Saturday, May 14, 2011

Universal service - Economists argue there is no rationale for subsidizing voice or Internet access

[regulation 2.0] Economists Greg Rosston and Scott Wallsten argue that the FCC should take the cash now collected from everybody’s phone bills to extend voice service to poor people and remote areas, and redirect the money to high-speed Internet service (read broadband). They recommend experimenting to see which approaches to spreading broadband access work best, and to employ competitive bidding for companies hired to provide the subsidized services. That would certainly beat business-as-usual, which amounts to throwing money at an old problem (getting plain old telephone service) and hoping it will stick.

What’s absent, though, from the policy conversation is a clear economic rationale for subsidizing voice or Internet service in the first place. It would be nice to see if the social returns exceeded the costs – for all we know, from an efficiency perspective the optimal subsidy is no subsidy at all.

Broadband in Every Pot?

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