The FCC collects mandatory "contributions" from providers of interstate telecommunications services to subsidize rural telephone companies, phone service for low-income households, communications services for rural health care facilities, and Internet access for schools and libraries.
The FCC has sought comment on extending Universal service to broadband internet connections.
The FCC has also asked for comment on whether it should change funding rules for universal service and whether the fund is in need of fundamental reform.
Our Findings
Universal service fees raise the prices of these services for consumers, which causes them to use less and leaves them less well off.
The FCC does not evaluate the outcome of this program, making it impossible to determine whether it is accomplishing what it was designed for.
Extending universal service to broadband would dramatically increase the cost of the program and would likely cause fewer people to subscribe to broadband.
By the Numbers
Universal service long-distance charges totaled $2.7 billion and cost producers and consumers $1.16 billion in lost welfare (43 percent of revenue raised). For wireless, federal universal service charges generated a welfare loss of $978 million (56 percent of revenue raised).
A study of Texas found that the high-cost program averages $10,000 to connect a single telephone subscriber.
Expanding universal service to broadband would increase the size of the fund to by $700 million-$1.2 billion and would reduce subscribership by 4-7 million customers.
Recommendations
The FCC should issue outcome-based reports on Universal Service, so that it becomes possible to evaluate whether it has successfully achieved its goals.
The FCC should arrange an independent analysis of universal service's history to determine whether past efforts have been effective.
The commission should not extend the universal service entitlement to broadband, which would likely be a net harm to consumers.
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