Factors that may increase future spending from the universal service fund: a CBO paper

Original publisher: [Washington, D.C.] : Congress of the United States, Congressional Budget Office, [2006] OCLC Number: (OCoLC)70879761 Subject: Telecommunication -- United States -- Finance. Excerpt: ... XIII SUMMARY that received by the existing telephone company. Because Restructuring intercarrier compensation rates would also the competitive entrants are almost all wireless compa-alter which groups make payments to rural telephone nies - whose cost of providing service is likely to be lower companies. Under the current structure, only people or than that of the incumbent landline provider - the sub-companies that originate or terminate calls on the net-sidy paid to new entrants is likely to be higher than the works of rural telephone companies make intercarrier amount needed to attract new providers who will offer compensation payments to those companies. If intercar-services in rural areas at rates comparable to those rier compensation payments were converted to USF sup-charged in urban areas. port, long-distance customers as a whole would pay for it. Proposals that would peg subsidies to a provider's own In addition, converting intercarrier compensation pay-cost of offering service would thus probably lower pay-ments into USF support could fix the transfer of funds to ments to new entrants. The FCC could make that change rural telephone companies at current levels, even though without any legislative action being required. However, competition from other telecommunications providers basing support on a company's own costs might lessen the and technologies is gradually reducing such payments. incentive that current policy gives wireless entrants to Thus, restructuring intercarrier compensation could pro-expand their telephone networks and to produce services tect rural telephone companies from the competition that at the lowest possible cost. is occurring in other telecommunications markets and thereby deny consumers the benefits of that competition. Res...