 Competition in network industriesNo 1591, Policy Research Working Paper Series from The World Bank Abstract: A wave of privatization is sweeping the globe, affecting about 100 countries and adding up to an average of more than $60 billion a year in business in the past decade. The challenge is to ensure that privatization yields clear benefits. Empirical studies suggest that ownership change by itself will often yield results, especially when it reduces government interference. But the regulation required in areas of natural monopoly can become overly intrusive and undermine progress. Real competition is required to generate sizable and lasting welfare improvements. But in infrastructure sectors, the introduction of competition is complicated by the existence of complex transport and communications networks. Debate about whether and how to introduce competition in network industries is sometimes heated. Certain questions recur: Will continuing regulation be needed? Whether and at what terms will private finance be forthcoming? The author argues that policymakers need to understand how competitive forces can be brought to bear in network industries. He explains the following: 1) common principles that are often lost in"technical"debates about specific sectors; 2) various methods for introducing competition in network industries; 3) competition for the market, and bidding for franchises; 4) options for competition for existing networks; 5) options for expanding competitive systems by decentralizing investment in new network capacity; 6) the option of allowing competition among multiple networks; and 7) the implications of these options for the sectors and for financing industry expansion. In case of doubt, he contends, policymakers should not restrict the entry of competitive firms in such networks. If they do, entry restrictions should be subject to an automatic test after a set period, and reviewed for costs and benefits. Keywords: Economic Theory&Research; Decentralization; Markets and Market Access; Environmental Economics&Policies; Labor Policies; Education for the Knowledge Economy; Economic Theory&Research; Access to Markets; Markets and Market Access; Environmental Economics&Policies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:1591 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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