There is an easy econ 101 answer response. If you're really trying to help the poor at the (presumably managable) expense of everyone else, then subsidize the subscriptions of the poor households by explicitly taxing. This dramatically reduces market distortions and makes clear exactly what's happening. Putting up rules that require the rich to indirectly subsidize the poor in the way being described (making the tax invisible) predictably leads to an awful situation.
People often reply "this isn't politically feasible", but that's giving up the game. If the opaque, inefficient, and difficult-to-measure strategy is politically feasible but the transparent one is not, that's a good sign it's a bad choice.
Yep. Though subsidising subscriptions is a pretty non transparent way of tendering for access. If you are in the business of creating lots of little monopolies to achieve universal access, wouldn't it be more transparent to just create one big monopoly?
We tried this in oz. A gov. built backbone to be sold off (the naturally competitive part), with a gov. built and maintained 'fibre to the home' access (the natural monopoly part).
Fox / News waged a months long campaign to have them booted out of office, in which they explicitly and repeatedly called the gov. nazi's, and outrageously lied about the associated costs for both the gov. and opposition broadband systems. Now we have a system which locks in contracts for the backbone, and rents copper infrastructure for the next 50 years for access. If you want fibre access, you have to pay for it to be hooked up at a prohibitively large cost.
We know we can deliver access to everyone in oz through gov. for close to the price of delivering access to a privileged few through market monopolies. At a certain point, you have to realise this isn't about bad political choice, but a deliberate and sustained attempt to lock in privilege for the wealthy at the expense of everyone else. This is the real market distortion.
> If you're really trying to help the poor at the (presumably managable) expense of everyone else, then subsidize the subscriptions of the poor households by explicitly taxing.
Isn't this exactly what local governments are doing? It's just that the tax falls on the (shareholders of) broadband companies, who are presumably not, for the most part, local residents. The reason this is more politically feasible is not that it isn't a tax, but that the tax is not being levied on voters. Or does the name matter that much?
The problem is that taxing entrants into the cable market creates a very high barrier to entry. The tax is not being levied directly on voters, but indirectly, by creating a monopoly that provides poor service, when they could instead have competition providing great service.
> The tax is not being levied directly on voters, but indirectly, by creating a monopoly that provides poor service, when they could instead have competition providing great service.
But isn't the point here precisely that without the tax or other barriers to entry, "they" would not have great service? Some might -- but it seems likely that far fewer would get it than with build-out requirements and so on in place. I think the government has an obligation to avoid leaving those people behind in this case.
An explicit tax on the company by the local government would still be better than a build-out requirement, since this would at least be transparent.
But even if you want to transfer money from someone to the poor, and (perhaps unethically) you want to take it from someone who's not a voter, it still makes no sense to pick on this particular company. Why not tax any of the other non-voting companies that service a locality? Say, the tax on coca-cola?
> An explicit tax on the company by the local government would still be better than a build-out requirement, since this would at least be transparent.
I guess I don't quite see how it's more transparent. What information would it provide, and to whom, that the current system obscures? And is the issue whether we call it a "tax" vs. "build-out requirement", or is the issue what is being taxed (land use vs. revenue from local customers vs. ...)? I can't picture what such a tax would look like, how it would really differ from the status quo, and why it would result in better service -- walk me through it.
> But even if you want to transfer money from someone to the poor, and (perhaps unethically) you want to take it from someone who's not a voter, it still makes no sense to pick on this particular company. Why not tax any of the other non-voting companies that service a locality? Say, the tax on coca-cola?
Well, I take it that there are some relevant differences here, as qq66 pointed out. Internet access is infrastructure, and increasingly, it is essential; access to Coca-Cola is not. I think the government has some obligation to avoid creating a disparity between haves and have-nots for infrastructure like this. It's not the only consideration, but that is one reason build-out requirements are appropriate for broadband companies, while not for soda vendors.
Also, this infrastructure often has to be built on public land. It's the government's job to make sure that land is managed well for an indefinite period into the future, presumably well beyond the life of whatever cable is being laid down. This is why it's appropriate for the government to demand more oversight of these companies in general, whether that comes in the form of build-out requirements, a fund for cleanup fees, or whatever. A story I've seen again and again is public land rights being granted to a private company, which subsequently damages the land and then tries to stick the public with the bill. The government has an obligation to protect public interest in the land and avoid that kind of situation. Again, it has no such obligation with respect to many other businesses: Coca-Cola doesn't need land rights to sell bottles in private stores, so that kind of oversight is not appropriate.
> I guess I don't quite see how it's more transparent. What information would it provide, and to whom, that the current system obscures? And is the issue whether we call it a "tax" vs. "build-out requirement", or is the issue what is being taxed (land use vs. revenue from local customers vs. ...)?
The transparency issue is that a build-out requirement isn't denominated in dollars. (There are other economic efficiency arguments, such as if the poor people would rather have the money than the cable connection, but I'm addressing your question on transparency.)
A cable company has much more expertise than a local government for what the long-run costs and potential profits are for a build-out requirement, and moreover they have a much higher incentives to apply their expertise to the local situation than a politician. If you institute a build-out rule, it does so without knowing the size of the costs; they are simply imposed silently. Any future public debate about revising the rule is enfeebled.
> I can't picture what such a tax would look like, how it would really differ from the status quo, and why it would result in better service -- walk me through it.
The company is charged $X per year to use public rights of way. The government hands this money to the poor people who can choose to buy cable connections or not. (If they don't, this is a sign that they have something better to use the money on.) If the government doesn't trust the poor people to use the money responsibly, then the government directly subsidizes their cable connection fees instead.
> Well, I take it that there are some relevant differences here, as qq66 pointed out. Internet access is infrastructure, and increasingly, it is essential; access to Coca-Cola is not. I think the government has some obligation to avoid creating a disparity between haves and have-nots for infrastructure like this. It's not the only consideration, but that is one reason build-out requirements are appropriate for broadband companies, while not for soda vendors.
You missed the point. I wasn't saying that we should have build-out requirements for soda, I was saying that if we use a tax instead, then we can take the subsidizing resources from anyone rather than just a company in the field whose customers we wish to help. This would allows us much greater flexibility in getting those resources in a non-distortive way.
> whether that comes in the form of build-out requirements, a fund for cleanup fees, or whatever.
A fund for cleanup fees is completely different idea, and indeed is generally economically sensible. (Clean up fees are about correctly pricing externalities. Build out requirements are about getting one group of people to subsidize another.)
> A story I've seen again and again is public land rights being granted to a private company, which subsequently damages the land and then tries to stick the public with the bill.
This has nothing to do with the topic. I've seen people litter all the time in public spaces. Should I institute the loud-car ban because some people have littered in the past?
Whoops, I wrote this in haste but now it's too late to edit. The last sentence referred to an analogy that I decided didn't work. I would say: just because I've seen people litter all the time in public places doesn't have much to do with the badness (or non-badness) of economically inefficient/opaque methods for correcting other bad externalities.
> The transparency issue is that a build-out requirement isn't denominated in dollars...If you institute a build-out rule, it does so without knowing the size of the costs; they are simply imposed silently.
OK, I think I see.
> The company is charged $X per year to use public rights of way. The government hands this money to the poor people who can choose to buy cable connections or not. (If they don't, this is a sign that they have something better to use the money on.)
But I'm still having trouble seeing how this scenario improves on the original problem.
I thought that local governments were already charging $X for uses of rights of way, and build-out requirements are in addition to this. So if I understand right, the idea is to charge more (say $(X + Y)) but not impose those requirements, and instead let the broadband companies decide where and when to build out; then distribute the excess $Y (and, possibly, funds from elsewhere) to subsidize Internet service for the poor.
The problem I see here is that, if I'm one of those N poor folks the broadband company decides it doesn't want to build out to, I'm out of luck. I don't even have the option of buying broadband service, and offering up my $Y/N dollars does not give me much leverage to change that. If enough of my neighbors got together and pooled our funds, maybe that would be enough to convince the company to build out to our neighborhood, but maybe not, especially if (1) the company has already decided our neighborhood isn't worth it, or (2) building out would require the company to pay more in right-of-way fees (though maybe this is included in the initial $X+Y price?).
In short, it seems like our government trades the relatively strong leverage we have as a collected political force for the relatively weak leverage we each have as individuals, plus $Y/N dollars apiece.
In this particular case, that does not sound like a good trade, for the reasons I mentioned: Internet access is more or less essential infrastructure, and there is public interest in having nearly-universal access to that infrastructure, rather than a class of haves and a class of have-nots.
I wouldn't think it's that the government doesn't trust the poor (or really, anyone not yet built-out-to) to spend this money on responsibly. Rather, it's that divvying it up and letting individuals make their own decisions on how to spend it sacrifices political and economic coordination, which is required in this case to serve a desireable public end, near-universal access. Solving coordination problems like this is a big part of why governments exist, and we shouldn't be rushing to give up that coordination for individual decision making. We can easily end up in a situation where we're all worse off that way.
Explicitly taxing and subsidizing involves the kind of economy planning you don't want in a free market. Plus, it's a permanent fix. It's much easier for the government to build the fiber infrastructure, lease it to operators in the short term, possibly sell it or spin it off in the medium term. Just give the free market a bump to move it out of a local maximum.
People often reply "this isn't politically feasible", but that's giving up the game. If the opaque, inefficient, and difficult-to-measure strategy is politically feasible but the transparent one is not, that's a good sign it's a bad choice.