Regulation of Below Rail Infrastructure Assets in Queensland: What can we learn from the Canadian experience?

Stephen Mclay s2840946

Supervised by Alex Robson and David Rynne

Contents

Introduction p 3

Defining the economic principles of natural monopoly infrastructure assets and the benefits/costs of privatisation p 3

The pros and cons of direct regulation p 5

Where commercial negotiation has been successful and the difference between commercial negotiation with government owned corporation monopolies and private monopolies p 7

Current QLD situation and the risks imposed by natural monopoly specific to the context p 10

CN Rail privatization as a point of empirical evidence p 13

Considerations p 15

Conclusions p 16

Reference List p 19

Bibliography p 20

Appendices p 21

Introduction

In 2012, the Queensland Government privatised bulk freighting services and coal business in Queensland and New South Wales as well as the regional freight business in Queensland, bulk mineral haulage in Queensland and Western Australia and the containerised freight between Cairns, Brisbane, Sydney, Melbourne, Adelaide and Perth. The privatisation of bulk freighting services under the banner of Aurizon National, a natural monopoly, raises the issues of economic rent extraction, decreasing levels of services and other concerns that regulators must contain when regulating monopolists.

This paper will look at the economic principles behind natural monopoly regulation, the advantages and disadvantages of direct regulation, introduce