There are many reasons why the e-rate, the regulation by which ISPs are required to offer a 50% discount to educational institutions, is a bad idea. It was thus when first mooted in 2001, and nothing about the laughable attempts at implementing it since then makes it a better idea.
Paul Vecchiatto enumerates a few reasons in this column, as do some of the comments on it, as do comments on his article reporting that a hefty fine is now to be imposed on non-complying ISPs.
Naturallly, opposition parties are all emotional about it. The poor kids, and so forth.
They too miss the point.
The poor kids should be the last people we'd want to see as victims of this ill-conceived policy, of government's economic illiteracy.
Do they deserve cheaper Internet access? Of course! But so do hospitals, police stations, NGOs, lawyers (yes, lawyers), struggling start-up businesses, and successful large ones. Not to mention all the millions - including millions of school children - who don't have Internet access at all, because when Poison Ivy decreed "let there be Internet access", it was not so, and nobody saw that it was good, but only saw her resting on the seventh day.
Besides, why don't kids deserve cheaper stationery, books, furniture, vehicles, buildings, or any of the other commodities that are required for organised, quality education?
Either way, will an e-rate solve this problem? No. It will make it worse.
Of price control and charity
A mandatory discount is just a complicated means of price control. Besides the bureaucratic costs of implementation, there are reams of evidence to show that the only reliable effect of forcibly reducing retail prices is to make supply vanish. There are reams of theory to explain why this happens.
Do they [schools] deserve cheaper Internet access? Of course! But so do hospitals, police stations, NGOs, lawyers (yes, lawyers), struggling start-up businesses, and successful large ones.
Ivo Vegter, ITWeb contributor
Producers can obviously not afford to produce at a loss. But even if mandatory prices only eat into profit, they will not produce commodity A, or sell to consumer X, when producing commodity B, or selling to consumer Y, can make them more money. The market is rational, not emotional.
Individuals might be moved to donate to charities, and many do. More are likely to do so if they don't feel resentful about a patronising government that forces them to be charitable via taxes or otherwise. Note the comments from ISPs who were already connecting schools for free. Do they sound offended? I would too, if I were them.
In a free market, competition brings prices down, and provides an incentive for people to try to reach potential markets that others haven't reached. Any new start-up will always try to be innovative and offer a better service at a better price than an incumbent rival. In fact, that's the only way in which they can succeed.
What it means to be free
But free means free. It doesn't mean "private sector". It doesn't mean "competition" among a limited number of government-selected companies. It doesn't mean unlimited competition at the retail end of a supply chain while the wholesale end is dominated by a closed cartel. Before whining that the "free market" hasn't done this or that, government should learn what it means for a market to be free.
While private charity works, and free markets work, producers only ever respond negatively to price controls by government. Instead of expensive Internet access, or a 50% discount, schools will simply receive no access at all if the e-rate were finally enforced. And if a subsequent decree enslaves ISPs by forcing them to supply access to any school that asks, no matter what the consequences, they will go out of business, either because they can't sustain the losses, or because opening some other business might prove to be more profitable. (The term enslavement, above, was chosen very deliberately.)
Quackery, begone!
So, do our kids deserve a 50% discount? No, they don't.
It used to be that female hysteria was cured by lobotomies. Fevers were cured by applying leeches. Infected wounds were just bandaged. In each case, "doing something" seemed better than doing nothing. In each case, the solution either misdiagnosed the cause, or failed to solve it, or both.
The future of our children is too important to be ruined by government quacks who can think no further than putting plasters on festering sores.
Abolishing the e-rate is the best thing the outgoing administration can do to mitigate in some small way its disastrous telecoms policy legacy.
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