The state and prospects of regulation: A long term perspective on Italy and beyond

Adopting a long term perspective helps to evaluate the rationale, outcomes, and dilemmas of the regulation evolution and its reforms. After having been ignited by market liberalisations and privatisations of the 1980s and 1990s, regulation reforms impacted on utilities differently. Some sectors (like telecoms) appear to have reaped the highest benefits from incentive-based regulation; others (such as electricity), for a variety of reasons, did not completely abandon rate-of-return (ROR) or featured hybrid tools. While the price cap stands as the regulatory champion, its many variants prevent sound experimental assessments; moreover, so far it has not been able to entirely solve quality underinvestment. Consequently, a new generation of output-based regulation is being developed: it encompasses a wider menu of policy targets. Telecoms, which remain the front-runner of future trends, experiment new regulatory models for stimulating infrastructure-based competition, and guaranteeing universal service. Furthermore, the role of privatisations remains contentious and appears generally overstated. The regulatory agenda is now concerned with the solution of Government failures, and the harmonisation between regulation and industrial policy. The resurgence of the latter in the EU is unveiled by a 'vibrant' State aid policy, that targets sectors (utilities) that are nodes of systemic interdependence. At the same time, telecoms markets uncover original policy dilemmas at the intersection of antitrust and regulation. While industrial eras and regulatory paradigms seem to chase one another, new insights on how to better regulate monopolistic markets come from "nudges" and behavioural theories of regulation. Concerning the research agenda, cases of 'regulatory exuberance' may warrant scrutiny, while a deeper investigation of the limits of independent authorities is needed.