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Quick Feedback Print this Section E-mail to a Friend[Response by Sophie Trémolet and Diane Binder, August 2009]
Infrastructure reforms, as with any reforms, are likely to generate winners and losers, and therefore, to generate resistance. As a result, strong political will is usually required to take the reforms forward.
Governments, in their role as policy-makers, are usually in charge of driving infrastructure reforms, as opposed to regulators. Regulators are usually set up as a consequence of infrastructure reforms and would usually be too recent or immature at the time of reform to be able to drive those forward. Once regulators are in place, however, they may recommend, as experts of the sector, further reforms to policy-makers (they would be called upon to make policy choices and balance stakeholders’ interests), but they would not usually be expected to take them forward.
The position of utility providers towards reform can vary significantly depending on their competitive position. Incumbent operators1, which are usually state-owned enterprises, would usually tend to oppose reforms, as they are usually afraid that these would affect their existing dominance and associated benefits (in the form of high prices linked to a monopolistic position, political favors, or potentially, corruption). On reverse, new entrants2 may seek to apply pressure on policy-makers and regulators in order to further open the market to competition or to private investments. This is typically the case in the telecommunications sector, where the potential for introducing competition is high and benefits from such competition substantial. In that sector, a consensus emerged that monopoly practices were hampering innovation, product differentiation and the translation of lower costs into final prices. New entrants have thus been pushing for incumbent operators to open their networks to interconnection so as to allow new entrants to be viable. This can also be the case, albeit at a more limited scale, in the water sector when competition has been introduced. For example, in England and Wales new entrant water companies can apply for "inset appointments" to serve specific groups of customers in areas that are usually served by regional monopolies. Although they may seek to influence the scope or the pace of infrastructure reforms, utility providers cannot drive reforms as such, however.
Driving infrastructure reforms requires careful planning, in order to avoid unwanted consequences and prevent potential failure. Driving reform should not be equated with dictating the terms of such reforms as forcing through reforms is often doomed to fail. Instead, it requires consulting potentially affected parties about their priorities and needs, conducting information campaigns to clarify the potential benefits of reform, identifying potential resistances up-front so as to put in place mitigation measures and potential compensation mechanisms as well as provide adequate incentives to increase the attractiveness of reforms.