June, 2008

Mercatus on Policy: Texas-Sized Savings From High Cost Universal Service Reform

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Ten years ago, the Texas Public Utility Commission (PUC) reduced subsidies for rural phone service that were hidden in long-distance charges, substituting explicit subsidies funded by a surcharge on Texas telephone bills. In 2005, the Texas legislature enacted sweeping telecommunications legislation that directed the PUC to evaluate universal service programs and consider further reforms.

To help inform the universal service debate in Texas, in 2007 Joseph Rotondi and Jerry Ellig undertook an analysis of alternative reforms the Texas Public Utility Commission (PUC) might consider.  They found that the PUC had a variety of options that could significantly reduce the cost of the subsidy program with minimal impact on rural telephone subscribership.