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As Federal Phone Tax Heads Higher, 'Cap The Fund' Web Site To Help Consumers Support FCC Curbs on Universal Service Fund (USF) Waste
Mar 18, 2008 (10:03 AM EDT)

WASHINGTON, March 18 /PRNewswire-USNewswire/ -- Consumers who want to support pending Federal Communications Commission (FCC) proposals to curb waste and abuse of Universal Service Fund (USF) phone tax revenues will be able to do so in a quick easy way at the Web site for Cap The Fund ( HASH(0x154df30) ). Concerned Americans have until April 3, 2008 to speak out in favor of two ways the FCC has proposed to rein in waste of billions of dollars in revenues from the controversial USF phone tax, which is set to jump in the second quarter of 2008 from 10.2 percent to 11.3 percent of carrier revenues collected from phone consumers.

Launched on September 27, 2007, already has been used by consumers to send over 225,000 pro-cap emails to Congress, the FCC and USF State-Federal Joint Board. The new message available on the Web site continues to support the cap, but also embraces the "reverse auction" and "identical support" provisions contained in pending FCC rule proposals now open for public comment.

Current members of Cap The Fund include The Seniors Coalition, Americans for Tax Reform, the Maryland Taxpayers Association and The Media Freedom Project. The controversial and waste-riddled "high cost" portion of the USF was intended to provide phone service to people in remote rural areas, but has been criticized for turning into an open-ended slush fund for often undeserving wireless and rural telephone companies.

The new customizable letter for consumers now featured on reads as follows: "As a phone consumer, I urge you to put an end to the waste and abuse under the $7 billion Universal Service Fund (USF) tax phone bills. I support a cap that would be imposed by the Federal Communications Commission (FCC) on High Cost Support under the Universal Service Fund. I also am in favor of the two pending proposals to reform the manner in which high cost support is distributed. Specifically, I support the use of reverse auctions and limits on 'identical support' to reduce the amount of money wasted on USF ...

I am encouraged to read that reverse auctions could reduce USF spending by billions of dollars. If reverse auctions have been used successfully by other countries in these kind of cases, why shouldn't the U.S. do the same thing? I urge the FCC to impose a reverse auction system so that the lowest-cost provider is the only one that gets a tax subsidy in each market.

I also support action to curb abuses under the 'identical support' rule, under which wireless carriers collect the same amount per line in subsidies as their landline-based competitors. In my view, the USF should not be subsidizing duplicated carriers in the same market - and phone companies certainly should not be getting paid for costs they never incurred."

Americans do not support the current USF phone tax regime. A November 2007 national opinion survey showed that more than seven in 10 Americans (71 percent) - including 75 percent of Republicans, 69 percent of Democrats and 67 percent of Independents -- support a cap on the "high cost" portion of the Universal Service Fund (USF) in the wake of recent increases in USF subsidies to wireless telephone companies.

Runaway spending on the high-cost portion of the federal USF phone tax have caused it to skyrocket from $2.2 billion in 1999 to about $4 billion in 2006. The overall USF tax has surged to $7 billion, up from less than $4 billion in 1998. To pay for the Universal Service Fund, the tax rate applied to long distance revenues has skyrocketed five-fold from 2.1 percent to its current level of just under 11 percent. Unwary U.S. taxpayers pay up to $13,345 per telephone line per year for federally subsidized phone service under the U.S. government's steep USF phone bill tax.

Rather than providing phone service to low-income consumers in need, the bulk of USF taxpayer dollars are now part of a multi-billion wealth-transfer that goes from the pockets of U.S. taxpayers to small, uneconomical private rural telephone companies that often have only a few hundred customers and are so engorged with tax dollars that they can afford to pay out more in dividends to shareholders than they actually charge for phone service. Increasingly, USF funds are also flowing to large wireless companies that provide what is often purely duplicative service competing with unsubsidized service providers.

Examples of current and recent USF tax subsidy recipients that have been highlighted by Cap The Fund include: one of the five biggest private-equity buyout firms in America, which is on track to take in up to $200 million a year in USF tax subsidies; a phone company headed by a tobacco company heir who owns multi-million dollars homes in Washington, D.C., Nantucket and a seaside estate in Georgia; a wireless company that subsidizes a NASCAR race team and also pays its top executives to play golf at Augusta National Golf Club, including picking up the cost of travel on company jets (from 2001-2005, this wireless telephone company's jets were reported to have landed more than 150 times at the airport in Augusta, Georgia); a telephone company created by a NBA team co-owner who liked a New York City restaurant so much that he and other investors moved it to a small town in the Midwest; and a rural telephone company founded by the owner of a $12 million Manhattan townhouse and also involving a principal who was the advisor to the ruling family of one of the world's leading oil-producing nations.

CONTACT: Ailis Aaron Wolf, +1-703-276-3265,, forCap The Fund, Washington, D.C.

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