Federal Phone Subsidies Face Change
November 24, 1998
WASHINGTON - The Associated: Federal subsidies
that help make phone service affordable for
people in rural and expensive-to-serve areas
won't be reduced and actually could grow a
little under a recommendation made Monday
by a board of federal and state regulators.
The Federal Communications Commission is
considering revamping these phone subsidies
to prepare for the day when there is
widespread competition in the local phone
market.
It is up to the FCC to implement the board's
recommendations when it decides how to
revamp the subsidies in the spring of 1999.
The board's recommendations _ and the
FCC's ultimate action _ would affect only the
amount of subsidies going to big telephone
companies, such as the Baby Bells and GTE,
that serve rural customers and others living
in high-cost areas. It would not affect small
carriers.
Right now, federal subsidies cover
one-quarter of the costs of keeping phone
service affordable in these expensive areas,
with the rest coming from states. The board
recommended doing away with this funding
split.
Under the new approach, states whose costs
to provide phone service are well above a
yet-to-be-determined national average
would kick in as much money as they can to
help make phone service affordable. Federal
subsidies would cover the rest.
Still, the board _ to ensure that phone rates
in expensive areas don't go up _ also
recommended that no state should receive
less federal subsidy than it does now. This
pleased local phone companies.
''This general framework strikes me as
logical and fair,'' said FCC commissioner and
joint board member Susan Ness.
US West President and Chief Executive
Officer Solomon Trujillo said in an interview
that the board's recommendations
''directionally, seem good ... but the devil is
in the details.''
Federal subsidies are mostly paid by fees the
FCC imposes on AT&T, MCI, Sprint and other
long-distance companies, which pass them
on to customers.
Big phone companies now get $250 million in
federal subsidies to help make local phone
service affordable in high-cost areas. Of
that, $140 million goes to the main phone
company in Puerto Rico. Alabama and
California are two other big recipients.
Because details have yet to be determined,
FCC officials said it is impossible to determine
the total amount of federal subsidies that
would be available under the
recommendations.
Separately, the $1.45 billion in federal
subsidies that now go to small phone
companies would not be affected.
The board also recommended that
long-distance companies not mislead
customers when they break out fees in
telephone bills that help make local phone
service affordable. Historically, these charges
have been included in long-distance rates,
but this year MCI, Sprint and AT&T began
spelling them out in separate line items.
Specifically, the board recommended the FCC
adopt rules barring companies from creating
a line-item charge that is greater than their
share for supporting affordable phone
service. The board also suggested that
companies be barred from depicting the fees
as a tax.
These line items should not be used ''as a
smokescreen for unjustified rate increases,''
Ness said.
[Copyright 1998, Associated Press |
