The Financial Implications of the Une-Platform: A Review of the Evidence

Abstract

Recent reports on the financial consequences of UNE-P sales for Bell Operating Companies have drawn additional attention to long-standing complaints by the BOCs that such sales are confiscatory, and amount to "subsidized competition." This paper subjects the conclusions of these claims and the financial studies upon which they are based to careful scrutiny, and finds that they are largely without merit. Errors in both the alculation of unbundled element revenues, and in the wholesale costs of providing unbundled elements, are identified. Using actual payments by a representative CLEC and publicly available ARMIS expense data, we obtain realistic revenue and current cost figures usable for financial analyses. Our analysis suggests that the wholesale business, taken alone, is profitable for the BOCs.

Keywords: telecommunications, competition, policy, communications, TELRIC, UNE-Platform, UNE-P, UNE-L, UNE-Loop, unbundling, unbundled, network, elements, UNEs, UNE, FCC, Federal Communications Commission, 1996 Telecommunications Act, TELRIC, LRIC, long run incremental cost, below cost, actual cost, embedded cost

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