The study by George Mason University professor Thomas Hazlett, a former chief economist at the FCC, and Scott Wallsten, a former economist for the FCC's National Broadband Plan, says the Universal Service Fund, which is meant to connect rural areas with phone service, is subsidizing some phone companies at a rate of more than $24,000 per phone line, despite the fact that satellite service is available across 99.8 percent of the country and could be supplied at about $600 per household per year.
"All but about 600,000 Americans live[ed] in the coverage area of a mobile telephone operator. Supplying each of those residents, in about 230,000 households, free unlimited domestic telephone service via satellite would cost no more than $173 million per year using the retail prices stated by one satellite provider offering a recent low-cost unlimited service plan," the study says.
"This puts the $4.5 billion annual cost of the [Universal Service Fund's Connect America Fund] into perspective," said the nonpartisan Alliance for Generational Equity (AGE) in a statement.
The study called, "Unrepentant Policy Failure: Universal Service Subsidies in Voice & Broadband," says that the program meant to bring disadvantaged Americans into the digital age, was being exploited by phone companies that serve isolated, but sometimes extremely exclusive communities.
The study found Westgate Communications LLC, doing business as Weavtel, in Washington state, was given a subsidy of $375,858 for 16 phone lines, taking in $23,491 per phone line. Adak Tel Utility in Alaska was given a total subsidy of $2,784,558 to establish 165 phone lines at a cost to taxpayers of $16,876 per phone line.
In another example, Sandwich Isles Communication in Hawaii was paid $12,371 per phone line, collecting $25,583,457 to establish 2,068 phone lines.
"USF waste is taking place on an epic scale. The federal government has spent about $110 billion (in 2013 dollars) since 1998, of which $64 billion went for telephone carrier subsidies, extending voice services to, at most, one-half of one percent of U.S. households," Age said.
The so-called High Cost Fund "has largely operated without a budget constraint. With limited exceptions, high-cost fund recipients report how much money they 'need' and regulators provide it by adjusting tax rates," Wallsten said.