WASHINGTON—Instead of giving subsidies to rural telephone companies, the government could save $1 billion annually by giving away free wireless and satellite phones to Americans who do not have access to landline telephony, according to a study released by the Seniors Coalition.
“The upshot is that the entire system of annual high-cost fund payments could be replaced with a one-time allocation for cellular repeaters and satellite phone units, distributed to households where no other local phone service is available,” according to the study titled: “Universal service telephone subsidies: What does $7 billion buy?”
“The USF is such a costly mess, it makes the Pentagon hammers look like a bargain,” said Flora Green, national spokeswoman for the Seniors Coalition. “Our biggest concern is taking a hard long look at what appears to be a massive misuse of funds within the Federal Communications Commission.”
The Seniors Coalition proposes two changes to the USF system. One would be to cap the USF and the other to use reverse auctions to determine who could provide telephony service at the least cost to a specific area.
Both ideas are opposed by the rural telephone industry, but are generally supported by the wireless industry.
The rural telephone industry’s Keep America Connected Coalition said that universal service is necessary to maintain the networks that are used by wireless carriers, so simply handing out new phones will not achieve the goal of affordable service comparable to urban areas.
“The report’s so-called proposed alternatives—wireless and broadband—will cease to function without proper maintenance of the underlying network infrastructure upon which such ‘competitive alternatives’ ride,” said Shirley Bloomfield, representative of the Coalition to Keep America Connected and vice president of the National Telecommunications Cooperative Association. “Without universal service, rural seniors would not have access to state-of-the-art communications services that provide them with much needed health care and educational opportunities, and the chance to keep in touch with friends and loved ones throughout the country.”
With the passage of the Telecommunications Act of 1996, wireless carriers and other competitors began receiving universal-service subsidies, which is one of the reasons for the skyrocketing costs of the USF. The growth of the universal-service fund frightens groups like the Seniors Coalition because it “is essentially out of money,” said Thomas Hazlett, professor of law and economics at George Mason University and author of the study.
The telecommunications network funded by the universal-service fund is full of “gold-plated inefficiencies,” said Hazlett.
Since rural local exchange carriers consider the USF to be a cost-recovery mechanism, there is no incentive for them to deploy modern technologies, said Hazlett.
“The more service costs, the more subsidies phone companies receive,” said Hazlett. “A clear incentive to pad costs.”
