Coalition To Keep America Connected.

Washington, D.C., January 19, 2006 -- The Coalition to Keep America Connected today applauded the release of a paper citing several flaws in policy recommendations produced by the Progress and Freedom Foundation's (PFF) Digital Age Communications Act Working Group on Universal Service. According to the paper, the PFF proposals could undermine the sustainability and sufficiency of the universal service fund (USF)-the mechanism that helps ensure all consumers have access to affordable telecommunications services and the latest technologies-no matter where they live.

The paper, "Ten Myths That Could Destroy Universal Service," written by Alaska Pacific University telecommunications professor Dale Lehman, says the PFF proposal fails to take into account the need for future rural investment in the network and the group is wrong to gauge universal service policy solely on the metric of economic efficiency.

"The PFF universal service Working Group ignores the need for investment in rural areas, using a misguided and misapplied veil of economic efficiency as their justification," says the paper. "Rural investment may or may not be economically efficient, but that is (fortunately) not a requirement for good public policy."

The paper identifies several proposals set forth by the PFF that could undermine the sustainability and sufficiency of the universal service fund. These include: technologically un-neutral household vouchers; an unrealistic affordability benchmark; a dangerous cap on universal service funds; a misguided Block Grant program; an unnecessary shift to price cap regulation for rural carriers; and an insufficiently thought out move to universal service auctions.

The paper goes on to explore the 10 myths perpetuated by the PFF which form the basis for the group's misguided USF recommendations. The 10 myths are:

Most high cost support goes to households that do not need support.
Support should go directly to households, not to carriers.
Economic efficiency requires deriving USF from telephone numbers, not revenues.
New technology makes most USF unnecessary and wasteful.
Sunk investment is irrelevant to economic efficiency.
Universal Service should be devolved to the states while competition and interconnection are Federal issues.
Incentive regulation is necessary to avoid waste in USF.
Auctions to provide universal service are likely to save money.
Past high cost support has been ineffective.
Economic efficiency is the sole metric for formulating public policy.

The paper concludes that by focusing solely on economic efficiency, the PFF misses the point of universal service. The goal of sufficient and predictable support to provide comparable rates and comparable services in rural and urban areas is sound public policy and that its achievement can be affordable and sustainable. The draconian "solutions" offered by the PFF Working Group are neither warranted nor advisable.

Click here to downloaded a copy of the paper. (PDF 102 KB)

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The Coalition to Keep America Connected is dedicated to ensuring that all consumers have access to affordable telecommunications services and the latest technologies-no matter where they live. The effort is organized by four rural telecom associations, whose memberships include 700 small and midsize communications companies. Together these companies serve millions of consumers and 40% of the landmass across America. Visit us at www.keepamericaconnected.org.