Competition, Spatial Location of Economic Activity and Financial Issues
Edited by Miroslav N. Jovanović
Chapter 3: European Economic Integration and Network Industries
Pierre-André Buigues and Roderick Meiklejohn1 1 INTRODUCTION Network industries (telecommunications, postal services, air, rail, electricity, gas) are particularly important since they play a major role as determinants of the growth and competitiveness of the economy. In these industries, market opening (liberalisation) was expected to enhance the static and dynamic efficiency of firms. This chapter summarises the progress of the opening to competition of the network industries following the completion of the internal market programme. It was expected that the removal of the barriers between the member states of the European Union will induce a supply-side shock under the pressure of new competitors and that costs and prices will come down. This chapter is structured as follows. Section 2 discusses the economic characteristics of network industries. Section 3 presents the evolution of the regulatory and competition frameworks designed to allow these industries to operate efficiently. Section 4 covers the market structure and cross-border activities in the network industries, trade or mergers and acquisitions. Finally, section 5 presents an evaluation of the performance of network industries and the impact of liberalisation on performance. 2 MARKET INTEGRATION IN NETWORK INDUSTRIES The Economic Characteristics of Network Industries Network industries are characterised by the delivery of essential services to consumers via a network infrastructure. The network infrastructure is a structure of lines and nodes that determines the distribution of the services. The network structure is generally very costly (expensive capital investment) and the duplication of network infrastructures is often not economic. The network industries share...
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