10 September 2007

Structural Separation

There has been a bit of a debate going on that argues, in essence, since network neutrality seems infeasible, let's separate transport from services. BT in the UK has taken this approach, which has apparently been hailed by EU Commissioner Viviane Reding. I have a few questions about this idea:

  • We have tried structural separation in the past in the US ... some of us remember Computer I and Computer II. Is this proposal different? Why? How?
  • While structural separation, in theory, does remove incentives on the part of network operators to discriminate, to what extent would infrastructure investments be inefficient? That is, can transport providers make more efficient investments if they know (and can confidently predict) upcoming services and their deployment? Part of this is a problem of opportunism and asset specificity that Williamson predicted would result in increased transaction costs (and hierarchy).
  • Assuming that the above questions are resolved, how would this be implemented? Do you think it could happen voluntarily (as it did in the UK)?

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