World Dialogue on Regulation

This discussion paper critically examines the rationales that may be used to support the creation of multisector regulatory agencies. The paper begins with definitions of industries, sectors and multisectors that rest on degrees of substitution possibilities in production or consumption. The possibility that increased reliance on common use of rights of way and conduits may have in fact caused hitherto distinct infrastructure sectors such as telecom, electricity and transportation to converge is examined by means of a description of the state of the art regarding common use of rights of way and conduits. The increased tendency of firms to cross sectoral boundaries is examined both as a possible indicator of underlying convergence and as corporate strategy that may be driven by pecuniary factors such as advantages in taxation, regulatory flexibility, etc. This discussion is supplemented by an appendix that describes the multisector activities of selected firms. The claims for multisector regulation based on common use of regulatory skill sets and potential economies of regulation are critically examined. Here, it is shown that the core problem of scarcity of regulatory resources is caused by government restrictions on the effective functioning of markets in regulatory skills. In the short term, it is possible to realize economies of regulation by means short of merger or agencies such as sharing of facilities. It is also shown that effective multisector agencies that would save costs are unlikely to result from after-the-fact consolidations, but would have to be embedded in the original design. The pragmatics of sector reform, especially when conducted by “line” ministries, are shown as likely to result in sector-specific agencies that would be susceptible to a degree of government influence. In the final section, a list of discussion questions are presented.