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Why Telecom Rate Regulation is a Bad Idea

  • January 12, 2016
  • Michael Mandel

In 2000, Americans devoted 2.7% of total personal consumption expenditures to telephone, internet, and cable service. Back then, no one had a smartphone, and almost everyone used dial-up to access the Internet.

Today, after 15 years of the greatest communications revolution in history and more than $1 trillion in investment by the telecom and broadcasting industry, many Americans practically live on their devices. And do you know how much we are spending on telephone, internet, and cable service?  A stunning (sarcastic!) 2.9% of consumer spending.

Against this backdrop, the House Subcommittee On Communications and Technology held a hearing on H.R. 2666, the “No Rate Regulation of Broadband Internet Access Act.”  The bill would bar the FCC from imposing rate regulation on the broadband industry. Without taking a position on the legislation itself, we note two points. First, there is literally no evidence that rate regulation is needed. Americans are getting far more telecom services than 15 years ago, while laying out roughly the same share of consumer spending. Second, in the rapidly-changing world of the tech-telecom-content sector, rate regulation is like putting a ball and chain on an Olympic runner.  Economic growth depends on the creation of new markets, products, and services. The need to get rate approval will slow some innovations, and deter others.

In the end, rate regulation is solving a problem that doesn’t exist, while creating new ones.

 

 

 

 

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