Since politicians have already shown their economic ignorance through copious central planning, the unintended consequences caused by advances in communications technology will surely surprise them. I’m not surprised:
Rural phone-service subsidies are so bloated and inefficient that providing wireless or satellite phones is cheaper, an economic analysis prepared for a senior citizen advocacy group suggested yesterday.
Taxes to support the universal service fund, which is intended to pay for higher costs of serving rural areas, are growing so fast as to force some low-income people to drop phone service, said Thomas Hazlett, a George Mason University economist who prepared the analysis for the Seniors Coalition.
“It’s perverse when shifting tax money around for the universal service fund results in more people leaving the network than joining it,” said Hazlett.
Why I should subsidize those who choose to live in rural areas is a question I will never accept. Since it’s not up to me, I worked around it (and other similar questions of fees and taxes) years ago when I abandoned traditional phone service¹ almost five years ago. Now I use a combination of cellular and VoIP. I’ve never missed the land line, and I’ve definitely never missed the higher costs. I changed because I assessed my needs and made the decision that new technology satisfied my communication needs. No politician could know that.
More importantly, how much faster would rural customers have received phone service if politicians had let the free-market sort out customer requirements? Of course, that question is merely interesting because of the multiple interest groups involved. Each group wants it own special consideration, which only makes the tax structure confusing and the collection process more bureaucratic. For example:
Universal service subsidies have become so widespread that rural phone companies on average collect only 27 percent of their revenue from customer payments, Hazlett found. Even so, many rural customers are opting to drop traditional wired service to go wireless because “it’s cheaper, and they like the mobility,” he said.
Many rural carriers receive subsidies that exceed $1,000 a year per customer, with some subsidies topping $10,000 a year per customer, Hazlett said.
There will be no incentive to innovate in that atmosphere. Why bother, when the government will take from those living in cities and give through subsidies to those who don’t. There is no sense in this, other than politics. But politics rarely makes for good economics. It’s time to cut the apron strings and let each customer bear the cost of his choices.
¹ I have a land line today, but it’s the minimum service and is used only to provide communications for my home’s security system. Fees or not, I want emergency services contacted when necessary. I don’t think that gives politicians an open invitation to tax me for the economic inequality-du-jour.