Before competition, price regulation was needed to correct monopolistic tendencies (i.e. restricting output and holding up prices) by the incumbent. This was usually done with rate of return regulation or with price cap regulation [1].
In the transition to competition, many countries kept some retail price controls to manage the price rebalancing that comes with the transition from monopoly to competition.
With competition, the regulatory focus shifts from regulating retail prices to access prices and maybe neither (e.g. if there is effective infrastructure competition); but not both. To protect competition, the regulator may still need to act to prevent anti-competitive conduct [2]. And, there may be cases where access price regulation alone is not effective (e.g. mobile termination in CPNP countries).
This section reviews,
· Policy Issues
· Key Concepts
· Price Caps
END NOTES
[1] Another possibility is government fiat. This occurs under state ownership where the regulator or government department establishes prices usually after consultation with the management of the enterprise.
[2] Among the retail pricing issues considered under chapter on anti-competitive conduct are the vertical price squeeze, cross-subsidisation, predatory pricing and tying/bundling.