Universal Access Fund Reform

Published March 9, 2009

Federal and state Universal Access and Service Funds (UASFs) have become an inefficient and unnecessary use of taxpayer money.

The funds’ original intent—to expand basic telephone service to rural and low-income residents—has run its course. So now the federal government and several state legislatures are being urged to “reinvent” the UASF as a mechanism for expanding broadband Internet access.

Such an expansion would be very expensive, burdening consumers and providers alike and further distorting the marketplace for telecom services. UASFs prop up weak or inefficient telecom providers (who otherwise would not survive in the marketplace) at the expense of other, stronger providers.

Public policy should avoid favoring one company over another and instead strive to foster a more neutral, competitive, and non-distorted marketplace. Public policy also should be transparent, rather than relying on “backdoor” taxes and complex cross-subsidies. UASFs are just the opposite of sound public policy.

Expanded broadband access may be an important goal, but UASFs are the wrong way to achieve it. Eliminating government-created barriers to investment by the broadband industry, slashing excessive telecom taxes, and freeing up subsidized areas to market competition are a more taxpayer-friendly and efficient way to expand access to telecommunication services.

The following articles offer additional information on sound telecom policy and Universal Access Funds.


Ten Principles of Telecom Policy
This booklet, part of The Heartland Institute’s Ten Principles series, provides policymakers and civic and business leaders with a highly condensed yet easy-to-read guide to state telecom policy. It presents the 10 most important principles of sound telecom policy, from regulatory reform to the government’s role in expanding broadband.

Texas Considers Rural Phone Universal Service Subsidy Reform
Texas has already improved the transparency of its Universal Service Fund and is considering further reforms.

Digital Welfare: The Failure of the Universal Service System
This article outlines how public administrators have created a regulatory mess and disincentives through the use of the Universal Service Fund.

‘Universal Service’ Telephone Subsidies: What Does $7 Billion Buy?
This paper looks at the ineffectiveness of subsidizing universal service at the expense of taxpayers. It gives an overview of how the $7 billion Federal Universal Service Fund is distributed and how inefficient it has been.

High-Cost Universal Service Support
In this Recommended Decision, the Federal-State Joint Board on Universal Service recommends “the Federal Communications Commission address the long-term reform issues facing the high-cost universal service support system and make fundamental revisions in the structure of existing Universal Service mechanisms.”

A Telecommunications Policy Primer
This study explains how subsidizing higher-cost services will undermine technological innovation by reducing demand for alternatives.

Preliminary Proposal of the Universal Service Working Group
This paper analyzes the best ways to create an effective Universal Service policy structure. “The recommendations contained within this preliminary report derived from a set of universal service principles—affordability, efficiency, neutrality, and transparency.”


For further information on the subject, visit the Infotech Issue Suite on The Heartland Institute’s Web site at www.heartland.org.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, you may contact Legislative Specialist John Nothdurft at 312/377-4000 or [email protected].