We explore the problem of network interconnection in local telecommunicatio
ns. we develop a model with a competitive business sector and a regulated r
esidential sector. The model is used to analyze the celebrated New, Zealand
antitrust case between Clear and Telecom, We discuss implications of the m
odel for the economics of antitrust, including issues of competition versus
efficiency and the use of appropriate economic models. We also examine the
implications of some proposed rules for interconnection. In particular, we
examine reciprocity, 'bill and keep', and the rule that the courts ultimat
ely endorsed, the Baumol-Willig rule.