Privatising Network Industries

Abstract

Successful network utility privatisation requires incentive-based regulation that allows investment to be adequately rewarded from unsubsidised revenues while maintaining quality, and restructuring that permits effective competition for the network services. The potential for success and the size of the potential gains from privatising and restructuring vary by utility, with a ranking telecoms, gas, electricity, water and lastly, rail. There are doubts whether privatising rail delivers sustainable improvements. The paper gives evidence primarily from the UK, and surveys some of the international evidence. Real consumer prices for telecoms, gas and electricity fell in the UK, overcoming most opposition to privatisation.

Keywords: privatization, regulation, competition, telecoms, electricity, gas, water, rail

JEL Classification: L33, L51, L91, L94, L95, L96