Integration and access regulations in telecommunications

Abstract Competition in telecommunications is not only affected by the integration structure, but also by regulatory arrangements on access. We find that, under partial deregulation, where access is mandated but access rates are not regulated, the access charge and hence the price of long distance calls is lower when LECs are not integrated with IXCs than when they are integrated. However, under both complete deregulation and full regulation, competition in integration is more efficient than separation. Under all three regulation regimes, consumers are better off in integration than separation, while the firms are worse off. These results suggest that regulation on access should be formulated in conjunction with industrial or competition policy. They also indicate that a particular market structure may emerge endogenously under a given regulation regime.