Privatisation
In order to ensure that consumers benefit from competition, certain services that were previously run by the State have been privatised.
What is Privatisation?
It is the opening up of particular markets to competition, i.e. all the traders can offer their services to consumers.
The aim is to offer consumers more services, of better quality, at a lower cost.
Privatisation has occurred in those sectors that were regarded as natural monopolies and were previously managed by the State:
- Transport (railway, air transport, maritime transport, urban transport);
- Telecommunications;
- Distribution of energy (gas and electricity);
- Postal services;
When a service requires the existence of a network (eg - railways), privatisation is generally separates the management of the network and service use. The network is still managed by one organisation (to maintain consistency), however, other companies can use that network to provide services for consumers (eg - various train companies).
Services have to be accessible to all and, due to the nature of competition, they need to be of a high quality and a reasonable price to attract consumers.
As the provision of some of these services is not profitable (the costs incurred to ensure the services are of a significantly high standard are higher than the price that can be charged for them) States may help companies provide these services.
It is one of the instances where State aid is permitted. This aid cannot, however, disturb competition between the various service providers, ie - one of them cannot benefit to the detriment of the others.
Note: Other services are provided in areas that are governed by basic rights. Examples: education, housing, access to drinking water, health, culture, a healthy environment, access to information, etc.
These are the subject of discussions under the proposal for a Directive on service privatisation.
© European Union, 2010
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