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The aim of the paper is to examine alternative methods of regulating prices and/or profits of privatised utilities in low‐income countries with a view to identifying their…
The aim of the paper is to examine alternative methods of regulating prices and/or profits of privatised utilities in low‐income countries with a view to identifying their strengths and weaknesses.
The economics of regulation literature has favoured the use of a price cap over rate of return or cost of service regulation because of its greater incentive effects. A third alternative, sliding‐scale regulation, has been put forward as a compromise between the price cap and a controlled rate of return, which is said to combine the merits of both methods. This paper considers the operation of a price cap, rate of return regulation and sliding‐scale regulation in the context of low‐income economies by reviewing the theory in relation to the conditions likely to be found in low‐income economies.
It is concluded that the case for the use of a price cap is much reduced in low‐income economies. This is because of its information requirements, need for regulatory expertise and, more broadly, the institutional endowment found in many low‐income countries.
It is recognised that this conclusion is tentative and deserves further research, comparing theory and practice.
Countries need to consider carefully which method of regulation will work best in the context of the institutions of the country, rather than simply copy a method from the developed world.
This is one of the first papers to challenge the prevailing belief that price cap regulation is superior to rate of return regulation in the context of economic development.
The concept of light-handed regulation, including light-handed approaches to the regulation of airport services, is discussed. The rationale for the economic regulation of…
The concept of light-handed regulation, including light-handed approaches to the regulation of airport services, is discussed. The rationale for the economic regulation of airport services and the traditional approaches used for economic regulation of airport charges are summarized. The evolution of international practice of light-handed regulation is outlined, including the experience with minimal regulation across monopoly industries in New Zealand and the acceptance of “negotiated settlements” in utility industries in North America. General reasons for moving to light-handed regulation of airports include the disadvantages of the price cap approach in practice and the benefits of facilitating greater negotiation between airports and users. Comparisons are made between alternative approaches to light-handed regulation of airport services, including price and quality of service monitoring, information disclosure regulation and negotiate-arbitrate regulation, approaches that have been applied to airport services in Australia and New Zealand. The role and nature of the incentives under each approach are discussed. The chapter concludes that whether light-handed regulation provides a suitable alternative approach to direct regulation depends on the market circumstances and the design characteristics of the light-handed approach.
In 1999 the Federal Communications Commission adopted an order granting complete deregulation of the rates for special access service for specific metropolitan statistical…
In 1999 the Federal Communications Commission adopted an order granting complete deregulation of the rates for special access service for specific metropolitan statistical areas based on an objective showing that there was potential competition in that market. This was done in an environment where the local exchange carriers (LECs) subject to price caps were earning a rate of return in excess of 22 percent, with the rate of return on an upward trend. By 2002, the average rate of return across all price cap LECs topped 35 percent. The question that is investigated in this paper is whether the price cap LECs have market power in supplying special access service and whether they have taken advantage of this. The data clearly show that this is the case. Given the prevailing situation, there is a clear need to revisit the pricing flexibility order. First, the product market for special access service needs to be more carefully examined. Second, the metrics used to define the potential for competition need to be revamped.
In many countries state ownership of public utilities is being abandoned in favour of private ownership with state regulation. To prevent monopoly abuse, regulatory…
In many countries state ownership of public utilities is being abandoned in favour of private ownership with state regulation. To prevent monopoly abuse, regulatory structures are being created for the telecommunications, gas, electricity and water and sewerage sectors. From 1984 the UK privatised its major utilities and introduced a form of regulation that is proving to be a model for other countries. This paper looks at the performance of UK privatised utilities and the role of regulation in improving performance. It also considers the important subject of regulatory governance. The paper concludes that regulatory governance depends on the institutional context of regulation and that one country’s regulatory system cannot be successfully transferred to another country with a very different set of institutional constraints without appropriate adaptation.
The issue explored is whether incentive regulation of local exchange carriers in the USA has resulted in an increase in efficiency. After providing an overview of the…
The issue explored is whether incentive regulation of local exchange carriers in the USA has resulted in an increase in efficiency. After providing an overview of the nature of incentive regulation, the methodology for measuring the effects of incentive regulation on efficiency is reviewed. This methodology is data envelopment analysis and allows for the measurement of both technical efficiency and allocative efficiency of individual local exchange carriers. The results of empirically implementing the data envelopment approach (DEA) approach indicate that there is little change in technical efficiency. In fact average technical efficiency in 1988 was the same as in 2001. Next, while outputs continued to grow at about their historical rate across LECs, the sizeable increase in the two types of capital increased inputs well above their historical average rates for some LECs leading to short run allocative inefficiency. On average, however, allocative efficiency shows no identifiable trend between 1988 and 2001. Finally, in the aggregate, total economic efficiency does not demonstrate any trend between 1988 and 2001.
Incentive regulation has become an important regulatory tool in the telecommunications industry in the USA. The issue explored here is whether incentive regulation has…
Incentive regulation has become an important regulatory tool in the telecommunications industry in the USA. The issue explored here is whether incentive regulation has resulted in an increase in productive efficiency. After providing an overview of the nature of incentive regulation, a methodology for measuring technical efficiency and its change is introduced. This is a multiple‐output/multiple‐input distance function approach to measuring technical efficiency. The results of implementing this approach for 19 local exchange carriers for the 1988‐1999 period indicate that, in the production of local service, intrastate toll/access service, and interstate access to local loops, there was no change in technical efficiency between the 1988‐1990 and the 1991‐1999 periods, something that incentive regulation was specifically designed to promote.
The purpose of the paper is to review the progress made with the EU Roaming Regulation and to identify policy options from the review that the EC must now undertake.
The paper presents a review of the development of the two regulations, of the market developments in the EU and beyond, and an identification of the policy and regulatory options.
The new Commission is constrained by the decision not to use a competition law approach and the lack of a robust market definition, and thus a further period of price controls seems unavoidable.
Key documents and data are not available, making analysis of certain constraints and revenue flows between operators impossible to evaluate.
The EC will have to craft a new set of price controls and develop a pathway towards the use of the directives to regulate roaming charges.
The paper is a first attempt to identify options and constraints for the future regulation of international mobile roaming charges.
Examines Spain’s problems in implementing regulatory reform and offers suggestions for addressing them. Hopes to be instructive to other countries embarking on regulatory…
Examines Spain’s problems in implementing regulatory reform and offers suggestions for addressing them. Hopes to be instructive to other countries embarking on regulatory reform. Concludes that other countries should concentrate on problems on implementation that they are likely to face and should be prepared for.
Internationally public utilities, sometimes referred to as network industries, are being privatised and dedicated regulatory structures to protect the public interest are…
Internationally public utilities, sometimes referred to as network industries, are being privatised and dedicated regulatory structures to protect the public interest are being introduced. This study looks at the related issues of post‐privatisation performance, regulatory risk and management strategies in privatised public utilities, drawing on evidence from the UK. The main findings are, first, that in assessing the impact of privatisation on economic performance it is difficult to separate out the effects of ownership, competition, regulation and technological change. Second, that in terms of the distribution of the efficiency gains, initially investors were the main beneficiaries in the UK, but consumers gained as competition developed and regulation tightened. Third, regulated enterprises are subject to regulatory risk as well as commercial risk with implications for types of management strategies adopted. Following privatisation the dynamics of regulation involve both the regulator and management learning about regulation and the optimal strategies to adopt. The UK's experiences are educational for those countries now contemplating or in the process of introducing privatisation programmes.
This paper reviews and evaluates the literature concerning the privatisation and regulation of the utility industries in the UK. The economic theories behind and political…
This paper reviews and evaluates the literature concerning the privatisation and regulation of the utility industries in the UK. The economic theories behind and political reasons for the programme are considered to give the reader an appreciation of the environment from which these organisations were born and the implications for their continued existence. Once this has been established the paper then considers the role that accounting has played and will continue to play in these industries. This includes consideration of the technical questions which these new organisations are asking and also the role that accounting has in the organisational structure and culture. It draws as a conclusion that these recently privatised industries provide a unique and rich source for further accounting research.