Ownership structures and market performance in network industries

Abstract

Since 1980``s, a massive privatization and liberalization program of most network industries have been undertaken worldwide, which is due partly to significant inefficiencies of these industries and partly to the rapid technological development which makes monopolistic and competitive sectors coexist vertically. With this, various ownership structures have emerged as alternative policy options about vertical market structure. Either theoretical or practical alternatives include (i) integrated monopoly, (ii) structural separation, (iii) vertical integration, (iv) accounting separation and (v) joint ownership. Thus far, there has yet been no clear-cut consensus about which structure is better than the others since most previous research has been focused on one aspect or another of quite complicated circumstances of network industries. Hence, it is not surprising to find that policy recommendations of the previous research are quite mixed and confusing. In this thesis, we propose an integrated framework for understanding and analyzing the relationship between ownership structures and market performance. We specify alternative ownership structures and the dimensions on which to evaluate both economic and uneconomic performance of a certain ownership structure. To understand the causality between ownership structures and market performance, various influence factors are identified. We treat the problem of ownership structures as who owns the bottleneck facility of monopolistic activity? We identify the following four ownership structures: (i) independent ownership where a monopolist operates as a separate entity and competitive firms need an access to the bottleneck on an equal footing; (ii) integrated ownership where one of the competitive firms own the bottleneck and others need an access to this; (iii) mixed ownership where competitive firms own part of the bottleneck by share-holding; and finally (iv) joint ownership where the competitive firms jointly own th...