Free markets and rural universal service

[Commentary] Federal Communications Commission Commissioner Ajit Pai eschews free-market principles in his proposal to modernize the rural universal service telephone subsidy program to promote broadband Internet access. Instead, he follows decades of FCC commissioners before him by going along with the tried, true and massive subsidy programs that have no known effect on subscription rates. This anachronistic and out-of-date tax and subsidy scheme is merely an inefficient transfer of billions of dollars from urban areas to rural areas and, given the nature of how funds are raised, also a transfer from the poor to the wealthy. Pai's proposal (and the original modification of the rural subsidy system put forth by the chairman) would simply ensure that ineffective subsidies continue to flow uninterrupted to politically powerful rural telephone companies. Like Commissioner Pai, we, too, believe that markets have yielded unprecedented innovation. We hope he'll realize that his love of markets should extend to universal service and also convince his fellow commissioners to take an economically rational and socially responsible approach to broadband subsidies.

[Rosston is deputy director and senior fellow at the Stanford Institute for Economic Policy Research and director of the public policy program at Stanford University. Wallsten is vice president for research and senior fellow at the Technology Policy Institute.]