1. 3rd Annual Conference of Competition and Regulation in Network Industries
Residence Palace, Brussels, Belgium
November 19, 2010
Struggling for competition
in regulated network industries:
experiences in Italy.
Alberto Asquer
Dipartimento di Ricerche Aziendali
Faculty of Economics
University of Cagliari, Italy

2. Introduction
We commonly follow 'standard prescriptions' for reforming
vertically and horizontally integrated industries with monopoly
traits (Joskow, 1996).
There is evidence that implementing regulatory reforms does
not necessarily result in enhanced competition/performance
(Newbery, 1999; Gómez Ibáñez, 2003; Landy et al., 2007).
Why is it so? Country-specific economic institutions matter
(Williamson, 1975, 1985; Ménard, 2003; Levy and Spiller,
1994, 1996).
What about sector-specific institutions? Evidence from water,
gas, electricity, telecommunications, railways, highways, local
public transport, urban solid waste in Italy.

3. Frame of reference
Institutional Analysis and Development (Ostrom et al., 1994)

4. The water sector
Infrastructure/service delivery system features Main actors
Local governments
Localized infrastructure Regional governments
Local regulatory agencies
Local government-owned
firms
Industry community features Business companies
Selected performance aspects
Incumbents' dominant position
Local governments' ownership
Prices increasing
(but relatively low?)
Investments less than
Regulatory system features expected
Franchise allocation Evaluation / Issues
(Few) tender offer competition
Price cap (some RoR) Regulatory governance
(controller=controlled)
Incentive contracts
Tender offer competition

5. The gas sector
Infrastructure/service delivery system features Main actors
Local governments
Nation-wide infrastructure,
National government
Internationally connected Energy & Gas Authority
(Some) vertical segmentation
ENI group
Local government-owned
firms
Industry community features
Business companies
Incumbents' dominant position
Selected performance aspects
Local governments' ownership
National government
ownership Prices relatively stable
(increasing?)
Investments less than
Regulatory system features expected
Franchise allocation Evaluation / Issues
Price cap
Import quotas
Tender offer competition
Long-term import contracts

6. The electricity sector
Infrastructure/service delivery system features Main actors
Local governments
Nation-wide infrastructure,
National government
Internationally connected Energy & Gas Authority
(Some) vertical segmentation
ENEL group
Local government-owned
firms
Industry community features
Business companies
Incumbents' dominant position
Selected performance aspects
Local governments' ownership
National government
ownership
Prices relatively high
Regulatory system features
Franchise allocation Evaluation / Issues
Price cap
Generation quotas
Tender offer competition
Long-term contracts

7. The telecommunications sector
Infrastructure/service delivery system features Main actors
Nation-wide infrastructure,
Internationally connected
Dual infrastructure Telecom Authority
(fixed and mobile) Telecom Italia group
Other business companies
Industry community features
Selected performance aspects
Incumbent dominant position
(somehow)
Prices generally decreasing
Investments less than
expected
Regulatory system features
Evaluation / Issues
TPA regulation
Net neutrality
Network upgrade
Digital divide

8. The railways sector
Infrastructure/service delivery system features Main actors
CIPE (inter-ministerial
Nation-wide infrastructure,
committee economic
Internationally connected
planning)
Ministry of Treasury
FS group
Industry community features Business companies
Incumbent dominant position Selected performance aspects
National government
ownership
Prices relatively low
Investments less than
expected
Regulatory system features
Evaluation / Issues
Licences
Price cap (somehow)
Regulatory governance
Tender offer competition
Regulatory independence

9. The highways sector
Infrastructure/service delivery system features Main actors
CIPE (inter-ministerial
Nation-wide infrastructure,
committee economic
Internationally connected
planning)
ANAS
Autostrade group
Industry community features Other business companies
Incumbent dominant position Selected performance aspects
National government
ownership Prices increasing
Investments (less than
expected, possibly
Regulatory system features misdirected)
Evaluation / Issues
Franchises
Price cap (somehow)
Regulatory governance
Incentive contracts
Tender offer competition

10. The local public transport sector
Infrastructure/service delivery system features Main actors
Regions
Localised infrastructure Local governments
Local government-owned
firms
Business companies
Industry community features
Selected performance aspects
Incumbent dominant position
Local government ownership
Prices relatively low
Investments less than
expected
Regulatory system features
Evaluation / Issues
Franchises
Regulatory governance
Incentive contracts
Tender offer competition

11. The urban solid waste sector
Infrastructure/service delivery system features Main actors
Regions
Localised infrastructure Local governments
Local government-owned
firms
Business companies
Industry community features
Selected performance aspects
Incumbent dominant position
Local government ownership
Prices increasing
Regulatory system features
Evaluation / Issues
Franchises
Price cap Regulatory governance
Incentive contracts
Tender offer competition
Crime organisations

12. Explanatory arguments
Recurrent mechanisms:
1) Persistence of barriers to entry against competitors (long
franchises, long-term contracts, safety requirements,
capacity)
2) Collusion practices between rent-seeking actors
(incumbent firms' executives and employees, public officers
in governments)
3) Collusion practices between the regulator and the
regulated (national or local governments' stakes in both,
regulator also player in the industry)

13. Conclusions
Resulting effects: two 'problematic' performance scenarios
a) Relatively low tariffs, low cost effectiveness, loss-making
utility firms, low investments to expand or upgrade the
infrastructure network (e.g., railways)
b) Relatively high or increasing tariffs, firms' profitability or
stakeholders' rent appropriation, low investments, low
customers' service, stifled competition (e.g., highways)

14. Conclusions
1) Incumbents persist dominating network industries despite
regulatory efforts to lower barriers to entry and quotas
(erosion of the dominant position may depend on technical
feasibility of competition, e.g., dual networks or common
carriage)
2) Local government-owned incumbents persist dominating
localised network industries despite franchise tender offer
mechanisms (erosion of the dominant position may depend on
unsustainability of subsidies and/or need for investments)
3) National government-owned incumbents persist dominating
network industries despite legislative provisions for opening up
to competitors (erosion of dominant position may depend on
public pressure triggered by dismal comparative performance)

15. Thank you for your attention