ice elasticity of demand for interstate and international services, the cost of these taxes is extremely high, costing the economy between $3 bil- lion and $7 billion a year over and above the $6 billion raised by the pro- gram. 17 It is difficult to see how these extraordinary costs can be justified by regulators who are sensitive to ratepayers' concerns about increases in tele- phone bills. Moving away from the implicit and explicit universal service policies could therefore generate as much as $14 billion in economic efficiency gains. Even if deregulation of all voice services created some opportunity A Look Back and a Look Forward for telephone companies to exert market power, it is difficult to see how any such monopoly pricing could cost the economy $14 billion a year. Assuming that the demand for local service has a price elasticity of demand of -0.03 and a current price of $25 a month, even a 50 percent increase in local rates for every household in the country would create a deadweight loss of only about $100 million a year. Given the rise of wireless and VoIP, the price elasticity of demand for local service is surely increasing, but it may increase SO much that incumbents will have little ability to raise local rates anyway. The new problems posed by VoIP telephony and cable television deliv- ery of high-speed services have already ensnared the FCC in a difficult set of issues. How can it continue to regulate DSL and circuit-switched voice telephony and not regulate VoIP and cable modem services? If it forbears from regulating the latter services, what will happen to its contribution base for universal service charges? Will states have to allow ILECs to raise local rates to residential consumers in order to offset the loss in access charges and long-distance revenues that have been supporting residential rates for decades? The obvious direction for regulators is a phase-down of all telecom reg- ulation. The unbundling regime could be phased out in three years, as some observers have suggested. 18 All c