DSL Prime: Lots of Noise About UNE-P

The Bells continue to claim that regulation lowers deployment but real world data shows that where there's no competition, the Bells don't deploy.

by Dave Burstein DSL Prime [July 14, 2003]

FCC Triennial: Lots of noise
First 120 days show UNE-P works for consumers, cable competition driving broadband
Kevin Martin believes cable competition is sufficient to motivate the Bells to bring prices closer to world norms, and since the first announcement Verizon and SBC are cheaper while promising increased deployment. I still basically concur with Mike Powell's observation that ending line sharing reduces competition and keeps prices higher in the long run. Since Martin's decision is becoming the law of the land, I hope he's right and I'm wrong about the effect. Meanwhile, consumers are getting better deals in the aggressive UNE-P states, again as Martin foresaw.

Crucial data for judging UNE-P
Real world data is more persuasive than ideological arguments, so I was impressed by Larry Spiwak's new paper that the Bells have invested more in states with more UNE-P lines [.pdf]. Eric Rabe of Verizon replies, "I'm sure you are aware of the fallacy in classical logic theory, 'post hoc, ergo propter hoc.' The fallacy occurs when a second event or thought is said to result form a former one but the only relationship is that one follows the other. The second thought is not the logical consequence of the other.

That is what we are dealing with here. You see strong UNE-P taking by our competitors and also investment by us and make the 'Post hoc' assumption that they are related. In fact, our investment is coming in large states, with major customer bases which have a variety of competitors, including cable TV and wireless providers (who do not rely on UNE-P). The size of the states themselves may be a contributor to our decision to invest at a certain level. Certainly the need to continuously modernize our network is a major factor causing us to invest. There may be a variety of other factors such as the needs of a particular customer or group of customers, or even growth in places such as Texas or California.

Dressing up a logical fallacy in fancy economic report format with lots of footnotes does not change the fact that a fallacy—in this case a fatal fallacy—has occurred. "

Rabe's correct that most empirical studies are vulnerable to post hoc, but I prefer the data to the typical D.C. debates over obscure ideology. Spiwak's data are the best I've seen; they should be respected or rebutted. Any D.C. politician who says UNE-P cuts investment will look foolish unless they directly refute the facts Spiwak provides.

I also sincerely hope no reporter picks up the predictable Bell comment that UNE's are "below cost." That's simply untrue, no matter how many times folks like Ed Whitacre repeat it. They look very stupid when I ask their company to back up the claim with facts.

D.C. humor
These are real issues, which I know Powell, Martin and their staff are taking very seriously. Both men are much smarter than outsiders think, and this isn't really an ego game. But a veteran reporter does paint a suggestive picture of how the squabble looks.

Martin (to Powell): "If you poke me in the eye, I'll kick you in the groin."
Powell (to Martin): "Oh yeah? Well, if you kick me in the groin, I'll stomp on your toes."
Martin (to Powell): "Is that so? Well, how about if I just punch you in the stomach?
Powell (to Martin): "How about if I just jerk on your ears?"
Martin (to Powell): "Why can't we all just get along?"
Powell (to Martin): "Where have I heard that before?"

Copyright 2003 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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