The Georgia House Telecommunications Subcommittee held a hearing this week to consider reforms to the state’s telecom system.  At the center of the discussion is House Bill 168, which would eliminate the state’s costly and inefficient Universal Access Fund (UAF).

The UAF costs consumers and businesses in Georgia over $15 million per year to subsidize inefficient telecom providers in rural areas.  The UAF slush fund has also become fraught with waste and abuse, leading to tens of thousands of dollars in payments to telecom companies for items completely unrelated to providing service – like reroofing cabins and throwing extravagent Christmas parties.

ATR submitted the following testimony to the Georgia House Telecommunications Subcomittee in support of HB 168 or for establishing reverse auctions to cut down excessive UAF costs.

Dear Members of the Telecommunications Subcommittee,
I write to strongly support your efforts to reform or eliminate Georgia’s intercarrier competition system. In particular, House Bill 168 would eliminate an antiquated and inefficient Universal Access Fund (UAF) that has cost consumers and businesses millions of dollars each year.
The UAF is a wasteful and costly program that results in higher bills for consumers and direct subsidies to inefficient carriers. Independent telephone companies that collect UAF funds have become dependant on this subsidy program and over the past few years the size of the fund has skyrocketed from roughly $3 million to well over $15 million. For 2009-2010, 15 telephone companies have requested a staggering $10.5 million from other state service providers. Furthermore, the UAF has become fraught with waste and abuse, including tens of thousands of dollars in requests that do not pertain in the least to providing telephone service.
Customers of the telephone providers who pay into the UAF bear the cost for these payments and see a higher monthly bill as a result. The Center for Fiscal Accountability and Americans for Tax Reform Foundation have calculated how much taxes add to the cost of goods and services, including telecom utilities. After accounting for the Universal Service Fund, city and state telecommunications taxes, and other federal, state, and local taxes, consumers across the country already spend 51.8% of their landline phone bill and 46.4% of their wireless bill paying for government taxes and fees. Regulation through the Georgia UAF contributes to this staggeringly high cost for consumers.
If not eliminated, as in House Bill 168, the UAF should be replaced with a “reverse auction” system that eliminates the practice of making payments to subsidize inefficient and wasteful carriers. Reverse auctions permit rural providers to submit bids to the government to provide service and the lowest cost bid is accepted. This would bring much needed competition that currently does not exist under the UAF structure. Competitive bidding will bring down the costs to providers and their customers who currently fund the UAF, and provide service to rural areas with efficient telephone companies.
I urge the committee to approve House Bill 168 and thank you for the opportunity to provide input on your efforts to reform Georgia’s telecommunications system. If you have any questions, you can contact Kelly Cobb, state affairs manager, at 202-785-0266.
Grover Norquist
Click here for a PDF version of the testimony.