ate over congestion pricing as a choice between flat-rate and usage-sensitive pricing over- looks the full range of possible pricing arrangements. Although later scholars have disputed the specifics of his analysis, 15 it still serves as a useful illustration of the ben- efits of thinking more broadly about alternative institutional solutions to the prob- lems of exclusion. In the process, it demonstrates how public policy might be better served if providers of club goods were given the latitude to explore the use of proxies 15 Van Zandt (1993); Epstein (1999); Odlyzko (2004). Networks in Telecommunications that minimize transaction costs while incorporating some of the positive features benefits associated with usage-sensitive pricing. C. Implications of Congestion Economics for Network Neutrality The economics of congestion offers potential justifications for many of the practices criticized by network neutrality proponents. Although these restrictions would place some limits on end users' ability to run applications, access content, and attach devices as they see fit, they could also provide a new way to internalize the congestion costs that high-volume users impose on others. They could also create consumer benefits by reducing the congestion costs and by lowering the access prices that low- volume end users must pay. Although network neutrality proponents have suggested that mandating network neutrality is essential to preserve the environment for innovation on the Internet, a close examination of the economic literature reveals that such arguments are misplaced in the context of physical networks such as the Internet, because the network owner has both the ability and the incentive to internalize any spillover benefits associated with innovative activity. The economic attractiveness of employing usage-sensitive pricing on the Inter- net turns on the nature of congestion and the magnitude of the transaction costs needed to implement such a scheme. The standard result is that in the absence of transaction cos