ABSTRACT
Regulation seeks to regulate monopolies. Anatural monopoly occurs when economies of scale available and the production process are so large that the relevant market can be served with the least cost by a single firm. Therefore, rather than have electricity companies laying separate infrastructure or cables or several telecommunications companies laying separate networks, it may be more efficient to give one firm a monopoly subject to regulation of such matters as price and access to the market. It should, however, be noted that not all aspects of the supply process may be naturally monopolistic, for example, the transmission of electricity rather than its generation. Therefore, the task of regulators is to identify those parts of the process that are naturally monopolistic so that these can be regulated while other aspects are left to the influence of competitive forces.
