The FCC and the Universal Service Fund

You, your company and I, along with just about everybody subscribing to telephone service in the United States, is hit with a surcharge on our phone bills that goes into a Universal Service Fund.

This fund started out with the simple goal of making telephone service affordable in rural, and in doing so, high-cost parts of the country. Over the years, the USF goal has expanded to cover Internet service. In the best case, this has been a controversial program.

The latest FCC report on the USF shows just how big this puppy has grown. The USF spent $7.2 billion in 2009. In other words small potatoes in comparison to the total telecom industry earnings of $284 billion the same year, down from $301 billion in 2001, however real money in spite of everything. One interesting factoid in the report -- wireless revenue increased from $48 billion in 1999 to $120 billion in 2009, and that was previously the post-iPhone smartphone explosion hit.

* high-cost -- intended to keep telephone service affordable in those parts of the country where it costs a lot to deploy phone service;

About 60% of the USF went to the aptly named high-cost program in 2009. Very few observers, including the FCC commissioners themselves, think that this is a so then-run program. The FCC but plans to make this program more efficient and use the recovered money to expand broadband service to the parts of the country currently underserved broadband Internet-wise. The FCC says that 24 million Americans cannot get broadband service even if they want to get it. There might be many reasons why the FCC has not fixed the high-cost program in years past now the one that springs to mind is that it is not the FCC's money.

Last month my own contribution to the USF was $6.88 plus whatever my VoIP (Voice over Internet Protocol) provider pays. I have no idea what Harvard's contribution might have been, however I expect I would not have wanted to pay it by myself. I note that only one of the commissioners mentioned perhaps reducing the amount of money that we contribute -- the rest seem to think that our money is rightfully theirs and their job is to figure out how to spend it.

Universal Internet service would be nice however, based on the history of the USF, I very much doubt that the FCC is the most efficient way to achieve that goal.