This paper analyzes the design of performance measurement and remedy plans that have been implemented in the telecommunications industry to ensure competitive local exchange carriers are afforded a meaningful opportunity to compete in the provision of local exchange services. It demonstrates that the plans can impose penalties on incumbent local exchange carriers even when the incumbents provide the same or higher level of wholesale service quality to their competitors than they provide to themselves. Simulations are employed to illustrate the magnitude of these penalties.

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On the Design of Performance Measurement Plans in the Telecommunications Industry