Essential Facilities, Economic Efficiency, and a Mandate to Share: A Policy Primer

Sat Jan 01 15:24:00 EST 2000
By Dr. Karl McDermott, Dr. William Taylor, et al.

Policymakers continue to restructure the electric industry from one in which vertically-integrated monopoly suppliers provide generation, transmission and distribution to one in which different firms specialize in the provision of these services in competition with the incumbent provider. During this process, policymakers face a fundamental question: what resources and/or facilities, if any, should incumbent electricity providers be compelled to "share" and make available to their competitors? We use economic analysis, evidence from prior antitrust court cases and the experience available from the telecommunications industry to help policymakers answer this question. We present a methodological approach that policymakers can use to determine whether certain services or facilities should be shared and argue that four conditions must be met simultaneously to conclude that a facility of a utility is essential to competition and should be shared with competitors.