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Wednesday, March 10, 2004

Taxation by Regulation
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Ray and I attended the AEI-Brookings forum on VoIP this morning. The panelists included Bobs Crandall and Litan, Reed Hundt and Harold Furchtgott-Roth.

Bob Crandall and Reed Hundt's world-views collided. Hundt, for example, believes narrowband is "far less" regulated than broadband. On universal service, his view is that, since political realities dictate that we're going to subsidize something, it might as well be broadband. I gathered that this wouldn't be "little broadband" like DSL or cable modem service, but what Hundt calls the real communications revolution: "big broadband" networks with speeds greater than 10Mbps. Imagine being able to incorporate this theory into your everyday life without repercussions - if you take me out to lunch, then I'm going to get the most expensive thing on the menu. Hell, I'm not paying for it!

A nationally subsidized broadband policy, according to Hundt, would cure us of our ills. We'd recoup the millions of jobs that we've lost over the past several years. We'd close the broadband penetration gap with Korea. (Which would be fine, if only the United States were similarly confined to a geographical area the size of Michigan.)

Bob Crandall premised his discussion on Judge Posner's classic article, Taxation by Regulation. The main function of regulation, according to that article, is to move money between competing interests. The battle now is not about market power, according to Crandall, but how carriers will be able keep prices up once VoIP takes off. Also at stake are the $27 billion in taxes that the current access and USF schemes impose on customers every year. A rewrite of the Telecom Act is therefore necessary, concluded Crandall, in order to eliminate the excessive costs of "taxation by regulation."

Hundt, on the other hand, does not see any need for a rewrite of the rules. And why would he? His own legacy would be at stake.

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