Geographically Segmented Regulation : Lessons from the FCC for European Communications Markets

Since telecommunications markets were liberalized, competition has not developed in a geographically uniform manner, and the introduction of NGA networks is likely to exacerbate these geographic differences. Geographic variations in competition have caused European regulators to consider the use of geographically segmented regulation. Unfortunately, geographically segmented regulation is complicated and requires compromises and judgment calls. As a result, there is a danger that inconsistent implementation of geographically segmented regulation by NRAs may threaten the Single European market. This paper examines the experience of the Federal Communications Commission (FCC) in defining relevant geographic markets and in adopting geographically segmented regulation. The paper begins by sketching the statutory and regulatory framework within which the FCC must operate. It then describes the FCC's approach to defining relevant geographic markets for purposes of merger review and dominance determinations. The paper then examines how the Commission has attempted to adjust regulation for geographic differences in the level of competition, both in rule making proceedings and in response to petitions seeking forbearance from regulation. Drawing on the U.S. experience, the paper concludes with some observations on the difficulties and tradeoffs that European NRAs are likely to face in implementing geographically segmented regulation