If you’re using a telephone, you’re an enabler for Washington’s uncontrolled spending habit. A cryptic line variously labeled as a “Federal Universal Service Fee” or “Universal Connectivity Fee” lurks within the monthly bill for most communications services. This tax feeds nearly $7.7 billion into the Universal Service Fund (USF) every year. It’s time to end this tremendous waste of money.
The USF was created to establish essential communications links for low-income residents in underserved areas. As with many such well-intentioned federal ideas, however, the program has grown into something that helps well-connected business more than it helps the needy get connected.
Rural phone companies that provide “high-cost” wireline service land more than $4 billion a year. Why U.S. taxpayers should subsidize rural service today is a bit odd, considering that 96.2 percent of us have access to phone service.
In addition, wireless and satellite-based communications options can cheaply and efficiently provide service in rural areas without the “last mile” expense of running physical wires down every dirt road. Technology has advanced a bit since the days of Alexander Graham Bell. However, the law’s measure of success has not. The goal should be to foster efficient communication, not tether people to wires at any cost.
Another $2 billion of USF money goes to E-Rate, a program originally created to “wire every classroom” with Internet access. It sounded like a good idea at the time - but the current availability of cheap wireless solutions demonstrates that the government may have been too quick to lay those wires. The reality is that the free market has done more to make communication more available and affordable than any government program could ever hope to do.
With billions of taxpayer dollars in hand the Universal Service Administrative Company, which runs the federal fund, has seen little reason to be cost-conscious. As George Mason University Law professor Thomas Hazlett has pointed out, the state of Alaska has been the greatest per-capita recipient. Grant recipients enjoyed nearly $5,000 per household or $1.1 billion from 1998 to 2008.
Rural phone companies see the greatest benefit. In 2008, the USF gave the Oregon Telephone Corporation $16,834 federal subsidy for each of the company’s subscribers in Beaver Creek, Wash. Such largess is especially absurd now that satellite phones can provide service anywhere in the country where one has a clear view of the sky at a fraction of the cost.
The lessons are clear. “Free” money never suffers a shortage of recipients - deserving or not. And federal programs last on autopilot even after they’ve stopped serving any useful purpose. It’s time to step into the 21st century and dump the Universal Service Fund.