A recent paper by IEP Director Dr. Thomas Hazlett and Scott Wallsten, senior fellow at the Technology Policy Institute, has been covered by the Wall Street Journal’s “Marketwatch” and the online news-magazine Computerworld. The paper, “Unrepentant Policy Failure: Universal Service Subsidies in Voice & Broadband,” describes how the FCC’s Universal Service Fund levies a substantial tax on long-distance telephone service and enriches inefficiently small telecommunications firms, yet fails to make an even modest impact in improving access to phone and broadband service.
News coverage of the piece has largely focused on egregious specific examples of waste cited in the paper, such as the USF granting annual subsidies of over $20,000 for single phone lines. While noteworthy, Hazlett and Wallsten draw attention to the full extent of USF waste. The scholars estimate, for instance, that $64 billion has been spent on telephone carrier subsidies, extending voice services to, at most, one-half of one percent of US households. Despite recent cosmetic USF reforms, USF continues to incentivize inefficient behavior by telecommunications firms.