It’s a well-known fact that economists can’t agree. Particularly, it seems, when they are dealing with telecommunications — and when competing parties are paying the bill.
In the wake of the well-publicised Todd Consortium report about Telecom’s local-service profit, commissioned by Clear, LECG Consulting — commissioned by Telecom —has produced a study saying the Todd report’s claimed profit figure for Telecom is a fiction.
LECG spokesman and former Treasury secretary Graham Scott says a comparison of estimates of costs with independent studies prepared for the Ministry of Commerce shows the Todd estimate of monopoly profit relies on a cost figure which is about $390 million lower than that obtained in the other studies.
“Todd starts with a model of a large-scale telecommunications network with nothing but the latest equipment,” Scott says. “Of course, in the real world this never exists.”
LECG says it has identified numerous input and model flaws.
The Todd report suggested Telecom made $382 million in monopoly or excess profits.
LECG debates some costing between the Todd model and other models but specifically doesn’t give exact figures for Telecom’s local-loop costs.