Wheeler’s Plan Ends 1% Silicon Subsidy; The 99% Would Benefit Even More If Other Distortions Ended, Too

by Mike Wendy on May 6, 2014

One of the key takeaways from Tom Wheeler’s new Net Neutrality proposal is that regardless of what form it will take (either a 706 or Title ll approach), it will remove, or certainly lessen, the “Silicon Subsidy” to rich 1% edge providers like YouTube and Netflix.

Consumer advocates should be shouting for joy for the 99%, elated that the subsidy is going bye-bye! You see, the now illegal Net Neutrality rules essentially made Average Joe pay for YouTube / Netflix and his neighbor’s 20-movie-a-day downloading addiction even if Joe didn’t use those services. The new rules (if they are adopted as reported) would greatly minimize that, placing the costs more closely on YouTube / Netflix and the movie addict instead of Joe.

The regressive nature of some subsidies, fees and taxes tends to inhibit the uptake by less advantaged individuals of any given product or service.  Keeping these levies low is of especial concern on the “essential” Internet, because as one consumer activist has astutely noted:

“For folks who are thinking about adopting broadband, who have much lower incomes or don’t value broadband as much—[even an] extra dollar [of fees or taxes] on the margins will cause millions of people…to not adopt.”

Millions not adopting.   From fees / taxes / subsidies. That doesn’t sound good for the 99%.

At the end of the day, Tom Wheeler wants his new version of Net Neutrality to boost broadband deployment and, ultimately, its adoption by all Americans. Eliminating the “Silicon Subsidy” for some of the richest companies in America is a good start.

But Wheeler shouldn’t stop there.

If he’s truly concerned about increasing broadband adoption, he would do well to push to remove the thicket of federal, state and local taxes, fees, surcharges, and other regulatory extortions, which have made America’s communications landscape more regressively taxed than “sinful” items like tobacco and alcohol. Not only would that reduce prices, it would bring new competition into the marketplace, helping broadband consumers get better services at lower costs.

Ending the 1% “Silicon Subsidy” and allowing network providers to better recover their costs is the right policy. The 99% could be further encouraged to adopt broadband if other choking government distortions were eliminated, too.

Keep going, Tom!

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