Access Regulation for Naturally Monopolistic Port Terminals

The dissertation <link erim events _blank>Access Regulation for Naturally Monopolistic Port Terminals: Lessons from Regulated Network Industries of Enzo Defilippi analyzes the characteristics of access policies implemented in the telecommunications, electricity supply, natural gas and railways industries. It uses the lessons learned from these experiences to propose a model suitable for the port industry. Its relevance resides in the importance of the subject for the formulation of development strategies in developing countries, and the lack of previous studies in the field.

The research concludes that integration is the most recommendable option of vertical structure for naturally monopolistic port terminals. Another conclusion is that negotiation constitutes the most recommendable option to determine price and non-price terms. In these circumstances, the regulator should only intervene when parties do not reach an agreement. For the same reasons, a cost-based methodology should be used to determine access charges. Last, the most recommendable mechanism to determine when to require the incumbent to expand the terminal’s infrastructure is the use of “triggers”.

Enzo Defilippi has defended his dissertation on June 30, 2010 at Erasmus School of Economics, Erasmus University. His promoter is Prof.dr. Hercules Haralambides, Professor of Maritime Economics and Logistics, Erasmus School of Economics, Erasmus University. Other members of the Doctoral Committee are Prof.dr. S.L. van de Velde, Prof.dr.ir. R. Dekker and Prof.dr.ir. J.A.E.E. van Nunen†.

About Enzo Defilippi

Enzo Defilippi (Lima, 1969) studied Economics at Pontificia Universidad Católica del Perú, where he graduated in 1993. In 2000, he received Master´s degrees in both Public Policy and Business Administration from IESA (Caracas, Venezuela). After working several years as a financial analyst and public officer, he started his academic career in 2002. In that year, he co-authored a paper that obtained the “International Journal of Maritime Economics and Logistics Prize”. Since then, his work has been published in journals such as Transport Research Part A: Policy and Practice and Maritime Economics and Logistics, as well as in various research series at Peruvian universities. He has also developed a successful career as an economic consultant, having provided services to the European Commission, the International Finance Corporation, the Andean Community, USAID, GTZ, diverse Peruvian ministries and government agencies, and a large number of private companies. He currently works in Lima as a researcher and consultant in regulation, antitrust, and public-private partnerships.

Abstract

The problem of access arises in industries where inputs from monopolistic and competitive markets are complementarily needed to provide a service. In these circumstances, the firm controlling the monopolistic segment has incentives to deter competition in the competitive segments (markets) to recover profits foregone by regulation (Paredes, 1997). In the port industry, for example, a number of services need to be jointly provided to complete the logistics chain: pilotage, towage, stevedoring, storage, etc. Without any of these, cargo cannot be delivered. In ports where a terminal constitutes a natural monopoly, an integrated terminal operator has incentives to deter competition in the markets of services that are necessary to complete the logistics chain, since this would allow him to charge disproportionate prices and extract monopolistic rents. This strategy can be implemented by preferential treatment to itself or sister companies, or by restricting competitors access to the terminal.

To avoid such situations from occurring, regulators have two options. They can either (i) forbid integration between terminal operators and carriers or, (ii) establish a framework under which all service providers are allowed to access and use the terminal under reasonable conditions. As suggested by Vickers (1995), the first option (vertical separation) may create non-trivial transaction costs that result in higher prices for the consumers, for which the second option (the implementation of access policies) constitutes a more desirable policy. However, formulating access policies is not an easy task. If access conditions are too high, a limited number of entrants will use the terminal, allowing providers to obtain economic rents. If conditions are too relaxed, an excess of entry may occur, thus reducing the terminal operator’s incentives to adequately maintain and expand the infrastructure (Laffont and Tirole 1994).

The objective of this thesis is to analyze the characteristics of access policies implemented in the telecommunications, electricity supply, natural gas and railways industries, and to use the lessons learned from these experiences to propose a model suitable for the port industry.

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