Toll Calls

The long-distance guide to economic indicators.

The Wall Street Journal and the Heritage Foundation annually rank the countries of the world on a scale of economic freedom. It's an arduous task, involving a multitude of judgment calls about comparisons of legal liability, tax policy, immigration laws, and more.

Here's a database which saves everyone a lot of work: the rate card from U.S. long-distance provider Startec (see Table). Simply by listing the price-per-minute of calls, it delivers a useful metric of how governments screw with people's economic well-being and, literally, freedom of speech.

Robert Crandall, a superb economist at the Brookings Institution, has estimated the actual costs of providing phone service around the globe. In the United States, he figures the expense, including fixed capital costs, to deliver a minute of long-distance is less than 2.5 cents. Administrative and billing costs go on top of that, but are modest and can be covered by monthly charges of $3 to $4 per subscriber.

International long-distance charges are roughly analogous. Vast fiber-optic cables deliver huge, cheap capacity to every corner of the planet. Even in the most remote, landlocked zones, satellites can beam down a dial tone for about 5 cents a minute. Bundled with local service, Crandall says the actual cost of reaching out and touching someone anywhere on Earth is less than 7 cents per minute.

But you'll pay more. Charges vary from about 8 cents in the U.S., U.K., and Canada to 19 cents in Mexico to a whopping 79 cents in Pakistan. Is that because Pakistanis are such stimulating conversationalists that callers are willing to spend oodles more to chat with them? Not exactly.

When permitted, competition drives down the price of long-distance service almost to the cost of service. The political climate can preempt that natural process, however. So the cost of doing business swings wildly, as do fee schedules for connecting with state telephone monopolies.

The differences in per-minute charges are essentially attributable to public policy--imposed charges, taxes, regulations, and monopoly barricades sealing off a nation's citizens from the efficiencies of markets. The variance on the rate chart says a lot about political behavior. Economic freedom flourishes when government opportunism is constrained through relatively free elections and open markets.

Where rulers lounge comfortably in their castles, the peasants are routinely treated as hostages. The king exacts a tribute every time a serf touches a dialpad or answers the phone. The mark-ups are rich--20 cents a minute here, 60 cents there--but are not simply cream skimmed by the potentates. That money gets spread around to tollkeepers and to cronies awarded fat franchises. Most of the lucre is squandered in inefficiencies, including regulatory uncertainty (tyrannical governments are known to confiscate private property).

Even in the good old U.S. of A., phone costs are politically padded. Hefty "access fees" are tacked onto bills to pay for universal service subsidies, while major competitors (you know them as the Baby Bells) are still largely barred from competing with AT&T, MCI, and Sprint for long-distance customers. In developing countries, huge surcharges on incoming long-distance calls are justified as bilking rich foreigners. In some places, nine in 10 international phone calls originate from outside the country, so the domestic government argues that such a policy helps locals by getting non-locals to generate revenues.

In truth, it establishes a quarantine more effective than any set of sanctions a foreign power could mount. Residents of such realms are effectively cut off from international commerce and a host of global opportunities. Modern communications are stalled, free speech stifled, economic development thwarted. Hell, in our kingdom even a criminal suspect gets to make a free phone call. Thanks to kleptocrats around the world, billions of our brothers and sisters regard such a modest consideration living large.

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