Tendering Universal Service Obligations in Liberalized Network Industries

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Inhoud: In the past decades, several countries have introduced reverse auctions for allocating universal service or public mission subsidies in various industries. Examples include urban transport, air transport and telecommunications. Recently, such mecha...nisms have also been envisioned in liberalized postal markets. Issuing an invitation to tender for obligations in otherwise liberalized markets significantly differs from auctioning off a monopolistic provision of services or goods ("competition for the market"), as is e.g. the case with spectrum auctions in the telecommunications sector. We discuss the rationale for introducing such a regulatory regime as well as conceptual and practical issues concerning its implementation. <br>It turns out that designing an efficient tender for universal service subsidies in liberalized markets is considerably more difficult than tendering e.g. a monopoly franchise. A first reason is that the cost assessment is more complex in the former case as future competitive market outcomes have to be anticipated; in the case of franchise bidding, at least the number of competitors is given by the tender itself. Hence, revenue effects caused by competitors are easier to calculate. Second, the threat of a winner's moral hazard requires more detailed ex ante regulations. These raise the social cost of universal service provision. Compared to direct designation of universal services with ex post compensation, tendering causes a series of fundamental concerns and trade-offs that make the application of auctions less attractive than in other sectors.hide

Urban Planning and Railway Corridors: Resolving Regulatory Dysfunction in Australia

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Inhoud: In Australia, land adjacent to rail corridors has traditionally been considered blighted owing to the detrimental environmental impacts that rail operations have on their surroundings. However, this adjacent land is now increasingly being used for ...residential development, which means that there is an increasing number of people living next to rail corridors negatively impacted by rail operations, particularly with respect to noise and vibration. This also means that there is increasing political and regulatory pressure on rail operators and track owners to ameliorate noise impacts. There are a number of issues at play when considering the conflicting relationship between transport corridors and development adjacent to these corridors. These are 1) the willingness of governments to employ adequate planning instruments and Development Application (DA) processes that consider the potentially conflicting interactions between different land uses, 2) the level of sophistication pertaining to noise and vibration reduction technology utilised by rail industry organisations, and 3) the willingness of rail organisations responsible for rail operations and infrastructure to address these conflicts through technological upgrades and negotiate with policymakers. A qualitative research study was undertaken to determine the level of conflict between the regulation of environmental emissions (primarily noise, dust and visible diesel emissions), state-based planning regulations, and DA approvals administered at a local government level.1 As a result, regulatory inefficiency was identified in the context of urban development encroaching on rail corridors and facilities. These inefficiencies are set against a historical background resulting from the Australian federalist system of government, which has led to a disjuncture between the three tiers of government in the administration of environment-specific regulation, particularly where state governments have a high degree of control.hide

How Independent Are Belgian Regulators?

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Inhoud: In this paper we attempt to analyse the independence of five Belgian regulatory agencies. In the theoretical part we cover the existing literature and find that independence is frequently used as a proxy for credibility. In the empirical part we us...e the framework constructed by Johannsen (2004) to measure the independence of Belgian regulatory agencies. In this framework four aspects of independence are identified and quantified leading to an overall independence index. Using legal analysis this framework is applied to the Belgian situation. We find that the independence of the Belgian financial regulator is very high, while the railway regulator is lacking most features of independence. The other regulators' score (the competition authority, the energy and telecommunications regulators) is somewhere in between. The overall picture is one of inconsistency.hide

The Dynamic of Competition in Presence of Switching Costs. Lessons from British Gas (1997-2007)

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Inhoud: Theoretical models with switching costs have shown that, in a dynamic game, firms have incentives to adopt two-period strategies. Initially firms will 'invest' in markets at an early stage in their development to be able to then 'harvest' at a late...r stage when consumers are locked-in to the supplier they have previously patronized. This article illustrates, based on a case study: the supply of electricity in Great Britain, that this two-period strategy is not always crowned with success. Specifically, certain firms (in this case British Gas) may have difficulties sustaining customer loyalty in the second phase because customers benefit from a 'learning effect', which in turn lowers their switching costs. Taking these learning effects into account could enrich the range of situations analyzed in the existing economic literature with respect to the understanding of the impact of switching costs on competition.hide