Natural monopoly and its implications for service delivery: Evidence from PDAM Surya Sembada Surabaya

Abstract

Natural monopolies, particularly in the provision of clean water by Regional Drinking Water Companies (PDAM), have deep historical roots in Indonesia's post-independence development. The damage to infrastructure caused by colonialism and the war of independence compelled the government to take direct responsibility for basic public services, including clean water, in order to safeguard public welfare. In this context, PDAM Surya Sembada Surabaya has become the main provider of drinking water, serving over half a million household connections. However, the monopolistic nature of this service raises various concerns, such as potential abuse of power, perceived unfair pricing policies, limited consumer choice, and uneven service quality. Although PDAM’s status is protected by Article 33 of the 1945 Constitution, its monopolistic practices continue to invite debate from legal, economic, and social perspectives. This study employs a qualitative, library-based research method to analyze the impact of PDAM’s monopoly on consumers, the quality of public services, and the effectiveness of existing legal regulations. The findings reveal that while PDAM plays a vital role in meeting public needs, there remain challenges related to governance, transparency, and equitable service provision. Strengthening oversight and promoting Good Corporate Governance (GCG) are crucial for ensuring fair and sustainable clean water services in the future