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Competition Policy and Sector-Specific Regulation for Network Industries

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  • Martin Hellwig

    ()
    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

The paper discusses the respective roles of competition policy and sector-specific regulation for industries such as telecommunications, electricity, and gas, in which network infrastructures that are natural monopolies serve as essential facilities for anybody who wants to provide services in downstream markets. Whereas, in the past, such industries tended to be organized as state-owned or state-regulated vertically integrated monopolies, after a fundamental change of paradigm, appropriate governance nowadays is considered to involve downstream competition supported by a state-mandated access provision to the monopoly infrastructures. Following a brief sketch of the paradigm change, the paper enters into a systematic discussion of (i) the comparative advantages and disadvantages of the two policy regimes in enforcing access provision, (ii) the appropriate framework for drawing the line between regulated and unregulated parts of the industry, and (iii) a set of issues that arise when competition policy and to sector-specific regulation apply to a given industry at the same time. The discussion refers to (i) the German experience before 2005 when competition policy was used to regulate access in the energy sector, (ii) the European Directives of 2002, which rely on the concepts of “market” and “significant market power” to determine which parts of the industry should be subject to regulation, and (iii) the recent cases in the telecommunications and postal sectors in which European competition law was used to proscribe behaviour that had been accepted by national regulators.

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File URL: http://www.coll.mpg.de/pdf_dat/2008_29online.pdf
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Bibliographic Info

Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2008_29.

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Date of creation: Jul 2008
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Handle: RePEc:mpg:wpaper:2008_29

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Keywords: Network Industries; Competition Policy; Sector-Specific Regulation;

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  1. Felix Höffler & Sebastian Kranz, 2007. "Legal Unbundling can be a Golden Mean between Vertical Integration and Separation," Bonn Econ Discussion Papers bgse15_2007, University of Bonn, Germany.
  2. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
  3. Felix Höffler, 2006. "Monopoly Prices versus Ramsey-Boiteux Prices: Are they “Similar”, and: Does it Matter?," Journal of Industry, Competition and Trade, Springer, vol. 6(1), pages 27-43, March.
  4. Newbery, D., 2006. "The relationship between regulation and competition policy for network utilities," Cambridge Working Papers in Economics 0631, Faculty of Economics, University of Cambridge.
  5. Newbery, David M., 2002. "Problems of liberalising the electricity industry," European Economic Review, Elsevier, vol. 46(4-5), pages 919-927, May.
  6. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  7. David M. Newbery, 2002. "Privatization, Restructuring, and Regulation of Network Utilities," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640481, December.
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