The Regulation

In September 2008, the Federal Communications Commission (FCC) issued a Notice of Inquiry on management and oversight of the Universal Service Fund (USF).  The USF subsidizes rural telephone companies, phone service for low-income households, Internet service for schools and libraries, and telecommunications service for rural health care facilities. Among other issues, the FCC asked whether it should adopt outcome-oriented performance measures for these programs.

Our Analysis

In previous comments on this docket, Mercatus Center scholars recommended that the FCC should measure three types of outcomes: the effect of subsidies on the affordability and availability of service to the target populations; the effect on subscribership; and the effect on the ultimate economic, social, educational, health, and cultural outcomes the subsidies are supposed to produce.

Of the 35-40 commenters in this docket who discussed performance measures, most favored measuring the intermediate outcomes we proposed: affordability, availability, and subscribership.

Many problems can be avoided if the FCC focuses on measuring how the subsidies have affected affordability, availability, and subscribership, rather than just measuring the total amount of these outcomes.

Measuring the number of people affected by the subsidies may convey important information, but such "McMeasures" ("billions and billions served") are output measures, not outcome measures.

Educational institutions who object to evaluating the effect of the school and library subsidies on educational achievement are not advancing the cause of education.  Without evidence of the effect of subsidized services on learning, neither the FCC nor Congress can know whether the schools and libraries program achieves results that are valuable to the consumers who pay the tab.  

Recommendations

The FCC should immediately measure the effects of USF subsidies on the availability and affordability of subsidized services and on subscribership or connectivity.