TracFone CEO Seeks Sharp Cuts in High-Cost USF Program
F.J. Pollack, TracFone Wireless’ CEO, called for at least a significant reduction of the Universal Service Fund’s high-cost program, the one part of the fund that has had major increases in recent years. Pollack spoke Monday at a Technology Policy Institute lunch on Capitol Hill.
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The high-cost program makes up about $4.3 billion of the $7.4 billion USF. “I believe it could be much less, maybe $1 billion,” said Pollack, who’s also a CTIA board member. “It could maybe be zero. The bottom line is, this fund really does need reform, no matter who pays into it.” He said he sees many abuses in the program, since reimbursement is on a “cost-plus” system, which discourages holding down expenses. TracFone offers service through the much smaller Lifeline program and has been active on USF issues.
Pollack pointed to an unspecified CEO he knows who owns four rural telephone companies that get high-cost support. “He owns two homes in South Florida because the house he originally owned couldn’t support the 180-foot yacht that he owns today,” Pollack said. “He had to buy the house next door so he could put his yacht in his backyard. He also happens to have his jet that flies around the entire world.”
Greg Rosston, deputy director of the Stanford Institute for Economic Policy Research and a member of the Obama administration transition team, questioned whether the USF program should subsidize service just because it’s expensive. “Right now we tax all subscribers, including urban, low- income people, to provide subsidies to Aspen, Colo.,” he said. “It’s a crazy system. There are a lot of people in Aspen, Colo., who would be willing to pay $20 or $30 or $40 a month more to have high-speed access, and they can afford to do it.”
The USF’s purpose should be to get connected people who otherwise couldn’t afford telecom or Internet service, Rosston said. “If you're giving a subsidy to someone who would otherwise connect it’s an income transfer program. … It’s not a universal service program. The current universal program, the way it’s done in the United States, does not keep this goal in mind.” The high-cost program doesn’t benefit 80 percent of people with low incomes, he said.
Rosston said too much attention has been paid lately to the benefits of universal broadband and universal service, rather than to who will pay the costs. “Universal service and universal broadband are kind of like apple pie. Who doesn’t like it? It’s great. Everybody should have it. But as an economist it’s not free. The whole debate in Washington right now, and in Silicon Valley, is only on the benefits not on the costs.”