Wednesday 7 December 2016

Irish Water must be controlled with protection of the consumer in mind

Regulation of monopolies has become a toothless ritual and the time is long overdue to make changes

Published 02/02/2014 | 02:30

BACKLASH: Most houses won’t have meters installed when the water charges begin
BACKLASH: Most houses won’t have meters installed when the water charges begin

The controversy over Irish Water and its encounters with the Oireachtas committee system these last few weeks have barely scratched the surface of an ongoing problem in Irish economic policy, namely the regulation of monopolies.

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Nobody is free, in theory anyway, to impose excess costs on the public through lax management of a public utility. Running a company with lots of keen competitors is hazardous for the senior managers. In normal businesses, those pesky competitors improve products and services, cut costs and prices, run clever marketing campaigns and generally squeeze the fun out at every opportunity. Customer loyalty cannot be relied on. The customer will bail out at the first sniff of a bargain and will hail your rival as a hero. Rivals can even out-compete to the point where your business goes wallop.

It is more comfortable by far to choose a career in a business where there are simply no competitors. Unless government regulators get in the way, running a monopoly is just about the dandiest job in business, with the possible exception of running a bank in the good old days. Monopolies enjoy automatic customer loyalty, since the customers have nowhere to go. Excess costs can be incurred, including the costs of a happy and contented workforce, profits can be posted and dividends paid. Mistakes, such as foolish investment projects, can be glossed over and the bill passed along to the captive customers, who will grumble but cannot desert.

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