For Immediate Release:
February 27, 2006 Contact: Susan Martin, Press Office
415-955-6120 or smartin@pacificresearch.org SAN FRANCISCO – Tomorrow the U.S. Senate Commerce Committee will conduct hearings on the Universal Service Fund (USF) – a federal welfare system that redistributes revenue from the telecommunications industry. “Congress should recognize that the failures of the Universal Service Fund seriously threaten the future of technological innovation in America,” warns Vince Vasquez, policy fellow in Technology Studies at the Pacific Research Institute, a free-market think tank, and author of the new study “Digital Welfare: The Failure of the Universal Service System” (available at www.pacificresearch.org). “Because of lax oversight and short-sighted regulations, billions of dollars have been redistributed through the Universal Service Fund to finance wasteful carriers and fraudulent vendors,” Mr. Vasquez said. “To bail out USF from its reckless spending habits, program proponents now want to create new taxes and regulations on high-tech services, raking in billions more to sustain disastrous policies.” He added, “Before these problems get any worse, Congress should prudently reform the Universal Service Fund.” Mr. Vasquez provides the following points for members of the Senate Commerce Committee to consider as they listen to testimony on Tuesday:
- For more than 20 years, Fund administrators have disbursed more than $48 billion to universal service recipients, a massive undertaking that has spiraled out of control. The USF budget has nearly doubled in just the last eight years, resulting in a tripling of the “telecom tax” on long distance calling providers.
- Due to political pressures, short-sighted USF rules have entrenched local carriers with wasteful subsidies and deterred new entrants with economic disincentives, denying needy communities the greater benefits of a competitive marketplace. A lack of adequate oversight has also generated endless cases of fraud and abuse, as ravenous recipients have exploited the Fund for financial profit and personal gain.
- Many of the problems ailing USF have also afflicted many state-based funds, including California’s. Like the federal initiative, California’s universal service system has suffered ballooning costs, wasteful subsidies, and has even attempted to tax new high-tech communication services – deplorably laying siege to Silicon Valley, the birthplace of the Internet Revolution.
- To fix the Universal Service Fund’s financial problems, program proponents have suggested creating new taxes and regulations on high-speed Internet access, as well as advanced communications services like Voice over Internet Protocol (VoIP). But with the United States already ranking a dismal 16th for broadband deployment in the world, a new Internet bureaucracy will only further hamstring our national competitiveness in the global marketplace.
- As Congress now debates the next steps for the Fund, members should consider the merits of introducing pro-competitive policies such as technology-neutral vouchers for the neediest consumers, and rules that ensure public accountability and safeguard cutting-edge innovations. USF should stop subsidizing failure, and work towards drastically reducing the government’s role in telephone connectivity.
“The Universal Service Fund has created more problems than it has solved, and is in desperate need of fundamental reforms. When businesses are allowed to compete in open markets and regulators work vigorously to enforce reasonable laws, consumers will win.” said Mr. Vasquez. ### About PRI
For 27 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at http://www.pacificresearch.org/ |
