1 - A framework for resolving the regulatory problem

Summary

People the world over are calling for privatization and regulatory reform as the solution to the problem of poor performance by public utilities, and as the means to improved service and lower prices. In this book we argue that these expectations may not always be met because of the way a country's political and social institutions – its executive, legislative, its judicial systems, its informal norms of public behavior – interact with regulatory processes and economic conditions. By making administrative expropriation and manipulation of utilities more or less difficult in some settings than in others, a country's institutions influence the confidence of investors and the performance of privatized utilities. In particular, the analysis in this book looks at the problem of utilities regulation through the lens of the new institutional economics – with its microanalytical perspective and its view of regulation as a contracting problem – to offer insights into the performance of privatized telecommunications utilities in different political and social circumstances.

The book presents the results of a comparative assessment of the impact of core political and social institutions on regulatory structures and performance in the telecommunications industry in Jamaica, the United Kingdom, Chile, Argentina, and the Philippines. We argue that the credibility and effectiveness of a regulatory framework, and so its ability to encourage private investment and support efficiency in the production and use of services, vary with a country's political and social institutions.