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From The Expert Corner
May 06, 2011
USF: Subsidizing Rural America, Untangling the Line 
By Barlow Keener, Attorney
On February 9, 2011, the FCC (News - Alert) released a Notice of Proposed Rulemaking (“NPRM”) and Further Notice of Proposed Rulemaking seeking comment on numerous proposed changes to “fundamentally modernize” the USF (Universal Service Fund) and another subsidy program called the “intercarrier compensation system.”
The USF “High Cost Fund” is a multibillion dollar annual subsidy created in 1996. The High Cost Fund is a tangled web of caps, cost studies, and complex rules. The USF High Cost Fund quietly transfers a significant amount of money - $4.8 billion every year - from urban telephone customers to rural telephone customers. There is a “quiet transfer” because the typical customer paying the USF fee and the typical customer receiving the fee have no clue that the USF fee is supporting the telephone service for rural customers. Other USF fees fund geo-neutral services: the $1.2 billion Low Income fund and $2.7 billion Schools & Libraries E-rate fund. A grand total of $8.7 billion per year is collected and distributed under the plan. To put this amount in perspective, two years of USF collections equals 12.5% of the total amount of $134 billion Recovery Act stimulus funds received during 2009 and 2010... Read More
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