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Universal Service?

Mises Daily: Thursday, May 06, 1999 by

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Al Gore may be dull-witted, and his speech slow and stiff. But despite this pathetic demeanor, Gore is a formidable defender of government. His program to "reinvent" government was a brilliant maneuver to hide a massive increase in government size and power in a guise of phony cuts in government employees and improved government efficiency.

Gore can also take credit for the new government prohibition on market transactions in human organs and body parts. Medical knowledge and technology advanced to the point of creating a new treatment that could help millions and Gore made sure that government would be in "control" and make a mess out of it.

Now, Gore has a plan to deal with Internet, and it is based on universal service criterion that made such a mess of telephone communications. At the heart of the monopoly is the concept of universal service in which government ostensibly keeps the price of phone service affordable by keeping your monthly local phone bill low.

Government and its phone monopoly are not giving anything away for free. Long distance and business customers are forced to subsidize the monthly local bill. Urban residential customers subsidize rural residential customers by paying the same bill for a much lower cost system.

All of these taxes and subsidies create an interesting political dynamic, but the real reason for universal service is for government to maintain its stranglehold and monopoly on the phone system. Universal service and set phone rates are the raison d'etre of monopoly.

Almost 95% of American homes have a phone; many have numerous phones and multiple lines. Many of the rest do not what or do not need a phone. Even the majority of those in poverty have a phone. We no longer need government interventions, including at least 40 different government programs, and their inevitable distortions to prices, to achieve universal service.

These policies have done nothing to improve access to telephone service because they do not lower the overall phone bill. Economic growth and higher incomes is the real reason why phone service is so widespread in the States. In fact, if politicians were serious about reducing our phone bills and making telephone service more affordable, they could kill the telephone tax, a relic of the Spanish American war!

The government's system of taxes and subsidies worked fine with the AT&T monolith and it has proved workable during restructuring because long distant companies and local phone service companies remained separate. Now, however, locals are entering long-distance service and long distance companies are entering the local market and the system is breaking down.

If we only would allow the system to die, the price of phone services would seek their normal levels and would become competitive. We would have competing local phone companies and the competitive pressures would spread to related products like cable television and Internet service.

Naturally, however, Washington is going to save universal service and attempt to maintain the monopoly longer.

But it is Al Gore that has extended the concept of universal service to providing Internet and advanced telecommunication services to hospitals, schools, and libraries. Gore has breathed new life into the concept of universal service, created a new entitlement, and guaranteed the government's control over the new and emerging forms in the telecommunications industry. Government budgets are already growing and more interest groups are lobbying to be included in the program.

The next time someone makes fun of how stupid Al Gore is, remind them of his dangerous accomplishments in maintaining and extending government in our lives. Stupid is, as stupid does.

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Mark Thornton is the O.P. Alford III Resident Scholar at the Ludwig von Mises Institute.