The Costs of the ITC Downstream Exclusion Order to the U.S. Economy – Technical Appendix
Published by The Brattle Group, Inc.
We take a “bottoms up” approach to estimating economic harm by first identifying the various consumer and producer groups that are affected by the Order and then adding the effects on individual groups together to arrive at a grand total. The analysis proceeds in three steps. First, we construct a baseline forecast of the mobile wireless industry absent the ITC Order using forecasts by industry analysts of mobile subscribers, prices of handsets, and average revenue from various services. Second, we predict the change in the baseline forecast caused by the ITC Order—specifically, the lost revenue from foreclosed economic activity. Finally, we compute the monetary value of the economic harm to consumers and firms resulting from the change in industry activity.
The ITC Order forecloses purchases of mobile wireless handsets and services that consumers would otherwise have made. To measure the resulting harm to consumers, we place a dollar-value on the difference between the value of those purchases to consumers and the cost to them of the purchases—what economists call “consumer surplus”—both with and without the ITC Order. Essentially, this measures the consumer counterpart to lost profit because it represents the additional value they would have received absent the ITC Order above and beyond the “cost” of producing that value.
