ts, economic welfare would be maximized if the price of incremental usage of network services were set equal to the contribution of that incremental usage to network congestion. If transaction costs are sufficiently high, it may well prove more economical to allow network providers to pursue alternative pricing regimes. Because Internet-based communications operate on fundamentally different principles, the transaction costs associated with metering Internet traffic are likely to be even more significant than those associated with local telephone service. The protocol that composes the Internet breaks every piece of communication into smaller packets that are transmitted individually and reassembled at their desti- nation. In addition, the Internet is connectionless, in that it does not establish a closed, dedicated circuit between the originating and terminating computers. Instead, each packet is allowed to move independently. Because routing tables are updated dynamically, it is possible for different packets from the same commu- nications to pass through different routes on the way to their destination. As a result, multiple records are required to account for every Internet-based communi- cation. Indeed, the number of records needed to account for the packets associated with a ten-minute telephone call over the Internet could number in the tens of thousands (MacKie-Mason and Varian 1995b). Consequently, the industry has struggled to develop workable methods for metering Internet usage (Telephony 2006). The Regulation of Broadband Networks and the Internet At the same time, the increasingly varied and intense demands that end users are placing on the network and the rise of applications that are more sensitive to variations in throughput rates have made the need to manage congestion all the more acute. Furthermore, because any impact of the congestion costs imposed by a particular user depends upon the volume and pattern of other traffic being car- ried by the network, congestion only begins to degrade service