Senators Decry Disparities In Universal Service Fund Contributions

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Senate Commerce Communications Subcommittee Chairman John Kerry (D-Mass.) and Sens. Frank Lautenberg (D-N.J.) and Bill Nelson (D-Fla.) are pressing the Federal Communications Commission to address the issue of Universal Service Fund contributions as part of a larger effort to reform the fund.

In a letter to FCC Chairman Julius Genachowski, the lawmakers argue that their states as a whole pay comparatively more into the fund than they receive, and that this disparity should be taken in consideration by the FCC as it attempts to comprehensively overhaul the universal service system.

Earlier this month, the FCC voted to begin the lengthy, complex process of reforming both the Universal Service Fund and the current structure for companies to compensate each other for connecting calls--two systems that, if modernized, could hasten the deployment of high-speed internet services nationwide, a key goal of the National Broadband Plan.

One matter that will not be addressed in the FCC's rulemaking proceeding is who will contribute to the new fund--and how much.

“Although we support the concept of universal service and recognize the importance of universal access to broadband for all Americans, the USF desperately needs to be changed to address the numerous inequities and inefficiencies in its current administration,” the senators wrote in a letter dated Feb. 18. “While there may be benefits to having as many Americans as possible connected to the network, this does not mean we should tolerate a system that is either unfair to our states or structurally distracted from its true mission.”

Urban and rural interests differ sharply on universal service reform and 2011 will test lawmakers' and regulators' abilities to forge consensus between the nation's largest telecommunications companies and the smallest over how to repurpose billions of dollars a year in federal spending to support the deployment of broadband infrastructure in rural America.

The fund currently only subsidizes the cost of providing basic phone service in rural and sparely populated regions of the country--those regions considered “high cost.” All companies offering interstate telecommunications services must contribute a certain percentage of their end-user revenues to the fund. For the first quarter of 2011, that percentage--known as the contribution factor--will be 15.5, a record high.

The commission wants to transform USF from a program that subsidizes plain old telephone service--or POTs--to one that subsidizes high-speed internet service, as articulated in the National Broadband Plan.

All three senators--Kerry, Lautenberg, and Nelson--represent states that contribute more than they get back.

For example, in 2009, New Jersey paid $4.68 to the fund for every dollar they received in return; Massachusetts paid $3.66 to the fund for every dollar they got back, and Florida paid $2.23.

Most consumers pay a “Universal Service” line item surcharge on their monthly bills. Though not required, a telephone company can recover the required USF contributions directly from a customer through a line-item charge

By Paul Barbagallo

For the letter, visit