^{Democracy & Technology Blog} Georgia’s moment of truth

Government subsidies typically result in waste, fraud and abuse. A recent audit of Georgia’s Universal Access Fund contained the hardly surprising findings that one or more small rural telephone companies were reimbursed for a $15,000 dinner, a $20,000 Christmas party, a new roof and the housekeeping expenses for a cabin in North Carolina and other questionable expenses.
Remarkably, the Georgia Universal Access Fund distributed $1.7 million in 2003 to five companies and $10.2 million last year to 15 rural phone companies.
Georgia legislators were quick to react. In the House of Representatives, a bill (HB 168) which would terminate the fund passed by a vote of 124-41. The bill is awaiting its fate in the state senate.
The legislature is considering another bill (HB 376) which would bring the state’s high intrastate access rates to parity with the significantly lower interstate access rates on file at the Federal Communications Commission over 10 years.
Small rural phone companies claim their customers will unfairly suffer. But many of these consumers pay lower rates for local service than the statewide average — under $8 per month in one case.
Generous subsidies for low-priced analog phone service in rural areas cannot be maintained any longer. That’s because urban and suburban consumers who underwrite the subsidies can cut the cord. They can give up their fully-taxed analog service in favor of lesser-taxed and far more efficient wireless or voice over Internet substitutes.
Public policy ought to encourage deployment of the most efficient technology in rural areas. But it does just the opposite. Small rural carriers who market wireless and voice over Internet services pay a penalty in the form of lower subsidies.
Allowing the market to set prices would spread the benefits of competition in rural areas.
Our recent paper, “Stimulate Broadband and Lower Utility Bills With Regulatory Reform,” notes that Georgia could open up new technological opportunities and economic efficiencies that promise a direct economic stimulus of at least $3.3 billion over the next five years in the form of lower prices for voice services, plus an additional $3.9 billion in economic impact annually from increased broadband availability and use by simple reforms of outmoded laws.
Eliminating outmoded and unsustainable subsidies is an obvious key step Georgia can take to ignite a new spiral of innovation and revival based on new technologies and services tapping into new worldwide webs of glass and light and air.