In early February, the Georgia House Telecommunications Subcommittee considered a bill (HB 168) that would completely scrap the Universal Access Fund (UAF). The UAF costs consumers and businesses in Georgia millions per year to subsidize inefficient telecom providers in rural areas.
But just when reform looked to be on the way, today the House Telecom Subcommittee passed House Bill 376 that would expand the size of the fund to $25 million from the current level of $10 million. Even worse, the bill is being dubbed the major reformpackage from Georgia’s telecom system.
Below is ATR’s letter opposing expansion of the UAF. Click here for a PDF copy.
Georgia House Telecommunications Subcommittee
RE: House Bill 376
Dear Members of the Telecommunications Subcommittee,
I write concerning House Bill 376, which would reform Georgia’s intercarrier competition system. While certain sections of this bill make needed improvements, Americans for Tax Reform strongly opposes any expansion of the Universal Access Fund.
Section 5 of HB 376 would establish an Access Transition Fund to replace the current Universal Access Fund (UAF) and drastically expand the size of the fund, which provides direct subsidies to inefficient service providers. In particular, setting a cap of $25 million on a fund that currently pays out roughly $10 million per year will result in significantly higher costs for consumers and companies that pay into the fund. Additionally, a larger fund will mean higher payments to independent carriers, promoting further inefficiency and wasteful spending.
In its current form, the UAF is a wasteful program that drives up costs for consumers. Telecom companies that collect UAF funds have become dependant on the subsidy, grossly expanding payments in recent years. The size of the fund has grown from roughly $3 million in 2007 to over $15 million today. Furthermore, the system is ripe with abuse and payment requests by independent carriers are often made for things that do not pertain to providing telephone service. Permitting the UAF to grow to $25 million will only further promote inefficiency and waste in Georgia’s telecom system.
Americans for Tax Reform and the Center for Fiscal Accountability have calculated that after accounting for the Universal Service Fund, city and state telecommunications taxes, and other federal, state, and local taxes and fees, consumers across the country already spend 51.8% of their landline phone bill paying for the cost of government. Expanding the size of the UAF will ensure that Georgians pay even more for their utilities as a direct result of this intervention.
Creating a new, larger UAF does not reform Georgia’s intercarrier compensation system; it continues and expands a system that does not work. Instead, Americans for Tax Reform supports House Bill 168, which would eliminate the UAF. Additionally, we support a “reverse auction” system that allows telecom companies to bid for the lowest cost service. This will drive down the price for consumers and bring needed competition that cannot exist under the UAF regime.
On another note, House Bill 376 rightly eliminates subsection (h) of 46-5-167, which prohibits companies from making the UAF charge a transparent line item on customers’ bills. Telecom customers bear the burden of the UAF’s costs and see higher monthly bills as a result. If companies are permitted to make the access fee transparent, Georgians will see exactly how the UAF inflates the cost of their services. Since the true burden imposed by government is often hidden, as is the case with these access charges, consumers and taxpayers lack the ability to hold their elected officials accountable and make informed decisions about their utility service.
In fact, a 2007 report by the Georgia Senate Communications Taxes, Fees, and Telecom Franchising Processes Study Committee concluded that the telecom tax structure in Georgia “is complex and does not abide by rules of fairness and transparency.” It continued, “This results in a discriminatory tax structure that creates both distortion in the free marketplace and customer confusion.”
I urge the committee to oppose expanding the size of the Universal Access Fund. Additionally, any reform of the current system should permit companies to make the access fee a transparent line-item on customers’ bills. Thank you for the opportunity to comment on your effort to reform the intercarrier compensation system in Georgia. If you have any questions, you can contact Kelly Cobb, state affairs manager, at 202-785-0266.
President, Americans for Tax Reform