Report Attacks Universal Service Program

A new study, titled “Unrepentant Policy Failure: Universal Service Subsidies in Voice & Broadband,” written by George Mason University Professor Thomas Hazlett and Scott J. Wallsten, vice president for research and a senior fellow at the Technology Policy Institute and at Georgetown University Center for Business and Public Policy, is highly critical of the Federal Communications Commission’s high-cost Universal Service Fund, which pays part of the cost of delivering communications services in rural areas where the costs of providing service are high.

Rural telephone companies are “laughing all the way to the bank,” said Dave Herman, vice president of policy for the Alliance for Generational Equity. In the study, the authors argue that “any plausible cost-benefit test reveals that economic welfare would increase were the entire $9 billion per year USF program eliminated.” The $9 billion number that the authors cite includes not only the high-cost Universal Service program but also several other components of the program that target low-income users, rural healthcare providers and schools and libraries. The authors also argue that in transitioning today’s voice-focused high-cost program to a broadband-focused Connect America Fund, the FCC is providing “a new rationale for subsidies.”