k. The costs of expanding an existing network reflect the medium-term costs of expanding its capacity and the adjustment costs of incorporating new facilities into its system. If the network firm were to establish at least parts of its network after compelled access, then its costs of capacity would reflect more long-term costs more closely. Furthermore, even if access caused network demand to fall, it might still require the network to be reconfigured if traffic patterns changed or demand for capacity increased only at particular locations in the network. 1. Retail Access Mandating access to a network alters the market equilibrium for network capacity. Unless there is substantial excess capacity to cover the mandated access, the result could be an imbalance of demand and supply and economic inefficiency. Even if total demand for capacity decreases or stays constant, there may be changes in the distribution of capacity requirements across the incumbent firm's network that require reconfiguration of the network. Accordingly, we propose a principle of network capacity. 12 Restoring market equilibrium requires that mandated access to a network be accompanied by compensating adjustments - higher prices, greater capacity, or reduced services - that correct imbalances in the demand for and supply of network capacity. There may, however, be practical or regulatory constraints that foreclose some of these compensating mechanisms. In sizing its network, the network owner must forecast what the likely demand for network resources will be and design a network to accommodate it. These deci- sions are complicated by the fact that capacity typically cannot be expanded in a con- tinuous manner. Instead, the indivisibility of fixed cost investments often forces net- work owners to add capacity before it is actually needed. More importantly, capacity generally cannot be expanded instantaneously. The network owner must precom- mit to a particular level of capacity based on the anticipated network demand. 12 This type of problem ar