Archivé — A Future Friendly Digital Economy Strategy: Submission to the Government of Canada's Digital Economy Consultation — Appendix 2
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Thème(s) : L'infrastructure numérique, La croissance de l'industrie des TIC, L'innovation grâce aux technologies numériques
Robert W. Crandall, Everett M. Ehrlich and Jeffrey A. Elsenach
Regarding the Berkman Center Study (NBP Public Notice 13)
November 16, 2009
In the Matter of
- The Berkman Study's Conclusions are not Supported by Quantitative Analysis
- The Berkman Study's "Do-Over" of the de Ridder Study is Fatally Flawed
- The Evidence from Other Quantitative Studies Does Not Support Unbundling
- The Berkman Study's Conclusions are not Supported by Qualitative Analysis
- The Berkman Study's Analysis is Flawed in Other Significant Respects
1. We have been asked by National Cable & Telecommunications Association and United States Telecom AssociationFootnote 1 to review and comment on Next Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around the World, a draft report submitted to the Federal Communications Commission by the Berkman Center for Internet and Society.Footnote 2
2. Our declaration responds specifically to National Broadband Plan Notice #13,Footnote 3 in which the Commission asked for comment on six specific issues:
- Does the study accomplish its intended purposes?
- Does the study provide a complete and objective survey of the subject matter?
- How accurately and comprehensively does the study summarize the broadband experiences of other countries?
- How much weight should the Commission give to this study as it develops a National Broadband Plan?
- Are additional studies needed along the lines of the Berkman Study?
- Please provide any other comments on the Berkman Study that you deem relevant.
3. We conclude that the Berkman Study does not provide a complete or objective survey of the subject matter, nor does it present an accurate or comprehensive summary of the evidence regarding broadband policies in other countries. The study does not serve the Commission's announced purpose of obtaining an "independent expert review of existing literature and studies about broadband deployment and usage throughout the world."Footnote 4 Rather, the study appears to be explicitly biased towards a particular policy agenda, advancing findings and conclusions that conflict with the accumulated evidence found in existing research. The study's attempt to provide new evidence that contradicts this mounting body of evidence fails badly. Accordingly, the Commission should not rely on the Berkman Study's findings in developing its National Broadband Plan.
4. Specifically and most importantly, the Commission should reject what the Berkman Study refers to as its "most surprising and significant" finding, namely that
"open access" policies – unbundling, bitstream access, collocation requirements, wholesaling, and/or functional separation – are almost universally understood as having played a core role in the first generation transition to broadband in most of the high performing countries; that they now play a core role in planning for the next generation transition; and that the positive impact of such policies is strongly supported by the evidence of the first generation broadband transition.Footnote 5
We agree with the Berkman Study that such a finding – if it were supported by the evidence – would indeed be both "surprising" and "significant." Wishing, however, cannot make it so: the incontrovertible fact is that open access policies have not been shown to increase broadband adoption, availability, or infrastructure investment. To the contrary, the bulk of the available evidence points in the opposite direction, and the Berkman Study provides no new evidence that supports a different conclusion.
5. The remainder of this declaration is organized as follows. In Section II, we briefly present our qualifications. In Section III, we discuss the Berkman Study's "review of existing literature and studies about broadband deployment and usage," including its over-reliance on a single, fatally flawed regression analysis to support its conclusions and its failure to mention, let alone comprehensively review, much of the available research on the impact of unbundling policies in the U.S. and around the world. In Section IV, we examine the Berkman Study's "case studies" of broadband policies in selection countries, and find them to be in many cases factually inaccurate, generally misleading, and, overall, unsupportive of the report's conclusions. In Section V, we point out various other errors and omissions in the Berkman Study, which taken together demonstrate further that the report's conclusions cannot be relied upon as the basis for decisions by the Commission. In Section VI, we present a brief summary of our conclusions.
6. My name is Robert W. Crandall. I am a Nonresident Senior Fellow in Economic Studies at the Brookings Institution in Washington, DC, where I have been since 1978. Prior to that I was the Acting Director, Deputy Director, and Assistant Director of the Council of Wage and Price Stability in the Executive Office of the President, and between 1974 and 1975 I was an Adviser to Commissioner Glen Robinson of the Federal Communications Commission. I was an Assistant Professor and Associate Professor of Economics at MIT between 1966 and 1974. I have written widely on telecommunications policy, the economics of broadcasting, and the economics of cable television. I am the author or co-author of eight books on communications policy published by the Brookings Institution, including Competition and Chaos: U.S. Telecommunications since the 1996 Act (2005) and Broadband: Should We Regulate High- Speed Internet Access? (edited with James Alleman, 2002). My complete curriculum vita is provided as Exhibit A to this declaration.
7. My name is Everett M. Ehrlich. I am President of ESC Company, an economics consulting firm in Washington, DC. I have served as the Undersecretary of Commerce for Economic Affairs (Clinton I) where, among other duties, I co-chaired (with W. Bowman Cutter) the National Economic Council's Interagency Group on the structural effects of technological change on the economy. I have also been the Chief Economist and later head of strategic planning for Unisys Corporation, then a Fortune 100 supplier of computer hardware and systems. I have also served as Senior Vice-President and Director of Research of the Committee for Economic Development, a nonpartisan, business-based public policy think tank, and as Assistant Director of the Congressional Budget Office for Natural Resources and Commerce. I hold a Ph.D. in economics from the University of Michigan and a B.A. in economics from the State University of New York at Stony Brook. My biography is provided as Exhibit B to this declaration.
8. My name is Jeffrey A. Eisenach. I am Chairman of Empiris LLC, an economic consulting firm based in Washington, D.C., and an Adjunct Professor at George Mason University Law School. I have served in senior policy positions at the U.S. Federal Trade Commission (FTC) and the White House Office of Management and Budget (OMB), and on the faculties of Harvard University's Kennedy School of Government and Virginia Polytechnic Institute and State University. Prior to joining Empiris, I served as Chairman of Criterion Economics, Chairman of CapAnalysis, the economic consulting arm of Howrey LLC, and President of The Progress & Freedom Foundation. I have authored or co-authored numerous expert reports in litigation matters as well as in regulatory proceedings, testified before Congress on multiple occasions, and am the author or co-author of eight books. I hold a Ph.D. in economics from the University of Virginia and a B.A. in economics from Claremont McKenna College. My complete curriculum vita is provided as Exhibit C to this declaration.
- 1 The opinions expressed herein are our own. This research was requested and supported by NCTA and USTA. We are grateful to Allan Ingraham, Kevin Caves and Andrew Card for assistance. We also thank John de Ridder for providing us with the regression data he used in his 2007 OECD study. (back to footnote reference 1)
- 2 Next Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around the World, October 2009 (Draft) (available at http://www.fcc.gov/stage/pdf/Berkman_Center_Broadband_Study_13Oct09.pdf) (hereafter, Berkman Study). (back to footnote reference 2)
- 3 Federal Communications Commission, Comments Sought on Broadband Study Conducted by the Berkman Center for Internet and Society, (DA 09-2217, October 14, 2009). (back to footnote reference 3)
- 4 Federal Communications Commission, "Harvard's Berkman Center to Conduct Independent Review of Broadband Studies to Assist FCC" (Press Release, July 14, 2009). (back to footnote reference 4)
- 5 Berkman Study at 11. (back to footnote reference 5)
III. The Berkman Study's Conclusions are not Supported by Quantitative Analysis
9. The Berkman Study focuses on two market characteristics associated with broadband diffusion: the intensity of competition and the rate of investment. Unfortunately, it focuses almost exclusively on intra-platform competition and public investment. It discounts the significance of platform competition and of private investment, allowing its authors to ignore the link between policies that promote private investment in competitive platforms, on the one hand, and market performance, on the other.
10. The Berkman Study claims that its attachment to intra-platform competition through mandated network unbundling of incumbent telecommunications networks at regulated prices is grounded in empirical analysis. However, it largely ignores the vast empirical literature that finds no general relationship between network unbundling and broadband penetration, while focusing on one study, by John de Ridder,Footnote 6 which appears to find such a relationship. Based on its re-estimation of de Ridder's original specifications, the Berkman Study finds that mandatory unbundling policies increase broadband penetration by one percent per year. As we explain in Section III (A) below, however, subsequent research demonstrated that de Ridder's results are spurious; and, our further econometric analysis demonstrates that the Berkman Study's efforts to resuscitate de Ridder's results are unsuccessful. Simply put, the quantitative analysis upon which the Berkman Study bases its conclusion that unbundling increases broadband penetration is invalid.
11. Given the Berkman Study's emphasis on unbundling and its mandate to "review existing literature and studies about broadband deployment and usage," we were surprised at its cursory treatment of the extensive existing literature on the effects of unbundling regulation, which on balance fails to support the proposition that unbundling enhances penetration, but does find that unbundling reduces investment incentives, especially for new technologies such as fiber to the premises.Footnote 7
12. In section III (B) below, we conduct the broader review of the existing literature we would have expected to find in the Berkman Study. Our review demonstrates that the bulk of the existing quantitative research finds no basis for concluding that unbundling leads to higher levels of broadband penetration, increased infrastructure investment, or other positive effects on significant public policy objectives.
A. The Berkman Study's "Do-Over" of the de Ridder Study is Fatally Flawed
13. In this section, we review the Berkman Study's econometric analyses, from which it concludes that unbundling policies increase broadband penetration. These analyses are based on the 2007 OECD de Ridder Study. Based on its econometric analysis, the Berkman Study concludes that
consistent with the findings of this recent work, and inconsistent with a recent critique of it, econometric analysis supports the proposition that unbundling contributed to broadband penetration in OECD countries. Indeed, new analyses we perform on the existing data suggest that the effect was larger than previously thought, the confidence level higher, and the finding more robust.Footnote 8
As we demonstrate below, the Berkman Study's econometric analysis does not support any of these conclusions.
14. The de Ridder Study presents least-squares regression results for a model that takes the general form:
- Qtot represents total broadband penetration (as measured by the ratio of broadband connections to population in each country);
- GUyrs represents the number of years since unbundling policies were enacted in each country;
- X represents a vector of other explanatory variables (denoted by the index variable j) such as urbanization, average age, or median income;
- i is an index variable representing the country and t is an index variable representing time;
- a and b are regression coefficients; and
- e is a random and identically distributed error term that captures variance unexplained by the model.Footnote 9
15. Simply put, the thesis being tested is that, holding other factors constant, unbundling policies increase broadband penetration, with the effect increasing with the length of time unbundling policies have been in place. Thus, de Ridder estimates least squares regression parameters for various regression specifications to determine whether the coefficient on the unbundling variable (a1 in the equation above) is positive and statistically significant.
16. Specifically, the de Ridder Study estimates seven different regression equations that include the GUyrs policy variable. Four of those seven equations yield a positive coefficient for this variable that is significant at the 5 percent level. On this basis, de Ridder concludes that "unbundling (as measured by GUyrs) is currently more significant than platform competition in explaining broadband penetration."Footnote 10 Obviously, this result supports the Berkman Study's pro-unbundling position.
17. However, the de Ridder Study was effectively critiqued in a 2008 paper by Boyle, Howell and Zhang.Footnote 11 By estimating de Ridder's regressions with robust standard errors, their paper demonstrates that the statistical significance of GUyrs disappears after controlling for heteroskedasticity. In addition, Boyle, Howell, and Zhang showed that GUyrs was likely serving as a proxy for the natural diffusion of broadband into the economy – that is, rather than capturing the time elapsed since the adoption of unbundling, GUyrs was actually capturing, at least in part, the time elapsed since the introduction of DSL.Footnote 12 Indeed, when Boyle, Howell, and Zhang controlled for the number of years broadband service had been available in each country, the GUyrs variable became insignificant in both an economic and statistical sense.Footnote 13
18. The Berkman Study seeks to resuscitate the de Ridder results by making two significant modifications. First, it modifies the GUyrs variable, either by replacing it with a zero-one indicator variable for unbundling, or by replacing the values of GUyrs used by de Ridder with new values.Footnote 14 Second, it applies a more sophisticated econometric technique, utilizing a mixed-effects regression model.Footnote 15 Based on these changes, the Berkman Study concludes that unbundling, whether represented by an indicator variable or a continuous time variable, is generally significant and positive, i.e., that unbundling increases broadband penetration.Footnote 16
19. The Berkman Study's econometric analysis is flawed for three primary reasons. First, it simply fails to address the Boyle-Howell-Zhang critique of the de Ridder Study, which showed that the GUyrs variable is capturing the natural diffusion of broadband over time rather than the effect of unbundling. Second, the mixed effects regressions presented in the Berkman Study fail a Hausman Test for specification, implying that the mixed effects model is inappropriate for this data set and does not produce reliable results. Third, its decision to simply replace the values of the key variable (GUyrs) with values more consistent with its prior beliefs is simply unjustifiable as a matter of econometric technique.
20. In what follows, we present the results of our own regression analysis of the basic de Ridder/Berkman model. Our regressions utilize additional years of data (thus significantly increasing the number of observations, as well as utilizing more recent observations), and apply more appropriate regression specifications and techniques. As we demonstrate, when additional years of data and additional relevant explanatory variables are added – that is, when the model is more fully and correctly specified, and applied to a more complete data set – the effect of unbundling not only disappears but reverses: Rather than increasing broadband penetration, our results demonstrate that unbundling reduces it.
1. The Inclusion of Relevant Data and Explanatory Variables Reverses the Effect of Unbundling on Penetration
21. The primary reason for the de Ridder Study's decision to limit observations to these two years was its use of regressions that include the price of DSL service, for which data is only available for 2002 and 2005. Perhaps because it initially focuses on replicating the de Ridder regressions, the Berkman Study also uses only data from 2002 and 2005.
22. However, as the Berkman Study explains, because the price of DSL service is correlated with the unbundling variable,Footnote 17 it is not appropriate to use price as a separate explanatory ("right-hand-side") variable. Accordingly, in most of its regression specifications, the Berkman Study drops the DSL price variable, which would have allowed it to utilize additional years of data. As we explain further below, our regression analyses rely on data from 2001-2006, for a total of 168 observations.
a. Least-Squares Regression Results
23. To examine the effect of both increases in sample size and the natural diffusion of broadband into the economy, we perform regression analysis on fourth quarter OECD data from 2001 through 2006. Table 1 lists the variables used in the analysis and presents summary statistics. The regression data reflects a 28-country (rather than 30-country) sample, because we were unable to determine the date of DSL availability in Greece and the Slovak Republic.Footnote 18
|GUyrs||Years since unbundling enacted||3.940||2.942||0.000||11.000|
|unbundled||=1 if guyrs > 0
= 0 otherwise
|DSLyears||Time since DSL was available||4.238||1.813||0.166||7.667|
|Pop dens||Population density||139.838||133.943||2.527||489.183|
|Pops||Population in millions||40.719||58.814||0.287||299.715|
|Gdp||Gross Domestic Product per capita in US PPP||28720.140||11688.920||6178.182||80471.400|
|State owned||= 1 if network was state owned
= 0 otherwise
It should be noted that the simple correlation coefficient between variables GUyrs and DSLyears is 0.58. This indicates that, as expected, the two variables share a moderate to strong positive correlation.
24. Table 2 below presents least squares regression results of "reduced form" specificationsFootnote 19 that include DSLyears, and estimate the effect of unbundling using either the GUyrs variable or, in some specifications, Unbundled, which is a one-zero indicator variable.
|Variable||Coefficient||Robust t-Stat||Coefficient||Robust t-Stat|
|Specification 1||Specification 2|
Note 1: For both specifications, a White test for heteroskedasticity rejects the null hypothesis of homoskedasticity. We therefore present the regression results with t-Statistics generated from White-Huber standard errors, which account for correlation between the right hand side variables and the error terms in the regression.
|DSLyears||2.900 ***||10.21||3.253 ***||16.85|
|pop dens||0.012 ***||3.19||0.013 ***||3.48|
|Pops||-0.017 ***||-4.03||-0.013 ***||-3.56|
|Gdp||0.000 ***||5.06||0.000 ***||7.71|
|state owned||-7.400 ***||-4.26||-9.602 ***||-6.17|
|Constant||-10.042 ***||-7.43||-10.544 ***||-9.17|
|N = 168||N = 168|
|R-squared = 0.72||R-squared = 0.72|
|F (zero slopes) = 83.94||F (zero slopes) = 76.41|
25. To begin, the regression results in Table 2 first show that the explanatory variables in the model are, in general, statistically significant at a 1 percent significance level. Specifically, the coefficient on DSLyears is positive and significant in both regression specifications, and positive coefficients on population density and GDP indicate that broadband penetration tends to be higher in wealthier economies and in countries with higher population densities, but lower in larger countries (those with large populations) and in countries where the telecommunications network is state-owned. All of these effects are of the anticipated sign.
26. Regarding unbundling, the Berkman Study found that the effect of GUyrs was positive and statistically significant at 1 percent. But when DSLyears is inserted into the equation, as in Specification 1, the effect disappears, indicating that the number of years unbundling policies have been in place has no independent effect on broadband penetration, and confirming the result in Boyle-Howell-Zhang that GUyrs is simply a proxy for the number of years since DSL was first introduced.Footnote 20
27. As explained above, the correct question with respect to unbundling is whether it shifts the technology diffusion curve, so that, other things equal, broadband penetration increases more rapidly in countries that adopt unbundling. To test this proposition, we introduce the indicator variable Unbundled in a regression that also controls for the time that DSL has been available in each country. The second regression specification in Table 2 provides the results of this test: as the table shows, the coefficient on Unbundled is negative and statistically significant.Footnote 21 This result indicates that unbundling has slowed the pace of broadband adoption in the sample countries, a result which directly contradicts the Berkman Study, but, as we note below, is consistent with prior empirical research.
b. Fixed Effects, Random Effects, and Generalized Least Squares
28. We next extend the above regressions to the estimation of fixed effects, random effects, and generalized least-squares models. A fixed effects regression essentially involves the inclusion of country-specific indicator variables in the model, and is a common practice in panel datasets. Random effects regressions take advantage of variation across countries without the inclusion of indicator variables for each country in an attempt to estimate the right hand side variables in a more efficient manner than fixed effects. Applying generalized least squares to panel data allows one to control for both heteroskedasticity (a cross-sectional data problem) and autocorrelation (a time-series problem).
|Fixed Effects||Random Effects||GLS|
|Unbundled||-3.7421 ***||-3.8||-3.8146 ***||-3.91||-1.2038 *||-1.93|
|DSLyears||2.5213 ***||8.62||3.0633 ***||19.24||2.2488 ***||13.54|
|pop dens||-0.1093||-0.68||0.0138 *||1.94||0.0009||0.08|
|Pops||-0.5699 ***||-2.89||-0.0137||-0.85||-0.0296 **||-2.34|
|Gdp||0.0009 ***||5.24||0.0004 ***||4.7||0.0007 ***||6.31|
|Constant||14.199||0.6||-11.351 ***||-4.64||-17.321 ***||-5.06|
|N = 168||N = 168||N = 168|
|R-squared (within) = 0.88||R-squared (within) = 0.86||Chi-Squared = 1367.86|
|R-squared (between) = 0||R-squared (between) = 0.33|
|R-Squared (overall) = 0.01||R-Squared (overall) = 0.61|
29. The results reported in Table 3 show that the Unbundled variable has a negative coefficient when any of these panel data techniques is used. In the case of fixed and random effects, the Unbundled variable is negative and statistically significant at 1 percent. In the GLS model controlling for both autocorrelationFootnote 22 and heteroskedasticity, Unbundled is again negative, and significant at 5.4 percent. Therefore, panel data analysis supports the least-squares results presented in Table 2 above – namely, that unbundling reduces broadband penetration.
30. It is also worth noting that in the fixed effects regression, the effect for the United States is both positive and statistically significant. That is, the fixed effect regression indicates that the United States has broadband penetration above what the model predicts based on the other control variables in the model, such as wealth and population density. Moreover, the United States fixed effect is statistically significant at 1 percent both in regressions that apply traditional standard errors and in regressions that use robust heteroskedastic-consistent standard errors. This finding indicates that a characteristic not specifically controlled for in the model is causing higher broadband penetration in the U.S. than the model itself predicts. Plausible candidates for such a characteristic include tastes (i.e. consumer preferences), the presence of robust infrastructure competition, or policy variables (other than unbundling) not captured in the model.
2. The Mixed Effects Regressions in the Berkman Study Fail a Hausman Specification Test
31. As noted above, in addition to least squares models, the Berkman Study estimated a mixed effects model,Footnote 23 which contains both fixed and random effects. In a mixed effects model, fixed effects are estimated directly and the random effects are calculated indirectly via an estimated variance-covariance matrix.Footnote 24 As a result, a mixed effects estimator attempts to take advantage of information contained in variation between countries, whereas the fixed effects estimator includes controls for each specific country. Both techniques allow one to estimate a regression coefficient on a variable such as GDP or GUyrs, but the two estimation techniques analyze the data differently. A benefit of the random effects model is that it has greater degrees of freedom, because the estimation of many indicator variables is unnecessary.Footnote 25 Random effects estimation, however, relies on an assumption that the random effect itself is uncorrelated with the right hand side variables in the regression, which may be unlikely.
32. The key factor in selecting between fixed effects and random effects models is whether the assumptions underlying the random effects approach holds. If the effect is uncorrelated with other right hand side variables, then random effects is consistent and efficient relative to fixed effects. If this assumption fails, however, random effects models are inconsistent, and the fixed effects approach is preferred.
33. The appropriate test for determining which approach is preferred is the Hausman Specification Test,Footnote 26 which we applied to the data used in the de Ridder and Berkman analyses. The test is constructed as follows. First, both models are estimated in accordance with the original de Ridder specification, with price on the right-hand side. Next, the coefficients and variance-covariance matrices are statistically compared between the two models. If significant differences exist, then a mixed (or random) effects approach is superior. Otherwise, the fixed effects regression is preferred. We found that the Berkman Study's mixed-effects model failed the Hausman Test: That is, contrary to the Berkman Study's contentions, the mixed effects model does not offer statistical efficiency above that of the fixed effects model. Moreover, when we estimated the fixed effects model using the de Ridder data, the positive effects of unbundling highlighted in the Berkman Study disappear.
34. To perform the Hausman Test, we first estimated a fixed effects model on the following variables:Footnote 27
- log of DSL price (lnpdsl)
- Urbanization (uurb)
- Facilities competition (Cfac)
- Years of unbundling (GUyrs)
- Indicator variable for 2005 (Dummy)
We found that the coefficient on GUyrs is statistically insignificant.
35. Next, we estimated both a random effects model and a mixed effects model using identical regressors to the fixed effects regression outlined above. The Hausman Test generated a Chi-Squared statistic of 3.33 when comparing random to fixed effects, and a statistic of 4.04 when comparing the mixed and fixed effects estimates. Neither of these statistics was sufficiently large to reject the null hypothesis that fixed effects is the more efficient estimator.Footnote 28 Consequently, the regression results presented in the Berkman Study are questionable not only because of the limited data sample and the exclusion of a relevant variable, but also because they result from use of an inappropriate regression technique.
3. The Berkman Study Makes Inappropriate Modifications to the Data
36. In several of its regression specifications, the Berkman Study changes the underlying data used by de Ridder. Specifically, as shown in Table 4.8 of the Berkman Study, the authors altered 17 of the 30 values of GUyrs from the values used in the original de Ridder analysis. Using the altered data, the Berkman Study finds that GUyrs "seems to have larger effects" and "is much more significant."Footnote 29 Given the nature of the data alterations, these results are hardly surprising.
37. As the Berkman Study notes, its data alterations result "in many more countries defined to have GUyrs = 0 than before."Footnote 30 More specifically, the countries for which GUyrs were set to zero were Belgium, United States, United Kingdom, Luxembourg, Germany, Ireland, Poland, and Greece. The average value of Qtot in 2005 for these eight countries was 11.22, significantly below the average of 14.14 for all 30 countries. (The lower average for the eight "zeroed-out" countries is driven primarily by Ireland, Poland, and Greece, which have particularly low broadband penetration.) Thus, the positive effect of GUyrs in the regression specifications utilizing the altered data is the result of the exclusion of three countries that had very low broadband penetration but had adopted unbundling. In addition, the United States is assigned zero years of unbundling in 2005 despite the fact that it began to require unbundling in 1996 and, for a time, even required line sharing. And Germany is also assigned a zero, despite the fact that ECTA reported that it had 2.5 million unbundled lines devoted to broadband out of a national total of 10.7 million broadband lines!Footnote 31 In other words, many of the regression results reported by the Berkman Study are the result of simply replacing the values for selected observations with data points that are more favorable to its conclusions. Obviously, the Commission should not base its policies on analyses of what amounts to manufactured data.
B. The Evidence from Other Quantitative Studies Does Not Support Unbundling
38. In addition to the de Ridder Study, there is a significant body of quantitative research into the effects of mandatory unbundling on broadband penetration. Despite its mandate to conduct a "review of existing literature and studies about broadband deployment and usage," the 231-page Berkman Study devotes only half a paragraph to reviewing this literature, briefly mentioning only five studies, two of which it concedes do not find unbundling to have a significant effect on penetration. Nevertheless, based on its highly selective literature review, the Berkman Study concludes that "unbundling had a positive and significant effect on levels of penetration."Footnote 32 In this section, we conduct a more complete review of the existing literature and show, contrary to the Berkman Study's conclusion, that the vast majority of studies find either no relationship or a negative relationship between unbundling and broadband penetration. We also note that most studies also find evidence that platform competition – i.e., the U.S. model, which is rejected by the Berkman Study – does have a positive and significant effect. In short, the quantitative evidence is directly contrary to the Berkman Study's policy recommendations.
1. Summary of Prior Empirical Studies
39. Table 4 summarizes the pre-existing empirical literature on broadband penetration, availability, and mandated unbundling. As the table shows, the bulk of the studies surveyed do not support the proposition that mandated unbundling, with its focus on intraplatform competition, increases broadband penetration or deployment. Most studies find the relationship to be either a negative or insignificant. The few studies reporting positive effects fail to provide persuasive evidence, owing to various biases and data deficiencies. On the other hand, the majority of the studies examining the role of inter-platform competition (all but one) find that competition across platforms leads to increased broadband penetration. Thus, the existing literature suggests that mandatory unbundling is either ineffective or counterproductive in increasing broadband penetration.
* Distaso, Lupi & Mantenti (2005) find that inter-platform competition is a substantial driver of broadband penetration, and that competition within the market for DSL services does not play a significant role. Somewhat paradoxically, the researchers also find that a decrease in the local loop unbundling price has a positive and significant effect on penetration. However, as noted above, their econometric analysis assumes that mandated access prices are exogenous, implying that this effect may reflect reverse causality. (back to Table 4, footnote reference *)
|Inter-Platform Competition Increases Penetration?|
|Studies Showing Negative and/or Insignificant Effects of Unbundling on Penetration|
|Aron & Burnstein (2003)||Cross-Section, 46 US States||N||Y|
|Bauer, Kim, & Wildman (2003)||Cross-Section, 30 OECD Countries||N||N/A|
|Denni & Gruber (2005)||Panel, 50 U.S. States||N||Y|
|Distaso, Lupi & Mantenti (2005)||Panel, 14 European Countries||N*||Y|
|Cava-Ferreruela & Albau-Munoz (2006)||Panel, 30 OECD Countries||N||Y|
|Wallsten (2006)||Panel, 30 OECD Countries||N||N/A|
|Waverman Meschi, Reillier, and Dasgupta (2007)||Panel, 12 European Countries||N||N/A|
|Boyle, Howell, and Zhang (2008)||Panel, 30 OECD Countries||N||N|
|Wallsten and Haulsaden (2009)||Panel, 27 European Countries||N||N/A|
|Studies Showing Positive Effects of Unbundling on Penetration|
|Garcia-Murillo (2005)||Cross-Section, 18 Countries||Y||N/A|
|Grosso (2006)||Panel, 30 OECD Countries||Y||Y|
|deRidder (2007)||Panel, 30 OECD Countries||Y||N/A|
40. In addition to the studies summarized in Table 4, there is a substantial empirical literature on the relationship between unbundling and investment. As we discuss below, the evidence from these studies strongly supports the hypothesis that unbundling regulation reduces infrastructure investment
2. Studies Finding Negative and/or Insignificant Effects of Unbundling on Penetration
41. As shown in Table 4, we identified nine studies that find either a negative or an insignificant effect of unbundling on broadband penetration.
42. First, using a cross-section of 46 U.S. states from the year 2000, Aron and Burnstein (2003) estimate the effect of intermodal competition on broadband penetration, relative to the effect of simple broadband availability, while controlling for various demand and cost drivers.Footnote 33 The authors measure head-to-head intermodal competition as the percentage of the population in a given state residing in cities where both cable modem and DSL are deployed; broadband availability is measured by the percentage of the population of a given state residing in cities where cable modem or DSL have been deployed. The demand controls include the percentage of households with internet access and an education metric; the cost controls include a metric for teledensity (measuring the number of switched access lines per mile), the average length of a local switched access line, and the regulated price of an unbundled network element.Footnote 34
43. The regression results reveal that, although broadband penetration is positively correlated with broadband availability, this effect disappears after controlling for intermodal competition. Thus, for a given level of demand and cost drivers, an increase in broadband availability in areas without intermodal competition does not stimulate additional adoption of broadband. Furthermore, the relationship between unbundled access prices and penetration is not statistically significant.Footnote 35
44. Analyzing a cross-section of 30 OECD countries from the year 2001, Bauer, Kim, and Wildman (2003) examine the effect of various policy variables on broadband penetration, including unbundling, cable-telco cross ownership, and government funding for broadband.Footnote 36 The researchers allocated the countries in their sample into one of three clusters, depending on the extent to which each of these policies was in place. The authors find that two factors, the population density and the "preparedness" of a given country (as captured by an index measuring attitudes towards advanced information technologies and the availability of complementary technologies, such as computers) are consistently significant in explaining broadband penetration. The analysis fails to detect any statistically significant relationship between membership in a given policy cluster and broadband penetration.Footnote 37
45. Denni and Gruber (2005)Footnote 38 analyze biannual state-level panel data from 1999 to 2004 in an effort to determine the extent to which intra- versus inter-platform competition affects broadband penetration, using a logistic model of technology diffusion. The dependent variable in their model is the ratio of broadband subscribers to the population of a given state. Inter-platform competition is measured with a modified version of the traditional Herfindahl index, using technologies' market shares instead of firms' market shares.Footnote 39 Intra-platform competition is measured somewhat differently, using a special case of the Herfindahl index that applies when all firms have symmetric shares.Footnote 40 Due to the potential endogeneity of these competition indices, the authors use lagged values of the endogenous variables as instruments.
46. The authors find that inter-platform completion plays a far more important role than intra-platform competition in determining the rate of diffusion of broadband infrastructure: Inter-platform competition is shown to have a substantial positive effect on diffusion in the long run, whereas intra-platform competition has only a small initial effect that rapidly dissipates. Furthermore, the authors find that mandatory unbundling actually inhibits broadband penetration. Specifically, the results indicate that the share of central offices upgraded for equal access has a negative and statistically significant effect on the rate of broadband diffusion.Footnote 41
47. Distaso, Lupi, and Manenti (2005) develop and estimate a model of oligopolistic competition between differentiated products to analyze the relative importance of intra-platform competition and inter-platform competition in driving broadband adoption.Footnote 42 A key implication of their theoretical model is that inter-platform competition (between alternative platform providers such as cable companies and fiber-optic providers) should be more effective than intra-platform competition (competition among incumbents and DSL providers using unbundled loops) in increasing broadband penetration.Footnote 43
48. When estimating their model, the authors employ a panel data set of 14 European countries running from the fourth quarter of 2000 through the second quarter of 2004. The dependent variable in each of their econometric specifications is broadband penetration, as measured by the percentage of all access lines (copper, cable, fiber, and satellite) that have been upgraded to transmit high-speed data.Footnote 44 The authors measure the degree of intra-platform competition as the level of concentration in the DSL market, using a standard Herfindahl index. The degree of inter-platform competition is modeled using a modified Herfindahl index, computed using technologies' market shares instead of firms' market shares, as in Denni and Gruber (2005). To control for potential endogeneity of the competition metrics, the two Herfindahl indices are instrumented using their lagged values.
49. Consistent with their theoretical predictions, the authors find that, although interplatform competition is a substantial driver of broadband adoption, competition within the market for DSL services – the type of intra-platform competition that mandatory unbundling of broadband is designed to stimulate – does not play a significant role.Footnote 45
50. Cava-Ferreruela and Alabau-Munoz (2006),Footnote 46 employing data from a panel of 30 OECD countries from 2000 to 2002, explore the determinants of wireline broadband coverage, (defined as the percentage of local loops that are DSL-enabled), as well as cable broadband coverage (defined as the percentage of homes passed by cable television networks).Footnote 47 The analysis indicates that gross national income per capita is the single most important determinant of both DSL coverage and cable coverage. The authors also find evidence that the share of DSL-enabled local loops is dramatically higher in countries where inter-platform competition is more robust, whether measured by the presence of cable infrastructures or by the number of competitors operating competing broadband platforms. In contrast, neither the existence of unbundling regulations nor the number of unbundled loops is found to be significantly correlated with DSL coverage.Footnote 48
51. Using a panel of 30 OECD countries from 1999-2003, Wallsten (2006) investigates the determinants of broadband subscribers per capita. Wallsten's regression analysis includes dummy variables for (1) various types of unbundling regulation (full unbundling, bitstream unbundling, and subloop unbundling); (2) collocation regulations; and, (3) access price regulation. The regressions also control for GDP per capita, and the number of fixed telephone lines per capita.Footnote 49
52. In his fully specified model, which includes time and country fixed effects, Wallsten finds no consistent evidence that full unbundling has a positive effect on penetration. The effect of full unbundling is positive and significant in some specifications, negative and significant in others, and statistically insignificant in his full specifications that include all covariates. With respect to bitstream unbundling, the estimated coefficients are positive, but statistically insignificant in the full specification. Furthermore, with respect to sub-loop unbundling, the effect on penetration is consistently negative and statistically significant. Wallsten does find evidence that on-site collocation requirements are positively and significantly correlated with penetration. However, he also finds a negative and statistically significant relationship between regulation of collocation charges and broadband penetration.Footnote 50
53. Waverman, Meschi, Reillier, and Dasgupta (2007) employ a panel of 12 European countries from 2002-2006 to estimate the effect of unbundling on broadband penetration.Footnote 51 The researchers' control variables include GDP, a lagged Herfindahl index (computed using technology platform shares) and the share of internet-ready cable plant.Footnote 52 Mandatory unbundling is captured with a variable measuring the price of a fully unbundled local loop as well as the number of years since unbundling was implemented. The coefficient on the unbundled price is also allowed to vary depending on whether bitstream access is available. The authors report that the number of years since adoption of unbundling has no statistically significant effect on penetration, and that the coefficients on the unbundled price variables are negative and statistically significant. This implies that that lower unbundling rates induced substitution away from alternative platforms and toward copper platforms, and that the net effect over the sample period was to steeply reduce the number of broadband consumers.Footnote 53
54. As noted above, Boyle, Howell, and Zhang (2008) analyze a panel of 30 OECD countries from 2002 – 2005 to estimate the determinants of broadband penetration under two sets of specifications.Footnote 54 In one set of regressions, unbundling is measured with a simple indicator variable equal to one if the country has implemented local loop unbundling in the year in question, and zero else. In a second set of specifications, unbundling is measured as the number of years since local loop unbundling was first implemented. The authors control for the retail price of DSL, the urban percentage of the population, the age of the population, and the number of non-DSL connections as a percentage of total broadband connections (to control for the presence of competing platforms).
55. The second set of regressions also includes a variable equal to the number of years for which broadband technology has been available in each country, to control for diffusion of broadband over time. (In the absence of this control variable, the unbundling variable employed in the second set of regressions might simply reflect spurious, diffusiondriven correlations). In all specifications, the authors find that the relationship between unbundling and penetration is statistically insignificant.Footnote 55 Finally, the authors do not find a statistically significant relationship between platform competition and penetration, although, unlike most researchers, they do not attempt to correct for endogeneity in the competition metric.
56. Finally, using a biannual panel of 27 European countries from 2002 to 2007, Wallsten and Haulsaden (2009) investigate the effects of unbundling on the penetration of nextgeneration broadband technology.Footnote 56 The authors estimate a regression in which the number of fiber broadband connections per capita is specified as a function of GDP per capita and the number of unbundled lines per capita (defined as the number of per-capita DLS connections offered over either unbundled loops or through bitstream unbundling). The authors also include country and time fixed effects. Estimating separate equations for incumbents and entrants, the authors find, in both cases, that the relationship between unbundling and fiber per capita is negative and statistically significant.Footnote 57
3. Studies Finding Positive Effects of Unbundling on Penetration
57. Garcia-Murillo (2005) analyzes a cross-section of countries from 2001 to investigate the factors determining broadband availability and penetration, using two types of specifications.Footnote 58 The first set of results is of limited interest in the current context, because the dependent variable is a simple, binary indicator of whether broadband has been deployed at all in a given country. Such an analysis is incapable of assessing the degree to which unbundling does (or does not) increase penetration or investment in countries where broadband has already been deployed.
58. The dependent variable employed by Garcia-Murillo in the second set of regressions, the percentage of internet users subscribing to broadband, is more relevant. Explanatory variables in these regressions include GDP per capita, the retail price of broadband, the number of broadband providers, the percentage of internet users, and an indicator for unbundling, which is found to be positive and statistically significant in one specification. However, the sample size is quite small (less than 20), and many of the econometric results are quite anomalous, which calls the overall reliability of the model into question. For example, GDP per capita is found to have no statistically significant effect on penetration, while the estimated relationship between broadband penetration and the retail price of broadband is positive and statistically significant.Footnote 59
59. Grosso (2006) analyzes a panel of 30 OECD countries from 2001-2004, and estimates an econometric model in which broadband penetration is a function of several variables, including a dummy variable for local loop unbundling.Footnote 60 Additional independent variables in the model include GDP per capita and lagged broadband penetration, as well as a variant of the Herfindahl index computed using technology (platform) shares to measure crossplatform competition. The econometric results indicate a negative and statistically significant relationship between the Herfindahl index and broadband penetration, indicating that crossplatform competition increases broadband penetration. In addition, the relationship between unbundling and penetration is positive and statistically significant. However, due in part to data limitations, several key explanatory variables are omitted from the analysis, including demand and cost drivers such as the price of broadband and population density.Footnote 61
60. Importantly, both Garcia-Murillo (2005) and Grosso (2006), along with nearly all empirical researchers, assume that unbundling policies are exogenous when estimating the effect of unbundling on broadband penetration. This ignores the fact that regulatory outcomes such as mandated access prices and the adoption of unbundling policy regimes are subject to political and administrative processes, which implies that they are endogenous.Footnote 62 Endogeneity bias is driven by the fact that regulators may respond to incumbents' infrastructure investments by providing easier access to entrants (by mandating unbundling and/or lowering access prices). Thus, unbundling may appear to drive increased investment and broadband penetration, when in fact the causation runs in the opposite direction. Only a handful of studies have attempted to assess the empirical magnitude of this source of bias. Those that have find substantial evidence of endogenous regulation.Footnote 63
61. Moreover, as we discussed above in the context of the de Ridder Study, few empirical studies control for the fact that the passage of time should have a substantial effect on penetration, due to technology diffusion. So-called general purpose technologies, such as broadband, tend to follow a well-known "S-shaped" curve as they mature.Footnote 64 While initially only early adopters find it worthwhile to purchase the technology, eventually the technology achieves mass-market acceptance and adoption accelerates. Finally, the rate of adoption begins to level off as saturation approaches, and the few remaining non-adopters tend to be those who place a relatively low value on the technology. As noted above, Boyle et. al. (2008) have shown that failure to control for diffusion over time can lead to spurious correlations between unbundling and penetration. Furthermore, this effect will be exacerbated by endogenous regulatory outcomes, to the extent that regulatory commitment problems become more acute with movements along the diffusion curve, as broadband adoption – and the infrastructure investments that make it possible – begin to accelerate.
4. Studies Relating Unbundling to Network Investment
62. There is also a large body of empirical work focusing on the relationship between mandatory unbundling and network investment, which has demonstrated that mandatory unbundling discourages investment by both incumbents and entrantsFootnote 65 and thus calls into question the "stepping stone" hypothesis,Footnote 66 which posits that mandatory unbundling can create a set of "rungs" on a "ladder of investment" allowing entrants to invest gradually in their own facilities. Indeed, the primary author of the ladder of investment thesis, Dr. Martin Cave, has acknowledged that it "remains no more than a hypothesis, as scientific testing of an imprecise proposition of this kind remains problematic."Footnote 67 The most recent authoritative review of the literature on unbundling and investment examines more than 20 empirical studies of access regulation and investment incentives, and concludes that while additional research could be useful, "most of the evidence shows that local loop unbundling…discourages both ILECs and CLECs from investing in networks."Footnote 68 The summary table from that study is reproduced as Exhibit E to this Declaration.
63. The Berkman Study does not express disagreement with the above results. Rather, it simply ignores the effect of policy on private network investment. Instead it focuses approvingly on public investment in broadband network infrastructure. It should be noted that many countries whose regulatory policies have failed to induce investment by incumbents or entrants are now turning to public investment to remedy their policy errors.Footnote 69 We doubt that U.S. authorities would welcome such an outcome.
- 6 John de Ridder, "Catching-up in Broadband – What Will it Take?" Organisation for Economic Co-Operation and Development (July 25, 2007) (hereafter, de Ridder Study). (back to footnote reference 6)
- 7 The United States has been a leader in network investment, in large part as a result of its rejection of overly broad unbundling policies, but the Berkman Study chooses to ignore this encouraging result, perhaps because it conflicts with its policy recommendations. See, e.g., Jeffrey A. Eisenach, "Broadband in the U.S. – Myths and Facts," in Australia's Broadband Future: Four Doors to Greater Competition (Melbourne: Committee for Economic Development of Australia, 2008) 48-59. (back to footnote reference 7)
- 8 Berkman Study at 75. (back to footnote reference 8)
- 9 For ease of exposition, we utilize the same system of notation as that used by both the de Ridder Study and the Berkman Study. (back to footnote reference 9)
- 10 de Ridder Study at 20. (back to footnote reference 10)
- 11 Glenn Boyle, Bronwyn Howell and Wei Zhang, "Catching up in Broadband: Does Local Loop Unbundling Really Lead to Material Increases in OECD Broadband Uptake?" New Zealand Institute for the Study of Competition and Regulation Working Paper (July 2008) (hereafter Boyle, Bronwyn and Zhang). (back to footnote reference 11)
- 12 The process by which new technologies are adopted has been studied by economists for many years. See, e.g., Zvi Griliches, "Hybrid Corn: An Exploration in the Economics of Technological Change," 25 Econometrica, Oct. 1957 (showing the standard technology diffusion curves in the case of the introduction of hybrid corn into farming). (back to footnote reference 12)
- 13 Boyle, Howell and Zhang at 7-9. Boyle, Howell and Zhang also corrected various other problems in the de Ridder Study, including de Ridder's misspecification of the GUyrs variable, which he allowed to take negative values in the years prior to the adoption of unbundling. (back to footnote reference 13)
- 14 Like Boyle, Howell and Zhang, the Berkman Study also eliminates negative values for GUyrs. (back to footnote reference 14)
- 15 The de Ridder Study performs least-squares regressions on a 30 country sample from 2005, and a pooled 54 observation sample by adding 24 data points from 2002; it also differenced the two data sets and performed regressions on the resulting 24-country sample. The regressions on the differenced data, however, did not include the GUyrs variable, as differencing it would result in a constant of 3 across all observations, which would result in the dropping of the variable from the regression. That is, one cannot estimate a regression parameter for a "variable" that does not vary. (back to footnote reference 15)
- 16 Berkman Study at 117. The Berkman Study presents regression results for approximately two dozen different model specifications, some of which simply replicate the results in the de Ridder Study, and the remainder of which estimate least-squares and mixed effects models using different regression specifications and different formulations of the GUyrs variable. (back to footnote reference 16)
- 17 Berkman Study at 115, 141. (back to footnote reference 17)
- 18 Our regression data are presented in Exhibit D, so that others can replicate our results and also perform original analysis using the data. We also note that more recent OECD reports have updated certain data series. To be clear, we have used broadband penetration data from Table 1G of the OECD's December 2008 Broadband Report. These data are available from the OECD Broadband Portal, at http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html. Prior series are available in the December reports for various years, which are available at http://www.oecd.org/statisticsdata/0,3381,en_2649_34225_1_119656_1_1_1,00.html. (back to footnote reference 18)
- 19 The exclusion of price in the equations is appropriate because price is an endogenous variable that is likely correlated with the disturbance term in the Qtot regression.. Under a linear two equation model with Qtot and Price as dependent variables, the Price equation would serve as the cost equation, with the right hand side variables that affect the build out and operation of the broadband network. Population density, for example, would be a natural cost shifter that would serve this purpose. Substituting for price in the Qtot equation then yields the reduced form equation, which excludes Price, but still controls for its affect. An alternative approach would be to instrument for Price using two-stage least squares. Additional data on price over time would be required to perform this correction. (back to footnote reference 19)
- 20 Our confidence in this conclusion is further strengthened by the fact that, if we replicate the Berkman Study's misspecification, we get the same result: When DSLyears is removed from our regression, GUyrs becomes positive and statistically significant at 1 percent. (back to footnote reference 20)
- 22 An AR1 process was estimated, yielding a constant autocorrelation coefficient of 0.99 for all countries. There were 28 separate estimated covariances for the heteroskedasticity correction. Relaxing the heteroskedasticity correction yields similar results. The population variable, however, is insignificant, and the p-value for the Unbundled variable is 0.08. (back to footnote reference 22)
- 23 Berkman Study at 139. (back to footnote reference 23)
- 24 For a more complete explanation of mixed effects models, see Jose C. Pinheiro and Douglas M. Bates, Mixed-Effects Models in S and S-PLUS (Springer 2000). (back to footnote reference 24)
- 25 See, e.g., William H. Greene, Econometric Analysis 287-88 (Prentice Hall 5th ed., 2003) (introducing the fixed effects estimator) (hereafter Greene). (back to footnote reference 25)
- 26 Greene at 301-302 (discussing the Hausman Specification Test for fixed versus random effects models). (back to footnote reference 26)
- 27 We include the variable names, as listed in both the de Ridder Study and the Berkman Study for convenience. (back to footnote reference 27)
- 28 This result was also robust to the use of the Berkman Study's modified GUyrs variable, in which they altered the values in 2005 for 17 of 30 countries (we discuss this in more detail below). In particular, substituting that formulation of GUyrs still results in a failure of both random and mixed effects relative to fixed effects. Moreover, the GUyrs variable in the fixed effects model is not statistically significant. (back to footnote reference 28)
- 29 Berkman Study at 146. (back to footnote reference 29)
- 30 Id. at 145. (back to footnote reference 30)
- 31 ECTA, Broadband Scorecard, 4th quarter, 2005. (back to footnote reference 31)
- 32 Berkman Study at 115. (back to footnote reference 32)
- 33 Debra Aron & David Burnstein, "Broadband Adoption in the United States: An Empirical Analysis," Working Paper, LECG Ltd. (March 2003). (back to footnote reference 33)
- 34 Id. at 11-12. (back to footnote reference 34)
- 35 Id. at Table 3. (back to footnote reference 35)
- 36 Johannes Bauer, Jung Kim, & Steven Wildman, "Broadband Uptake in OECD Countries: Policy Lessons and Unexplained Patterns," Paper prepared for the European Regional Conference of the International Telecommunications Society (August 2003), at 14. (back to footnote reference 36)
- 37 Id. at 17-18. (back to footnote reference 37)
- 38 38Mario Denni & Harald Gruber, "The Diffusion Of Broadband Telecommunications: The Role Of Competition," Paper presented at the International Communications Society Conference (2005). (back to footnote reference 38)
- 39 Id. at 10. For example, if half of all broadband connections were served by DSL, and the other half by cable, then the index would be computed as 0.52 + 0.52 = 0.5 (back to footnote reference 39)
- 40 Id. at 11. For example, if there are three DSL providers, the competition index for that market is equal to 1/3. (back to footnote reference 40)
- 41 Id. at 13. (back to footnote reference 41)
- 42 Walter Distaso, Paolo Lupi, & Fabio Manenti, "Platform Competition And Broadband Uptake: Theory And Empirical Evidence From The European Union," Paper presented at the joint PURC - University of Florida and LBS 2005 telecommunications conference (April 2005). (back to footnote reference 42)
- 43 Id. Corollary 1, at 12. (back to footnote reference 43)
- 44 Id. at 13. (back to footnote reference 44)
- 45 The authors do find evidence that lower unbundling prices are significantly associated with higher levels of broadband penetration. However, their analysis assumes that the regulated price of a local loop is determined exogenously. Id. at 16. As discussed in more detail below, to the extent that opportunistic regulators choose to lower access prices in response to increased levels of broadband investments by incumbents, this assumption is invalid, and results in a spurious negative correlation between penetration and unbundling prices. (back to footnote reference 45)
- 46 Inmaculada Cava-Ferreruela & Antonio Alabau-Munoz, "Broadband Policy Assessment: A Cross- National Empirical Analysis," Telecommunications Policy 30 (2006). (back to footnote reference 46)
- 47 The authors are unable to distinguish between cable networks that have or have not been upgraded to provide broadband service. Id. at 449. (back to footnote reference 47)
- 48 Id. at 455. (back to footnote reference 48)
- 49 Scott Wallsten, "Broadband and Unbundling Regulations in OECD Countries," AEI-Brookings Joint Center for Regulatory Studies, Working Paper 06-16 (June 2006). (back to footnote reference 49)
- 50 Id. at Table 2. (back to footnote reference 50)
- 51 Leonard Waverman, Meloria Meschi, Benoit Reillier, & Kalyan Dasgupta, "Access Regulation and Infrastructure Investment in the Telecommunications Sector: An Empirical Investigation," Working Paper, LECG Ltd. (Sept. 2007). (back to footnote reference 51)
- 52 Unlike other studies, the authors do not use the lagged Hirfindhal index to instrument for the contemporaneous index, and instead estimate an equation in which the lagged index enters directly as an independent variable. As a consequence, the authors do not directly estimate the role of inter-platform competition. (back to footnote reference 52)
- 53 Id. at Table 4. (back to footnote reference 53)
- 54 Glenn Boyle, Bronwyn Howell, & Wei Zhang, "Catching Up in Broadband Regressions: Does Local Loop Unbundling Really Lead to Material Increases in OECD Broadband Uptake?," New Zealand Institute For The Study Of Competition And Regulation (July 2008). (back to footnote reference 54)
- 55 Id. at Table 2. (back to footnote reference 55)
- 56 Scott Wallsten and Stephanie Hausladen, "Net Neutrality, Unbundling, and their Effects on International Investment in Next-Generation Networks," Review of Network Economics 8(1) (March 2009). (back to footnote reference 56)
- 57 As a practical matter, the architecture of the next-generation networks that have deployed in the United States would make unbundling either extremely costly or flatly infeasible. See Robert Crandall, Jeffrey Eisenach, & Robert Litan, "Vertical Separation of Telecommunications Networks: Evidence from Five Countries," Federal Communications Law Journal (forthcoming). (back to footnote reference 57)
- 58 Martha Garcia-Murillo, "International Broadband Deployment: The Impact of Unbundling," Communications & Strategies 57 (2005). (back to footnote reference 58)
- 59 Id. at Table 8. (back to footnote reference 59)
- 60 Marcelo Grosso, "Determinants of Broadband Penetration in OECD Nations," Working Paper, Regulatory Development Branch, Australian Competition and Consumer Commission (2006). (back to footnote reference 60)
- 61 Id. at Table 1. (back to footnote reference 61)
- 62 See, e.g., J. Gregory Sidak and Daniel F. Spulber, "Deregulatory Takings and Breach of the Regulatory Contract," New York University Law Review 71(4) (1996), discussing circumstances under which mandatory unbundling can lead to "deregulatory takings" by opportunistic regulatory agencies; see also David Newbery, Privatization, Restructuring, and Regulation of Network Utilities (MIT Press 2002); see also Jeffrey A. Eisenach and Hal J. Singer, "Irrational Expectations: Can a Regulator Credibly Commit to Removing an Unbundling Obligation?" AEI-Brookings Joint Center Working Paper No. 07-28 (December 2007), available at: http://ssrn.com/abstract=106516. (back to footnote reference 62)
- 63 See, e.g., Robert Crandall, Competition and Chaos (Brookings Institution Press 2005), at 71, providing evidence that regulators lower access prices in response to investments by incumbents; see also Tomaso Duso & Lars-Hendrik Röller, "Endogenous Deregulation: Evidence from OECD Countries," Economic Letters 81(1) (2003), showing that political indicators explain the degree of deregulation in the mobile telecommunications industry; see also Michal Grajek and Lars-Hendrik Röller, "Regulation and Investment in Network Industries: Evidence from European Telecoms," ESMT Working Paper No. 09-004 (2009). Using political and geographic variables as instruments, as well as lagged endogenous variables, Grajek and Röller provide empirical evidence that access regulation is determined endogenously, and that failure to control for this bias distorts the statistical relationship between regulation and telecommunications investment decisions. (back to footnote reference 63)
- 64 See, e.g., Elhanan Helpman, ed., General Purpose Technologies and Economic Growth (MIT Press 1998). (back to footnote reference 64)
- 65 See, e.g., Robert W. Crandall, Allan T. Ingraham and Hal J. Singer, "Do Unbundling Policies Discourage CLEC Facilities-Based Investment?" Topics in Economic Analysis and Policy 4 (2004). The authors use cross-state and within-state variation in the price of constructing local phone lines relative to leasing unbundled loops to identify the sensitivity of CLEC investment in local lines to the LLU rate. They show that mandatory unbundling encourages a CLEC to delay facilities-based investment by altering its relative net present value of investment between time periods. See also Jeffrey A. Eisenach, Paul Lowengrub and James C. Miller III, "An Event Analysis Study of the Economic Implications of the FCC's UNE Decision: Backdrop For Current Network Sharing Proposals," Commlaw Conspectus 17;1 (2008). An even larger body of research has examined competition and liberalization in regulated industries more generally. See Mark Armstrong and David Sappington, "Regulation, Competition, and Liberalization," Journal of Economic Literature 44:2 (2006) (back to footnote reference 65)
- 66 Martin Cave, "Encouraging Infrastructure via the Ladder of Investment," Telecommunications Policy 30 (2006). (back to footnote reference 66)
- 67 Martin Cave, "Applying the Ladder of Investment in Australia," (December 17, 2007), at 1. (back to footnote reference 67)
- 68 Carlo Cambini and Yanyan Jiang, "Broadband Investment and Regulation: A Literature Review," Telecommunications Policy (2009) (in press), at 11-14. (Although the article's title might suggest an exclusive focus on broadband, in reality the authors provide an extensive survey of the literature examining the relationship between regulation and investment in telecommunications infrastructure generally). The International Telecommunications Union (ITU) echoed this finding in a recent report, noting that "the reason that there was so little investment in (local loop) infrastructure by new entrants [in the United States] was that they could not deploy new infrastructure at the regulated local service prices, which were too low and acted as a disincentive to investment. " See International Telecommunications Union, Trends in Regulatory Reform 2008 (November 2008), at 52. Note also that Armstrong and Sappington, supra, at 360, observe that "providing entrants with long-term subsidized access to the incumbent's infrastructure…generally [is] not recommended." (back to footnote reference 68)
- 69 Two of the authors of this Declaration, Crandall and Eisenach, discuss this phenomenon in a separate paper. See Robert W. Crandall, Jeffrey Eisenach, and Robert Litan. (2009), "Vertical Separation of Telecommunications Networks: Evidence from Five Countries," Federal Communications Law Journal (forthcoming) (available at http://ssrn.com/abstract=1471960) (hereafter Crandall, Eisenach and Litan). (back to footnote reference 69)
IV. The Berkman Study's Conclusions are not Supported by Qualitative Analysis
64. To advance its case for an expanded network unbundling regime in the United States, the Berkman Study attempts to buttress its quantitative analysis with extensive discussions of unbundling policies in various OECD countries. While it does not suggest that every country that has pursued unbundling has achieved success through such a policy, its general conclusion is that unbundling has generally had favorable effects. As we explain below, like the quantitative evidence, the qualitative evidence does not support the Berkman Study's conclusions.
A. The Alleged Successes
65. The Berkman Study concludes that network unbundling has generated competition, lower prices, and greater broadband penetration in several Nordic countries, the Netherlands, France, the United Kingdom, and Japan. A careful examination of available data for each of these countries suggests that the Berkman Study's conclusions are either incorrect or, at best, vastly overstated.
1. The Nordic Countries and Netherlands
66. A cursory look at the OECD broadband penetration rankings reveals that a large share of the best performers are cold, northern countries – Denmark, Norway, Sweden, Finland, Netherlands, and Iceland occupy the top six positions. Countries with more moderate climates, such as Italy, Spain, New Zealand, and Australia are far down the OECD list. Equally important, despite substantial differences in policy across these Nordic countries, all are converging to a very similar level of broadband penetration as Figure 1 shows.Footnote 70 This might suggest that cultural, weather, or other demand factors explain a large share of the variance in penetration, but the Berkman Study chooses to focus on network access policies. Its discussion of even the "best" performers is not persuasive.
Source: OECD [Description of figure 1]
67. In discussing the Nordic countries, the Berkman Study is somewhat equivocal about the effects of network unbundling. With respect to Denmark, for example, it simply concludes that
Competition developed both within each technological platform, and across platforms; to some extent benefiting from unbundling when it was available, and to some extent benefiting from relatively low levels of investment necessary to upgrade an existing infrastructure like cable….Footnote 71
The report does not point out to the reader that cable modems exceed the number of unbundled and shared lines in Denmark,Footnote 72 or that cable modem competition in Denmark was highly developed before the recent growth of unbundled lines to deliver DSL.Footnote 73 Thus, intra-platform competition appears to have followed inter-platform competition in Denmark, and the available empirical evidence suggests that such inter-platform competition is far more important than intra-platform competition.
68. In Sweden, platform competition has also been responsible for more broadband subscriptions than has network unbundling. As of the first quarter of 2009, cable connections and non-incumbent telco fiber to the home, provided largely over government fiber networks, accounted for 1.2 million connections while DSL over unbundled and shared loops for only 600,000 connections, and the number of lines delivered over unbundled/shared lines is actually declining.Footnote 74 Much of Sweden's "success' derives from its government-provided fiber, not from network unbundling. Nevertheless, the Berkman Study relies on the views of the Swedish regulator:
Convinced by the perceived success of unbundling in fostering competition, investment, and innovation in its broadband markets, concerned about managing the transition to next generation networks, and possibly smarting from the long fought battle over bitstream access, the Swedish regulator PTS concluded that it would best manage the transition to next generation connectivity by imposing functional separation on its incumbent.Footnote 75
69. This is a curious conclusion, given that the incumbent has not been among the leaders in the EU in network investment and only has 12 percent of the country's fiber connections. The transition to next generation networks in Sweden has been over networks built largely by municipal governments, not by the incumbent operator.
70. The Berkman Study's dismissal of the effect of unbundling in Finland is similarly curious. It asserts that "Finland was the first Nordic country to introduce unbundling, in 1996. Unbundling seems to have had little or no effect in the Finnish market, however."Footnote 76 But according to latest ECTA data, broadband delivered over unbundled and shared loops accounted for 25 percent of all broadband lines while they accounted for only 18 percent in Sweden, a country that the Berkman Study argues is a "perceived success of unbundling." Notably, Finland – an early adopter of network unbundling – has not deployed any fiber to the home according to the ECTA data.
71. Finally, in the case of Netherlands, the Berkman Study suggests that network unbundling plays a critical role in allowing facilities-based entrants, the cable companies, to address customers in areas where they lack facilities. But unbundled and shared lines accounted for only about 680,000 lines in March 2009 while broadband over cable accounted for 2.2 million lines according to the latest ECTA data. And despite the Berkman Study's glowing description of the incumbent's (KPN's) decision to offer unbundled fiber to its competitors, the latest ECTA data show no such unbundling. Perhaps more important, the ECTA data show that entrants have 140,000 subscribers over their own fiber, but KPN has none, and the latest data from IDATE show that KPN has yet to even deploy FTTH.Footnote 77
72. The Berkman Study makes much of differences between France's and Germany's unbundling policies. It paints the French policy since 2002 in very rosy terms, pointing out that an EC infringement action forced the French regulator to mandate lower rates for unbundled and shared loops. Subsequently, in 2003 new entrants expanded rapidly. By contrast, the German regulator is described as unwilling to enforce an unbundling regime that works.Footnote 78 These differences in policy lead the Berkman Study to opine that: "Despite having roughly similar GDP per capita (Germany slightly higher) and population concentration (France slightly higher), the two countries present quite different trajectories."Footnote 79 What trajectories is it referencing? A quick look at Figure 2 shows that the trajectory of broadband penetration since 2003 is very similar in the two countries. Why worry about differences in unbundling policy, given this obvious fact? Figure 2 shows that Germany actually experienced slightly greater broadband growth after 2003, a result that is largely due to the greater growth of inter-platform competition from cable television. Germany now has about 2 million cable broadband subscribers – more than twice the number in France.Footnote 80
73. Moreover, both France and Germany remain far below the Nordic countries and Netherlands in terms of broadband penetration. Neither has yet to deploy much fiber to the subscriber. France had only 40,000 fiber loops in the first quarter of this year, out of a total of more than 18 million broadband connections; Germany had none. By contrast, Verizon alone had 3.3 million FTTH broadband connections at the end of the third quarter of 2009. Thus, while unbundling has created competition among suppliers of DSL in France, it has not led entrants or incumbents to invest much in fiber to the subscriber. Despite the Berkman Study's assertion that France Telecom has responded with "higher investment," its capital spending as a share of revenues remains mired in the very lowest echelons of capital spending among EU-15 incumbents.Footnote 81
3. The United Kingdom
74. Two of the authors of this declaration were co-authors of an earlier study of network separation policies that is being published this year in the Federal Communications Law Journal. In that article, we reviewed in great depth the results of Ofcom's new (2005) unbundling and functional separation policy. We concluded that under this policy the rate of growth of the UK's broadband subscribers had declined relative to the growth in the overall EU-15.
75. Specifically, we showed that:
A comparison of UK broadband growth with growth in the EU-15 yields a similarly bleak conclusion about the effects of functional separation. According to ECTA data, between September 2002 and September 2005, when the new Ofcom policy went into effect, UK broadband lines increased at an annual rate of 76 percent while EU-15 broadband lines rose at a rate of 54 percent. Thus, prior to the change in policy, the rate of increase in UK broadband lines was 41 percent greater than the rate of increase in the EU-15. In the three years following the implementation of the new Ofcom policy, UK broadband line growth fell to 21 percent, and EU-15 broadband line growth fell to 23 percent.Footnote 82 …Thus, the new policy has been associated with a severe decline in UK growth relative to the growth in the EU-15. Indeed, the UK broadband growth rate is now less than the average rate for the entire EU-15, and broadband penetration in the UK has fallen relative to EU-15 penetration in the three years that the policy has been in place.Footnote 83
76. The recent ECTA data do not alter this conclusion; UK broadband subscriptions have grown more slowly than EU-15 subscriptions over the 3.25 years since the new unbundling regime went into effect in the third quarter of 2005. Nor do the ECTA data show any fiber deployment in the United Kingdom through the first quarter of this year. The policy has simply not worked to accelerate the growth of broadband or encourage deployment of a Next Generation Network.
77. The authors of the Berkman Study would have us believe that Japan's policy of network unbundling has been an unqualified success, although it admits that facilities-based competition is driving fiber deployment. It claims that the Japanese regulator's decision to require fiber unbundling has not deterred fiber investment: "…the overall level of investment in the fiber market questions the argument that open access deters investment."Footnote 84 However, we can find no evidence that NTT has actually delivered a significant number – or, for that matter, any number – of unbundled fiber connections. Fiber "unbundling" has not deterred NTT's investment in FTTH for a simple reason: fiber unbundling has not been implemented in a meaningful manner.
78. Contrary to the impression created by the Berkman Study, Softbank (Yahoo!BB) states in its most recent annual report that it is losing broadband DSL customers steadily, and it reports no customers over NTT's fiber plant. Indeed, the Softbank 2009 annual report downplays any discussion of the decline in its wireline broadband business, simply stating that it is reducing capital expenditures in its fixed-wire operations: "…the segment's profitability and cash flow are showing marked increases. This reflects a lower depreciation from the end of major capital expenditures, combined with a structural transformation toward businesses."Footnote 85 It is not investing in fiber to the home or any other form of residential connections, but rather shifting its attention to the business market.
79. In short, the unbundling era in Japan appears to be fading rapidly. DSL subscriptions have been declining for three years. Fiber connections, supplied by NTT and a host of other platform-based competitors now substantially exceed DSL connections. The principal competitors of NTT in delivering broadband over fiber optics are the country's power companies, not the companies who have used NTT's copper loops to deliver DSL service.Footnote 86 At this point, these power companies are deploying fiber without any apparent concern that they will have to unbundle their fiber networks. Platform competition, not network unbundling, is driving fiber deployment in Japan.
B. The Doubtful Cases or Outright Regulatory "Failures"
80. The Berkman Study reviews the regulatory developments in several OECD countries, citing their failure to embrace network unbundling, or the failure to implement it assertively, as a regulatory mistake. These countries include South Korea, Germany (already discussed), Italy, New Zealand, and Canada.
1. South Korea
81. No matter how the Berkman Study tries to characterize it, the South Korean broadband policy is a triumph for platform-based competition. The Study argues that:
The South Korean experience is more ambiguous on access, pointing more toward heavy government investment. Both (Japan and South Korea) suggest that a strong, professional regulator, exercising effective power over incumbent providers, can foster significant market development and competition.Footnote 87
82. But this "strong" regulation essentially amounted to subsidizing capital investments by the cable and electric utility companies, but discouraging these companies from offering retail broadband Internet services over their own platforms. As a result, new entrants sprang up offering broadband services over their own platforms and over the cable companies' and electric companies' networks.
83. As the Berkman Study correctly observes, this platform competition led to rapid growth in Korean broadband before any unbundling requirements were imposed on the incumbent telco, KT, in 2002. By that time, Korea had by far the highest broadband penetration in the OECD –21.8 percent versus an average of 4.8 percent in the OECD. Since 2002, Korea's penetration has grown very slowly, expanding by less than 50 percent to 32 percent in December 2008 while the average OECD country has nearly quintupled its penetration to 22.4 percent. Four Nordic countries and the Netherlands have surpassed Korea since its new unbundling requirement took effect in 2002.Footnote 88 Thus, unbundling had nothing to do with South Korea's spectacular early broadband growth.
84. The Italian regulator required network unbundling in 2001 and then required functional separation of Telecom Italia in 2006-08. As of March 2009, entrants using unbundled or shared lines accounted for 27 percent of all lines. The principal problem in Italy had been the absence of platform competition since it had virtually no cable television. Platform competition did emerge in the form of Fastweb'sFootnote 89 fiber deployment in large cities, but this deployment has now been halted. Fastweb has chosen to grow only through leasing Telecom Italia's loops now that functional separation of TI assures them of rapid access to TI's loops as TI's own retail division.Footnote 90 Thus, contrary to the Berkman Study's assertion that Fastweb will continue to deploy fiber and share it with TI, Fastweb has chosen to abandon further fiber investment because of recently improved access to TI's unbundled loops. Fastweb's recent decision is evidence of the adverse effect of mandated network sharing on investment in new technologies. But Italy's relatively low broadband penetration probably has little to do with its regulatory policy. Rather, it is likely a reflection of low personal computer penetration in the country.Footnote 91
3. New Zealand
85. New Zealand had decided not to mandate network unbundling in 2003, but the Communications Ministry changed course in 2006. The government imposed network unbundling and structural separation of Telecom New Zealand in December 2006, undoubtedly because broadband penetration was relatively low, and there was very little platform competition. Since that time, New Zealand's broadband penetration has grown more rapidly than the OECD average, but New Zealand's penetration is still below the OECD average. Moreover, there is no sign of fiber to the premises deployment by Telecom New Zealand or its competitors.
86. Canada's broadband policy has been similar to that in the United States. Canada has very strong platform competition from cable, a fact that propelled it to second place in OECD broadband penetration in 2001. As in the United States, cable broadband connections have exceeded DSL connections from the very beginning. Thus, inter-platform competition was extremely strong in Canada from the outset. Canada has had network unbundling regulations in place since 1997, but few entrants have succeeded in using unbundled loops for delivering broadband or other telecommunications services to residential customers perhaps because of the strength of inter-platform competition in most regional Canadian markets. Most of the local entrants using unbundled loops were unable to compete in this environment and either failed or were acquired. The Berkman Study is incorrect, however, when it asserts that "[t]here are no smaller entrants of note."Footnote 92 MTS-Allstream has been using Bell Canada's and Telus's local loops for years, but with little apparent effect on broadband penetration because its principal focus has been the business market, not the residential market. Thus, while unbundled loops have been available in Canada for more than a decade, they have not been used successfully by entrants to compete in the mass market for broadband services.
87. The Berkman Study has failed to unearth any systematic anecdotal information that mandated network unbundling has increased broadband penetration in OECD countries. This is hardly surprising given the preponderance of empirical studies which conclude that unbundling has limited or no effect. Its narrative does often suggest, however, that platform competition is important in driving competition in countries such as South Korea, the Nordic countries, Canada, and the Netherlands. This too is consistent with the published empirical evidence.
88. The Berkman Study's focus on unbundling of copper loops to promote intraplatform competition is misplaced. The issue for U.S. regulators today is not how to increase competition in DSL services, but rather how to encourage the development of new, faster networks. Even if unbundling copper loops had been a mild success in promoting DSL, this result would not suggest that a similar policy would be successful in promoting the development of new fiber-based networks. Indeed, we have shown that the empirical literature on network investment and access regulation shows that mandated access regulation reduces the incentive to invest in new network technologies.
89. The Berkman Study is critical of the United States and Canadian policies for not being sufficiently aggressive in promoting network sharing and is correspondingly approving of a general European regulatory bias towards encouraging such sharing. Unfortunately for the Europeans, their more aggressive regulatory policy has resulted in far less deployment of fiber in the European Union than in North America as demonstrated by Figures 3 and 4.
Sources: Canadian Households from www40.statcan.ca/l01/cst01/famil55a-eng.htm; U.S. Households, from https://www.census.gov/quickfacts/; European Households, from http://w3.unece.org/pxweb/Dialog/varval.asp?ma=08_GEFHPrivHouse_r&ti=Private+households+by+Household+Type%2C+Measurement%2C+Country+and+Year&path=../DATABASE/Stat/30-GE/02-Families_households/&lang=1; FTTH subscribers Europe, from ECTA; FTTH subscribers North America, from "North American FTTH/FTTP Status," Fiber-to-the-Home Council: North America (2009) at 4. [Description of figure 3]
Sources: Household data, same as Figure 3; FTTH Homes Passed North America, from "North American FTTH/FTTP Status," Fiber-to-the-Home Council: North America (2009) at 2; FTTH Homes Passed Europe 2006 from "FTTH Situation in Europe," Idate Consulting & Research (February 2007 at 20; FTTH Homes Passed Europe 2008 from "FTTH European Panorama," Idate Consulting & Research (December 2008) at 10. [Description of figure 4]
- 70 We show the growth in broadband penetration on a logarithmic scale in this and the next figure to illustrate the rate of growth of broadband over time in these two countries. (back to footnote reference 70)
- 71 Berkman Study at 91. (back to footnote reference 71)
- 72 ECTA Broadband Scorecard, 2009, 1st Quarter. (back to footnote reference 72)
- 73 ECTA Broadband Scorecards, various editions. (back to footnote reference 73)
- 74 ECTA Broadband Scorecard, 2009 1st Quarter, and earlier editions. (back to footnote reference 74)
- 75 Berkman Study at 92. (back to footnote reference 75)
- 76 Berkman Study at 93. (back to footnote reference 76)
- 77 ECTA, Broadband Scorecard, 1st quarter 2009; IDATE, FTTH European Panorama (February 11, 2009) at 10. (back to footnote reference 77)
- 78 It is also important to recognize that neither country has had aggressive competition from cable systems until recently. Cable's share of broadband is about 5 percent in France and 9 percent in Germany according to the most recent ECTA data. (back to footnote reference 78)
- 79 Berkman Study at 95. (back to footnote reference 79)
- 80 ECTA, Broadband Scorecard, 1st quarter 2009. (back to footnote reference 80)
- 81 Company annual reports for 2008. Among the 12 incumbents for which we have data for 2008, only Belgacom has lower capital spending as a share of revenue (13.1% versus 13.2% for FT). By contrast, DT's 2008 CapEx was 14.1% of revenues. (back to footnote reference 81)
- 82 The most recent ECTA data are for the first quarter of 2009. (back to footnote reference 82)
- 83 Crandall, Eisenach and Litan at 21-22. (back to footnote reference 83)
- 84 Berkman Study at 85. (back to footnote reference 84)
- 85 Softbank, Annual Report 2009, p. 41. (back to footnote reference 85)
- 86 The Ministry of Internal Affairs and Communications (MIC) reported in March 2009 that the power companies, including the company bought by KDDI, had nearly 16 percent of fiber connections, NTT had approximately 74 percent, and USEN, the largest cable company, had 4 percent. " See MIC, Disclosure of Quarterly Data Concerning Competition Review in the Telecommunications Business Field," March 25, 2009. (back to footnote reference 86)
- 87 Berkman Study at 83 (emphasis added). (back to footnote reference 87)
- 88 OECD Broadband Statistics, various years. (back to footnote reference 88)
- 89 Fastweb is an Italian company now owned by Swisscom. (back to footnote reference 89)
- 90 Meeting of Robert Crandall with Fastweb, Milan, Italy, September 23, 2009. (back to footnote reference 90)
- 91 Italy ranked 13th among EU-15 countries in household personal computer penetration in 2005. Fewer than 50 percent of Italian households had a personal computer. By contrast, nearly 80 percent of households in Nordic countries have a PC. See OECD, 2007 Communications Outlook at 134. (back to footnote reference 91)
- 92 Berkman Study at 110. (back to footnote reference 92)
V. The Berkman Study's Analysis is Flawed in Other Significant Respects
90. In addition to the errors noted above, the Berkman Study relies on erroneous analyses or makes misleading assertions on a number of fronts. In the sections below, we focus on four of these: (A) its over-reliance on bivariate analysis and "scatter plots" to support its conclusions; (B) its mischaracterization of the evolution of U.S. broadband policy; (C) its mischaracterization of the policy consensus abroad, especially in the European Union.
A. The Berkman Study Relies Almost Exclusively on Bivariate Analysis
91. Bivariate analysis – the comparison of two sets of data to determine the extent to which one variable is correlated with another – can be a useful means of describing the relationships between variables, and as a starting point for more rigorous multivariate (i.e., regression) analysis. It cannot, however, take the place of multivariate analysis, and can almost never support valid findings of causality. Yet, the Berkman Study relies heavily on such analysis to support its conclusions, presenting scatter plot after scatter plot, depicting everything from the relationship between broadband penetration and entrepreneurship (Figure 2.3) to the relationship between average download speeds and median download speeds (Figure 3.191-i). Identifying and critiquing each and every instance in which the Berkman Study relies inappropriately (explicitly or implicitly) on such comparisons to support its conclusions would require far more space than we can justify here.
92. We do, however, point out one particularly egregious (and significant) example of how bivariate analysis can be used to present misleading information: Figure 4.2 of the Berkman Study (reproduced below) presents a scatter plot which shows the results of one of the two quantitative analyses contained in the study, a survey of broadband price and speed offerings by 59 companies in OECD countries. The Berkman Study relies heavily on this analysis for its conclusions, stating that the figure
shows that prices and speeds at the highest tiers of service follow a clear pattern. The highest prices for the lowest speeds are overwhelmingly offered by firms in the United States and Canada, all of which inhabit markets structured around "inter-modal" competition – that is, competition between one incumbent owning a telephone system, and one incumbent owning a cable system.Footnote 93
Moreover, subsequent to the study's release, author Yochai Benkler (in the course of responding to various criticisms of the study) posted a blog entry in which he stated that Figure 4.2 shows results that "are consistent with the open access hypothesis, and inconsistent with the inter-modal competition hypothesis," and that it supports "the basic storyline," that "Where a regulator rolled up its sleeves and really implemented open access, new and innovative entrants used the opportunity to invest in new service models and new electronics, introduced bundled voice over IP, or IPTV, or nomadic access."Footnote 94
Source: Berkman Center analysis of OECD Broadband Statistics and Global Comms 3.0
Note: Includes highest speed offerings from US players with minimum 2 million subscribers [Description of figure 5]
93. While the Berkman Study's Figure 4.2 may appear visually to support the Berkman Study's "basic story line," the figure hardly constitutes "analysis" and provides virtually no basis for any conclusions about the relationship between unbundling and investment. For example:
- Most obviously, the figure fails to account for other variables that likely affect the cost (and hence price) of broadband services, such as loop lengths, urbanicity, dwelling type (multi-dwelling units vs. single-family homes), and topology;
- By the same token, the figure fails to account for policy variables other than unbundling (e.g., government subsidies) which likely affect both costs and prices;
- The data presented shows only each carrier's "highest speed offering," which may or may not be utilized by a significant number of consumers;Footnote 95
- The figure compares data points for firms (such as Verizon and Qwest) that serve large, low-density areas with firms (such as Fastweb) that serve only dense urban areas.
94. Thus, even leaving aside issues of measurement (e.g, whether advertised speeds faithfully reflect delivered speeds), the "analysis" in the Berkman Study's Figure 4.2 is in fact nothing more than a description of the relationship between two sets of variables, from which no conclusions about causality (let alone policy) can appropriately be drawn.
B. The Berkman Study Mischaracterizes the Evolution of U.S. Broadband Policy
95. The Berkman Study is being offered at a time when the Commission and the National Telecommunications and Information Administration (NTIA) are developing a broadband plan. At the same time, the FCC is considering new rules governing "network neutrality" on broadband networks. We are not aware, however, that the FCC is planning to revisit the rules that it has established to implement the network access requirements in the 1996 Telecommunications Act. Yet, the Berkman Study is openly critical of the evolution of these rules, seeing them as a reflection of incumbent "resistance" and "skeptical" courts.Footnote 96 In the course of its criticism, the Berkman Study mischaracterizes the evolution of U.S. policy towards unbundling.
96. At one point, the United States had the most ambitious and aggressive unbundling policy among the OECD countries. In implementing the 1996 Act, the FCC decided to require incumbents to unbundle every network element, not just the "local loop" that connects the subscriber to the carrier's wire center. Indeed, the incumbents were required to offer all of these elements as an "unbundled network element platform" or UNE-P at regulated rates based on forward-looking costs. No other country required such a wholesale offering. In addition, the FCC required the incumbents to share their subscriber loops with entrants seeking to offer only broadband services through the higher frequencies on the loop. The incumbents would be left with the lower frequencies to offer traditional telephone service.
97. This aggressive unbundling policy was contested in the federal courts as inconsistent with the requirements of the 1996 Act. The DC Circuit Court of Appeals and the Supreme Court forced the FCC to revise its unbundling rules in several ways. First, the Supreme Court overturned the FCC's approach to unbundling as overly broad because the Commission had failed to consider whether an entrant could self-provision the various unbundled elements or acquire them from a third party and because the Commission had considered any increase in costs a source of "impairment" that, in turn, required access to unbundled elements at regulated prices.Footnote 97
98. Second, the DC Circuit reversed the FCC's rules on line sharing in United States Telecommunications Association v. FCC, 290 F.3d 415 (2002) because the Commission had failed to evaluate the effects of inter-platform competition. The FCC complied in 2003 by dropping the line-sharing requirement. However, entrants would still be able to lease the entire local loop –a requirement that remains in place today.
99. Third, the DC Circuit was also skeptical of the FCC's ruling that virtually every network element, including mass-market switching, had to be offered by incumbents to competitors at regulated rates. The Court instructed the Commission to examine whether the unbundling of switching was required in every geographic market given the investment in switching by many new competitors in many urban markets. When the FCC failed to drop the requirement for unbundling switching services in its revised rules in 2003, the DC Circuit once again instructed the FCC to reconsider in a strongly-worded opinion. (United States Telecommunications Association v. FCC, 259 F3d. 572 (2003)) As a result, in 2004 the FCC was forced to eliminate unbundling of mass-market switching and, therefore, the UNE-P. However, competitors could still lease, among other network elements, the copper loop at regulated rates if they wished to offer broadband and any other telecommunications services.
100. Thus, the Berkman Study is incorrect when it asserts that:
By the fall of 2001 a new FCC had changed course. Between that fall and the spring of 2002, the FCC passed a series of decisions that abandoned the effort to implement open access, and shifted the focus of American policy from the idea of regulated competition within each wire – competition over the copper plant of the telephone company and over the coaxial cable of the cable company – to competition between the owners of the two wires.Footnote 98
To the contrary, neither the FCC nor state regulators in the U.S. "abandoned" local loop unbundling in 2002 or at any time since then. Competitors may still lease the local loop at regulated rates. However, they do not have the right to share the loop at even lower regulated rates.
101. It is true, however, that as a result of these changes in U.S. policy, competitors' use of incumbents' unbundled network elements began to decline. A large share of this decline was due to the ending of the UNE-P caused by the FCC's decision to drop network switching from the list of required mandatory unbundled elements. These lines were not being used to offer broadband services, but rather to compete in the provision of traditional telephone services. Many entrants – including Covad, NorthPoint, Rhythms, and Net 2000 – had tried to offer DSL services over unbundled incumbent loops and even shared incumbent loops and had failed. Indeed, given the aggressive competition between cable companies and incumbent telephone companies in offering broadband, and despite the best efforts of state and federal regulators to create a favorable regulatory environment and low rates for unbundled elements, no U.S. broadband entrant that has relied on unbundled loops has been able to avoid bankruptcy.Footnote 99
102. The Berkman Study also presents an incomplete (and, as a result, misleading) discussion of the U.S. decision not to impose open access policies on cable broadband providers, implying that the FCC failed to actively consider imposing such rules on cable operators. As the Berkman Study tells it,
…around 1999-2000, as AT&T purchased major cable systems, a new question emerged – whether cable should be subject to the same kind of open access regulation. In several instances cable franchising authorities tried to do this; but the power to impose open access on cable operators was seen as residing in the FCC, not local authorities.Footnote 100
103. In fact, the FCC actively considered imposing open access as a merger condition at the time of the AT&T-TCI merger. After considering the matter, its Chairman at the time, William Kennard, explained the grounds for his decision to forego such a vast expansion of open access regulation onto the cable pipe. As he said in a September 1999 speech,
It is easy to say that government should write a regulation, to say that as a broad statement of principle that a cable operator shall not discriminate against unaffiliated Internet service providers on the cable platform. It is quite another thing to write that rule, to make it real and then to enforce it…. So, if we have the hope of facilitating a market-based solution here, we should do it, because the alternative is to go to the telephone world, a world that we are trying to deregulate and just pick up this whole morass of regulation and dump it wholesale on the cable pipe. That is not good for America.Footnote 101
C. The Berkman Study Mischaracterizes the Policy Consensus Abroad
104. The Berkman Study also goes out of its way to characterize foreign views of unbundling, seeking to present a picture of virtual unanimity among foreign regulators about unbundling's virtues, with the U.S. (along with a few others) as "recalcitrant" outliers.
105. While it is undeniably true that unbundling has played a larger role in some other countries than in the U.S., the reason for this result is not – as the Berkman Study suggests – because their regulators agree that intramodal competition (supported by unbundling) is generally superior to intermodal competition. To the contrary, there is a wide and deep consensus that conditions among and within countries vary widely, and that intermodal competition is superior wherever it is possible.
106. Consider, for example, the June 2009 report of the European Regulators Group (ERG),Footnote 102 which is cited numerous times by the Berkman Study for the proposition that foreign regulators support the unbundling of broadband networks. In fact, the ERG Report emphasizes that economic conditions vary from country to country, that the "economic viability of roll-out strategies is largely influenced by specific local characteristics,"Footnote 103 and that "[o]verall, the country cases support the result … that there are significant differences between and within countries, which reflect differences in the economics of NGA networks, resulting from e.g. different densities or loop length but also from the relevance of competitive pressure from cable networks."Footnote 104
107. For example, the ERG Report finds with respect to Korea and Japan that "Due to the high population density and greater proportion of aerial cables… it is relatively cheap to deploy fibre in these countries."Footnote 105 The ERG also notes approvingly that "Outside of Europe, AT&T is rolling out a FttCab network and Verizon offers FttH in certain US cities. This is in part because of the poor quality of existing DSL services (due to long copper lines) and because of strong competition from cable operators."Footnote 106
108. While the ERG Report acknowledges that various factors affect broadband penetration and investment, and that these factors vary across countries, it is unambiguous in its support for infrastructure competition, finding that "Competition, in particular infrastructure competition, promotes investment as can be seen in countries with high cable penetration. Regulation should set the framework in such a way that it promotes competition."Footnote 107 Thus, "Where it is practically and economically feasible to promote infrastructure based competition, this should be the aim of national regulatory authorities (NRAs)."Footnote 108
109. The Berkman Study does not stop, however, at mischaracterizing foreign regulators' opinions: It also mischaracterizes their actions. For example, at page 76, the Berkman Study lists as a core finding that "Access rules are now being applied to the next generation transition, particularly to fiber," and cites the ERG Report in support of this conclusion. In fact, however, the ERG Report states plainly that among European countries, "Unbundled fibre access is only available on regulated terms in the Netherlands."Footnote 109
Moreover, as noted above, the most recent ECTA and IDATE data show that the incumbent in the Netherlands (KPN) currently has no residential fiber loops to unbundle!
- 93 Berkman Study at 12. (back to footnote reference 93)
- 94 See http://cyber.law.harvard.edu/node/5751. (back to footnote reference 94)
- 95 The Berkman Study acknowledges that the U.S. has among the lowest "entry level" prices, and that this fact should lead to higher levels of penetration. It never reconciles this fact with its contention that penetration in the U.S. is low as a result of the absence of unbundling, which could only increase penetration to the extent it reduces prices. (back to footnote reference 95)
- 96 Berkman Study at 78. The Berkman Study's highly opinionated characterization of U.S. policy during the first decade of the 21st century is consistent with the previously expressed views of its principal investigator, Dr. Yochai Benkler, who (for example) has previously characterized the FCC's decision to classify cable modem service as an "information service" (a decision upheld by the Supreme Court in the Brand X case) as a "legally admissible policy error." See, Yochai Benkler, The Wealth of Networks (2006) at 400 (available at www.benkler.org/Benkler_Wealth_Of_Networks.pdf). (back to footnote reference 96)
- 97 AT&T Corp. v. Iowa Utilities Board, 525 U.S. 366 (1999). ("The FCC cannot, consistent with the statute, blind itself to the availability of elements outside the incumbent's network. In addition, the FCC's assumption that any increase in cost (or decrease in quality) imposed by denial of a network element renders access to that element 'necessary,' and causes the failure to provide that element to 'impair' the entrant's ability to furnish its desired services, is simply not in accord with the ordinary and fair meaning of those terms.") (back to footnote reference 97)
- 98 Berkman Study at 82. (See also at 77: "Some form of open access regulation has at this point been adopted by every country in the OECD except the United States, Mexico, and the Slovak Republic (which has been in the process of passing unbundling requirements for over two years, but has not yet done so)." The Berkman Study then goes on to note that broadband penetration in both Mexico and the Slovak Republic is relatively low, apparently implying that there is a connection between low broadband penetration and the absence of unbundling in these countries. Yet, the Berkman Study provides no evidence whatsoever for this conclusion; to the contrary, its regression analysis of the determinants of broadband penetration suggests that penetration in these countries is explained by their relatively low incomes and population densities.) (back to footnote reference 98)
- 99 For a discussion of the causes of the CLECs' demise, see Larry F. Darby, Jeffrey A. Eisenach and Joseph S. Kraemer, "The CLEC Experiment: Anatomy of a Meltdown," Progress on Point 9.23, The Progress & Freedom Foundation (September 2002); see also Jeffrey A. Eisenach and Janusz R. Mrozek, "Do UNE Rates Reflect Underlying Costs?" CapAnalysis LLC (December 2003). (back to footnote reference 99)
- 100 Berkman Study at 82. (back to footnote reference 100)
- 101 William E. Kennard, "Consumer Choice Through Competition: Remarks Before the National Association of Telecommunications Officers and Advisors, 19th Annual Conference," (September 17, 1999) (available at http://www.fcc.gov/Speeches/Kennard/spwek931.html). (back to footnote reference 101)
- 102 European Regulators Group, Report on Next Generation Access - Economic Analysis and Regulatory Principles (June 2009) (hereafter ERG Report). (back to footnote reference 102)
- 103 ERG Report at 4. (back to footnote reference 103)
- 104 ERG Report at 5. (back to footnote reference 104)
- 105 ERG Report at 7. (back to footnote reference 105)
- 106 ERG Report at 6. (back to footnote reference 106)
- 107 ERG Report at 16. (back to footnote reference 107)
- 108 ERG Report at 1. (back to footnote reference 108)
- 109 ERG Report at 13. (back to footnote reference 109)
110. In our opinion, for the reasons explained above, the Berkman Study does not constitute a sound foundation for decisionmaking by the Commission. The study is neither rigorous nor impartial, but instead presents a highly opinionated, and in many respects demonstrably incorrect, portrayal of the evidence as it relates to the effects of public policy on broadband penetration and other key indicators of performance in the broadband market. In particular, as we have demonstrated above, the weight of the evidence demonstrates that mandatory unbundling has reduced broadband penetration and deterred investment in broadband telecommunications infrastructure, and that mandatory unbundling of Next Generation infrastructures would have similar effects.
Robert W. Crandall
Everett M. Ehrlich
Jeffrey A. Eisenach
November 16, 2009
Exhibit A: Crandall Qualifications
Robert W. Crandall
Non-Resident Senior Fellow, The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC 20036
Phone Nos: 202-244-0056
Fields of Specialization:
Industrial Organization, Antitrust Policy, Regulation
- Adjunct Professor, School of Public Affairs, University of Maryland, 1987 - 1993
- Deputy Director, Council on Wage and Price Stability, 1977 - 1978
- Acting Director, Council on Wage and Price Stability, 1977
- Adjunct Associate Professor of Economics, George Washington University, 1975 - 1977
- Assistant Director, Council on Wage and Price Stability, 1975 - 1977
- Associate Professor of Economics, M.I.T., 1972 - 1974
- Assistant Professor of Economics, M.I.T., 1966 - 1972
- Johnson Research Fellow, The Brookings Institution, 1965 - 1966
- Instructor, Northwestern University, 1964 - 1965
- Consultant to Environmental Protection Agency, Antitrust Division Federal Trade Commission, Treasury Department, various years
- Ph.D., Economics, Northwestern University, 1968
- M.A., Economics, Northwestern University, 1965
- A.B., Economics, University of Cincinnati, 1962
- American Economic Association
- Board of Directors, Baltimore Life Insurance Company
- Competition and Chaos: U.S. Telecommunications since the 1996 Act. Washington, DC: The Brookings Institution, 2005.
- Broadband: Should We Regulate High-Speed Internet Access? (edited with James Alleman), AEI Brookings Joint Center for Regulatory Studies, 2002.
- Telecommunications Liberalization on Two Sides of the Atlantic. (with Martin Cave) AEI Brookings Joint Center for Regulatory Studies, 2001.
- Who Pays for Universal Service? When Telephone Subsidies Become Transparent. (with Leonard Waverman) Washington: The Brookings Institution, 2000.
- Cable TV: Regulation or Competition? (with Harold Furchtgott-Roth), Washington: The Brookings Institution, 1996.
- Talk is Cheap: The Promise of Regulatory Reform in North American Telecommunications. (with Leonard Waverman) Washington: The Brookings Institution, 1996.
- The Extra Mile: Rethinking Energy Policy for Automotive Transportation. (with Pietro S. Nivola) Washington, DC: The Brookings Institution/Twentieth Century Fund, 1995.
- Manufacturing on the Move. Washington, DC: The Brookings Institution, 1993.
- After the Breakup: The U.S. Telecommunications Industry in a More Competitive Era. Washington, DC: The Brookings Institution, 1991.
- Changing the Rules: Technological Change, International Competition and Regulation in Communications. (Edited with Kenneth Flamm), Washington, DC: The Brookings Institution, 1989.
- Up from the Ashes: The Rise of the Steel Minimill in the United States. (With Donald F. Barnett), Washington, DC: The Brookings Institution, 1986.
- Regulating the Automobile. (With Howard K. Gruenspecht, Theodore E. Keeler, and Lester B. Lave), Washington, DC: The Brookings Institution, 1986.
- Controlling Industrial Pollution: The Economics and Politics of Clean Air. Washington, DC: The Brookings Institution, 1983.
- The Scientific Basis of Health and Safety Regulation. (Ed. with Lester Lave), Washington, DC: The Brookings Institution, 1981.
- The U.S. Steel Industry in Recurrent Crisis. Washington, DC: The Brookings Institution, 1981.
Articles, Reports, and Contributions to Edited Volumes:
- "Vertical Separation of Telecommunications Networks: Evidence from Five Countries," (with Jeffrey Eisenach and Robert Litan), SSRN Abstract # 1471960, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1471960.
- "Letting Go? The Federal Communications Commission in the Era of Deregulation," Review of Network Economics, Vol. 7, Issue 4, 2008.
- "Extending Deregulation: Make the U.S. Economy More Efficient," in Opportunity08:Independent Ideas for America's Next President. Brookings, 2007.
- "Is Mandatory Unbundling the Key to Increasing Broadband Penetration in Mexico? A Survey of International Evidence," 2007, (with J. Gregory Sidak), available at SSRN: http://ssrn.com/abstract=996065
- "The Adverse Economic Effects of Spectrum Set-Asides" (with Allan T. Ingraham), Canadian Journal of Law and Technology, November 2007, pp. 131-40.
- "Does Video Delivered Over a Telephone Network Require a Cable Franchise?" ( with Hal J. Singer and J. Gregory Sidak) Federal Communications Law Journal, Vol. 59 (2007).
- "The Failure of Competitive Entry into Fixed-Line Telecommunications: Who Is at Fault?"(with Leonard Waverman) Journal of Competition Law and Economics, Vol 2, 2006, pp. 113- 148.
- "Broadband Communications," in Handbook of Telecommunications Economics, Vol II, Sumit K. Majumdar, Ingo Vogelsang, and Matin E. Cave (eds.), Elsevier, 2005.
- "The Remedy for the 'Bottleneck Monopoly' in Telecom: Isolate It, Share It, or Ignore It?" University of Chicago Law Review, Vol. 72, No.1, Winter 2005.
- "Are Vertically Integrated DSL Providers Squeezing Unaffiliated ISPs (and Should We Care)?," (with Hal J. Singer), in Access Pricing: Theory, Practice and Empirical Evidence, Justus Haucap and Ralf Dewenter eds., Elsevier Press, 2005.
- "Should Regulators Continue to Breathe Life into Unaffiliated ISPs?"(with Hal J. Singer), Regulation, 2005.
- "Bandwidth for the People" (with Robert Hahn, Robert Litan, and Scott Wallsten), Policy Review, No. 127, October-November 2004.
- "Internet Telephones: Hanging Up on Regulation, " with Robert W. Hahn, Robert E. Litan, and Scott Wallsten," The Milken Institute Review, 2004-III, Vol. 6 No. 3, pp. 30-34.
- "Foreign Investment Restrictions as Industrial Policy: The Case of Canadian Telecommunications," (with Hal J. Singer), Canadian Journal of Law and Technology, Vol 3, No. 1, March 2004, pp. 19-32.
- "Do Unbundling Policies Discourage CLEC Facilities-Based Investment?", (with Allan T. Ingraham, and Hal J. Singer) Topics in Economic Analysis & Policy, 2004, Vol. 4: No. 1, Article 1.
- "Should Regulators Set Rates to Terminate Calls on Mobile Networks?"(with J. Gregory Sidak) Yale Journal on Regulation, 2004.
- "Injunctive Relief in Sherman Act Monopolization Cases," (with Kenneth G. Elzinga) Research in Law and Economics, Vol. 21, Elsevier, 2004, pp. 277-34.
- "Telecommunications Policy and the Evolution of the Internet," in The New Economy in East Asia and the Pacific, Peter Drysdale, ed., RoutledgeCourzon, London, 2004, pp. 60-87.
- "Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence," (with Clifford Winston) Journal of Economic Perspectives, Fall 2003, pp. 3-26
- "The $500 Billion Opportunity: The Potential Economic Benefit of Widespread Diffusion of Broadband Internet Access" (with Charles L. Jackson), in Allan L. Shampine (ed) Down to the Wire: Studies in the Diffusion and Regulation of Telecommunications Technologies, Nova Science Press, Haupaugge, NY, 2003
- "An End to Regulation?" in Competition and Regulation in Utility Markets, Colin Robinson, ed., Edward Elgar, London, 2003.
- "Is Structural Separation of Incumbent Local Exchange Carriers Necessary for Competition?" (with J. Gregory Sidak), Yale Journal on Regulation, Vol. 19, No.2, 2002, pp. 335-411.
- "The Empirical Case Against Asymmetric Regulation of Broadband," (with J. Gregory Sidak and Hal J. Singer) Berkeley Technology Law Journal, 2002
- "Universal Service, Equal Access, and the Digital Divide," in Bridging the Digital Divide. Hitachi Public Affairs Forum, California Council on Science and Technology, May 2001, pp. 29-38.
- "Telecommunications Policy Reform in the United States and Canada," (with Thomas W. Hazlett) in Martin Cave and Robert W. Crandall (eds.), Telecommunications Liberalization on Two Sides of the Atlantic, AEI/Brookings Joint Center for Regulatory Studies, 2001.
- "The Failure of Structural Remedies in Sherman Act Monopolization Cases," Oregon Law Review, Spring 2001, pp. 109-98.
- "Sports Rights and the Broadcast Industry" (with Martin Cave), The Economic Journal, Vol. 111, February 2001, pp. F4-F26.
- "Bridging the Digital Divide – Naturally," Brookings Review, Winter 2001, pp. 38-43.
- "Local and Long Distance Competition: Replacing Regulation with Competition," in Randolph J. May and Jeffrey A. Eisenach (eds.), Communications Deregulation and FCC Reform: What Comes Next? Washington: The Progress and Freedom Foundation, 2000.
- "Competition in U.S. Telecommunications Services: Effects of the 1996 Legislation," (with Jerry Hausman) in Sam Peltzman and Clifford Winston (eds.), Deregulation of Network Industries, Washington: The Brookings Institution, 2000.
- "Competition in Telecom: The U.S. and Canadian Paths," (with Leonard Waverman) in Dale Orr and Thomas R. Wilson (eds.), The Electronic Village: Policy Issues in Telecommunications. Toronto: C.D. Howe Institute, 1998.
- "New Zealand Spectrum Policy: A Model for the United States?" The Journal of Law and Economics, October 1998, pp. 821-839.
- "The Impact of Telecommunications Deregulation on Midsize Business," in Gary D. Libecap (ed.), Advances in the Study of Entrepreneurship, Innovation, and Economic Growth: Legal, Regulatory, and Policy Changes that Affect Entrepreneurial Midsize Firms. Stamford, CT: JAI Press, 1998, pp. 23- 42.
- "Telephone Subsidies, Income Redistribution, and Economic Welfare," in Roger G. Noll and Monroe E. Price, A Communications Cornucopia: Markle Foundation Essays on Information Policy. Washington: The Brookings Institution, 1998.
- "Electric Restructuring and Consumer Interests: Lessons from Other Industries," The Electricity Journal, Volume 11, No. 1, January/February 1998.
- "Is it Time to Eliminate Telephone Regulation?" in Donald L. Alexander (ed.), Telecommunications Policy: Have Regulators Dialed the Wrong Number?, Westport, CT: Praeger, 1997, pp. 17-30.
- "Competition and Regulation in the U.S. Video Market," Telecommunications Policy, Vol. 21, No. 7, 1997, pp. 649-660.
- "Are We Deregulating Telephone Services? Think Again." Brookings Policy Brief, Number 13, March 1997
- "Are Telecommunications Facilities 'Infrastructure?' If They Are, So What? Regional Science and Urban Economics, 27 (1997), pp. 161-79.
- Economic Deregulation and Customer Choice: Lessons for the Electric Utility Industry. (with Jerry Ellig), Center for Market Processes, George Mason University, 1997.
- "Telecom Mergers and Joint Ventures in an Era of Liberalization," in Gary Clyde Hufbauer and Erika Wada(eds.) Unfinished Business: Telecommunications After the Uruguay Round. Washington, DC: Institute for International Economics, 1997, pp. 107-24.
- "From Competitiveness to Competition: The Threat of Minimills to Large National Steel Companies," Resources Policy, Vol. 22, Nos. 1/2, March/June 1996, pp. 107-118.
- "Clearing the Air: EPA's Self-Assessment of Clean-Air Policy," (with Frederick H. Rueter and Wilbur A. Steger), Regulation, 1996, Number 4, pp. 35-46.
- "Phone Rates in a Deregulated Market,"The Brookings Review, Summer 1996.
- "Competition and Regulatory Policies for Interactive Broadband Networks," (with J. Greory Sidak), Southern California Law Review, July 1995.
- "The Unregulated Infobahn," (with J. Gregory Sidak), Jobs & Capital, Vol. 4, Summer 1995, pp. 28-32.
- "Managing the Transition to Deregulation in Telecommunications," in Steven Globerman, W.T. Stanbury, and Thomas A. Wilson (eds.), The Future of Telecommunications Policy in Canada. University of British Columbia and the University of Toronto, 1995.
- "Productivity Growth in the Telephone Industry Since 1984," (with Jonathan Galst) in Patrick Harker (ed.), The Service Productivity and Quality Challenge, Dodrecht: Kluwer Academic Publishers, 1995, Chapter 14.
- "Cable Television: Reinventing Regulation," The Brookings Review, Winter 1994, pp. 12-15.
- "Explaining Regulatory Policy" (with Clifford Winston), Brookings Papers on Economic Activity, Microeconomics, 1994, pp. 1-31.
- "Pricing Issues in Telecommunications," Maine Policy Review, Vol. 3, No. 1, May 1994.
- "Regulation and the "Rights" Revolution: Can (Should) We Rescue the New Deal?" Critical Review, Vol. 7 Nos. 2-3, 1993, pp. 193-204.
- "Comment: Transactions Prices," Price Measurement and Their Uses, (Murray F. Foss, Marilyn E. Manser, and Allan H. Young, eds.), University of Chicago Press, 1993.
- "Pollution Controls" in David R. Henderson (ed.), The Fortune Encyclopedia of Economics, New York: Warner Books, 1993.
- "Relaxing the Regulatory Stranglehold on Communications," Regulation, Summer 1992, pp. 26- 35.
- "Regulating Communications: Creating Monopoly While Protecting Us From It," The Brookings Review, Summer 1992, Volume 10, No. 3, pp. 34-39.
- "Policy Watch: Corporate Average Fuel Economy Standards," Journal of Economic Perspectives, Spring 1992, pp. 171-80.
- "Why Is the Cost of Environmental Regulation So High?" Center for the Study of American Business. St. Louis: Washington University, Policy Study No. 110, February 1992.
- "Liberalization Without Deregulation: Telecommunications Policy During the 1980s," Contemporary Policy Issues, October 1991.
- "Halfway Home: U.S. Telecommunications (De)Regulation in the 1970s and 1980s," in Jack High (ed.), Regulation: Economic Theory and History. Ann Arbor: The University of Michigan Press, 1991.
- "Efficiency and Productivity," in Barry G. Cole (ed.), After the Breakup: Assessing the New Post-AT&T Divestiture Era. New York: Columbia University Press, 1991.
- "The Politics of Energy: New Fuel Economy Standards?" (with John D. Graham), The American Enterprise, March/April 1991.
- "The Clean Air Act at Twenty," Journal of Regulation and Social Costs, September 1990.
- "Fragmentation of the Telephone Network" in Paula Newberg (ed.), New Directions in Telecommunications Policy. Durham, NC: Duke University Press, 1989.
- "The Effect of Fuel Economy Standards on Automobile Safety," (with John D. Graham), Journal of Law and Economics, April 1989.
- "Surprises from Telephone Deregulation and the AT&T Divestiture," American Economic Review, May 1988, pp. 323-327.
- "The Regional Shift of U.S. Economic Activity" in Robert E. Litan, et al., American Living Standards, Washington, DC: The Brookings Institution, 1988.
- "Deregulation and Divestiture in the U.S. Telecommunications Sector" in Economic Deregulation: Promise and Performance. Proceedings of the 1987 Donald S. MacNaughton Symposium, Syracuse University, 1988.
- "Whatever Happened to Deregulation?" in David Boaz (ed.), Assessing the Reagan Years. Washington, DC: The CATO Institute, 1988.
- "Regulatory Reform: Are We Ready for the Next Phase?" in The Brookings Review, The Brookings Institution, Winter 1988/89.
- "Telecommunications Policy in the Reagan Era," Regulation, Washington, DC: American Enterprise Institute, 1988, Number 3, pp. 18-19.
- "A Sectoral Perspective: Steel" in Robert M. Stern, et.al. (eds.), Perspectives on a U.S.-Canadian Free Trade Agreement, Washington, DC: The Brookings Institution, 1987.
- "The Effects of U.S. Trade Protection for Autos and Steel," Brookings Papers on Economic Activity, 1987:2, The Brookings Institution.
- "Has the AT&T Breakup Raised Telephone Rates?" in The Brookings Review, Winter 1987.
- "Public Policy and the Private Auto," (with Theodore E. Keeler) in Gordon, et.al. (eds.), Energy: Markets and Regulation, Essays in Honor of M.A. Adelman. Cambridge, MA: MIT Press, 1986
- "Materials Economics, Policy, and Management: An Overview," with Michael B. Bever, in Encyclopedia of Materials Science and Engineering, Pergamon Press, 1986.
- "Metals Industries: International Structure," in Encyclopedia of Materials Science and Engineering, Pergamon Press, 1986.
- "The Steel Industry in Transition," Materials and Society, Pergamon Journals Ltd., Vol. 10, No. 2, 1986.
- "The Public Interest in Metals Policy," in David A. Gulley and Paul Duby (eds.), The Changing World Metals Industries. New York: Gordon and Breach, 1986.
- "Economic Rents as a Barrier to Deregulation," The CATO Journal, Spring/Summer 1986.
- "The Transformation of U.S. Manufacturing," Industrial Relations, Spring 1986. "Investment and Productivity Growth in the Steel Industry: Some Implications for Industrial Policy," in Walter H. Goldberg, Ailing Steel: The Transoceanic Quarrel, Gower, 1986.
- "The EC-US Steel Trade Crisis," in Loukas Tsoukalis (ed.), Europe, America, and the World Economy, Oxford: Basil Blackwell, 1986.
- "Why Should We Regulate Fuel Economy at All?" in The Brookings Review, Spring 1985.
- "An Acid Test for Congress," Regulation, September/December 1984.
- "Import Quotas and the Automobile Industry: The Costs of Protectionism," The Brookings Review, Summer 1984.
- "Automobile Safety Regulation and Offsetting Behavior: Some New Empirical Estimates," (with John D. Graham), American Economic Review, Papers and Proceedings, May 1984.
- "The Political Economy of Clean Air: Practical Constraints on White House Review," in V. Kerry Smith, Environmental Policy Under Reagan's Executive Order: The Role of Benefit-Cost Analysis, University of North Carolina Press, 1984.
- "The Marketplace: Economic Implications of Divestiture," (with Bruce M. Owen), in Harry M. Shooshan III, Discounting Bell: The Impact of the AT&T Divestiture, Pergamon Press, 1984.
- "Environmental Policy in the Reagan Administration," (with Paul R. Portney), in Paul R. Portney (ed.), Natural Resources and the Environment: The Reagan Approach, The Urban Institute and Resources for the Future, 1984.
- "The Emerging Competition in the U.S. Telecommunications Market" in New Opportunities for Entrepreneurship, The Kiel Institute, 1984.
- "Deregulation: The U.S. Experience," Zeitschrift fur die gesamte Staatswissenshaft, October 1983, pp. 419 - 434.
- Review of John Zysman and Laura Tyson, American Industry in International Competition, Science, Vol. 222, October 21, 1983.
- "Air Pollution, Environmentalists, and Coal Lobby," in Roger G. Noll and Bruce M. Owen (eds.), The Political Economy of Deregulation, American Enterprise Institute, 1983.
- "The Use of Environmental Policy to Reduce Economic Growth in the Sun Belt: The Role of Electric-Utility Rates" in Michael A. Crew (ed.), Regulatory Reform and Public Utilities, Lexington Books, 1982.
- "The Cost of Automobile Safety and Emissions Regulation to the Consumer: Some Preliminary Results," (with Theodore E. Keeler and Lester B. Lave), American Economic Review, May 1982.
- "Environmental Policy," Regulation, March/April 1982.
- "Has Reagan Dropped the Ball?" in Regulation, November/December 1981.
- "The Use of Cost-Benefit Analysis in Regulatory Decision-Making," Annals New York Academy of Sciences, 1981.
- "The Deregulation of Cable Television," (with Stanley M. Besen), Law and Contemporary Problems, Duke University School of Law, Vol. 44, No. 1, Winter 1981.
- "The Impossibility of Finding a Mechanism to Ration Health Care Resources Efficiently" in A New Approach to the Economics of Health Care, Mancur Olson (ed.), American Enterprise Institute for Public Policy Research, 1981.
- "Pollution Controls and Productivity Growth in Basic Industries" in Productivity Measurement in Regulated Industries, Academic Press, 1981.
- "Where is the Public Interest in Broadcasting Regulation?" in Regulation and the Future Economic Environment-Air to Ground, Charles F. Phillips, Jr. (ed.), December 1980.
- "The Environmental Protection Agency," (On Saving the Kingdom: Advice for the President- Elect), Regulation, November/December 1980.
- "Steel Imports: Dumping or Competition?" in Regulation, July/August 1980.
- "Regulation and Productivity Growth" in Proceedings: Conference on Productivity, Federal Reserve Bank of Boston, Martha's Vineyard, June 1980.
- "The Prospects for Regulatory Reform," Government Regulation: New Perspectives, Andrew Blair, ed., Pittsburgh: University of Pittsburgh, 1980.
- "The Economics of the Current Steel Crisis in OECD Member Countries" in Steel in the 80's, Organisation for Economic Co-operation and Development, Paris, 1980.
- "Environmental Control Is Out of Control," Chemical and Engineering News, Vol. 57, April 23, 1979.
- "Paying for Government Policy Through the Price Level" in Clarence C. Walton (ed.), Inflation and National Survival, 1979.
- "Is Government Regulation Crippling Business?" in Saturday Review, January 20, 1979.
- "Federal Government Initiatives to Reduce the Price Level," Brookings Papers on Economic Activity, 1978:2.
- "Competition and 'Dumping' in the U.S. Steel Market," Challenge, July/August 1978.
- "Regulation of Television Broadcasting: How Costly is the 'Public Interest'?" in Regulation, January/February 1978.
- "Placing a Value on the Electromagnetic Spectrum: A Suggested Approach for FCC Decision-Making," Proceedings of the Conference on Telecommunications Policy Research, Airlie House, 1977.
- "Theoretical Issues in the Regulation of Communications Common Carriage" in Rate of Return Regulation, FCC Future Planning Conference, July 1976.
- "The Postwar Performance of the Motion Picture Industry," The Antitrust Bulletin, Spring 1975.
- "An Econometric Model of the Low-Skill Labor Market," (with C.D. MacRae and Lorene Y.L. Yap), The Journal of Human Resources, Winter 1975.
- "The Economic Case for a Fourth Commercial Television Network," Public Policy, Harvard University Press, Fall 1974.
- "The Profitability of Cable Television: An Analysis of Acquisition Prices," The Journal of Business, University of Chicago, October 1974.
- "A Reexamination of the Prophecy of Doom for Cable Television," (with Lionel L. Fray), The Bell Journal of Economics and Management Science, Spring 1974.
- "Monopoly," The Dictionary of American History, Charles Scribner's & Sons, 1973.
- "FCC Regulation, Monopsony, and Network Television Program Costs," The Bell Journal of Economics and Management Science, Autumn 1972.
- Study Guide for Basic Economics (with R.S. Eckaus), Little, Brown and Company, 1972.
- Contemporary Issues in Economics: Selected Readings (with R.S. Eckaus), Little, Brown and Company, 1972.
- "Economic Subsidies in the Urban Ghetto," (with C.D. MacRae), Social Science Quarterly, December 1971.
- "The Economic Effect of Television-Network Program 'Ownership'," The Journal of Law and Economics, Vol. XIV, October 1971.
- "The Decline of the Franchised Dealer in the Automobile Industry," The Journal of Business, University of Chicago, January 1970.
- "Motor Vehicle Repair, Repair-Parts Production, and the Franchised Vehicle Dealer," Hearings: The Automobile Industry, U.S. Senate Antitrust Subcommittee of the Committee on the Judiciary, 1969.
- "Vertical Integration and the Market for Repair Parts in the United States Automobile Industry," The Journal of Industrial Economics, Oxford: Basil Blackwell, July 1968.
VI. Conclusions (continued)
Exhibit B: Ehrlich Qualifications
Everett M. Ehrlich
Dr. Everett M. Ehrlich is one of the nation's leading business economists. His firm, ESC Company, combines economic analysis, business development, and communications skills to solve a wide range of business problems. ESC's diverse clientele have included leading firms in the financial, accounting, pharmaceutical, automotive, and other industries, and such diverse organizations as the Pew Center for Global Climate Change and the Major League Baseball Players Association. He also recently served as Executive Director of the CSIS Commission on Public Infrastructure under co-chairmen Felix Rohatyn and Warren Rudman; a bipartisan bill to enact their recommendations was introduced in the 110th Congress.
Dr. Ehrlich served in the Clinton Administration as Under Secretary of Commerce for Economic Affairs, the principal economic policy official for Commerce Secretaries Brown and Kantor and chief executive of the nation's statistical system. As such, he led the first comprehensive strategic review of the nation's economic statistics in four decades, leading to a major modernization of featured measures of the economy. He supervised the redesign of the 2000 decennial census. He co-chaired the White House working group on the restructuring of the U.S. economy in the face of information technology, was a leader in the U.S.' planning effort of the two G-7 "Jobs Summits," and oversaw the Administration's economic analysis of global climate change.
Prior to his service as Under Secretary, Dr. Ehrlich was Vice-President for Economic and Financial Planning, and for Strategic Planning, of Unisys Corporation, from 1988 to 1993. As such, he had responsibilities concerning corporate development and finance, formulating business strategy, and economic forecasting. He reported directly to two chairmen of the company. He has also been the Senior Vice-President and research director of the business-based think tank, the Committee for Economic Development.
Dr. Ehrlich earlier served as Assistant Director of the Congressional Budget Office, where he directed the CBO program in trade and technology, infrastructure and space transportation, energy and the environment, and agriculture. He joined CBO in 1977, after having served as a Legislative Aide to Congressman John Conyers, Jr., and having briefly taught economics at the university level.
Dr. Ehrlich is the author of two critically-acclaimed novels: Big Government (1998), and Grant Speaks (2000), both by Warner Books. He was, for eight years, a regular economics commentator on National Public Radio's Morning Edition, and his writings have appeared in The Financial Times, Investors Business Daily, The Christian Science Monitor, The Washington Post, The International Economy, The New York Review of Books¸ and other publications.
Dr. Ehrlich was born in New York City in 1950 and is a product of its public schools. He received a B.A. in 1971 from S.U.N.Y. Stony Brook and a Ph.D. in economics in 1975 from the University of Michigan. He lives with his family in Bethesda, Maryland, where he has coached little league, acted in children's theater, been wardrobe master for the high school chorus, and waits for the Washington Nationals to win the World Series.
VI. Conclusions (continued)
Exhibit C: Eisenach Qualifications
Jeffrey August Eisenach
- Ph.D. in Economics, University of Virginia, 1985
- B.A. in Economics, Claremont McKenna College, 1979
- Chairman and Managing Partner, Empiris LLC, September 2008-present
- Chairman, Criterion Economics, LLC, June 2006-September 2008
- Chairman, The CapAnalysis Group, LLC, July 2005-May 2006
- Executive Vice Chairman, The CapAnalysis Group, LLC, February 2003-July 2005
- President, The Progress & Freedom Foundation, June 1993-January 2003
- Executive Director, GOPAC, July 1991-May 1993
- President, Washington Policy Group, Inc., March 1988-June 1991
- Director of Research, Pete du Pont for President, Inc., September 1986-February 1988
- Executive Assistant to the Director, Office of Management and Budget, 1985-1986
- Special Advisor for Economic Policy and Operations, Office of the Chairman, Federal Trade Commission, 1984-1985
- Economist, Bureau of Economics, Federal Trade Commission, 1983-1984
- Special Assistant to James C. Miller III, Office of Management and Budget/Presidential Task Force on Regulatory Relief, 1981
- Research Associate, American Enterprise Institute, 1979-1981
- Consultant, Economic Impact Analysts, Inc., 1980
- Research Assistant, Potomac International Corporation, 1978
- Adjunct Professor, George Mason University School of Law, 2000-present (Courses Taught: Regulated Industries; Perspectives on Government Regulation; The Law and Economics of the Digital Revolution)
- Adjunct Lecturer, Harvard University, John F. Kennedy School of Government, 1995-1999 (Course Taught: The Role of Government in the 21st Century)
- Adjunct Professor, George Mason University, 1989 (Course Taught: Principles of Economics)
- Adjunct Professor, Virginia Polytechnic Institute and State University, 1985, 1988 (Courses Taught: Graduate Industrial Organization, Principles of Economics) Instructor, University of Virginia, 1983-1984 (Courses Taught: Value Theory, Antitrust Policy)
- Teaching Assistant, University of Virginia, 1982-1983 (Courses Taught: Graduate Microeconomics, Undergraduate Macroeconomics)
Awards, Activities and Concurrent Positions
- Member, Economic Club of Washington, 2009-
- Member, Board of Directors, Intelligent Grid Solutions, 2009-
- Member, Board of Directors, PowerGrid Communications, 2008-2009
- Member, Board of Advisors, Washington Mutual Investors Fund, 2008-present
- Member, Board of Advisors, Pew Project on the Internet and American Life, 2002-present
- Member, Board of Directors, The Progress & Freedom Foundation, 1993-2009
- Member, Attorney General's Identity Theft Task Force, Virginia, 2002
- Member of the Board of Directors, Privacilla.com, 2002-2003
- Member, Executive Board of Advisors, George Mason University Tech Center, 2001-2004
- Contributing Editor, American Spectator, 2001-2002
- Member, Bush-Cheney Transition Advisory Committee on the FCC, 2001
- Member, Governor's Task Force on E-Communities, State of Virginia, 2000-2001
- Member, 2000-2001 Networked Economy Summit Advisory Committee, 1999-2001
- Member, Board of Directors, Internet Education Foundation, 1998-2003
- Member, Internet Caucus Advisory Committee, 1998-2003
- Member, American Assembly Leadership Advisory Committee, 1996-2002
- Member, Commission on America's National Interests, 1995-2000
- Adjunct Scholar, Hudson Institute, 1988-1991
- Visiting Fellow, Heritage Foundation, 1988-1991
- President's Fellowship, University of Virginia, 1981-1984
- Earhart Foundation Fellowship, University of Virginia, 1981-1983
- Member, Reagan-Bush Transition Team on the Federal Trade Commission, 1981
- Henry Salvatori Award, Claremont Men's College, 1979
- Frank W. Taussig Award, American Economic Association, 1978
Publications and Major Presentations
- "The U.S. Abandons the Internet," (with J. Rabkin), The Wall Street Journal, October 3, 2009
- "The Economics of Retransmission Consent Negotiations in the U.S. and Canada," (with S. Armstrong), Armstrong Consulting and Empiris LLC, September 11, 2009
- "The Impact of Regulation on Innovation and Choice in Wireless Communications," (with E. Ehrlich and W. Leighton), Empiris LLC, September 2009
- "Vertical Separation of Telecommunications Networks: Evidence from Five Countries," (with R. Crandall and R. Litan), Federal Communications Law Journal, forthcoming
- "The Economics of Retransmission Consent," Empiris LLC, March 2009
- "Economic Effects of Tax Incentives for Broadband Infrastructure Deployment," (with H. Singer and J. West), Empiris LLC, January 5, 2009
- "An Event Analysis Study of the Economic Implications of the FCC's UNE Decision: Backdrop For Current Network Sharing Proposals," (with P. Lowengrub and J.C. Miller III) Commlaw Conspectus 17;1, 2008
- "Broadband Policy: Does the U.S. Have It Right After All?" in Telecommunications Policy & Regulation, Practicing Law Institute, December 2008
- "Broadband in the U.S. – Myths and Facts," in Australia's Broadband Future: Four Doors to Greater Competition, Committee for Economic Development of Australia, 2008
- "A La Carte Regulation of Pay TV: Good Intentions vs. Bad Economics," (with A. Thierer) Engage, June 2008
- "The Benefits and Costs of I-File," (with R. Litan and K. Caves) Criterion Economics, LLC, April 14, 2008
- "Irrational Expectations: Can a Regulator Credibly Commit to Removing an Unbundling Obligation?" (with Hal J. Singer), AEI-Brookings Joint Center Related Publication 07-28, December 2007
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- "Restoring IT Sector Growth-Why Broadband, Intellectual Property and Other E-Commerce Issues Are Key to a Robust Economy," Remarks, August 2001
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- "Local Loop, High-Tech Noose," The American Spectator, March 2001
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- The Digital State 2000, (with T. Lenard) The Progress & Freedom Foundation, September 2000
- The Digital Economy Fact Book 2000, (with T. Lenard, S. McGonegal) The Progress & Freedom Foundation, August 2000
- "Critics Fear Surveillance of Web Surfers Compromising Personal Privacy," Progress on Point 7.11, The Progress & Freedom Foundation, July 2000
- "Access Charges and The Internet: A Primer," Progress on Point 7.9, The Progress & Freedom Foundation, June 2000
- "The Need for a Practical Theory of Modern Governance," Progress on Point 7.7, The Progress & Freedom Foundation, May 2000
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- "Remarks at the 2000 Global Internet Summit," March 14, 2000
- "Nation's Conservatives Should Support a Breakup of Microsoft," The Union Leader & New Hampshire Sunday News, February 22, 2000
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- Digital New Hampshire: An Economic Factbook, (with R. Frommer, T. Lenard) The Progress & Freedom Foundation, December 1999
- "Benefits Riding on a Breakup," The Washington Times, November 14, 1999
- "Is There a Moore's Law for Bandwidth?" (with C. Eldering, M. Sylla), IEEE Communications Magazine, October 1999
- "The High Cost of Taxing Telecom" Progress on Point 6.6, The Progress & Freedom Foundation, September 1999
- The Digital Economy Fact Book, (with A. Carmel and T. Lenard), The Progress & Freedom Foundation, August 1999
- "Creating the Digital State: A Four Point Program," Progress on Point 6.4, The Progress & Freedom Foundation, August 1999
- "How to Recognize a Regulatory Wolf in Free Market Clothing: An Electricity Deregulation Scorecard," (with T. Lenard) Progress on Point 6.3, The Progress & Freedom Foundation, July 1999
- Competition, Innovation and the Microsoft Monopoly: Antitrust in the Digital Marketplace, (ed., with T. Lenard), Kluwer Academic Publishers, 1999
- "Still Wondering What Cyberspace is All About?" Insight on the News, Vol. 15, No. 11, March 22, 1999.
- "The Digital State: Remarks on Telecommunications Taxes," Address Before the Winter Meeting of the National Governors Association, February 21, 1999
- "Computer Industry Flexes Its Muscle," Intellectual Capital.com, January 28, 1999
- "Into the Fray: The Computer Industry Flexes Its Muscle on Bandwidth," Progress on Point 5.9, The Progress & Freedom Foundation, December 1998
- "Surprise: Even in Electricity, the Market Works," The Progress & Freedom Foundation, Nov. 1998
- "The Digital Economy," Address at the George Mason University Conference on The Old Dominion and the New Economy, November 1998
- "Finally! An 'Electricity Deregulation' Bill That Deregulates," Progress on Point 5.7, The Progress & Freedom Foundation, October 1998
- "A Convergence Strategy for Telecommunications Deregulation," Address at the United States Telephone Association's Large Company Meeting, September 1998
- "Time to Junk the Telecom Act," Investor's Business Daily, July 23, 1998
- "Consumers Win in Mergers," Denver Post, July 5, 1998
- "Microsoft's Morality Play," News.com, March 11, 1998
- "California Will Soon Be Eating Dust," Forbes Magazine, August 1997
- "Watch Out for Internet Regulation," The Washington Times, July 9, 1997
- "Time to Walk the Walk on Telecom Policy," Progress on Point 4.3, The Progress & Freedom Foundation, July 1997
- "Ira Magaziner Targets the Internet," The Washington Times, March 26, 1997
- "Revolution -- or Kakumei" Forbes ASAP, December 1996
- "Digital Charity," Intellectual Capital.com, November 28, 1996
- "The FCC and the Telecommunications Act of 1996: Putting Competition on Hold?" (with G. Keyworth), Progress on Point 2.1, The Progress & Freedom Foundation, October 1996
- "Forebearance, Self-Certification and Privatization," (with J. Gattuso, et al) Future Insight No. 3.2, The Progress & Freedom Foundation, May 1996
- "Privatizing the Electromagnetic Spectrum," (with R. Crandall, et al) Future Insight No. 3.1, The Progress & Freedom Foundation, April 1996
- "Broadcast Spectrum: Putting Principles First," (with R. Crandall et al) Progress on Point 1.9, The Progress & Freedom Foundation, January 1996
- "Those GOP Blockheads Just Don't Get It; Block Grants Are Merely Another Bogus Solution," The Washington Post, September 3, 1995
- The People's Budget, (with E. Dale, et al), Regnery Publishing, 1995
- The Telecom Revolution: An American Opportunity, (with G. Keyworth, et al) The Progress & Freedom Foundation, 1995
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- "Poor Substitute," (with P. du Pont), National Review, December 31, 1994
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- Readings in Renewing American Civilization, (ed. with S. Hanser) McGraw-Hill, Inc, 1993
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- "Just Say No To More Drug Clinics," St. Louis Post-Dispatch, June 14, 1991
- "Drug Rehab Funding is No Panacea," Chicago Tribune, June 7, 1991
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- Drug-Free Workplace Policies for Congressional Offices, (ed.) The Heritage Foundation, Washington, DC, 1991
- "Fighting Drugs in Four Countries: Lessons for America?" Backgrounder 790, The Heritage Foundation, Washington, DC, September 24, 1990
- America's Fiscal Future: Controlling the Federal Deficit in the 1990's, Hudson Institute, 1990
- "The Vision Thing, Conservatives Take Aim at the '90's," Policy Review 52, Spring 1990
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- "Invest Social Security Surplus in Local Project Bonds," Wall Street Journal, January 4, 1989 The Five-Year Budget Outlook, Hudson Institute, 1988
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Testimony, Government Filings and Expert Reports
- In the matter of the Constitution of the Co-Operative Republic of Guyana and In the matter of the application for redress under Article 153 for the contravention of the Applicant's fundamental rights guaranteed by Articles 20, 146, and 149D of the Constitution of the Republic of Guyana and In the Matter of the Telecommunications Act No. 27 of 1990, U-Mobile (Cellular) Inc., v. The Attorney General of Guyana, Expert Report on Behalf of Guyana Telephone and Telegraph Company (June 19, 2008)
- Comments on the Virginia State Corporation Commission's Second Order for Notice and Hearing In Re: Revisions of Rules for Local Exchange Telecommunications Company Service Quality Standards, On Behalf of Verizon Virginia (March 13, 2009)
- In the Matter of Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements, Federal Communications Commission Docket MB 07-198, Supplemental Report on Behalf of the Walt Disney Company (December 11, 2008)
- In re: Investigation of Rates of Virgin Islands Telephone Corporation d/b/a Innovative Communications, PSC Docket 578, Rebuttal Testimony on Behalf of Virgin Islands Telephone Corporation (October 31, 2008)
- Evidence Relating to the ACCC's Draft Decision Denying Telstra's Exemption Application for the Optus HFC Footprint, Australian Consumer and Competition Commission, Expert Report on Behalf of Telstra Corporation Ltd. (October 13, 2008)
- In re: Investigation of Rates of Virgin Islands Telephone Corporation d/b/a Innovative Communications, PSC Docket 578, Direct Testimony on Behalf of Virgin Islands Telephone Corporation (September 26, 2008)
- In the Matter of the Appropriate Forms of Regulating Telephone Companies, Maryland Public Service Commission, Case No. 9133, Rebuttal Testimony on Behalf of Verizon Maryland (September 24, 2008)
- Comments on the Virginia State Corporation Commission's Proposed Service Quality Rules for Traditional Landline Telecommunications, On Behalf of Verizon Virginia (August 21, 2008)
- In re: Complaint and request for emergency relief against Verizon Florida, LLC for anticompetitive behavior in violation of Sections 364.01(4), 364.3381, and 364.10, F.S., and for failure to facilitate transfer of customers' numbers to Bright House Networks Information Services (Florida), LLC, and its affiliate, Bright House Networks, LLC, Florida Public Service Commission, Docket No. 070691-TP, Rebuttal Testimony on Behalf of Verizon Florida LLC (July 25, 2008)
- In the Matter of the Appropriate Forms of Regulating Telephone Companies, Maryland Public Service Commission, Case No. 9133, Direct Testimony on Behalf of Verizon Maryland (July 8, 2008)
- Comparative Analysis of Communications Markets as it Relates to the Economic Viability of Optus' HFC Network and Telstra's Proposed HFC Exemption, Australian Consumer and Competition Commission, Expert Report on Behalf of Telstra Corporation Ltd. (June 23, 2008)
- In the Matter of Bright House Networks LLC. et al v. Verizon California et al, Federal Communications Commission File No. EB-08-MD-002, Expert Declaration on Behalf of Verizon Communications (February 29, 2008)
- In the Matter of Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements, Federal Communications Commission Docket MB 07-198, Reply Report on Behalf of the Walt Disney Company (February 12, 2008)
- In the Matter of Verizon's 2007 Price Cap Plan for the Provision of Local Telecommunications Services in the District Of Columbia, District of Columbia Public Service Commission, Formal Case No. 1057, Rebuttal Testimony (January 31, 2008)
- In the Matter of Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements, Federal Communications Commission Docket MB 07-198, Expert Report on Behalf of the Walt Disney Company (January 4, 2008)
- In the Matter of Verizon's 2007 Price Cap Plan for the Provision of Local Telecommunications Services in the District Of Columbia, District of Columbia Public Service Commission, Formal Case No. 1057, Direct Testimony (December 7, 2007)
- In the Matter of the Commission's Investigation Into Verizon Maryland, Inc.'s Affiliate Relationships, Maryland Public Service Commission, Case No. 9120, Rebuttal Testimony (November 19, 2007)
- On Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit, Pacific Bell Telephone Company d/b/a AT&T California, et al., Petitioners, v. Linkline Communications, Inc., et al., Respondents, Brief of Amici Curiae Professors and Scholars in Law and Economics in Support of the Petitioners (with R. Bork, G. Sidak, et al) (November 16, 2007)
- In the Matter of the Commission's Investigation Into Verizon Maryland, Inc.'s Affiliate Relationships, Maryland Public Service Commission, Case No. 9120, Direct Testimony (October 29, 2007)
- Application of Verizon Virginia, Inc. and Verizon South for a Determination that Retail Services Are Competitive and Deregulating and Detariffing of the Same, State Corporation Commission of Virginia, Case No. PUC-2007-00008, Rebuttal Report (July 16, 2007)
- Testimony on Single Firm Conduct, "Understanding Single-Firm Behavior: Conduct as Related to Competition," United States Department of Justice and United States Federal Trade Commission, Sherman Act Section 2 Joint Hearing (May 8, 2007)
- Testimony on Communications, Broadband and U.S. Competitiveness, Before the Committee on Commerce, Science and Transportation, United State Senate (April 24, 2007)
- Application of Verizon Virginia, Inc. and Verizon South for a Determination that Retail Services Are Competitive and Deregulating and Detariffing of the Same, State Corporation Commission of Virginia, Case No. PUC-2007-00008, Expert Testimony and Report (January 17, 2007)
- In re: ACLU v. Gonzales, Civil Action No. 98-CV-5591, E.D. Pa., Rebuttal Report (on behalf of the U.S. Department of Justice) (July 6, 2006)
- In re: ACLU v. Gonzales, Civil Action No. 98-CV-5591, E.D. Pa., Expert Report (on behalf of the U.S. Department of Justice) (May 8, 2006)
- In re: Emerging Communications Shareholder Litigation, "The Valuation of Emerging Communications: An Independent Assessment" (with J. Mrozek and L. Robinson), Court of Chancery for the State of Delaware (August 2, 2004)
- In the Matter of Review of the Commission's Rules Regarding the Pricing of Unbundled Network Elements and the Resale of Service by Incumbent Local Exchange Carriers, WC Docket No. 03173, Declaration of Jeffrey A. Eisenach and Janusz R. Mrozek, Federal Communications Commission (December 2003)
- In the Matter of Disposition of Down Payments and Pending Applications Won During Auction No. 35 for Spectrum Formerly Licensed to NextWave Personal Communications, Inc., NextWave Power Partners, Inc. and Urban Comm – North Carolina, Inc., Federal Communications Commission, (October 11, 2002)
- In the Matter of Echostar Communications Corporation, General Motors Corporation, and Hughes Electronics Corporation, Federal Communications Commission (February 4, 2002)
- In the Matter of United States v. Microsoft Corp. and New York State v. Microsoft Corp., Proposed Final Judgment and Competitive Impact Statement (with T. Lenard), U.S. Department of Justice, Civil Action No. 98-1232 and 98-1233 (January 28, 2002)
- In the Matter of Implementation of Section 11 of the Cable Television Consumer Protection and Competition Act of 1992 (with R. May), Federal Communications Commission (January 4, 2002)
- In the Matter of Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications (with R. May), National Telecommunications and Information Administration (December 19, 2001)
- In the Matter of Implementation of the Telecommunications Act of 1996, Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Consumer Information; Implementation of the Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, As Amended (with T. Lenard and J. Harper), Federal Communications Commission (November 16, 2001)
- In the Matter of Flexibility for Delivery of Communications by Mobile Satellite Service Providers (with W. Adkinson), Federal Communications Commission (October 22, 2001)
- In the Matter of Deployment of Advanced Telecommunications Capability (with R. May), Federal Communications Commission (October 5, 2001) In the Matter of Deployment of Advanced Telecommunications Capability (with R. May), Federal
- Communications Commission (September 24, 2001) In the Matter of Nondiscrimination in Distribution of Interactive Television Services Over Cable (with R. May), Federal Communications Commission (March 19, 2001)
- In the Matter of High-Speed Access to the Internet Over Cable and Other Facilities (with R. May), Federal Communications Commission (December 1, 2000)
- Testimony on Federal Communications Commission Reform Before the Committee on Government Reform, Subcommittee on Government Management, Information and Technology, United States House of Representatives (October 6, 2000)
- In the Matter of Public Interest Obligations of TV Broadcast Licensees (with R. May), Federal Communications Commission (March 27, 2000)
- Testimony on Truth in Billing Legislation Before the Subcommittee on Telecommunications, Trade and Consumer Protection, Committee on Commerce, United States House of Representatives (March 9, 2000)
- In the Matter of GTE Corporation, Transferor and Bell Atlantic, Transferee for Consent to Transfer of Control, (with R. May), Federal Communications Commission (February 15, 2000)
- Testimony on Reforming Telecommunications Taxes in Virginia, Governor's Commission on Information Technology (October 26, 1999)
- Testimony on Telecommunications Taxes, Advisory Commission on Electronic Commerce (September 14, 1999)
- In the Matter of GTE Corporation, Transferor and Bell Atlantic, Transferee for Consent to Transfer of Control, Federal Communications Commission (December 23, 1998)
- In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996 (with C. Eldering), Federal Communications Commission (September 14, 1998)
- Testimony on Section 706 of the Telecommunications Act of 1996 and Related Bandwidth Issues Before the Subcommittee on Communications Committee on Commerce, Science, and Transportation, United States Senate (April 22, 1998)
- Testimony on the Impact of the Information Revolution on the Legislative Process and the Structure of Congress Before the Subcommittee on Rules and Organization of the House of the Committee on Rules, United States House of Representatives (May 24, 1996)
- Testimony on Efforts to Restructure the Federal Government Before the Committee on Governmental Affairs, United States Senate (May 18, 1995)
- Testimony on The Role of the Department of Housing and Urban Development and the Crisis in America's Cities Before the Committee on Banking and Financial Services, United States House of Representatives (April 6, 1995)
VI. Conclusions (continued)
Exhibit D: Regression Data and Variable Description
Source Notes: OECD Broadband data for the most recent report (2008) is available at:
|qtot||Broadband penetration per 100 persons||OECD|
|yeardsl||Year in which DSL was first offered||Incumbent carrier filings and news reports|
|monthdsl||Month in which DSL was first offered||Incumbent carrier filings and news reports|
|dslyears||Years since DSL was first offered||Constructed using yeardsl and monthdsl|
|gdp||GDP per capita in US PPP||OECD|
|pops_mils||Population in millions||OECD|
|State owned||Whether the network is state owned||Company and country sources|
|guyrs||Formulation of GUyrs used in Boyle-Howell-Zhang and in many Berkman Study regressions. This formulation does not contain negative values in years before unbundling.||de Ridder Report, based on 2005 OECD data, Table 2.10.|
|guyrs_new||GUyrs values used by Berkman Study||Berkman Study, Table 4.8|
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