ASi" kUCTURE FlOR DEVELOPMENT

Sectoral agendas for reform
tion. Most elements of these services are highly marketable
and can be provided through approaches in-
. Although cmuntry characteristics are important, sec- volving competition within a market or competition
* to.i characteristics cast the deciding vote among for. the right to serve that market (Table 6.4). The
institutional options. The "marketability" of ira- major exceptions have strong scale economies
structure activities is detemined by the following (power transmission) or require specfic sites and
characteristics: production technology that leads to have significant environmental effects (large-scale
natural monopolr the public nature of consump- hydroelectric generation).
' tion constraints on cost recovery, distributional
concerns; and the importance of spillover effects. TELECwMMUNIcAoNs The marketability of tele-
Table 63rillustrates the diffrences, both within and communication services is high, especially for long
between sectors, in the marketability of infrastruc- distance and value-added services such as data
rhre activities. Each activity is scored from 1 (least tansmission. Falling transmission and switching
marketable) to 3 (most marketable) according to the costs, technological innovations (such as wireless
five chrac cs just specified (the darker the services), and changing patterns of demand have
shadin& the more marketable the activity). For in- strongly boosted the competitive potential of the'.
stance, large networked facilties, such as tasmis- telecommunications industry for most services, Insion
.grids,. primary irrigation channels, and duding in many cases local telephony. Private pro-
;: rilbeds,allow very little competition, while activi- vision is appropriate in countries that have the
ties such as urban waste collection and urban bus capacity to provide the necessary regulatory frameservice
are potentially quite compettive Some m- work Concessions with regulatory constraints emfrastructure
goods, such as phone service or tertary bodied in contracts are attractive alternatives in
irrigation, are entirely private in consumption while countries where independent regulatory capacity is
others, including many woads, are public goods. The unlikely to be effective
last column of Table 63 gives an index of mar- Today, the challengeof meetingthe large andrisketability
potential (the simple average of the five ing demand can be met by moving toward a sector
columns).
structure that is plurl and competitive, with a m
This exercise suggests that the potential for com- of service providers-prrvate and public-using
merialization and competition in infastructure is various technologies and offenng services tailored
more widespread than is commonly supposed. to different user needs. New entry is the single most
Some activities, such as long distance telecomnunui- powerful tool for encouraging telecommunications
cations, urban bus services, or solid waste col[ec- development because monopolies rarely meet all
.ton are adaptable to market provision once they demands. Licensing multiple providers is the best
are unbundled from related activities Other activi- way to accelerate the inveshtent needed to create a
ties, such as urban piped water and power tans- broadly based national network. Additional service
mission, are intinsically monopolistic but provide providers also increase user choice, lower costs, and
private goods amenable to commerial provision bring capital and management skills into the sector.
and cost recovery. Rual roads are intinsically pub- Market liberalization, like privatization, puts preslic
infrasucture, being both monopolistic and a sure on existing service providers to be more effipublc
good with low potential for cost recovery. cient and more responsive to consumers.
The following sections relate the main options to The transition from state-owned monopoly to
finrastructure sectois within three major groups- multiple operators requires new attention to regulatelecommunications
and energy, water and waste, tion. Preventing the dominant operator from abusand
transporL The options suggested are indicative ing its market power (by restricting output and unof
what is most relevant not narrowly presciptive derpicing competitive services) requires proper
of the only, or single best, approach in each country accounting and disclosure requirements, perfor-
0 ;~.i.n-
type.
mance targets, and incentive-based pnce controls.
Tdelecomunicatims and energy
This infrastructure group covers utilities that produce
services for which user fees are charged, typically
based on direct measures of consumption, and
that generalIy use large-scale networks for distribu-
n4
Experience shows that new service suppliers wil
not be able to interconnect with the incumbent operator
on reasonable terms without regulatory aid.
Service providers, both public and private, should
operate at am's length from the government and be
subject to commercial discipline and to oversight by
an independent regulator.