Making a case for yardstick competition

What is the best way to regulate a network monopoly? This question was considered by Frontier (London and Cologne) at the 3rd International Conference on Applied Infrastructure Research in Berlin, Germany, sponsored by DIW and the World Bank Institute. Frontier demonstrated that from a commercial perspective yardstick competition is beneficial for customers, shareholders and a typical utility management. However, the management of poor-performing firms may lose out and this may explain some political resistance against the introduction of yardstick schemes in practice. Under a yardstick scheme shareholders are able to replace unsuccessful management teams so that shareholders can typically be expected to be better off even if their firm is starting from a relatively poor level of performance. In a separate session Frontier presented how yardstick competition could be implemented in practice.