Unbundled Network Elements

I originally wrote this entry on August 16, 2004 and published it on blogs.sun.com.

Transaction costs include legal costs of maintaining a regulatory regime. A good regulatory regime should optimally reduce such costs.

On Lessig Blog, Tim Wu writes that "the Telecom Act of 2006" should include among other things the abandonment of 1996 Act's "Unbundled Network Element" approach to telephony competition. "The litigation costs just aren't worth it," he adds.

With rather great detail on particular cases of unbundling, the Telecommunications Act of 1996 stipulates that operators would have to make available, for sale to their competitors, their unbundled network elements. This implies unbundling not only physical elements but the uses of that physical element. So, for example, operators owning voice and DSL service infrastructure, such as the last mile of connectivity, would have to make the infrastructure elements for these two services available to their competitors as an unbundled, separate and individual market items for each service type.

To be more precise, the 1996 FCC Act, defines and stipulates unbundled access up to the point such that the elements could be rebundled by the buyer.

UNBUNDLED ACCESS- The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory in accordance with the terms
and conditions of the agreement and the requirements of this
section and section 252. An incumbent local exchange carrier
shall provide such unbundled network elements in a manner that
allows requesting carriers to combine such elements in order to
provide such telecommunications service.