[Disclosure Note: As I've mentioned previously, AT&T is a client of mine, and they share my views (and those of every other rational observer) on the urgent need for universal service reform--both on the contribution and distribution sides. Unfortunately, for you (the reader), Bob Quinn (of AT&T) already came out with a quick, clever, and succinct statement on the health of the USF earlier in the week when he pronounced that the Fund was in a "death spiral"--meaning that the Fund's precarious status of quickly losing contributors would exacerbate the "per customer" pain caused by the fact that the Fund continues to grow on the distribution side, and so on, and so on . . . . Regretably, for the reader, I dithered with a contribution factor post, and then opted for the relatively repetitious "fact, fact, fact" format. Hang in there, though, it's got a great ending;-)]
Fact: Earlier this week, the FCC announced that the "contribution factor" for the federal Universal Service Fund (a federally-created subsidy pool designed to support telecommunications services to high-cost areas, low-income consumers, schools and libraries, and rural health care facilities), will reach an all-time high of almost 13% for the third quarter. This means that the FCC has authorized telecom providers to add a surcharge to the phone bills of most Americans amounting to about 13% of the interstate telecommunications portion of their wireless or wireline services bill. The surcharge is up from about 10% in the first quarter of this year.
Fact: The Universal Service Fund, in the past year alone, disbursed as much money as the total dollar amount of funds appropriated under the "broadband stimulus" provisions of the American Recovery and Reinvestment Act--about $7.2 billion.
Fact: In a report to Congress earlier this month, the FCC listed the top ten highest per-line USF beneficiaries. It's an interesting read, notable for two facts that seem counterintuitive. First, in all but two cases (where year over year data were available), the highest per line recipients either retained or increased the number of access lines served, while subsidies per line also increased. In other words, the subsidy trends tend to buck commonly-accepted notions of telecommunications being a high fixed-cost, low variable cost industry. Thus, as line counts increase, one would intuitively expect the necessary subsidies per line to decrease, not increase.
Second, the highest per line subsidy recipients were generally located in service territories surrounded by large LECs (maybe "high cost" but "non-rural") that managed to provide service to what would appear to be similarly-situated territories, but at drastically lower per line subsidy contributions.
The report noted that one rural carrier received almost $17,000 per access line in 2008. House Energy and Commerce Committee Ranking Member, Congressman Joe Barton (R-TX) reacted with this statement: "It is unreasonable to expect subscribers to pay more than 11 percent of their long-distance phone bills to subsidize scores of telephone providers in each geographic market, especially when other providers are serving the same markets without a penny of support." Congressman Barton said this before he knew the contribution factor would be well above 11%.
Continue reading Are You There Gov? It's Me, USF Contributor (a/k/a "Taxpayer")