Politics and the Pursuit of Efficiency in New Zealand's Telecommunications Sector 1987-2008

Abstract

Economic analysis takes as its defining performance benchmark the pursuit of increases in efficiency. Competition law and industry-specific regulation provide two competing means of intervention whereby the pursuit of efficiency can be enhanced. Ultimately legislators decide how governance of industry interaction will be allocated between these two institutional forms. Whilst competition law can govern interaction in most industries where the underlying economic conditions are sufficiently different industry-specific regulation offers advantages. However its weakness is the risk of capture leading to the subjugation of the efficiency end to the pursuit of other objectives. But if the regulatory institution could be bound in some way to pursue an efficiency objective could the risk of capture be averted? New Zealand's 'light-handed' regulation instituted in 1987 attempted to enshrine the pursuit of efficiency into statute firstly by relying solely upon competition law and contractual undertakings and subsequently creating a regulatory body with an explicit legislated efficiency directive. In practice however the inability of a government prioritising efficiency to bind its successors to pursue the same objective renders sector strategy and hence the efficiency objective subject to political capture. Consequently inherent systemic instability attends the pursuit of the efficiency objective and the institutions overseeing its enforcement.