 by mediation by a state public utility commis- sion. If the parties are unable to reach a voluntary agreement, the statute gives state public utility commissions the authority to set rates through binding arbitra- tion, which would be governed by one of two statutory mandates. First, rates for interconnection and access to unbundled network elements set by arbitration shall be "based on the cost of providing the interconnection or network element," provided that cost is "determined without reference to a rate-of-return or other rate-based proceeding." Second, the statute required that compensation for traffic originating on one network and terminating on another be governed by the princi- ple of "reciprocal compensation," which "provide[s] for the mutual and reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier's network facilities of calls that originate on the network facilities of the other carrier." Such costs must be determined "on the basis of a reasonable Networks in Telecommunications approximation of the additional costs of terminating such calls," although carriers may waive mutual recovery in favor of other arrangements, such as bill-and-keep systems (47 U.S.C. § 252(d)(2)(A)(i)). The result was a widescale federalization of local telephony, including many areas of regulation that had previously fallen within the jurisdiction of the states. By their nature, both interconnection and access to UNEs typically require the requesting carrier to place some of its equipment on the incumbent local telephone company's property. In addition, UNE access presupposes some ability to combine the incumbent's network elements with facilities supplied by the new entrant. In either case, requesting carriers must be allowed to establish physical connections between their equipment and the incumbent's network. The element most likely to be accessed in this manner is the local loop, which possesses the characteristics of a natural monopoly more than perhaps any other ne