Independent Analysis Shows Wireless Substitution Not Relevant -- No Downward Pressure on Wireline Prices Found When Customers "Cut the Cord"
-- Nationwide, just 11.84% of residential customers have switched to wireless only. In the West, where Qwest seeks forbearance in three markets, only 9.54% of customers are wireless-only. Slightly more, 12.35%, have "cut the cord" in Minneapolis. -- Even these low numbers are skewed upwards by reliance on data for population groups that may have never had a wireline service to "cut" in the first place. Nearly one-third (27.9%) of wireless-only customers are college-age adults with unique purchasing patterns and behavioral choices that do not represent the adult population as a whole."Citing wireless substitution as evidence of competition is the Baby Bells' latest ploy to end run the pro-competitive pricing rules of the Telecom Act," said Heather B. Gold, senior vice president of external affairs for XO Communications. "Qwest is blowing smoke, but no reliable economist can find the fire." "Every forbearance proceeding is a serious issue that determines the fate of competition and consumer choice in a market," said Russell C. Merbeth, federal counsel for Integra Telecom. "Qwest's reliance on data using non-representative population groups is frivolous, and demonstrates the weakness of its petitions." The Gillan study notes that the Commission recently denied that wireless service is a substitute for traditional wireline service, and concludes that if the Commission considers residential wireless data to estimate competitive market share in a forbearance proceeding, the estimate of wireless-only subscribers must meet four criteria:
-- Neutral Source: The estimate should be developed from the best- available data gathered by a neutral party. In the absence of a broader study by the Commission, data from the semi-annual National Health Interview Survey released by the Centers for Disease Control (CDC) may best satisfy this criterion. -- Regional Variation: In the absence of individual market-specific data, the estimate should at the very least reflect regional differences in wireless acceptance -- Accuracy with "Confidence": The CDC Survey employs a sample average to estimate population, and a second measure called "confidence intervals" which encompass the range of values within which the actual mean is likely to reside. By relying on the lower bound of this interval estimate, the FCC will avoid potentially adopting an inflated estimate of the actual number of wireless-only subscribers. -- Elimination of Non-Representative Groups: The estimate should exclude identifiable groups such as college-age respondents that exhibit wireless preferences that are not representative of the population as a whole.
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