  We study the noncritical two-dimensional heterotic string. Long fundamental
strings play a crucial role in the dynamics. They cancel anomalies and lead to
phase transitions when the system is compactified on a Euclidean circle. A
careful analysis of the gauge symmetries of the system uncovers new subtleties
leading to modifications of the worldsheet results. The compactification on a
Euclidean thermal circle is particularly interesting. It leads us to an
incompatibility between T-duality (and its corresponding gauge symmetry) and
locality.
