I suspect money is/was the underlying reason for the change.
The WRU could "afford" to help finance 4 teams - there wasn't enough cash to go round 10 or 12.
Even today, the 4 Welsh Regions are at a significant disadvantage in terms of playing budgets compared with not only the English & French, but also the Irish & Scots.
Other significant disadvantage includes the limited game time internationals are permitted to play for their regions. I think this has a detrimental effect on development because the young players are in and out of the team all of the time
Another disadvantage is the amount of time our influential players are away from their regions for training camps in Autumn, Summer and for six Nations. Their influence is diminished because of this imo.
One thing that would help the budgets of our regions, as well as help in fast track young talent, would be to allow free movement of out top players abroad. I truly believe that would ultimately be good for our game here in Wales.
Letting another club or union pay for the upkeep of our top players would mean more cash to spend in the regions. With the money we could nurture more talent and the space freed up by the players being allowed to leave would be snapped up by the next eager generation of talent.
Necessity for players would speed up the production process in Wales, fast tracking players into the mix. The WRU could maybe also allow an extra key foreign signing in each region. A Southern Hemisphere ex-international is much cheaper than an incumbent Welsh international so its economical.
If taken seriously we could introduce transfer fees so Richer would have to buy players from us, not as stupidly as the football transfer market, but we should introduce transfer fees non the less.
Throwing money at top players to encourage them to stay in Wales is a false economy because I believe that for every Dan Bigger there is a Sam Davies, for every AWJ a Rory Thornton, Gethin Jenkins a Nicky Smith. We need to add these players to the gene pool as quickly as possible and make our game in Wales more competitive through an increase in numbers, skill and talent.
I think Gatlands law is short sighted and restrictive. Preventing players from gaining knowledge and experience of other cultures ultimately inhibits their development as players and stunts their potential. With the right stimulation they could get better and better, so why stifle their talent and stop them growing?.