Telstra-Report of Gregory Sidak

Before the
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
In the Matter of )
)
Assessment of Telstra’s Unconditioned Local )
Loop Service and Line Sharing Service )
Monthly Charge Undertakings )
EXPERT REPORT OF J. GREGORY SIDAK
Qualifications
Introduction
I. Government Subsidy of an Activity in the Economy Requires Proof of a Positive

Externality
A. In the Absence of Externalities, Economic Efficiency Requires That the Price of a
Service Reflects the Marginal Cost of Providing That Service
1. Allocative Efficiency
2. Productive Efficiency
3. Dynamic Efficiency
B. Statutory Obligations Require That the Price of a Service Reflect Its Incremental
Cost
1. Long-Term Interest of End-users
2. Direct Costs of Providing the Access Service
3. Promotion of Efficient Investment
C. By Requiring All of Telstra’s Customers to Share Telstra’s Incremental Cost of
Providing ULLS, the ACCC’s Proposal Violates the Incremental Cost Test for
Cross-Subsidization
II. The ACCC’s Has Failed to Provide Evidence of an Externality in the Use of ULLS by
Access Seekers
A. The ACCC’s Proposal Improperly Subordinates Consumer Welfare to Competitor
Welfare
B. The ACCC Incorrectly Applies Option Value Analysis to Inflate Its Assessment
of the Positive Externalities in the Use of ULLS by Access Seekers
C. The ACCC Posits Positive Externalities in the Use of ULLS by Access Seekers
That Are Contradicted by the Empirical Evidence on Mandatory Unbundling from
Comparable Nations
C R I T E R I O N E C O N O M I C S
-2-
1. The United States

2. The United Kingdom
3. Canada
4. Germany
5. Summary
D. The ACCC and Other Regulatory Bodies Have Scrutinized the Existence of
Positive Externalities to Justify Government Intervention in Similar Contexts
E. The ACCC Illegitimately Engages in a Legislative Function of Taxation and
Appropriation Rather than a Regulatory Function of Setting Wholesale Prices in
Relation to the Cost of Service
F. The ACCC Violates Ramsey-Boiteux Principles for Pricing and Taxation
G. The ACCC Ignores Whether Intermodal Competition Obviates the Imposition of a
New Regime of Mandatory Access at Regulated Prices Set Below Cost
Conclusion
Appendix A: Curriculum Vitae of J. Gregory Sidak
QUALIFICATIONS
1. My name is J. Gregory Sidak. I am Visiting Professor of Law at Georgetown
University Law Center; founder of Criterion Economics, L.L.C., an economic consulting firm in
Washington, D.C.; and founding U.S. editor of the Journal of Competition Law & Economics, an
international peer-reviewed journal published by the Oxford University Press. My work concerns
antitrust policy, the regulation of network industries, and constitutional issues regarding
economic regulation.
2. I was Deputy General Counsel of the U.S. Federal Communications Commission
from 1987 to 1989, and Senior Counsel and Economist to the Council of Economic Advisers in
the Executive Office of the President of the United States from 1986 to 1987. As an attorney in
private practice with Covington & Burling in Washington, D.C., I worked on numerous antitrust
cases and federal administrative, legislative, and appellate matters concerning
telecommunications and other regulated industries. From 1992 through 2005, I was a resident
-3-
scholar at the American Enterprise Institute for Public Policy Research (AEI), where I directed
AEI’s Studies in Telecommunications Deregulation and held the F.K. Weyerhaeuser Chair in
Law and Economics. From 1993 to 1999, I was a Senior Lecturer at the Yale School of
Management, where I taught a course on telecommunications regulation with Dean Paul W.
MacAvoy.
3. I have been a consultant to more than 20 companies in the telecommunications,
media, and computing industries in North America, Europe, Asia, and Australia. They include
Alcatel, Bell Atlantic Corporation, BellSouth Corporation, BT (British Telecommunications plc),
CanWest Global Communications Corporation, Comsat Corporation, Deutsche Telekom AG,
Eircom plc (formerly Telecom Eirann), GTE Corporation, Ericsson, France Telecom, Hongkong
Telecommunications Limited, Microsoft Corporation, National Association of Broadcasters,
Nippon Telegraph and Telephone Corporation, NTT West, NTT DoCoMo, Portugal Telecom,
Qwest Communications, Recording Industry Association of America, SBC Communications
Inc., Siemens, Telecom Italia, Telefónica de España, Telstra Corporation Limited, The Walt
Disney Company, United States Telecom Association, Verizon Communications, Verizon
Wireless, and Videsh Sanchar Nigam Limited. I have also been a consultant to the Canadian
Competition Bureau and the Antitrust Division of the U.S. Department of Justice on competition
matters concerning telecommunications, and to the Republic of Mexico in the World Trade
Organization dispute between the United States and Mexico concerning trade in international
telecommunication services.
4. I am a member of the U.S. Advisory Board of NTT DoCoMo, Japan’s largest
wireless telecommunications company. In that capacity, I meet twice annually with the CEO and
-4-
senior management of DoCoMo to discuss strategic business, technology, and regulatory matters
concerning wireless telecommunications.
5. I have written numerous books. With Jerry A. Hausman, I am completing The
Failure of Good Intentions: Is Regulation or Competition the Future of American
Telecommunications? (forthcoming Cambridge University Press 2006). With Richard A. Posner
and Frank H. Easterbrook, I am writing Antitrust Law: Cases and Materials (forthcoming 3d ed.
West Publishing 2006). With Dan Maldoom, Richard Marsden, and Hal J. Singer, I am the co-
author of Broadband in Europe: How Brussels Can Wire the Information Society (Springer
2005). I am the author of Foreign Investment in American Telecommunications (University of
Chicago Press 1997). With Daniel F. Spulber, I am co-author of Deregulatory Takings and the
Regulatory Contract: The Competitive Transformation of Network Industries in the United States
(Cambridge University Press 1997) and Protecting Competition from the Postal Monopoly (AEI
Press 1996). With William J. Baumol, I am the co-author of Toward Competition in Local
Telephony (MIT Press 1994) and Transmission Pricing and Stranded Costs in the Electric Power
Industry (AEI Press 1995). I am the co-editor of Competition and Regulation in
Telecommunications: Examining Germany and America (Kluwer Academic Press 2000), and I am
the editor of Is the Telecommunications Act of 1996 Broken? If So, How Can We Fix It? (AEI
Press 1999), and Governing the Postal Service (AEI Press 1994).
6. I have published approximately seventy scholarly articles in journals, including the
American Economic Association Papers and Proceedings, Antitrust Law Journal, California
Law Review, Columbia Law Review, Contributions in Economic and Policy Research, Harvard
International Law Journal, Journal of Competition Law & Economics, Journal of Network
Industries, Journal of Political Economy, New York University Law Review, Review of Industrial
-5-
Organization, Stanford Law Review, Supreme Court Economic Review, University of Chicago
Law Review, Virginia Tax Review, Yale Law Journal, and Yale Journal on Regulation, as well as
opinion essays in the New York Times, Wall Street Journal, and other business periodicals. I am
the co-author of the chapter on remedies and the interface between antitrust and sector-specific
regulation in the Handbook of Telecommunications Economics. I am ranked seventh among the
top 1000 legal authors on the Social Science Research Network (SSRN) in terms of number of
downloads of scholarly papers. My writings have been translated into Japanese, Chinese,
Korean, and Spanish.
7. I have testified before committees of the U.S. Senate and House of
Representatives on regulatory and constitutional law matters. My writings on antitrust,
regulation, and constitutional law have been cited by the Supreme Court of the United States, the
lower federal and state supreme courts, state and federal regulatory commissions, and the
European Commission. In United States v. Microsoft Corporation, decided in June 2001, my
article “Antitrust Divestiture in Network Industries” was the first work of legal scholarship
quoted by the U.S. Court of Appeals for the District of Columbia Circuit. In Verizon
Communications Inc. v. FCC, decided by the Supreme Court of the United States in May 2002,
both the majority and dissenting opinions quoted my writings on telecommunications regulation.
8. I earned A.B. (1977) and A.M. (1981) degrees in economics and a J.D. (1981), all
from Stanford University. I was a member of the Stanford Law Review. Following law school, I
clerked for Judge Richard A. Posner during the judge’s first term on the U.S. Court of Appeals for
the Seventh Circuit.
-6-
9. The views expressed here are mine and not those of the Georgetown University
Law Center, which does not take institutional positions on specific legislative, regulatory,
adjudicatory, or executive matters.
INTRODUCTION
10. I have been asked by Telstra Corporation Ltd. (Telstra) to provide my expert
opinion on the economic soundness of the decision by the Australian Competition and Consumer
Commission (ACCC) to change its existing policy that permits Telstra to recover all of the
specific costs of unconditioned local loop service (ULLS) in the prices that Telstra may charge to
the users of ULLS only. I begin by explaining that government subsidization of any activity is
justified only in the presence of externalities. In the absence of externalities, economic efficiency
requires prices to be subsidy-free. Because the ACCC has failed to demonstrate the existence of
externalities in the use of ULLS by access seekers, there is no basis for a massive subsidy of the
kind contemplated by the ACCC’s proposal. I find that the ACCC’s proposal would reduce
economic welfare by harming the long-term interest of end-users, by thwarting the recovery of
the direct costs of providing service, and by distorting decisions for efficient investment.
I. GOVERNMENT SUBSIDY OF AN ACTIVITY IN THE ECONOMY REQUIRES PROOF OF A

POSITIVE EXTERNALITY
11. In this section, I explain why economic efficiency requires that the price of a
service reflects its incremental cost in the absence of an externality. An externality is defined as
the indirect effect of a consumption activity or a production activity on the consumption set of a
-7-
consumer, the utility function of a consumer, or the production function of a producer.1
Competitive outcomes are considered socially optimal if externalities are not present in the
economy. In such outcomes, prices reflect the marginal cost of production. Prices that exhibit
this property are said to be “subsidy-free.” Government intervention, whether it takes the form of
a subsidy (for positive externalities) or a tax (for negative externalities), is necessary only when
prices do not accurately reflect the marginal social benefits of consuming the service. Because
externalities are the exception rather than the rule in an economy, and because they are difficult
to quantify, the burden of proof to justify interference with market-determined prices rests with
the regulator. That is, the proper default assumption is that the marginal private benefit of
consuming a service is equal to the marginal social benefit of consuming that service.
12. The ACCC’s practice to date has been to allow Telstra to recover its ULLS-
specific costs from ULLS lines. ULLS-specific costs are the incremental costs of systems for
qualifying and ordering ULLS—that is, costs that are directly attributable to ULLS and are not
shared with other wholesale or retail services. The first basis for such a policy is economic
efficiency in general and the principle of cost causation in particular. The second basis is the
ACCC’s statutory duty under the Trade Practices Act of 1974, as amended. An implicit
assumption for both bases is the lack of a positive externality in the use of ULLS by an access
seeker.
A. In the Absence of Externalities, Economic Efficiency Requires That the Price of a

Service Reflects the Marginal Cost of Providing That Service
13. In competitive outcomes, prices approach the marginal cost of production. The
marginal cost pricing rule states that price is set according to the demand curve at a level of
1. THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 263 (John Eatwell, Murray Milgate & Peter Newman,
eds., MacMillan Press 1991).
-8-
production where marginal cost equals marginal revenue.2 If the firm’s marginal costs change,
all else constant, then the firm’s level of production will change in response. If some factor alters
the firm’s cost schedule for a specific product, the firm will respond by modifying its level of
production for that product. Therefore, holding demand constant, the costs specific to a firm’s
production determine the level of output that it produces.
14. Marginal cost pricing, and therefore cost causation, is an essential component to
the theory of welfare economics. Welfare theory states that a competitive economy—that is, an
economy where prices reflect marginal costs—will result in the efficient allocation of resources
and, consequently, the maximization of society’s welfare.3 Regulatory action is justified only
when a specific market imperfection is evident and when the benefit from correcting that market
imperfection exceeds the cost of properly regulating the market.4 If a market imperfection is not
apparent, or if the benefits of correcting that imperfection are small, then intervention risks
causing more harm than good to the economy.
15. If any ULLS-specific costs were absorbed into the prices of non-ULLS services,
then ULLS would be under-priced relative to its costs. Pricing below marginal cost is
undesirable because it introduces three forms of economic inefficiency: allocative, productive,
and dynamic.5
2. See, e.g., MICHAEL KATZ & HARVEY ROSEN, MICROECONOMICS 209-11 (McGraw-Hill 3rd ed. 1998)
[hereinafter KATZ & ROSEN, MICROECONOMICS]; JOSEPH E. STIGLITZ, PRINCIPLES OF MICROECONOMICS 284-85,
339-41 (W.W. Norton & Co 2d ed. 1997) (discussing marginal cost pricing under both perfect and imperfect
competition); ANDREU MAS-COLELL, MICHAEL D. WHINSTON & JERRY R. GREEN, MICROECONOMIC THEORY 140-
43 (Oxford University Press 1995) (rigorously deriving the marginal cost pricing decision under various production
functions).
3. See, e.g., KATZ & ROSEN, supra note 2, at 398-99.
4. Id.
5. Antitrust cases in network industries can present particularly subtle tensions between these three distinct
forms of economic efficiency. See Howard A. Shelanski & J. Gregory Sidak, Antitrust Divestiture in Network
Industries, 68 U. CHI. L. REV. 1, 16-31 (2001) (discussing allocative, productive, and dynamic efficiency in the
context of fashioning remedies in the Microsoft case).
-9-
1. Allocative Efficiency
16. Allocative inefficiency arises when too much of a service is consumed in the
sense that the resources employed to produce the marginal units of the service exceed the value
that consumers derive from those units. When the marginal cost of producing a service exceeds
the marginal value that consumers derive from the service, society as a whole would benefit if
less of the service were produced. The reduced production level would allow resources to be
redeployed to produce other services that consumers value more highly. Pricing a service below
its marginal cost of production results in allocative inefficiency because some consumers (those
whose valuations exceed the established price but are less than the marginal cost of producing
the service) choose to purchase the service even though their marginal valuation of the service is
less than the marginal cost of producing the service. Although those who purchase the service
that is priced below cost benefit from the low price, their benefit comes at the expense of
consumers of other products. The costs of producing other products, and thus the prices of these
products, could be reduced if production resources were redeployed to more highly valued uses.
Most importantly, on balance, society as a whole would gain if the allocative inefficiency were
eliminated by ensuring that prices do not fall below marginal production costs.6
2. Productive Efficiency
17. Productive inefficiency arises when a service is produced by a firm that is not the
least-cost provider of the service. Pricing below marginal cost can introduce productive
inefficiency by rendering unprofitable the operation of the most efficient producers.7 Industry
6. See, e.g., KATZ & ROSEN, supra note 2, at 390-391.

7. To illustrate this point, consider a setting where there are two potential producers, firm A and firm B, each
of which operates with constant unit production costs. Suppose firm B is the least-cost producer because its marginal
cost of production is 6 while firm A’s marginal cost is 7. If firm A charges a price of 4 for its product, firm B cannot
profitably match this (below-cost) price, even though it is the least-cost provider of the service. Consequently,
below-cost pricing results in production by a high-cost supplier in this setting, as it can more generally.
- 10 -
costs increase, and thus the net benefits to society decline, when below-cost pricing limits or
precludes production by the least-cost supplier.
3. Dynamic Efficiency
18. Dynamic inefficiency arises when the level of investment in research and
development that maximizes the net value to society is not undertaken. When one firm prices a
service below the cost of producing the service, the profit that other firms anticipate from
supplying the service is reduced. Consequently, firms may decide to devote research and
development efforts to other services rather than to the service that is priced below cost.
Although such a reallocation of investment in research and development will increase profit, it
may reduce the net benefits that accrue to society as a whole.8
B. Statutory Obligations Require That the Price of a Service Reflect Its Incremental
Cost
19. The general purpose of Part XIC of the Telecommunications Amendment of the
Trade Practices Act 1997 is to require the ACCC to promote the long-term interest of end-users.9
A key component of promoting the long-term interest of end-users is to allow the access provider
to recover the direct costs of providing access service.10 The ACCC is also statutorily required to
encourage the economically efficient use of, and investment in, telecommunications
8. To illustrate this point, return to the simple setting considered in note 7 supra, where firm A’s marginal cost
is 7 but it sets a price of 4. Now suppose that firm B could reduce its marginal cost from 6 to 5 by incurring
negligible research and development expenditures. Absent the below-cost pricing by firm A, firm B would undertake
the research and development expenditures because the expenditures would increase its profit by reducing its
operating costs. However, firm B will not undertake the socially beneficial investment when firm A charges a unit
price of 4, because firm B cannot operate profitably in the industry even when its unit costs are reduced to 5.
Consequently, below-cost pricing eliminates a firm’s incentives to undertake socially desirable research and
development expenditures in this setting, as it can more generally.
9. Access Pricing Principles—Telecommunications, A Guide, ACCC, July 31, 1997, at 3-10 (available at
http://www.accc.gov.au/content/item.phtml?itemId=324346&nodeId=file4236572b6a015&fn=Access%20pricing%
20principles.pdf) [hereinafter Access Pricing Guide].
10. Id. at 10.
- 11 -
infrastructure.11 The distribution of ULLS-specific costs over lines other than existing ULLS
lines contradicts the statutory principles set forth in Part XIC.
1. Long-Term Interest of End-users
20. Part XIC requires the ACCC to seek the long-term interest of end-users in
determining whether access prices are reasonable. The ACCC has stated that the long-term
interest of end-users “will, in general, be promoted by lower prices (that are sustainable), higher
quality of service, and greater choice of products.”12 The ACCC allows the recovery of ULLS-
specific costs from access seekers. Therefore, the allocation of ULLS costs over lines other than
existing ULLS lines would reduce the cost that the access seeker must bear. This cost allocation
policy would directly result in increased prices paid by the end-user. Because this increased price
for end-users would directly result from an ACCC cost allocation decision (unlike Telstra’s costs
of complying with a request for access). Because it would raise prices for Telstra customers who
in no way participated in the pertinent cost causation, this allocation of ULLS-specific costs over
other lines clearly violates the ACCC’s statutory duty to promote the long-term interest of end-
users.
2. Direct Costs of Providing the Access Service
21. The ACCC has stated that access prices are set such that the access provider
recovers the direct costs of providing the access service.13 The ACCC clearly stated that “direct
costs are those costs necessarily incurred (caused by) the provision of access.”14 ULLS-specific
costs result directly from Telstra’s provision of ULLS to access seekers. Telstra therefore has the
statutory right to recover those costs.
11. Id. at 7-9.

12. Id. at 5.
13. Id. at 4.
14. Id. at 10.
- 12 -
3. Promotion of Efficient Investment
22. Part XIC also requires the ACCC to encourage the economically efficient use of,
and investment in, telecommunications infrastructure. The ACCC has interpreted this statutory
requirement to mean that “firms have the appropriate incentives to invest, innovate, improve the
range and quality of services, increase productivity, and lower costs through time.”15 As
discussed in section I.A.1. above, the allocation of ULLS-specific costs to other lines would
decrease economic efficiency, thereby clearly violating the ACCC’s statutory duty.
C. By Requiring All of Telstra’s Customers to Share Telstra’s Incremental Cost of

Providing ULLS, the ACCC’s Proposal Violates the Incremental Cost Test for
Cross-Subsidization
23. In its ULLS Draft Decision, the ACCC argues that reasonable ULLS monthly
charges should consist only of a contribution to network costs and a contribution to ULLS-
specific costs.16 With respect to ULLS-specific costs, the ACCC argues that ULLS costs should
be recovered from a larger base of customers than the base of ULLS customers only.17 Because
all consumers would benefit from the allegedly lower prices from greater unbundling, the ACCC
posits incorrectly, all consumers should bear the ULLS costs. The ACCC argues that, so as long
as the decrease in prices is more than the added cost per line across all users, the benefits will
outweigh the costs. By allowing access seekers to pay less than the incremental costs they
impose on Telstra for providing ULLS, the ACCC is subsidizing competitive entry by raising the
prices of all customers, including those who do not migrate from Telstra to a competitor that uses
ULLS.
15. Id. at 7.
16. Australian Competition and Consumer Commission, Assessment of Telstra’s ULLS and LSS Monthly
Charge Undertakings, Draft Decision, at 23 (public version, Aug. 2005) [hereinafter ULLS Draft Decision].
17. Id.
- 13 -
24. Cross-subsidy in a regulatory context typically involves misallocation or shifting
of costs from an unregulated, competitive service (for which returns are uncertain) to a regulated
service subject to rate-of-return regulation (for which returns are guaranteed). In a frequently
cited article, Professor Gerald Faulhaber proposed two tests for the presence of cross-subsidy:
the incremental cost test and the stand-alone cost test.18 To satisfy the incremental cost test,
incremental revenues from a service or a combination of services must exceed incremental costs
of that service or combination of those services. To satisfy the stand-alone cost test, incremental
revenues from a service or a combination of services must be equal to or less than the stand-
alone costs of that service or combination of those services. Professor Faulhaber shows
mathematically that, under the assumption that the firm breaks even so that its revenues precisely
equal economic costs, these two tests for cross-subsidy are equivalent. When applied to a non-
regulated service, that assumption is violated (revenues may exceed economic costs), and only
the incremental cost test is relevant.
25. The ACCC’s refusal to allow Telstra to recover fully the incremental costs
associated with providing ULLS to access seekers violates the incremental cost test, as
incremental revenues from providing a service (ULLS) to access seekers would not exceed
incremental costs of that service (ULLS-specific costs). The result would be a transfer of wealth
from customers who do not choose a competitive carrier to customers who choose a competitive
carrier. Telstra would be forced to subsidize the entry of rivals in a competitive market by raising
the prices of its retail offerings to all customers, including those who do not choose a competitive
carrier. The ACCC would compel Telstra to produce the opposite of a margin squeeze—call it a
margin wedge—that would give access seekers a lower input cost and a higher retail price. Such
18. Gerald R. Faulhaber, Cross-Subsidization: Pricing in Public Enterprises, 65 AM. ECON. REV. 966, 967
(1975).
- 14 -
a policy could be justified only in the presence of a positive externality in the use of ULLS by
access seekers.
II. THE ACCC’S HAS FAILED TO PROVIDE EVIDENCE OF AN EXTERNALITY IN THE USE OF
ULLS BY ACCESS SEEKERS
26. Many parts of the ACCC’s proposal for the recovery of ULLS-specific costs
employ unsound economic reasoning. The resulting hodgepodge is intellectually indefensible as
a matter of economic policy. If implemented, the ULLS Draft Decision would harm the long-
term interests of end-user and thus turn the ACCC’s primary legislative mandate on its head. The
most glaring deficiency in the ACCC’s proposal is the failure to demonstrate empirically the
existence of a positive externality. Its failure to do so undermines the entire argument for
subsidy.
A. The ACCC’s Proposal Improperly Subordinates Consumer Welfare to Competitor

Welfare
27. Under section 152AB(1) of the Trade Practices Amendment
(Telecommunications) Act 1997, the ACCC’s highest duty is to protect the long-term interests of
end-users. That is to say, the ACCC’s first obligation is to the ultimate retail consumers of
telecommunications services. The ACCC can declare that mandatory access be made available to
competitors of a vertically integrated firm that owns a bottleneck facility that is a critical input in
the production of the telecommunications service that is ultimately sold to end-users. This
essential facilities condition leads to the familiar problem of the pricing of inputs sold to
competitors, which has been perhaps the central question confronting telecommunications
regulators for at least the past decade.
28. Put differently, the ACCC polices both retail markets and wholesale markets. This
duality of responsibilities is now the norm for regulators around the world, and it has repeatedly
presented in a variety of countries an intellectual dilemma of enormous consequence: When does
- 15 -
the regulator, acting in the belief that greater use of the incumbent’s bottleneck facility by access
seekers will increase retail competition, cross the line such that the impetus for the regulator’s
policy making and implementation becomes the short-term interests of competitors rather than
the long-term interests of end-users? In other words, when does the regulator forsake consumer
welfare for competitor welfare as the animating principle of access regulation in
telecommunications?
29. It is clear that the ACCC has crossed the line in this proceeding and is
preoccupied with competitors rather than consumers. This inversion of priorities is evident from
the implausible story that the ACCC weaves about cost causation. It seems that consumers as a
whole, not access seekers specifically, are the ones who should properly pay for ULLS-specific
costs because it is the regulator’s edict (not the access seeker’s use of the unconditioned local
loop) that “causes” ULLS-specific costs, and it is consumers generally (not merely the access
seeker) who benefit from a particular access seeker’s use of that unconditioned local loop. The
ACCC describes the many links in this chain of causation as follows:
It is worth commenting here on one argument consistently made by Telstra. It suggests

that allocative efficiency requires that the consumer taking a ULL pay the costs of the
ULLS-specific investment because they are the ones who ‘caused’ it and they are the
ones who ‘benefit’ from it. As discussed above, the consumer using a ULL does not
benefit to any greater or lesser extent than do all market participants. The ‘cause’ of the
ULLS-specific costs is the regulatory regime which deems it necessary to correct for
market failure.19
The notion that there is universal consumer benefit whenever a single access seeker uses an
unconditioned local loop is frivolous. However, it is critical to a regulator’s objectives of
reducing an access seeker’s cost of an unconditioned local loop to the maximum extent possible,
so as to encourage access-based entry that would be marginally uneconomic at a higher ULL
19. ULLS Draft Decision, supra note 16, at 50.
- 16 -
price. The regulator may then claim credit for facilitating the appearance of competition, using
the number of access-based entrants as a measure of regulatory success. Without the ACCC’s
implausibly large positive externality to consumers from the leasing of unconditioned local
loops, and without the proposition that regulators rather than access seekers are the actual parties
who cause the costs associated with Telstra’s compliance with the policy of mandatory access to
customer access network, the ACCC could not slice off a slab of the costs that access seekers
would otherwise have to pay under an access pricing regime that employed correct analysis of
cost causation and of the marginal contribution of a single entrant to the long-term interests of
end-users.
30. Competition advances consumer welfare and economic efficiency. But
competition is a process, not a preconceived outcome among a set of players. Competition is not
naïvely measured by counting the number of firms in a market or by computing their market
shares. Judge Richard Posner has observed that “[c]ompetition is the allocation of resources in
which economic welfare (consumer welfare, to oversimplify slightly) is maximized; it is not rivalry
per se, or a particular form of rivalry, or some minimum number of competitors.”20 In a 1983
decision, he stated: “The policy of competition is designed for the ultimate benefit of consumers
rather than of individual competitors, and a consumer has no interest in the preservation of a
fixed number of competitors greater than the number required to assure his being able to buy at
the competitive price.”21
20. Roland Mach. Co. v. Dresser Indus., 749 F.2d 380, 395 (7th Cir. 1984) (Posner, J.) (citing Product Liab.
Ins. Agency, Inc. v. Crum & Forster Ins. Cos., 682 F.2d 660, 663-65 (7th Cir. 1982) (Posner, J.)).
21. Marrese v. American Academy of Orthopaedic Surgeons, 706 F.2d 1488, 1497 (7th Cir. 1983) (Posner, J.)
(citing Products Liability Ins. Agency v. Crum & Forster Insurance Cos., 682 F.2d 660, 663-64 (7th Cir. 1982)
(Posner, J.); and University Life Ins. Co. of America v. Unimarc Ltd., 699 F.2d 846, 853 (7th Cir. 1983) (Posner,
J.)). In Products Liability, Chief Judge Posner wrote in 1982: “The consumer does not care how many sellers of a
particular good or service there are; he cares only that there be enough to assure him a competitive price and
quality.” 682 F.2d at 664. In another antitrust decision the following year, he wrote that “competition in the antitrust
- 17 -
31. The correct economic methodology for assessing market power requires
knowledge of price elasticities of demand and supply, not merely market shares. But even this
framework must be supplemented by the understanding that effective competition may occur not
only simultaneously among multiple firms producing the same product, but also sequentially
over an extended period to achieve prominence in a market through the introduction of new
products that are differentiated by their technological superiority. Regulators (who may be
motivated by short-term political considerations) may claim to serve the immediate interests of
consumers by undertaking or threatening regulatory intervention that expropriates investor
wealth, but such a policy dampens the incentive of incumbent firms and entrants alike to
undertake the risky investments that make robust competition possible in technologically
dynamic markets over an extended period of time.
B. The ACCC Incorrectly Applies Option Value Analysis to Inflate Its Assessment of
the Positive Externalities in the Use of ULLS by Access Seekers
32. The ACCC argues that its policy—not the use of the line by a competitor of
Telstra—is what causes the cost of providing access:
The ACCC believes that [expert economist Henry] Ergas and Telstra have taken an
overtly narrow approach in their assessment of the causes of the specific costs. It is the
ACCC’s view that specific costs are incurred in order to provide consumers with an
option to move suppliers. This option is valuable to all consumers as it leads to greater
competition and lower prices. Consequently the appropriate cost recovery method is to
spread the costs over the largest customer group possible.22
Next, the ACCC presents a “corollary” to its “finding” that mandatory unbundling of ULLS and
LSS would lead to greater competition:
Telstra is able to price above cost because the natural monopoly characteristics of the
CAN mean that prospective purchasers do not have an alternative to Telstra, i.e. they lack
sense signifies not the preservation of all existing competitors but the maintenance of a sufficient number to assure
that consumers get the best possible quality of product at the lowest possible price.” University Life, 699 F.2d at 852
(citing Products Liability, 682 F.2d at 663-64).
22. ULLS Draft Decision, supra note 16, at 40.
- 18 -
an outside option. The purpose of the ULLS and LSS declarations, and consequently the
purpose of the specific costs, is to provide such an outside option to all consumers.23
In a later section, I analyze the ACCC’s assumption that consumers lack outside options when
choosing a carrier for voice service. Here, I focus on the ACCC’s incorrect use of option values
to inform access pricing decisions.
33. The option value of end-user access, which is manifested in the universal service
obligation (USO), is quite different from the option value that the ACCC claims that the end-user
derives when an access seeker can use the customer access network (CAN) at a subsidized price.
The traditional rationale for a USO is that it forces the incumbent to give the consumer an option
to use the network—hence the distinction between access and usage. Mere access is valuable.
Because all users benefits from more people being on the network, the cost of the USO gets
absorbed into the prices that all users pay, rather than being fully borne by those whose access is
most costly to supply. Here, the ACCC is substituting “unbundled access of competitors to the
loop” for “universal service.” But the next steps of the argument are far more tenuous than the
familiar USO story.
34. In the academic literature on option values and the pricing of access, the option
value is properly characterized as a common cost of the network.24 There are two common
applications of option values in this area. The first application concerns the exchange between an
23. Id. (citing Louis Makowski & Joseph M Ostroy, Perfect Competition and the Creativity of the Market, 39 J.
OF ECON. LIT. 479-535 (2001)).
24. For a detailed analysis of the scope of the unbundling decision and the access pricing decision by a
telecommunications regulator, see Jerry A. Hausman & J. Gregory Sidak, A Consumer-Welfare Approach to
Mandatory Unbundling of Telecommunications Networks, 109 YALE L. J. 417 (1999). For a review of
unbundling in other contexts, see J. Gregory Sidak & Hal J. Singer, Interim Pricing of Local Loop Unbundling in
Ireland: Epilogue, 4 J. NETWORK INDUS. 119 (2003); J. Gregory Sidak & Allan T. Ingraham, Mandatory
Unbundling, UNE-P, and the Cost of Equity: Does TELRIC Pricing Increase Risk for Incumbent Local Exchange
Carriers?, 20 YALE J. REG. 389 (2003); J. Gregory Sidak & Hal J. Singer, How Can Regulators Set Nonarbitrary
Interim Rates? The Case of Local Loop Unbundling in Ireland, 3 J. NETWORK INDUS. 273 (2002); Thomas M.
Jorde, J. Gregory Sidak, & David J. Teece Innovation, Investment, and Unbundling, 17 YALE J. REG. 1 (2000).
J. Gregory Sidak & Daniel F. Spulber, The Tragedy of the Telecommons: Government Pricing of Unbundled
Network Elements Under the Telecommunications Act of 1996, 97 COLUM. L. REV. 1081 (1997).
- 19 -
access seeker and an incumbent for access to some network functionality. The access seeker
would be willing to pay an access rate that exceeded the marginal cost of the self-provided
functionality because much of the cost of providing the functionality is a sunk and irreversible
cost. If the access seeker elects to lease that functionality from the incumbent, the access seeker
is under no obligation to pay this rate during the entire useful life of the network element that
supports that functionality. By leasing from the incumbent rather than making investments in its
own facilities, the access seeker does not take the risk that the price of the leased element will
decrease, or that a substitute will develop to supplant the existing technology and thereby reduce
the economic life of the element. The access seeker preserves the option of abandoning the
incumbent’s unbundled functionality in favor of self-provisioning by leasing the functionality
from the incumbent instead of deploying its own facilities. This option has a positive value that
adds to the amount that an access seeker is willing to pay for the unbundled element.25 Because
of this value, it is efficient for the access seeker to pay more than merely the incremental cost of
providing access.
35. A second application (and the one more closely related to the concept of the USO)
concerns the existence of network externalities in telecommunications, which could justify
access pricing that deviates from marginal costs. For example, network externalities in mobile
services exist because a consumer’s mobile subscription has a positive effect on other parties
(both fixed and mobile subscribers). These parties benefit in various ways from the decision of a
consumer to subscribe to mobile service. They benefit from any call they can place to the new
subscriber. They also benefit from any call that the new subscriber places to them. Additionally,
25. For a further discussion of the theory of the option value, see Jerry A. Hausman, The Effect of Sunk Cost in
Telecommunications Regulation, in THE NEW INVESTMENT THEORY OF REAL OPTIONS AND ITS IMPLICATION FOR
TELECOMMUNICATIONS ECONOMICS (James Alleman & Eli Noam, eds. Kluwer Academic Publishers 1999).
- 20 -
they benefit from the ability to contact, and to be contacted by, the new subscriber—the so-called
option value. This option value is in addition to the value that the parties place on the actual call
as they exercise the option. Since callers to mobiles therefore benefit from the called party’s
decision to subscribe to a mobile network, the economically efficient charge they pay for the call
must reflect this benefit.26 On the other hand, if the mobile subscriber were to bear the full costs
of the termination, he or she would be less likely to subscribe to the mobile service—even in
situations in which such a subscription would enhance overall economic welfare due to the
positive externalities obtained.
36. The problem with the ACCC’s crude application of option theory in this case is
that “unbundled access of competitors to the loop” does not create the same positive externality
as a USO. Compare the real externality of a new user joining a wireless network to the purported
externality of an existing fixed-line customer choosing a competitive fixed-line carrier that
repackages Telstra’s network functionalities. The addition of a new wireless user has a positive
effect on existing wireless users, whereas the change of carriers by an existing fixed-line user has
no effect on existing wireline users. The ACCC incorrectly believes that a migration of fixed-line
customers from Telstra to competitive carriers will result in lower prices for (infra-marginal)
Telstra customers. But as I demonstrate below, the empirical evidence to date indicates that
access seekers have not passed on any savings to their customers, either because the access price
and the marketing costs exceeds the arbitrage opportunity or because the access seeker keeps 100
percent of the arbitrage opportunity. In summary, the positive externality created by mandatory
access is illusory.
26. See, e.g.,OFTEL, REVIEW OF THE CHARGE CONTROL ON CALLS TO MOBILES 4 (Sept. 26, 2001), at 37,
available at http://www.ofcom.org.uk/static/archive/oftel/publications/mobile/ctm0901.pdf [hereinafter OFTEL
STUDY].
- 21 -
C. The ACCC Posits Positive Externalities in the Use of ULLS by Access Seekers That
Are Contradicted by the Empirical Evidence on Mandatory Unbundling from
Comparable Nations
37. Mandatory unbundling has been justified by regulatory agencies in various
countries based on the following rationales: (1) competition in retail markets is desirable, (2)
competition in retail markets cannot be achieved without mandatory unbundling, (3) mandatory
unbundling promotes future facilities-based investment, and (4) competition in wholesale access
markets is desirable. I focus on the unbundling experience in the United States, the United
Kingdom, Canada, and Germany. For each country, I examine whether mandatory unbundling at
total element long-run incremental cost (TELRIC) was substantiated in practice. I rely on data
from the relevant regulatory agency that implemented the unbundling regime.27
1. The United States
38. The Telecommunications Act of 1996 ordered the FCC to introduce competition
into the local services market by forcing incumbent local exchange carriers (ILECs) to provide
entrants access to the ILECs’ existing facilities at regulated rates. In the United States,
mandatory unbundling does not appear to have decreased local service prices measurably—
despite the fact that CLECs had more than 13 percent of the nation’s access lines by 2003.
According to the FCC, the average residential rate for local service provided by ILECs in urban
areas before taxes, fees, and miscellaneous charges increased from U.S. $13.71 in 1996 to U.S.
$14.55 in 2002.28 Hence, mandatory unbundling does not appear to have decreased retail prices
in the way that the FCC intended. The availability of wholesale access appears to have
discouraged CLECs from investing in their own facilities over time. Robert Crandall, Allan
27. The material for this section draws upon J. Gregory Sidak & Jerry A. Hausman, Did Mandatory
Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries, 1 J. COMPETITION L. & ECON. 173
(2005).
28. Trends in Telephone Service, FCC Industry Analysis Division, 2003 Report, at 13-1 (rel. Aug. 2003)
(available at http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/trend803.pdf).
- 22 -
Ingraham, and Hal Singer found that the share of CLEC lines that are facilities-based is lower in
states where the UNE rental rates are lower, which suggests that unbundling decreases facilities-
based competition in the short term.29 James Eisner and Dale E. Lehman found that states with
lower UNE-P rates would have more non-facilities-based entry. 30
2. The United Kingdom
39. Mandatory unbundling in the United Kingdom was first considered by the former
telecommunications regulator, the Office of Telecommunications (Oftel), in 1996. Oftel
recognized that mandatory unbundling would undermine the goals of dynamic efficiency.
According to Oftel, from 1996 through the middle of 2001, the time at which BT was required to
begin unbundling, prices for residential service decreased by approximately 20 percent.31 In
contrast, prices for residential service slightly increased after BT was required to unbundle.
Similarly, the price of telecommunications service for businesses decreased by 40 percent
between 1996 and mid-2001, but it has not declined measurably since mandatory unbundling
was implemented. From 1994 through 2000, telecommunications investment in the United
Kingdom increased substantially. Approximately £4 billion was invested by the
telecommunications industry in 1994, accounting for 4 percent of total investment in the United
Kingdom that year.32 By 2000, nearly £12 billion was invested by the telecommunications
industry. Between 2000 and 2001, telecommunications investment in the United Kingdom fell by
approximately £4 billion. BT’s share of both residential and business voice revenues has
29. Robert W. Crandall, Allan T. Ingraham & Hal J. Singer, Do Unbundling Policies Discourage CLEC
Facilities-Based Investment?, Topics in Economic Analysis and Policy Section, 4 BERKELEY ELECTRONIC JOURNALS
in ECONOMIC ANALYSIS AND POLICY (2004).
30. James Eisner & Dale E. Lehman, Regulatory Behavior and Competitive Entry, Presented at the 14th
Annual Western Conference Center for Research in Regulated Industries, June 28, 2001.
31. Oftel, The UK Telecommunications Industry Market Information: 2001/02, Mar. 2003, at 7 (available at
http://www.ofcom.org.uk/static/archive/oftel/publications/market_info/ 2003/ami0303.pdf).
32. OFCOM, STRATEGIC REVIEW OF TELECOMMUNICATIONS: PHASE I ANNEX F-J 35 (Spring 2004) (available
at http://www.ofcom.org.uk/codes_guidelines/telecoms/strategic_ review_telecoms/?a=87101#remit).
- 23 -
decreased significantly since 1993. BT’s share of residential voice revenues, which was nearly
100 percent in 1993, declined steadily to just below 70 percent in 2001.33 Since 2001, when BT
was required to unbundle the local loop, BT’s share of residential revenues has remained
constant at 70 percent. Entrants controlled 24.0 percent of the revenues for residential voice
services by March 2001,34 and 39.5 percent of the business revenues from voice services by
March 2001.35 The high level of facilities-based competition that predated the decision-making
process for local loop unbundling raises serious issues as to whether mandatory unbundling was
even needed for voice or broadband services in the United Kingdom by the time that Oftel
mandated it in November 1999. The industry structure facing U.K regulators was unique in the
sense that competition from cable telephony emerged before mandatory local loop unbundling
was ordered, let alone implemented.
3. Canada
40. The Canadian Radio-Television and Telecommunications Commission (CRTC)
regulates telecommunications providers in Canada. In May 1997, the CRTC effectively opened
Canada’s entire telecommunications market to competition.36 In Decision 97-8, the CRTC
established unbundling rules, including price ceilings on prices that ILECs may charge CLECs
for facilities, price floors on prices that ILECs may charge for business local exchange services,
and the establishment of mandatory unbundling of local loops.37 The CRTC believed that
mandatory unbundling would “stimulate” competition in telecommunications and concluded that
33. Id.
34. Oftel, The UK Telecommunications Industry Market Information: 2001/02, Mar. 2003, , at 26 (tbl. 8)
(available at http://www.ofcom.org.uk/static/archive/oftel/publications/market_info/2003/ami0303.pdf).
35. Id. at 32 (tbl. 13).
36. See, e.g., William T. Stanbury, Chronology of Events Related to the Canadian Telecommunications
Industry: January 1992 to March 1995, in THE FUTURE OF TELECOMMUNICATIONS POLICY IN CANADA 489 (STEVEN
GLOBERMAN, WILLIAM T. STANBURY & THOMAS A. WILSON EDS., 1995) (reviewing the industry structure facing
Canadian regulators in the early 1990s).
37. CRTC, Telecom Decision CRTC 97-8, May 1, 1997.
- 24 -
competition in telecommunications would not be possible without mandatory unbundling.38
CLECs increased their share of local access lines in the business sector from 1.8 percent in 1998
to 8.6 percent in 2002, but their share in residential lines reached only 1.4 percent by 2002.39
Since 1999, the price of telephone service has increased at a faster rate than the general rate of
inflation. Because the spread between the CPI and the telephone index narrowed since the price
cap was put into effect, it appears that mandatory unbundling is not having the desired effect of
lowering the retail price of telephone service in Canada. From 1998 to 2001, CLECs’ capital
expenditure was lower in absolute value than that for ILECs, but the capital expenditure per
revenue dollar for CLECs was 20 to 30 percent higher than for ILECs during the same period.40
This result is expected because CLECs were just getting started, and with “lumpy investment”
CLECs had to invest more per dollar of revenue. In 2002, however, CLECs’ capital expenditure
per revenue dollar decreased by 20 percent (below the ILECs’ comparable ratio), as demand for
all services declined. While CLEC investment per revenue dollar decreased, ILEC capital
expenditure per revenue dollar remained relatively stable over this time period.41 Despite the
increase in the absolute number of CLEC-owned access lines, Canadian CLECs became
increasingly dependent on unbundled loops. From 1999 to 2002, the share of unbundled loops
increased by roughly 23 percent and the share of resold lines decreased by roughly 22 percent.
Because the share of CLEC-owned lines remained relatively constant from 1999 to 2002, most
of the substitution was from resale to local loop unbundling.
38. Id. See also William T. Stanbury, Chronology of Events Related to the Canadian Telecommunications
Industry: January 1992 to March 1995, in THE FUTURE OF TELECOMMUNICATIONS POLICY IN CANADA 489 (Steven
Globerman, William T. Stanbury & Thomas A. Wilson eds., 1995).
39. Id. at 44 tbl. 4.15, 45 tbl. 4.17.
40. CRTC, Report to the Governor in Council: Status of Competition in Canadian Telecommunications
Markets—Deployment/Accessibility of Advanced Telecommunications Infrastructure and Services (2003), at 19 fig.
4.5, 20 fig. 4.6.
41. Id. at 19 fig. 4.5.
- 25 -
4. Germany
41. Germany’s Telecommunications Act of 1996 requires that a dominant operator
allow a new entrant to interconnect to its network.42 The 1996 legislation gave the Regulator of
Telecommunications and Post (RegTP) the authority to regulate and monitor the German
telecommunications industry. Through mandatory unbundling in Germany, regulators correctly
did not attempt to achieve marginal cost-based pricing,43 as the high fixed costs and common
costs of telecommunications networks preclude such an outcome. In particular, German
regulators envisioned a telecommunications industry in which each supplier in the market
strategically considers the existence and reaction of its competitors when making its own
decisions.44 Furthermore, regulators recognized that barriers to entry into the telecommunications
industry would decline over time.45 Since mandatory unbundling was implemented in Germany,
prices for fixed-line telecommunications services have declined substantially. Since January
1999, prices for fixed-line telecommunication service in Germany have declined by roughly 15
percent.46 Prices for all Internet services, including dial-up Internet access, declined by 35
42. Federal Ministry of Posts and Telecommunications, Telecommunications Act at §33-35 (Oct. 1996)
(available at www.bfd.bund.de/information/tkgeng.pdf) [hereinafter German Telecommunications Act].
43. See, e.g., Christopher Engel, The Path to Competition for Telecommunications in Germany, in
COMPETITION AND REGULATION IN TELECOMMUNICATION: EXAMINING GEMRANY AND AMERICA 17 (J. Gregory
Sidak, Christopher Engel, & Gunter Knieps ed., Kluwer Academic Publishers 2001) [hereinafter, Engel Path to
Competition].
44. Id. For example, the Telecommunications Act states that telecommunications regulators shall report every
two years to the “Monopolies Commission on the question as to whether there is workable competition in the
telecommunications markets.” German Telecommunications Act, supra note 42, at §81. Therefore, workable, and
not necessarily perfect, competition was considered acceptable.
45. See, e.g., Engel Path to Competition, supra note 43, at 17. Engel states that the German Act’s reference to
workable competition is evidence that German regulators considered the possibility that multiple
telecommunications services, such as fixed-line and mobile, would compete in the same market. Thus, barriers to
entry would be reduced. For a discussion of the potential integration between fixed and mobile telephone and data
services in Germany, see, e.g., Hasan Alkas, Entwicklungen und regulierungspolitische Auswirkungen der Fix-
Mobil Integration, Dec. 2002 (available for purchase at: http://www.wik.org/content_e/diskus/210.htm).
46. Federal Statistics Office, Price Index for Telecommunications Services (available at
http://www.destatis.de/indicators/e/tpi001aj.htm).
- 26 -
percent from 2000 through 2004.47 In 1995 and 1996, the years before and during Germany’s
decision to require unbundling, Deutsche Telekom invested over €4 billion annually in its fixed
telecommunications network. In 1997, the year after Germany’s 1996 Act, DT’s investment in its
fixed network fell from €4.26 billion to €2.35 billion. Annual investment in DT’s fixed network
remained below €3 billion until 2001, the height of the industry’s growth, when it increased to
€3.83 billion. Investment subsequently fell to €2.61 billion in 2002 and €1.6 billion in 2003.
Because DT’s investment in its fixed network assets was largest in the years just before and
during Germany’s decision to unbundle, it is difficult to accept the hypothesis that mandatory
unbundling stimulated incumbent investment activity.
5. Summary
42. With a few possible exceptions, the rationales for mandatory unbundling do not
appear to be substantiated in practice. In the United States, United Kingdom, Canada, and
Germany, the existence of facilities-based competition between cable providers and ILECs
proves that the barriers to entry in local communications, to the extent they exist, are not
insurmountable. Finally, competition from CLECs generally does not appear to lower retail
prices following the imposition of mandatory unbundling.
D. The ACCC and Other Regulatory Bodies Have Scrutinized the Existence of Positive
Externalities to Justify Government Intervention in Similar Contexts
43. As noted above, the ACCC’s decision to abandon its existing policy on the cost
recovery for ULLS hinges on its assertion that there is a positive externality for end-users if they
(or Telstra’s investors) subsidize seekers of access to Telstra’s customer access network. Simply
to hypothesize the existence of a positive externality in telecommunications does not prove that it
47. Id.
- 27 -
exists. The standard practice of regulators to date, including the ACCC, has been to require more
than mere hypotheses of positive externalities.
44. The existence of positive externalities in mobile communications might justify
mobile termination rates that are set by regulation below incremental costs. The value of a
mobile connection for an existing customer increases as new customers are added to the mobile
network. In its Mobile Services Review proceeding, the ACCC required all parties involved in the
mobile termination rate proceeding to provide detailed empirical evidence on the existence (or
nonexistence) of positive externalities:
In this instance, no party has provided the Commission with any evidence or analysis to
suggest that the profit-maximising incentive the Commission expects would drive pricing
decisions for mobile termination and retail mobile services would drive mobile operators
to set a structure of prices that would conform with an efficient use of
telecommunications infrastructure. Accordingly, the Commission does not believe it has
been presented with any compelling arguments with regard to mobile network
externalities that suggest declaration would not promote an efficient use of the
infrastructure used to provide telecommunications services.48
The ACCC rejected calls for government intervention in the setting of mobile termination rates
due to the lack of empirical evidence of a positive externality. In that instance, the ACCC
recognized that market-determined prices would reflect the marginal social benefit in the absence
of a positive externality. Indeed, the ACCC also demanded quantification of the “net welfare
gain” from regulation (in addition to quantification of the externality) as a condition to intervene:
During this inquiry, no party has attempted to quantify the size of the net welfare gain or
loss generated by the existing set of prices for the mobile termination, mobile retail or
other related services.49
48. Australian Competition and Consumer Commission, Mobile Services Review: Mobile Terminating Access
Service, Final Decision, at 169 (June 2004).
49. Id. at 155
- 28 -
If the ACCC were to hold itself to the same standard in this proceeding, it would reject its own
proposal to inject a massive subsidy without strong evidence of a positive externality in the use
of ULLS by access seekers.
45. The ACCC’s lack of empirical corroboration of the positive externality that is the
foundation for its change in policy stands in sharp contrast to the way that other regulators have
evaluated positive externalities. For example, to inform its decision on whether to regulate
mobile termination rates, Oftel relied on an elaborate consumer welfare model that turned largely
on estimates of the own-price elasticity of demand for wireless service, the marginal private
benefits of wireless use, and the marginal social benefits of wireless use.50 The major U.K.
mobile network operators (MNOs)—BT Cellnet, One2One, Orange, and Vodafone—submitted
economic testimony that contained empirical estimates of the relevant demand elasticities.
Another major issue facing Oftel was whether above-cost pricing of mobile termination rates
was justified on the basis of network externalities. Network externalities in mobile services exist
because a consumer’s mobile subscription has a positive effect on other parties (both fixed and
mobile subscribers), for the reasons explained earlier. These parties benefit in various ways from
the decision of a consumer to subscribe to mobile service. They benefit from any call they can
place to the new subscriber. They also benefit from any call that the new subscriber places to
them. Additionally, they benefit from the ability to contact, and to be contacted by, the new
subscriber—the so-called “option value.”
46. The difficult question is how to value the network externality. This valuation
determines whether the difference between the price and the costs of fixed-to-mobile termination
50. OFTEL, REPORTS ON REFERENCES UNDER SECTION 13 OF THE TELECOMMUNICATIONS ACT 1984 ON THE
CHARGES MADE BY VODAFONE, O2, ORANGE AND T-MOBILE FOR TERMINATING CALLS FROM FIXED AND MOBILE
NETWORKS, ch. 1, §§ 1.12(a)-(d) (Jan. 22, 2003), available at http://www.competition-
commission.org.uk/rep_pub/reports/2003/fulltext/475c1.pdf.
- 29 -
can be explained as a reflection of the network externality or instead as an exercise of market
power by MNOs. Economists Jeffrey Rohlfs and James M. Griffin have suggested an approach
that can be used to provide lower and upper bounds for the value of the network externality.51
They explain that the ratio of marginal social benefit to marginal private benefit—which has
become known as the Rohlfs-Griffin factor—is likely to lie in the range of one to two. Oftel’s
determination of the fixed-to-mobile termination rate was based on consultation from Rohlfs,
whose early work at Bell Labs on network externalities resulted in the eventual publication of the
seminal paper on the subject.52 In particular, Oftel assumed on the basis of economic reasoning
that the Rohlfs-Griffin factor is between 1.3 and 1.7.53 Because this new subscriber can be
reached over the fixed network, Oftel reasoned, some of the benefits to existing network
members of being able to contact a new subscriber have already been captured.54
47. In short, Oftel used sophisticated economic analysis to reject a claim of large
positive externalities for end-users. The ACCC’s assertion that consumers would benefit from a
large positive externality is this case is not presented with a comparable level of economic rigor.
E. The ACCC Illegitimately Engages in a Legislative Function of Taxation and

Appropriation Rather than a Regulatory Function of Setting Wholesale Prices in
Relation to the Cost of Service
48. The ACCC explicitly proposes that other customers pay for some of the recovery
of the specific costs of ULLS. The ACCC neglects to consider that, if those other customers are
unwilling to pay higher prices for the services that they currently purchase from Telstra, they will
switch to other suppliers or stop consuming the service altogether. In that case, Telstra’s
51. See Jeffrey Rohlfs, Economically Efficient Bell-System Pricing, BELL LABORATORY DISCUSSION PAPER,
No. 138, 16 (1979); James M. Griffin, Welfare Implications of Externalities and Price Elasticities for
Telecommunications Pricing, 64 REV. ECON. & STAT. 59, 64 (1982).
52. Jeffrey Rohlfs, A Theory of Interdependent Demand for Communication Services, 5 BELL J. ECON. 16
(1974).
53. Oftel Study, supra note 26, at 66-67.
54. Id.
- 30 -
investors will be left to absorb the loss from the unrecovered portion of specific costs of ULLS.
The regulator’s recommendation to Telstra to seek recovery of ULLS costs from price-sensitive
customers will be as useless as the broom with which King Canute tried to sweep back the tide.
The entry subsidy for Telstra’s competitors will be paid by Telstra itself.
49. The establishment of the ACCC’s proposal for cost recovery does not resemble an
exercise of either the power to set just and reasonable rates or the power to enforce competition
law. Rather, the ACCC’s plan resembles a legislative choice concerning taxation and
appropriation. It creates an off-budget funding source for a program that the ACCC believes will
promote economic welfare in Australia. The ACCC’s goal is qualitatively different from setting
the price for one of Telstra’s regulated services to ensure that it is just and reasonable in light of
the long-run incremental cost of providing that service on a forward-looking basis. This novel
subsidization of access seekers gives fresh meaning to Judge Richard Posner’s famous term
“taxation by regulation.”55
50. An analogy from the United States may be help to make the point. In Process Gas
Consumers Group v. Pennsylvania P.U.C., the Pennsylvania Supreme Court held that revenue
derived from the Pennsylvania Public Utilities Commission’s surcharges on natural gas used as
boiler fuel had to be accounted for through a reduction in the regulated rates of the natural gas
utilities that imposed those surcharges and could not be appropriated for a state-wide energy
conservation plan.56 The court held that Pennsylvania’s Public Utility Code “does not empower
the PUC to create funds or to mandate programs to utilize those funds.”57 In the case of cost
recovery for ULLS, the ACCC aspires to create funds (overcharges to Telstra’s other customers
55. Richard A. Posner, Taxation by Regulation, 2 BELL J. ECON. & MGMT. SCI. 22-50 (1971).
56. 511 Pa. 88, 511 A.2d 1315 (1986).
57. 511 Pa. at 99, 511 A.2d at 1321.
- 31 -
or expropriation of the capital of Telstra’s investors) so that it can mandate a program to utilize
those funds (the subsidization of access seekers). The ACCC would appropriate value from
Telstra’s customers and investors so that Telstra’s competitors could receive below-cost prices
for wholesale services and compete against higher retail prices charged by Telstra.
51. The access regime that the ACCC seeks to manipulate is not a creature of
regulatory fiat. It was enacted by the Australian Parliament. Those same legislators could have
established an explicit program to subsidize the cost of entry into local telecommunications.
They did not do so. It follows with greater force that they did not enact a tax on some or all of
Telstra’s customers to pay for unspecified access subsidies that the ACCC might one day
determine to be good economic policy. In light of the Parliament’s having not enacted legislation
to do either of these two things, the ACCC cannot arrogate to itself fiscal powers to supplement
the regulatory and law enforcement powers that the Parliament precisely delegated to it. The
ACCC cannot do indirectly what it cannot do directly: raise and appropriate funds for
government programs without the required legislative authorization.
F. The ACCC Violates Ramsey-Boiteux Principles for Pricing and Taxation
52. The ACCC’s analysis of Ramsey-Boiteux pricing is completely backwards. First,
the ACCC permits cost recovery on products where the demand elasticity or price-cap regulation
would deny Telstra the opportunity to recover common costs through markups above
incremental cost. This is “reverse Ramsey pricing.”
53. A second kind of Ramsey problem in that the spreading of the alleged “common
costs” of ULLS across various large defined customer bases for other services is completely ad
hoc and is not rooted in any principles of public finance on the design of an efficient tax system.
More fundamentally, why is the asserted positive externality from competition in the access
network (which the ACCC critically argues is not incremental to the cost of any given service)
- 32 -
something that should be recovered in the prices of services? Lump sum or ad valorem taxes on
telecommunications goods are only several of the many arrows in the quiver of the public
treasury when designing an efficient tax system. Why does the ACCC not consider proposing
that the cost of subsidizing competitor access to ULLS be funded by the least distortionary tax,
which might mean relying on broad-based income or value-added taxes? The likely answer
involves (1) the ACCC’s efforts to effect its desired subsidy for access seekers without seeking
legislative approval for it (which would be necessary if the funding mechanism were a broad-
based tax); (2) the ACCC’s understanding that forcing Telstra to the be tax collector for this
industrial policy will cause it to bear the revenue shortfalls when the tax cannot be passed on to
other customers (either because of preexisting regulatory constraints or limitations inherent in the
own-price elasticities of demand for the other services on which the ACCC would have Telstra
attempt to raise prices), and (3) the added assistance to Telstra’s competitors when regulation
compels Telstra to raise its prices.
G. The ACCC Ignores Whether Intermodal Competition Obviates the Imposition of a

New Regime of Mandatory Access at Regulated Prices Set Below Cost
54. Intermodal competition in telecommunications is anathema to regulators. The
existence of intermodal competition exists threatens the regulator’s need to regulate. Consumers
unquestionably view intermodal providers such as cable companies, wireless carriers, and voice
over Internet protocol (VoIP) providers as alternatives to wireline providers like Telstra.
55. In most developed nations, including Australia, wireless voice service constrains
the price of wireline voice service. Wireless service increasingly serves as a competitive
constraint for fixed-line operators. For example, in February 2004, the U.S. Current Population
Survey of the Census Bureau included a special supplement that addressed the topic of wireless
phone usage. From this survey, the Census Bureau estimated that about 6 percent of all
- 33 -
households rely on wireless phones as their only telephone service, a substantial increase from its
previous estimate in November 2001 of slightly over 1 percent.58 And the rate at which wireless
phones are displacing wireline phones appears to be increasing.59 For households headed by
someone under 24 years of age, 18.0 percent had a cellular telephone only; 9.6 percent of
households headed by someone between 25 and 34 years of age had cellular telephones only.60
These facts suggest that wireless voice service constrains the pricing of wireline voice service.
56. In addition to survey data, there are many academic studies that substantiate the
existence of wireless-wireline substitution. In a December 2004 article in Information Economics
and Policy, Gary Madden and Grant Coble-Neal examined the interchangeability between fixed-
line and mobile telephony using a global telecommunications panel dataset comprised of 58
countries from 1995 to 2000.61 The authors concluded that mobile and fixed-line telephone
subscription are competitive alternatives, with a one percent increase in the fixed price yielding a
0.12 percent mobile subscription growth increase.
57. In another paper Réka Horváth and Dan Maldoom analyzed survey data on over
7,000 British telephone users to measure the relationship between mobile phone ownership and
fixed telephone usage.62 Using 2001 survey data, they compute the predicted spending of mobile
users on fixed service if they did not have a mobile phone, as well as the predicted expenditure
58. The survey was administered to roughly 32,000 households during February 2004. The survey asked about
purchases and bills including spending on cellular phone and landline. In particular, the surveys asked whether (1)
the household had a bill for local or long distance calls in the past three months and (2) the household had a bill for a
cellular phone in the past three months. See Clyde Tucker, Brian Meekins, J. Michael Brick, & David Morganstein,
Household Telephone Service and Usage Patterns in the United States in 2004, presented at the 2004 Annual
Meeting of the American Association for Public Opinion Research.
59. C. Cosentino, Standard & Poor’s, FCC Data Supports Standard & Poor’s View of Local Telephony
Competition, Feb. 4, 2005, at 1-2.
60. Clyde Tucker, J. Michael Brick & David Morganstein, Household Telephone Service and Usage Patterns in
the U.S. in 2004, Bureau of Labor Statistics, at 5, available at http://www.ris.org/uploadi/editor/st040130.pdf.
61. Gary Madden & Grant Coble-Neal, Economic Determinants of Global Mobile Telephony Growth 16
INFORMATION ECONOMICS & POLICY 519-34 (2004).
62. Réka Horváth & Dan Maldoom, Fixed-mobile substitution: a simultaneous equation model with qualitative
and limited dependent variables, DotEcon Discussion Paper, Aug. 2002.
- 34 -
of non-mobile users if they decided to use a mobile phone. They find that for both groups the
effect of (actual or potential) mobile phone ownership is a similar reduction in the size of the
fixed bill—the expected reduction in the fixed bill as a result of getting a mobile for the whole
sample was around £74 per quarter as of the third quarter 2001.63 As the market facts and
academic literature confirm, wireless operators constrain the price of wireline service through
wireless-wireline substitution.
58. Cable telephony and voice over Internet protocol (VoIP) are also emerging as
constraining forces in select geographic markets worldwide. For example, the number of cable
telephony subscribers in the United States is rapidly increasing. Further, the take rates for cable
telephony where it is available are high and the number of cable telephony subscribers is rapidly
increasing. According to the equity research firm Bernstein Research, cable-company VoIP
subscribers in the United States are projected to overtake their circuit switched subscribers in
2006.64 Bernstein projects that cable voice services will reach 16.4 percent penetration of total
U.S. households by 2010 (equal to roughly 18 percent of addressable homes),65 with 19.5 million
cable telephony subscribers by 2010 (including both circuit-switched and IP-based lines), from a
base of only 2.8 million at the end of 2003 (nearly all circuit-switched).66 In any geographic
market served by an independent cable operator, such as Optus, Telstra’s wireline customers can
substitute to a rival telecommunications provider.
59. In addition to cable companies, VoIP is available from multiple independent
providers to anyone with potential access to a broadband connection to the Internet. VoIP is
63. Id. at 16.

64. Bernstein Research, U.S. Telecom and Cable: Faster Rollout of Cable Telephony Means More Risk for
RBOCs, Faster Growth for Cable, Dec. 17, 2003, at 1-3.
65. Id. at Exhibit 1 (projecting that 92 percent of total U.S. households will be passed by either VoIP or circuit-
switched systems by 2010).
66. Craig Moffett, et al., Bernstein Research Call, Cable and Telecom: VoIP Deployment and Share Gains
Accelerating; Will Re-Shape Competitive Landscape in 2005, at 2 (Dec. 7, 2004).
- 35 -
competitively priced and growing rapidly. For example, Skype provides global IP-to-IP and IP-
to-PSTN VoIP service. As of September 2005, Skype was adding approximately 150,000 users
per day, with over 167 million total downloads by September 2005.67 In September 2005, eBay
agreed to acquire Skype for approximately $2.6 billion, granting Skype the opportunity to
continue to grow rapidly.68 Thus, the market evidence shows that VoIP, whether it is delivered
by cable operators or by independent providers, has the potential to constrain the prices of
wireline operators.
CONCLUSION
60. The ACCC lacks any justification for injecting a massive new subsidy on
telecommunications consumers in Australia. The notion that the use of ULLS by access
providers generates positive externalities for all telecommunications consumers is incorrect is
theory and in practice. Access seekers incur large marketing expenses that prevent them from
passing any of the regulatory arbitrage opportunity—equal to the difference between retail rates
and the regulated wholesale rates—onto their customers. Empirical evidence from several
countries that have experimented with mandatory unbundling reveals that access seekers do not
pass on savings to their customers, and thereby do not impose a constraint on the pricing of
incumbent operators. Hence, the positive externality that the ACCC hypothesizes is illusory.
Without a clear demonstration of a positive externality in the use of ULLS by access seekers,
there is no basis for the massive new subsidy proposed by the ACCC.
67. Skype was downloaded 167,746,045 times by September 16, 2005 (available at http://www.skype.com/).
68. eBay to Acquire Skype, SKYPE PRESS RELEASE, Sept. 10, 2005 (available at
http://www.skype.com/company/news/2005/skype_ebay.html).
- 36 -
* * *
DECLARATION
I declare under penalty of perjury that the foregoing is true and correct.
J. Gregory Sidak
Date: 22 September 2005
- 37 -
APPENDIX A: CURRICULUM VITAE OF J. GREGORY SIDAK
J. GREGORY SIDAK
Georgetown University Law Center
6018 Hotung International Law Building
600 New Jersey Avenue, N.W.
Washington, D.C. 20001
United States of America
202–662–9934, jgsidak@aol.com
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=206474
E DUCATION
STANFORD UNIVERSITY, J.D., 1981; A.M. (Economics), 1981; A.B. with honors and distinction (Economics), 1977.
Associate Editor, Stanford Law Review. Myers Prize in Economics, 1977.
CURRENT E MPLOYMENT
GEORGETOWN UNIVERSITY LAW CENTER, Washington, D.C.: Visiting Professor of Law, 2005-present.
JOURNAL OF COMPETITION LAW & ECONOMICS, published by the Oxford University Press, Oxford, United Kingdom:
Founding editor, 2004-present.
CRITERION ECONOMICS, L.L.C., Washington, D.C.: Founder, 1999-present.
E MPLOYMENT HI STORY
AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH, Washington, D.C.: Resident Scholar and F.K.
Weyerhaeuser Fellow in Law and Economics Emeritus, 2002-05. Director, AEI Studies in Telecommunications
Deregulation, 1992-95. F.K. Weyerhaeuser Fellow in Law and Economics, 1995-2002. Resident Scholar, 1992-95.
YALE SCHOOL OF MANAGEMENT, New Haven, Connecticut: Senior Lecturer, 1993-99.
COVINGTON & BURLING, Washington, D.C.: Associate, 1989-92.
FEDERAL COMMUNICATIONS COMMISSION, Washington, D.C.: Deputy General Counsel, 1987-89.
COUNCIL OF ECONOMIC ADVISERS, EXECUTIVE OFFICE OF THE PRESIDENT, Washington, D.C.: Senior Counsel
and Economist, 1986-87.
THE BOSTON CONSULTING GROUP, INC., Los Angeles: Management Consultant, 1984-86.
O’MELVENY & MYERS, Los Angeles: Associate, 1982-84.
U.S. COURT OF APPEALS FOR THE SEVENTH CIRCUIT, Chicago: Law Clerk to Judge Richard A. Posner, 1981-82.
CORPORA TE B OARDS
NTT DOCOMO, Tokyo, Japan: Member, U.S. Advisory Board, 2002-present.
- 38 -
ACAD EMIC B OARDS
GLOBAL COMPETITION LAW CENTRE, COLLEGE OF EUROPE, Bruges, Belgium: Senior Fellow, 2004-present.
AUTHOR ED B OOKS
Antitrust Law: Cases and Materials, co-authored with Richard A. Posner and Frank H. Easterbrook (forthcoming 3d
edition West Publishing Co. 2006).
The Failure of Good Intentions: Is Regulation or Competition the Future of American Telecommunications?, co-authored with Jerry A.
Hausman (forthcoming Cambridge University Press 2006).
Broadband in Europe: How Can Brussels Wire the Information Society, co-authored with Dan Maldoom, Richard Marsden, and
Hal J. Singer (forthcoming Kluwer/Springer 2005).
Deregulatory Takings and the Regulatory Contract: The Competitive Transformation of Network Industries in the United States
(Cambridge University Press 1997), co-authored with Daniel F. Spulber. Chinese translation: Horizon Media Co.
Ltd. 2004.
Foreign Investment in American Telecommunications (University of Chicago Press 1997).
Protecting Competition from the Postal Monopoly (AEI Press 1996), co-authored with Daniel F. Spulber.
Transmission Pricing and Stranded Costs in the Electric Power Industry (AEI Press 1995), co-authored with William J.
Baumol.
Toward Competition in Local Telephony (MIT Press & AEI Press 1994), co-authored with William J. Baumol. Korean
translation: Korea Information Society Development Institute 1996.
E DITED B OOKS
Competition and Regulation in Telecommunications: Examining Germany and America (J. Gregory Sidak, Christoph Engel &
Günter Knieps, editors, Kluwer Academic Press 2000).
Is the Telecommunications Act of 1996 Broken? If So, How Can We Fix It? (J. Gregory Sidak, editor, AEI Press 1999).
Governing the Postal Service (J. Gregory Sidak, editor, AEI Press 1994).
J OURNAL ARTICLE S
Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries, 1 JOURNAL OF COMPETITION LAW &
ECONOMICS 173 (2005), co-authored with Jerry A. Hausman.
The Quasi War Cases—and Their Relevance to Whether “Letters of Marque and Reprisal” Constrain Presidential War Powers, 27
HARVARD JOURNAL OF LAW & PUBLIC POLICY 465 (2005).
The Future of the Postal Monopoly: American and European Perspectives After the Presidential Commission and Flamingo Industries,
28 WORLD COMPETITION 163 (2005), co-authored with Damien Geradin.
Überregulation without Economics: The World Trade Organization’s Decision in the U.S.-Mexico Arbitration on Telecommunications
Services, 57 FEDERAL COMMUNICATIONS LAW JOURNAL 1 (2004), co-authored with Hal J. Singer.
Do States Tax Wireless Services Inefficiently? Evidence on the Price Elasticity of Demand, 24 VIRGINIA TAX REVIEW 249 (2004), co-
authored with Allan T. Ingraham.
- 39 -
Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?, CONTRIBUTIONS IN ECONOMIC AND POLICY
RESEARCH, vol. 3, issue 1, article 3 (2004), co-authored with Jerry A. Hausman, available at
http://www.bepress.com/bejeap/contributions/vol3/iss1/art3/.
Should Regulators Set Rates to Terminate Calls on Mobile Networks?, 21 YALE JOURNAL ON REGULATION 261 (2004), co-
authored with Robert W. Crandall.
Competition Law for State-Owned Enterprises, 71 ANTITRUST LAW JOURNAL 479 (2003), co-authored with David E. M.
Sappington.
An Economic Theory of Censorship, 11 SUPREME COURT ECONOMIC REVIEW 81 (2003).
REMEDIES AND THE INSTITUTIONAL DESIGN OF REGULATION IN NETWORK INDUSTRIES, 2003 Michigan State DCL
Law Review 741 (2003).
Interim Pricing of Local Loop Unbundling in Ireland: Epilogue, 4 JOURNAL OF NETWORK INDUSTRIES 119 (2003), co-authored
with Hal J. Singer.
The Failure of Good Intentions: The WorldCom Fraud and the Collapse of American Telecommunications After Deregulation, 20 YALE
JOURNAL ON REGULATION 207 (2003).
Mandatory Unbundling, UNE-P, and the Cost of Equity: Does TELRIC Pricing Increase Risk for Incumbent Local Exchange
Carriers?, 20 YALE JOURNAL ON REGULATION 389 (2003), co-authored with Allan T. Ingraham.
Incentives for Anticompetitive Behavior by Public Enterprises, 22 REVIEW OF INDUSTRIAL ORGANIZATION 183 (2003), co-
authored with David E. M. Sappington.
The Price of Experience: The Constitution After September 11, 2001, 19 CONSTITUTIONAL COMMENTARY 37 (2002).
Does Bell Company Entry into Long-Distance Telecommunications Benefit Consumers?, 70 ANTITRUST LAW JOURNAL 463 (2002),
co-authored with Jerry A. Hausman and Gregory K. Leonard.
The Empirical Case Against Asymmetric Regulation of Broadband Internet Access, 17 BERKELEY TECHNOLOGY LAW JOURNAL
953 (2002), co-authored with Robert W. Crandall and Hal J. Singer.
The Pig in the Python: Is Lumpy Capacity Investment Used and Useful?, 23 ENERGY LAW JOURNAL 383 (2002), co-authored with
William J. Baumol.
Exporting Telecommunications Regulation: The U.S.-Japan Negotiations on Interconnection Pricing, 43 HARVARD INTERNATIONAL
LAW JOURNAL 317 (2002), co-authored with Jeffrey H. Rohlfs.
Is Structural Separation of Incumbent Local Exchange Carriers Necessary for Competition?, 19 YALE JOURNAL ON REGULATION
335 (2002), co-authored with Robert W. Crandall.
How Can Regulators Set Nonarbitrary Interim Rates? The Case of Local Loop Unbundling in Ireland, 3 JOURNAL OF NETWORK
INDUSTRIES 273 (2002), co-authored with Hal J. Singer.
The Legislator-in-Chief, 44 WILLIAM & MARY LAW REVIEW 1 (2002), co-authored with Vasan Kesavan.
Capital Subsidies, Profit Maximization, and Acquisitions by Partially Privatized Telecommunications Carriers, 26
TELECOMMUNICATIONS POLICY 287 (2002).
Why Did the U.S. Telecommunications Industry Collapse?, 28 INFOCOM REVIEW 17 (2002) (in Japanese).
The Efficient Allocation of Proceeds from a Utility’s Sale of Assets, 22 ENERGY LAW JOURNAL 233 (2001), co-authored with
Paul W. MacAvoy.
- 40 -
Acquisitions by Partially Privatized Firms: The Case of Deutsche Telekom and VoiceStream, 54 FEDERAL COMMUNICATIONS LAW
JOURNAL 1 (2001).
Antitrust Divestiture in Network Industries, 68 UNIVERSITY OF CHICAGO LAW REVIEW 1 (2001), co-authored with
Howard A. Shelanski.
Mr. Justice Nemo’s Social Statics, 79 TEXAS LAW REVIEW 737 (2001).
An Antitrust Rule for Software Integration, 18 YALE JOURNAL ON REGULATION 1 (2001).
Cable Modems and DSL: Broadband Internet Access for Residential Customers, 91 AMERICAN ECONOMIC ASSOCIATION PAPERS
AND PROCEEDINGS 302 (2001), co-authored with Jerry A. Hausman and Hal J. Singer.
True God of the Next Justice, 18 CONSTITUTIONAL COMMENTARY 9 (2001).
Residential Demand for Broadband Telecommunications and Consumer Access to Unaffiliated Internet Content Providers, 18 YALE
JOURNAL ON REGULATION 129 (2001), co-authored with Jerry A. Hausman and Hal J. Singer.
Are Public Enterprises the Only Credible Predators?, 67 UNIVERSITY OF CHICAGO LAW REVIEW 271 (2000), co-authored
with David E. M. Sappington.
Innovation, Investment, and Unbundling, 17 YALE JOURNAL ON REGULATION 1 (2000), co-authored with Thomas M.
Jorde and David J. Teece.
A Consumer-Welfare Approach to Mandatory Unbundling of Telecommunications Networks, 109 YALE LAW JOURNAL 417
(1999), co-authored with Jerry A. Hausman.
What Is Wrong with American Telecommunications?, MULTIMEDIA UND RECHT, Mar. 1999, at 15, co-authored with Paul
W. MacAvoy, reprinted in COMPETITION AND REGULATION IN TELECOMMUNICATIONS: EXAMINING GERMANY
AND AMERICA (J. Gregory Sidak, Christoph Engel & Günter Knieps, editors, Kluwer Academic Press 2000).
A General Framework for Competitive Analysis in Wireless Telecommunications, 50 HASTINGS LAW JOURNAL 1639 (1999),
co-authored with David J. Teece and Hal J. Singer.
Essential Facilities, 51 STANFORD LAW REVIEW 1185 (1999), co-authored with Abbott B. Lipsky, Jr. Spanish
translation republished as Facilidades esenciales, 27 IUS ET VERITAS 126 (2004).
The Petty Larceny of the Police Power, 86 CALIFORNIA LAW REVIEW 655 (1998) (review essay).
Deregulation and Managed Competition in Network Industries, 15 YALE JOURNAL ON REGULATION 117 (1998), co-
authored with Daniel F. Spulber.
Cyberjam: The Law and Economics of Internet Congestion of the Telephone Network, 21 HARVARD JOURNAL OF LAW &
PUBLIC POLICY 337 (1998), co-authored with Daniel F. Spulber.
Network Access Pricing and Deregulation, 6 INDUSTRIAL AND CORPORATE CHANGE 757 (1997), co-authored with
Daniel F. Spulber.
Givings, Takings, and the Fallacy of Forward-Looking Costs, 72 NEW YORK UNIVERSITY LAW REVIEW 1068 (1997), co-
The Tragedy of the Telecommons: Government Pricing of Unbundled Network Elements Under the Telecommunications Act of
1996, 97 COLUMBIA LAW REVIEW 1081 (1997), co-authored with Daniel F. Spulber.
Monopoly and the Mandate of Canada Post, 14 YALE JOURNAL ON REGULATION 1 (1997), co-authored with Daniel F.
Spulber.
- 41 -
Deregulatory Takings and Breach of the Regulatory Contract, 71 NEW YORK UNIVERSITY LAW REVIEW 851 (1996), co-
Pricing of Services Provided to Competitors by the Regulated Firm, 3 HUME PAPERS ON PUBLIC POLICY, No. 3, at 15 (1995),
co-authored with William J. Baumol.
Stranded Costs, 18 HARVARD JOURNAL OF LAW & PUBLIC POLICY 835 (1995), co-authored with William J. Baumol.
The Line-Item Veto Amendment, 80 CORNELL LAW REVIEW 1498 (1995).
Competition and Regulatory Policies for Interactive Broadband Networks, 68 SOUTHERN CALIFORNIA LAW REVIEW 1203
(1995), co-authored with Robert W. Crandall.
The Pricing of Inputs Sold to Competitors: Rejoinder and Epilogue, 12 YALE JOURNAL ON REGULATION 177 (1995), co-
authored with William J. Baumol.
The Pricing of Inputs Sold to Competitors, 11 YALE JOURNAL ON REGULATION 171 (1994), co-authored with William J.
Baumol.
Telecommunications in Jericho, 81 CALIFORNIA LAW REVIEW 1209 (1993) (review essay).
War, Liberty, and Enemy Aliens, 67 NEW YORK UNIVERSITY LAW REVIEW 1402 (1992).
Why Did President Bush Repudiate the “Inherent” Line-Item Veto?, 9 JOURNAL OF LAW & POLITICS 39 (1992), co-
authored with Thomas A. Smith.
The Inverse Coase Theorem and Declarations of War, 41 DUKE LAW JOURNAL 325 (1991).
To Declare War, 41 DUKE LAW JOURNAL 27 (1991).
Takeover Premiums, Appraisal Rights, and the Price Elasticity of a Firm’s Publicly Traded Stock, 25 GEORGIA LAW REVIEW
783 (1991), co-authored with Susan E. Woodward.
Corporate Takeovers, the Commerce Clause, and the Efficient Anonymity of Shareholders, 84 NORTHWESTERN UNIVERSITY
LAW REVIEW 1092 (1990), co-authored with Susan E. Woodward.
Four Faces of the Item Veto: A Reply to Tribe and Kurland, 84 NORTHWESTERN UNIVERSITY LAW REVIEW 437 (1990),
co-authored with Thomas A. Smith.
The President’s Power of the Purse, 1989 DUKE LAW JOURNAL 1162.
The Recommendation Clause, 77 GEORGETOWN LAW JOURNAL 2079 (1989).
The “New Payola” and the American Record Industry: Transactions Costs and Precautionary Ignorance in Contracts for Illicit
Services, 10 HARVARD JOURNAL OF LAW & PUBLIC POLICY 521 (1987), co-authored with David E. Kronemyer.
Debunking Predatory Innovation, 83 COLUMBIA LAW REVIEW 1121 (1983).
A Framework for Administering the 1916 Antidumping Act: Lessons from Antitrust Economics, 18 STANFORD JOURNAL OF
INTERNATIONAL LAW 377 (1982).
Antitrust Preliminary Injunctions in Hostile Tender Offers, 30 KANSAS LAW REVIEW 491 (1982).
The Deterrent Effect of Antitrust Enforcement, 89 JOURNAL OF POLITICAL ECONOMY 429 (1981), co-authored with
Michael K. Block and Frederick C. Nold.
- 42 -
Rethinking Antitrust Damages, 33 STANFORD LAW REVIEW 329 (1981) (student note).
The Cost of Antitrust Deterrence: Why Not Hang a Price Fixer Now and Then?, 68 GEORGETOWN LAW JOURNAL 1131
(1980), co-authored with Michael K. Block.
CHAPTER S IN B OOKS
European and American Approaches to Antitrust Remedies and the Institutional Design of Regulation in Telecommunications, in THE
HANDBOOK OF TELECOMMUNICATIONS ECONOMICS, volume 2 (Martin Cave, Sumit Kumar Majumdar & Ingo
Vogelsang, eds. North-Holland, forthcoming 2004), co-authored with Damien Geradin.
Remedies in Network Industries—A View from the United States, in REMEDIES IN NETWORK INDUSTRIES: EC COMPETITION
LAW VS. SECTOR-SPECIFIC REGULATION 255 (Damien Geradin ed., Intersentia 2004).
Competition Law for State-Owned Enterprises, in COMPETING WITH THE GOVERNMENT: ANTICOMPETITIVE BEHAVIOR
AND PUBLIC ENTERPRISES (Rick Geddes ed., Hoover Institution Press 2004), co-authored with David E. M.
Sappington.
The Failure of Good Intentions: The Collapse of American Telecommunications After Six Years of Deregulation, in SUCCESS AND
FAILURES IN REGULATING AND DEREGULATING UTILITIES: EVIDENCE FROM THE UK, EUROPE AND THE USA 1
(Colin Robinson ed., Edward Elgar 2004).
What Is Wrong with American Telecommunications?, in COMPETITION AND REGULATION IN TELECOMMUNICATIONS:

EXAMINING GERMANY AND AMERICA (J. Gregory Sidak, Christoph Engel & Günter Knieps, editors, Kluwer
Academic Press 2000), co-authored with Paul W. MacAvoy.
The Dismal Science of Law, 1992 PUBLIC INTEREST LAW REVIEW 121 (book review of DANIEL A. FARBER & PHILIP
P. FRICKEY, LAW AND PUBLIC CHOICE: A CRITICAL INTRODUCTION (1991)).
The Economic Perspective on Broadcasting Regulation, in THE NATIONAL ECONOMISTS CLUB READER 15 (Richard T. Gill
ed. 1991).
Two Factors That Reduce Record Company Profitability, 1987 ENTERTAINMENT, PUBLISHING AND THE ARTS
HANDBOOK 371, co-authored with David E. Kronemyer.
Risk and Responsibility, in 1987 ECONOMIC REPORT OF THE PRESIDENT 179, co-authored with Stephen J. DeCanio,
Arlene S. Holen, and Susan E. Woodward.
The Structure and Performance of the U.S. Record Industry, 1986 ENTERTAINMENT, PUBLISHING AND THE ARTS
HANDBOOK 263, co-authored with David E. Kronemyer.
N EWSPAPER AND MAGAZIN E ARTI CLES
The F.C.C.’s Duty, NEW YORK TIMES, Oct. 8, 2002, at A31.
Should Consumers Pay the “Stranded Costs” of Utility Companies?, INSIGHT, Nov. 9, 1998, at 24.
Voters Should Back State’s Besieged Law on Retail Competition, BOSTON SUNDAY HERALD, May 24, 1998, at 25.
Avoiding America’s Regulatory Mistakes in Hong Kong’s Telecoms Market, HONG KONG ECONOMIC JOURNAL, Aug. 29,
1997 (in Cantonese).
Telecommunications: America’s Investment Xenophobia, JOURNAL OF COMMERCE, Aug. 22 1997, at 8A
The line-item veto: two views; Next stop: Supreme Court, JOURNAL OF COMMERCE, Aug. 20, 1997, at 9A.
- 43 -
Antitrust and the Federal Software Commission, JOBS & CAPITAL, vol. 6, at 18 (winter 1997).
Stranded Cost Recovery Benefits Consumers, REGULATION, 1996 no. 2, at 12 (1996), co-authored with William J.
Baumol.
Let Utilities Recover Stranded Costs, WALL STREET JOURNAL, June 17, 1996, at A15, co-authored with William J.
Baumol.
Competition and the Postal Service, THE AMERICAN ENTERPRISE, vol. 7, no. 3, at 74 (May/June 1996).
When Competition Amounts to Taking, NATIONAL LAW JOURNAL, Apr. 1, 1996, at A19.
Post Office Monopoly: Unfair Market Practice, NATIONAL LAW JOURNAL, Oct. 23, 1995, at A23.
The Unregulated Infobahn, JOBS & CAPITAL, vol. 4, at 28 (summer 1995), co-authored with Robert W. Crandall,
reprinted in Australia in POLICY, vol. 11, no. 2, at 9 (winter 1995).
Stranded Cost Recovery: Fair and Reasonable, PUBLIC UTILITIES FORTNIGHTLY, May 15, 1995, at 20, co-authored with
William J. Baumol.
Telecommunications: Unleashing the Industry, THE AMERICAN ENTERPRISE, vol. 5, no. 5, at 42 (Sept./Oct. 1994).
Don’t Stifle Global Merger Mania, WALL STREET JOURNAL, July 6, 1994, at A18.
Telecommunications: The Big Picture, ROLL CALL, June 27, 1994, at 4 (supp.).
Broadcast News, THE AMERICAN ENTERPRISE, vol. 3, no. 2, at 70 (Mar./Apr. 1992).
The Veto Power: How Free Is the President’s Hand?, THE AMERICAN ENTERPRISE 58, vol. 2, no. 2 (Mar./Apr. 1991),
co-authored with Thomas A. Smith.
Spending Riders Would Unhorse the Executive, WALL STREET JOURNAL, November 2, 1989, at A18, col. 3.
How Congress Erodes the Power of the Presidency: The Appropriations Muzzle, WALL STREET JOURNAL, Feb. 6, 1989, at A8,
col. 3.
Marketplace Solution to Midair Collisions, WALL STREET JOURNAL, Mar. 2, 1987, at 20, col. 3.
MISCE LLANEOUS PUBLIC ATIONS
The Economics of Mail Delivery: A Comment, in GOVERNING THE POSTAL SERVICE 14 (J. Gregory Sidak, ed., AEI
Press 1994).
The Appropriations Power and the Necessary and Proper Clause, 68 WASHINGTON UNIVERSITY LAW QUARTERLY 651
(1990) (questioner for symposium panel discussion).
W ORKING PAPER S
The Optimal Price Floor for a Multiproduct State-Owned Enterprise (Mar. 2005).
When Does an Optional Tariff Not Lead to a Pareto Improvement? The Ambiguous Effects of Self-Selecting Nonlinear Pricing When
Demand Is Interdependent or Firms Do Not Maximize Profit, co-authored with John C. Panzar (Aug. 2005).
- 44 -
T ESTIMONY, GOVERNMENT REPORTS ,

AND BRIEFS AMICUS CURIAE
Supplemental Testimony of J. Gregory Sidak on behalf of PECO Energy Company, Joint Application of PECO Energy
Company and Public Service Electric and Gas Company for Approval of the Merger of Public Service Enterprise Group
Incorporated with and into Exelon Corporation, Pennsylvania Public Utility Commission, Dkt. No. A-110550F0160
(filed Aug. 26, 2005).
Rebuttal Testimony of J. Gregory Sidak on behalf of PECO Energy Company, Concerning the Appropriation of Non-
Regulated, Generation-Related Merger Synergies and Asset Sale Proceeds to Fund Rate Reductions by PECO Energy
Company, Joint Application of PECO Energy Company and Public Service Electric and Gas Company for Approval of
the Merger of Public Service Enterprise Group Incorporated with and into Exelon Corporation, Pennsylvania Public
Utility Commission, Dkt. No. A-110550F0160 (filed July 29, 2005).
Declaration of J. Gregory Sidak and Hal J. Singer on behalf of TCR Sports Broadcasting Holding, L.L.P., In the Matter
of Applications for Consent to the Assignment and/or Transfer of Control of Licenses Adelphia Communications
Corporation, (and subsidiaries, debtors-in-possession), Assignors, to Time Warner Cable Inc. (subsidiaries), Assignees;
Adelphia Communications Corporation, (and subsidiaries, debtors-in-possession), Assignors and Transferors, to
Comcast Corporation (subsidiaries), Assignees and Transferees; Comcast Corporation, Transferor, to Time Warner Inc.,
Transferee; Time Warner Inc., Transferor to Comcast Corporation, Transferee, Federal Communications Commission,
MB Dkt. No. 05-192 (filed July 21, 2005) (filed on behalf of the holding company for the Baltimore Orioles baseball
team).
Deposition of J. Gregory Sidak, RLH Industries, Inc. v. SBC Communications, Inc., Case No. 02 CC 16869, Superior Court of
California for the County of Orange (Sept. 2, 2004) (expert testimony for SBC Communications in antitrust litigation).
A Critical Review of Europe Economics’ Proposed Model for Estimating Operating Costs for a Hypothetically Efficient
Irish Telecommunications Carrier (prepared for eircom P.L.C. for submission to the Commission for Communications
Regulation, Republic of Ireland, Mar. 2004), co-authored with Jerry A. Hausman.
Competition in Broadband Provision and Its Implications for Regulatory Policy (prepared on behalf of the Brussels
Round Table (Alcatel, BT, Deutsche Telekom, Ericsson, France Telecom, Siemens, Telefónica de España, and Telecom
Italia) for submission to the European Commission, Oct. 15, 2003), co-authored with Dan Maldoom, Richard Marsden,
and Hal J. Singer.
Expert Report of J. Gregory Sidak, Arbitration Between Levicom International Holdings BV, Levicom Investments
Curaçao NV, Claimants, and Tele2 Sverige AB, Tele2 AB, Respondents, Arbitration No: 2392, London Court of
International Arbitration (filed July 25, 2003).
Declaration of J. Gregory Sidak on behalf of the National Association of Broadcasters, Application of General Motors
Corporation, Hughes Electronics Corporation, Transferors, and The News Corporation Limited, Transferee, For
Authority to Transfer Control, Federal Communications Commission, MB Dkt. No. 03-124 (filed June 20, 2003).
Is State Taxation of the Wireless Industry Counterproductive? (prepared for Verizon Wireless Apr. 2, 2003).
Improving the U.S. Postal Service as a Public Service Government Agency (prepared for the Newspaper Association of
America for submission to the Presidential Commission on the United States Postal Service, Apr. 2003).
An Economic Assessment of the Industry Advisory Group’s Final Report to the Commission for Communications
Regulation on Interim Pricing for Local Loop Unbundling in Ireland (prepared for eircom P.L.C. for submission to the
Commission for Communications Regulation, Republic of Ireland, Feb. 14, 2003).
Declaration of J. Gregory Sidak on behalf of Qwest Corporation, In the Matter of the Complaint of the Minnesota
Department of Commerce Against Qwest Corporation Regarding Unfiled Agreements, Minnesota Public Utilities
Commission, Dkt. No. P-421/C-02-197 (filed Nov. 8, 2002).
- 45 -
Telecommunications and Trade Promotion Authority: Meaningful Market Access Goals for Telecommunications Services in International
Trade Agreements: Hearing before the Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and
Commerce, U.S. House of Representatives, 107th Cong., 2d Sess. (Oct. 9, 2002).
The Economic Benefits of Permitting Winning Bidders to Opt Out of Auction 35 (prepared for Verizon
Communications, Aug. 26, 2002).
Letter Concerning Spectrum Auction 35 to the Honorable Michael K. Powell, Chairman, Federal Communications
Commission, from Peter C. Cramton, Robert W. Crandall, Robert W. Hahn, Robert G. Harris, Jerry A. Hausman,
Thomas W. Hazlett, Douglas G. Lichtman, Paul W. MacAvoy, Paul R. Milgrom, Richard Schmalensee, J. Gregory Sidak,
Hal J. Singer, Vernon L. Smith, William Taylor, and David J. Teece (Aug. 16, 2002).
Reply Declaration of J. Gregory Sidak on behalf of the National Association of Broadcasters, Application of EchoStar
Communications Corporation, General Motors Corporation, Hughes Electronics Corporation, Transferors, and
EchoStar Communications Corporation, Transferee, For Authority to Transfer Control, Federal Communications
Commission, CS Dkt. No. 01-348 (filed Apr. 24, 2002).
Declaration of J. Gregory Sidak on behalf of the National Association of Broadcasters, Application of EchoStar
Communications Corporation, General Motors Corporation, Hughes Electronics Corporation, Transferors, and
EchoStar Communications Corporation, Transferee, For Authority to Transfer Control, Federal Communications
Commission, CS Dkt. No. 01-348 (filed Feb. 4, 2002).
Replying Affidavit of J. Gregory Sidak, eircom P.L.C. v. Director of Telecommunications Regulation, No. 2001 No. 539 JR, High
Court of the Republic of Ireland (filed on behalf of eircom plc, Dec. 12, 2001).
Declaration of Robert W. Crandall and J. Gregory Sidak on behalf of SBC Communications Inc., In the Matter of SBC
Petition for Expedited Ruling that It Is Non-Dominant in Its Provision of Advanced Services and for Forbearance from
Dominant Carrier Regulation of Those Services, Federal Communications Commission (filed Oct. 1, 2001).
Declaration of J. Gregory Sidak and Hal J. Singer on behalf of The Walt Disney Company, et al., In the Matter of
Nondiscrimination in the Distribution of Interactive Television Services over Cable, Notice of Inquiry, Federal
Communications Commission, CS Dkt. No. 01-7 (filed May 11, 2001).
Expert Report of J. Gregory Sidak, Arista Records, Inc. v. MP3Board, Inc., No. 00 Civ. 4660 (SAS) (S.D.N.Y. filed Mar.
28, 2001) (report on behalf of various record companies in copyright infringement litigation).
Declaration of J. Gregory Sidak on behalf of Deutsche Telekom AG, In the Matter of VoiceStream Wireless
Corporation and Powertel, Inc., Transferors, and Deutsche Telekom AG, Transferee, Federal Communications
Commission, IB Dkt. No. 00-187 (filed Jan. 8, 2001).
Foreign Government Ownership of American Telecommunications Companies, Hearings before the Subcommittee on
Telecommunications, Trade, and Consumer Protection of the Committee on Commerce, U.S. House of Representatives, 106th Cong.,
2d Sess. 101 (Sept. 7, 2000) (testimony on behalf of Deutsche Telekom AG).
Declaration of J. Gregory Sidak on behalf of U S WEST Communications, Inc., U S WEST Communications, Inc. v.
United States, No. 00-43, U.S. Court of Federal Claims (filed May 17, 2000).
Declaration of J. Gregory Sidak on behalf of United Parcel Service, In the Matter of Predatory Pricing Complaint
Against Deutsche Post AG, Commission of the European Communities Directorate-General, Competition,
Bruxelles (filed Feb. 11, 2000).
Ex Parte Reply Declaration of Jerry A. Hausman and J. Gregory Sidak on behalf of GTE Corporation, In the
Matter of Applications for Consent to the Transfer of Control of Licenses, MediaOne Group, Inc., Transferor, To
AT&T Corp., Transferee, Federal Communications Commission, CS Dkt. No. 99-251 (filed Nov. 1, 1999).
- 46 -
Declaration of Daniel L. Rubinfeld and J. Gregory Sidak on behalf of GTE Corporation, In the Matter of
Applications for Consent to the Transfer of Control of Licenses, MediaOne Group, Inc., Transferor, To AT&T
Corp., Transferee, Federal Communications Commission, CS Dkt. No. 99-251 (filed Aug. 23, 1999).
Reply Affidavit of Jerry A. Hausman and J. Gregory Sidak, appended to Comments of BellSouth Corporation in
Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Second Further
Notice of Proposed Rulemaking, Federal Communications Commission, CC Dkt. No. 96-98 (filed June 10, 1999).
Declaration of J. Gregory Sidak on behalf of Telecom Eireann, In the Matter of Local Loop Unbundling,
Consultation Paper, Document No. ODTR 99/21, Office of the Director of Telecommunications Regulation,
Republic of Ireland (filed June 8, 1999).
Affidavit of Jerry A. Hausman and J. Gregory Sidak, appended to Comments of the United States Telephone
Association in Implementation of the Local Competition Provisions in the Telecommunications Act of 1996,
Second Further Notice of Proposed Rulemaking, Federal Communications Commission, CC Dkt. No. 96-98 (filed
May 26, 1999).
Affidavit of Thomas M. Jorde, J. Gregory Sidak, and David J. Teece, appended to Comments of the United States
Telephone Association in Implementation of the Local Competition Provisions in the Telecommunications Act of
1996, Second Further Notice of Proposed Rulemaking, Federal Communications Commission, CC Dkt. No. 96-98
(filed May 26, 1999).
Prepared Statement of J. Gregory Sidak, Local Broadcast Ownership: An En Banc Hearing, Federal
Communications Commission (Feb. 12, 1999).
Opinion of Law Concerning Initial Comments of Various Parties in Direct Access to the INTELSAT System, filed on
behalf of Comsat Corporation in Direct Access to the INTELSAT System, Notice of Proposed Rulemaking,
Federal Communications Commission, IB Dkt. No. 98-192 (filed Jan. 29, 1999).
Declaration of J. Gregory Sidak and David J. Teece on behalf of GTE Corporation in 1998 Biennial Regulatory
Review of Spectrum Aggregation Limits for Wireless Telecommunications Carriers, Cellular Telecommunications
Industry Association’s Petition for Forbearance From the 45 MHz CMRS Spectrum Cap, Amendment of Parts 20
and 24 of the Commission’s Rules of Broadband PCS Competitive Bidding and the Commercial Mobile Radio
Service Spectrum Cap Implementation of Sections 3(n) and 332 of the Communications Act Regulatory Treatment
of Mobile Services, Notice of Proposed Rulemaking, Federal Communications Commission, WT Dkt. Nos. 98-
205, 96-59, GN Dkt. No. 93-252 (filed Jan. 25, 1999).
Declaration of Robert W. Crandall and J. Gregory Sidak on behalf of Bell Atlantic Corporation and GTE
Corporation, In the Matter of GTE Corporation, Transferor, and Bell Atlantic Corporation, Transferee, For
Consent to Transfer of Control, Federal Communications Commission, CC Dkt. No. 98B184 (filed Dec. 23, 1998).
Opinion of Law Concerning the Constitutionality of the Commission’s Proposal to Require Level 3 Direct Access
to Space Segment Capacity on the INTELSAT System, filed on behalf of Comsat Corporation in Direct Access to
the INTELSAT System, Notice of Proposed Rulemaking, Federal Communications Commission, IB Dkt. No. 98-
192 (filed Dec. 22, 1998).
Direct Testimony and Cross Examination Testimony of J. Gregory Sidak on behalf of Public Service Company of
New Mexico, Application of and Complaint by Residential Electric, Inc. v. Public Service Company of New
Mexico, Case No. 2867, Application of Residential Electric, Inc. for a Certificate of Public Convenience and
Necessity, Case No. 2868, New Mexico Public Utility Commission (Nov. 17, 1998).
Affidavit of J. Gregory Sidak on behalf of Public Service Company of New Mexico, Application of and Complaint
by Residential Electric, Inc. v. Public Service Company of New Mexico, Case No. 2867, Application of Residential
Electric, Inc. for a Certificate of Public Convenience and Necessity, Case No. 2868, New Mexico Public Utility
Commission (filed Nov. 9, 1998).
- 47 -
Affidavit of Joseph Gregory Sidak on behalf of Hong Kong Telephone Company Limited, Hong Kong Telephone
Company Limited v. Office of the Telecommunications Authority, High Court of the Hong Kong Special Administrative
Region, Court of First Instance (filed Sept. 22, 1998).
Cross Examination Testimony of J. Gregory Sidak on behalf of the Edison Electric Institute in Public Service
Company of New Hampshire v. New Hampshire Electric Cooperative, Inc., Federal Energy Regulatory Commission, Dkt.
No. EL96-53-002 (Sept. 10, 1998).
Prefiled Direct Testimony of J. Gregory Sidak on behalf of the Edison Electric Institute in Public Service Company of
New Hampshire v. New Hampshire Electric Cooperative, Inc., Federal Energy Regulatory Commission, Dkt. No. EL96-
53-002 (filed Aug. 27, 1998).
Affidavit of J. Gregory Sidak on behalf of PECO Energy Company, Omnipoint Corporation v. PECO Energy Company,
Federal Communications Commission, No. PA 97B002 (filed Aug. 5, 1998).
Affidavit of J. Gregory Sidak, appended to comments of the Newspaper Association of America, in 1998 Biennial
Regulatory Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to
Section 202 of the Telecommunications Act of 1996, Notice of Inquiry, Federal Communications Commission,
MM Docket No. 98-35 (filed July 21, 1998).
A Report to the Minister for Communications, the Information Economy, and the Arts on the State of
Competition in Australian Telecommunications Services One Year after Deregulation (June 30, 1998) (prepared
for Telstra Corporation Ltd.)
Affidavit of J. Gregory Sidak, appended to Comments of Telstra Corporation Ltd. in Declaration of Local
Telecommunications Services, Australian Competition and Consumer Commission (May 21, 1998).
Opinion of Law Concerning the Commission’s Authority to Permit the Acquisition by CanWest Global
Communications Corporation of More Than 25 Percent of the Stock of an American Broadcast Licensee, Letter to
William E. Kennard, Chairman, Federal Communications Commission (May 11, 1998).
Testimony of J. Gregory Sidak, Bell Atlantic v. United States, Case No. 96CV-8657 (E.D. Pa.) (Mar. 18, 1998)
(investment tax credit refund litigation).
Deposition of J. Gregory Sidak, Bell Atlantic v. United States, Case No. 96CV-8657 (E.D. Pa.) (Mar. 3, 1998)
(investment tax credit refund litigation).
Affidavit of J. Gregory Sidak, appended to Comments of the United States Telephone Association in Jurisdictional
Separations Reform and Referral to the Federal-State Joint Board, Notice of Proposed Rulemaking, Federal
Communications Commission, CC Docket No. 80-286 (filed Dec. 10, 1997), and in Amendment to Uniform
System of Accounts for Interconnection, Notice of Proposed Rulemaking, Federal Communications Commission,
CC Docket No. 97-212 (filed Dec. 10, 1997).
Cross Examination Testimony of J. Gregory Sidak on behalf of PECO Energy Company, Application of PECO
Energy Company for Approval of Its Restructuring Plan Under Section 2806 of the Public Utility Code, Regarding
the Enron Choice Plan, Pennsylvania Public Utility Commission, Dkt. Nos. R-00973953, P-00971265 (Nov. 17,
1997).
Prefiled Testimony of J. Gregory Sidak, Application of PECO Energy Company for Approval of Its Restructuring
Plan Under Section 2806 of the Public Utility Code, Regarding the Enron Choice Plan, Pennsylvania Public Utility
Commission, Dkt. Nos. R-00973953, P-00971265 (filed Nov. 7, 1997).
Prefiled Testimony of J. Gregory Sidak on behalf of El Paso Electric Company, City of Las Cruces, New Mexico,
Federal Energy Regulatory Commission, Dkt. No. SC97-2-000 (filed Oct. 3, 1997).
- 48 -
Reply Comments of J. Gregory Sidak, Rules and Policies on Foreign Participation in the U.S. Telecommunications
Market, Order and Notice of Proposed Rulemaking, Federal Communications Commission, IB Dkt. No. 97-142
(filed Aug. 11, 1997).
Prefiled Rebuttal Testimony of J. Gregory Sidak, Regarding an Economic Analysis of the Appropriate Standard of
Conduct That Should Govern the Relationship Between PECO’s Regulated Wire Business and Its Competitive,
Unregulated Generation and Other Businesses and An Economic and Constitutional Analysis of the Justness and
Reasonableness of PECO’s Full Recovery of Its Stranded Costs, Application of PECO Energy Company for
Approval of Its Restructuring Plan Under Section 2806 of the Public Utility Code, Dkt. No. R-00973953,
Pennsylvania Public Utility Commission (filed July 18, 1997).
Statement of J. Gregory Sidak on behalf of Hong Kong Telephone Company Concerning Interconnect Access
Charging Principles, Submission on the Hong Kong Local Interconnect Charging Regime, OFTA Review of
Statement No. 7, Carrier-to-Carrier Charging, Office of Telecommunications Authority, Hong Kong (filed May 13,
1997).
Hearings on H.R. 22, The Postal Reform Act of 1997, Subcommittee on the Postal Service of the House Committee on
Government Reform and Oversight, 105th Congress, 1st Session (Apr. 16, 1997).
Prefiled Testimony of J. Gregory Sidak, Regarding an Economic and Constitutional Analysis of the Justness and
Reasonableness of PECO’s Full Recovery of Its Stranded Costs, Application of PECO Energy Company for
Approval of Its Restructuring Plan Under Section 2806 of the Public Utility Code, Dkt. No. R-00973953,
Pennsylvania Public Utility Commission (filed Mar. 26, 1997).
Affidavit of J. Gregory Sidak and Daniel F. Spulber, appended to Comments of the United States Telephone
Association in Usage of the Public Switched Network by Information Service and Internet Access Providers,
Notice of Inquiry, Federal Communications Commission, CC Dkt. No. 96-263 (filed Mar. 24, 1997).
Reply Affidavit of J. Gregory Sidak and Daniel F. Spulber, appended to Reply Comments of the United States
Telephone Association in Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers;
Transport Rate Structure and Pricing; Usage of the Public Switched Network by Information Service and Internet
Access Providers, Notice of Proposed Rulemaking, Third Report and Order, and Notice of Inquiry, Federal
Communications Commission, CC Dkt. Nos. 96-262, 94-1, 91-213, 96-263 (filed Feb. 14, 1997).
Affidavit of J. Gregory Sidak and Daniel F. Spulber, appended to Comments of the United States Telephone
Association in Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate
Structure and Pricing; Usage of the Public Switched Network by Information Service and Internet Access
Providers, Notice of Proposed Rulemaking, Third Report and Order, and Notice of Inquiry, Federal
Communications Commission, CC Dkt. Nos. 96-262, 94-1, 91-213, 96-263 (filed Jan. 29, 1997).
Testimony of J. Gregory Sidak on behalf of GTE South Inc., Petition of AT&T Communications of the South
Central States, Inc., for Arbitration of Certain Terms and Conditions of a Proposed Agreement with GTE South
Inc. Concerning Interconnection and Resale Under the Telecommunications Act of 1996, Case No. 96-478, Public
Service Commission of Kentucky (Jan. 14, 1997).
Cross Examination Testimony of J. Gregory Sidak on behalf of GTE North Inc., In the Matter of Sprint
Communications Company L.P.’s Petition for Arbitration of Interconnection Rates, Terms, Conditions and
Related Arrangements with GTE North Inc., Case No. 96-10210-TP-ARB, Public Utilities Commission of Ohio
(Nov. 21, 1996).
Testimony of J. Gregory Sidak on behalf of GTE South Inc., Petition of MCI, Public Service Commission of
Kentucky (Nov. 12, 1996).
Direct Testimony of J. Gregory Sidak on behalf of GTE North Inc., Petition of Sprint, Public Utilities
Commission of Pennsylvania (Nov. 7, 1996).
- 49 -
Direct Testimony of J. Gregory Sidak on behalf of GTE Midwest Inc., Petition of MCI, Public Utilities
Commission of Indiana (Nov. 1, 1996).
Direct Testimony of J. Gregory Sidak on behalf of GTE Midwest Inc., AT&T Communications of the Midwest Inc. v.
GTE Midwest Inc., Iowa Utilities Board, Dkt. No. ARB-96-3 (Oct. 15, 1996).
Direct Testimony of J. Gregory Sidak on behalf of GTE North Inc., Petition of AT&T, Public Utilities
Commission of Pennsylvania (filed Sept. 9, 1996).
Affidavit of J. Gregory Sidak, appended to Memorandum of Law in Support of Petition of the Energy Association
of New York State in Energy Association of New York State v. Public Service Commission of the State of New York, Index
No. 5830-96 (filed Supreme Ct. N.Y., County of Albany, Sept. 18, 1996).
Rebuttal Testimony of J. Gregory Sidak on behalf of Central Power and Light Company in Application of Central
Power and Light Company for Authority to Change Rates, Competitive Issues Phase, Public Utility Commission of
Texas, SOAH Dkt. No. 473-95-1563, PUCT Dkt No. 14965 (filed Aug. 1, 1996).
Reply Affidavit of J. Gregory Sidak, appended to Reply Comments of the United States Telephone Association in
Allocation of Costs Associated with Local Exchange Carrier Provision of Video Programming Services, Federal
Communications Commission, CC Dkt. No. 96-112 (filed June 12, 1996).
Affidavit of J. Gregory Sidak, appended to Comments of the United States Telephone Association in Allocation of
Costs Associated with Local Exchange Carrier Provision of Video Programming Services, Federal
Communications Commission, CC Dkt. No. 96-112 (filed May 31, 1996).
Affidavit of Michael J. Doane, J. Gregory Sidak, and Daniel F. Spulber, appended to Reply Comments of GTE
Service Corporation in Implementation of the Local Competition Provisions in the Telecommunications Act of
1996, Federal Communications Commission, CC Dkt. No. 96-98 (filed May 30, 1996).
An Empirical Analysis of the Efficient Component-Pricing Rule and Sections 251 and 252 of the Telecommunications Act of 1996,
appended to Comments of GTE Service Corporation in Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, Federal Communications Commission, CC Dkt. No. 96-98 (filed May 16,
1996), co-authored with Michael J. Doane and Daniel F. Spulber.
Technological, Environmental and Financial Issues Raised by Increasingly Competitive Electricity Markets, Hearings before the
Subcommittee on Energy and Power of the House Committee on Commerce, 104th Congress, 2d Session (Mar. 28, 1996).
Monopoly and the Mandate of Canada Post, in Submission of the Director of Investigation and Research, Competition
Bureau, to Canada Post Corporation Mandate Review Committee (Ottawa, Feb. 15, 1996).
Reply Comments of J. Gregory Sidak, Market Entry and Regulation of Foreign-affiliated Entities, Notice of
Proposed Rulemaking, Federal Communications Commission, IB Dkt. No. 95-22 (filed May 12, 1995).
Comments of J. Gregory Sidak, Market Entry and Regulation of Foreign-affiliated Entities, Notice of Proposed
Rulemaking, Federal Communications Commission, IB Dkt. No. 95-22 (filed Apr. 11, 1995).
The Line-Item Veto Amendment: Hearings before the Subcommittee on the Constitution of the Senate Judiciary Committee, 104th
Congress, 1st Session (Jan. 24, 1995).
Competition and Regulatory Policies for Interactive Broadband Networks, in Competition Policy, Regulation and the
Information Economy: Submission of the Director of Investigation and Research, Bureau of Competition Policy,
to the Canadian Radio-television and Telecommunications Commission, Public Notice CRTC 1994-130, Order in
Council P.C. 1994-1689 (Ottawa, Jan. 16, 1995), co-authored with Robert W. Crandall.
Line Item Veto: The President’s Constitutional Authority: Hearing before the Subcommittee on the Constitution of the Senate
Judiciary Committee, 103d Congress, 2d Session (June 15, 1994).
- 50 -
Opinion of Law Concerning Legislation to Reform the Cost-Justification Defense to Discrimination in the Sale of
Telecommunications Services, Letter to Ms. Deena Shiff, General Manager, Corporate Affairs, Telstra Corporation
Limited, Sydney, New South Wales, Australia (Jan. 13, 1994) (distributed to the Australian Parliament).
Brief of Amicus Curiae J. Gregory Sidak, Association of American Physicians and Surgeons, Inc. v. Hillary Rodham
Clinton, 997 F.2d 898 (D.C. Cir. 1993), filed Apr. 5, 1993.
E DITORIAL ADVIS ORY B OARDS
Journal of Economics and Management Strategy, Journal of Network Industries
B AR AD MISSIONS
California (1982); District of Columbia (1989); Supreme Court of the United States (1989).
MEMBERS HIPS
Cosmos Club, Washington, D.C.
PERSON AL IN FORMATION
American citizen, born August 17, 1955. Married to Melinda Ledden Sidak. Four sons: Gunnar, Christian, Colin,
and Lachlan. Resident of Washington, D.C.
September 1, 2005

Telstra-Report of Gregory Sidak

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Telstra-Report of Gregory Sidak

Hochgeladen von

Copyright:

Verfügbare Formate

Before the

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

EXPERT REPORT OF J. GREGORY SIDAK

I. Government Subsidy of an Activity in the Economy Requires Proof of a Positive

1. The United States

Appendix A: Curriculum Vitae of J. Gregory Sidak

1. My name is J. Gregory Sidak. I am Visiting Professor of Law at Georgetown

2. I was Deputy General Counsel of the U.S. Federal Communications Commission

cases and federal administrative, legislative, and appellate matters concerning

Management, where I taught a course on telecommunications regulation with Dean Paul W.

3. I have been a consultant to more than 20 companies in the telecommunications,

Alcatel, Bell Atlantic Corporation, BellSouth Corporation, BT (British Telecommunications plc),

CanWest Global Communications Corporation, Comsat Corporation, Deutsche Telekom AG,

Telecommunications Limited, Microsoft Corporation, National Association of Broadcasters,

Qwest Communications, Recording Industry Association of America, SBC Communications

Disney Company, United States Telecom Association, Verizon Communications, Verizon

4. I am a member of the U.S. Advisory Board of NTT DoCoMo, Japan’s largest

concerning wireless telecommunications.

5. I have written numerous books. With Jerry A. Hausman, I am completing The

Failure of Good Intentions: Is Regulation or Competition the Future of American

Telecommunications? (forthcoming Cambridge University Press 2006). With Richard A. Posner

2005). I am the author of Foreign Investment in American Telecommunications (University of

Industry (AEI Press 1995). I am the co-editor of Competition and Regulation in

6. I have published approximately seventy scholarly articles in journals, including the

regulation in the Handbook of Telecommunications Economics. I am ranked seventh among the

Korean, and Spanish.

7. I have testified before committees of the U.S. Senate and House of

Representatives on regulatory and constitutional law matters. My writings on antitrust,

European Commission. In United States v. Microsoft Corporation, decided in June 2001, my

the Seventh Circuit.

adjudicatory, or executive matters.

I. GOVERNMENT SUBSIDY OF AN ACTIVITY IN THE ECONOMY REQUIRES PROOF OF A

consumer, the utility function of a consumer, or the production function of a producer.1

A. In the Absence of Externalities, Economic Efficiency Requires That the Price of a

production determine the level of output that it produces.

causing more harm than good to the economy.

undesirable because it introduces three forms of economic inefficiency: allocative, productive,

6. See, e.g., KATZ & ROSEN, supra note 2, at 390-391.

precludes production by the least-cost supplier.

may reduce the net benefits that accrue to society as a whole.8

lines contradicts the statutory principles set forth in Part XIC.

1. Long-Term Interest of End-users

2. Direct Costs of Providing the Access Service

statutory right to recover those costs.

11. Id. at 7-9.

3. Promotion of Efficient Investment

C. By Requiring All of Telstra’s Customers to Share Telstra’s Incremental Cost of

24. Cross-subsidy in a regulatory context typically involves misallocation or shifting

the incremental cost test is relevant.

employ unsound economic reasoning. The resulting hodgepodge is intellectually indefensible as

A. The ACCC’s Proposal Improperly Subordinates Consumer Welfare to Competitor

27. Under section 152AB(1) of the Trade Practices Amendment

regulators for at least the past decade.

presented in a variety of countries an intellectual dilemma of enormous consequence: When does

welfare for competitor welfare as the animating principle of access regulation in

ACCC describes the many links in this chain of causation as follows:

It is worth commenting here on one argument consistently made by Telstra. It suggests

unconditioned local loop is frivolous. However, it is critical to a regulator’s objectives of

so as to encourage access-based entry that would be marginally uneconomic at a higher ULL

19. ULLS Draft Decision, supra note 16, at 50.

30. Competition advances consumer welfare and economic efficiency. But

the competitive price.”21

consumers by undertaking or threatening regulatory intervention that expropriates investor