Routing the two-tier system: Part VI – Communication

If you want to eliminate two-tier systems for a socially important service, then the recommended solution is to provide all users with the top tier service.


Communication has become a very important part of our society.  Cell phones are nearly universal, and the Internet and access to it has become extremely important.  Yes, we still have landlines and snail mail, but the need for speedy communications has become essential.

If you’re read the earlier parts of this series of articles, you can probably guess what I am going to suggest.  Because, of course, we have a two-tier system going on in our communications. There are basic levels of cell phone operation, and there are basic sorts of access to the Internet.  But the operators of each system try to charge more and more for what should be basic. For example, as the speed of the Internet increases, the operators try to charge more for the faster service, and they push those who pay less into the slower service.  But paying for faster speed may not be worth it, because while you pay you may not actually get it.

The same is true for cell phones.  There may be a charge for unlimited use and then another charge where the use is limited.  These are called “plans.” For example, “Verizon has three unlimited plans priced at $75, $85 and $95 per month, respectively: “Go Unlimited,” “Beyond Unlimited” and “Above Unlimited.” The pricing for each decreases as you add more lines to the account.

Verizon’s Beyond Unlimited plan is capped at 22GB of high-speed 4G LTE data per month, while the Above Unlimited is curbed at 75GB. If you hit these ceilings, Verizon reserves the right to slow your data speeds. 

“The entry-level Go Unlimited is unique. Unlike the more expensive plans, there’s no guarantee of a certain about of high-speed unlimited data you can use without seeing throttling. Verizon explained to me that “data may be temporarily slower than other traffic during times of congestion” at any point during your usage.” 

When you try to explore the costs that go into delivering cell phone service, you’ll find that it has little to do with speed.  “Spectrum fees will remain high as a source of revenue for Treasury, with the funds often repurposed, such as into FirstNet. Towers need land, and they aren’t making more of that. We always want faster, more capable phone service and data. New technology means new equipment. Plus servicing and maintaining all the old equipment and paying all the access fees, and power bills. Then convincing you to buy requires a fleet of staff and stores, plus support once you’re hooked but need help.” The differential in plans seems to be a way of getting money and not much else.

It would probably make sense to eliminate the price differential and provide all users with a “top of the line” service.  This may raise prices, but there is apparently an easy way for the government to control those prices if they get out of hand.  The cell phone companies must bid in the spectrum auction, and they rely on certain tax breaks.  The government certainly has the ability to vary these to a company that insists on paying its CEO $21 million annually, which is 500 to 600 times the salary of the ordinary employee. If the price to the consumer is still too high, then the government can follow the Swiss model in healthcare and pay a subsidy for poorer people to even out the costs

If you want to eliminate two-tier systems for a socially important service, then the recommended solution is to provide all users with the top tier service.  A subsidy should be granted to the poorer customers, on the one hand, and the government should use the tax and other systems to control excessive profits by the provider.

Another solution is to have a basic service which is affordable.  In most instances, that basic service will be sufficient for most people.  The wealthy can be permitted to pay for add-ons. The poorer people can get a subsidy for the add-ons if they have a need but not the ability to buy it.  And if the provider makes too much money (what they pay the CEO is usually a clear signal of excessive profits), then the government should tax the provider accordingly.


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