Telecom Deregulation and the Economy: The Impact of 'UNE-P' on Jobs, Investment and Growth
23 Pages Posted: 1 Sep 2008
Date Written: January 2003
Numerous studies have demonstrated that investment in telecommunications infrastructure and other forms of information technology is the primary cause of the acceleration in productivity growth, which began in the late 1990s and has continued, unabated, to the present.
Economists also recognize that government policies have a major impact on the performance of the heavily regulated telecommunications sector. The Federal Communications Commission and state public utility commissions continue to regulate telecommunications prices at both the retail and wholesale levels, and to impose upon incumbent carriers a complex array of sharing requirements. These rules, known as the "Unbundled Network Element" or "UNE" rules, require incumbent firms to lease their facilities to competitors at prices specified by the FCC and state commissions. One form of UNE, "UNE-P," allows competitors to lease virtually all of the facilities needed to provide service, thereby avoiding the need to make any significant investment of their own. Many economists believe these rules discourage investment in new facilities.
In this study, we examine the empirical evidence on the impact of UNE rules on telecommunications investment. While the studies we review utilize different techniques, rely on different data and analyze different variables, they are nearly unanimous in finding that the UNE regime does indeed deter investment. We estimate that UNE reform would increase GDP by between $14.3 billion and $33.9 billion, and create between 94,000 and 223,000 jobs, in the first year after adoption. In three years (i.e. by year-end 2005), GDP would rise by between $42.9 billion and $101.7 billion, and the economy would have created between 282,000 and 669,000 additional jobs.
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