The real story on the latest USF data

Several news stories recently came out as a result of data released from the Federal Communications Commission about the Universal Service program. What got the most headlines was the fact that AT&T and Verizon topped the list of funding recipients -- a reality that generated no small amount of outrage. Unfortunately for small rural carriers, a story also came out that was highly critical of two small carriers that received unusually large amounts of USF funding to provide service to areas that were unusually expensive to serve.

But what hasn't been reported is that six of the 10 small carriers with the highest per-line USF support also have at least one competitive carrier collecting support at virtually the same level -- and all or nearly all of these are cellular operators. Those carriers can collect what is commonly called "identical USF support" at virtually the same level as the small telco, even though their costs are not the same as the telco's and unlike the telco, they are not required to provide service throughout the entire serving area. Sprint Nextel, for example, earned more than $12,000 per customer for serving 600 people in an ultra-high-cost USF study area (or small rural telco serving area) in Hawaii. Many USF critics do not appreciate the extent to which competitive, primarily wireless, carriers have contributed to the fund's excesses. The data provides some vivid illustrations of the extent to which wireless carriers are milking the system.