US/ND-2: Scope of Universal Service
Scope of Universal Service
Ken Hammer (ken.hammer@ConnRiver.net)
Sat, 07 Sep 96 20:27:54 -0500
Comment on the following 2 paragraphs of the Week 2 Scope:
"There is a second issue which might make one want to narrow the scope
of Universal Service subsidies. This is the question of who puts into
the Universal Service Fund, and who takes out of it. Traditionally,
the Universal Service Fund has been circular, with the same companies
putting into the fund, typically in proportion to the number of urban
customers they serve, and taking out of the fund, typically in
proportion to the number of rural customers they serve."
"If one were to extend coverage of the Universal Service subsidies for
schools and libraries to areas beyond the typical reach of traditional
telecommunications suppliers, it opens up a whole new set of concerns
about fairness. If, for example, the fund were to cover the purchase
of computers, should computer vendors be required to make payments
into the fund? You will find much discussion of this issue in the
Comments presented to the FCC. Typically, those businesses which have
not previously had to pay into the fund are arguing against having new
regulatory requirements imposed upon them through this sort of
arrangement."
Comment: The presumption throughout is that "companies" and
"businesses" pay the subsidy. If the flow of funds is "circular", it
is a long loop running from one set of consumers to another with some
overlap. Companies and businesses in the loop are only tax
collectors; collecting at the behest of government from one set of
consumers in prices and distributing to others in subsidies. Once
this hidden tax becomes too large, citizens rebel. The national
examples of medicine and education reveal the consequences. On a more
human scale, Vermont provides some concrete examples. Tiny in
population, it is often compelled to perform with bravado as
"first/best" in the nation.
Vermont continues to try and "manage" the health care system. In our
small town, if government paid the full cost of all the health
benefits it has "given" to various ones of us, the hospital bill for
all the rest would be 35% lower than the current charge. So we all
rebel against the health system when it was the government which
promoted promiscuous excess in use and in practice.
In the more direct interest of this seminar, education was championed
by Vermont state government from the '60's through most of the '80's.
Vocational education, special education and "state standards" were
implemented. Higher teaching salaries were encouraged. The State
promised subsidies which actually grew to 60% of our town's total
education costs by 1991 (while costs were locally controlled 20% below
the state average for comparable districts). Since 1991, that State
support of education in our town is reduced to 40% in the FY 1997
budget. The local result is catastrophic increases in the property
tax and voter rebellion against the teachers and School Board. That
is now common in many towns in Vermont. Attempts to hide further
education funding with compelled transfer payments in the private
sector will not be well received if/when they are recognized.
Vermont's excess of political activism has so exceeded its economic
capacity that pension funds, trust funds and local town budgets are
being savaged. To complete the illusion, the Governor audaciously
claimed during the Democratic convention that Vermont serves as an
example of fiscal and social responsibility for the US. What was
really accomplished was a massive transfer of state obligation to
local property taxes and an increasing clamor by polititicians for
still more taxing authority for the State to ease the local tax pain.
The only "circular" in this scenario is that of the political logic.
Excessive government justifies more government. That is Vermont's
lesson about hidden subsidies.
Suggestion: The scope of subsidies should be small and limited. The
beginning understanding should be that it is original seed capital.
If the service created provides ongoing value, it should be supported
by a tax base close enough to home to be seen and disciplined. I'm
therefore inclined to support initial external wiring, initial
computing equipment, an initial round of training and ongoing external
system operation. Don't provide ongoing training and technical
support or subsequent equipment upgrades. Otherwise, the hidden
subsidies will become a means of federal takeover of the whole
educational system as it becomes dependent on the dictated largess.
Even worse, unproductive efforts will be sustained because there is no
one to render a concluding judgement on failures. Promising future
initiatives will be stifled by the continued subsidy of those
preserved failures.
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K.F.Hammer Associates Ken Hammer
management consultations St. Johnsbury, VT 05819
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