Regulation of the private provision public water-related services CEPIS/OPS/OMS

REGULATION OF THE PRIVATE PROVISION PUBLIC WATER-RELATED SERVICES


Figure 3
Functional separation increases the options for competition and facilitates regulation
Competitive activities
Direct market competition
No industry­specific regulation.
Competition from substitutes
Even limited competition can reduce the need for regulation. The threat of regulatory intervention may be sufficient to prevent monopoly abuse.
Competition in the capital market
Structural reforms to approximate more closely industry structure to that needed for competition and isolate natural monopoly elements.
Monopoly

activities
Contestability (threat of entry)
The threat of entry limits monopoly power. Regulation seeks to remove barriers to entry (terms of access).
Competition via regulatory mechanism
Benchmark competition reduces the monopolist's capacity to extract rent from its monopoly of information.
Franchising (competition for the market)
Franchising seeks to use some of the desirable incentive properties of competition to facilitate regulation.
Integrated state­owned monopoly
Integrated monopoly
No effective competition
Detailed and extensive regulation of prices, product and service quality, level of service, investment, etc.
Initial status
Industry structure
Options for competition
Object of regulation

Source: adapted from World Bank (1994a).

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