Make or Buy? Unbundled Elements as Substitutes for Competitive Facilities in the Local Exchange Network

In this paper, we estimate demand curves for unbundled loops sold by incumbent local exchange telecommunications carriers to their retail rivals. Of primary interest are the cross-price effects between unbundled loops purchased with and without unbundled switching. As expected, we find downward-sloping demand curves for unbundled elements, with own-price elasticities in the elastic region of demand. Interestingly, however, we also find no evidence of positive cross-price elasticities between alternative modes of unbundled element entry