Information Technology Reference
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problems as hold-up, coordination, or transaction
costs are not significant in the POTS market.
As the Internet is a self-governed and dispersed
network and voice is handled as one of the various
applications over the Internet, the distinction
between local and long-distance has disappeared.
The only remaining distinction is between access
and the network. Therefore, discussions on struc-
tural separation in the broadband market will be
focused on access division.
Various access technologies in the broadband
market are being introduced. Technologies such as
ADSL, cable modem, Wi-Fi, WiMAX, FTTx and
cellular have been appearing in the market one after
another and it is difficult to predict which technol-
ogy will dominate the market. Even in the case of
FTTx, actual implementation varies. In the basic
case, an individual subscriber uses exclusively a
fibre core. In the case of VDSL, fibre cores are
shared by some users by interconnecting with
the inside metallic cables. NTT local companies
are offering services for individual users based
on the sharing of a fibre core by several users. In
other cases a fibre core is highly utilised based on
wave-length multiplexing technology. Therefore,
the definition of bottleneck facilities depends on
technological innovation. NTT local companies
are offering shared fibre services. In this case,
up to 8 users share a fibre core. Competitors are
demanding the unbundling of each shared element
of a fibre and NTT local companies are insisting
that they should offer dark fibre only on a core
basis. The designation of bottleneck facilities
depends on the definition of the market. Unless
we define the market, we cannot decide whether
market power exists or not. Even if market power
is admitted to exist, it is hard to decide where to
separate the vertically integrated firm.
The Internet technologies are making steady
progress. Both IPV4 and IPV6 are utilised with
the introduction of NGN by NTT local companies
and the coordination between access technologies
and the network has become more complicated as
shown in Figure 3. These facilities are in the pro-
cess of being built up. Huge investment is required
and it is necessary to coordinate on specifications
and service qualities with downstream firms.
Thus it is important to consider such problems
as hold-up coordination and transaction costs in
a broadband market.
Figure 3. Structure of POTS and broadband
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