Digital Welfare: The Failure of the Universal Service System

[SOURCE: Pacific Research Institute, AUTHOR: Vince Vasquez]
Pacific Research Institute calls universal service a "federal welfare system that redistributes revenue from the telecommunications industry." This paper argues that: 1) For more than 20 years, Universal Service Fund (USF) administrators have disbursed more than $48 billion to universal service recipients, a massive undertaking that has spiraled out of control. The USF budget has nearly doubled in just the last eight years, resulting in a tripling of the “telecom tax” on long distance calling providers. 2) Due to political pressures, short-sighted USF rules have entrenched local carriers with wasteful subsidies and deterred new entrants with economic disincentives, denying needy communities the greater benefits of a competitive marketplace. A lack of adequate oversight has also generated endless cases of fraud and abuse, as ravenous recipients have exploited the Fund for financial profit and personal gain. 3) Many of the problems ailing USF have also afflicted many state-based funds. 4) To fix the Universal Service Fund’s financial problems, program proponents have suggested creating new taxes and regulations on high-speed Internet access, as well as advanced communications services like Voice over Internet Protocol (VoIP). But with the United States already ranking a dismal 16th for broadband deployment in the world, a new Internet bureaucracy will only further hamstring our national competitiveness in the global marketplace. 5) As Congress now debates the next steps for the Fund, members should consider the merits of introducing pro-competitive policies such as technology-neutral vouchers for the neediest consumers, and rules that ensure public accountability and safeguard cutting-edge innovations. USF should stop subsidizing failure, and work towards drastically reducing the government’s role in telephone connectivity.
http://www.pacificresearch.org/pub/sab/techno/2006/Digital_Welfare.pdf

See press release:
http://www.pacificresearch.org/press/rel/2006/pr06-02-27.html