Lassman Sees Savings from Less Overhead, More Competition
WASHINGTON D.C. - The residents of Missouri and the state's revenue stream would benefit from the adoption of a statewide video franchise that would be administered by the Public Service Commission, argues Progress & Freedom Foundation Research Fellow Kent Lassman in the Progress on Point "A Model to Analyze Costs and Benefits of Franchise Reform: What Would Reform Mean to Missourians?" Such a franchise would permit easy entry to the Missouri market by video competitors such as the Bell companies, he says, and the resulting competition would be widely beneficial.
Localities are naturally loath to give up what they view as a bountiful source of taxation through franchise fees, Lassman acknowledges, but he argues under a statewide video franchise that Missouri residents would yield an estimated $23 million to $53.8 million of social welfare in the first year of the program. This is equivalent to approximately $4.00 to $9.35 for every man, woman and child in Missouri. The savings is based on the significant reduction in government overhead and manpower that would result from shifting video franchise regulation from numerous localities to one central regulator in the state PSC.
"Fundamental changes in the communications marketplace have introduced new services and technologies to the menu of options available to video consumers," Lassman writes. "As a result of these changes, the market for public policy changes is showing increasing vigor." Lassman says the administrative costs to an individual state of a video franchise likely would be greater than if there were a federal video franchise. Such a national franchise is being considered on Capitol Hill. Absent a federal preemption, however, Lassman maintains that a state franchise remains economically superior to the status quo for the state.
"New competition sparked by lower entry barriers to the marketplace would create additional consumer welfare," Lassman argues. "Through the course of the three years analyzed, the value to consumers of increased wireline competition as a result of a streamlined franchise process would be between $122.4 million and $228.2 million compared to the likely benefit of only $4.5 million that would result from the status quo. As a result, the total benefit for Missouri consumers as a result of franchise reform ranges from nearly $188.7 million to $277.3 million by 2009."
"A Model to Analyze Costs and Benefits of Franchise Reform: What Would Reform Mean to Missourians?" is available on the PFF web site.
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.