Abstract #301353

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JSM 2003 Abstract #301353
Activity Number: 171
Type: Contributed
Date/Time: Monday, August 4, 2003 : 2:00 PM to 3:50 PM
Sponsor: Business & Economics Statistics Section
Abstract - #301353
Title: Misuse of the "Modified" t-Statistic in Regulatory Telecommunications
Author(s): John D. Opdyke*+
Companies: DataMineIt
Address: 46 Tioga Way, Suite 302, Marblehead, MA, 01945-1581,
Keywords: modified t ; Telecommunications Act ; parity testing ; performance measurement testing ; OSS testing ; regulatory telecommunications

The 'modified' t-statistic (Brownie et al. 1990) has gained widespread use and acceptance in the telecommunications regulatory arena for performing two-sample hypothesis tests on Bell companies' performance measurement data, with significant financial consequences for the entire industry. Expert testimony from multiple sources has justified use of the 'modified' t in this context primarily based on the following claims: (a) the distribution of the 'modified' t is asymptotically standard normal; (b) the 'modified' t minimizes the potential for test manipulation by including in its denominator only one sample's variance; © the 'modified' t can be used to test Ho: M1< =M2 AND Var1< =Var2 against Ha: M1>M2 OR Var1>Var2; This paper uses both simulation and analytic derivation to show that none of these claims is valid, making statistical inferences based on them incorrect, and policies based on these inferences misguided, largely because the statistic was designed to test a different pair of hypotheses (Ho: M1< =M2 AND Var1< =Var2 against Ha: M1>M2 AND Var1>Var2) in a very different (controlled experimental) setting. This paper briefly surveys alternate tests to accomplish (b) and (c).

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