Quick Blogging.

The Supreme Court recently upholds KPPU (the Indonesian Competition Commission) condemning PT. Adhya Tirta Batam (ATB) for violating Article 17 of the Competition Law. The KPPU Decision reads:

• PT. Adhya Tirta Batam is proven legally and convincingly violating Article 17 of Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition;
  
• PT. Adhya Tirta Batam is not proven violating Article 19, point d of Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition;
  
• PT. Adhya Tirta Batam is not proven violating Article 25 paragraph (1), point a of Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition;
  
• PT. Adhya Tirta Batam should revoke the policy of disconnecting the new water meter connection;

Michael Pritchard demonstrated his Lifesaver Bottle that can turn filthy water into drinkable water in a matter of second. The portable lifesaver filter is said to have 15 nanometer pores, small enough to filter viruses. The running cost to produce 25.000 litres of water through a Jerrycan equipped with Livesafer filter is 0.5 cents per day.

If the technology develops and applied to drinking water infrastructure, we may soon say goodbye to natural monopoly in the water sector. Treatment costs will go significantly low making any household eligible to build their own treatment facilities so long as water sources are available.

My master thesis attempts to define "Obstruction of performance" under Article 86(2) of the EC Treaty and how this category can be applied to the water industry. The thesis argued that Obstruction of performance has to be narrowly interpreted and necessity/proportionality of the measure has to be taken into account in order to invoke "Services of General Economic Interest" (SGEI) justification under the EC Treaty. Comparing with electricity and gas sector, I conclude that specific situations in the water industry may justify its exclusion from general EC Competition rule. Scenarios where "obstruction" in the water industry occurs were explored.

Preiview:

Provision of water and sewerage services has traditionally lies upon the responsibilty of the state for ages. Internal market integration and liberalisation processes so far had always exclude water sector from its agenda. Even until today, there has been no sectoral regulation adopted by the EU concerning liberalisation of water and sewerage services. The Parliament in its Resolution makes clear of its position that it rejects water being put in a sectoral directive due to its regional characteristics, but calls for “…without going as far as liberalisation, for water supply to be ‘modernised' with economic principles in accordance with quality and environment standards and the needs of efficiency”.

However, the Comission had shown its interest in liberalising water and sewerage service. The annual turnover of the water sector in EU is estimated at 80 billion Euro, more than the turnover of the gas sector. The Commission has expressed concerns that horizontal and vertical restrictions from long term supply dealings “…may be harmful and contrary to EC law even where national law allows them”. In its internal market strategy for 2003-2006, water is listed as one of the area where” new action may be required”, by reviewing legal and administrative situation in the water and waste-water sector, which include an analysis of the competition aspects.

Download the full thesis here.

Here's a link to an OECD article on the role of KPPU in supervising concession markets in Indonesia and other set of regulatory framework. This article only discusses the peripherals, but is nevertheless not bad as a start.

Download here.

The answer is likely to be yes, but if the question is how, maybe the its the engineers that should answer. What is relevant to be discussed is, "what is the legal implication"?

Most water industries are heavily regulated, because it is a natural monopoly (i.e. more seller means higher price, one seller is optimum price). I have red a research indicating that the scale of natural monopolies in the water industry varies. In the developed economy and high-tech countries, the scale of the natural monopoly reduces.

Thus, a reduction in the character of natural monopoly will allow more competitor to enter the market. For example, in water industry, more water supplier might be able to enter the common carriage through an economically feasible schemes. Regulators and network owners should not prevent them from entering these 'essential facilities' because it could amount to a violation of competition law.

This also implies that governments may need to adjust its regulatory mechanism.

But before we discuss this further, I'd like to hear from the engineers. In what way would nanotech makes water purification/treatment cheaper?