III-1.9: La régulation des réseaux industriels. Quelles évolutions et perspectives en France et en Europe? Par la Fondation Nationale Entreprise et Performance

In her preface, Marie-Dominique Hagelsteen defines regulation as the “appropriate form of public intervention in private activities involving concerns that go beyond the companies involved.” This broad definition of regulation could be applied to a great deal of industries, such as finance, healthcare, or even to the general concern for the common interest rather than any particular industry, such as environmental protection. The report concentrates its analysis on what are commonly called “network industries,” namely telecommunications, energy, rail transportation, and postal services.

The study first performs a comparative analysis of the question by taking examples from various European countries (Germany, The Netherlands, United Kingdom, and Sweden) and non-European countries (South Korea, United States), distinguishing between national initiatives and the influence of European Union legislation, which, even though there is no such thing as a pan-European regulator, has nonetheless shaped member states’ national models. This temporal and spatial description provides a clear and easily understandable panorama of the relevant economic theories and legislation. Specialists will be able to recognize the fundamentals, and less specialized readers will benefit from a perfect general introduction to the subject.

The report is based on observations gleaned from many months of interviews and visits abroad performed by the Foundation’s team. These observations are the basis for the series of 9 propositions that are intended to improve the regulation of industrial networks in France and in Europe.

First of all, the report is in favor of a tax on the regulated industry to finance the regulator’s budget. This measure is intended to protect regulators’ independence, which is directly proportional to their budgetary independence. The rate of this tax would be proposed by the regulator and approved by Parliament. In order to enable regulatory agencies to develop sufficiently close and expert relationships with the industry, the report proposes that agencies be led by a multidisciplinary team of full-time employees. As is already the case in many countries, all regulators should systematically carry out public consultations and publish a summary of these consultations before making any decisions, and all major decisions should be preceded by an impact study. Lastly, because of the importance of regulators’ activities, their calendar should be made public. The report also believes that these procedures would be sufficient to end many of the criticisms about regulators’ lack of independence.

However, the report also reminds the reader that regulators must be held accountable. The authors insist that accountability should take the form of judicial review, which implies that magistrates must receive an education in economics and technology, equivalent to that of the lawyers with whom they must deal on a daily basis. Furthermore, magistrates should be kept in office for three to six years.

Regulatory agencies must also be evaluated on the basis of their performance. Indeed, the report borrows the notions of efficacy from economics and economic law and suggests rules of “performance.” Thereby, regulators’ means and support functions must be mutualized, and a parliamentary body must have the power to periodically evaluate the regulation of any particular industry. In order to increase this method’s efficacy, the report suggests that regulatory agency’s boards of directors establish a “roadmap” detailing their goals, which should also be approved by Parliament.

The Foundation’s report then addresses the substantial theme of industry regulation. The authors pertinently remark, “better regulation means guaranteeing the proper functioning of strategic industries over the long term.” This is a broadened understanding of regulation that goes beyond market failure and therefore also goes beyond institutional concerns, and a crucial one at that, because it not only takes into account the ever closer relationship between regulation, investment, and industrial and economic policies, but also because in the near future it will likely be implemented at the European level in many industries. To that end, the report proposes that foresight committees be created within regulatory agencies, and that these committees be granted the ability to set long-term price orientations in order to allow prices to meet market expectations.

But the report goes further in its ambitions for regulators, which it sees as technical experts for society’s debates. This is why Parliament should be required to ask for their opinion before voting any law or amendment concerning a regulated industry.

The second part of the report (chapter III) is devoted to the major issue of a potential European harmonization of regulation. The authors cite one of the people they interviewed, who stated that national markets have been successfully opened to competition, but that a European market has yet to be created. The study points out that national regulatory systems are highly disparate, not only from a legal point of view, but also from an economic and technical one. Therefore, the report desires the creation of a “European regulatory law”. The authors themselves use the quotation marks because they propose a minimal solution by which good practices would be propagated, a common set of powers would be granted to all regulators, and cooperation between national regulators would be increased. This solution would allow national regulators’ decisions to have an impact on other member states: indeed the markets are geographically European, but must yet become European in substance.

The report observes that the industries on which it focuses are essentially national, but that European construction makes going further than simple cooperation—such as within the frameworks of the ACER in energy regulation or the BEREC in telecommunications regulation—necessary. Indeed, the network of competition authorities is a model of efficiency, but the very idea of cooperation via networking is insufficient. According to the authors, true regulatory bodies must be created in every instance where European issues come to play on a market. Such issues exist in the field of energy (interconnection stations), rail transportation (corridors and border crossings), and telecommunications (interconnections and roaming).

This institutional evolution would strengthen the idea of a “service in the general economic interest” at the expense of competition, which was the primary goal in the past, but which it would be more appropriate to nuance when faced with European public services.

Furthermore, the document posits that the creation of European regulators is necessary because building a common market requires the construction of trans-European networks, which itself requires adequate regulation that can only take place at the European level. The report highlights that the reason why European regulators are so necessary is because European construction, rather than implementing competition on national markets, should be the goal. However, the report concedes that the creation of such bodies is only conceivable in the medium-to-long term.

It is true that the report can only formulate propositions for the long term because of the audacity of these propositions: for example, the report proposes transferring national regulatory agencies’ dispute settlement powers to the hypothetical European agencies, which should also benefit from the power to set prices. National regulatory authorities would only be consulted for their opinions.

Finally, a “European Observatory of Network Industries” should also be created to evaluate policies in this domain.