ABSTRACT
Over the last decade, network industries in most industrial countries have been subjected to processes of regulation and change. Sectors such as telecommunications, transport, electricity, gas and water share the characteristic that they involve the establishment of a single network. To lay two electricity or telephone cables to the same house may be competitive but it is expensive. In the past, network industries tended to be perceived as ‘natural monopolies’, i.e. there could be only one network owner and manager. Since they were ‘natural monopolies’, they were also inevitably highly regulated and often state owned. In the last decade, however, these ‘natural monopolies’ have been dismantled in many countries by a combination of privatization and deregulation designed to bring the competitive forces of the market into the sector. Why has this occurred? Explanations can be divided into two categories. The first category, which we refer to as the ‘technological determinist approach’, points to the emergence of new technologies which remove certain key characteristics that explained the natural monopoly of a network industry. This explanation has perhaps been most widely offered to explain and justify changes in telecommunications where the advance of mobile phones, digital technology and fibre-optic cable systems have challenged the traditional technological bases of the state-owned telecom operators. The second category, which we refer to as the ‘political voluntarist’ approach, focuses on the advantages of market-mediated transactions as opposed to firm internal transactions. Thus ‘natural monopolies’ have been seen as inefficient and unresponsive to their customers’ requirements. Devising ways of breaking them into parts has therefore become the stock-in-trade of the purveyors of free-market liberalism in politics, the media and the banking system.
