s open to competition. At the same time, economic theory has raised serious doubts about the extent to which fixed costs, network economic effects, and vertical exclusion represent anticompetitive threats. Subsequent work in applied economics and experience implementing the traditional regulatory instruments has exposed the immense practical difficulties associated with the traditional regulatory regime. Last, the traditional rationales have focused almost entirely on how best to allocate the network resources that exist today. In the process, they have overlooked the equally (if not more) important question of how maximize incentives to create the optimal network of tomorrow. In other words, the approach to telecommunications regulation has placed too much emphasis on static efficiency and too little emphasis on dynamic efficiency. 1. Natural Monopoly As noted earlier, one of the classic causes of natural monopoly is the presence of fixed costs sufficiently large to create scale economies that are not exhausted over the relevant range of production. This suggests that a natural monopoly can be dissipated either by a reduction in the fixed costs needed to create and operate a telecommunications network or by an increase in the total demand for the services provided by the network. Technological and economic forces have pushed from both of these directions to undermine the natural monopoly rationale. Perhaps the most important is the On the removal of DSL elements from the UNE requirements of the 1996 Act, see FCC (2003e), aff'd in relevant part sub nom. U.S. Telecom Ass'n V. FCC, 359 F.3d at 578-85. On the removal of switching and other key elements needed to provide local telephone service from the UNE requirements of the 1996 Act, see FCC (2005h). Networks in Telecommunications reduction in fixed costs needed to provide local telephone service. Although the provision of local service involves a large number of components, the two that have required the greatest up-front investment in fixed costs have historical