Innovation, Investment and Regulation: What are the Options for Regulation in the Near Future?

We address the question of the available options for regulating the sector in the coming period. In order to answer this question, we focus on the problem of investment and innovation in an ex ante regulated sector. Relying on existing literature, we argue that ex ante regulation could represent a danger for the long term development of the sector by delaying or canceling projects of investment, especially (but not only) concerning the construction of new infrastructures. We also argue that ex ante regulation is also distorting the investment itself: Incremental investment is privileged compared to radical investment. In this context, we identify three possible options for regulation in the coming period: Continuing ex ante regulation; substituting ex post regulation to ex ante regulation; and finally implementing an industrial policy for macrostrategic reasons. After having described a few major mutations of the sector that must be taken into account by the regulator and after having presented the major dilemmas the regulator is facing, we propose two possible solutions inspired from foreign policies. The First one consists in offering regulation holidays to investors, with regular reviews in order to prolong or not those holidays. The second one consists in implementing an industrial policy which could take the form of a contract negotiated between the regulator and the operators. It would guarantee the absence of ex ante regulation if the conditions of the contract (in terms of regional planning, price, quality of service, types of investment...) are met.