Opportunities and constraints for public and corporate networks in post-reunification Germany.
The study exammes the relationship between corporate and public telecommunication
networks, and the role of interconnection. The telecommunication development in East
Germany in the post-unification period is presented as a critical case study to examine the
impact of restricted interconnection and monopolistic network supply on corporate network
growth. A survey questionnaire in conjunction with in-depth interviews with large corporate
users is applied to evaluate their propensity to establish private networks in East Germany. In
order to generalise the results, statistical methods (logit and probit models) have been applied
to several empirical data sets. The empirical findings of the analysis are compared with
assumptions that have guided public policy in Germany between 1990 and 1994.
The study demonstrates that interconnection accelerates network tipping, i.e., the adoption of
private networks by a majority of large corporate users in conjunction with their exit from the
public network. It evaluates different technical solutions to unbundle activities in digital
nehvorks that enable an interconnection of corporate and public telecommunication networks
In distinguishing between closed and open network access, interconnection is related to the
concept of 'appropriability'. Open network access facilitates competitive network supply and
undermines the traditional monopolies of the Post, Telegraph and Telephone Administrations
(PTTs). Closed network access restricts competitive network supply and is a characteristic of
a network design controlled by a dominant PTT. The study argues that closed network access
can lead to a 'lock-in' configuration, i.e, an inefficient adoption of network technologies It
postulates that the 'lock-in' situation in the East German telecommunication sector in the 19905
is due to the instantaneous application of the West German regulatory framework and
monopolistic inefficiencies of German Telekom.
The main conclusion is that there is a need to reconsider the traditional 'natural' monopoly as
the most appropriate industrial structure to accelerate infrastructure development in countries
with poorly developed telecommunication networks especially in East and Central East
Europe. Moreover, it is argued that the expansion of corporate networks can contribute to the
modernisation of telecommunication infrastructure when open network access is permitted.
However, the specific circumstances in which open interconnection policies can facilitate the
modernisation of the public network depend on a large number of country specific features.
These are examined in detail for the case of the former East Germany.