The glossary provides definitions of terms and concepts that can be useful for the course.
Wikipedia (Wikipedia, Network convergence, 2013): (Network) convergence refers to the provision of telephone, video and data communication services within a single network. In other words, one pipe is used to deliver all forms of communication services. The process of Network Convergence is primarily driven by development of technology and demand. One main goal of such integration is to deliver better services and lower prices to consumers. Users are able to access a wider range of services, choose among more service providers. On the other hand, convergence allows service providers to adopt new business models, offer innovative services, and enter new markets.
Economies of scale
Economies of scale are the advantages that directly relate to the scale on which an undertaking is producing (Gent, Bergeijk, & Heuten, 2004). By increasing the scale of production an undertaking can often acquire lower costs per unit of output as fixed costs are spread out over more units of output. Furthermore operational efficiency is often also higher with increasing scale leading to lower variable costs as well (Wikipedia, Economies of scale, 2013).
Example given: By increasing the scale of an electricity generating plant using combustion higher temperatures can be acquired resulting in a higher operational efficiency yielding lower variable costs. The higher investment costs for a larger electricity plant are generally compensated by lower costs per MWh since the capital costs are spread out over a larger energy output.
Interdependence is a relationship in which each member is mutually dependent on the others. This concept differs from a dependence relationship where the relationship between the members in it is only unidirectional.
In infra-systems one could discern four types of interdependencies: Physical interdependencies, cyber interdependencies, geographic interdependencies and logic interdependencies (Rinaldi, Peerenboom, & Kelly, 2001).
Physical interdependencies: Physical interdependencies are linkages between the inputs and outputs of agents. A commodity that is produced or modified by one infrastructure, is required by another infrastructure to operate. In the model that is developed in this study, multiple physical interdependencies occur. These interdependencies will be modelled as physical linkages between the different networks.
Cyber interdependencies: These interdependencies are linkages of information between agents that are required for the operation of an infrastructure. The operation of networks requires information of those networks. For the deliverance of this information, another network is required. This will be included in the model.
Geographic interdependencies: Geographic interdependencies occur if infrastructure elements are located near to each other. A local event would affect all of those infrastructures that are located in the same place, which makes them geographically interdependent. Between all networks considered in this study geographical interdependencies exist.
Logic interdependencies: All interdependencies between infrastructures that cannot be classified as physical, cyber or geographic; are called logic interdependencies. These links are dependent on a specific context. Given the abstract level of this study, these interdependencies will not be modelled. .
Wikipedia (Wikipedia, Interoperability, 2013): Interoperability is the ability of diverse systems and organizations to work together (inter-operate). While the term was initially defined for information technology or systems engineering services to allow for information exchange (Institute of Electrical and Electronics Engineers, 1990), a more broad definition takes into account social, political, and organizational factors that impact system to system performance (Slater, 2013).
Internationalization (of networks, markets and supply chains)
Internationalization is the process where activities over increasingly larger distances are being undertaken and in this way cross national borders. Internationalization is a consequence of globalization and has changed the nature of networks, markets and supply chains to a vast extent (Hoof & Ruysseveldt, 1996).
Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities; the doctrine is associated with classical liberalism. The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a "bigger pie" for everybody. Thus, liberalisation in short refers to "the removal of controls", to encourage economic development (Choudhary, 2008).
Although economic liberalization is often associated with privatization, the two can be quite separate processes. For example, the European Union has liberalized the gas and electricity markets, instituting a system of competition; but some of the leading European energy companies (such as EDF and Vattenfall) remain partially or completely in government ownership (Wikipedia, Liberalization, 2013).
Wikipedia (Wikipedia, Natural monopoly, 2013): A monopoly describes a situation where a majority of sales in a market are undertaken by a single firm. A natural monopoly by contrast is a condition on the cost-technology of an industry whereby it is most efficient (involving the lowest long-run average cost) for production to be concentrated in a single firm. In some cases, this gives the largest supplier in an industry, often the first supplier in a market, an overwhelming cost advantage over other actual and potential competitors. This tends to be the case in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market, and hence high barriers to entry; examples include public utilities such as water services and electricity or transportation services (Perloff, 2012).
Path dependency is captured by the idea that 'history matters' because past decisions influence the future decisions to be made (Dam, Nikolic, & Lukszo, 2012). In economics path dependency is caused by high switching costs. The presence of utility infrastructures such as a gas infrastructure system is an example where path dependency arises. Because of the presence of a gas infrastructure system it is relatively cheap to use gas as an energy source for various applications making the use of gas more attractive. If the infrastructure system would not be present, other energy carriers might be more attractive such as electricity which could result in totally different technologies being developed for the applications where first gas would have been used. An example is the use of gas for cooking instead of an electric stove.
Public values are those providing normative consensus about (1) the rights, benefits, and prerogatives to which citizens should (and should not) be entitled; (2) the obligations of citizens to society, the state and one another; and (3) the principles on which governments and policies should be based (Bozeman, 2007). With respect to infrastructures examples of public values are universal accessibility, affordability of services, availability of services and acceptability of means used to deliver services (Correlje, 2013).
Private sector / Public sector
Wikipedia (Wikipedia, Private sector, 2013): In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state. By contrast, enterprises that are part of the state are part of the public sector; private, non-profit organizations are regarded as part of the voluntary sector, a subset of the private sector.
Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector. The transfer of ownership can be given either to a business that operates for a profit or to a nonprofit organization. It may also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management (Chowdhury, 2006).
A regulatory agency (also regulatory authority, regulatory body or regulator) is a public authority or government agency responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity. An independent regulatory agency is a regulatory agency that is independent from other branches or arms of the government. (Wikipedia, Regulator agency, 2014)
Sunk costs are a term in economics indicating costs that have already been incurred and cannot be recovered. This type of costs arises when for instance production means (buildings, machines, infrastructures) are so specific and unilateral in use that they cannot or barely be used in other marketsectors or segments (Gent, Bergeijk, & Heuten, 2004).
A characteristic of infrastructures is that they often have high sunk costs. Example given: Imagine a railroad connects a distant port for cargo traffic. To construct the railroad large capital costs have to be made. Should the port close down because it has lost its function the railroad would lose its function as well and no longer generate income for its owner. Since the railroad cannot be recovered without inducing extra (large) costs, the costs made for building it are lost (sunk costs).
Transmission and distribution operators
As a result of Article 10 of the Electricity and Gas Directives of 2009, as amended by the European Commission, utility companies in the electricity and gas sector had to be unbundled. As a result, many utility companies were split up into a (1) production, (2) transmission and (3) distribution company. The transmission company is usually referred to as a transmission system operator (TSO). A TSO is entrusted with transporting energy in the form of natural gas or electrical power on a national level, using fixed infrastructure. A distribution company is entitled to a similar task on the regional (decentralized) networks. (Wikipedia, Transmission system operator, 2014)
Unbundling is a market opening process that is being used more and more in network industries. Unbundling is the process of separating non-competitive segments, which generally have inherent natural monopoly features, from those that are potentially competitive. By doing this competition can be introduced in the potentially competitive segments which could lead to higher efficiencies and cost reductions in the sectors (Ceriani, Doronzo, & Florio, 2009).
The working paper 'Privatization, unbundling and liberalization of network industries: a discussion of the dominant policy paradigm in the EU' discusses an interesting way how the EU uses the three concepts privatization, unbundling and liberalization in her policy (Ceriani, Doronzo, & Florio, 2009).
Universal service obligation
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country (Wikipedia, Universal service, 2013).
Utilities fulfill a universal service obligation and are often obliged through regulation to deliver their services with a defined level of quality.
Wikipedia (Wikipedia, 2013): "A public utility (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies. (Common arguments in favor of regulation include the desire to control market power, facilitate competition, promote investment or system expansion, or stabilize markets. In general, regulation occurs when the government believes that the operator, left to his own devices, would behave in a way that is contrary to the community's best interests.)
The term utilities can also refer to the set of services provided by these organizations consumed by the public: electricity, natural gas, water, and sewage. Telephony may occasionally be included within the definition. (Merriam-webster, 2013) (InvesterWords.com, 2013)"
Bozeman, B. (2007). Public Values and Public Interest: Counterbalancing Economic Individualism. Washington, D.C.: Georgetown University Press.
Ceriani, L., Doronzo, R., & Florio, M. (2009). Privatization, unbundling and liberalization of network industries: A discussion of the dominatn policy paradigm in the EU.
Choudhary, C. (2008). India's Economic Policies. Sublime publications.
Chowdhury, F. (2006). Corrupt Bureaucracy and Privatisation of Tax Enforcement. Dhaka: Pathak Samabesh.
Correlje, A. (2013, 8 13). Public values. Retrieved from Next Generation Infrastructures: http://www.nextgenerationinfrastructures.eu/index.php?pageID=12&itemID=433249&language=nl
Dam, K. v., Nikolic, I., & Lukszo, Z. (2012). Agent-based modelling of socio-technical systems. Springer.
Gent, C. v., Bergeijk, G. v., & Heuten, H. (2004). Basisboek, Markt- en micro-economie. Groningen: Wolters Noordhoff.
Hoof, J. v., & Ruysseveldt, J. v. (1996). Sociologie en de moderne samenleving : maatschappelijke veranderingen van de industriele omwenteling tot in de 21ste eeuw. Boom.
Institute of Electrical and Electronics Engineers. (1990). IEEE Standard Computer Dictionary: A Compilation of IEEE Standard Computer Glossaries. New York.
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Perloff, J. (2012). Microeconomics. Pearson Education.
Rinaldi, S., Peerenboom, J., & Kelly, T. (2001). Identifying, understanding and analyzing critical infrastructure interdependencies. IEEE Control Systems Magazine, 11-25.
Slater, T. (2013, 8 13). What is Interoperability? Retrieved from Network Centric Operations Industry Consortium: https://www.ncoic.org/technology/what_is_interoperability
Wikipedia. (2013, 8 12). Economies of scale. Retrieved from Wikipedia : http://en.wikipedia.org/wiki/Economies_of_scale
Wikipedia. (2013, 8 13). Interoperability. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Interoperability
Wikipedia. (2013, 8 12). Liberalization. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Liberalization
Wikipedia. (2013, 8 12). Natural monopoly. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Natural_monopoly
Wikipedia. (2013, 8 13). Network convergence. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Network_Convergence
Wikipedia. (2013, 8 13). Private sector. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Private_sector
Wikipedia. (2013, 8 12). Public utility. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Public_utility
Wikipedia. (2013, 8 12). Universal service. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Universal_service
Wikipedia. (2014, 5 4). Transmission system operator. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Transmission_system_operator
Wikipedia. (2014, 5 4). Regulator agency. Retrieved from http://en.wikipedia.org/wiki/Regulator_(economics)