As another folder in this toolkit suggests, when existing regulation has not worked this may be a ‘trigger for action’ leading to new regulation. The reasons that regulation does not work can be many and varied, including that the problem the regulation was intended to address was not directly addressed.
Paul Scott and David de Joux “Uncertainty and Regulation: Insights from Two Network Industries” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). The origin of the cycle is generally blamed on the failure of the light-handed regulatory regime. It underwent widespread criticism, especially at the end of the 1990s; yet, the actual failure of this regulatory system remains uncertain. Howell argues that New Zealand did not perform any worse than many other countries which were more heavily regulated. She attributes this success in part to: … a combination of factors including the serendipitous emergence of the internet at the same time as an imperfect interconnection agreement intertwined with the 'Kiwi Share' obligations to create a near unique set of factors that led to rapid and low-priced deployment of broadband. What is undeniable, however, is that the whole regime was based on an inherent dysfunction: the vertical integration of a natural monopolist. This dysfunction is arguably at the basis of the need for reform. This had already become obvious in the mid-1990s, with the 1995 Inquiry.
Paul Scott and David de Joux “Uncertainty and Regulation: Insights from Two Network Industries” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). The issue of welfare obligations was largely a failure. The Commission interpreted the compensation mechanism as focusing solely on the losses caused by providing services in unprofitable areas, while the other industry actors claimed that those losses should be compensated by Telecom's profits. Disputes over calculation issues led to five different law suits. Information disclosure mechanisms were largely insufficient, and the exact cost of providing those loss-making services remained unclear. The reform failed to take into account the fact that Telecom was under its deed allowed to increase line rental prices according to the Price Consumer Index rather than the Industry Price Index. This would only be addressed in the Rural Broadband Initiative in 2010, with the implicit recognition that Telecom had been overcompensated for the last decade.
Kate Tokeley “Consumer Law and Paternalism: A framework for policy decision making - Further Analysis” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). There are many different ways that the regulator can attempt to nudge or coerce consumers to change their behaviour. The philosophical debate about legitimacy will influence the question of whether hard or softer forms of paternalistic regulation are appropriate. Effectiveness will be determined by the responsiveness of consumers to the regulation. Regulators will need to assess the likelihood of consumers altering their behaviour in the anticipated way.