pricing of network access and uses that framework to critique existing approaches to establishing access prices. Chapter 7 considers the constitutional limitations on access imposed by the Fifth Amendment to the U.S. Constitution, which pro- hibits the taking of property for public use without the payment of just compen- sation. A. Economic Justifications for Regulating Networks 1. Natural Monopoly Perhaps the classic justification for regulating telecommunications networks is that they have long been presumed to be natural monopolies. As noted in Chapter 2, a given production technology is said to exhibit natural monopoly characteristics if it is subadditive; that is, a single firm can supply the entire market demand at Networks in Telecommunications lower cost than could two or more firms. A sufficient condition for subadditivity is for the technology to exhibit scale economies, such as occur when a production technology requires the incurring of joint and common fixed costs that can be spread across units of output or across multiple outputs. Scale economies give the producer with the largest volume a cost advantage that allows it to underprice its competitors, which in turn allows it to capture a larger share of the market. This causes the cost advantage to widen still further until all other producers are driven from the market. Under these circumstances, a single firm will eventually dominate markets that initially consist of multiple producers. Natural monopoly gives rise to two normative implications. First, like all monopolists, natural monopolists tend to charge prices that are inefficiently high and to produce quantities that are inefficiently low. Second, the fact that the market ultimately reaches equilibrium with only one producer implies that the fixed costs incurred by any subsequent entrant will inevitably end up being wasted, because only one set of capital assets will ultimately end up being used. Both of these rationales have long been applied to the telecommunications industry. Indeed, throug