ercent confidence level. Thus in the second quarter of 2001, at least, households appear to have been responsive to rel- ative prices of local service. At the point of means, the elasticity of CLEC choice with respect to relative prices is close to -2.0. Why Have Local Entrants Struggled? The market's lofty expectations for CLECs have clearly not been realized. What has happened since 1999 to suggest otherwise? As explained earlier, the simplest answer is that CLECs could not and did not wrest sufficient revenues from the incumbents to satisfy these expectations. By the end of Local Competition under the 1996 Act 1999, it was already clear that their revenues per line were declining steadily (see figure 4-4). At that time, 41 percent of CLEC lines were resi- dential and small business lines; by the end of 2003, this share had risen to 63 percent. Between December 1999 and December 2003, the incumbent companies' line counts among medium and large businesses and institu- tions fell by 8.4 million, while the CLECs attracted 6 million net additions these large users. But there is little evidence that the CLECs were attracting the high-revenue customers from this group. In earlier research, I concluded that the entrants' network strategies were an important determinant of their ability to grow and to attract revenues. 48 Specifically, CLECs that built their own networks were more likely to con- vert capital spending into revenues than were those that relied heavily on resale or UNEs. Since that time, however, several of the larger facilities- based carriers, such as XO and RCN, have encountered severe difficulties and have been reorganized under the protection of bankruptcy. Indeed, all of the new carriers are now struggling or have failed altogether. By the end of 2002, the market values of new entrants, regardless of net- work strategy, were substantially less than the cumulative 1996-2002 cap- ital expenditures by all new entrants in each category (figure 4-5). By this measure, the carriers building their own facil