Resort to Principles of Economics

According to the Wall Street Journal, neither the Federal Communications Commission (FCC) nor the Federal Trade Commission (FTC) have been capable of reigning in the increasing annoyance of robocalls, scammers, etc. The only thing that the Telephone Consumer Protection Act seems to have accomplished is proving the ineptness of the bureaucracy in enforcing it.

Since 2015, the FCC has levied over $200 million in fines for violations of the Do Not Call Registry. That would be a deterrent if collected but to date the FCC has collected less than $7000 or .00004%. The FTC has obtained court judgments of $1.5 billion since 2004 in civil penalties for robocalls or violations of the Do Not Call Registry. It has done better than the FCC in collections but only because the FCC success rate is so pathetic. The FTC has recovered an unimpressive 8% or $121 million.

The FCC claims that it lacks enforcement authority and has to rely on the Justice Department. The FTC told the Journal that it was proud of its “strong enforcement.” No wonder that the number of robocalls has soared. Robocalls to mobile phones reached 50 billion last year according to the Pew Center.

Carriers are supposed to be working on verification systems that will help consumers decide if calls are legitimate. Of course, those systems won’t prevent the annoying ringing of calls that seem to always come at the worst of times. Consumers can purchase equipment or apps that will block unwanted calls but devices for landlines can cost over $100 and while some mobile systems are free, subscription apps cost at least several dollars a month. While apps provide some level of protection they’re not fool proof. There have been estimates that no service flags more than two-thirds of calls because many robocalls spoof their identities.

A professor at the University of Texas, Roger Meiners, suggests that economic principles might provide a better answer. Namely, if you want less of something, in this case robocalls, etc., raise its cost by imposing a tax on calls. Meiners has proposed the Penny for Sanity Tax. A I cent tax on 50 billion calls would raise $500 million annually. He makes the point that since the tax applies to all calls, it would avoid litigation over discrimination and would be very difficult to avoid.
According to the Pew Center, the average adult cell phone owner makes and receives around 5 voice calls a day. If we assume that average holds for land lines as well, assuming 3 calls made per day would cost 3 cents or less that $1 per month. At 5 cents, the monthly cost would be slightly less than $5. While $60 a year is steep relative to other options, it probably is more effective. Many would gladly pay a reasonable price to avoid the annoyance. Congress ought to be able to find a creative way to make that tax deductible or authorize consumer rebates to significantly reduce the burden on all of us. Congress has an incentive to do so because it is voters who are receiving these calls.

Author: billo38@icloud.com

Founder and president of Solutions Consulting which focuses on public policy issues, strategic planning, and strategic communications.

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