Download Regulation and the National Regulatory Authority in

International Affairs Committee
Universal service / Regulation
Is it a Burden or a Way to Sustainability
João Confraria
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3.
4.
The role of the state and liberalization
Liberalization and Universal Service
Liberalization and market regulation
Regulatory independence
1 September 2006
IAC Forum Kiev
1. The Role of the State and
Liberalization
1 September 2006
IAC Forum Kiev
Directive 97/67
The role of the state
Sources of regulation
• No natural monopoly /
essential facilities
argument for regulation
• Political objectives:
Universal Service
• Possibility of reserved
area to finance USO
(until…)
• Regulation
– Price
– QoS
– Possibility of uniform tariffs
– Quality of service
obligations (QoS)
1 September 2006
IAC Forum Kiev
Liberalization
Rationale
•
• Electronic
communications
development
•
– Threats
– Opportunities
• Competition as source of
– Efficiency
– Innovation
– New services
1 September 2006
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•
Conditions
Stagnant (declining?)
postal markets
Technology and labor
intensity in postal
markets
Public firms
Non economic
objectives
IAC Forum Kiev
2. Liberalization and Universal Service
1 September 2006
IAC Forum Kiev
Liberalization and Universal Service
2 base scenarios?
USP bankruptcy
USP survival (growth?)
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Entry
Cream skimming
Losses of USP
Price increases of USP
Entrant’s growth
…
1 September 2006
Economies of scale
Strong brand
Increased efficiency
New postal services
New services
IAC Forum Kiev
Liberalization and Universal Service
Political and regulatory options
i.
ii.
iii.
iv.
Postpone market opening + wait and see
Full market opening + wait and see
End of Universal Service
Introduction of greater flexibility in price
and QoS regulation
v. Introduction of greater flexibility in USO
concepts
vi. Change the concept of Universal Service
1 September 2006
IAC Forum Kiev
Avoid market opening + wait and see
• Political and regulatory inertia
• Short run policy
• Bureaucratic behavior
may lend plausibility to this (dangerous)
scenario
1 September 2006
IAC Forum Kiev
Promote market opening + wait and
see
• Political and regulatory inertia
• Short run policy
may lend plausibility to this (dangerous)
scenario
1 September 2006
IAC Forum Kiev
End Universal Service
• Scenario politically unlikely
• Probably against the will of the population
1 September 2006
IAC Forum Kiev
Flexibility in price regulation
Current situation
Distortions
Rigidity
• Cost oriented prices
for each service
• Is it reasonable?
1 September 2006
• Allocation of common
costs
• Insensitivity of prices
to demand
• Miscalculation of
costs (regulatory lag)
IAC Forum Kiev
Increased flexibility in price regulation
• Global price cap
• Ramsey prices
1 September 2006
Disadvantages of
Ramsey prices are not
likely to happen
Knowledge of
price elasticity
Redistributive
effects
IAC Forum Kiev
What is the relevant public interest?
• Traditional USO?
• Other…
1 September 2006
IAC Forum Kiev
3. Liberalization and market regulation
1 September 2006
IAC Forum Kiev
Regulation may be a source of
competitive distortions?
• Price oriented costs on an individual basis
in the reserved area may impose undue
restrictions on competitive strategy in the
liberalized area
1 September 2006
IAC Forum Kiev
Competitors’ access to USP networks
• A regulatory restriction?
• An opportunity?
1 September 2006
IAC Forum Kiev
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Competitors’ access to USP networks
Possibilities?
• No mandatory access
• Mandatory access at
negotiated prices
• Mandatory access at
regulated prices
1 September 2006
• The danger of ever
widening regulation
as a result of
– Political pressure at
EU and national levels
– Internal dynamics of
regulatory
organizations
IAC Forum Kiev
4. Regulatory independence
1 September 2006
IAC Forum Kiev
Regulation and the National
Regulatory Authority in Directive 97/67
Article 22
Each Member State shall designate one or more national regulatory
authorities for the postal sector that are legally separate from and
operationally independent of the postal operators.
Member States shall inform the Commission which national
regulatory authorities they have designated to carry out the tasks
arising from this Directive.
The national regulatory authorities shall have as a particular task
ensuring compliance with the obligations arising from this Directive.
They may also be charged with ensuring compliance with
competition rules in the postal sector.
IAC Forum Kiev
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Regulation and the National
Regulatory Authority in Directive 97/67
Independence from the
operator…
..why?
1 September 2006
• Liberalization
• A matter of
institutional
governance
• Privatization
IAC Forum Kiev
Regulation and the National
Regulatory Authority in Directive 97/67
from independence
from the operator
to
independence from
the government
1 September 2006
• State failure
• Public demand
IAC Forum Kiev
Regulation under Directive 97/67?
Informed decisions on a technical basis…
…given politically and clearly defined
objectives
1 September 2006
IAC Forum Kiev
Problems:
information asymmetries + …
• Government
dependent regulation
– Regulation and
government policy
– Potential for
government failure
– Market control
1 September 2006
• Regulation
independent from the
government
– Discretionary power
and regulatory
objectives
– Credibility of the
regulator
– Market control
IAC Forum Kiev
But there are potential gains…
– Cost accounting (if appropriate…)
– Simulation of competition
• Efficiency gains under proper regulation
1 September 2006
IAC Forum Kiev