- Associated Press - Friday, May 1, 2015

COLUMBIA, S.C. (AP) - Cellphone customers would help pay for phone services for rural customers and people with disabilities under a bill that narrowly passed the state Senate.

The Senate voted 22-20 Thursday on a measure that lowers fees for the state’s 1 million landline customers by extending them to 4.5 million cellphones and all internet phones. Currently, some of the state’s roughly 400,000 “voice-over internet phone” users pay the fees, though how many is unknown, according to the state’s Office of Regulatory Staff, which regulates utilities.

Opponents argue it forces cellphone users to subsidize old technology.

Sen. Gerald Malloy, D-Hartsville, called it a cost shift.

“It’s regressive. For once, I’m going to be on the side of the no-tax people,” said Malloy, among three Democrats who voted “no.” ”This is a tax on cellphones.”

But Office of Regulatory Staff director Dukes Scott said it’s about spreading the cost to everyone who benefits from landline connections, since even wireless calls are relayed over landlines between cellphone towers.

“It’s only fair and equitable. If you’re going to use phone lines to make wireless calls - which you have to - let everyone pay,” he said.

Currently, landline customers pay 25 cents monthly to ensure nearly 25,000 deaf and speech-impaired customers can communicate by phone, plus nearly 3 percent of their bill for rural landlines. That would change to 6 cents and 1 percent, respectively, if the House agrees.

Opponents focus on the state’s Universal Service Fund, which the Legislature created in 1996 to ensure affordable phone service for people in rural areas where it’s costly to extend and maintain lines.

“If you’re in these companies’ service area and want a residential phone, they have to provide the service. They can’t say ‘no,’” Scott said.

In exchange, these so-called “carriers of last resort” are supplemented through the fund. Currently, 44 rural providers receive $28 million yearly, ranging from $20,000 to several million each, depending on their customers, according to Scott’s office. That’s far below the $170 million allowed by state law. The legislation would reduce the cap to about $40 million.

The supplement is paid for by a shrinking number of landline customers. Without legislation, their current state USF fee of 2.65 percent will continue to climb, Scott said.

Cellphone users in South Carolina already pay the federal USF fee. In the 27 states that have a state version, 19 extend the fee to cellphones.

A coalition of five wireless companies - Verizon, Sprint, US Cellular, T-Mobile and Tracfone - is leading the opposition.

Michelle Robinson, a Verizon vice president, questioned the entire system, saying it subsidizes certain landline companies when wireless companies could serve the same rural customers.

The subsidies are “old fashioned and outdated and don’t keep up with the competitive environment,” she said. “There needs to be a review of the fund. … Taxes on communications are already way too high.”

Senators amended the bill Thursday to require future reports from Scott’s office on the need for the fund and its distribution.

The bill’s supporters include AT&T;, which does not receive any money through the fund, and anti-tax advocate Don Weaver. The president of the state’s 4,000-member Association of Taxpayers said the legislation does not represent a new tax.

“It’s an issue of fairness,” he said. “We’re looking at it like an update in the fee structure that’s already enacted.”

The measure also guarantees continued services for hearing- and speech-impaired residents, who receive, free of charge, the “dual party relay” equipment and operator services that allow them to receive and send calls. The fee for that also pays for closed captioning on state TV. It can’t get any higher. The 1990 state law that created the system capped what customers could be charged at 25 cents.

Scott estimates the fee will no longer cover costs in about two years, meaning services could be reduced.

“I don’t want to scare people, but at some point, as landlines go down, we can’t pay for something,” he said.

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