Statement of Congressman John D. Dingell, Ranking Member
Committee on Energy and Commerce

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET HEARING ON “UNIVERSAL SERVICE: WHAT ARE WE SUBSIDIZING AND WHY?”

June 21, 2006

Mr. Chairman, thank you for calling this series of hearings. Our Committee has a vital responsibility to ensure the proper implementation and ongoing integrity and sustainability of universal service programs.

Providing high-quality telecommunications services at affordable rates to all Americans, regardless of geography or income, has long been a cornerstone of our Nation’s communications policies. But universal service imposes a significant and growing cost on consumers and the economy. Spending rose by 50 percent in the past five years and now exceeds $7 billion. The main source of growth is the High-Cost program, which we are examining today.

Much has changed in the telecommunications landscape since 1996. The revenues subject to universal service fees have declined. This caused the assessment on consumer bills to rise, from less than 6 percent in 2000 to more than 10 percent now. Indeed, the Federal Communications Commission’s (FCC) decision to drop telephone broadband revenue out of the funding pool in August leaves consumers facing the prospect of paying even more.

Given the increasing consumer costs, we are appropriately focusing on ways to restructure and improve the program.

First, who should contribute to the universal service fund? All companies who offer telephone services, whether over the Internet or through a traditional network, should carry the same obligation to support universal service. The FCC took an interim step this morning to broaden the base by requiring VOIP providers to pay and raising the safe harbor for wireless carriers.

But, let me be clear, even with debate over the proper percentages, the FCC only did the easy part. The true test will be whether the FCC can muster the will to resolve difficult questions among industry participants who have benefitted handsomely – and do so without finding consumers’ pockets easy prey.

Second, who should be subsidized by the universal service fund? The hefty increase in the High-Cost Fund is mostly attributable to competitive eligible telecommunications carriers, typically wireless companies. Federal and State regulators have grappled with the proper mechanisms and eligibility requirements to fund carriers who enter rural areas to compete against incumbent providers. With multiple providers, how can we ensure the program is properly disciplined? With different technologies, how can we guarantee that providers offer the service quality and coverage that the American public should expect of those it is funding?

Another important question is whether to subsidize broadband service. Broadband networks are integral to a community’s economic development. But funding broadband could represent a massive new commitment of resources. Can the program support broadband without skyrocketing consumer contributions or jeopardizing the affordability of basic telephone services for rural or working poor Americans?

Third, how can we best protect the integrity of the High-Cost Fund? As with other universal service programs, the High-Cost Fund must be rooted in rigorous accountability. We have seen clear examples of abuse and gold-plating of businesses across rural America. To remain worthy of the taxpayer’s trust, universal service expenditures must have tough accountability measures, including regular audits and detailed reporting requirements, showing the American public that their support is being used for its intended purposes.

Universal telecommunications service has been fundamental to this country’s economic and social development, and will be equally important in the coming decades. I again thank the Chairman for this hearing today, and I thank the witnesses for their testimony.

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(Contact: Jodi Seth, 202-225-3641)