Your World - Delivered! On Mon, Jul 12, 2010 at 11:02 PM, Glenn Kelley <gl...@hostmedic.com> wrote: > Yeah - Imagine that. $17,763 per line! I wish I had their grant writer > on staff ! > Via: > http://arstechnica.com/tech-policy/news/2010/07/rural-telco-serves-17-people-rakes-in-300k-of-your-money.ars > > > AT&T was insanely profitable in 2009, with $34.4 billion in revenue and > $12.5 billion in net income. The company even returned most of this cash > ($9.7 billion) to investors as dividends. So why did the US government > direct $435 million into the company's coffers? > > Thank (or blame) the Universal Service Fund, which last year collected $7.2 > billion dollars from phone companies—charges that are passed on to > consumers, often as a separate line item on their bills. The money amounts > to a 14 percent tax on phone service. It pays for four things: telephone > service to expensive-to-wire places, subsidies for low-income users, > computers and Internet access for schools, and telecommunications services > for rural health care providers. > > Most of the money goes to install and maintain "high-cost" phone service, > usually in rural areas. The House Energy and Commerce Committee is > investigating the USF, a notorious pit of inefficiency and error—for > instance, half the high-cost money paid out in 2009, a full $2 billion, went > to "rate of return" telcos who are allowed to make an 11.25 percent profit. > If they don't, the government makes up the difference. > > The FCC has now supplied more detailed USF data to Congress. Among the > revelations: AT&T has pulled down more than $1.3 billion in USF money over > the last three years, while Verizon got $1.2 billion and CenturyTel picked > up $930 million. In return, the companies must provide phone service to > anyone in their service area who wants it. > > Outrageous? Possibly. The program has been a useful one, making telephone > service in the US truly ubiquitous, but critics have always charged that > telcos get far too much cash, or got cash for projects they would have done > anyway. Cecilia Kang at the Washington Post pointed out some of these > complaints last week. > > And the new FCC documents certainly provide fodder for critics. > > $17,763 per line > > There's the case of Weavtel, a tiny Washington state telco that raked in > $301,966 in USF money in 2009—all in order to support 17 copper telephone > lines. That's an average of $17,763 per line. > > In 2008, the company was paid $188,382 for the 15 phones lines that it > serviced, for an average of $12,559 per line. > > In 2007, Weavtel supported 14 lines at an average of $16,621 per line. > > Ponder these numbers for a moment. The company had already built the local > exchange infrastructure needed to handle phone calls in 2007, but it still > received almost $500,000 over the next two years—and it added service to a > grand total of three lines in that time. > > In three years, the $700,000 spent on phone service for these 17 residents > could have been used instead to simply buy sat phones and satellite > Internet—and pay for service—for the remote community of Stehekin, a place > so remote that it is bordered by a national forest and is accessible only by > boat. > > In 2005, Weavtel tried to begin the project and ran into local opposition > from Stehekin residents (the Seattle Times ran a nice profile of the town at > the time, explaining the controversy over the phones). In a letter to > residents (PDF), Weavtel noted "that there is a difference of opinion > concerning the number of people who want telephone service. It is also clear > that some people do want service. We have made a business decision that the > number of people who do want service makes this a viable business > opportunity." > > Seventeen people paying monthly phone bills isn't much of a "business > opportunity"... not unless the government directs a few hundred thousand > dollars a year toward the project (and lets you run your towers and lines > over federal parkland, as the company requested). Weavtel, in fact, > collected the most money per line of any telco in the entire US in 2009. > > But still, a case might be made for service to Stehekin, which has never had > a local exchange. The FCC numbers show, however, that plenty of USF money is > also being paid out to local telcos in areas that already have plenty of > cell phone coverage. It's a policy that makes increasingly little sense for > a program whose basic goal is mere voice connectivity. > > Terral Telephone Company serves rural Oklahoma, and in 2009 it took home > $1.6 million in USF money to provide service to 246 lines. That's $6,563 per > line, per year, one of the highest rates in the country. > > Unlike Weavtel, though, Terral's customers have a choice. The FCC points out > that the company's service area is 100 percent covered by AT&T, Sprint, and > Verizon. T-Mobile has 95 percent coverage. None of these carriers received > USF "high-cost" support for this area in 2009. > > Reform a-comin' > > The FCC hopes to (finally) reform many of the worst elements of the USF > system. In its National Broadband Plan, the agency argued that "rate of > return" carriers should be eliminated and switched to an incentive-based > scheme instead. "Rate-of-return regulation was not designed to promote > efficiency or innovation," says the plan, noting that it was product of the > 1960s and a world with a single monopoly telco. > > It also wants Sprint and Verizon to "reduce the High-Cost funding they > receive as competitive ETCs to zero over a five-year period as a condition > of earlier merger decisions." (Both companies have already agreed to this, > which could save $500 million a year.) > > Just as importantly, these huge amounts of money won't be used to install > archaic technology. Instead, the FCC wants to transition USF funding to > support broadband and fully converged IP networks instead of simple POTS > service. These proposals have been controversial with just about everyone, > since they propose only modest speeds of 4Mbps and could also reduce money > to existing telcos like Weavtel and Terral. > > > > > > -------------------------------------------------------------------------------- > WISPA Wants You! 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