Wall Street Journal, April 29, 2008
By Amy Schatz

Federal regulators are on the verge of capping a multibillion-dollar phone subsidy program, a move that would help consumers who are frustrated over bigger phone bills.

Within days, the Federal Communications Commission could announce an agreement to temporarily cap the federal Universal Service Fund, which subsidizes phone services in rural areas and for low-income Americans.

The fund grew to almost $7.2 billion in 2007 from $5.2 billion in 2002. Most of the growth came from an increase in the number of cellphone companies that have been able to tap into it to provide service in rural areas.

The plan would cap the fund at its March 2008 level for the foreseeable future. Three of five FCC commissioners have signed off on the plan, which is enough for it to pass. One of the Democratic commissioners, Michael Copps, voted against it. The other Democratic commissioner, Jonathan Adelstein, hasn't voted yet.

The program is funded by a fee on consumer phone bills that usually runs a dollar or two every month for each phone or data line. The FCC's move means that consumers won't likely see the "Federal Universal Service Charge" on their phone bills increase much, if at all.

FCC Chairman Kevin Martin proposed capping the largest part of the fund six months ago because of concerns about its growth. The plan stalled at the agency, however, with some commissioners hoping to use the issue as leverage to push broader overhaul.

"This thing is spiking out of control and we need to move on," said Robert McDowell, a Republican FCC commissioner who voted to approve the plan Monday. "We need to be fiscally responsible here."

While a boon for consumers, the move suggests that broader overhaul of the subsidy program could be less likely this year. Several efforts to rein it in have been floated at the agency, including Mr. Martin's proposal to use a reverse-auction system to pick which phone companies receive multimillion-dollar payments to provide service in rural areas.

But the Universal Service Fund has powerful supporters on Capitol Hill who have resisted broad changes to the program, particularly lawmakers representing rural areas that benefit from it the most.

This article is copyrighted material, the use of which has not been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.