Taiwan has undergone a great transformation in the regulation of its telecommunications market in the past five years. Profound changes in technology and the rapid growth in telecommunications markets have created conditions in which production of most telecommunications services by competitive suppliers can now be presumed to belittle, if any, more costly than monopoly production. Under these circumstances, the earlier goal of regulation-to protect consumers against monopoly exploitation-should be replaced by the goal of fostering conditions favorable to competition and encouraging efficient markets. As liberalization of the telecommunication sector proceeds, regulatory involvement in telecommunications markets should be reformed to ensure that those markets are competitive. The prototypical telecommunications market structure has been a vertically-integrated dominant operator (DO) that supplies a wholesale interconnection service and a variety of retail services. For the DO's retail competitors, interconnection is a bottleneck resource and decisions about pricing of interconnection, more than any other relationship between the DO and other operators, will profoundly affect the terms of telecommunications competition. Continued regulations is necessary to prevent the because of market power by the dominant provider and to ensure the supply of interconnection on equal terms to the dominant provider and to ensure the supply of interconnection on equal terms to competitors. This article focuses on the competition law and policy issues for Taiwan's telecom market liberalization. The author introduces the background, issues and the political- economic context of the passage of the telecom reform legislation in Taiwan in 1996. Although such enactment aid the foundation for market opening, the author finds fault with the inadequate emphasis on competition in these amended laws and their failure to comfort with the fundamental principles of the Fair Trade Law. Moreover, the author makes an in-depth analysis and concrete proposals regarding the enhancement of competition rules in the telecom sector, and argues that competition laws should have more influence on telecom policy and laws to ensure effective competition, and that procedural safeguards should be installed to protect substantive rights in the marketplace. To this end, many specific recommendations regarding further amendment of the telecom law and strengthening telecom regulation are proposed. They include adding competition safeguard as on of the legislative goals, redefining typeⅠand typeⅡ telecom companies, requirements for negotiation and dispute resolution of unresolved terms and conditions in Interconnection Agreements, and strengthening mandatory disputed resolution mechanisms and investigative powers of the regulators. In conclusion, the author notes that deregulation is a complex process. It involves converting a regulated monopoly firm into one company with several rivals, all of which operate under fully effective competition. If the resulting competition is weak or incomplete, the deregulation fails. Therefore, the author argues that interconnection between the networks of various competitors and providers of telecommunications services is an essential requirement for the effective functioning of a liberalized telecommunications market, particularly to enable and ensure the viability of new competitors. Furthermore, regulation's role shall continue to evolve, away from detailed prescription of rates and services to a focus on the structure of interconnection arrangements and elimination of entry barriers.