Sununu Backs USF Reform Proposal to Cap Fund Growth
A plan to reform the Universal Service Fund (USF) with more state control and a cap on growth got Sen. Sununu’s (R-N.H.) conditional backing at a Wed. forum sponsored by the Progress & Freedom Foundation (PFF), which also proposed the reform package. As it stands, the USF program “significantly distorts the marketplace, undermines innovation and limits services to customers,” Sununu said. PFF’s plan correctly aims to limit growth and increase efficiency, he said: “We've got too many programs that are on auto-pilot.”
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The PFF plan would cap USF growth at $4.8 billion and put states in charge of distributing funds via performance-based block grants. The plan would finance the fund by levying a 77-cent monthly tax on each phone number, which could cut the amount residential and business customers pay, PFF said.
Sununu declined to back PFF’s suggested $4.8 billion cap, but said he strongly favors growth limits. “You could design a $5 billion program that’s more effective than what we have now, or a $10 billion program that’s a disaster,” he said. “It’s more important to discuss the structure of the program first and then put a number on it.” Sununu also said USF reform would be a major driver in telecom legislation this Congress, with 2 Senate hearings set for Feb. He urged focus on changes to distribution and the contribution methodology, complaining that contribution change gets too much attention.
“The proposal to switch to a numbers-based tax is well-based in economics,” said Jerry Ellig of George Mason U., one of 10 experts who drafted PFF’s proposal. PFF admitted a numbers-based tax could cause consumers and businesses wanting to avoid the tax to subscribe to fewer phone lines. Wireless firms that offer bundled discounts for multiple phone lines fret about the proposal, said Kathleen Ham, T-Mobile managing dir.-federal regulatory affairs. PFF offers one remedy: The FCC could levy an “appropriate tax” to supplement USF revenue. Others have discussed a “connections-based” tax, said NARUC Legislative Dir. Brian Adkins.
BellSouth and USTelecom dismissed the plan as politically unworkable, since it doesn’t confront the impact on companies dependent on USF revenue. “If we can’t figure out a way of reducing the dependence of small companies on USF support, this discussion is going to become academic,” said Robert Blau, Bell South vp-public policy development. “That’s a hard political reality, and unless it’s addressed you're not going to get the political attention that’s needed.” USTelecom Vp-Policy David Cohen agreed, criticizing the proposal for failing to include market-based principles: “Capping the fund and punting to the states doesn’t do this justice.”
Former Alaska state regulator Nanette Thompson questioned the proposal’s delegation of authority to the states -- a move she said would swell govt. without necessarily improving its efficiency. “It would politicize the process,” she said. The block grant program could shake up the market, since companies wouldn’t know how much money they could get from the grants, and could be held hostage to a host of requirements before funding is released, she said.
Panelists agreed USF needs repair, and a step toward that would be evaluating what the program has achieved and where it needs to go. But those answers won’t be easy to get. “It’s considered rude to ask, ‘What are the benefits of USF?’ when trying to perform a cost-benefit analysis,” Ellig said. In fact, “USF is largely a faith-based initiative,” he quipped, but the responsible approach should be to ask what we are trying to accomplish.”