Southwest is a great example that the current model is working. Don't want to pay baggage fees, and get nickeled and dimed for everything? Fly Southwest.
I frequently recommend them as the best domestic airline for people who don't fly enough to get airline status, and aren't willing to pay for first/business class travel. They've got a pretty good route network, and the difference between the highest tier passenger on a Southwest flight and the lowest tier passenger on a Southwest flight is far less than traditional carriers.
I hope the free market punishes the ultra-economy fares that traditional carriers are offering. Flying a traditional carrier on an economy ticket without status is already such a degrading experience. Hopefully passengers won't be willing to suffer further degradation, and will just switch their business to Southwest, Alaska or another carrier that doesn't offer ultra-economy fares.
There is also real competition occurring at many airports throughout the country. For example, Delta and Alaska Air are waging an all-out war in Seattle right now, with both airlines aggressively pursuing flyers in that market.
Now, I do think some additional regulation is necessary. The fact that airlines aren't responsible to take care of stranded passengers during weather delays is inexcusable, and increased fare transparency would help the competitive side of the marketplace. And I agree with the article that regulators should also be much more skeptical of mergers that decrease competition and establish de facto monopolies.