Are carriers in your state net Universal Service recipients or payers?

One of the most interesting pieces of information to emerge from last week’s Senate commerce hearing on Universal Service reform is a spreadsheet presented by Philip B. Jones, a commissioner for the Washington Utilities and Transportation Commission (you can download the entire spreadsheet here…bring your reading glasses : >).

The spreadsheet shows the total amount of money that carriers in each state currently contribute to support each of the four different Universal Service programs—including the low-income program, the schools and libraries program, the rural health care program and the high-cost program—as well as what carriers in each state extract from the program. All four programs combined cost about $8 billion a year—and although the program is self-funded by carriers, those carriers pass on their costs to their customers.
It appears Jones’s document may have caught the attention of Massachusetts senator John Kerry who, according to news reports, expressed concern about the difference between what Massachusetts residents pay into Universal Service and the amount of subsidy received in the state in return. Kerry reportedly said inequity might be OK if the fund is really efficient and targets only the communities that need it the most.

According to Jones’s research, carriers operating in Massachusetts pay about $169.5 million into the program and receive just $46.3 million out of it. But Massachusetts carriers fare better than those in California, where carriers pay in $238.7 million more than they take out—or in Florida, where carriers’ net payout is $274 million.

The top states where carriers receive more than they pay are Mississippi, where carriers receive $254.5 million more than they pay into the fund and Alaska, where net receipts are $225 million.

Even after proposed Universal Service reforms are made, carriers in more urban states are likely to pay out more than they receive. Currently about half of all funds go to support service in high-cost areas—and as the high-cost program transitions to specifically support broadband, it is likely to remain the largest element of the overall program. And because rural states are costlier to serve, they are likely to remain the net recipients.

As Jones noted in his testimony, however, it’s not possible to create a spreadsheet showing how proposed Universal Service reforms will impact the payment balance because although the FCC proposes to rely heavily on a cost model, it has not yet determined what that cost model will be.

It’s also worth noting that the elimination of duplicate support for competitive—primarily wireless carriers—will have a greater impact on some states than others. Data released last year showed that competitive carriers in three states and Puerto Rico collected more high-cost Universal Service support than the incumbents (CP: The real story of USF data).