Why regulate? Lessons from New Zealand

The United States Congress is likely to revisit the Communications Act several times over the next few years. A number of critics have suggested that the FCC should simply be abolished in the course of these legislative changes that it is no longer necessary to regulate telecommunications at all. In Europe, an analogous debate manifests itself in a more nuanced fashion. It is widely anticipated that telecommunications regulation will gradually become unnecessary, and be replaced by competition law. This is largely viewed as a migration from overarching ex-ante (before the fact) prohibitions to more isolated ex-post (after the fact) responses to specific instances of anticompetitive conduct. It is timely to ask: Why do we regulate telecommunications? What might happen in the absence of regulation? Few realize that this experiment has already been attempted, and the verdict is in: outright elimination of telecommunications regulation is a bad idea. Reformist New Zealand attempted to operate with a bare minimum of sector-specific regulation for telecommunications and other network industries; by 2001 they had given it up, and instead implemented sector-specific regulation. What exactly were the consequences in New Zealand? What broke, and why? What lessons can other countries draw from this experience?.