Markey's Timely Universal Service Reminder

The FCC recently announced that the surcharge on interstate communications services to support universal service programs has reached an all-time high of 11.7%. This additional tax on communications ain't peanuts, and, regardless of your views on smoking, taxing communications has very different economic and societal impacts than taxing cigarettes.

On April 2, Ed Markey, Chairman of the House Telecom Subcommittee sent a letter to FCC Chairman Kevin Martin asking a series of questions concerning universal service policy. To my mind, on the whole, Markey's questions are pertinent and important ones. You can read Chairman Markey's entire letter here.

But apart from the individual questions, some of Chairman Markey's prefatory comments are particularly worth noting, and encouraging, if they can be fairly taken as an indication of an inclination for trying to achieve meaningful reform of the bloated--and still "bloating" as I write--univeral service regime. Referring to the 1996 Telecommunications Act, Markey said: "Congress anticipated that competition would promote consumer welfare, even in many high cost areas where universal service support was needed to keep rates affordable, by lowering the cost of universal service as providers competed for the universal service subsidy. Further, advances in technology were expected to make networks deliver supported services more efficiently, not in a more costly manner."

What is also especially noteworthy about Markey's letter is his citation to the 1996 Act's congressional reports as support for the above propositions. From House Report No. 104-204 (I): "Over time, [the Congressional Budget Office] expects the operating costs of telephone companies would tend to fall as a result of competitive pressures and the total amount of subsidies necessary would decline." From Senate Report No. 104-23: "[C]ompetition and new technologies will greatly reduce the actual cost of providing universal service over time, thus reducing or eliminating the need for universal service support mechanisms as actual costs drop to a level that is at or below the affordable rate for such service in an area." [The emphasis is all mine.]

Universal service subsidies have done nothing but balloon since the program's inception, leading to today's 11.7% USF tax. I am sure that Chairman Markey and I probably differ concerning how, how much, and how fast we would reform the program. But his USF letter indicates that he may be inclined to push for meaningful reform to reduce the size of the USF subsidies. If so, he should be commended. And by recalling the legislative history acompanying the 1996 Act, Markey has reminded us that Congress understood then that new competition and new technologies--which certainly rapidly proliferated since 1996--should have let to a decline in subsidies, not ever increasing ones.