9.1 INTRODUCTION

The urban water supply combines three main characteristics that places it in a rather peculiar situation as an industry: it is an essential service for the health and welfare of the populations, a natural monopoly, and a relevant economic activity. The former characteristic, which is self-explanatory, provides great political and social importance; conversely, it requires that the service provided fits the population needs on a sustainable basis. It is a natural monopoly because it requires the construction and use of expensive transport infrastructures that cannot be used by other service providers, either of the same or of a different nature; subsequently, market competition rules are not applicable. The latter characteristic economic relevance derives from the fact that it requires high capital investments and produces significant management and operating profits; it has transformed this activity into an attractive business.

These three characteristics are sometimes conflicting. On the one hand, the sustainable development of the urban water supply services requires an efficient management of the undertakings. The systems and technologies have grown in complexity in recent years, and demand and expectations on the service are everincreasing. On the other hand, the level of development of the urban water supply activity tends to be a step behind other activities with much lower economic relevance, due to the lack of market competition stimulation derived from the monop- olistic nature of the service. With the growth of the private participation, the management objectives move toward...