The Dangers of Over-Regulation in the Electronic Communications Sector

Abstract

Sector-specific regulation of the electronic communications sector is one of the policy tools aimed at promotion of competition and correction of market failures resulting from the high levels of market power possessed by former telecoms monopolists. While, in principle, academics and policy makers concur on the value added of regulation for increasing social welfare and efficient allocation of resources, their analysis of past regulatory experience shows that under a number of circumstances regulation can be flawed and lead to welfare harm rather than benefit. Inappropriately designed sector-specific remedies and regulatory delays in the introduction of new telecommunications services can hold up the development of the market towards effective competition and instead might incur considerable welfare losses.1 This article has been shortlisted for the 2nd World Competition Young Writer’s Award.