USF Benefits Who?

Rich Tehrani : Communications and Technology Blog -
Rich Tehrani
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USF Benefits Who?

The San Jose Mercury News has an in-depth article on the Universal Service Fund with a slant on California and their particular funds. The article hints at abuse and discusses exactly who benefits from the fund. The biggest beneficiary is AT&T by the way and this is not surprising as it is the largest phone company. "This program isn't a windfall to us," said Diamond. "AT&T doesn't receive any benefit. We simply are recovering our costs to provide phone service to high cost areas." Cable companies do not benefit from the fund as they do not provide services everywhere.
One of the most ironic twists of the USF is that Malibu, California is an area of the country receiving subsidies because of its difficult terrain. While this does seem to make sense, it doesn’t seem in the spirit of a fund we pay into to help the needy, underprivileged and those who live in rural areas.
Here is part of the article which I thought most interesting:
The state's 25 million cellular subscribers contributed 60 percent of the payments to the B Fund, an Associated Press investigation found. That proportion that is likely to increase given the growing number of consumers relying exclusively on wireless communication.
Where the money goes and how it's divvied up among the phone companies is shrouded in secrecy because government-sanctioned reporting procedures cloak the information from public view. What's clear is that the subsidies aren't always used to install phone lines in high-cost areas.

"We're mostly concerned that high-cost universal service funding has been used predominantly to subsidize inefficient wireline carriers," Kuo said. "(But) we also have seen significant waste in how that funding is distributed."

Much of the money disappears into corporate treasuries to be used at the companies' discretion; some sits in the bank, and some has even vanished into the state's general fund. During the 2002-2003 fiscal year the Legislature "borrowed" more than $278 million from its high-cost surcharge funds to help balance the budget. It has never been repaid.

Rob Schladale, assistant program budget manager for the state Department of Finance, said the transfer was never supposed to be repaid because the B Fund contained a surplus at the time. A 2003 change in the law prohibited further transfers.

"It's Verizon's position that special purpose funds should only be used for their intended purpose," company spokesman Jon Davies said. The high-cost subsidy "should never be tapped to balance the budget."

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