While reinforcing the economic and environmental constraints on network industries (telecommunications, rail, energy, post, water), the countries of the EU-15 have agreed on the need for a re-regulation of those industries. This process is taking place following a partial and timely restoration of the system of natural public monopolies that characterized the organization of these industries in the 1980s. But more often than not, re-regulation proceeds from a combination of increasing reliance on the market combined with a changing level of state intervention, instead of the disappearance of the latter (Finger et al. 2007; Ménard and Ghertman 2009). Prescribed rules take into account sectoral specificities, and seek to attain a high level of quality in those services known as services of general interest . These reforms are part of the ‘Europe 2020’ strategy, which is designed to support economic growth and to integrate the environmental impacts of human activity. In both respects, drinking water supply and sanitation services are part of this general process. They represent the last re-regulation project and they benefit from special treatment due to the special status of these services within European regulation.

Following the European political agenda, this ‘modernization’ of European Urban Water Systems (UWSEs) dates from the mid-1990s, and the enactment in 2000 of the Water Framework Directive (WFD) marks its formal inauguration (European Commission 2003; Gee 2004). This regulatory shock has been the subject of numerous publications and, after a period where other topics were explored, the academic and business worlds have today reintroduced it at the forefront of their concerns. There are three reasons for this need to refocus. Firstly, the guiding principles of the modernization of UWSEs have now been transposed into different national rights, which renew the interest in these topics. Next, by the time the first deadlines for the achievement of the WFD’s objectives had come around, regulation had evolved, and this new state of affairs made it necessary to look at potential policy readjustments. Finally, in many cases, the observed condition of UWSEs does not match expectations and the diagnosis of the action required for modernization needs to be redefined. These three factors have encouraged research to be undertaken on the process of modernization of UWSEs, especially as this process appears to be less informed than the re-regulation of the other network industries.

We will seek to identify and explain the effects of the modernization of UWSEs on their organization and sustainability . To do this, we will make use of institutional economics and the explanatory models of new institutional economics (NIE) , mainly in relation to organizational impacts, and institutional resource regimes (IRR) , predominantly regarding the impact of sustainability.

We support the theory that modernization leads to a change in the modalities of coordination of UWSEs, while intensifying and polarizing issues of sustainability based around the economic dimension. On an organizational level, we defend the notion that modernization tends to depoliticize the UWSEs and is linked to an increase in their socio-institutional resilience . By depoliticization we mean a change in the scope of intervention and less direct control of the state over the UWSEs. Resilience refers to the capacity for a quick socio-institutional auto-reorganization of UWSEs following a shock, in order to maintain the stakeholders’ level of satisfaction. These two phenomena result mainly from a hybridization of institutional arrangements which tends to result in a specialist market. With regard to the impact of modernization on the potential for sustainability, a lack of coherence in developing the re-regulation of UWSEs explains the relatively pessimistic outlook. In fact, the efficiency , integrity and sustainability of UWSEs remain threatened. For example, the good qualitative and quantitative condition of the resource is not assured; the infrastructure is deteriorating, primarily because of a lack of investment in renewal . We are seeing the appearance of a paradox manifesting in the intrinsic inability of modernization to maximize the potential for sustainability of UWSEs, though is the latter is nevertheless one of the primary objectives of the reform.

After this initial presentation, we shall address three items: (1) the contours of the field of investigation; (2) setting out the research problem; and (3) the specificities of theoretical choices. Afterwards, we will take a look at the business approach and expected results in order to justify the structure of this book.