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Ellig Costs And Consequences Of Telecom Regulation Feb 2005
1. Costs and Consequences of Telecom and Broadband Regulations Jerry Ellig Senior Research Fellow
2. $105 billion annually at stake for consumers Unbundled network elements Local number portability Enhanced 911 Satellite regulation Resale of incumbent’s local service Number pooling and CALEA Long-distance access charges Broadband regulatory uncertainty Universal service Spectrum management Cost to consumers of these regulations…
3. How much? $11.1 billion Unbundled network elements $1.7 billion Local number portability $1.2 billion Enhanced 911 Unknown Satellite regulation $21 million Resale of incumbent’s local service $800 million Number pooling and CALEA $3.6 billion Long-distance access charges $4.5 billion Broadband regulatory uncertainty $4.4 billion Universal service $77 billion Spectrum management
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7. How do the costs compare? $120 billion Total cost to society (Assumes wealth transfer is wasted) $41 billion “ Excess burden” (Forgone consumer + producer surplus) $105 billion Total cost to consumers (Assumes wealth transfer is wasted or goes to firms) $25 billion Forgone consumer surplus $75 billion Wealth transferred
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14. Excess burden %s 61% Unbundled network elements 62% Local number portability 60% Enhanced 911 N.A. Satellite regulation 67% Resale of incumbent’s local service 62% Number pooling and CALEA 44% Long-distance access charges N.A. Broadband regulatory uncertainty 43-62% Universal service 56% Spectrum management Max 40% General federal taxation
15. Spectrum allocation FCC allocation not necessary to prevent interference Prevent signal interference Tends to reduce consumer welfare Consumer welfare Implies no particular outcome “ Public interest” Outcome Achieved Intended Outcome
17. Universal Service Unknown Improved educational outcomes Unknown Redistribution to rural consumers $5155-20,000 per added subscription Increase rural subscription Lifeline: $99/household Linkup: $18/household Redistribution to poor $1581-2200 per added subscription Increase low-income subscription Outcome Achieved Intended Outcome
18. Long-distance access charges $24 average per low-income household Redistribution to poor Negligible or negative Increased low-income subscription Negligible or negative Increased local subscription Outcome Achieved Intended Outcome
19. Unbundled network elements Unlikely when reselling incumbent’s services Innovative new services Each $ gain costs $26 Increased economic welfare Substituted for facilities-based competition Increased competition $9.7 billion transferred, but inefficiently Lower prices Outcome Achieved Intended Outcome
20. Local number portability Unknown Increased competition/ consumer welfare Outcome Achieved Intended Outcome
21. Enhanced 911 $1000 cost savings per cardiac patient Reduced health/safety costs Big reductions in cardiac mortality Improved health/safety Outcome Achieved Intended Outcome
22. Misc. wireless mandates Unknown CALEA – improved law enforcement/national security Unknown Number pooling – improved utilization of numbers Outcome Achieved Intended Outcome
23. Resale of incumbent’s local service Unlikely when reselling incumbent’s services Innovative new services Has not been attractive entry strategy Increased competition/ consumer welfare Outcome Achieved Intended Outcome