s presumes that the scope of regulation should constantly contract over time, as technological change and increases in demand open larger portions of the telecommunications industry to competition. This dynamic quality of the scope of regulation explains much of the history of telecommunications policy. As noted earlier, initially the entire telephone system was regarded as a natural monopoly. As a result, the entire network was subjected to rate regulation. Over time, it became clear that CPE manufacturing was not subject to the high fixed costs traditionally associated with natural monopoly and was instead potentially open to competition. The emergence of microwave and satellite transmission also lowered the fixed costs of providing long-distance service by allowing new long distance entrants such as MCI to compete without having to establish nationwide networks of high-volume telephone lines. As it became clear that each of these markets was now open to competition, the FCC released them from rate regulation and prohibited regulated entities from offering them on an integrated basis. Eventually, the only portion of the telecommunications industry that remained subject to rate regulation was local telephone service. Over time, even that premise has come under fire, as wireless has reduced the fixed costs needed for transmission and as computer processing has reduced the fixed costs of switching. 3. Unbundling The precipitous drop in the cost of switching suggests that the only portion of the telephone network that remains a natural monopoly may be the wires connecting the central offices maintained by local telephone companies to individual residences (commonly known as local loops). Although the demand for local loops servicing large business enterprises is sufficiently high to permit competition, it is arguable that local loops serving residences and small businesses may remain a natural monopoly. The logic of rate regulation and structural separation would require a constant narrowing of the scope of rate re