Unbundling and Facilities-Based Entry by Clecs: Two Empirical Tests

Abstract

In this paper, the determinants of the provision of facilities-based lines by competitive local exchange carriers ("CLECs") are examined using data collected by the Federal Communications Commission and the entry decisions of a large, facilities-based CLEC. The multiple regression models are based on the economics of entry, considering both the effects of market size and sunk costs on provision of facilities-based service to end-users by CLECs. These estimated regressions indicate that CLEC facilities-based entry is positively related to market size and inversely related to the sunk costs of entry. Both regressions indicate that unbundled element prices are inversely related to facilities-based entry. On average and other things constant, higher element rates are associated with a reduced amount of facilities-based entry by CLECs.

Keywords: telecommunications, competition, communications, empirical, econometrics, 1996 Telecommunications Act, Telecommunications Act, substitution, impairment, entry, loop, switching, TELRIC, LRIC, TSLRIC, total element long run incremental cost, FCC, Federal Communications Commission, policy, competition policy

JEL Classification: R3, L0, L1, L4, L5, L9, K2,