Prices play an important role in a market economy - they coordinate the decisions of producers and consumers. Administered prices are inflexible and, if wrong, can distort decisions made in the marketplace. Of all the possible combinations for price and quality, consumer satisfaction, and the cost of a product or service, there is no single entity to accurately determine the price of a product or service. Prices should be set by the dynamic forces of a market, which harness information beyond the reach of any individual, to coordinate the decisions of many buyers and sellers. Despite volumes of data and analysis, prices are not accurately set without competitive forces.
Subsidies prevent competition.
Telecommunications services, especially telephone services, depend upon an intricate and complex cross-subsidy system that lies at the heart of the relationship between interconnection, access fees and universal service. The universal service program is fundamentally flawed and should be revamped. However, the symbiotic relationship that it has with the structure of access fees prevents a change in one without a change in the other, whether it is intended or not. Certainly, the entire subsidy and tax regime can be substantially improved. However, a piecemeal approach to reform may create more economic damage than economic benefit, while slowing the march toward full competition in all telecommunications markets.