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FCC Caps Subsidies For Rural Wireless Expansion

The FCC is limiting payments through its Universal Service Fund that are used to expand services into rural areas.
The Federal Communications Commission has capped payments to telecommunications companies for bringing wireless services to customers in rural areas.

The FCC voted last week to limit payments through its Universal Service Fund (USF). The fund is paid for by customers through taxes and fees on phone bills. The program was designed to expand services into rural areas.

Critics say it has led to taxpayer support of multiple carriers in areas so sparsely populated that one carrier cannot survive without government help. Members of the FCC have said the program has failed to keep pace with evolving communications technology.

The FCC decided that telecommunications companies' annual support will be equal to the support they were eligible to receive in March 2008.

In announcing the decision, the FCC noted that consumers pay more than 11% in USF fees on interstate phone bills, and that payments under the program grew from $1.5 million in 2000 to more than $1 billion last year.

"Left unchecked, this staggering growth threatens the sustainability of the USF program and forces consumers to pay excessive and ever-increasing contributions to the fund," the FCC explained in a news announcement. The cap contains exemptions for carriers serving tribal lands or Alaska Natives.

The move drew praise from Citizens Against Government Waste, which says studies have shown that subsidized companies are no more likely to provide services in rural areas than unsubsidized companies.

"The decision announced today by the FCC moves toward a USF policy that will more efficiently provide access to underserved areas and save taxpayers money," CAGW president Tom Schatz said in a statement. "It is time to put this subsidy in check while still serving the needs of rural America."

Congress is working to reform the program, created under the Telecommunications Act.

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