Liberalization and regulatory reform of network industries: A comparative analysis of Italian public utilities

This study aims to contribute investigating the difficulties to reap the intended benefits from liberalization and regulatory reforms of network industries. This issue is tackled through the ‘theoretical lenses’ of new institutional economics, in particular by applying the Institutional Analysis and Development (IAD) framework. The study is a comparative analysis of liberalization and regulatory reforms of network industries within the same country context. In Italy, various reforms of network industries have been made and implemented during the 1990s and 2000s, especially in water, gas, electricity, telecommunications, railways, highways, local public transports, and urban solid waste. These reforms generally resulted in greater or lesser degrees of changes of regulatory institutions and industry structure, but in relatively modest competitive pressures on the whole. This analysis suggests that the difficulty to implement liberalization and regulatory reforms of network industries in Italy may be explained by various concurrent mechanisms, which have to do with the rent-seeking behavior of the actors of the industry’s community, the rise of barriers to entry against competitors, and the risk of collusive practices between regulators and regulated. This study suggests some tentative generalizations concerning the effectiveness of reforms intended to open up network industries to competitive pressures.

► I compare eight utility sectors within the same country context, Italy.
► Market opportunities abroad for the incumbents seem to facilitate liberalization.
► Lack of independence and power of regulators seems to hamper liberalization.
► Sub-national governments are another important source of resistance to liberalize.
► EU legislation is important but not pivotal to ensure effective liberalization.