argin and greatly reducing the incumbents' revenues per line. This regulatory arbitrage opportunity is now apparently coming to an end. Terminating Calls Competition could not work in a network industry if networks did not interconnect. If new entrants were forced to negotiate such interconnec- tion with incumbents that had virtually all of the subscribers, the entrants would be at a substantial disadvantage. For this reason, the act requires that all interconnection rates for connecting traffic be the same for entrants and incumbents. If the incumbent were to insist on, say, $0. 10 per minute for terminating calls that originate on the entrants' networks, the entrants must also be paid $0.10 per minute for terminating calls from the incum- bents' network. This requirement for "reciprocal compensation" reduces the incentive for the incumbent to exploit its market power in terminating calls.22 Indeed, given the ability of entrants to attract customers with a large share of terminating traffic, this requirement succeeds in keeping the rates for interconnecting local networks reasonably low. 23 Mandatory Resale In addition to offering new local entrants access to unbundled network elements, the incumbent telephone companies must allow the entrants to market, or "resell," their services. For these services entrants must pay reg- ulated wholesale rates that are equal to the retail rate less the incumbent's "avoidable cost" of retailing the service, namely, the marketing, billing, and collection costs. Because incumbents have such modest retailing costs, the discounts offered to entrants under this provision have been generally about 15 percent, a level that is simply not very attractive to entrants. 24 Opening Telecom Markets: The 1996 Telecommunications Act Collocation Since incumbent local carriers were required to interconnect at any fea- sible point in their networks and to offer their network piece-parts as unbundled network elements, they also had to allow entrants to "collo- cate" their equipment in the incumbe