Paul J. J. Welfens and George Yarrow A. Telecommunications in Western Europe: Liberalization, Technological Dynamics and Regulatory Developments 9 Paul J. J. Welfens and Cornelius Graack 1. Introduction 9 2. Liberalization and Market Expansion in Telecommunications 12 2. 1 Global Forces in Telecoms Liberalization 19 2. 2 Privatization and Deregulation in Western Europe 22 2. 3 Politico-economic Deregulation Pressures 26 3. Technological Dynamics 30 3. 1 Digitization 31 3. 2 Integrated Services Digital Network 33 3. 3 Fibre Optics, Fibre to the Home and Optical Networks 35 3. 4 Mobile Communications 38 4. Regulatory Developments 40 4. 1 Regulatory Developments on the EC Level 41 4. 2 National Regulatory Frameworks: Developments and Experiences 46 4. 2. 1 Telecommunications Equipment 47 4. 2. 2 Value-added Services 49 4. 2. 3 Infrastructure 52 5. Prospects and Consequences for Central and Eastern Europe 72 Appendix 78 B. Telecommunications in Systemic Transformation: Theoretical Issues and Policy Options 85 Paul J. J. Welfens 1. Introduction 85 2. Points of Departure in Eastern Europe 90 2. 1 Structure of the Telecoms Industry in an East-West Perspective 94 2. 2 Telecoms Industry as a Strategic Industry for Systemic Transition 97 VI Telecommunications and Energy in Systemic Transformation 3. Theoretical Aspects of the Telecoms Industry 99 3. 1 Some Problems of Uniform Subscriber Pricing 99 3. 2 Competition, Natural Monopoly and Economies of Scope 102 3. 3 External Effects of Telecoms Network Expansion 109 3.