Competition Policy and Sector-Specific Regulation for Network Industries

38 Pages Posted: 29 Sep 2008  

Martin F. Hellwig

Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Economics

Date Written: July 2008

Abstract

The paper discusses the respective roles of competition policy and sector-specific regulation for industries such as telecommunications, electricity, and gas, in which network infrastructures that are natural monopolies serve as essential facilities for anybody who wants to provide services in downstream markets. Whereas, in the past, such industries tended to be organized as state-owned or state-regulated vertically integrated monopolies, after a fundamental change of paradigm, appropriate governance nowadays is considered to involve downstream competition supported by a state-mandated access provision to the monopoly infrastructures. Following a brief sketch of the paradigm change, the paper enters into a systematic discussion of (i) the comparative advantages and disadvantages of the two policy regimes in enforcing access provision, (ii) the appropriate framework for drawing the line between regulated and unregulated parts of the industry, and (iii) a set of issues that arise when competition policy and to sector-specific regulation apply to a given industry at the same time. The discussion refers to (i) the German experience before 2005 when competition policy was used to regulate access in the energy sector, (ii) the European Directives of 2002, which rely on the concepts of "market" and "significant market power" to determine which parts of the industry should be subject to regulation, and (iii) the recent cases in the telecommunications and postal sectors in which European competition law was used to proscribe behaviour that had been accepted by national regulators.

Keywords: Network Industries, Competition Policy, Sector-Specific Regulation

JEL Classification: K21, K23, L 40, L50

Suggested Citation

Hellwig, Martin F., Competition Policy and Sector-Specific Regulation for Network Industries (July 2008). MPI Collective Goods Preprint, No. 2008/29. Available at SSRN: https://ssrn.com/abstract=1275285 or http://dx.doi.org/10.2139/ssrn.1275285

Martin F. Hellwig (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Bonn - Department of Economics

Adenauerallee 24-42
D-53113 Bonn
Germany

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