USF: Radical overhaul or just a tweak?

The Universal Service Fund needs either a radical overhaul or just a slight tweaking. The two opposing opinions were expressed today in a Senate Commerce Committee hearing chaired by Sen. Ted Stevens (R.-Alaska).

While most at the hearing supported an expansion of the contribution base to USF, there was widespread disagreement on both how far that expansion should go and distribution of funds. Sen. Gordon Smith (R.-Ore.) summarized what many at the hearing called a broken system, saying, “we have to do something. The funding base is falling apart.”

Likewise, Stevens said it is the fundamental right of every American to have some form of communications. At the same time, if a new USF law is to be passed it must take into account new technologies, specifically broadband.

“We shouldn’t write a bill knowing that within 10 years it’s going to have to be re-written,” he said.

However, when asked whether the system needs a complete rewrite, Glenn Post, CEO of CenturyTel, said he thinks only minor adjustments need to be made.

“I think we can do without a major rewrite,” he said, noting that most of the growth in payment has been on to competitive eligible telecommunications carriers (CETCs). “Action on Universal Service needs to be taken today. If this committee doesn’t act on Universal Service, consumers in rural areas will be left behind.”

However, Tom Simmons, vice president of public policy at Midcontinent Communications, said he favored a significant overhaul of the system with an emphasis being on changing the payment method.

“We ought to spend some time considering what the requirements are, and the right sizing of the program, before getting into the contribution methodology,” he said. “To simply say the broadband [providers], whatever that may be, should pay into USF would be an error.”

On the contribution side, FCC Chairman Kevin Martin has publicly supported a numbers-based approached where any service assigned a phone number would pay into the fund. That approach, favored by many incumbents who see it as a way to force VoIP providers to pay into the system, has been attacked by consumer advocates as unfair to low-usage users. In a press conference yesterday, the Keep USF Fair Coalition said such an approach would amount to an unfair tax on seniors and those with low incomes.

“For a consumer who dials only a handful of long-distance calls every year, the effective tax rate would soar by more than 1000% on an annual basis,” said Linda Sherry, director of national priorities for Consumer Action, which is part of the Coalition. “There is just no case to be made for such a radical change.”