Reaching the Urban Poor with Private Infrastructure

Nontraditional infrastructure service
providers supply many low-income consumers in slums and
urban peripheries in developing countries. And technological
change has eased entry by new providers. But the current
approach to private participation in infrastructure
typically gives exclusivity to a local monopoly for a long
period. In return, the monopoly utility is obligated to
provide service to all in the area at a certain standard,
charging a rising block tariff and using some
cross-subsidies. This approach can inadvertently erect
barriers to improving service for low-income households.
Policymakers therefore need to rethink their approach to
private participation transactions and their regulation. In
particular, they need to focus on facilitating new entry.