Convergence of technologies is spurring ’surprisingly’ strong pus...

10. More than 200 state and local govts. are providing telecom services, with 100 offering cable service and others everything from Internet to local telephony, said study titled Does Government Belong in the Telecom Business? Argument that govt. involvement can provide benchmark of real costs of providing service, thereby helping regulators set prices at appropriate levels, is myth, study said, because municipal utilities, like other govt. entities, benefit from “plethora of tax and regulatory advantages not available to the private sector": (1) Municipalities are able to issue tax-free debt. (2) They have access to public rights-of-way on terms not available to private companies. (3) They “avoid” franchise fees and other “taxes” that private companies must pay. (4) They aren’t subject to generally accepted accounting practices. (5) They often receive interest- free loans or outright public subsidies. As result of subsidies and advantages, public utilities never provide accurate gauge of true costs of providing service but distort marketplace, study said. Because subsidies allow public utilities to “undercut” prices charged by private companies, they deter entry by real competitors and thus prevent marketplace from setting cost-based prices, it said. Study said govt. agencies that had entered telecom business had been saddled with financial losses and obsolete, legacy technologies. It said such entry distorted marketplace incentives and slowed development of private sector competition. Study said govt. role in telecom marketplace must be confined to removal of regulatory barriers to private deployment of services and reduction of telecom taxes that “account for over 18% of the typical telephone bill.” Recent study by foundation found that high telecom taxes cause one million fewer households to have 2nd telephone line.