTS. For example,
although the usage of LLU (Local Loop Unbun-
dling) was expanded in Germany at the beginning
of 2000, it was mainly used for voice services. It
was around 2004 when LLU began to be utilised
for broadband. Although the EU imposed a LLU
obligation in 2000 (EC (2000)), it moved to a
market analysis approach. It will decide whether or
Figure 1. Structural separation and broadband market structure in the U.S.A.
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