BuckeyeBlog

Rep. Rick Boucher (D-VA), co-chairman of the Congressional Internet Caucus Advisory Committee, stated in a speech this week that Congress would be looking at enacting regulations mandating so-called “net neutrality” as well as imposing new taxes on Internet service to fund government subsidies for rural deployment of such service. He is not alone in his desire for enacting net neutrality legislation, as evidenced by the grilling his colleagues on the other side of the Capitol gave the Federal Communication Commissioners about the issue.

“Net neutrality” is just a fancy way to say “government regulation.” The government has generally kept its hands off the Internet and allowed it to grow as consumers dictate. However, if the government begins imposing price controls on the Internet in the form of net neutrality regulations, this will end. Former Carter Administration official Alfred Kahn, who can do a much better job than I at pointing out what is wrong with these proposals, discusses the issue here.

Boucher’s idea to impose more taxes on broadband service in order to provide money for the Universal Service Fund (USF) is also a bad idea. These taxes would merely raise the price of such service, which in turn would make it less likely to be deployed in rural areas. Furthermore, giving more money to the USF, while popular politically, is bad policy. Thomas Hazlett, of George Mason University’s Information Economy Project, released a report last year that illustrates many of the problems with the USF:

Federally subsidized phone service costs taxpayers a large multiple of what the most efficient network solutions would. That is because ‘high-cost’ subsidies are delivered not to low-income customers, but to rural phone companies, typically on a ‘cost-plus’ basis. The more service costs, the more money the phone carrier receives–a clear incentive to avoid cost savings. This not only bloats administrative expenses, it undercuts market forces that would naturallylead consumers to abandon traditional fixed lines in favor of newer,cheaper, and functionally superior technologies.

Unfortunately, both of these ideas have strong support in Congress. We’ll have to wait and see what emerges with the new Democratic majority.

This entry was posted on Thursday, February 1st, 2007 at 5:07 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.