ous. On the one hand, by increasing the number of customers that subscribers can reach, interconnection access causes the value of the network to increase, which in turn should cause network demand to increase. On the other hand, the presence of alternative local telephone networks means that some customers may choose to become customers of other local tele- phone providers, which places downward pressure on network demand. Whether on balance network demand will increase or decrease depends on which of these two effects dominates. The possibility that network demand may fall means that network owners may no longer have sufficient volume to take advantage of cost-reducing technologies. In addition, in contrast to retail and wholesale access, which only mandate access at the edges of the network where the network owner already offers service, inter- connection access requires the creation of new points of entry at major nodes in the middle of the network. Networks that do not voluntarily offer service at these points will have to create new interfaces to permit interconnection and to meter service at these locations. Permitting access at these points also introduces a new source of flows in the middle of the network, which can have a major impact on Communications Daily (1997); Communications Today (1998); Telecommunications Reports (1998a); Telecommunications Reports (1998b); Wall Street Journal (2004). The Regulation of Local Telephone Networks optimal network configuration and may cause congestion in portions of the net- work located quite far from the access point. The fact that traffic now originates and terminates outside of a single network also increases the cost of obtaining the information necessary for network planning and creates the possibility of strategic behavior to take advantage of the information asymmetries. Some commentators have also warned that incumbent local telephone com- panies can use the refusal to provide interconnection access to harm competition. They argue that in the absence of int