http://www.ncpa.org/pd/regulat/pdreg/pdreg11.htmlCato Study: Choice In Rural
Telephone Service (Summary)
The 1996 Telecommunications Act will eventually open local telephone markets to
competition, but some analysts are wondering how telephone customers in
high-cost, usually rural, service areas will be protected against higher rates for
service.
The act maintained universal service subsidies for customers in high-cost areas.
These subsidies, from long distance phone companies, have been going to local
monopoly phone companies. But how will the subsidies be distributed to local
competing phone companies?
One suggestion is
a "competitive bidding" system whereby companies bid against one another to serve
a single market at the lowest price.
Hudson Institute analyst Peter Pitsch, however, is suggesting an alternative: a
"consumer choice" plan.
Pitsch contends that the competitive bidding system is actually
anti-competitive because it confers special advantages on one company in an
area -- rather than allowing true competition.
Under the consumer choice alternative, companies would be subsidized per
customer -- allowing customers to move from one company to another and
carry their subsidies with them.
Such a system would have the advantages of being competitively neutral, he
argues, and pressures would be generated for low prices as well as high
quality service.
In all likelihood, rates would be reasonably comparable in all areas, urban as
well as rural.
Other advantages of a consumer choice plan would be greater ease of
administration and lower entry costs. Moreover, he contends, subsidies could be
more easily phased down under the consumer choice system.
Source: Peter Pitsch, "Reforming Universal Service: Competitive Bidding or
Consumer Choice?" Briefing Paper No. 29, May 7, 1997, Cato Institute, 1000
Massachusetts Ave., N.W., Washington, D.C. 20001, (202) 842-0200.
For the full text of this Cato study
http://www.cato.org/pubs/briefs/bp-029es.html*******************************************************
Of course "choice" only works if there is actually a choice. We've seen with our telephone companies that we have no real choice and costs are going through the roof.And I'm not in a rural area, either