s a natural monopoly"); Kahn (1971, p. 127) ("That the provision of local telephone service is a natural monopoly is generally conceded"); Breyer (1982, p. 291) ("Local telephone service seems to be generally accepted as a natural monopoly"). For an excellent discussion of the diseconomies of scale in switching, see Mueller (1989). 12 Weiman and Levin (1994); Mueller (1997). The Regulation of Local Telephone Networks diseconomies of scale, the Bell System did not begin widescale deployment of mechanical switches until 1919 (U.S. House 1939). The explanation for the reasser- tion of the Bell System's dominance after 1907 lies elsewhere. Disputes over the extent to which the local telephone network constituted a nat- ural monopoly persisted well into more recent times. Leading treatises on regulated industries acknowledge the persistence of disputes over whether the telephone industry was characterized by increasing or decreasing average costs (Bonbright 1961). A vibrant empirical literature emerged debating whether local telephone networks were natural monopolies. Some studies concluded that local telephone service was subadditive (Charnes et al. 1988; Röller 1990a, 1990b; Wilson and Zhou 2001; see also Gabel and Kennet 1994; Gasmi, Laffont, et al. 2002). Other studies drew the opposite conclusion (Evans and Heckman 1983, 1984; Shin and Ying 1992; Berg and Tschirhart 1995). Subsequent technological developments have largely rendered these disputes moot. The advent of digital technologies has caused a precipitous drop in the cost of switching. In 2003, the FCC removed switches serving large business customers from the list of elements to which new entrants could obtain UNE access. At the same time, it continued to allow UNE access to switches serving residences and small businesses, not because of high fixed costs, but rather because of operational problems associated with "hot cuts," during which the line serving a particular customer is disconnected from the incumbent's switch and reattached to the new entrant's.