The Technology Liberation Front - Latest Comments in (Telephone) Welfare As We Know It

Re: (Telephone) Welfare As We Know It

Tim Lee — Fri, 01 Feb 2008 17:24:49 -0000

I agree with Glenn. Paying based on cost is silly. If consumers can be provided by one firm for $X, and another firm can only do it for $X+1 dollars, then that difference should be visible to customers in the form of different prices. Providing equal subsidies to all carriers makes the price differentials to consumers and puts pressure on companies to find ways to cut costs. Providing larger subsidies to less efficient firms gives firms every incentive to exaggerate their costs in order to get larger subsidies.

Re: (Telephone) Welfare As We Know It

Glenn Blackmon — Fri, 01 Feb 2008 17:11:21 -0000

Okay, let's say the FCC pays each company based on its own costs and, as you suggest, the new competitor's costs are lower. What is the rationale for paying the incumbent a higher subsidy for providing the same basic local phone service? Perhaps the problem with the current system is not that competitors get identical support but that this support is tied to the less efficient competitor. If a competitor offers service and does so at lower cost, it makes sense to reduce the support paid to the incumbent in recognition that a lower cost provider is available. To do otherwise simply subsidizes ineffiency.

Re: (Telephone) Welfare As We Know It

eee_eff — Thu, 31 Jan 2008 23:00:10 -0000

Well, you're making a case that the universal service subsidy may have outlived it's usefullness, which is possible.

However, I still think that before wireless became available the subsidy was a reasonable policy.