Grilling a Responsible Commissioner

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The New York Sun

If you want to see a modern-day Joan of Arc, try watching the Senate Commerce Committee hearing tomorrow starting at 10 a.m. Sitting alone will be a petite Tennesseean, Commissioner Deborah Taylor Tate of the Federal Communications Commission.

She will be asked to explain why a board she heads recommended a form of political heresy in Washington: temporarily capping part of a federal fund rather than passively watching it grow uncontrollably. Many senators have written to the FCC, disapproving of the fiscally responsible recommendation.

Ms. Tate is chairwoman of the Federal-State Joint Board on Universal Service, a bipartisan board of regulators that makes recommendations to the FCC on matters related to the federal Universal Service Fund.

That fund was formally created as part of the Telecommunications Act of 1996, primarily as a continuation of pre-existing programs — totaling little more than $2 billion — to provide federal support for high-cost incumbent rural telephone companies and low-income households. At the time, the USF was funded by a fee assessed on interstate telecommunications services revenue. It amounted to about 3% of revenue and was paid primarily by AT&T, MCI, Sprint, and other long-distance carriers.

Today, the program has mushroomed to more than $7 billion. The pre-existing programs have grown. Much of the growth has come from new programs such as a $2.25 billion schools and libraries fund and a large program for new-entrant telecommunications providers.

To pay for these growing programs, the federal USF assessment fee has grown to 11.7%, one of the highest of the federal fees that consumers pay. The federal USF fee is higher than the federal excise tax on beer and wine, and approximately half of the federal excise tax on cigarettes. Federal policy is aimed at discouraging tobacco use, but it is also supposed to encourage the widespread use of telecommunications services. An 11.7% federal USF fee does just the opposite.

Each time we make a long-distance call or use our cell phone, part of the revenue goes to the federal USF. If we look closely at our telecommunications bills, we can usually see a line item for the charge. Telecommunications companies such as AT&T and Verizon collect the fee from customers and remit it to the federal government.

All of which brings us back to Ms. Tate and her joint board. The other federal commissioner members are Kevin Martin and Michael Copps. The members from state regulatory commissions are Ray Baum (Oregon), Lisa Edgar (Florida), Larry Landis (Indiana), and John Burke (Vermont). Billy Jack Gregg (West Virginia) is the consumer advocate on the joint board. Yet the Senate Commerce committee wants to hear only from Ms. Tate.

The joint board could have done what it has done for many years (including 1998–2001, when I served on it): passively watched the program balloon. The result has been an unsustainably increasing fee that discourages use of telecommunications services.

Ms. Tate and her colleagues were not passive. They overwhelmingly recommended temporarily capping that part of federal program that gives money to new firms competing to offer telecommunications services in rural areas. During the temporary cap, the FCC would have time to adopt a more sustainable funding mechanism.

Reasonable people can and will disagree about how the USF should be capped. For the first time in the 11-year history of the joint board, it has had the courage to recommend a cap on an existing program. To have done nothing yet again would have been irresponsible.

Several senators are running for president. Despite their rhetoric about cutting spending, none appears to have the imagination to ask to appear tomorrow to support Ms. Tate and publicly say: “Commissioner Tate, you are doing a great job. I admire your courage. To have done nothing to stop the growth of USF would have been irresponsible. Keep up the good work.” The American consumer would cheer.

Senators on the Commerce Committee will grill Ms. Tate for having the courage of her convictions. Rather, they should praise her for trying to stop the unsustainable growth of a federal program, and in so doing, preserve it for the future.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He has consulted on issues related to reform of the USF. He can be reached at hfr@furchtgott-roth.com.


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