Texas Universal Service Fund Reform
What Others Are Saying About Texas Universal Service Fund Reform
Suddenlink and Texas cable companies support keeping Lifeline,
Relay Texas and similar programs funded through the TUSF. We
believe all Texans deserve affordable basic phone service. However,
about 75 percent of TUSF fees subsidize large telephone companies
(more than $425 million in 2006) such as AT&T, Verizon and
Windstream. This money was originally intended to provide reasonably
priced basic telephone service to rural and hard-to-serve Texans.
It's this component, known as the "large carrier fund," that
is now in question.
Even a majority of rural Texans - those intended to benefit
most from TUSF - say the fund needs reforming and currently benefits
big telephone companies more than rural telephone customers,
according to a recent statewide poll by Wilson Research Strategies.
Overall, only 4 percent of Texans believe the TUSF large carrier
fund should be left intact. Hard-working Texans must be assured
that their dollars are being used as intended and not flowing
to corporate bottom lines. If much of the TUSF is no longer needed,
Texans deserve to get a tax break.
The bottom line is this: It’s our money, and it should be returned
to the hardworking men and women of Texas…The TUSF was created
to help telephone companies provide affordable phone service to
low-income and rural Texans. We need to make sure our money is
being used as intended…. Taxes stand in the way of the growth of
small business. And small business is the engine that drives the
economy of Texas, the 11th largest economy in the world. The Texas
Universal Service Fund is one tax that is ripe for reform for the
good of both the state’s small businesses and its citizens.
Imposing taxes on telecommunications services that are two
and three times higher than those imposed on other goods and
services: Forms an unjustifiable burden on low and middle income
consumers; Creates a variation in taxes from city to city and
state to state, placing a high compliance burden on communications
companies; Distorts consumer choices and investment decisions;
and Hampers economic growth and global competitiveness.
While the Fund helped promote the transition to a market-based
system, today the fund is often more a hindrance than a help
in fostering competition, essentially subsidizing some consumers
and businesses at the expense of others.
Few bills are as complicated as telecommunications bills - whether
for land lines, cell phones, satellite or cable service. The fees
and surcharges, taxes and franchise fees add up to a single bottom
line, however, and for Texans, that bottom line is much more than
it should be….Texans shouldn't have to pay taxes on taxes,
fees for functions that are long since fulfilled, and to subsidize
some businesses over others.
Texas phone customers have paid about $2.2 billion in subsidies over the past five years to help big phone companies cover the cost of serving rural areas.
It's been nearly 10 years since the state devised the formula
it uses to collect the (USF) money, and phone companies have
resisted opening their books to show how it's spent. "It's
been a concern for us for years," said Roger Stewart, telecom
attorney for the Texas Public Utility Counsel, the state's consumer
advocacy office. "From the very beginning, there hasn't
been an adequate amount of auditing and oversight we would like
to see from (state regulators). This is money coming out of consumers'
checkbooks, consumers' pocketbooks, so we think the fund should
be no bigger than is necessary to get the job done."
And those (USF) subsidies, which appear as line items in consumer
phone bills, have become big revenue streams for the state's
largest phone companies, including San Antonio-based AT&T
Inc. But here's the problem: Some of the service areas for which
the phone companies are being reimbursed are no longer rural.
And some customers in those areas can now purchase phone service
from rival providers like cable companies or Internet-based telecommunications
Phone companies, which not surprisingly want the subsidies to continue,
insist the billions collected make it worthwhile for them to do business in
remote areas. But in some areas still designated for subsidies, spots once
considered “rural” now are thriving suburbs… And even in areas that are remote
or pose special terrain problems, recent advances in technology provide methods
of communication that weren’t widely available just a decade ago, such as the
Internet and cell phones. So the system in use to determine and justify the
subsidies is a heavy black dial phone plopped down on a lace doily in a fast-changing
digital world. Nor is there accountability. Consumers and watchdog groups have
no idea where those huge piles of money go.
Texas phone customers spent nearly $1.3 billion over
the last three years subsidizing large phone companies. Neither
the formula nor the areas considered rural have been updated
since 1997…before some rural areas turned suburban and before
cellular and Internet options became as widely available. Cellular
phone users pay the subsidies even though they get no apparent
benefit from the fees. The Texas Universal Service Fund has
collected so much money, in fact, that it has a surplus of $83
million...."There is really no accounting for how this money
The PUC should study the USF subsidy and be empowered to make
cuts if the Legislature does not do so in 2007. Cuts in these
subsidies should not be “made up” by increases in other services.