1. THEORIES OF REGULATION
Public Interest Theory
intervention in case of
- monopoly
- externalities
- provision of public goods
- imperfect information
Private Interest or “Capture” Theory
- assymetrical gains and losses from regulation
- favouring organised interest groups
Regulation as Taxation
- aimed at achieving better income distribution than permitted by market economy
General Theory
- takes political view with regulator acting as vote maximiser; however fails to
address bureaucratic type appointments

2. THREE TYPES OF REGULATION
Rate of Return Regulation
- especially relevant in US
- can be inefficient and punish incentive
Price-cap Regulation
- used in UK starting in 80’s
- inflexible system price can be subject to frequent review
Franchise Bidding and Regulation
- difficulties with length of contract
- proposed for deregulation of bus services in Dublin

3. DEREGULATION
State Sector – civil service, Gardai, education, local authorities, health boards, commercial state sponsored bodies and non-commercial bodies
Increasing competition often associated with legal enforcement (i.e. competition policy)
Privatisation (whole or in part)
Subcontracting of non-essential activities to specialist providers
Introduction of charging system for former “free” services
Reorganisational changes with a view to increasing efficiency

4. PRIVATISATION AND DEREGULATION
Regulation of Monopolies
- greater supervision and accountability
- setting maximum prices
Exposure to International Competition
Breaking Monopoly into Component Parts
- enables greater efficiency
- some divisions can be subject to competition
Opening up Infrastructure to Outsiders
- e.g. telecommunications, electricity grid
Enforcing Competition Regulations

5. PRIVATISATION AND DEREGULATION (con)
Major compoonents of privatisation
Introduction of charges
- i.e. where service previously provided free of charge
Contracting Out
- privatisation of certain services that continue to be financed by
the public sector e.g. in health sector
Full Privatisation
- selling off of public companies
Deregulation and Liberalisation
- e.g. airlines and communications

6. NATIONALISATION AND PRIVATISATION
Reasons for Nationalisation
Political Philosophy
Social and Historical
Economies of Scale
Externalities
Failure of Private Sector

7. NATIONALISED INDUSTRIES
Financial
- setting targets
- measuring performance
- capital investment
Pricing Issues
- elasticity considerations
- peak pricing
- marginal cost pricing
- cross subsidisation
Investment Analysis
- financial implications
- cost benefit analysis

8. NATIONALISED INDUSTRIES (con)
Existence in:
Transport – air, bus, sea, rail etc.
Energy – electricity, oil, gas, coal, turf etc.
Posts and Telecommunications
Other – e.g. steel, food

9. PRIVATISATION Arguments for: Market forces - efficiency
- splitting into separate companies
- competition for private finance
- influence of shareholders
Reduced Government Interference
- clear objectives
- freedom from government influence
Financial
- current revenue
- capital revenue
- elimination of need for subsidisation

10. PRIVATISATION (con) Possible Problems
- loss of social ethos and consideration of externalities
- loss of profit revenues
- need for government intervention in case of difficulty

11. STATE COMPANIES • Irish Shipping - closed down in 1982 • B and I Line
- sold off a number of years ago
NET
- former state fertiliser company that has been sold to private sector
• Irish Steel Holdings
- sold to Ispat
Whitgate refinery
- sold to private company Tosco in 2001
Bord na Mona
- a public limited company since 1999

12. STATE COMPANIES (con) • Greencore - first to be privatised (1991)
• Irish Life
- raises additional issues (part privatisation and golden share)
Bord Gais
- management in favour of privatisation but no decision taken by
government
- need to increase source of supply e.g. interconnector to Scotland and
Corrib gas field
Aer Lingus
- though state owned is now run in fully commercial manner
- set for part privatisation this summer though serious issues remain
with date still in doubt

13. STATE COMPANIES (con) Aer Rianta - still state owned
- Government has now split company into three independent
entities though monopoly stuation at Dublin still apparent
- no decision on building new terminal with private airport company
in competition
Eircom
- has been privatised by degrees with part sale (15%) followed by total
sell-off
- since then private company has been split in two with mobile phone
division taken over by Vodaphone competition in mobile phone area;
however fixed line transmission still a monopoly though
infrastructure has been deregulated allowing competition through
lease line operators
- proposal now for take over of Eircom by a venture capital company (Babcock and Brown)

14. STATE COMPANIES (con) • ESB - still a state owned monopoly
- though deregulation is encouraged in practice little competition has
emerged
- special regulator set up for industry (as in communications) who
seems to favour company's agenda
CIE
- comprises three companies, Dublin Bus, Bus Eireann and
larnrod Eireann
- government trying to bring in more competition for buses through
tendering 25% of new routes in Dublin
- no competition likely in rail sector
An Post
- another state monopoly and likely to remain so in near future
- main competition coming from technological developments in
communication

15. STATE COMPANIES (con) ACC Bank
      - business bank now sold off to Dutch company in state sector (ICC sold off to Bank of Scotland)
                  
VHI
- market for health insurance has now been deregulated – two competitors in market
• Others
- e.g. Coillte