TAILIEUCHUNG - Taxation by Telecommunications Regulation

Regulated industries such as telecommunications, transportation, and electric power have always had numerous “cross-subsidies” embedded in their rate structures. To promote “universal service” or just to sat- isfy the demands of politically influential consumer groups, state and federal regulatory agencies have set rates for some services at levels below the costs of supplying them and other rates at levels commensurately higher than costs of supply. As a result, some consumers have paid what amounts to a tax on their telephone and electricity bills to finance subsidized service to other consumers. The pat- tern of cross-subsidies has generally been from business customers to residential customers and from urban to ru- ral customers—but the subsidies. | Taxation by Telecommunications Regulation Taxation by Telecommunications Regulation The Economics of the E-Rate Jerry Hausman The AEI Press Publisher for the American Enterprise Institute WASHINGTON . 1998 Alex Brill Susan Dynarski and Hyde Hsu provided research assistance. Jim Poterba and Tim Tardiffprovidedhelpful comments. Available in the United States from the AEI Press c o Publisher Resources Inc. 1224 Heil Quaker Blvd. . Box 7001 La Vergne TN 37086-7001. To order call 1-800-269-6267. Distributed outside the United States by arrangement with Eurospan 3 Henrietta Street London WC2E 8LU England. ISBN 0-8447-7121-X 1 3 5 7 9 10 8 6 4 2 1998 by the American Enterprise Institute for Public Policy Research Washington . All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from the American Enterprise Institute except in cases of brief quotations embodied in news articles critical articles or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff advisory panels officers or trustees of AEI. The AEI Press Publisher for the American Enterprise Institute 1150 17th Street . Washington . 20036 Printed in the United States of .

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