Positive & Negative Impacts of Deregulation on Consumers

Some positive impacts of deregulation on consumers are increased competition, tax reduction, reduced price, and increased consumer savings, while some negative impacts include loss of jobs, compromise on product quality standards (which doesn’t favor consumers), and the negative effect on consumers in rural areas. Deregulation lowers barriers to entry into industries, which assists with improving innovation, entrepreneurship, competition, and efficiency; this leads to lower prices for customers and improved quality.

Deregulation: Positive Impact on Consumers

1. Increased Competition on Internet Access

  • Deregulation frequently reduces consumer prices by enhancing competition and productivity.
  • An example is the case of internet service providers (ISP), both for wireless smartphone service and home Internet service over cables, telephone lines, fiber optics, and satellites.
  • Before 2016, ISPs were permitted to use and share customer personal data, such as Internet browsing history, unless the consumer “opted out” of data sharing. With so many consumers staying with the default sharing option, ISPs could earn revenue from subscriber fees, tracked by the industry’s consumer price index (CPI), and using or sharing customer data.
  • Equivalently, the receipt of customer data allowed ISPs to earn the same profits with a lower subscriber fee. In effect, consumers paid for part of their subscription in money and another part by providing personal data.
  • In 2016 the FCC proposed and finalized a broadband privacy rule requiring ISPs to default consumers to paying in money only, thus prohibiting the opt-out system and instead requiring the opt-in system. This rule, which was likely anticipated well before 2016 as the FCC was moving ISPs under the stricter “Title II” regulation, was to go into effect on January 3, 2017.
  • In 2017, Congress passed, and President Trump signed a resolution of disapproval under the Congressional Review Act to overturn the 2016 FCC rule and prevent future Administrations from adopting similar rules.
  • The 2017 deregulatory action assured market participants that the ISP market would proceed with low subscriber fees. By overturning the 2016 rule, the 2017 action restored the FCC’s pre-2016 regulatory approach to protecting customer privacy.
  • Consumers with privacy concerns may opt-out and request that their ISPs not share their data.
  • Overturning the FCC’s opt-in rule resulted in lower prices for wired and wireless Internet service, as shown by the CPIs in the below figure.
  • Wireless service prices fell simultaneously, that Congress was considering the resolution of disapproval and wired Internet prices fell a couple of months later.
  • Both these declines are about $40 per subscriber over the life of the subscription, which is similar to independent estimates of the per-subscriber cost of obtaining personal data consent from retail customers that are the basis for our quantitative analysis.

Wireless and Wired ISP Price Cuts Close to the CRA’s Nullification of the FCC Rule, 2016–17

2. Consumer Savings on Healthcare

  • Deregulation is also said to be reducing prices for healthcare.
  • Prescription drug prices had outpaced general inflation for decades, but they have fallen more than 11 percent below the previous trend of May 2019 and below general inflation in the past two years.
  • In 2018, prescription drug prices even declined in nominal terms over the calendar year for the first time since 1972.
  • This results from the Trump Administration’s efforts at the FDA, such as its 2017 Drug Competition Action Plan and 2018 Strategic Policy Roadmap, to enhance choice and price competition in the biopharmaceutical markets.
  • Under these policies, the FDA has approved a record number of generic and new brand-name drugs to compete against existing drugs.
  • It is estimated that these actions will save consumers almost 10% on retail prescription drugs, which results in an increase of $32 billion per year in the purchasing power of the incomes of Americans.
  • The Trump Administration has also taken deregulatory actions in other healthcare markets, such as insurance.
  • The four actions that the administration took, which removed restrictions and alleviated some of the costs of Federal policies introduced during the years 2010–16, are by themselves expected to increase average real incomes by about 0.5%, or an average of about $700 per household per year.

Inflation-Adjusted CPI for Prescription Drugs, 2009–19

3. Tax Reduction

Deregulation: Negative Impact on Consumers

1. Loss of Jobs

2. Impact on Consumers in Rural Areas

3. Compromise on Quality Standards

Glenn is the Lead Operations Research Analyst at The Digital Momentum with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

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