The Frontier of Telecommunications Deregulation: Small Countries Leading the Pack

Interconnection, equal access, unbundling, and industry structure are four key determinants of facilities-based competition in telecommunications. Using these building blocks, this paper analyzes the differences in telecommunications regulatory regimes in Australia, Chile, Guatemala, and New Zealand, assessing the effect on competition and consumer welfare. Some regulation is necessary as incumbents can prolong their market power after demonopolization by exploiting positive externalities inherent to telecommunications networks. The authors emphasize the superiority of market mechanisms over traditional regulatory processes to achieve efficient transactions among operators. Such market mechanisms need clear rules and credible enforcement.