26 January 2006

Universal Service Charges

My local phone bill every month from Qwest, includes 66 cents of Universal Service Fund Charges (10.2% of something), and 43 cents for the Colorado part of that bill (2.9% of in-state monthly telecommunications charges for local, wireless, paging, in-state long distance and optional services). "Where does it go?", I wondered. And, the internet being the wonderful thing it is, I could look it up. The answer:

The federal part goes, according to the FCC:

56% to the "high cost" program (i.e. rural phone companies)

29% to schools and libraries

What Benefits Are Available Under the Schools and Libraries Program?

Eligible schools and libraries receive discounts on telephone service, Internet access, and internal connections (i.e., network wiring).

The discounts range from 20% to 90%, depending on the household income, level of students in the community, and whether the school or library is located in an urban or rural area.

How Does the Schools and Libraries Program Work?

A school or library must develop a technology plan that demonstrates the relationship between the information technology to be supported and the school's curriculum or library objectives. The school or library then provides notice that it seeks services.

Vendors bid to provide the desired services to the school or library. After the school or library selects a vendor, it files an application with the Universal Service Administrative Company (USAC) for approval of its request for discounted service. USAC is the entity that is charged with administering the Universal Service Program.

After USAC approves the school or library's application, the vendor provides the services to the school or library at discounted prices. Generally, the vendor is then reimbursed the amount of the discount from the Federal Universal Service Fund.


14% to help low income customers

What Benefits are Available Under the Low-Income Program?

Link-Up America helps qualified low-income consumers to initiate telephone service. This federal program offsets one-half of the initial hook-up or connection fee, up to $30.00. The program also includes a deferred payment schedule for these charges.

Lifeline Assistance Program provides certain discounts on monthly service for qualified telephone subscribers. These discounts can be up to $10.00 per month, depending on your state.

Residents of Native American Indian and Alaska Native tribal communities may qualify for enhanced Lifeline support (up to an additional $25.00 in support beyond current levels) and expanded Link-Up support (up to $70.00 in additional support beyond current levels).

0.5% to rural health care providers

What Benefits Are Available Under the Rural Health Care Program?

Public and non-profit health care providers in rural areas can receive discounts on monthly telecommunications charges, installation charges, and long distance Internet connection charges.

Rural health care providers are using funds from this program for a variety of patient services, such as transmitting x-rays from remote areas to be read by health care professionals and experts in urban areas.

Eligible entities include:
Post-secondary educational institutions offering health care instruction, including teaching hospitals and medical schools;
Community health centers or health centers providing health care to migrants;
Community mental health centers;
Not-for-profit hospitals;
Dedicated emergency departments in for-profit hospitals;
Rural health care clinics; and
Consortia of health care providers consisting of one or more entities described above.

The state portion also goes to rural areas (and has since 1995):

Some rural areas of Colorado are very expensive for the telephone companies to serve. Yet, the rates the companies are allowed to charge for basic local service do not reflect these higher expenses. If every rural customer were charged the full and actual cost of providing telephone service, many would be unable to afford the service.

In the past, some telephone companies were allowed to charge more for some services - such as in-state long-distance, advanced features such as call waiting and call forwarding, and access fees that long-distance companies pay to connect to the local network - to keep basic local rates affordable for all customers. However, those subsidies are no longer appropriate in a competitive market.

To ensure that all customers continue to have access to affordable basic telephone service under competition, the Colorado Legislature in 1995 authorized the Public Utilities Commission to establish a universal service fund. Money from the fund is used to reimburse companies that serve areas with high costs. This allows local phone rates to remain reasonably comparable across the state.


Many of these programs I have real doubts about, for example, why should be subsidizing the maintenance and construction of land lines in rural areas with a regressive tax, where most new phone lines are for exurban ranchette developments? Does it really make sense to impose a regressive tax on local phone service (more so than either the state income tax, state sales tax or property taxes which would otherwise pay for such investments) as a means of paying for putting internet access in schools? Does it make sense to impose a special tax and spending program in order to help doctors get modest discounts on their phone bills, when those doctors are typically the best paid people in their communities? Does it make sense to go through the process of collecting funds with a regressive tax and then implementing a means test program with the associated paperwork for a lifeline phone program that saves someone $30 once and up to $120 per year?

I have grave doubts about the degree to which it is all worthwhile. Admittedly, at $13 a year, give or take, it isn't really worth much time worrying about, but it does seem unnecessary.

2 comments:

Gnarl said...

There's a common misconception about the USF. It only helps people that already have telephone service. It doesn't help people get telephone service.

Susan Knapp said...

I saw this on my bill and had questions. I am disappointed in this type of implementation being rather a "sneaky" form of adding tax to what is for me a mandatory cost of living. When you multiply the number of lines and cell accounts for our household alone, this becomes a significant amount. It appears to be an uninformed way of attacking the public then let them know afterwards. If I am not getting the full picture I would be willing to hear the other side.