Works really well in a densely populated area, but what about small cities (5-50k people) where the philosophy of competition is not as readily applied?
If company A does a bad job providing a service, that creates an opportunity for company B to provide a superior service and make a profit; in turn, that encourages company A to improve its service standards in order to stay in business. The consumer benefits from the competition. In a rational world, bad companies would go out of business and the remainder would provide a competitively superior quality of service at a price and quantity that is appropriate to the community they serve.
If, on the other hand, company B does not exist there is a problem. It can be argued that an opportunity exists for some entrepreneur to create company B and everyone lives happily ever after. Unfortunately, in smaller communities quite often "some entrepreneur" is... you. Until things get really bad, the community will bear with poor/overpriced products.
So, if I live in a small city, my choices of garbage collection service providers might be Bob Down the Street, or Nobody. I would have to commission my own landfill (you're not suggesting landfill sites be regulated, surely?!), mortgage a truck, train and hire staff, and solicit business in a town of 5000. Then begins the long battle against Bob Down the Street Who Everybody Knows and Who Picked Up Mom's Garbage All Her Life. It is simply not profitable for me to go to such extremes unless the barrier to entry is extremely low.