Introduction

Parts of the former natural monopolies for public services in telecommunications, electricity, gas, transportation, etc. are now viewed as potentially competitive, such as long-distance services in telecommunications, and generation in electricity or gas, and consequently open to competition. Conversely some elements, such as the transmission grid in electricity and the tracks in railways are still considered natural monopolies, and remain regulated, possibly with new forms of regulation like incentive regulation.

The management of the interface between the competitive and regulated sectors is crucial for the success of liberalization. The conditions under which competitors can access the regulated sector, which is an essential input for their activities, determine the profitability of entry and therefore the level of competition in the sectors opened to competition. They also dictate the efficiency of the utilization of the natural monopoly elements.

Despite its vital role for the success of liberalization, which is regarded as a key institutional change for development, no specific proposals of desirable access pricing rules for developing economies are currently available. The purpose of this chapter is to start to fill this gap. All along, we will keep in mind the main features of developing countries which may call for specific rules: high cost of public funds, poor auditing and monitoring facilities, low transaction costs of corruption, weak counterpowers, weak ability to commit, and inefficient tax systems.