A Future Friendly Digital Economy Strategy: Submission to the Government of Canada's Digital Economy Consultation — Appendix 2

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Submitted by TELUS 2010-07-10 13:14:09 EDT

Theme(s): Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies


Declaration of
Robert W. Crandall, Everett M. Ehrlich and Jeffrey A. Elsenach
Regarding the Berkman Center Study (NBP Public Notice 13)

November 16, 2009

In the Matter of

International Comparison and Consumer Survey Requirements in the Broadband Data Improvement Act
GN Docket No. 09-47
A National Broadband Plan for Our Future
GN Docket No. 09-51
Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act.
GN Docket No. 09-137


  1. Introduction
  2. Qualifications
  3. The Berkman Study's Conclusions are not Supported by Quantitative Analysis
    1. The Berkman Study's "Do-Over" of the de Ridder Study is Fatally Flawed
      1. The Inclusion of Relevant Data and Explanatory Variables Reverses the Effect of Unbundling on Penetration
      2. The Mixed Effects Regressions in the Berkman Study Fail a Hausman Specification Test
      3. The Berkman Study Makes Inappropriate Modifications to the Data
    2. The Evidence from Other Quantitative Studies Does Not Support Unbundling
      1. Summary of Prior Empirical Studies
      2. Studies Finding Negative and/or Insignificant Effects of Unbundling on Penetration
      3. Studies Finding Positive Effects of Unbundling on Penetration
      4. Studies Relating Unbundling to Network Investment
  4. The Berkman Study's Conclusions are not Supported by Qualitative Analysis
    1. The Alleged Successes
      1. The Nordic Countries and Netherlands
      2. France
      3. The United Kingdom
      4. Japan
    2. The Doubtful Cases or Outright Regulatory "Failures"
      1. South Korea
      2. Italy
      3. New Zealand
      4. Canada
    3. Conclusions
  5. The Berkman Study's Analysis is Flawed in Other Significant Respects
    1. The Berkman Study Relies Almost Exclusively on Bivariate Analysis
    2. The Berkman Study Mischaracterizes the Evolution of U.S. Broadband Policy
    3. The Berkman Study Mischaracterizes the Policy Consensus Abroad
  6. Conclusions
    1. Exhibit A: Crandall Qualifications
    2. Exhibit B: Ehrlich Qualifications
    3. Exhibit C: Eisenach Qualifications
    4. Exhibit D: Regression Data and Variable Description
    5. Exhibit E: Summary of Studies of the Effect of Unbundling on Investment

I. Introduction

1. We have been asked by National Cable & Telecommunications Association and United States Telecom AssociationFootnote 1 to review and comment on Next Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around the World, a draft report submitted to the Federal Communications Commission by the Berkman Center for Internet and Society.Footnote 2

2. Our declaration responds specifically to National Broadband Plan Notice #13,Footnote 3 in which the Commission asked for comment on six specific issues:

  1. Does the study accomplish its intended purposes?
  2. Does the study provide a complete and objective survey of the subject matter?
  3. How accurately and comprehensively does the study summarize the broadband experiences of other countries?
  4. How much weight should the Commission give to this study as it develops a National Broadband Plan?
  5. Are additional studies needed along the lines of the Berkman Study?
  6. Please provide any other comments on the Berkman Study that you deem relevant.

3. We conclude that the Berkman Study does not provide a complete or objective survey of the subject matter, nor does it present an accurate or comprehensive summary of the evidence regarding broadband policies in other countries. The study does not serve the Commission's announced purpose of obtaining an "independent expert review of existing literature and studies about broadband deployment and usage throughout the world."Footnote 4 Rather, the study appears to be explicitly biased towards a particular policy agenda, advancing findings and conclusions that conflict with the accumulated evidence found in existing research. The study's attempt to provide new evidence that contradicts this mounting body of evidence fails badly. Accordingly, the Commission should not rely on the Berkman Study's findings in developing its National Broadband Plan.

4. Specifically and most importantly, the Commission should reject what the Berkman Study refers to as its "most surprising and significant" finding, namely that

"open access" policies – unbundling, bitstream access, collocation requirements, wholesaling, and/or functional separation – are almost universally understood as having played a core role in the first generation transition to broadband in most of the high performing countries; that they now play a core role in planning for the next generation transition; and that the positive impact of such policies is strongly supported by the evidence of the first generation broadband transition.Footnote 5

We agree with the Berkman Study that such a finding – if it were supported by the evidence – would indeed be both "surprising" and "significant." Wishing, however, cannot make it so: the incontrovertible fact is that open access policies have not been shown to increase broadband adoption, availability, or infrastructure investment. To the contrary, the bulk of the available evidence points in the opposite direction, and the Berkman Study provides no new evidence that supports a different conclusion.

5. The remainder of this declaration is organized as follows. In Section II, we briefly present our qualifications. In Section III, we discuss the Berkman Study's "review of existing literature and studies about broadband deployment and usage," including its over-reliance on a single, fatally flawed regression analysis to support its conclusions and its failure to mention, let alone comprehensively review, much of the available research on the impact of unbundling policies in the U.S. and around the world. In Section IV, we examine the Berkman Study's "case studies" of broadband policies in selection countries, and find them to be in many cases factually inaccurate, generally misleading, and, overall, unsupportive of the report's conclusions. In Section V, we point out various other errors and omissions in the Berkman Study, which taken together demonstrate further that the report's conclusions cannot be relied upon as the basis for decisions by the Commission. In Section VI, we present a brief summary of our conclusions.

II. Qualifications

6. My name is Robert W. Crandall. I am a Nonresident Senior Fellow in Economic Studies at the Brookings Institution in Washington, DC, where I have been since 1978. Prior to that I was the Acting Director, Deputy Director, and Assistant Director of the Council of Wage and Price Stability in the Executive Office of the President, and between 1974 and 1975 I was an Adviser to Commissioner Glen Robinson of the Federal Communications Commission. I was an Assistant Professor and Associate Professor of Economics at MIT between 1966 and 1974. I have written widely on telecommunications policy, the economics of broadcasting, and the economics of cable television. I am the author or co-author of eight books on communications policy published by the Brookings Institution, including Competition and Chaos: U.S. Telecommunications since the 1996 Act (2005) and Broadband: Should We Regulate High- Speed Internet Access? (edited with James Alleman, 2002). My complete curriculum vita is provided as Exhibit A to this declaration.

7. My name is Everett M. Ehrlich. I am President of ESC Company, an economics consulting firm in Washington, DC. I have served as the Undersecretary of Commerce for Economic Affairs (Clinton I) where, among other duties, I co-chaired (with W. Bowman Cutter) the National Economic Council's Interagency Group on the structural effects of technological change on the economy. I have also been the Chief Economist and later head of strategic planning for Unisys Corporation, then a Fortune 100 supplier of computer hardware and systems. I have also served as Senior Vice-President and Director of Research of the Committee for Economic Development, a nonpartisan, business-based public policy think tank, and as Assistant Director of the Congressional Budget Office for Natural Resources and Commerce. I hold a Ph.D. in economics from the University of Michigan and a B.A. in economics from the State University of New York at Stony Brook. My biography is provided as Exhibit B to this declaration.

8. My name is Jeffrey A. Eisenach. I am Chairman of Empiris LLC, an economic consulting firm based in Washington, D.C., and an Adjunct Professor at George Mason University Law School. I have served in senior policy positions at the U.S. Federal Trade Commission (FTC) and the White House Office of Management and Budget (OMB), and on the faculties of Harvard University's Kennedy School of Government and Virginia Polytechnic Institute and State University. Prior to joining Empiris, I served as Chairman of Criterion Economics, Chairman of CapAnalysis, the economic consulting arm of Howrey LLC, and President of The Progress & Freedom Foundation. I have authored or co-authored numerous expert reports in litigation matters as well as in regulatory proceedings, testified before Congress on multiple occasions, and am the author or co-author of eight books. I hold a Ph.D. in economics from the University of Virginia and a B.A. in economics from Claremont McKenna College. My complete curriculum vita is provided as Exhibit C to this declaration.


  1. 1 The opinions expressed herein are our own. This research was requested and supported by NCTA and USTA. We are grateful to Allan Ingraham, Kevin Caves and Andrew Card for assistance. We also thank John de Ridder for providing us with the regression data he used in his 2007 OECD study. (back to footnote reference 1)
  2. 2 Next Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around the World, October 2009 (Draft) (available at http://www.fcc.gov/stage/pdf/Berkman_Center_Broadband_Study_13Oct09.pdf) (hereafter, Berkman Study). (back to footnote reference 2)
  3. 3 Federal Communications Commission, Comments Sought on Broadband Study Conducted by the Berkman Center for Internet and Society, (DA 09-2217, October 14, 2009). (back to footnote reference 3)
  4. 4 Federal Communications Commission, "Harvard's Berkman Center to Conduct Independent Review of Broadband Studies to Assist FCC" (Press Release, July 14, 2009). (back to footnote reference 4)
  5. 5 Berkman Study at 11. (back to footnote reference 5)

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