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Reach Out And Milk Someone

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You know that "Universal Service Fund" you're paying into on your phone bill? It's supposed to subsidize phone service to people in rural areas. Well, it turns out it's more of a Universal Corporate Handout Fund.

We're paying up to $13,345 per phone line per year, but a study shows it would be cheaper to simply give away free cell phone service to all those people. (On a side note, I wonder if they can get reception in all those rural areas.) But, free satellite phone service is another more cost-effective option the study suggests.

The people we're really subsidizing are the shareholders of the small rural telephone companies, who are really making out. The George Mason University study for "The Seniors Coalition" identified 20 companies in Alaska, Arizona, Arkansas, Colorado, Hawaii, Kansas, Mississippi, Nebraska, Nevada, New Mexico, Oklahoma, Texas, Utah and Wyoming that are the worst for milking consumers:

The Hazlett study notes that, rather than providing phone-service to low-income consumers in need, the bulk of USF taxpayer dollars are now part of a $3.7 billon wealth-transfer subsidy known as the "High-Cost Fund" that goes from unwary U.S. taxpayers to small, uneconomical private rural telephone companies that often have only a few hundred customers and are so engorged with tax dollars that they can afford to pay out more in dividends to shareholders than they actually charge for phone service.

... the incentives created by these subsidies encourage widespread inefficiency and block adoption of advanced technologies - such as wireless, satellite, and Internet-based services - that could provide superior voice and data links at a fraction of the cost of traditional fixed-line networks. Ironically, subsidy payments are rising even as fixed-line phone subscribership falls, and as the emergence of competitive wireless and broadband networks make traditional universal service concepts obsolete. Unless policies are reformed to reflect current market realities, tax increases will continue to undermine the very goals 'universal service' is said to advance."

"Grandma" Flora Green, national spokesperson, The Seniors Coalition said: "America's seniors and other taxpayers are getting a real wake-up call today: The Universal Service Fund is such a costly mess that it makes those bills we all paid for Pentagon hammers and toilet seats look like a downright bargain! American taxpayers need to insist on reining in the runaway Universal Service Fund, which should only help out those who really need it. The Fund should be capped and then reviewed from top to bottom to squeeze out all the billions of dollars of waste and fraud going on today. We think FCC Chairman Kevin Martin is correct in calling for a reverse-auction system to make sure that those Americans who really need USF help get it with the best available technology and at the lowest possible cost to taxpayers."

The Universal Service Fund tax has surged to $7 billion, up from less than $4 billion in 1998. To pay for the Universal Service Fund, the tax rate applied to long distance revenues has skyrocketed five-fold from 2.1 percent to its current level of 10.5 percent. The primary cause of USF increases stem from rising payments to rural phone carriers, labeled "High-Cost Support," where annual payments mushroomed from $1.7 billion in 1998 to $3.7 billion in 2005. These rising expenditures are, in turn, driven by increasingly expensive per-line payments to high cost rural phone carriers and by new payments to wireless phone carriers now qualifying as recipients of such funds.


via TechDirt

Posted by aalkon at July 23, 2006 10:02 AM

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Comments

i strongly recommend the documentary film "The Corporation" featuring Noam Chompsky. There are all sorts of examples of greed and corporate gluttony....

Posted by: Rob at July 24, 2006 6:43 AM

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