ructure is likely to have a degree of competition, although the data suggest that such competition might be limited to three players. Such oligopolistic competition would nonetheless alter the policy balance in significant ways. When the alternatives are regulated and unregulated monopoly, the large welfare losses associated with monopoly pricing can arguably justify regulation despite the well-recognized defects and distortions that plague direct regulation of prices. When the decision shifts to a choice between regulated and unregulated oligopoly, the policy balance is quite different. Theoretical and economic research has shown that oligopolies, although still falling short of the competitive ideal, perform far better than monopolies, to the point where the policy balance shifts away from ex ante regulation (Nakahata 2002; Shelanski 2007). 2. Network Economic Effects Some commentators have invoked network economic effects as a justification for regulating access to last-mile broadband networks. The classic argument is that network economic effects give the early leaders in the broadband marketplace (i.e., cable modem providers) a decisive advantage. Because the value of the net- work increases with the number of others users connected to the network, new customers will flock to the technology that gets off to the fastest start, with the subsequent increase in network size causing the advantages created by network economic effects to increase still further. These demand-side scale economies allow cable modem providers to exercise market power against end users. At the same time, SO the argument goes, the deployment of proprietary protocols can exercise market power against providers of complementary services, such as applications and content, by increasing the costs of serving more than one market. Once that early technology becomes established, network economic effects may cause customers and content/applications providers to become locked in despite the emergence of subsequent competition from DSL (Hausman et