orks can cause network traffic to increase relative to a noninterconnected network. At the same time, the fact that some traffic now originates and terminates outside the incumbent's network raises the possibility of diversion of traffic below the levels that would exist under retail and wholesale access, in which all traffic originates and terminates on a single network. The impact of interconnection access on the demand for network services is thus ambiguous. As noted in Chapter 4, some commentators have also warned that networks can harm competition by refusing to engage in interconnection access. Network economic effects are often described as giving rise to demand-side economies of scale. In the absence of interconnection, customers will naturally flock to the largest network. Once the market reaches its tipping point, the value of the network of the dominant player will SO far outstrip those of its competitors that the market collapses into a natural monopoly. Once tipped, the difficulties that new entrants face in generating sufficient volume to untip the market can cause the resulting monopoly to become locked in. Network owners presented with a request for interconnection access are thus subject to conflicting impulses. Interconnection would enable customers to reach a larger number of other end users, which would increase the value of their network. Refusing to interconnect, on the other hand, would lead to a race to become the dominant player. Firms will choose among these conflicting strategies based on the skewness of the potential returns from winning and losing the resulting competition Networks in Telecommunications and the likelihood that they will emerge as the dominant player (Besen and Farrell 1994; Woroch 2002b). As noted earlier, it is often overlooked that the primary effect of network eco- nomic effects is to provide powerful incentives in favor of interconnection. For example, in a market in which five equally sized players are already interconnected, any player that refused to interconne