Regulation of Local Telephony 1. Early State and Federal Regulation and the Communications Act of 1934 Under the system of federalism enshrined in the U.S. Constitution, the authority of the federal government is limited to interstate commercial activities. The regulation of intrastate telephone rates fell under the jurisdiction of the states. 1 Although early legislation in five states had authorized some degree of regulation over local telephone companies, state regulation of local telephone service did not begin in Smith V. Ill. Bell Tel. Co., 282 U.S. 133, 148-49 (1930). Such a vision of dual federalism can be hard to maintain with respect to network industries such as telephony, in which the same capital assets are used for both intrastate and interstate service. With respect to other network industries, such as the railroads, the Supreme Court has acknowledged that intrastate and interstate rates "are SO related that the government of the one involves the control over the other" and has recognized that the federal government cannot create a coherent regulatory system without authority over both (Houston & Tex. Ry. V. United States (The Shreveport Rate Case), 234 U.S. 342, 351 (1914); accord Wickard V. Filburn, 317 U.S. 111, 125 (1942) (recognizing that purely intrastate activities can have a tangential impact on interstate commerce sufficient to bring those activities within federal jurisdiction)). This reasoning was not extended to telephony prior to 1996 (La. Pub. Serv. Comm'n V. FCC, 476 U.S. 355 (1986); Smith, 282 U.S. at 148-49). Networks in Telecommunications earnest until 1907, when states began authorizing their public utility commissions to oversee the reasonableness of local telephone rates. By 1921, all but three states had instituted some form of regulation of local telephone rates (U.S. House 1921). Federal regulation of interstate telephone service began in 1910 with the enact- ment of the Mann-Elkins Act, which gave the Interstate Commerce Commission (ICC) the power to review the reasonablene