Sorry, Ms. #Clyburn. There is no fairness in #broadband economics

Federal Communications Commission member Mignon Clyburn today gave her perspective and support for legislation, also announced today, that would reform the universal service fund’s Lifeline program so that it supports low income households that wish to purchase broadband services.

Lifeline has traditionally provided subsidies designed to lower the monthly telephone bills of low income consumers.  Consumers typically have to show that they meet a certain percentage of the poverty threshold and/or that they are subscribed to government programs such as Temporary Assistance for Needy Families (TANF), subsidized housing, or Medicaid.

What stood out for me in Ms. Clyburn’s statement was the following:

“The Commission’s reforms of Lifeline have led to significant savings—over $200 million, with an expectation such savings will double this year to $400 million. Expanding broadband service to low income consumers would be a boon for the nation with this savings. As one senior executive of a broadband company recently stated, this really is about fairness. Those who can benefit the most from high-speed Internet should have the means to purchase it, but when they don’t, not only is it not fair, the negative impact on our society and economy is immeasurable.”

First, I don’t know which broadband company executive Ms. Clyburn is referring to, but my hunch isn’t that he or she is talking about fairness to the consumer, but more about fairness to carriers who were expected to deliver services where their business models didn’t justify the costs and couldn’t be done without subsidies.

Second, and more importantly, there is no fairness in economics, atleast not as we practice it here in the United States, and I dare say rightfully so.  Our economic school of thought says that producers show a willingness and ability to supply services where consumers show a willingness and ability to pay.  When we start injecting fairness into that standard, we find ourselves sliding down a slippery slope.  We are forced to define fairness.  We find a small number of beaurucrats determing who gets service and influencing at what price services are to be delivered.  We get unnecesary market intervention; an intervention that takes decsion making out of the hands of consumers and producers alike.  The intervention also skews the signals that innovators are waiting on in order to come up with alternative services.  Those alternative services may find themselves unfunded as a result of the distortion implicit or explicit subsidies create.

A distorted market would be the true unfairness that results from a reformed Lifeline subsidy program.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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