Universal Service Subsidies & Public Choice Economics: Yet Another Case Study

by on August 7, 2012 · 10 comments

Those of you who spend a lot of time thinking about public choice economics and the problem of cronyism more generally might appreciate this little blurb I found today about the Universal Service Fund (USF).

It goes without saying that America’s “universal service” (telephone subsidy) system is a cesspool of cronyism, favoring some companies over others and grotesquely distorting economic incentives in the process. And the costs just keep growing without any end in sight. Just go to any FCC meeting or congressional hearing about universal service policy and listen to all the companies insisting that they need the subsidy gravy trail to keep on rolling and you’ll understand why that is the case. But plenty of policymakers (especially rural lawmakers) love the system, too, since it allows them to dispense targeted favors.

Anyway, I was flipping through the latest copy of “The RCA Voice” which is the quarterly newsletter of what used to be called the Rural Cellular Association, but now just goes by RCA.  RCA represents rural wireless carriers who, among other things, would like increased government subsidies for–you guessed it–rural wireless services. Their latest newsletter includes an interview with Rep. Don Young (R-AK) who was applauded by RCA for launching the Congressional Universal Service Fund Caucus, whose members basically want to steer even more money into the USF system (and their congressional districts). Here’s the relevant part of the Q&A with Rep. Young:

RCA VOICE: “How important is it for carriers serving rural areas to be engaged with their members of Congress on USF issues?”

REP. DON YOUNG (R-AK): “The more carriers engage with both their Representatives and Senators, the better. While the early bird may get the worm, the bird that doesn’t even try definitely won’t get any worms. The same applies to Congress.”

Well, you gotta admire chutzpah like that! It pretty much perfectly sums up why universal service has always been a textbook case study of public choice dynamics in action. Sadly, it also explains why there isn’t a snowball’s chance in hell that this racket will be cleaned up any time soon.

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