Earlier this month, the FCC announced it would reform the Universal Service Fund (USF) tax on consumers’ phone lines. The USF subsidizes low-income individuals, schools, and libraries, however the largest portion of the USF – roughly $4.5 out of $8 billion – is the “high-cost fund” that subsidizes rural phone companies. The USF (and especially the high-cost fund) has long faced scrutiny for lack of performance benchmarks and doling out hundreds of millions of dollars in error every year.
Today, a new study from the Technology Policy Institute has thrown even more fuel on the anti-USF fire. The report found that $0.59 cents out of every dollar spent on these high-cost fund corporate subsidies goes toward “inflated overhead expenses.” In short, phone consumers are subsidizing companies for things completely unrelated to providing phone service.
In its current proceeding, the FCC is hoping to expand this tax and spend program to also include broadband Internet service, as phone service is increasingly becoming Internet-based. The FCC has indicated they will review how they distribute funds to rural companies that can collect thousands of dollars of taxpayer money for each home connected. This is encouraging, yet reform should contain strict performance benchmarks (such as specifications on what money can be spent on) and a cap on the size of the fund. This will force the size of the fund to shrink, and the money to be prioritized and scrutinized instead of handed out at an increasing rate.