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Cleland: We Were Wrong on Phone Rules

With the nation's capital awash with 10-gallon egos, rarely do people who
seek the spotlight confess to missing a big call.

But The Precursor Group's Scott Cleland, a widely quoted telecommunications
analyst, broke with tradition Monday night by releasing a client note stating in
no uncertain terms that he and his team badly misjudged the outcome of the
local-phone-competition proceeding at the Federal Communications Commission last

"We were flat wrong," Cleland wrote. In Washington, that sentence usually
reads, "mistakes were made," in order to hide who exactly was at fault.

For weeks leading up to the decision, Cleland predicted the demise of the
unbundled-network-element platform, or UNE-P.

Instead, Republican FCC member Kevin Martin joined with the agency's two
Democrats to perpetuate UNE-P and give states the authority to determine its
long-term viability.

"Why we were wrong: We were wrong that a Republican majority would vote to
deregulate telecom to spur investment and growth in the sector and that the
White House could/would deliver Republican unity on this decision," Cleland

Based on his predictions, Cleland saw the telecommunications sector turning
around in 2003, with the demise of UNE-P and its cheap wholesale-rate structure
causing the Bell phone companies to ramp up capital expenditures, which would,
in turn, help to revive equipment vendors such as Lucent Technologies.

"Given that our central positive investment assumption of new deregulation .
proved incorrect, we return to our negative outlook on telecom: no telecom
recovery in 2003," Cleland said.