FCC Subsidy Cap a Victory for Consumers and Future of Universal Service Program

WASHINGTON - The Federal Communications Commission has garnered the critical third vote needed to cap skyrocketing Universal Service Fund subsidies paid to wireless companies - a good result for consumers and the likely prelude to broad reform of the nation's telecommunications subsidy system.

In a statement Monday (April 28), Commissioner Robert McDowell joined Chairman Kevin Martin and Commissioner Deborah Tate in support of the cap, creating a majority vote in favor of the action.

McDowell's announcement follows the agency's March 14 announcement that the federal government will collect even more this quarter to pay for Universal Service Fund  programs, a move that results in a nearly 11 percent increase in the surcharge consumers pay on their monthly phone bills.  The increased cost of the fund is due in large part to the growth in subsidy payments to Competitive Eligible Telecommunications Carriers (almost all of which are wireless companies). Those payments grew from $1 million in 2000 to over $1 billion in 2007, a one thousand-fold increase.

"Consumers will be happy to hear the FCC is taking control of the fund's growth," said Tom Tauke, Verizon executive vice president of public affairs, policy and communications. "This is a responsible first step.  The next step is comprehensive reform of the universal service high-cost fund to make it more efficient and useful for consumers who need it."

Verizon supports reforms of how the funds for the high-cost program are collected and dispersed.  The company filed a "reverse auction," or competitive bidding, proposal with the Federal-State Joint Board and the commission last year.

"This proposal meets the needs of rural consumers of high-quality services at an affordable price," Tauke said in March 1, 2007, testimony to the U.S. Senate Committee on Commerce, Science and Transportation. "[Verizon's proposal] stabilizes the fund, encourages a competitive and innovative marketplace, and promotes efficiency so consumers are treated fairly when they pick up the tab for universal service support."

Verizon also supports reform of the way USF contributions are collected by replacing today's complicated revenue system with a methodology based on telephone numbers.

Verizon Communications Inc. (NYSE:VZ), headquartered in New York, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers.  Verizon Wireless operates America's most reliable wireless network, serving more than 67 million customers nationwide.  Verizon's Wireline operations include Verizon Business, which delivers innovative and seamless business solutions to customers around the world, and Verizon Telecom, which brings customers the benefits of converged communications, information and entertainment services over the nation's most advanced fiber-optic network.  A Dow 30 company, Verizon employed a diverse workforce of approximately 232,000 as of the end of the first quarter 2008 and last year generated consolidated operating revenues of $93.5 billion.  For more information, visit www.verizon.com.