|
Universal Service Fund is an "Out of Control" Slush Fund Click to Get Teletruth Updates In the next few weeks, New Networks Institute and Teletruth will be releasing a report on Universal Service. Here's some information and links about Universal Service. The Unversal Service Fund is currently an 11.1% tax on all interstate wireline and wireless services, and even applies to parts of the local phone bill and DSL bills. It represents a number of different funds including the Erate (wiring of schools and libraries), the High-Cost Fund, Lifeline, and other funds.
Let's look at some simple stats: * 185% increase in five years: The Universal Service Fund has increased from 3.9% on long distance services in 1999 to 11.1% in 2005 --- a 185% increase. * The largest part of this fund is NOT for wiring of schools and libraries, but to "High Cost Funds", which are corporate subsidies to the phone companies. The High Cost Fund represents over 60% of the total collected, doubling from $1.7 in 1999 to $3.4 billion in 2004 --- and growing. * These funds are NOT going to corporations that need this money. Many of the phone companies receiving funds have 55% profit margins (EBITDA), in a large part. from this High Cost fund.
USA Today (November 14, 2004) found that one small telco, XIT Rural Telephone Cooperative, which serves only 1,500 customers in the Texas Panhandle, received $2.9 million in USF subsidies. It was so profitable that it gave a "dividend to its customers, who also own XIT, an average $375.".
* Declining Local Service Costs: The costs to offer local service has continued to drop over the last 5 years. The USF increases have been against a backdrop of construction cuts, down 50%, and employees-per-line plummeting 65% since 1984. * Regulators no longer examine profits --- 90% of the states no longer examine these companies' profits because of local phone deregulation. How can the FCC give billions in High Cost funds when costs are not taken into account? * Double-Quintuple Taxation? Many states have also added statewide High-cost funds, Erates, Lifeline services and other services covered under the federal program, and NO ONE has examined the totality of taxes from multiple funds! * Questionable taxation? The Universal Service Fund is being applied to charges on the local phone bill, including "Local Number Portability" and the "FCC Line Charge", which are not interstate by definition. Also, the USF charges are being taxed multiple state and federal taxes as well, adding insult to injury. * The E Rate, the schools and libraries fund, has an excess of $3.4 billion yet to be given out. Also, the phone companies are also the largest recipient of the Erate because they get paid back on network charges in full, for any discounts the schools receive. * Major Fraud and Lack of Audits -- Everyone from the FCC Attorney General and other regulators are finding Erate fraud, and a lack of audits.
In fact, in May 2004, the FCC Inspector General stated he had "...numerous concerns about the Erate program and believes that the program may be subject to a high risk of fraud, waste, and abuse through noncompliance and program weakness." And in February 2005, the General Accounting Office (GAO), released a report titled "Greater Involvement Needed by FCC in the Management and Oversight of the Erate Program." |