Towards Competition in Network Industries: Telecommunications, Energy and Transportation in Europe and Russia

573 Pages·1999·16.993 MB·English

by  Prof. Dr. Paul J. J. Welfens, Prof. George Yarrow, Prof. Dr. Ruslan Grinberg (auth.), Prof. Dr. Paul J. J. Welfens, Prof. George Yarrow, Prof. Dr. Ruslan Grinberg, Dipl.-Vw. Cornelius Graack (eds.)

Towards Competition
in Network Industries
Telecommunications, Energy
and Transportation in Europe and Russia
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Paul J. J. Welfens . George Yarrow
Ruslan Grinberg . Cornelius Graack
Editors
Towards Competition
in Network Industries
Telecommunications, Energy
and Transportation in Europe and Russia
With 63 Figures
and 63 Tables
i
Springer
Prof. Dr. Paul J. J. Welfens
University of Potsdam
European Institute for International Economic Relations
August-Bebel-Str. 89
14482 Potsdam
Germany
http://www.euroeiiw.de
Prof. George Yarrow
Oxford University
Regulatory Policy Research Centre
Hertford College
Oxford OX 13 BW
Great Britain
Prof. Dr. Ruslan Grinberg
Russian Academy of Sciences
Institute for International Economic & Political Studies
Novocheryomushkinskaya 46
117418 Moscow
Russia
Dipl.-Vw. Cornelius Graack
University of Potsdam
European Institute for International Economic Relations
August-Bebel-Str. 89
14482 Potsdam
Germany
Library of Congress Cataloging-in-Publication Data
Die Deutsche Bibliothek - CIP-Einheitsaufnahme
Towards competition in network industries: telecommunications, energy and transportation in
Europe and Russia: with 63 tables 1 Paul J. J. Welfens, Cornelius Graack, Ruslan Grinberg, George
Yarrow (eds). - Berlin; Heidelberg; New York; Barcelona; Hong Kong; London; Milan; Paris;
Singapore; Tokyo: Springer, 1999
ISBN-13: 978-3-642-64296-8 e-ISBN-13: 978-3-642-60189-7
DOl: 10.1007/978-3-642-60189-7
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TABLE OF CONTENT
List of Figures .................................................................................................. XV
List of Tables.............................................. ...................................................... XIX
Introduction ..................................................................................................... .
Paul J J Welfens
I. Deregulation and Market Dynamics in Telecommunications
A: Competition, Privatization and Foreign Direct Investment
in Network Industries........................................................................... 11
Paul JJ Welfens
1. Introduction. .......... ............. ............... ..... ... ........ ..... ...... ............. ....... ....... 11
2. Network Theory, Technological Progress and Competition .................. 15
2.1 Technological Progress and Competition...................................... 19
2.2 Problems of Standardization and Interconnection...... ............ ....... 20
3. Competition and Privatization ................................................................ 21
3.1 Telecommunications..................................................................... 22
3.2 Energy ........................................................................................... 27
3.3 Transportation ............................................................................... 33
4. Foreign Direct Investment in Network Industries .................................. 35
4.1 Importance of Multinational Companies....................................... 35
4.2 Foreign Direct Investment in Europe vs. FDI in Transforming
Economies ..................................................................................... 39
5. Conclusions............................................................................................. 44
Appendix ................................................................................................... ,... 45
Comments .............................................................................................. 55
Pieter H M Ruys
B: Privatisation, Competition and Regulation in Transforming
Economies: The Cases of the Electricity Supply Industry and
Telecommunications .......... ........ ........... ........... ............. ..... ................... 57
Piotr Jasinski
1. Introduction ................................................................................................. 57
2. Competition and Regulation in STEs .. ... ........................ .............. .............. 57
VI TOWARDS COMPETITION IN NETWORK INDUSTRIES
3. Systemic Transfonnation............................................................................ 59
4. Regulation Sensu Largo.............................................................................. 61
5. Regulation Sensu Stricto ........................................................... ,................. 65
6. The ESI and Telecommunications.............................................................. 66
6.1 The Electricity Supply Industry ................. ........................ .......... ..... 66
6.2 Telecommunications ......................................................................... 69
comments.............................................................................................. 75
Horst Brezinski
C: Deregulation, Privatization and Internationalization of European
Telecoms Markets ................................................................................. 79
Cornelius Graack
1. Introduction...................................... ....................................................... 79
2. Developments on the National Level ofEU Member States.................. 80
2.1 Developments in EU Countries Characterized by
Competing Fixed Network Operators ........................................... 81
2.2 Strategies and Adjustment Policies ofIncumbent Telecoms
Operators in Anticipation of 1998................................................. 86
2.3 Privatization ofEU Fixed Network Operators .............................. 93
2.4 Internationalization Strategies and International Cooperation...... 96
3. Impacts of the Liberalization and Privatization Process on
EU Telecoms Market Structures............................................................. 99
4. Conclusions............................................................................................. 105
Comments.............................................................................................. 111
Dieter Elixmann
D: Full Competition in Telecommunications: The Experience
of Finland............................................. .................................................. 115
Martin Andersson
E: Full Competition in Telecommunications: The US Perspective....... 123
Jaqueline Spindler
1. Introduction............................................................................................. 123
1.1 Convergence of Technology/Convergence of
Regulatory Frameworks.............................................. .................. 123
1.2 WTO Agreement........................................................................... 123
1.3 U.S. Implementation of Telecom Act: Lessons
for Other Countries........................................................................ 124
TABLE OF CONTENT VII
2. The Telecom Act -Key Principles ......................................................... 124
3. Rollout of the Trilogy ............................................................................. 125
3.1 Interconnection.............................................................................. 125
3.2 Universal Service .......................................................................... 126
3.3 Access Reform .............................................................................. 127
4. How the Trilogy Principles Apply to Other Countries ........................... 127
4.1 Interconnection...... ..... .................................... ......... ...................... 127
4.2 Universal Service ......................................................................... 128
4.3 Access Reform .............................................................................. 128
5. "Best Practices" for Other Countries ...................................................... 129
F: Market Entry in the Presence of a "Dominant" Network
Operator in Telecommunications .............. ..... ...................... ............... 131
Gunter Knieps
1. Introduction.................. ......... ...... ......... ........... ....... ....... .................. ........ 131
2. Excessive Regulation Due to an Oversized Regulatory Basis.. .............. 131
3. The Necessity for a Symmetric Regulatory Approach ........................... 133
3.1 The Basic Concept of the Disaggregated Regulatory
Approach....................................................................................... 134
3.2 Contestable Telecommunications Markets versus Monopolistic
Bottlenecks .................................................................................... 135
4. The Dangers of an Inadequate Application of Regulatory Rules Based
on the Concept of Dominant Network Carriers........ .............. .......... ...... 137
4.1 Interconnection of Networks ......................................................... 137
4.2 Universal Services. ........... ................................. ............................ 140
Comments .......................... ................................... ................................. 145
Jurgen Muller
1. Is Market Power Regulation Enough? .................................................... 145
2. Will Contestable Markets be Competitive? ............................................ 146
3. Implementing Regulation ....................................................................... 147
4. Is Structural Regulation Necessary? ....................................................... 148
G: Electricity Companies and Railway Networks as Newcomers in
Telecommunications ............................................................................. 149
Morten Falch
1. Introduction. ......... ................................................. ......... .... ..................... 149
2. Current Competition from the Network Facilities of Railway and
Electricity Companies............................................................................. 150
3. The Cost Structure ofa Telecoms Network............................................ 154
VIII TOWARDS COMPETITION IN NETWORK INDUSTRIES
4. The Role ofInvestment Costs................................................................. 157
5. Changing Demand Conditions................................................................ 160
6. Conditions for Effective Competition..................................................... 162
7. Conclusion.............................................................................................. 164
Comments.............................................................................................. 167
Oliver Lorz
H: Liberalization of Telecommunications in Central Europe ............... 171
Jerzy Kubasik
1. Introduction............................................................................................. 171
2. The Need for Changes ..................................................... ....................... 173
3. Objectives in Restructuring the Telecommunications Sector................. 174
4. Networks Developments......................................................................... 179
5. Regulation: Opening Up Competition.................................................... 180
6. Liberalization in Practice: The Example of Poland... ........... ..... .......... ... 184
7. Privatization of the National Network Operator: Different Methods ..... 185
8. Conclusions............................................................................................. 186
I: Regulation of the Telecommunication Sector in Russia:
Direct Foreign Investments and Options for Competition ............... 189
Svetlana Petuhova and Alexander Vronetz
1. Introduction...... ......... ...... ...... ............................................ ...................... 189
2. System of Control and Regulation in the Telecommunication
Complex.................................................................................................. 191
2.1 Legal and Organizational Basis of the Branch ....................................... 191
2.2 Problems Associated with Demonopolization and
Anti-monopoly Policy............................................................................. 196
3. Economic Indicators of Business Activity within the Telecom Sector.. 199
3.1 Privatization, Ownership and Structure of the Telecom Sector .... 199
3.2 Structure and Dynamics ofInvestment Activity............... ........ .... 202
3.3 Tariff and Pricing Policy in the Telecommunications Branch ...... 209
4. Direct Foreign Investments in Development of the
Communications Branch......................................................................... 217
5. Prospects for Telecommunications Development in Russia................... 222
6. Conclusion .......................................................................................... .... 228
Comments.............................................................................................. 231
Wolfgang Pfaffenberger
TABLE OF CONTENT IX
J: Systemic Transformation and Direct Foreign Investment in Russia:
Problems and Solutions ........................................................................ 233
Ruslan Grinberg
1. Market Reforms and Macroeconomic Stabilization in the
Central and Eastern European Countries and Russia: Comparing
Intermediate Results ............................................................................... 233
2. The Climate oflnvestment in Russia: Analysis and Conclusions....... ... 240
3. Foreign Direct Investment in Russia ...................................................... 244
4. Regulation and Management of Foreign Investment in Russia.............. 252
5. Perfection and Development oflnteraction with Foreign Capital.......... 259
Comments.............................................................................................. 267
Herbert Brucker
1. Introduction........................ ..................................................................... 267
2. Why Has Stabilisation Failed in Russia? ................................ ................ 267
3. Was Privatisation and Institutional Reform a Failure? ........................... 268
4. FDI: Is the Glass Half Full or HalfEmpty?........................................... 269
5. Are Investment Conditions Special in Transition Economies? .............. 271
6. Why is Foreign Investment so Low in Russia? ...................................... 272
7. What Can We Recommend as Policy? ................................................... 273
K: The Role of Foreign Investment in the Russian Internet .................. 275
Svetlana Petuhova
1. Introduction............................................................................................. 275
2. Analysis ofthe Modern State of the Internet in Russia.......................... 277
3. Financing of the Internet Development .................................................. 283
4. Prospects of the Russian Internet Development ..................................... 286
5. Conclusions............................................................................................. 290
L: Panel Discussion: Competition in European Telecommunications
and Market Perspective......................................................... ............... 293
Competition in Liberalised Telecommunications Markets............... 293
Dimitri Ypsilanti
Copyright and Related Rights in the Information Society on a
European and International Level... ............. ......... .................... ......... 295
Bert Eichhorn
X TOWARDS COMPETITION IN NETWORK INDUSTRIES
II. Liberalizing the Energy Sector
M: Vertical Integration in the Electricity Supply Industry:
Competition and Investment Issues ............................ .................. ...... 299
Alison Sinclair
1. Why the Interest in Vertical Integration?............................................... 299
2. Arguments for Vertical Integration from the Perspective of the Firm ... 302
3. Social Welfare Implications of Vertical Integration:
A Tradeoff Between Competition and Investment Efficiency?............. 307
4. Policy Conclusions ................................................................................. 311
Appendix: ......................................................................................................... 313
Comments .............................................................................................. 323
Peter Palinkas
N: Privatization and Modernization of the Electricity Sector in the
CEE Transition Countries ................................................................... 329
Zdenek Hruby
1. Introduction............................................................................................. 329
2. Energy Supply and Demand ................................................................... 330
3. Power Sector ........................................................................................... 332
4. The Environment .................................................................................... 334
5. Tariffs...................................................................................................... 334
6. Electricity Privatization and Investment Opportunities:
Countries Overview ................................................................................ 336
7. Summary of Regional Deregulation and Privatization Trends............... 338
8. Capacity Construction and Rehabilitation .............................................. 340
9. Summary ofCEE's Available Investment Needs in Power Sector ........ 341
0: Russian Electricity Industry: Towards Market Economics ............. 345
Vladimir Voloshin
1. Structure of the Electricity Industry and Degree of
Internationalisation in Russia.................................................................. 345
1.1 Branch and Regional Structure of the Power Industry .................. 345
1.2 Intra-branch Proportions................................................................ 351
1.3 The Main Problems of the Power Industry Development............. 355
1.4 Future Opportunities...................................................................... 360
1.5 International Aspects ..................................................................... 364