March 12, 2009

Performance Measures for the High Cost Universal Service Fund

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The House Energy and Commerce Committee's Subcommittee on Communications, Technology, and the Internet held a March 12 hearing on reform of the "high cost" universal service fund, which subsidizes phone companies in rural areas. Mercatus Senior Research Fellow Jerry Ellig was invited to submit written testimony to the subcommittee.


The Federal Communications Commission has spent $30 billion over the past decade on subsidies for phone service in high cost areas, but it has never developed outcome goals or measures to assess whether the subsidies have accomplished the intended results. Congress should require the FCC to measure the outcomes articulated in the Telecommunications Act: access in rural areas to services reasonably comparable to those in urban areas at reasonably comparable rates.  Legislators should also require the FCC or independent analysts to:

1. Analyze how much of a change in these two outcomes the high cost fund has caused,
2. Assess how this change in access and price has affected subscribership, and
3. Estimate how this change in subscribership has affected the economic, social, and cultural opportunities available to rural households, or other broad social benefits the high cost fund is supposed to promote.