The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation

In this article we use transaction cost economics to analyze the determinants of performance of privatized utilities in different political and social circumstances. Case studies are drawn from telecommunications regulation in Argentina, Chile, Jamaica, the Philippines and the United Kingdom. We explore how political institutions interact with regulatory processes and economic conditions in determining the potential for administrative expropriation or manipulation, and hence affect the sector's economic performance. We find that performance can be satisfactory with a wide range of regulatory procedures, as long as arbitrary administrative action can be restrained. We find also that regulatory credibility can be developed in unpropitious environments, that without such commitment long-term investment will not take place, that achieving such commitment may require inflexible regulatory regimes, that in some cases public ownership of utilities is the default mode of organization, and furthermore, that it may be the only feasible alternative. Copyright 1994 by Oxford University Press.