The economics of federalism is a broad discipline with more than five decades of experience. It may shed light on how regulatory jurisdiction is allocated in EU electricity and telecommunications markets. The liberalization of these markets has been accompanied by gradual harmonization of national markets to overcome resistance to competitive forces. Less steps than necessary have been undertaken to promote market integration. Positive and normative reasons remain however for the participation of national or even regional/local powers. Vertical cooperation will remain a necessary condition of a sound regulatory framework, but cooperation may sometimes be inhibited by distributive considerations. © 2009 Elsevier Ltd.