ublic policy analysis focuses primarily on telecommunications networks. Although we suspect that the economic and constitutional concepts that we discuss may have implications for other network industries, such as energy and transporta- tion, developing those ideas would require detailed consideration of the technolog- ical and regulatory conditions of those industries and would exceed the scope of this book. We therefore withhold any firm policy conclusions with respect to energy and transportation networks, although we draw on examples from the energy and transportation industries to help illustrate the analysis of networks. We believe, however, that the definitions of basic network concepts advanced here have general applicability to all network industries. PART I THE ECONOMICS OF NETWORKS The Structure and Functions of Networks Economic life is critically dependent on a wide variety of privately owned networks: for communications (the Internet and broadband data, telephone, broadcast tele- vision and radio, cable television), for transportation (airlines, railroads, buses, trucks, shipping, electric power transmission and distribution, natural gas and petroleum pipelines), and for distribution of products (wholesale trade and postal services). Although different types of networks vary significantly with respect to a wide variety of technical details, they share certain technical and economic features that are critical to understanding network access. This chapter introduces some basic aspects of network structure and design. The focus of our discussion is on physical networks, involving facilities such as telecom- munications switching equipment and transmission lines. The purpose is not only to provide a technical background to our study but also to obtain some important insights into how networks are organized. Evaluating the effects of regulation on the organization or formation of networks is central to our public policy analysis. This chapter also introduces a classification scheme that is useful for und