 scope is important for regulatory policy because it is another aspect of interconnection in networks. The network produces mul- tiple services more efficiently than separate networks would. This implies that Networks in Telecommunications c(Q1) c(Q2) c(Q1 + Q2) Figure 2.13. Sharing a high-capacity trunk line to achieve economies of scale, where c(Q1+Q2)<d(Q1)+dQ2). network services cannot be treated in isolation but must be considered as part of an interrelated set of services. The cost of an individual service cannot be considered independently. The cost of the service depends on the amount of other services provided by the network. The amount of the service in question that is supplied in turn affects the costs of other services. D. The Cost of Unbundled Access to Networks If unbundled access is a regulatory fact of life, what are its costs? The discussion of networks in the current and previous chapters serves to establish that networks are greater than the sum of their parts. If that is the case, how can a part of a network be separated out and assigned a cost without doing something that is inconsistent with the engineering design of the network or the economic optimization of the input mix? The proper way to think about the cost of unbundled network elements is to define the services those elements provide. Then the network firm can treat the services generated by specific elements as it does other types of network services, The Design and Costs of Networks most of which are generated by combinations of network elements. This chapter examines problems that arise with this approach, even though it is conceptually consistent with economic cost principles. First, even if it is possible to define services corresponding to specific network elements, it is not possible to assign costs to such services, because in general multiproduct costs cannot be assigned by output in anything but a haphazard fashion. Second, defining new services that are based on network elements as final services requires redefining the fi