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| Impact of Big Telco Plan on Consumers: At Least $2B, More Likely $5-10B |
| Friday, 29 July 2011 21:12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Big Telco Plan proposes an increase in the "Subscriber Line Charge" which would all go to the carrier. It may be up to $3.75/month, although in somes cases the telco won't be able to get the increase in practice. The increased charge on wireless customers is unclear. The first column is $3.75/line/month and the second at $2/line/month. Under different assumptions, that yields an increased consumer cost of between $2.8B and $18B. My opinion is that the most likely figure is $5-10B I've done an estimate for both 300M lines and 400M lines, wired and wireless. To reach the 400M figure, a fair number of people would need to pay for two phone plans.
In addition, the decrease proposed for intercarrier compensation lowers the cost of providing long distance service. Some of that may be passed on to customers in lower prices. A few years ago, customers had many choices in LD service, including MCI, Sprint, and AT&T actively marketed. It was reasonable to assume that much of that would be passed on to consumers. Today, nearly all of us buy LD from our wired or wireless voice provider as part of a bundle. Competition is less. Columns 3-6 have assumptions of 40% offset and 70% offset.
Some folks, including Congressman Boucher, have wanted to add USF to broadband. At the current 15% rate and a $35 average monthly price, that would add about $60/year. As we move towards 100M broadband homes, that's a whopping $6B/year. Last year, it looked like the fix is in on this; now, it's unclear. I don't think the FCC would tax broadband with an election on the way.
There are sophisticated techniques economists use to estimate things like this, but there are so many complicated pricing plans I don't think there's any way to come to an exact answer. In addition, much of the data that would be required to measure demand curves and pricing competition is proprietary.
All things considered, it's almost certain consumers will pay $billions more per year. Most of that would accrue to those carriers who now pay the most for intercarrier compensation and are unlikely to pass on the full savings to consumers by lowering prices. Those are AT&T and Verizon.
Improvements to this analysis welcome, but let's avoid sophistry.
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