Trump's State Department Responds to NBC News Story About Mexico Denying Deportation Fligh...
Gavin Newsom Doesn't Want You to Know About This Disastrous Emergency Services Decision
Here's the Line That Shows Trump's Firing of Inspectors General Was a Great...
What McConnell Did After the Hegseth Vote Is Infuriating
Mass Deportation Raids Have Begun in Los Angeles
Never Forget Who Democrats Are, Hold Them to Their Own Standards
A Quick Bible Study Vol. 252: What the New Testament Says About Leadership
Efficiency Is Not Limited Government
The Biden Administration Left a Medicare Mess Behind — Now Trump Must Clean...
Last Minute Pardons Break Political Retribution Cycle
Trump Clashes With Democrat in Fiery Debate Over LA Wildfires
Mexico Blocks U.S. Military Deportation Flight, Prevents Landing
Taliban Rejects Trump’s Demand to Return $7 Billion in U.S. Military Gear
Trump Cleans House, Fires 17 Inspectors General Overnight
Republican Lawmaker: 'Four Years of Trump Aren’t Enough'
OPINION

Congress, Don’t Wait on the Courts to Reform the Universal Service Fund

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
Advertisement
Advertisement
Advertisement
AP Photo/Jacquelyn Martin, File

The Federal Communication Commission’s little-known Universal Service Fund (USF) has long burdened consumers and taxpayers with waste, fraud, abuse, and mismanagement—but the fund has not escaped the watchful eyes of the courts. In fact, one court thinks the program may be downright illegal. However, Congress shouldn’t wait for the judiciary to reform it.

Advertisement

As the Fifth Circuit Court of Appeals recently noted in the case Consumers’ Research v. FCC, “nobody voted for” the fund’s inappropriate power delegation from Congress to the FCC and from the FCC to a private corporation, nor did they vote for its multibillion-dollar tax on ratepayers that keep the fund solvent. With conflicting decisions on the fund’s legality now swirling in different circuit courts, the program is on pause as a future showdown at the Supreme Court likely awaits.

Congress should make that legal debate a moot point instead. The USF falls woefully short of its original purpose to close the digital divide and provide Americans with affordable access to high-speed internet while imposing an unnecessary tax on ratepayers. As a recent report from the American Consumer Institute explains, USF’s unique funding model is largely to blame for the program’s shortcomings—which warrant policy reform irrespective of what the courts ultimately decide about the program’s legality.

Unlike many federal programs that require Congress to authorize payments in the appropriations process, the USF outsources administration to a private company that taxes a percentage of interstate and international telecommunication company revenues. That means neither Congress nor the FCC is directly responsible for setting this rate, making the USF uniquely unaccountable and susceptible to abuse. Plagued by a lack of oversight, the tax—and the financial costs of mismanagement—are passed down the ladder until consumers pay the price in more expensive monthly phone bills.

Advertisement

No need to take my word for it, the FCC says so itself. The FCC estimates that most USF contributors pass these costs onto customers. Among the hardest hit are low and middle-income Americans who must spend a larger portion of their income paying the tax than their wealthier peers. Older Americans—many of whom live on fixed incomes—are disproportionally impacted by the tax since they are more likely to rely exclusively on landlines.

Compounding the problem is that the universal service tax has continued to grow over the years, rising from less than 10 percent in 2004 to nearly 35 percent today. As fee-exempt forms of communication technology have slowly displaced older legacy systems (largely landlines), the revenue base that USF has traditionally relied on has shrunk. This has resulted in larger and more frequent increases in the universal service rate and calls for more industries to contribute.

Such calls would have some merit, if not for the fact that the program itself is already inefficient, wasteful, and in desperate need of reform. Economist Jeffrey A. Eisenach testified that the fund has “been rife with waste, fraud and abuse throughout its history,” pointing to examples where the Commission has written checks to cell phone carriers “for serving customers they were already serving without a subsidy.” Cutting red tape and reducing bloat must be prioritized before others are forced to participate.

In a particularly jarring example of wasteful spending, a Government Accountability Office audit of Lifeline (one of four USF programs) found the program had mistakenly gifted more than $1 million in phone subsidies to deceased individuals. Other research has found evidence that the USF routinely squanders money on administrative expenses, and contributes to problems like network overbuilding, where new networks are needlessly built on top of existing networks.

Advertisement

The USF’s unique funding model has made it unaccountable to Congress. Rather than rope more industry into a broken program, Congress should change the funding structure so that it is subject to the appropriations process. That reform would promote transparency and accountability while improving efficiency. Only time will tell what the courts decide about USF’s legality. In the meantime, Congress can rid the program of what ails it by getting the ball rolling on meaningful USF reform.

Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal

Join the conversation as a VIP Member

Recommended

Trending on Townhall Videos