ranting access has no impact on the overall capacity or the full-capacity operating costs of the network. On the other hand, if the link is already part of the minimum cut or if granting access to that link places it on the minimum cut, granting access to that link reduces the total carrying capacity of the network. Therefore, the retail value of the reduction in network capacity represents a good measure of the opportunity cost associated with granting access to competitors. Note, however, that the reduction in capacity is not necessarily equal to the size of access granted. The rest of the network may compensate for the reduction in the capacity of one link in ways that partially offset the impact of the reduction. In practice, access by competitors is not an isolated event but a pattern of usage that changes over time as more competitors access the network. The network's available carrying capacity will evolve over time as a consequence of the access decisions of competitors. B. Production Functions of Networks Networks provide streams of services, such as transmission and transportation. The services provided by such networks are usually measurable, at least in principle. For example, the services of a telecommunications system can be measured in terms of message minutes of use per unit of time. The Internet measures traffic flows in terms of megabytes of data transmitted per unit of time or packets transmitted per unit of time. The output of a passenger transportation system, such as a railroad or an airline, might be measured in terms of passenger miles per unit of time. The output The Design and Costs of Networks of a freight transportation system can be measured in ton-miles per unit of time. An electric power transmission grid measures capacity in terms of megawatt-miles. Networks, however, provide outputs that are much more complex than what is represented by these total measures. The origins and destinations of network transmissions are also very important. For example, it is possible to identify origi