H.R. 4445 would diminish the role of regulators and increase the role of market forces in the telecommunications marketplace. The proposed legislation does raise serious issues. Policymakers should consider the extent to which the federal government will continue its involvement in the marketplace for telecommunications services. The argument that a change to reciprocal compensation rules would automatically raise the consumer price of Internet service requires an examination of facts. Every price increase is not a tax increase.
Prices provide consumers with choices among alternatives.
By contrast, consumers cannot avoid taxes and taxes do not react to competitive pressures. There are a variety of prices offered for Internet service that range from free to thousands of dollars per month. Most consumers pay between ten and twenty dollars a month for a dial-up connection to the Internet. Any change to ISP prices would face immediate competitive pressures. Regulatory arbitrage is a relic of an era when state and federal policymakers set all contracts, prices, service offerings, and even costs.