5. Conclusions and further
work Exploring the public utility model approach, we learn that: 1) Cost-plus regulation leads to excessive costs and capital investments as has occurred historically in the European ATC sector. There is very little incentive to collaborate. This helps to explain the low standardization in the ATM industry leading to difficulties in comparing ATM performance. Cost-plus regulation is better suited for an ANSP that has customer interests well-represented in its decision making bodies. 2) Price cap regulation incentivizes cost efficiency and is a more appropriate regulatory for profit-maximizing ANSPs that are more similar to private firms. However, setting the price cap right requires extensive information. Also, ANSPs have an incentive to cut back on quality of service delivered. In our model, we have shown how ANSP could decide to reduce ATC capacity which could lead to higher delays. Therefore, we suggest to introduce hybrid price-caps in the SES performance regulation, rewarding ANSPs for outperforming service quality targets through a bonus-malus scheme. 3) Performance regulation affects technology implementation incentives. A pure price-cap provides weak incentives for investing in new technologies as ANSPs have to bear all the costs of the investments and see only limited benefits. A cost-plus approach, compensating ANSPs for the fixed investment cost, makes ANSPs more inclined to invest. However, the approach is still cost recovery based and depends on the ANSPs willingness to consider consumer benefits. A bonus-malus mechanism also leads to direct revenues for ANSPs thereby increasing their technology adoption incentives and potentially sharing airspace benefits more equitably among various actors (airlines, airports and ANSPs).
