Franchise Bidding for Public Utilities Revisited

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Abstract

Analogous to the reforms sweeping through Eastern Europe, important changes have been taking place in Western utility industries. Competition has been occurring in telecommunications and gas and is beginning to take place in electricity. Price-cap regulation is beginning to be employed in telecommunications. Privatization and calls for privatization are on the rise. Such changes are all raising serious questions about the life expectancy of rate-of-return (ROR) regulation and whether, in the traditional set-up and implementation of public policy towards utilities, too little consideration has been given to market-oriented solutions to natural monopoly problems.