Separation of the various components of production, distribution and service in order to introduce greater elements of competition to these segments of an industry. ‘Functional unbundling’ requires monopolistic utilities to provide access to (part of) their distribution or service network, in exchange for an access fee. ‘Structural unbundling’ makes complete vertical separation necessary and obliges monopolistic utilities to divest their production, their distribution or their service assets.

Source: Glossary of terms used in EU competition policy, Antitrust and control of concentrations, European Commission, 2002