Home Home

The Lowdown on the Federal Universal Service Charge

July 24, 2007 in Wireless Industry News

Ever noticed a line on your wireless bill that says “Federal Universal Service Charge”? Yeah, I didn’t either, at least until I stumbled upon the article called “Big Subsidies for Big Phone Companies”.

Alltel, one of the largest recipients of the FUSC fund.

Alltel, one of the largest recipients of the FUSC fund.

The FUSC, as I call it, was originally created over ten years ago to pay for providing phone service to the rural parts of the USA. Since phone service in urban and suburban areas generally cost less to setup and maintain, the government wanted to provide a subsidy (basically free money) to companies that did business in sparse regions. The move was also intended to create competition in these areas which would lower phone service prices for residents.

Each year, money collected from the Federal Universal Service Charge goes into a fund and is split several ways:

  • One chunk goes to schools and libraries
  • Another chunk goes to providing phone service to the poor
  • The third piece goes to rural health care facilities
  • And finally, the last and biggest piece of the pie goes to: the phone companies!

Last year, the FUSC fund totaled $6.6 billion dollars, with $4.1 billion going to phone service providers.

Now that wireless phone service has become the norm, wireless carriers have started getting their share of the multi-billion dollar Federal Universal Service Charge pie. One reason for this is the fact that the companies don’t have to deal with the costs of maintaining telephone wires and poles that traditional landline carriers have to.

Wireless carriers that do business in rural areas receive subsidies for each new service subscriber. However, the subsidy is per-customer, and not per-actual cost to the wireless company – so carriers end up receiving quite a bit more than what it costs to add that one customer to its network.

Which brings us to yet another flaw in the law: even if multiple carriers use the same network in the same area, they still get the subsidy.

The largest receiver of the FUSC funds is Alltel, which gains anywhere from 65 to 70 million dollars every quarter. And after that is the giant behemoth AT&T.

Sadly, attempts to change the law have failed, mostly due to stonewalling from certain members of Congress (some of whom received donations from a “rural telephone company trade group”).

Until various representatives and trade groups work out some sort of compromise, it looks like that service charge will be staying on your wireless bill.

Source: “Big Subsidies for Big Phone Companies – Yahoo! AP

***

Tags

,

John Walls
7/26/2007
11:11 am

Let’s set the record straight on USF… wireless consumers are pumping a little less than 40% into the fund’s total pot, while wireless carriers are allowed to withdraw about 16%. The rest of the money is going in large part to rural incumbent local exchange carriers, and that is the root of the USF problem. The current system is subsidizing an antiquated communications technology and this artificial support is a drain of the Fund and encourages inefficiency and waste. The wireless industry supports an overhaul of the USF program so that consumers’ best interests, and not those of rural ILECS’, are represented. We are confident that fair and equitable contribution and withdrawal mechanisms will lessen the likely unsustainable pressure the current system is under, and that policymakers should focus on what is best for the beneficiaries of USF, and not those in the past who have profited by it.

Got Something To Say?


nokia phone blog: version 5

Subscribe!The Nokia Phone Blog is about mobile phones, MeeGo, S60, the wireless industry, and now Windows Phone.
Subscribe here.  RSS, Atom
Email me at cary (at) nokiaphoneblog.com.

The Blog

28

Featured


142

Mobile Phone Software


152

Nokia Phone Accessories


134

Nokia Phone Deals


303

Nokia Phone News


122

Nokia Phone Previews


50

Nokia Phone Reviews


21

Nokia Phone Tips and Tricks


63

Nokia Randomness


20

Other Mobile Phones


351

Wireless Industry News


Current Phone Prices, Courtesy of PhoneMatchUp!

PhoneMatchup Sony Xperia TX: $516.77
Samsung Galaxy Note II N7100: $639.00
HTC J: $598.88
Sony Xperia SL: $388.85
Nokia Lumia 900: $419.98

More Sites By Me

randomlygifted

angbox


My personal blog.
 
PhoneMatchup

PhoneMatchup


An eBay cell phone comparison shopping/price monitoring project. Buy your next cell phone through PhoneMatchup and save!
 
randomlygifted

randomlygifted


Let randomlygifted find you the perfect (random) gift ideas.
 
MyDealSpy

MyDealSpy


The greatest deal aggregator that has ever existed. Okay, I'm a little biased here.