The Limits of Open Access as a Regulatory Yardstick in the Regulation of Utilities in Latin America

Abstract

The purpose of this paper is to offer some thoughts about the problem of defining the agenda of competition authorities in the regulation of infrastructure services in developing countries. Such institutional conditions entail, above all, a proper allocation of rights between market participants of this industry. This paper contends that the criteria drawn from conventional industrial organization, which is used for qualifying the position of these participants in the market, renders tautological conclusions which provide no answer to the problem of deciding whom should be given the right to operate the utility and under what conditions. These criteria emphasize the idea that "access" to the physical facility which is used to operate these services is foreclosed whenever conditions of "natural monopolies" limit the possibilities for more than one firm to participate in the market. Only the evolution of technology could eventually undermine the dominance enjoyed by the natural monopolist. In our opinion, this view of the problem leads to self-contained normative prescriptions, because it places the possibilities of institutional restructuring in the hands of factors above the will of the regulator, namely, technological evolution; indeed, it gives regulators an entire discretion in determining whether an industry should be regarded as possessing insufficient technological advance to erode the position of incumbent firms presumably enjoying a "natural monopoly."

Instead, we propose an alternative "network perspective" from which more meaningful conclusions could emerge about who-should-be-allowed-to-do-what. This perspective does not emphasise the idea of "accessing to a given market" but rather, that of developing "complementary capabilities" thus enabling the applicant party to connect to the network.

Keywords: Antitrust Policy, Infrastructure, Utilities, Development, Industrial Organization, Latin America

JEL Classification: K2, L4, L5