 Willig (1981). According to George Stigler (1968), barriers to entry are long-run costs that are imposed on entrants but not on incumbents. 16 The following discussion is based on Spulber (1989, 1995). Pricing of Access to Networks This is a quantitative difference but hardly a qualitative one; entrants can invest smaller amounts to create networks targeted at particular customers and specific services. As in natural monopoly analysis, the argument that sunk costs are a barrier to entry also depends in part on the similarity of the incumbent's and entrant's technology. Yet an entrant need not duplicate the incumbent's network. An entrant with lower operating costs could be assured of recovering at least the difference between the incumbent's operating costs and the entrant's own operating costs, which could well be sufficient to recover the costs of entry. This scenario is likely because technological change in telecommunications, such as the application of microprocessors in switching, potentially lowers the costs of operating networks. By differentiating its offerings through branding, customer service, and location, an entrant gains incremental revenues to cover the costs of entry. New technologies offer enhanced performance, such as the mobility of wireless services and the increased bandwidth of coaxial and fiber-optic systems, thus allowing competition with established networks. Technological change has even altered the need to sink costs into a telecom- munications network. For example, wireless technologies avoid customer-specific, irreversible investment for the "last mile" to the customer's location, because wire- less transmission towers can be relocated. Thus, even if substantial sunk costs are required to reproduce the incumbent's wireline network, a wireless alternative may be an effective competitor without the same sunk costs. Accordingly, sunk costs in telecommunications need not impede the market allocation of telecommunications services. D. Regulatory Approaches to Setting Rates in Regulated I