USF Costs to U.S. Economy Goes Beyond Payments into Fund
The universal service fund (USF) has hidden costs well beyond what subscribers pay into the program, since taxes usually reduce use of services, Jerry Ellig, senior research fellow at George Mason U.’s Mercatus Center, said Thurs. during a USF discussion at the Digital Age Communications Act conference. A new study puts those hidden costs at $2 billion a year, about 1/2 what the program brings in, Ellig said.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
“It turns out that in the case of universal service this cost is very large,” Ellig said. “The services that are taxed to fund universal service, primarily wireless and long distance, are services whose demand is very sensitive to price.”
A more market-oriented USF system won’t be easy -- rural telecom companies present a major obstacle to reform, panelists said. A DACA working group previously laid out a set of principles for USF. USF distributions should be transparent, efficient, technology neutral and transparent, the group recommended. USF charges should be assessed per- phone number, with an alternative minimum tax on those who otherwise would end up paying nothing.
Much of USF policy is misdirected, with the emphasis on spending money rather than achieving results, Ellig said. “Good intentions equal results and if we have spent the money on something the fact that the money is spent is the evidence that the results were accomplished,” he said: “If you question whether the results were accomplished you must be questioning good intentions -- which means you're challenging the values of people who set up the program, which means you're either rude or immoral.”
Fixing USF won’t be easy, said Ray Gifford, pres. of the Progress & Freedom Foundation. “It’s a very difficult problem and I don’t want to minimize it,” Proponents of change will have to overcome resistance from rural phone companies, which Gifford described as “a class of companies who are highly dependent on the current [USF] system, will be dependent on some sort of system going forward.”