Regulation is useful where the market by itself would produce undesirable or socially unacceptable outcomes.
Regulation attempts to prevent socially undesirable outcomes, and to direct market activity toward desired outcomes. For example telecommunications regulation is widely used to promote prices that reflect efficient costs and promote universal access to basic services.
However, regulation has potentially high costs. The regulatory process is inherently time consuming to administer and requires considerable expenditure of resources. In addition, regulation can have unintended consequences, that may be detrimental to customers and the "public interest". No matter how capable and well intentioned regulators are, they will never be able to produce outcomes as efficient as a well-functioning market.
Accordingly, regulation should only focus on those parts of the ICT sector where there is a clear need for regulation (that is, where effective competition is not feasible) and should only be a temporary measure. Over time, regulators should aim to establish or restore the conditions that provide for effective competition on a sustained basis. For example this entails removing or reducing barriers to entry and exit, and enabling the market itself — for example through the entry of additional competitors — to prevent the incumbent from exercising market power.
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