Berkman Gets It Backwards - Its Own Model Says 'Open Access' Fails

Phoenix Center Says Flawed Study Undermines FCC Bid for "Data-Driven
Decision-making"

WASHINGTON , Nov. 12 /PRNewswire-USNewswire/ -- The Phoenix Center released
today a new Phoenix Center Perspective examining a recent study by the Berkman
Center for Internet and Society and finds it wanting. The Berkman Study was
specifically requested by the Federal Communications Commission to "conduct an
independent expert review of existing literature and studies about broadband
deployment and usage throughout the world." According to Phoenix Center Chief
Economist Dr. George S. Ford, because the Berkman Center incorrectly
interprets the findings of its own model to draw the wrong conclusions about
the impact of so-called "open access" policies on broadband consumption, the
Berkman Study is so flawed that it cannot be relied upon to formulate public
policy.

Dr. Ford demonstrates, using standard econometric techniques, that the
"Berkman Study first improperly estimates its econometric model and then
incorrectly interprets the results from it. The error in the interpretation is
significant. While the [Berkman] Study's authors verbally conclude that open
access policies stimulate increased consumption of broadband, the econometric
model they rely upon shows the opposite -- open access reduces the consumption
of broadband."

Dr. Ford said his goal was to determine whether Berkman's statistical analysis
could withstand professional scrutiny and be relied upon by policymakers.
"Regrettably, the answer is no," he concludes. He said he would leave the
merits of whether the FCC should reinstitute an aggressive infrastructure
unbundling regime under current market conditions to other commentators. The
FCC's deadline for public comment on the Berkman study is Monday, November
16th.

"The Berkman Study's authors are befuddled by their own modeling effort.
Accordingly, policymakers would be remiss to accord the Berkman Study any
probative weight, particularly with regard to the positive or negative effects
of unbundling policies under current market conditions," says Dr. Ford.

Dr. Ford notes, for example, that Berkman's analysis includes a downward
sloping supply curve that implies the network operators provide less broadband
when prices rise. "Intuitively, this result makes little sense, violates the
law of supply and muddles interpretation," he says.

"The economic and econometric analysis used in the Berkman Study to support
its 'most significant finding' that unbundling improves broadband consumption
is embarrassingly bad. The analysis is so convoluted that even the Study's
authors cannot understand the results. The Berkman Study claims that 'open
access' stimulates broadband consumption, but the correct interpretation of
its own evidence is that unbundling reduces broadband consumption," concludes
Dr. Ford. As such, "given the multitude of technical flaws" in the Berkman
Study, "how much credibility the FCC accords the Berkman Study in the end will
provide a clear bellwether of the Commission's commitment to the intellectual
rigor it purports to want."

Phoenix Center Perspective 09-05: Whoops! Berkman Study Shows "Open Access"
Reduces Broadband Consumption, may be downloaded free from the Phoenix
Center's web page at:
http://www.phoenix-center.org/perspectives/Perspective09-05Final.pdf.

The Phoenix Center is a non-profit 501(c)(3) organization that studies broad
public-policy issues related to governance, social and economic conditions,
with a particular emphasis on the law and economics of telecommunications and
high-tech industries.

Phoenix Center for Advanced Legal & Economic Public Policy Studies
5335 Wisconsin Avenue, NW
Suite 440
Washington, D.C. 20015
Tel: (+1) (202) 274-0235
Fax: (+1) (202) 318-4909
E-mail: info@phoenix-center.org
Web Page: www.phoenix-center.org

SOURCE The Phoenix Center

Lawrence J. Spiwak of The Phoenix Center, +1-202-274-0235