TABLE OF CONTENTS Regulation is an activity requiring a great deal of discretion. It is not simply a linear, analytical process, nor is it a purely bureaucratic or policing role. An industry regulator is a constructive agent that must regulate appropriately, since the potential of regulation to bring consumer benefit carries the counterbalancing hazard of inflicting damage on an industry. A regulator within a market economy is not a market manager, and should not attempt to be one. Regulatory market management is in the long run impossible, since no regulator or government has the power to compel individuals or companies to enter a market or make investments. What the regulator should do, however, is to ensure that the market has the maximum potential to operate freely. In so doing, it must address market failure and intervene to curtail the abuse of market power. A regulator's guiding principles, a list of both positive and negative propositions, might possibly read as follows:
to create a thriving, viable industry, delivering quality, value-for-money services;
to resolve market failure and allow competitive market forces to operate as efficiently as possible;
not to attempt to engineer specific outcomes;
not to engender competition for competition's sake.
Regulatory actions need to be subjected to regulatory option appraisal. This may involve methods such as cost-benefit analysis, regulatory impact analysis and consumer impact analysis. These may take place explicitly, or implicitly through consultations with stakeholders. All regulatory actions have costs, at minimum the costs of...
