enters. It declined to incorporate an element to reflect the opportunity cost borne by the network owner providing unbundled access to network elements to competitors (FCC 1996c). 8 See AT&T V. Iowa Utils. Bd., 525 U.S. 366, 378 n. 6 (1999). The Regulation of Local Telephone Networks Although the statutory mandate underlying TELRIC on its face applied only to compensation for interconnection and access to unbundled network elements, the FCC determined that TELRIC should also govern compensation for physical collocation. In addition, the FCC determined that TELRIC represented the appro- priate interpretation of "the additional costs of terminating such calls" that govern reciprocal compensation, although the statue explicitly reserves the possibility of bill and keep (FCC 1996c). In SO ruling, the FCC rejected arguments that imposition of TELRIC violated the Takings Clause. In contrast to the reasoning advanced in its Expanded Inter- connection proceedings, which argued that takings of public utility property are governed by the Court's regulatory takings jurisprudence, the FCC argued that the guiding principle for determining whether regulation of public utilities violates the Constitution depends on whether the rates are confiscatory. Alternatively, assum- ing for the sake of argument that physical collocation constitutes a physical taking, the FCC found that its ratemaking methodology satisfies the just compensation standard, because the constitutional requirement that the government pay the fair market value of the property taken as compensation did not permit recovery of monopoly rents (FCC 1996c, 2000c). B. The Rationales for Regulating Local Telephone Networks The regulation of local telephone service provides an opportunity to examine the application of the regulatory rationales introduced in Chapter 4. The impact of these regulatory efforts and the challenges that state and federal regulators confronted illustrate the difficulty of attempting to impose regulation on such a technologically complex and dyna