US Subsidy Fund For Rural Phone Service Reaches All-Time High

A subsidy fund designed to help phone carriers offer service in rural areas has mushroomed to an all-time high - 12.9% of interstate telecommunications revenue, up from 9.5% in the beginning of the year, the Federal Communications Commission announced Monday. That means that consumers' phone bills will increase slightly on July 1, the start of the third quarter. The FCC's announcement forecasts a change that carriers will need to make to customers' phone bills effective on that date. The subsidy fund is supported by a tax on the long-distance and regular phone-service bills paid by wireless, Internet and traditional phone customers. The amount is a separate line item dubbed "universal service," and it usually adds up to few dollars per month. AT&T estimates that the increased customer payments from the first quarter to the third quarter of 2009 amount to roughly half a billion dollars. Industry insiders say the universal-service-tax percentage is increasing because the number of traditional landline subscribers is falling dramatically as people switch to all wireless or Internet-based phone services, where contribution rates are lower. Fewer phone bills overall means a higher-percentage subsidy tax for each one. The universal-service fund pays out about $8 billion annually to phone companies that offer service in hard-to-reach areas.