Bill calls for radical USF redistribution

A House bill introduced today by Rep. Lee Terry, R-Neb., would redistribute universal service fund subsidies from the non-rural high-cost portion of the fund that currently go to just eight states to as many as 46 states by changing the qualifying methodology.

This portion of the fund supports large carriers that serve high-cost areas. Mississippi, Alabama, West Virginia, Wyoming, Montana, Vermont, Maine and Kentucky are expected to divide $233.8 million in subsidies from this portion of the fund this year, with Mississippi expected to receive the most at $120.8 million. Of this group, Kentucky will receive the least at $3.2 million. While Mississippi, Alabama and West Virginia account for 83% of the subsidies expected to be doled out this year, 42 states – plus the District of Columbia and Puerto Rico – are expected to receive nothing.

Terry’s bill would change that by basing eligibility on individual wire centers rather than on statewide averages. Any wire center that has costs exceeding 375% of the national average would qualify for a subsidy.

“This is an equitability issue,” said Terry spokesman Jeffrey Connor. “If we’re going to encourage growth in rural areas, money has to be distributed to those areas. That’s what the fund was supposed to do.”

The U.S. Telecom Association, which presented its own five-point plan to forestall the collapse of USF this week during a Senate communications subcommittee hearing, wasn’t impressed with Terry’s effort.

“The Terry bill is a band-aid approach to one alleged problem with universal service,” said spokeswoman Allison Remsen. “The reality is that universal service is in grave jeopardy and Congress needs to take much broader and bolder steps to ensure the long-term sustainability for the fund.”

Some experts have predicted that USF will collapse by 2006 absent significant policy changes regarding how monies are collected and distributed.