The UNE Anticommons: Why the 1996 Telecom Reforms Blocked Innovation and Investment

Abstract

The United States is losing its competitive edge in telecommunications partly because of FCC mistakes in fragmenting property rights in, and in the regulatory oversight of local telephone facilities and services. As with post-socialist transition, reformers created a "tragedy of the anticommons" in which too many owners and regulators each can block the others' investments and all players forego innovation. By forcing existing companies to unbundle network elements (UNEs) and sell them too cheaply, the FCC has created an industry where the players cannibalize the legacy network, divert resources to regulatory arbitrage, and have little incentive for bold new investments.