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News Release
October 15, 2003
CONTACT: David Fish
(202) 289-8928

Wireless Phone Study:
Consumers Pay 18% Extra
Report Says Gov't Mandates Hit Minorities, Rural Areas Hardest

WASHINGTON, D.C. - A new study concludes that U.S. wireless telephone users could pay over $16 billion a year – almost ten dollars per month per user – in order to pay for taxes and regulations. The resulting 18-percent national increase would hit minorities and rural customers disproportionately hard. Nation-wide, the study concludes, the higher prices could result in 30.94 million fewer wireless users.

In their report released today, “Taxes and Regulation: The Effects of Mandates on Wireless Phone Users,” economists Thomas M. Lenard and Brent D. Mast of The Progress & Freedom Foundation list the major regulations and taxes affecting wireless consumers. They also examine national and state-level mandates already in place, as well as major new proposals, estimating their effects on the wireless market.

Their report – the first national study of its type -- says the typical wireless user faces a total tax rate (federal, state and local) of over 14 percent on wireless services. This amounts to $6.77 for the average monthly bill of $54.14. The authors contend that, minus this expense, 22.4 million more people could afford wireless services.

Two proposals that would add even more to consumers bottom-line wireless burdens: a proposal by California regulators that would cost subscribers an additional $3.86 per month, and a national proposal by a New York senator that would increase consumers’ bills in all 50 states.

“In such a competitive environment the costs associated with these mandates will be passed on to consumers,” Lenard and Mast conclude. “The wireless sector is under increasing pressure on a number of regulatory fronts – most notably in the areas of taxation and regulatory mandates. “ While the study says some of the mandates “may be justified,” the authors contend there has been little or no systematic analysis of the combined effects on average consumers.

Among the federal regulatory mandates assessed: Wireless Local Number Portability, Number Pooling, Communications Assistance for Law Enforcement Act, E911. The study projects the cost of these four programs to be $2.62 per consumer per month, and says the additional expense could price almost eight million potential wireless users out of the market.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation