TelecomWeb.com, February 28, 2006

In a continuing campaign to protect current methods of financing the Universal Service Fund (USF), consumer groups are saying regulatory and legislative opinions about the subsidy’s need for radical reform are a “hoax” designed to shift added new costs to telecom users.

For the third time in several months (TelecomWeb news break, Feb. 10; Nov. 17, 2005), the Keep Universal Service Fund Fair Coalition (KUSFF), comprised of 20-plus activist organizations, attacked flat-fee or per-line-charge USF assessments on telephone bills that have been discussed periodically at the Federal Communications Commission and in the U.S. Congress.

KUSFF issued a new report with additional details on how potentially changed USF fees on long-distance bills would increase phone taxes by as much as $700 million for 43 million U.S. households, most of them low-income seniors, rural residents and minorities.

The group and its members, who previously called the fee idea a “stealth” tax because there haven’t been open proceedings on the issue, yesterday claimed the need to fix a broken USF system is a "phony crisis" being manufactured by regulators and legislators.

“Exposing the Hoax: The Phony 'Crisis' of the Universal Service Fund” was timed to get a political jump on this week’s hearings by the Senate's Committee on Commerce, Science and Transportation that is looking into USF monetary contributions today and USF funds distribution on Thursday. Senators undoubtedly will be told about the continuing importance of USF subsidies from a variety of small/rural telcos, state regulators and education/consumer recipients listed as witnesses.

KUSFF is not among the witnesses but that doesn’t preclude the pressure outside the hearing room, including that from USF detractors. The Pacific Research Institute (PRI), for instance, issued a study that maintains the federal USF program is counter-productive and seriously threatens technology innovation. The PRI study carries an inflammatory message in its title – “Digital Welfare: The Failure of the Universal Service System" – and it also was released as a prelude to the Senate hearings.

For a more comprehensive look at this story, read the next issue of Telecom Policy Report. For a trial subscription, go to http://www.telecomweb.com/cgi/catalog/trial?TPR.

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