Comments on network interconnection in communications markets

[Commentary] While interconnection mandates may appear at first blush to be costless, they are not. Rather, as with virtually every other economic institution or arrangement, interconnection has costs as well as benefits.

Such costs may take the form of reduced incentives for network owners to invest in their networks, the loss of specialization that accompanies forced standardization, or various other forms. That is why interconnection and interoperability are not ubiquitous.

In the Internet environment, the value of interconnection is very high -- which is why IP interconnection has been both ubiquitous and voluntary from the Internet’s inception -- but that does not mean that interconnection is always the right answer. The question for policymakers is whether the task of balancing the benefits of interconnection against the costs should as a general matter be made by administrative process, or by the marketplace.