 element from the incumbent telephone company's network. Accordingly, the cost of providing access to unbundled network elements should be measured in terms of the reduction in overall network services that results from another company's use of a network element for another purpose. The proper cost valuation of making an input available is the direct cost of the input plus the reduction in the value of the output. Thus, prices set at the economic cost of an input must represent the sum of the direct incremental cost of providing the input and the opportunity costs associated with providing the input to a competitor. The analytical methodology for setting input access prices at these levels is known as the efficient component pricing rule (ECPR), 9 which would set access prices according to the following formula: access price = incumbent's per-unit incremental cost of providing access + the incumbent's opportunity cost of providing the unbundled input. Because another company's use of network elements potentially reduces the ser- vices that the network can provide, the correct price of those network elements depends on what the company could have obtained by selling network services in a competitive market. Thus, the market price of network services, the outputs of the network, should be used as the basis for determining the value of access to the services of network components, the inputs of the network. In the absence of market prices for network output, the opportunity cost calculation can be based on the regulated rates for the incumbent firm's output. We acknowledge that allocating the retail markup among multiple products using ECPR (or any other access pricing method) poses conceptual and adminis- trative problems. For example, if a competitor were to lease two or more network elements from an incumbent LEC, it would be improper to include the entire retail The ECPR concept originally appeared in Willig (1979); see also Baumol (1983) and Baumol and Sidak (1994), suggesting that local exchange carriers be al