Twenty Years of Liberalization of Network Industries in the European Union: Where Do We Go Now?

Abstract

Over the last twenty years, governments in many parts of the world have engaged in the liberalization of network industries (telecommunications, postal services, energy, and transport). This liberalization process, which was first observed in the United States in the late 1970s and in the United Kingdom in the early 1980s, became a central preoccupation of the European Commission at the end of the 1980s. Since then, the European Commission has initiated liberalization reforms in a range of sectors with some success. Some sectors, such as telecommunications and air transport, are now fully liberalized and are becoming increasingly competitive. Others sectors, such as energy (gas and electricity), postal services, and rail transport, are not yet fully liberalized, but the market opening dynamic is now well under way. The liberalization process has not been without difficulties, however, and many challenges still lie ahead. Against this background, the objective of this paper, prepared in support of my inaugural lecture as Professor of Competition Law and Economics at the Faculty of Law of Tilburg University and a senior member of TILEC, is to give a brief overview of the liberalization process and the results it has achieved, as well as to address some of the main challenges that still lie ahead. This paper is organized as follows. Part I explains why for almost a century firms involved in network industries generally took the form of State monopolies, as well as why this model of organization became subject to question in the late 1970s and was thus progressively replaced by a model based on market opening and competition. Part II explains that to be successfully completed the liberalization process should rely on three pillars: the removal of exclusive rights, the adoption of a regulatory framework and the setting-up of independent regulatory authorities. Part III analyses the current state of liberalization in the different network industries. Part IV explores three significant changes in the organization of network industries and on market structures: the vertical unbundling between infrastructure and services, the breaking down of the barriers between network industries, and the progressive withdrawal of the State in such industries. Part V reviews the various bottlenecks, which still prevent competition to take place on some markets. Part VI discusses the issue of whether one should be able to do away with sector-specific regulation at one stage. Finally, Part VII contains a short conclusion and some proposals for moving ahead.