The Governance of Network Industries

The Governance of Network Industries

Institutions, Technology and Policy in Reregulated Infrastructures

Studies in Evolutionary Political Economy series

Edited by Rolf W. Kunneke, John Groenewegen and Jean-François Auger

Infrastructures are subject to substantial readjustments of governance structures, often labeled as liberalization, privatization or re-regulation. This affects all traditional infrastructure sectors including communications, energy, transport and water. This study highlights and illustrates some of the major challenges for readjusting the governance of network industries from an economic, institutional, political and technological perspective. The three parts of the book address the institutional design of infrastructures, the role of technology in different sectors and actor behaviour.

Chapter 1: Challenges for Readjusting the Governance of Network Industries

Rolf W. Künneke and John Groenewegen

Subjects: economics and finance, industrial economics, institutional economics, public sector economics


Rolf W. Künneke and John Groenewegen INTRODUCTION In the past three decades, infrastructures have been subject to substantial readjustments of governance structures, often labeled as liberalization, privatization or reregulation. This readjustment appeared as a global phenomenon, in countries with different political preferences, ideologies, and stages of economic development. It affected all traditional infrastructure sectors, including communication, energy, transport, water and postal services. Basically this readjustment of governance consists of stronger involvement of private sector initiatives, allowing for competition in certain parts of the value chain, and arms length regulation of governments. Conway and Nicoletti (2006) provide some empirical evidence for these tendencies. Between 1975 and 2003, there was a significant decline of barriers to entry, less price control and a diminishing degree of public ownership. A fundamental change of market structures and industry restructuring, that is, vertical disintegration, is less obvious (see Figure 1.1). The reform efforts started in the late 1970s. Chile was one of the pioneering countries with its early liberalization of the electricity market (Raineri 2006). The United States, the United Kingdom, Canada, New Zealand and the Scandinavian countries started their liberalization policy in the early and mid 1980s (see Figure 1.2). Evidently all member countries of the Organisation for Economic Co-operation and Development (OECD) are significantly engaged in readjusting the governance of network industries in order to allow for more competition and private sector involvement. The period after 1995 shows an acceleration of these developments. Along with these institutional changes, technological innovations emerged, most prominently...

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