Tuesday, July 27, 2010

What is the USF Fund Up to?

This article on ARS about USF is infuriating.

"AT&T was insanely profitable in 2009, with $34.4 billion in revenue and $12.5 billion in net income. ... So why did the US government direct $435 million into the company's coffers? .. AT&T has pulled down more than $1.3 billion in USF money over the last three years, while Verizon got $1.2 billion and CenturyTel picked up $930 million." [ARS]

The Universal Service Fund collected $7.2 billion dollars last year. (Funny, that's the same amount as the Broadband Stimulus Plan originally). It was 14.1% in 1Q2010 and is now 13.6%. USF "pays for four things: telephone service to expensive-to-wire places, subsidies for low-income users, computers and Internet access for schools (E-rate), and telecommunications services for rural health care providers."

The fund has been abused especially for E-rate. But some telcos live off the money with a rate of return of 11%. For example, "There's the case of Weavtel, a tiny Washington state telco that raked in $301,966 in USF money in 2009—all in order to support 17 copper telephone lines. That's an average of $17,763 per line."

If it costs $6-17K per line in rural areas for voice, imagine what it will cost per house for 4MB Broadband!!!!

Time for some real USF reform at the FCC.

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