My brother was recently quoted in several newspaper articles, including one in the Austin American-Statesman, discussing the controversial Texas Universal Service Fund. The fund pays large telecom companies hundreds of millions of dollars per year to provide local phone service to rural customers. The justification for the fund is that the cost to provide phone service in rural areas is so high that few people in those areas could afford the full market rate cost to receive the service. Therefore, phone service subscribers in more urban areas are taxed so as to subsidize the cost of the rural service. Although my brother was primarily interviewed about the Texas Universal Fund, this issue applies to nineteen states.
On the face of it, this fund sounds like a reasonable thing, but there are quite a few catches. As my brother points out in these articles, the telecom companies don’t have to provide any public accounting records to document how they spend the money they receive from the fund. Also, the tax rate was determined many years ago, but the amounts haven’t been adjusted adequately to reflect advances in technology that should have lowered the costs to the telecom companies to provide service to rural areas.
In addition, mobile phone subscribers must also pay this tax, even though it was originally intended to apply to wireline services. In many areas that were declared rural under the original rules, expanding suburbs have made the cost of service cost effective for telecom companies to provide. However, these areas are still counted as rural areas with respect to requiring subsidies. In addition, many rural areas now receive adequate enough mobile telephone service that wireline service may not even be needed.
The San Francisco Chronicle recently ran article by an AP writer with the same basic info, but focused more on the situation in California. California, like Texas and ten other states, requires that mobile phone subscribers pay into the Universal Service Fund.
To make the issue even more confusing, there is also a federal Universal Service Fund that the telecom companies pay into which, in part, is also intended to subsidize the costs of providing phone service to rural areas. Of course, many of the big telecom companies pass on these costs to consumers, including mobile phone subscribers.
In addition to the interviews for these articles, my brother was also interviewed for a news piece that ran on Austin’s 90.5 FM KUT radio station. Go Roger!