Liberalizing telecommunications in Europe: path dependency and institutional complementarities

We empirically investigate the nature and outcomes of the liberalization process in European telecommunications. First, we show that decisions to liberalize a country's telecommunications sector have followed a path-dependent and cumulative pace. Moreover, we investigate the extent to which path dependency might have forced liberalizations, regardless of the creation of complementary institutions governing pro-market outcomes. We find that the impact of liberalizations on competition is strongly enhanced by the establishment of complementary institutions, such as the national regulatory authority. Our findings contribute to the existing literature by outlining the role played by path dependency and institutional complementarities in the process of European liberalization. Our conclusions may provide useful lessons for the optimal policy design of pro-market policies in those European network industries that still wait for substantial liberalization.