Adapting Infrastructure Regulation: What Should Be the Boundaries of Coercive Power?

Today’s utility regulation is marked with change, including the internationalization of infrastructure, challenges to traditional utility business models, the decline of the natural resource model for water, emerging market structures that are sometimes weakly competitive, and companies such as Google that aspire to be the dominant managers of the world’s information, computing, and network resources. This paper outlines an adaptive approach for developing regulatory responses. The adaptive framework recognizes that issues can be divided into two basic groups: technical and adaptive. Technical challenges are those for which there is general agreement on the existence and nature of the problem, the alternative solutions are clear, and work can be performed by subject matter experts. Adaptive challenges arise when fundamental changes in the environment call for a group to rethink basic goals and strategies. The model has as one of its goals the achievement of proper coherence, which is the proper alignment between institutions, technologies, and sector practices. When change is the norm, coherence should be dynamic with greater emphasis on liberty of ideas and less emphasis on static notions of efficiency and alignment. An adaptive regulatory system would be one that decentralizes control, permits multiple moving parts, allows for asymmetric treatment of service providers, facilitates deliberate experiments, and emphasizes information sharing. This paper is a work in progress. Please do not cite or quote without permission of the author.