America's independent, non-partisan advocate for overburdened taxpayers.
Printer Friendly



Prevent Universal Service Fund Expansion

December 11, 2007

Dear Chairman Martin:

On behalf of our 362,000 members, the National Taxpayers Union (NTU) urges the Federal Communications Commission (FCC) to put a hold on the explosive growth of the Universal Service Fund (USF). While we would strongly prefer to see the program's complete elimination, NTU supports proposals for a temporary cap on the USF as stop-gap measures while long-term solutions are implemented. NTU also encourages the FCC to eliminate USF fraud and reduce related taxes on existing and developing telecommunications technologies.

The Universal Service Fund is a textbook example of taxation and redistribution via regulation. By law, telecommunications companies are forced to "contribute" to this fund and the proceeds are used by the FCC to subsidize services for rural/lower income areas. The telecommunications industry is certainly no longer in its infancy, and continuing claims on taxpayer funds for handouts are unjustifiable. Simply put, the USF program is now outdated, unnecessary, inefficient, and riddled with fraud.

In fact, according to a recent report by the FCC's Office of the Inspector General, erroneous payment rates exceeded 9 percent in most USF programs. Not surprisingly the biggest problem area was in the high-cost fund, where investigators uncovered some $618 million in improper payouts.

Rather than helping to provide phone service, the bulk of USF disbursements are now part of a multi-billion-dollar wealth transfer. Money goes from the pockets of U.S. taxpayers to rural telephone companies that often have only a few hundred customers and pay out more in dividends to shareholders than they actually charge for phone service. This is waste at its worst.

As you know, NTU has sought more rational government telecommunications policies because of the high stakes for taxpayers and the economy. The USF is another example of a nonsensical government program in need of outright termination or, at a minimum, a comprehensive overhaul. Public officials, beginning with the FCC, owe it to consumers, to business, and to all taxpayers to eliminate or pare back this program now.


Kristina Rasmussen
Director of Government Affairs