Regardless of the merits of a new entrant, it would not be allowed to compete or build facilities. Further, companies require termination in countries where they have no presence, and there is significant disincentive for the incumbents to agree to termination rights for a smaller competitive player. So even if the country of domicile of a new entrant does allow competition, the new entrant may have to depend on its competitors for a significant amount of its international termination. Build-out of a rudimentary backbone network will cost tens of millions of dollars, much more if the carrier elects to construct the long haul assets rather than buy from existing physical plant. Further, rapid technological change requires constant updating on the terminating equipment, at a significant capital expense.
Carriers networks have significant cost differentiation for different strata of customers.
The installed base suitable to provide service in sparsely populated areas can be 10x to 20x the cost per customer in densely populated ones. The result in deregulated markets is intense competition in urban areas and on long hauls, minimal focus on rural or isolated areas. We should divide the Sunk Assets models into several subcategories. First and foremost are the backbone carriers. Backbone is a word that is more associated with Internet service than telecommunications, though the difference is minimal between the two.