w access prices reduce the incumbents' incentive to reinvest in their networks as well. The alternative is to follow the more orthodox mechanism of allowing the pres- ence of short-run supracompetitive returns to signal competitors that the market is in long-run disequilibrium and to provide incentives for them to expand produc- tion. This mechanism can only function if retail access prices are set at market levels. The best way to promote economic efficiency would thus be to base retail access rates on the price of local telephone service on the open market. Although local telephone service has long been regarded as a natural monopoly in which direct competition is impossible, the emergence of platform competition has begun to provide a wide range of possible external markets that can serve as bases for determining market value. New entrants have followed the lead of the CAPs and have constructed fiber optic networks that offer increasing competition with the incumbent LECs' networks. The Regulation of Local Telephone Networks Even more importantly, providers of wireless telephone services have success- fully emerged as direct competitors to the incumbent LECs. The FCC chose to deploy the first generation of wireless devices, composed of analog cellular telephones, by only issuing two licenses per city, with one of those licenses automatically going to the incumbent LEC servicing that city (FCC 1981). Thus, wireless initially offered only modest improvements to the competitive environment. The arrival of sec- ond generation wireless devices, known as "Personal Communication Services" (PCS), significantly increased the number of competitive options (FCC 1993b). The result is that the wireless telephone industry has become highly competitive, with ninety-three percent of the U.S. population able to choose from among four different wireless providers (FCC 2006b). As a result, Congress preempted state regulation of wireless rates in 1993 (Statutes at Large 1993, pp. 394-95 (codified at 47 U.S.C. $ 332(c)(3)(A)). Onc