Introduction

1To what extent did Europeanisation matter in the policy transformation of public utilities of new member states before and after the accession period? While Europeanisation literature has traced the EU’s influence during the accession period, the task for the second generation of researchers is to identify rigorously the impact of Europeanisation by untangling it from other possible processes, particularly globalisation. It is then crucial to test its impact systematically and empirically before the task to identify the continuation of Europeanisation after membership.

2Following literature on stepwise comparative design, [1] my article delves into a similar comparison of telecommunications and energy in Estonia and Poland. I choose Estonia and Poland following the most different cases design, with the former associated with Baltic States and the latter with an institutionalised Visegrad Four. [2] Their findings suggest that despite their vastly different characteristics, policy transformations in both countries are embedded in broader patterns of political continuity and globalisation. I choose to analyse network industries—telecommunications and energy in this article—because of the required political commitment and policy continuity that open an opportunity for scholars to analyse the impact of globalisation and Europeanisation diachronically. [3] For policy sector analysis, network industries are characterised by the reliance on transmission infrastructure for the administration of service. If the owner of the transmission infrastructure is also the producer and distributor, the owner might increase the cost for other competitors to use the same transmission infrastructure. Another variant of this comes in state ownership, which could bring problems to competition due to the privileged position of state companies. Therefore, telecommunications and energy are comparable since they both rely on highly integrated and established infrastructures for the distribution of its services.

3I use Europeanisation as the “institutionalisation of a shared political and economic order at the international level largely through membership in the EU, as well as in the creation of issue and sector-specific regimes at the EU level.” [4] I then focus on globalisation’s definition in International Political Economy (IPE) literature “as a multi-scalar process of increasing flows and interconnectedness associated with the broader economic restructuring of the global economy, imposing opportunities and limitations on state autonomy”. [5] However, it is also widely recognised that globalisation is not an entirely external influence on domestic institutions, but it is also an interactive bottom-up and inside out political process. [6]

4In this way, there are two kinds of policy transformations from Europeanisation and globalisation. [7] First is the transformation of markets or the liberalisation of the utility sectors, which is defined as the privatisation or non-state ownership of public utilities. This introduces competition to the sector, whether they are foreign or national buyers, by allowing fair access to transmission infrastructure. [8] Competition pertains to minimising the barrier for fair competitors to compete in the market. Second, the transformation of governance comes in independent [re]regulation, [9] which is defined as the creation of accompanying institutions—such as national regulatory agencies [NRA]—that are politically insulated from electoral volatility and politicisation.

5How do we measure if Europeanisation matters or not? What should be the expected outcomes? Drawing mainly from Levi-Faur, Jordana, and Puig, I nuance some of these answers in Central and East European (CEE) context by specifying the expectation that pressure for policy transformation should be at its strongest during the pre-accession process. [10] First, there “should be similar patterns and institutions of governance across”; [11] second, there should be varying degrees of market liberalisation “depending on the extent to which the specific European regime promotes it”; [12] third, a lesser degree of support for state companies, the most accepted model in CEE during the Cold War, via the advance of EU membership; and last, “new strategies of internationalisation by private firms, corresponding to the opportunities and obstacles accompanying the progress of EU membership”. [13]

6While the standard hypothesis of explaining policy transformation goes back to the accession process and the EU regulatory regime, I argue, instead that there is a tenuous link between the EU and policy transformation in Estonia and Poland—particularly, the transformation of markets and governance. I do this by using the following concepts. I posit the theoretical view of globalisation from the IPE literature, which argues that ‘broader’ homogenising features are taking place, but are limited by the unequal geographic articulations of wealth and global processes. [14] To define specifically what these processes are, I emphasise the convergence towards regulatory capitalism from public policy literature, which posits the transformative role of the state in public utilities, [15] within the broader inclusion of Estonia and Poland in the world economy. Therefore, to answer the form and extent of change in governance and markets, I forward that the type of capitalism and state size as organising logics of state management that shape policy transformation in the energy and telecommunications sectors.

7As such, the variety of post-communist capitalism literature argues that Estonia’s radical neoliberalism and Poland’s embedded capitalism explain the extent of transformation in governance and markets. Although these expectations originate from previous works on other economic sectors of post-communist states, I posit that public utilities, with its distinctive and salient feature of infrastructure reliance, as well as multiple public policy goals of security and economic functioning, articulate short-term and long-term expectations that cannot be easily retracted by the state because of the sunk costs of infrastructure investments. Post-communist capitalisms alone, thus, cannot explain the extent of change in governance and markets, but are refracted by the imperatives of state dynamics found in state size. Following small state literature, Peter Katzenstein’s Flexible Adjustment belies that small states have less bargaining power and are thus more vulnerable to economic globalisation. [16] However, as some have argued against such one-sided focus, small states are able to resists such imperatives when faced with threats to state security, and the institutionalisation of state autonomy. [17] These, I believe, can be found in Estonia’s ‘smallness’ and Poland’s ‘non-small state’ characteristics via its emerging role in CEE regional security. Estonia’s small state features parley a vulnerability to globalisation, a desire to capitalise on its location by transforming governance and market in telecommunications; but it has a need to protect the energy sector given its historical issues with Russia and infrastructural gas dependency. In contrast, Poland’s embedded capitalism and non-small state features explain the persistence of state autonomy in transforming governance and markets in telecommunications; similarly, the greater transformation of markets in the energy sector is explained by Poland’s management of globalisation, harnessing its opportunities. Notwithstanding the specificity of these cases, I argue that the consistency of both state capitalism and state size as factors within the broader context of convergence toward regulatory capitalism explain the form and extent of change of governance and markets.

8The article is structured as follows. First, I begin with a comparison of EU-level regulatory regimes in telecommunications and energy, establishing the varying levels of pressure by two different EU regulatory regimes. Second, I look at telecommunications and energy regimes in both countries before their respective accessions to EU membership. In doing so, the design increases the consilience of the comparison by comparing both nations and sectors. Third, I again compare the EU regulatory regime in both sectors. After an assessment, the final step looks at the two regimes in both countries after 2004.

EU Regulatory Regime in Energy and Telecommunications before 2004

9With the formal recognition of the EU Commission’s (hereafter, the Commission) responsibility over the single market in 1986, the EU started to publish regulatory initiatives such as the Open Network Provision (ONP), a crucial directive for the convergence of access conditions for telecommunication networks and services. At the start, many member states strongly resisted. The distributional conflict over utility liberalisation was taken to the European Court of Justice (ECJ) which ruled that the Commission had primary jurisdiction on this particular issue. Upon the ruling, France and Germany—the main opponents of supranationalising the sector—started to endorse the liberalisation of telecommunications. [18] The Commission published four more Green Papers between 1990 and 1996, aiming to gradually liberalise various aspects of telecommunications; for instance, before 1999, the focus of liberalisation was on value-added markets in terminal equipment, services, and satellites. Although with various state-specific exceptions, there were two big shifts in the EU Telecommunications’ regime. First, on 1 January 1998 all EU member states agreed to open voice telephony, a major and the largest part of the market, to free competition. [19] Second was the EU 2002 Telecommunications directive, which had four important provisions directly and indirectly related to the governance and markets of telecommunications—the Framework Directive, Access, Universal, and e-Privacy. The 2002 Directive also created the European Regulators Group to handle harmonisation and cooperation among telecommunications regulators.

10The earliest energy regulatory regime was formalised in the form of the EU directive 96/92/CE, known as the first package, which took the form of introducing competition in the electricity and gas markets; although it had support from some states, such as the United Kingdom and Netherlands, it was vehemently resisted by most member states. [20] With the realisation that any top-down measure would be politically impossible, the Commission decided to take a bottom-up approach by introducing the second liberalisation package, which mainly took the form of informal, network interactions by member state officials, non-state actors, and Commission members. Thus, 2003/54/CE on 26 June 2003, the second liberalisation package was formulated with the main goal of further unbundling and empowering energy regulators, as well as creating transparency in tariffs and service regulations. [21]

11In summary, the difference between the two regimes would likely lead to difficulties in transforming governance and markets in energy. However, there are two notable exceptions in CEE. In contrast to old member states, these developments were taking place during the accession process. Given this, CEE literature has already established that the accession period made state leaders in the region transform their domestic institutions in the biggest ever show of the EU’s foreign policy influence. [22] Another important disclaimer is that multiple outside organisations were pushing for the liberalisation of telecommunications—the Organisation of Economic Cooperation and Development, the World Bank, World Trade Organisation, and major economies such as Japan.

Telecommunications Regime in Estonia and Poland before 2004

12When privatisation began in Estonia, the Telecommunications Act of 1991 was legislated. One of the main goals of the law was to enhance, develop, and provide a mobile communications network and service. [23] The Estonian Mobile Telephone Company was formed by an international joint venture led by Estonian Telecom (51%), Finnish Telecom (24.4%) and Swedish Telecom (24.5%). [24] As long-distance calls and competencies in the Soviet Union were not developed properly, international telecommunication companies provided cheaper access to infrastructure upgrade and institutional partnership for incumbent companies of the region, [25] Estonia was one of the earliest states to capitalise on these offers. Telephone services that included telephone, telex, and telegraph were initially given to the full monopoly of the Estonian Telephone Company until 2000.

13For independent regulation, the Telecommunications Act proposed the Estonian National Communications Board [NCB], led by its director general, which had full independence from any political manœuvres and electoral instability. The independent regulatory body is in charge of pricing policies, competition rules, accounting checks, and regulatory harmonisation. [26] For sector regulation, the Estonian Telecommunications Inspectorate [ETI] was created; they were given the power to distribute radio frequencies. These trends continued as on 1 January of 2001, the government of Estonia opened the entire country to full competition and implemented a new law on a new regulatory framework. [27]

14In Poland, the passage of the Telecommunications Law in 1991 only allowed competition in local calls to ensure the infrastructural advantage of the state-owned Telekomunikacja Polska (TPSA). Ownership and control was put in the hands of the Ministry of Economy. Specifically, the TSPA obstructed liberalisation initiatives by halting pricing reforms, turnkey, and lease financing. [28] Furthermore, TPSA required a significant realignment of its local prices; Poland may not have perceived that there was a highly significant long-term advantage to pushing for rebalancing. Foreign firms and the US government objected to this move, and the ensuing discussion resulted in a 49% foreign ownership of TPSA. Even though the Polish government decided to permit ‘fairer’ competition in long-distance services on 1 January 1999, all other international services delayed opening to competition. [29]

15For independent regulation, the Polish Competition and Consumer Protection Office (UOKiK) handled the competition, [30] while the Polish Office of Telecommunication Regulation (URT) handled the sector regulation. However, these did not result in the clearer and streamlined regulation. There were also delays in preparing for the licensing of new entrants. Before the accession process, the Ministry of Economy did not have any intention to provide licences for the providers of long-distance services. [31] The UOKiK, instead, created a time-consuming transition process that resulted in two to three dominant producers. Furthermore, the utilisation of the same distributional infrastructure for TPSA was limited in several ways—requiring service providers to have bureaucratic authorisation, various levels of confusing rules, and inconsistency with rulings. Such problems limited foreign investments in Polish infrastructure, which had a penetration of only 32% of consumers in the whole country in 1999. [32]

Energy Regime in Estonia and Poland before 2004

16Although most of the companies in other sectors were privatised as early as 1991, Estonia’s energy sector in the form of the full state ownership ensured the state’s dominant role in the sector. However, when the accession negotiations started, Estonia had to comply with liberalisation. Thus, in 1997, the energy act was formulated and passed in the parliament, having important implications on the regulation and liberalisation. The Estonian government tried to privatise a significant minority stake (49%) of the power stations at Narva to an American energy company, but the government eventually withdrew its support for the scheme because of a fierce resistance from Eesti Energia and some members of the academia. [33]

17Even with continuous restructuring up to 2004, 90% of the electricity produced in Estonia was made from oil shale, a one-of-a-kind in the world, which was managed by Eesti Energia—“which at the time had 480,000 private customers and over 22,000 corporate consumers.” [34] However, due to the amount of investments needed for full restructuring, following the Directive 2004/84 of the ECJ, “Estonia was granted temporary derogation from the application of Art. 21 and Directive 2003/54 until December 2012.” The ECJ, however, mandated that partial competition begin on 1 January 2009. [35]

18In the area of institutional regulatory structure, even before the actual accession period, as part of the negotiations with the European Union, Estonia started to implement measures designed to follow the direction of Europe’s economic model. [36] Through the Energy Act, two very important regulatory agencies under the Ministry of Economic Affairs were established: the Estonian Energy Market Inspectorate (EMI) was established in 1998—which was in charge of energy competition, licensing, and price regulation—and the Estonian Surveillance Authority (ESA), which had to deal with inspection. However, these two agencies had to share its powers with the Estonian Competition Board (ECB), which had regulatory jurisdiction in all other sectors.

19In Poland, privatisation initiatives started as early as the 1990s, the power industry districts were liquidated in 1989 and coal and electricity sectors were separated. The Polish government reduced its control on the energy sector, tried to introduce competition, gave autonomy to production and distribution structures and separated some transmission companies from the vertical core. [37] By 2002, four of the largest system powers and electricity distribution companies, as well as several local heating plants, have been distributed to foreign investors. The division of the power industry into distribution, transmission, and generation was a relative success. [38]

20However, competition and majority ownership were still in the hands of the four biggest oligopolistic energy groups—Polskie Sieci Elektroenergetyczne [PGE], Enea, Energa, and Tauron. Major companies such as the state-owned PGE retained their dominant positions in the market, while the state at least owned 51% of Enea, Energa, and Energetyka Po?udnie S.A. [39] While PGE was established in 1990 as part of the ‘restructuring’ during the Soviet years, there were no significant operational changes as the state owed the majority of the company and PGE remained the largest power producing company in Poland. [40] Overall, Polish trade unions tried to block privatisation due to the fear of unemployment, but they were only partially successful.

21Institutional regulation changed as early as the 1990s in Poland. Although the UOKiK had the jurisdiction of competition, most of the regulatory powers specific to energy were delegated to the Energy Regulatory Office (URE). Changes in Poland reflect a sector-specific regulatory model similar to the United Kingdom’s pattern of single regulatory institutions, wherein specialised institutions handle a specific sector. In a similar vein, the URE as the specific energy regulator was created in 1997, partially as a response to, and product of the international negotiations. [41] The head of the URE is the President, appointed by the head of the ministry and independent from the Parliament, who possesses the sole capacity of having the ultimate decision on regulatory matters accorded by Polish law. [42] These powers include energy trade in contract, balance, and exchange market. [43]

Comparing across Nations and Sectors before 2004

22Since telecommunications was a key functional sector that integrated coordination amongst variegated economic sectors domestically and internationally, the size of Estonia enabled the transmission and distribution infrastructures to be built and developed easier, and allowed the sector to be privatised and liberalised during the 1990s. The location of the Estonia near the Baltic Sea allowed the Scandinavian countries to have a trading hub close to continental Europe and Russia. Thus, Estonia became an attractive destination for telecommunications investments because of its advantageous size and its proximity to willing and wealthy Scandinavian neighbours. On the flip side, the Polish economy followed an embedded capitalist model, which fostered a relatively slower pace through the gradual implementation of market policies and the slower reduction of guaranteed state employment. Poland’s incumbent telecommunications, along with their allies in the state, halted and pushed for ‘controlled privatisation’ by impeding competition in long-distance calls and delaying the licensing of newer entrants in the sector; hence, ensuring their competitive advantaged position. [44]

23In energy, Estonia was very reluctant to privatise. Although Estonia’s radical free market system opened the country to the forces of liberalisation and privatisation, energy did not take the same effect primarily because of deeply embedded oil shale infrastructures and perceptions of Russian threat at the time—outcomes Estonia’s small state size. The Energy Act in 1997 brought up issues of privatisation, but because of the energy sector’s integral position in state security, the initiatives were cancelled. In contrast, the production sector of Poland’s electricity, and to some extent in transmission, experienced gradual liberalisation. The Polish energy sector was transferred to the hands of domestic oligopolies with international partners in some levels of the vertical and horizontal integrated network. With massive inefficiencies costing large amounts of money, the government launched the five-year Hard Coal Sector Program, which reduced employment by 50%. The size and interconnections of the Polish infrastructural network to neighbouring countries encouraged foreign participation. For example the French monopoly Electricité de France invested in the 450-megawatt coal-fired plant in Krakow, while Spanish Edesa has some shares in the Tauron and PGE. [45]

24Thus, the liberalisation of the energy sector and conversion to marketable ventures were much more limited in Estonia. One of the main motivations for investing in private companies in Poland was not only higher demand for coal and energy, but also the convertibility of coal into other products for profit. [46] Although American companies tried to tap the Estonian market, the concentration of expertise and technological development in Estonia, as well as the development of oil shale, made conditions for liberalisation much less viable than in Poland. While oil shale could be converted to shale oil for household heating, Eesti Energia holds the exclusive expertise in that product. Since Estonia leads the oil shale development, its pace was much slower and contained and its direction was directed at securing energy independence.

25In terms of regulatory effectiveness, these policies were implemented much easier in the Estonian telecommunications, but the opposite happened in energy. Although no one could contest the decision made by ECB to conform to the insulation of a independent regulatory model—a source of tension in the design roots back to the appointment of the competition authority by the Minister of Economic Affairs and Communication. [47] In energy, this same minister is simultaneously the sole shareholder of Estonia’s dominant State Owned Company, Eesti Energia. Thus, a situation of ‘double hatted’ occurred in Estonia. As Einari Kisel had said, the single shareholder role of the Minister of Economic Affairs and Communication in Eesti Energia roots back to the Soviet period. This, he said, was not touched at all during the EU negotiations to protect the sector at the worst situations. In regulatory disputes, the role of the judiciary or the Estonian Supreme Court (ESC) was institutionalised and still very salient up until today. [48] In telecommunications, while the appointment system was also the same, the issues were not as tenuous and hotly debated in ESC. The relative absence of regulatory issues in telecommunications could be explained by the supportive state in Estonia’s radical neo-liberal model.

26For both sectors in Poland, the type of capitalism, the embedded capitalist model created regulatory problems in both sectors. Since the Polish government wanted to ensure the protection of workers from lay-offs and the consumers from the price shocks, this political goal was possible because majority ownership in both sectors was still in the hands of the Ministry of Treasury. Using the justification of protecting the people from economic shocks and inflation, the incumbents and the regulatory institutions delayed the entrance of new competitors and limited competition in both sectors. The Polish URT’s lack of autonomy and the authoritarian tendencies of the URE were keen examples. In 2001, Poland still had some of the lowest rates of telecommunications infrastructure and long-distance access in the CEE. While further competition might have benefited Poland, such an implication was not easily seen due to the need to cushion the incumbent telecommunication oligopolies. Similar to Estonia, the double-hatted issue took place in both sectors; the Ministry of Economy had the power to appoint the head of the URE and URT, and the Ministry of Treasury were the major owners of the state stakes in both companies. [49] To what extent does the accession process matter in pushing for policy transformation? In Estonia, the Telecommunications Act of 2001 opened the sector to full competition and dissolved the exclusive rights of the majority state-owned company, Eesti Telekom. The EU Directive of 2002 that deals with pricing access, information dissemination, and regulatory procedures was thoroughly implemented. Conversely, the Polish Telecommunications Law of 2000 was passed to open some level of competition, but the actual implementation only started in 2003—two years after most CEE states implemented similar laws. Poland had a problem in following the 2002/21/EC, [50] or the Common Regulatory Framework for Electronic Communications Networks and Services, also known as the EU directive of 2002. Poland passed the law in 2004 to comply with the requirements but there were multiple implementation problems, which resulted in the Commission taking Poland to the ECJ at least four times for infringement procedures. [51] Thus, the formation of large oligopolies or as some would call ‘neo-mercantilism’ during the accession negotiations shows the limit of the EU’s influence. Although neo-mercantilism existed and persisted in the telecommunication sectors of both states, Estonia managed to implement effective regulation and full competition even earlier than the EU mandate and better than some old member states; the contrasts in Polish telecommunications, where delays in long-distance competition, and the difficulties of acquiring licenses for new entrant, were common.

27In energy, the first and second packages were adapted in both states to promote liberalisation and competition. Though the first package lacked the backing of EU institutions apart from the Commission, the second package facilitated the informal regulatory exchange and learning amongst energy regulators in the EU. Energy regulators from both states also participated in Florence Initiative and the Madrid protocol, even before official EU membership. [52] Although neo-mercantilism was present, the partial liberalisation of Polish energy, in part due to the technological capacities of coal and mining show the opportunities given to the chemical and coke industries from both globalisation and Europeanisation. [53] The accompanying formation of oligopolies in Poland through partial privatisation was responding to liberalisation and modernisation trends. While the independence of energy regulators in both states were both questionable, majority state-ownership of energy seems a dominant model in most of the EU; however, the regulatory conflicts could be explained by state size—the role of other state institutions (ESC in Estonia’s case) to affirm the sovereignty of smaller states and the regulatory problems of bigger states per se.

28In sum, the EU regulatory regimes in both sectors should have pushed for the similar levels of transformation of governance, decreasing levels of neo-mercantilism, and strategies of internationalisation corresponding to the opportunities at the EU level. Indeed Estonia and Poland moved towards some of these transformations, but Europeanisation neither accounts for the reasons for shifting these transformations nor the forms taken after. Linking pre-accession to the argument, the successful transformation of Estonia’s telecommunications in governance and markets, and Poland’s partial transformation in energy markets, could be explained by their desire to harness the benefits of globalisation by structuring its economy around the effective infusion of capital. While state size and the type of capitalism explain the persistence of regulatory problems and partial liberalisation for Polish telecommunications, the same could be said for the state’s monopoly of energy in Estonia.

EU Regulatory Regime in Energy and Telecommunications after 2004

29There are two big shifts in the EU Regulatory Regime for both sectors after 2004. In the telecommunications regime November 2009, after two years of debate, the EU parliament and the Council of Ministers agreed to reform the EU Telecoms Regime. There were two new provisions under the 2009 directive that were to be transposed in the national laws and subsequently implemented: the Better Regulation Directive, which gives independent telecommunications regulation more power, and the Citizens’ Rights Directive, which broadly protects privacy rights. The four previous existing EU Telecommunication directives were to be amended.

30In the realm of energy, a mandatory third energy package took off, aiming to mandatory unbundle the energy sector—separate the production, transmission, and distribution aspects. This landmark summit in December 2008, after a year of debating in the EU Parliament, the EU decided on an ambitious project to downsize its emissions, expand the share of renewable energy and increase energy efficiency by 20%. To do this, the Commission was given powers to mandatory unbundle—separate energy distribution from energy production to promote competition and promote consumer interests. On the political side, climate and energy issues were officially declared to be interconnected and interrelated issues, which cannot be dealt with separately and impossible to dichotomise. Since Fukushima, the appeal of nuclear energy diminished in Germany, one of the biggest EU countries; and the demand for natural gas from Russia, amongst other possible places, has been projected to increase.

Telecommunications Regime in Estonia and Poland after 2004

31After 2004, Estonia was the first country to completely liberalise its telecommunication sector. The main goal of Estonia’s telecommunication policy is to enhance, ensure, and develop competition, as well as openness in the sector. Telecommunication development was pushed by foreign investors—mostly Nordic—who had huge amounts of investments in high technological, communication networks, and who integrated networks to develop the IT communications infrastructure in Estonia. Many analysts in the international scene consider Estonia to be the centre of broadband DSL Connection in CEE—in fact, for DSL penetration per telephone line, Estonia ranks amongst the top ten in the world.

32Liberalisation in Poland continued at a moderate pace after accession, still maintaining oligopolistic competition amongst several big companies. From 2004 to 2010, the state still owned majority shares in TPSA along with several important foreign shareholders. In 2007, the biggest shifts in Polish economic liberalisation came because of the increasing state deficits and the financial crisis in 2008. Although there were plans by the Ministry of Treasury to privatise some of the state-assets, the acceleration of privatisation came when the Polish government refused to increase taxes and decided instead to slash government spending in many of the state-owned enterprises, including Polish telecommunications. In 2011, the biggest mobile service provider, Polkomtel, which was shared amongst TPSA and the other three big companies, was bought out by Solorz-Zak, the owner of telecommunication competitors Cyfrowy Polsat and Aero2. While TPSA has been selling its subsidiaries, such as EMITEL, [54] the role of foreign shareholders French Telecom in incumbent company also increased to 49.47%.

33Estonia’s accession to the EU on 1 May 2004 and the implementation of the Electronic Communications Act on 1 January 2005 led to even greater harmonisation. Regulation took place via the Minister of Economic Affairs and Communications, the Estonian Technical Surveillance Authority (ETSA), and the Estonian Competition Authority (ECA). [55] The ETSA provided full transparency to the public regarding the availability of electronic communications networks, communication services, radio communications, the administrative structure of frequencies, numbering, apparatus, and state supervision over the compliance of full requirements and punishment for any form of violation. [56] The ECA provided the central coordination and regulation for all other state bodies. Eventually by 2007, the ETSA was put under the ECA, allowing a single body to preside over regulatory issues and functions in all policy sectors. After accession, the initial role of the telecommunications regulator in Poland became a mediator, rather than a stern and acting body to oversee competition. However, scrutiny from the Commission brought Poland to the URT for changes in Polish regulatory matters. Specifically, the Commission filed a case against Poland regarding the unlimited capacity of the Prime Minister to remove the head of the URT. [57] Since the state still remains to the major competitor in the sector, the Commission and the DG of Competition argued that this violated regulatory competences. [58] In response, then, Poland amended the telecommunications law in 2009 to comply with independent telecommunications regulation. Similarly, changes in the regulatory could be seen. In 2006, the UOKiK filed a huge case against TPSA regarding obscuring competition matters in broadband connections, while the URT continues to guide privatisation and regulatory matters in the sector.

Energy Regime in Estonia and Poland after 2004

34In Estonia, state-owned Eesti Energia was almost put in London’s Initial Public Offering. Such a decision was made by the board of directors of Eesti Energia, who thought that there was a need for private capital to increase the efficiency of the company and allow infrastructure restructuring. The decision of the company was reversed by the state, through the Minister of Economic affairs and Communication. Estonian’s plan could be seen in two pertinent documents. Estonia’s 2008-2015 Plan for Oil Shale development, and the Development Plan for the Estonian Electricity sector, affirm the desire of the state to remain strong in the sector. [59] While Eesti Energia still produces and provides the majority share of energy outputs, the state owns most of the transmission lines through the management of operation companies such as the OÜ Elering, which was moved under direct state control in 2010. [60] While there are 40 smaller distributional companies as a whole, the state-owned OÜ Jaotusvõrk controls 87% of the lines. [61]

35At this time, the derogation granted by the European Union expired. In 2009 the Estonian government opened 35% of the market to competition. Competition was also galvanised through the third package. In particular, laws that are directly and indirectly related to the transformation of markets and governance of renewable energy shares. Through renewable energy subsidies and cooperation with various renewable energy companies, the concern for security in Estonia pushed for a complicated state framework that is strategically aimed at reducing gas imports from Russia. [62] Renewable energy—specifically, biomass due to the weather—is rising heavily in Estonia, most especially since 2007. While the share of renewables was 5% in 2007, it pushed to 11% in 2012, in which most were heavily concentrated in the gas dependent regions. Thus, competition is being redirected towards gas dependent regions in Russia through the support of strategic renewable energy sectors.

36Due to the financial deficits experienced by the state, power producing companies in Poland are now being restructured and sold to Chinese and Japanese companies, and several major deals have been reported to take place soon. In 2007, the Ministry of Treasury transferred most of the shares in the smaller energy companies and Enea to Tauron, which became one of the largest companies in Poland. Other state-controlled energy companies such as Enea, Energa, and Tauron were floated in the Warsaw stock exchange in 2010. The state called for a majority bid on Enea, Tauron, and Energa, as well as the willingness to sell 10% of shares in PGE. In recent months, there was a failure to privatise due to issues of price negotiations. Poland tried to merge Energa into PGE, but failed on both the EU Competition DG and the UOKiK. For competition matters related to the third package, characteristics of a ‘big state’ and the geography make Poland conducive for renewable energy investments—particularly, in the wind sector industry. Renewable energy in 2010 was 9.1% and investments in renewable energy have been helpful to the Polish economy. [63]

37In energy regulation in Estonia after membership, the negotiations over the third liberalisation package remained vibrant. [64] Pertinent to regulatory matters, and similar to all other sectors in Estonia, all regulatory institutions were transformed into the Estonian Competition Authority in 2007. Similarly, ‘double-hatted’ issue of the Minister of Economic Affairs of Communication—having both roles of being the person in charge of appointing leaders of the ECA and the main shareholder of Eesti Energia—was resolved through limiting the power of the minister in certain decisions. [65] Pricing matters are set by the ECA, but the formula in calculating the appropriate electricity price was partially taken from the EU’s definition of fairness. In terms of the ESC, energy regulation cases remain numerous and controversial in the institution. In Poland, power still resided in the hands of the president of the URE. Although there were promises to allow greater leverage for price negotiations, the URE president remained firm on his stand regarding these companies. [66] Due to the need to preserve predictability in the economy, newer competences and autonomy were given to the URE. The institution, however, does not hold exclusive regulation in the sector since the UOKiK remains a vibrant regulator in mergers and competition matters. [67]

Comparison across Sectors and Nations after 2004

38In terms of telecommunication, both states are liberalised and to their own extents, conform to the demands of the EU. As discussed in the pre-2004 component, Estonia came in first, owing to the sector’s historical development and the infrastructure’s tenability in the country’s size. Poland followed right after due to the need of the state for capital. Estonia’s telecommunications continue to remain liberalise and open to competition, while similar trends are going on in Poland—Polkomtel was transferred into private hands. TPSA is facing competition in fixed-lines telephony and French Telecom is increasing its role in TPSA. Sector specific characteristics, such as the internationalisation and diffusion of the Internet access, the demand for mobile telephones, and the greater demand for capital were the intervening links to capital and other businesses. Thus, liberalisation and competition were also pushed by the need for the efficient functioning of the economy, a product of Estonia’s neo-liberal capitalism. [68]

39In energy, while Estonia is largely neo-liberal in many respects, concerns for geopolitical issues with Russia make the sector a target for state control—a typical manifestation of small state defensiveness. As Einari Kisel said, if Eesti Energia desires to profit, then it would push to investing in the production of shale oil—particularly, for heating and other uses. [69] However, because of concerns for security, technological and financial investments are directed towards improving the efficiency of oil shale electricity production.

40The financial crisis in 2009 pushed Poland to eventually create more privatisation policies across the economy, [70] specifically the retraction of embedded capitalism’s protectionist policies that were still kept in place since the post-communist period and hindered the fiscal growth of the country. [71] Although the majority of the biggest energy companies still remain in the hands of the state, several investors are coming and privatising former national stakes. [72] As such, although Poland was an ‘embedded capitalist’ state that chose to gradually move away from state planning, the direction of the country towards neo-liberalism pushed the financial burden to the government. Estonian telecommunications seem to remain efficient following their model of neo-liberal capitalism. In Poland, the role of the EU has been most salient since the Commission has launched several ECJ cases. However, even though there was a repeal of the telecommunications act in 2009, the URT remains a weak body in regulatory disputes. Instead, through the support of the EU, the UOKiK deals with regulatory and competition matters as well.

41Privatisation’s results have been quite different in energy. Estonia’s failed privatisation in 2009 pushed the country to greater state control. In 2011, Estonia requested EU cohesion funds to fund the newly planned oil shale infrastructures, but was block by the Commission and taken to the ECJ. The ECJ, then, ruled that Estonia’s plans threaten competition, prompting a reversal of oil shale restructuring funds. The refusal to privatise by limiting competition on non-production energy areas continues in Estonia. Poland’s privatisation continues, seeming to be directly linked to financial deficits of needing capital due to embedded capitalism’s subsidy of sectors and ‘welfare’. [73] Furthermore, the interest on Poland’s energy sector seems strong because of the carbon credits allowance allocated. [74] The Polish government, knowing this particularly well, intends to capitalise to draw in more investments. In this regard, technological-specific characteristics of sectors do not conform at all.

42In energy, regulatory measures seem to follow and conform to the ‘general regulatory’ model even after accession. Estonia’s regulatory institutions were merged into the central ECA. Furthermore in 2007, the power to appoint members of the ECA was also given to other institutions within the state aside from the Minister of Communications and Energy. Whereas previously, the Minister, as the sole shareholder of Eesti Energia, Estonia’s incumbent energy company, had that power exclusively. Poland’s URE task is to regulate tariffs and prices, and the institution seems to be conforming to the EU model. [75] Similarly, the UOKiK shares a role in dealing with competition matters.

43To what extent does the EU matter? First, the movement towards Poland’s privatisation in both telecommunications and energy could be traced back to the results of its embedded capitalist model—the general financial issues of the state because of protectionist policies and welfare buffers since the early 90s. The gradual reform of institutions and the necessity to cushion transition were some of the factors that led to the general dilemma. Second, the EU’s impact on both the markets of both states seem to be limited since the main movers of telecommunications and energy were state capitalism and size within the broader context of a greater globalising landscape. Similarly, the EU’s impact through membership seems to be null and liberalisation of telecommunications in both states continues, as part of the broader economic agenda. Estonia’s refusal to privatise in energy but allowance for partial competition in renewable energy, is a similar outcome. However, in terms of governance, the EU’s impact seem to be consistently strong—the legal unbundling in Estonia and the continuing independence of the URE. The sector-specific regulators in Poland seemed to be limited, but the competition board has taken a greater role.

Conclusion

44By process tracing liberalisation and independent regulation in Estonia and Poland using the stepwise comparative method, I argued that the link between the EU level regulatory regime and policy transformations in public utilities is tenuous. Instead, I forward that Estonia and Poland are able to internalise globalisation by managing and harnessing its economic and political opportunities. The type of capitalism and state size are organising logics of state action on globalisation, which largely influence the extent and form of market and governance shifts.

45In telecommunications, the effectiveness of policy transformation could be traced back to state’s desire to acquire capital—such as global competitiveness, state size for Estonia, and the pressures for liberalisation during the financial deficits after 2004 because of Poland’s embedded capitalist model. In Estonia, the energy sector remained protected under state control because of the security-oriented ownership it exudes, a function of Estonia’s small state defensiveness. Polish coal, while still mostly held by the government, has been gradually privatised since the end of the 90s. Oligopolistic structures remain in Poland, but privatisation became stronger after 2004, showing that the impact of membership on markets is weak. While privatisation seems to continue, competition appears to be limited by these oligopolistic trends that come from privatisation.

46For governance, independent regulation in Estonian telecommunications appears to be effective due to the Estonia’s radical neo-liberal model, which culminated in the decision to limit intervention in the sector. In Poland, governance seems to be a problem in both energy and telecommunications; specifically, since regulatory battles between the competition body and the sector-specific bodies continue, in which the EU seems to be strongly involved. Estonian energy regulation, conversely, remains under consistent state control because of security reasons, an influence of its small state status; while in cases of regulatory conflict, the ESC plays a strong role, protecting state sovereignty in the energy sector. In both states, although weaker in Estonian energy, the EU’s influence in pushing for independent regulation seems strong even after accession. Measuring the EU’s significance via the four standards of markets, governance, decreasing oligopolistic structures, and internationalisation, the EU’s role is clear in the facilitation of the market and governance shifts, or setting the agenda for policy transformation. Nonetheless, compliance and marketisation take place through the state and its ability to harness globalisation’s generative pressures. Even if the EU’s impact on governance seems stronger, it would be hard to conclusively say that the EU is the most important factor in the transformation of governance.

47Therefore, the theoretical and empirical contribution comes from process tracing the weak link between Europeanisation and policy transformation in the public utilities of two different new member states. Furthermore, while previous studies focus on ‘Western European countries’—Spain Portugal, Germany, France, Norway, and Switzerland—the article extends the empirical assessment to post-communist states, thereby testing the significance of EU membership. By demonstrating this argument both pre- and post-accession, the article interrogates the dominant theoretical point that the EU’s influence was the most salient before the accession period.