Prepared Statement of The Honorable Joe Barton

Universal Service: What Are We Subsidizing and Why? Part 1: The High-Cost Fund

Subcommittee on Telecommunications and the Internet
June 21, 2006

Mr. Chairman, thank you for holding this hearing today. The federal universal service support system now consumes more than $7 billion. This system is bloated, it is growing, and it is not sustainable.

The Energy and Commerce Committee has held multiple hearings on the waste, fraud, and abuse that permeate the $2.25 billion e-rate program, which is part of the federal universal service support system. While the e-rate program is also in need of reform, today's hearing will focus on the federal high-cost fund.

The high-cost fund has swollen considerably since the passage of the 1996 Telecommunications Act. In 1998, the fund distributed approximately $1.5 billion. In 2006, the fund is projected to distribute $4.2 billion. As we will hear from the Congressional Budget Office today, the high-cost fund is in jeopardy of growing even larger unless effective reforms are put in place.

There are important reforms that are necessary to rein in the high-cost fund. First, only one connection per household or business should be eligible for support. There is no reason that the telephone users who pay into the fund should have to subsidize extra phone lines in the house or a mobile phone in addition to a wireline connection.

Second, communications providers should receive support, if at all, based upon the costs of the lowest-cost provider of telephone service in a particular area. Wireless carriers should receive universal service support. But they should do so based on the costs of putting up towers in rural areas and getting connections back to the local loop. There is a perverse incentive that exists today in the high-cost program in which wireless carriers get as much money as wireline carriers to provide telephone service in a rural area.

This policy should be reversed. No provider should receive more support than what is necessary for the lowest-cost provider in an area to provide basic, voice-grade service. This is about making certain that anyone in rural America can call the doctor when they're sick. It's not about providing every house with cell phones, computer hookups, and the opportunity to chat on two or three lines at once.

The growth that has occurred in the high-cost fund is unacceptable, unsustainable, and unnecessary. With the right reforms, the program can be brought under control. This would ensure that the program can continue to do what it is supposed to do: provide people in rural areas with affordable voice-grade telephone service.

I look forward to working with the Chairman and the rest of my colleagues to determine the best way to reform the universal service system. I yield back.

Related Documents