 but its capital cost per customer would likely be far above the incumbents' $1,600 invest- ment per line in the first few years of operation because of the economies of density. An entrant that did happen to attract the lower-yielding resi- dential customers might realize annual revenues from local service of only $300 per line or even less. At these yields, the incumbent firm would be losing money except in the most densely populated areas. Even if the entrant operated much more efficiently than the incumbent, surely a pos- sibility, the returns would not be high enough to amortize its fixed invest- ment if it simply replicated the incumbent's plant. An entrant would there- Local Competition under the 1996 Act fore have to search for a lower-cost entry strategy or provide new services to its customers SO as to increase net revenues per line. Entry Strategies As already mentioned, the 1996 act opened local telecommunications markets to entry by barring state regulators from denying entrants the right to compete and by specifying a complex set of "interconnection" requirements between entrants and incumbent local exchange carriers (ILECs). Under the latter provisions, ILECs were required to (1) offer their services at wholesale rates to the entrants SO that the entrants could "resell" them; (2) "unbundle" their networks SO as to enable entrants to lease ILEC facilities, unbundled network elements (UNEs), at regulated prices that reflect costs; and (3) interconnect with entrants at any techni- cally feasible point. 10 These provisions allowed new firms to enter local telecommunications markets without having to replicate all of the incum- bents' network facilities. Resale Entrants have found the new entry options to be a mixed blessing. The simple resale of incumbents' services could never be a very profitable activ- ity because under the 1996 act entrants would simply be obtaining a mar- keting margin equal at most to the incumbents' "avoided costs" of retailing their services. This margin between retail and whol