ABSTRACT
This chapter analyses the viability of competition in small states given their economic and social characteristics and the impact of the characteristics in adopting regulatory frameworks. It discusses the definition of small country size with regard to network industries, more precisely telecommunications. The chapter deals with the special regulatory constraints of small states with reference to market entry, economic and social realities and the institutional setup of regulators. It suggests that the classic definition of smallness cannot be fully useful when it comes to discussing network industries, especially telecommunications. Advocates of government intervention in the market for a good or a service have developed several theories to support their arguments, including the public interest theory, capture theory, and economic theory of regulation. For some small states, isolation and remoteness result in high transportation and communication costs, adding to the economic disadvantages faced by these states. With regard to artificial restrictions, the Israeli-Palestinian conflict is a prime example.
