The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation (original) (raw)

Privatized utilities : regulatory reform and corporate control

2000

First, I would like to thank Jam es Dow as thesis supervisor, for his patience, en couragement and ideas. I would also like to thank other Professors, researchers and colleagues who have contributed through comments to my research. I am espe cially indebted w ith Ramon Marimon, Colin Mayer, John Vickers, Paul Levine and Vicente Salas for their insights. Financial support by the Spanish government through a Salvador do M adariaga grant is acknowledged. P a rt of the research was done in Oxford University thanks to a mission funded in the framework of the European Commission TM R P roject on " Financial Efficiency and Economic Efficiency". T h e EUI funded a mission to Chile in December 1998 th a t greatly improved my knowledge of privatization and regulation in Latin America. I thank the hospitality of Mario Drago there. In Santiago I received very helpful comments from Alex Galetovic, Ricardo Paredes and Carlos Huneeus, among others. I thank Steven Tokar for his great job in correcting my English. Professors, researchers and colleagues at the London Business School have greatly contributed to my knowledge of privatized utilities. I th an k them all, and especially

Privatization, corporate control and regulatory reform: the case of Telefonica

Telecommunications Policy, 2005

This study analyzes the interaction of agency problems in public policy and of agency problems inside the firm: it investigates the case of a large privatized firm subject to many policy constraints. The last steps of Telefonica's privatization were designed to promote a dispersed ownership and give managers a high level of discretion in running the company. This effectively created an agency problem inside the firm. There were no powerful shareholders to constrain the managers, and the threat of a takeover was not a credible one, since the government kept a golden share. There is no overall evidence of capture of politicians and regulators by managers in the interest of shareholders, although evidence suggests the existence of collusion between politicians and managers. The authors interpret the political interference with the firm's control (a well-documented phenomenon both in this study and in the cross-country literature on privatization; e.g. political ends in privatization, influence in appointments, golden shares) as the most visible part of such collusion. Liberalization and multi-level regulation will likely make any type of collusion or capture more difficult in the future. r

Regulation, institutions, and commitment in the British telecommunications sector

In the past decade the United Kingdom has emerged as a world pacesetter for institutional change in the telecommunications sector. In particular, British Telecom has been divested, price-cap regulation has been introduced, a new regulatory institution (Oftel) has been set up (with its Director General of Telecommunications), and the market has been opened up to increasingly more competition. At the same time, investment in the sector has jumped, despite the uncertainty that might have been created by the United Kingdom's lack of modern experience with public utility regulation, by the lack of constitutional protection against governmental and regulatory discretion, and by continuing institutional change. Part of the reason for the investors'confidence may be the government continuity resulting from a series of Conservative election victories. But the authors emphasize the nature of British Telecom's privatization and restraint on discretion achieved by basic features and...

Telecommunications liberalization and regulatory governance: lessons from Latin America

Telecommunications Policy, 2000

The role of the state changed in Latin American and Caribbean countries between 1985 and 1995 as eight regulatory commissions were created (for the nineteen countries in our regional sample). This institutional innovation was part of the liberalization process that has permeated the hemisphere. This study examines the determinants of telephone lines per capita, using economic, institutional and regulatory variables. Lacking information on total investment, we use lines as a proxy for telecommunications investment. The economic variables have the expected impacts. Gross Domestic Product (GDP) per capita affects investment in a positive way: telecommunications services are income-elastic. Openness (exports plus imports as a percentage of GDP) captures significant external links which require telecommunications to coordinate the production and delivery of goods and services. This variable had a positive (but not statistically significant) impact. Similarly, greater population density was a significant determinant of lines per capita for this particular sample of countries (reflecting lower cost of service for urban areas). Building on the work of Levy and Spiller (1996), we introduce institutional indices to capture the effects of political democracy, economic freedom, and a sound regulatory framework. The latter captures the degree of independence of the regulatory body, enforcement powers, neutrality, and mechanisms for resolving conflicts. It might be viewed as a proxy for serious reform initiatives (including reduction of entry barriers and privatization). The regulatory framework and freedom factors have significant positive impacts on telephone lines per capita. Another important explanatory variable is the number of cellular phones per capita. The positive impact is consistent with cellular being a complement for fixed line telephony. Alternatively, the positive impact could reflect a "competition effect" whereby competitive entrants in a liberalized sector stimulate improved performance (and additional investment) by incumbent wire-line firms.

Telecommunications Policies: Measurement and Determinants

Review of Network Economics, 2006

This paper presents new data on telecommunications reform for a cross section of countries. We measure telecommunications reform along two dimensions: entry barriers and regulatory independence. This data set is combined with a comprehensive set of performance, institutional and political data to analyze the determinants of telecommunications policies. We find that entry barriers are positively associated with the degree to which countries have an interventionist legal tradition, but they are unrelated to the partisan ideology of reforming governments. We also find that countries with weak protection of investors' quasi-rents by other means, and countries with a larger incumbent, are more prone to create independent regulatory agencies, although the latter is a weaker result.

The Political Economy of Privatization and Competition: Cross-Country Evidence from the Telecommunications Sector

Journal of Comparative Economics, 2002

Using a new data set of the telecommunications sector on privatization (1980-98 for 167 countries) and competition policies (1990-98 for 50 countries), this paper investigates the political economy determinants of privatization and liberalization in the telecommunications sector. Building on the framework of a generalized private interest theory, we derive hypotheses on how the characteristics of private interest groups and political structure affect policy changes in the telecommunications sector. We pay particular attention to how the effects of interest groups on policies vary from more democratic to less democratic countries. We find evidence in favor of the generalized interest group theory. Countries with stronger pro-reforms interest groups (the financial services and the urban consumers) are more likely to reform in more democratic countries. But countries are more likely to maintain the public sector monopoly in the sector when such a governance mode yields a higher payoff for the governments-when the sector has higher profitability and when the fiscal deficit is higher and cannot be more easily financed. Democracy appears to affect the pace of reforms by magnifying the voices of interest groups and by moderating politicians' discretion.

The political economy of telecommunications reforms

2000

Since most of the dramatic changes in telecommunications policies occurred in the past two decades, sufficient data to evaluate the many differences in details across countries are only now emerging. Using a new data set on privatization, competition, regulation, and tariff policies of the telecommunications sector, this paper investigates the political economy of Telecommunications reforms. In particular, we empirically analyze the explanatory power of various factors-including sectoral performances, constituents characteristics, political structure, as well as macroeconomic variables-in shaping countries' decision of reforms. In so doing we are able to test some influential (but not mutually exclusive) hypotheses in the literature of policy reforms such as the crisis hypothesis, the constituents demand hypothesis, the private-interest hypothesis, the ideology hypothesis, and some hypotheses emerging from the new institutional economics.

Regulatory Governance in the Latin American Telecommunications Sector “, (unpublished manuscript

2002

Abstract: Starting with Chile in the early 1980s, Latin American countries have pushed telecommunications reform to create regulatory environments that encourage private investment, especially foreign investment. I look at regulatory trends in telecommunications in 24 Latin American and Caribbean countries during 1980-97 and construct an index based on the following aspects: autonomy, accountability, clarity of roles and objectives, transparency and participation, and the type of legal mandate that creates a regulatory body. The index shows clearly that, in general, most countries embraced strong regulatory reforms along the lines recommended by experts and practitioners. The index also correlates well with main political, risk, economic and telecommunications variables.

State capacity and institutional change: a case study of telecom regulation in Brazil

2005

transformed the structure and the role of the states in the region. These reforms reflect to a large extent the pressures that have developed as a result of the globalization process. A landmark in this process was the international agreement at the World Trade Organization for the liberalization of telecommunications (Braga, 1997). Increased competition in the global markets and an increased capital mobility combined with important domestic fiscal crises have led countries in the region to privatize a vast array of state owned enterprises and implement a number of initiatives to foster competitiveness and promote the country’s insertion in the international economy. In fact, Latin America has been the region in which the privatization process was more intense (cf. Figure 1.1.). Not only the privatization episodes in the region were far more numerous than in other parts of the world, the changes in the role of the state were equally unsurpassed elsewhere. An important transformation...

The Institutions of Regulation: An Application to Public Utilities

Regulation is part of the complex web of a nation’s public policy. To understand regulatory design, then, it is imperative to understand the general determinants of public policy. The purpose of this essay is to highlight the usefulness of a transactional approach to public policy determination in understanding the origins, nature and the evolution of the institutions of regulation. As it merits an essay in a volume on the New Institutional Economics, we approach public policy as a (complex and often intertemporal) transaction among policy makers. As such, the nature and features of public policies are impacted by the type of contracts facilitated by the institutions—i.e., the rules of the political game—of the country in question. Here, then, we analyze the institutional determinants of regulatory policy making by looking at regulation as the outcome of complex intertemporal exchanges among policy makers. As in normal economic transactions, efficient intertemporal exchanges require safeguarding institutions. In their absence, we will observe the development of non-cooperative and shortterm behavior, inflexible rules to avoid political opportunism, and in general low quality regulatory policies.