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As regard as the energy and transportation sectors are concerned, there exist substantial sunk costs in establishing and maintaining alternative network. So the incumbent undertakings enjoy a substantial competitive advantage. Markets of these sectors contain product homogeneity and market transparency so that their competitive conditions are entirely different from the sectors’ above. In these sectors the incumbent undertakings whether public or private control large market power. Therefore liberalization in these sectors will be the first step, which produces elementary competitive circumstance. But the second step maybe hard that this market structure needs constant support and policing from a specialist regulator who understands these industries in depth to permit their survival. So it is more difficult to harmonize obligations in these sectors in Community level.
In addition, account should be taken of consumers’ protection. The most important is that the public service industries must have an obligation to keep transparency to customers. The content of transparency should include tariffs, contracts, choice and financing of providers which will protect consumers from discrimination and other anti-competitive practices.
5. Other Projects Not Discussed in This Paper but Need to Done
5.1 Sector-Specific Approach
Only the principles defined in Green Paper on Service of General Interest can not be implemented by itself. Because of the specific conditions in every sector, the implementation of public service should be based on sector-specific approach. So research to a sector-specific approach is necessary. Otherwise the goal of public service obligations cannot be realized really and truly. But my knowledge on this is so relatively poor now that I will not display my slight skill on this point before an expert. So it is not wise for me to discuss something I am not very clear here. And it is of consequence for me to research on the specific PSOs of each sector, such as energy, communication, postal and transportation, in my future research. And it will be core of my future research.
5.2 Transplant PSOs of EC into China
In order to establish market economy system, it is vital for Chinese authorities to start or advance the liberaliztion process in sectors where state-owned enterprises formed in the planned economy system are dominant. All business affairs except public service and basic industry have been privatized by access of private capital and cancellation of licenses until now. Fortunately, to liberate public service is on the schedule of the government, which has led to the decomposition of China Telecom, reformation of the railway transportation price system and prohibition of suicidally competitive practices in civil aviation. Although we don’t have a statute competitive law which is expected to be drafted in the next two or three years and little progress are made by contrast with other sectors, our goal to a competitive market is still on the road. As follows, I will take electricity sector in China as an example to illustrate regulatiing public service in China.
Tens years ago Chinese electricity sector was completely owned by the government and operated by administration. Lack of competition and economic operation brought about financial deficit and low-grade service. And these circumstances kept unsolved until Chinese government decided to liberalization this sector in 1990s. By more than ten years efforts four main achievements has been made in China. One is that Electricity Regulatory Commission of China (ERCC) was set up; the second is to decompose state electricity into five generation undertakings and two distribution undertakings; thirdly, private capital can be access to electricity sector by license; the last is to establish price and quality control by statute law. But there are still many corresponding issues left to be settled. (1) Because of political compromises ERCC is not the sole regulator in electricity sector, which will reduce the authority of ERCC and produce various regulatory policies. (2) The original plan of decomposition is to introduce competition in electricity sector. But because of the reserved distribution network of generation undertakings we must doubt the extent of implementation of this competition plan. Another problem here is how to compensate the loss of users who made long term purchase contracts before liberalization. (3) Although market access of private capital was established, there are no specific principles to affirm who and how get the license. (4) The statute law about price and quality control is so oversimplified that it can not be implemented. In conclusion, in the beginning of liberalization in electricity sector there are numerous regulatory and competitive problems for us to figure out.
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