One thing on which economists agree is that subsidies are
> "deadweight losses," i.e., pure inefficiency. Whenever you pay
> somebody to do something that isn't capable of paying its own way,
> you are wasting your own resources and getting him to waste his.
> There are rare exceptions, but even then, it's better to fix
> whatever is stopping the market from working normally,
> rather than counteract it with a subsidy.
There is no public passenger trasnportation anywhere in the world that is not subsidized--bus, air, rail, subway, light rail. The market is working properly. There is no demand for public passnger transportation at market prices...those which would have to be charged if there were no subsidy.
Do they have taxis in your community? Aside from some occasional targeted subsidies for such groups as handicapped or elderly, taxi fares are generally "free market" and fully pay for the service.
(In quotes because there's often some sort of gov't regulation as to the rates and tariffs).
***** Moderator's Note *****
Taxi fares are _not_ "free market": governments limit the number of taxis to assure the license holders a profit, and even use taxicabs as instruments of public policy: in Boston, all cabs must be hybrid vehicles in a few years.
Relevence to telecom? Substitute "CLEC" for "taxi".
Bill Horne Temporary Moderator
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Yup, just look at the state of passenger rail before the birth of Amtrak. Even now, Amtrak isn't the best, unless you live along the eastern seaboard between Boston and D.C.
And the MBTA isn't bad either. Right now they run trains into Providence seven days a week, and they've committed to run to the Warwick, RI station which is 1,500 feet from TF Green airport (PVD). I'd seriously dig it since the train station in Providence is less than a mile from me and it'd be so easy to just take the train to the airport.
But even though the MBTA is heavily subsidized, I still pay $250 a month for my commuter rail pass.
Here's the worst part. I'm planning on buying a car soon, and I have two criteria for it. It must get 40MPG or greater highway mileage, and it must cost < $30,000. I'm looking at the Smart fourtwo, it's made by Daimler, is about $16K and gets 33 city, 40 highway.
I plan on paying cash for the car, so when I did cost projections (Insurance, gas, maintenance) it comes out to exactly $250 a month.
So it breaks even with the MBTA rate. If I were to buy a car that got fewer MPG highway it would cease to do so.
I don't know about "anywhere in the world", but in the US other forms of transportation are heavily subsidized too. Direct user taxes such as tolls and gasoline tax pay for less than half of the cost of building and maintaining roadways, and that's not even counting the concomitant costs like policing, pollution, etc.
Taxis and other vehicles use roads built and maintained through taxes.
Practically every major infrastructure ever built - railroads, electrical grid, telephone network, highway system - was government supported either directly or indirectly (such as protection from competition.) The collapse of the telco bubble as many companies tried to build or upgrade networks on their own dime is perhaps the most dramatic illustration of why that assistance was probably necessary.