Posted by: Hank Hultquist on July 22, 2010 at 3:29 pm
If, like me, you’re in a sports fan diaspora (i.e., you grew up someplace else and continue to follow the teams you rooted for when you were a kid), you’re probably familiar with the feeling you get when the local paper has a full-length article about one of your teams. It’s a mix of excitement (yay! they’re writing about the Sox) and concern (I just know they’re going to somehow get the story wrong). Well, that’s pretty close to the feeling I had when I saw this story about universal service reform in The Washington Post the other day (If you have not noticed yet, USF is one of the “teams” I follow closely). As it turned out, I got to indulge both emotions.
First, on the concern front, readers of the Post article may have gotten the misconception that the Federal Universal Service Fund (USF) spends more than $8 billion annually on subsidies for rural America. In fact, the parts of the fund that focus on rural/high cost areas, account for about $4.6 billion. The rest of the money is divided among the E-rate program, about $2.7 billion, (which funds services provided to schools and libraries), the Low-Income program, approx $1.2 billion, (which provides discounts to qualified low-income consumers), and the Rural Healthcare program, approx $214 million, (which funds eligible health care providers for services, including broadband).
Now, on to the excitement. The WaPo article asked, but did not answer (at least not directly), a very interesting question. Why is it that AT&T and Verizon, which are the largest recipients of USF dollars, are supporting fundamental changes in the FCC’s high-cost support mechanisms? I mean, why would anyone want to turn down free money? While I can’t speak for Verizon, I can explain why AT&T wants these mechanisms changed (and don’t worry, I’m not going to say that it’s out of the goodness of our heart). But, in order to do so in a way that makes sense, I’m first going to provide a little more detail about some of the component parts of the high-cost program.
Read More 
