capacity as a result of retail access. access must be such that the demand for capacity is rationed. This means that the new price of retail access p** must allocate capacity. This requires that total demand for capacity, including retail demand and access demand, must equal network capacity: Da(p**) = K. This solution is likely to be the most efficient solution, at least in the short run, when network capacity is fixed. It may, however, be foreclosed by regulation. To the extent that retail prices are subject to rate regulation, such price increases may not be permitted. The third solution is to find a way to reduce demand for network capacity by shifting the retail demand curve to the left to compensate for the excess demand. There are many different ways to achieve such reductions in demand. Demand can be reduced by shifting peak demand to off-peak periods, thus reducing the need for peak capacity. Demand can be reduced by tolerating a lower quality of service, allowing more blocked calls in a circuit-switched telecommunications network or more information loss in a packet-switched communications network. Demand can be reduced by reducing the variety of services offered by the network firm. If platform access is not mandated by law, demand also can be reduced by decreasing platform access, thus lowering the number of types of complementary services delivered on the network, which will reduce consumer demand for network capacity. Economic Effects of Regulating Access to Networks Imposition of retail access thus places the network owner on the horns of dilemma. The duty to serve prevents it from protecting the quality of its services by refusing to deal with additional customers. The inevitable lag in adding capacity renders it unable to meet the unexpected increase in demand by expanding capacity. The price controls associated with rate regulation prevent it from adjusting price SO that it rations capacity. In effect, retail access leaves network owners with no choice but to respond to unanticipated increases i