rock (1981); Faulhaber (1987); Noll and Owen (1989). The Regulation of Local Telephone Networks believe that the best way of achieving interconnection is through voluntary private agreements" (FCC 2000b, p. 13534). A close analysis of the history of the era reveals that the refusal to interconnect likely played little role in allowing the Bell System to reassert its dominance. The Bell System's long-distance network was unlikely to serve as a source of demand-side economies of scale. During this period, long distance represented only a tiny fraction the overall demand for telephone service. 18 Indeed, contemporary observers acknowledged that its ability to provide superior long-haul long-distance service was "of little commercial or social importance." Short-haul long-distance service could be provided simply by interconnecting adjacent exchanges. Again, the Bell System held no competitive advantage for this type of traffic, because AT&T and the independents were employing the same technology (Mueller 1997). Neither were the Bell System's local telephone networks likely to have served as the source of significant network economic effects. As we explained in Chapter 4, network economic effects are unlikely to be a source of anticompetitive problems in markets undergoing rapid growth, as was the case in the early telephone industry. The Bell System had patterned its initial business strategy on Western Union's, which primarily provided long-distance communications to business customers located in large commercial centers. As a result, the Bell System largely ignored small cities, rural areas, and residential areas, not even making much of an effort to connect larger cities to their suburbs. The skeletal nature of the Bell System's network left substantial areas of the country in which new, independent telephone companies could enter without facing any opposition. The independents were thus free to pursue the large number of unserved customers who had no allegiance to the Bell System. Indeed, once the independents h