Cutting the ties that bind: structural separation and investment incentives for New Zealand's fibre-optic broadband

Abstract

Mandatory structural separation of networks from retail operations is increasingly becoming a feature of telecommunications markets - as evidenced in the 2007 legislation ultimately resulting in the separation of Chorus from Telecom's other operations and strict limitations upon the extent of retail ownership of the fibre companies to be established under the government's fibre strategy. Whilst such separation may facilitate rapid and extensive competitive retail entry experience from the electricity industry suggests it is far from clear that mandatory separation (with concomitant reliance upon contracting mechanisms to overcome many problems that would otherwise be more efficiently addressed via vertical integration) will result in the appropriate incentives for either timely or adequate levels of investment. Bronwyn Howell explores some of these issues with specific reference to the development of fibre-optic networks.