Universal service fund (USF) programs that target low-income hous...

“high cost” areas are adopting alternatives to subsidized landline phone service, although USF high-cost spending continues to increase. Through its report, “The Myths and Realities of Universal Service: Revising the Justification for the Current Subsidy Structure,” PFF said it was offering data to lawmakers without offering specific recommendations for USF reform. The report found that rural and urban households had remarkably similar phone use patterns. Nationwide, 51.7% of homes have both wireless and wireline service, while only 6% use just wireless. The report said 45.2% of rural households use both wireline and wireless phones and 5.3% of rural households are strictly wireless. The report said households with annual incomes of only $25,000 have 94% wireline use rate, but 40% of those homes also have a wireless service and 57% have cable TV. The report also found that more service providers are receiving subsidies, including many competitors in the same markets. The high-cost USF program to ensure service in rural areas is growing at an accelerating rate, the report said. From $2.6 billion in 2001, the fund was expected to grow to $3.6 billion in 2004 and surpass $3.9 billion this year. USF charges on telephone bills surpassed 10% for the first time this year, the report said. USF also suffers from inconsistencies from state to state, said Richard Levine, report co-author and researcher for the Law and Economics Consulting Group (LECG). Cal. has self-certification for its distributions of the “lifeline” program for low-income users, he said. Accordingly, Cal. has 3.2 million lifeline subscribers of the 6.6 million nationwide that receive the funding. Levine said Cal. has far more lifeline recipients than Miss., a much poorer state. While the report doesn’t give specific recommendation, co-author Randolph May said USF is “fixable.” Reform can be undertaken without jeopardizing universal service goals, including rural area’s access to reasonably priced telephone service,” said May, PFF senior fellow and dir.-communications policy studies. May said PFF would eventually make specific recommendations to Congress and regulators on USF reform. Another study co-author, Joseph Kramer of LECG, said there was no incentive in the USF program to hold costs down. “The higher the costs, the more money you get,” Kramer said -- www.pff.org/issues-pubs/books/050118usfreport.html.