lity Commission to deregulate their rates in light of the emergence of effective competition. The Idaho Public Utility Commission rejected the petition on the ground that the evidence that cell phones are functionally equivalent and competitively priced with Qwest's local service was unpersuasive (Idaho Public Utility Commission 2003). Over time, state public utility commissions have largely deregulated local phone service to businesses and have begun to deregulate residential local phone service as well (Tardiff 2007). 2. Structural Separation The tariff system was not sufficient by itself to eliminate the supracompetitive pricing resulting from monopoly power. A regulated firm that offered tariffed as well as untariffed services could evade the strictures of rate regulation simply by bundling its regulated service with an unregulated service and charging supracompetitive prices for the unregulated service. In addition, to the extent that the same facilities are used to provide both regulated and unregulated services, the regulated entity can manipulate the tariffing process to gain a competitive advantage. As discussed in Chapter 2, the allocation of joint costs among multiple products is inherently somewhat arbitrary. As a result, both regulators and regulated entities possess some degree of latitude over the percentage of shared costs to allocate to the regulated instead of the unregulated service. The concern is that this latitude will allow the network owner to allocate a disproportionate share of the joint costs to the regulated service. To the extent 16 The Court of Appeals upheld this order on judicial review (MCI WorldCom, Inc. V. FCC, 209 F.3d 760 (D.C. Cir. 2000)). Network Regulation Basics that rates are based on cost, this would guarantee their ability to recover a greater proportion of the shared costs through the rates charged for their regulated services. At the same time, allocating more of the shared costs to the regulated service would also yield advantages in the unregulated market, because t