Tuesday, January 18, 2005 - The Progress & Freedom Foundation Blog

Universal Service: Broken But Fixable

Just minutes ago, Joe Kraemer, Rich Levine, and I released a new book length study examining the current Universal Service system, focusing particularly on the high-cost and low-income subsidy programs. Read about it here.

The study contains a wealth of data demonstrating that consumers--speficially including those in rural and low-income households--are using non-wireline communications services, such as wireless and cable telephony, at rates that compare very favorably with the nation at large. In other words, competitive market forces now ensure a choice of service provider and lower prices for voice service independent of the universal service subsidy regime.

The universal service fund, particularly the high-cost part, is growing very rapidly, and the the USF fee tacked on to long distance calls now exceeds 10%. As with Social Security, some people just assume the Universal Service program is the "third rail" of communications policy--that it can't be reformed because it is "too difficult politically." But that can't be right, because delay will only exacerbate the problem, making real reform more difficult. And because so much traffic is moving outside the current US system so rapidly, there is a need to accomplish reform much sooner than with respect to Social Security. (Not to minimize the need for SS reform too!)

So, as we say in the Foreword: "It is our hope, if not our conceit, that armed with the information in this study, policymakers will recognize the need to act proactively to reform the burgeoning Universal Service regime before already-unleashed competitive forces bring it unceremoniously crashing down."

posted by Randolph May @ 12:14 PM | Communications