nts just as effectively simply by setting retail prices at appropriate levels. Indeed, because wholesale access prices are typically based on retail prices less any avoided costs, wholesale access mandates raise all of the problems associated with regulating retail rates, with the added complication that regulators must also determine the magnitude of the marketing and operational costs are actually avoided. Wholesale access also has the potential to impair dynamic efficiency. To have any benefit, wholesale access prices must be set very precisely. If they are set too high, the entire wholesale access regime does not constrain the incumbent and instead simply imposes regulatory costs without providing any compensating benefits. If they are set too low, wholesale access destroys incentives for competitors to invest in their own networks and dampens the incentives for the incumbent to invest in its own facilities, because any benefit that it develops will have to be shared at wholesale cost. Indeed, the incumbent faces a moral hazard problem, in that its competitors can avoid the risks of opening new markets simply by waiting until the incumbent undertakes the necessary investments and then entering only those markets that prove profitable. These difficulties are aptly demonstrated by the two major instances in which wholesale access has been mandated. Consider first Rochester Telephone's Open Market Plan, which proposed placing its local telephone network into a separate company that would serve all comers on a wholesale basis (Crandall and Sidak 2002). The NYPSC soon became concerned that the system of structural separation embodied in the Open Market Plan was unworkable. At the same time, the NYPSC received repeated requests for decreases in wholesale access prices, increasing the discount from full retail price from 5% to as much as 19.6%, as well as complaints about delays and difficulties in the process of ordering service. The wholesale access provisions of the Open Market Plan were eventually superseded by 