This news on the FCC and the USF (Universal Service Fund) definitely merits sharing. Seems like the FCC is more embattled than President Bush these days. Ok, maybe not quite as much as Bush, but Kevin Martin certainly isn't making any friends in the telecom & VoIP sector lately.
A controversial plan backed by Federal Communications Commission (FCC) Chairman Kevin Martin would result in higher federal phone taxes (or forced phone bill hikes) of as much as $707 million for 43 million low-volume long-distance user households in the United States, according to a new report by the Keep Universal Service Fund (USF) Fair Coalition. Of greatest concern within the group of harmed consumers: the most vulnerable of Americans – 16 million households of primarily low-income and elderly individuals – who currently can afford few or no long-distance phone calls, but would have to pay up to $383 million in higher USF taxes under the Martin scheme.
Entitled “Losing Numbers: How America’s Most Vulnerable Consumers Could Suffer Under Universal Service Fund (USF) ‘Reform,’” the report notes: “The currently consumer-friendly ‘pay for what you use’ approach to funding the Universal Service Fund would be replaced under the Martin plan with a regressive, flat-fee arrangement of $1-$2 or more per phone line – regardless of whether or not consumers even make a long-distance call. For a consumer who now dials only a handful of long-distance calls per year and pays correspondingly low USF taxes, the effective tax rate under the Martin plan would soar by more than 1,000 percent on an annual basis! With low-income and elderly consumers already socked with high gas prices, the prospect of soaring winter heating bills and continued inflation in medical prescriptions, the wide range of diverse groups in the Keep USF Fair Coalition are opposing the Martin ‘numbers’ based plan. These groups caution against balancing USF finances on the
backs of the very consumers who use long-distance the least and are unable to afford phone bills that would rise under “numbers” simply in order to subsidize high-income/high-volume callers.”
Consumer Action Director of National Priorities Linda Sherry said: “One of the most alarming aspects of the numbers-based proposal is that no one has yet produced an estimate of the effect of the change on low-income consumers, including the poor and seniors on fixed incomes. It does not make sense for the FCC or Congress to change the collection of USF funding without first taking a long, hard look at who would pay the piper for the so-called simplicity of a numbers based plan. At least give us some hard facts.”
The Senior’s Coalition Chairman of the Board Mary M. Martin said: “Chairman Martin’s plan is bad news for older consumers, who would make up most of the 16 million Americans paying more into the USF fund than they currently do. At a time when the basic costs of living – including the costs of healthcare and prescription drugs – present a major burden to these seniors on limited income, an arbitrary tax hike is the last thing seniors are prepared to handle. A ‘numbers’-based methodology for USF would place an unfair, and unnecessary strain, on our nation’s seniors -- the customers that account for the smallest part of telecommunications activity or revenues – in order to underwrite price reductions for customers who are better able to afford long-distance service. You can’t say ‘on average’ that consumers will be taken care of when you have to balance your ‘reform’ on the backs of those who are the least able to pay.”
One clear sign of the controversial nature of the Martin plan: U.S. consumers have sent 530,781 emails and letters to federal lawmakers through the Keep USF Fair Coalition Web site at http://www.keepusffair.org. One of the citizens who has spoken out against the Martin plan is Juanita Brown, a disabled nurse living on a fixed income in Lookout, West Virginia.
Appearing at the Coalition news conference today, Ms. Brown said: “I can barely afford long distance as it is now. I depend on my phone to stay in touch with my children and grandchildren. On my fixed income, I have to worry about keeping a roof over my head and paying for the heat, so the last thing I want to think about is having to give up my long-distance service because the rates have been jacked up by the federal government. I am here today to ask that I don’t get socked with a charge I can’t afford for telephone calls that I haven’t even made. Where is the fairness in that?”
In reviewing the public record on USF and phone-use volume trends, the Keep USF Fair Coalition made the following estimates:
* “No volume” long-distance users. The roughly 16 million consumer households who use no long-distance services in a typical month might pay an extra $192 million (under $1-a-line USF charge) to $383.1 million (under $2-a-line USF charge). Research data make it clear that virtually all of these consumers would be low-income individuals, with the largest number accounted for as senior citizens on fixed incomes. An estimated 15 percent of phone users make no long distance calls. Of those with incomes below $10,000, 40 percent report no long distance expenditures. A fifth of those with incomes between $10,000 and $20,000 report no long distance expenditures.
* “Low-volume” long-distance users. 27 million additional consumer households who are low-volume users might pay an extra $162 million ($1 line) to $324 million ($2 a line). This estimate takes into account that there are more than 43 million U.S. consumer households who are low-volume phone users making fewer than 10 minutes of long distance telephone calls per month, including the estimated 16 million who make no calls.
Taken together, the preliminary Keep USF Fair Coalition estimate is that some 43 million of what are predominantly America’s most vulnerable consumers would pay $354 million to $707 million in higher federal phone taxes or rate hikes that would have to be imposed by companies forced to cover USF costs.
The Keep USF Fair Coalition recognizes that there are limitations to its preliminary estimates on the consumer harm resulting from the Martin plan. However, the Coalition believes that the most important piece of information is an estimate that can be used as a starting point in this important public debate. As the new report notes, the Coalition urges that no move to “numbers” methodology for USF be undertaken until a full and complete study of consumer impacts takes place. It is critical to know who would be hurt and how badly before any overhaul of the Universal Service Fund contribution method is imposed.
ALTERNATIVE APPROACH RECOMMENDED
The chief argument advanced for the Martin “numbers” plan incorrectly assumes that there is no alternative approach to addressing potential USF solvency concerns. In reality, Keep USF Fair Coalition members and other groups concerned about the threat posed to America’s most vulnerable consumers by a “numbers” based approach are coalescing around the “Fair Share Plan,” which would eliminate the need for radical changes that would be injurious to vulnerable consumers. The Plan assumes the following, common-sense reforms to improve the USF contributions process to ensure sufficient funds:
* Expand the USF contribution base to include revenues derived from all telecommunications, including services provided using Voice over the Internet Protocol (VoIP) technology.
* Establish a contribution factor cap to be applied to the revenue-based approach, e.g., somewhere between 12 and 15 percent of revenues derived from interstate telecommunications (including VoIP).
* Carriers would still be assessed based on revenues up to that cap amount, and would still have the right to charge their end users a USF recovery charge not to exceed the capped amount.
The Plan would benefit those low-income users who make few interstate calls. They would be subject to flat assessments for their wireline and wireless telephone numbers, but the level of those assessments would be measured in cents, not the $1.00 or more anticipated under a “connection” or “numbers” based funding plan.
ABOUT THE COALITION
The Keep USF Fair Coalition (http://www.keepusffair.org) is committed to keeping the Universal Service Fund collection method fair, and opposing proposals to move to a regressive, per-line flat fee. Now counting more than 108,000 members in its ranks, The Keep USF Fair Coalition was formed in April 2004. Current members include Alliance for Public Technology, Alliance For Retired Americans, American Association Of People With Disabilities, American Corn Growers Association, American Council of the Blind, Black Leadership Forum, Consumer Action, Deafness Research Foundation, Gray Panthers, Latino Issues Forum, League Of United Latin American Citizens, Maryland Consumer Rights Coalition, National Association Of The Deaf, National Grange, National Hispanic Council on Aging, National Native American Chamber of Commerce, The Seniors Coalition, Virginia Citizen’s Consumer Council and World Institute On Disability.
The NAACP is a supporter of the Keep USF Fair Coalition, and is among the many national organizations that have filed comments with the FCC in support of a non-regressive USF collection method. Keep USF Fair also has received support through a resolution passed in 2005 by the National Association of Consumer Agency Administrators (NACAA). The resolution recognizes that a "restructuring effort of the Universal Services Fee must find a fair method, competitively neutral, that takes into consideration new technologies," and says that a "flat fee or exclusively numbers-based plan would be unfair to millions of consumers, especially lower call volume users if they would now pay the same fee as high volume, business users."