UNE-P Drives Bell Investment: A Synthesis Model

Abstract

The purpose of this POLICY BULLETIN is to evaluate the robustness of the empirical results presented in PHOENIX CENTER POLICY BULLETIN NO. 5, Competition and Bell Company Investment in Telecommunications Plant: The Effects of UNE-P. To accomplish this goal, this POLICY BULLETIN incorporates the constructive comments made by Drs. Thomas Hazlett, Arthur Havenner and Coleman Bazelon (HHB) and by Dr. Carter Hill about POLICY BULLETIN NO. 5 and, accordingly, estimates twenty new specifications models of the Bell Company investment equation. While these new specifications represent a synthesis of the modeling preferences of the Phoenix Center and the aforementioned economists, they nonetheless remain true to the neoclassical model of investment and valid econometric practice. These new specifications vary by estimation technique, explanatory variables included, and the measure of investment. Despite wide variations in model specification, all our new empirical specifications, especially those based on the suggestions of Drs. Hazlett et al., confirm that UNE-P competition increases Bell Company investment in local telecommunications plant. In all twenty models, the effect of UNE-P competition is positive and statistically significant. Despite the changes to specification, the new models continue to perform well in specification tests, which is, of course, encouraging. As such, the models set forth in this Policy Bulletin affirm both the results and specification of the empirical models in POLICY BULLETIN NO. 5.