New Telecom Study First to Find Artificial Price Controls Cost Americans More, Provide Few Benefits
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CONTACT: Richard Morrison, CEI
Full study available in pdf format
Washington, D.C., June 16, 2003—Artificially low wholesale prices for telecommunications services required under current federal unbundled network element (UNE) and platform (UNE-P) rules end up costing Americans substantially more than what would be the case in the absence of such regulations, according to a new study released today by the Competitive Enterprise Institute and the New Millennium Research Council.
The groundbreaking CEI/NMRC report authored by Stephen B. Pociask, president, TeleNomic Research, a leading research firm specializing in IT public policy issues, shows that current UNE and UNE-P rules cost the average American household more than $100 each annually, versus actual per-household savings that would result under a regulatory structure permitting greater competition. The benefits gained by consumers as a result of current local competition policies are estimated to be more than $11 per household each year.
“If low UNE and UNE-P prices were intended to save consumers money, they have been a dismal failure,” Mr. Pociask writes in the new report. “Because UNE-P regulations are usurping market forces and harming facility-based competitive and incumbent carriers, these regulations have created more harm than good for consumers. The report also shows that competitive carriers are abandoning their facility investments in favor of leasing network elements from incumbents at predatory prices.”
The study also notes: “... (R)etail customers are effectively subsidizing wholesale customers, ironically, for the purpose of achieving low retail prices. If those subsidies are being passed along to end users, the savings are likely to be low (as low as 1% since 1996) and are not reaching residential customers.”
Solveig Singleton, senior policy analyst at CEI, said: “This study provides significant empirical evidence that UNE pricing fosters the dependence on the lonely, aging, local phone network, rather than real competition between different networks. Competition is about real choices for consumers, and regulators will find it increasingly hard to deny that endlessly repackaging the same service will get us there.”
“The TeleNomic Research data makes it clear that the economic costs associated with setting artificially low wholesale prices far outstrip any consumer financial benefits,” said Allen Hepner, advisory board member of NMRC. “Mr. Pociask should be commended for his work, which finds that implementing rational wholesale prices would benefit consumers by encouraging investment, creating jobs, and stimulating economic growth.”
About CEI and NMRC
The Competitive Enterprise Institute (CEI) is a non-profit public policy organization dedicated to the principles of free enterprise and limited government. The New Millennium Research Council (NMRC) conducts research focused on developing workable solutions to the issues facing policymakers, primarily in the fields of telecommunications and technology.
Editor’s Note: A copy of the study and a streaming audio replay of a related news event will be available on the Web as of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />7 p.m. EDT on Monday, June 16, 2003 at www.newmillenniumresearch.org.