Research: USF: What Do High-Cost Subsidies Subsidize?
The Universal Service Fund: What Do High-Cost Subsidies Subsidize?
Technology Policy Institute
Scott Wallsten
February 2011
Wallsten examines the state of the Universal Service Fund. The USF is a program that collects taxes for telecommunications services in the neighborhood of about $7.5 billion a year. The funds are intended to be used to provide telephone lines and subsidize telephone service in rural areas to low-income individuals.
Wallsten’s research reveals that for every dollar spent from the fund $0.59 is being used to “general and administrative expenses” which he says includes:
- planning
- government relations
- personnel
Wallsten states that this is another reason in a long list of inefficiencies in the USF program and says that it is adding to the argument for the program to be reformed and the money put towards broadband expansion. Additionally he calls for reforms that would include focusing on helping low-income individuals rather than spending money in high-cost areas.
The full paper can be found here.
A low income subsidy would probably be the fastest way to increase broadband household penetration. That’s the biggest untapped market at this point.
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