When Taxpayer Subsidy Harms Rural Consumer Access & Choice

Rural America cannot catch a break. While there’s numerous examples of Rural America being treated as a collective Sacrifice Zone, let’s focus on the hollowing out of consumer access and choice for the benefit of narrowly-defined shareholder interest.

Fortune 500 companies have made it a strategy to saturate rural markets as part of a larger growth strategy (Walmart is poster child). Big money invests in these firms, and these firms “disrupt” incumbent enterprise. All too often, the incumbents are independents who are fixtures of the local economy. While locally-owned incumbent businesses are not always angels or competent (the same holds with major corporations), there does exist a body of rural sociology literature finding that such enterprise offers an enhanced local economic multiplier, even increasing civic capacity. These are important players in an era of government ineptitude at state and federal levels. Unfortunately, some of the biggest global economic players are actively destroying locally-owned incumbents, defending themselves as champions of the consumer.

There is good reason to question these motives.

Take for example the recent announcement by Verizon to boot thousands of rural consumers from their plans. Verizon has been gobbling up regional mobile markets, pushing out non-national players, again under the banner of abundant consumer choice (the recent ad campaign is “Verizon Unlimited for All – Now w/ More Unlimited Choices”). What many aren’t aware of is that Verizon has also received signifiant government subsidy to penetrate rural markets in the name of public safety. In states such as Illinois, Verizon is the government’s preferred mobile provider across the state, specifically for emergency disaster preparation infrastructure. The unspoken understanding is that Verizon, through generous state subsidy, will also piggyback rural mobile services.

Despite Verizon’s extreme profitability propped up on the backs rural taxpayers, Verizon has decided to take a narrow look at its balance sheet, deeming thousands of rural Americans as “unprofitable” and “subsidized” by other Verizon subscribers.

The irony here is that Verizon may -at least should– be opening a debate on the role of corporate subsidy and public benefit, particularly to hard-hit Rural America. It would appear that Verizon is the one being subsidized by the same rural people who are now being denied mobile services. If governments had worked to shore up regional providers, perhaps rural mobile service would have been enhanced. Instead, public officials have thrown their own citizens to the wolves of Wall Street.

 

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