Telecoms Get in Line for Bailout

Published February 1, 2009

Congress and President George W. Bush spent the last half of 2008 racking up more than $8 trillion in promised bailouts to Wall Street, the auto industry, and financial institutions. The technology industry also got in line.

AT&T is among the latest companies pleading for a portion of the pot. The company is asking for $30 to $60 billion in subsidies and tax breaks to upgrade its communications system to provide faster broadband speeds for the public.

Paying for Unwanted Services

“Subsidies and tax breaks always hurt consumers because they are designed to thwart the collective will of consumers,” said Bill Peacock, vice president of administration and director of the Texas Public Policy Foundation’s Center for Economic Freedom in Austin. “When people say the market has failed and it needs more regulations or subsidies, what they are really saying is that they don’t like the decisions that consumers are making, and [government needs] to do something about it.

“In this case, if broadband access isn’t universal, it is because consumers have chosen not to make it so,” Peacock added. “Either they don’t want it at the current price, or they don’t want it at all. Subsidizing broadband doesn’t make it any cheaper. It just shifts the costs from consumers to taxpayers—which happen to be the same group of people.

“So even though consumers don’t want universal broadband at its current price, they would be forced by the government to pay for it through subsidies as taxpayers,” Peacock said.

Little Positive Impact

Industry experts do not see a need for government interference or a bailout.

“The United States is near the top of the list in broadband accessibility and speeds,” Peacock said. “Statistics to the contrary are either skewed or don’t take into account the geographic diversity of our country. To the extent we need to improve in this area, what the government needs to do is eliminate and prevent regulations like net neutrality, which hurt investment in our fiber and wireless infrastructure.”

Craig Settles, president of, a wireless industry consulting firm, doubts a telecom bailout would do consumers much good.

“New technologies and business models are being developed in the wings that offer greater benefits to consumers than what the giant telcos offer, and the telcos are incapable of adopting these changes,” Settles said. “The thing the telecoms are likely to do with any money they get is to put people and practices into place that continually line executives’ and big stockholders’ pockets and protect them from competition—neither of which is good for consumers.”

Troy Stouffer ([email protected]) writes from Baltimore, Maryland.