Since When Did Phone Service Cost $13,000 Per Year?

from the cha-ching dept

The Universal Service Fund is a rather mysterious thing, its only visible effect for most people being the 10% or so tax on their phone bills that funds it. The idea behind the fund is that it’s supposed to subsidize phone service in rural areas or to people who couldn’t otherwise afford it, but unsurprisingly, taxpayers don’t look to be getting much value for the $7 billion they pay into the fund each year. A new study says that the government is paying up to $13,345 per telephone line for subsidized USF service — meaning it would be far cheaper to simply buy people cell phones to use and pay for the service. The study further underlines what others have said about the USF: it encourages inefficiency, acts as a barrier to competition and, ultimately, harms those it’s supposed to help by stifling newer, better technologies that can provide better service, much more cheaply.

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Comments on “Since When Did Phone Service Cost $13,000 Per Year?”

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Steve says:

That 7 billion could subsidize about 30,000,000 people’s phone service. Right now I bet it isn’t even subsidizing 1/10th of that amount.

Think about it, the government is paying 7 billion dollars to subsidize phone service to a little over 500,000 people. They talk about the oil companies ripping people off?

Just think how many people that 7 billion dollars can feed.

Chuck says:

More than Phone Service

The fund is used to pay for a LOT more than telephone service in rural areas. It subsidizes large portions of technology for grade schools, libraries, universities and even some health care institutions.

The concept is excellant, but the implementation and actual use of these programs breed contemptuous and corrupt practices. I have personally witnessed school systems bleed hundreds of thousands of dollars a year out of this fund while laughing all the way to the bank. It’s not easy to report such abuses, and expecting any action to prevent/eliminate them is nearly hopeless. No wonder the problem expands every year!

Wire Cramped (user link) says:

I suspect...

That this as well as many other taxes are in fact fraudulent, This is my opinion I want to get some research on it but instead of MS bashing(do not turn this into a MS bashing) I think that we here commenting could re-focus onto things like this and maybe just maybe reap some rewards!

Or wait I just realized that the universe needs cleaning from time to tim with pesky black holes and evil MS companies so this must be where we draw the funds to pay for the janitos of the UNIVERSE!!!!

Anonymous Cow-Art says:

How much do telcos cost us?

And the rip-off goes on and on

After promising fiber everywhere, the US telcos still sell the same shitty phone lines for DSL service, charge for the lousy bandwidth like crazy, make customers pay for bandwidth downstream and upstream, advertise “dedicated” DSL lines – HA – then tell customers they cannot use their line in both directions (no web server, please), unless they pay for a “business” plan, and keep telling the government that they need more money for high-speed Internet connections. They get it. Why?

Here is an example from the UK:

Now you know how far we are behind in the US thanks to our telcos and ISPs .

Beefcake says:

Sully the moment with your price-taggery

I would guess the reason for the $13k tag is because rural phone lines are expensive– the line must be laid for many miles, below ground.

The cell-phone response might be valid, as long as there happens to be a tower nearby. Putting up a tower though would probably exceed the $13k amount.

Not positive on this, just ruminating…

Junyo (user link) says:

Even programs that start out good outlive their usefulness, but rarely come off the books. I think every government program/agency should have to publish a cost/benefit analysis annually. Unless you’re saving lives or dispensing justice you’ve got 5 years to show a positive ROI – and no Enron math. Then you’ve got to maintain that positive ROI for at least seven of the last measured ten years. Otherwise your program is cut and taxpayers stop having their money wasted.

Se?or Pasteles says:

Re: Re:

Interesting comments, Junyo… I think that might be a good idea, but then, the government might just find a way to overpay for the cost benefit analyses, or flub those up completely. I’d like to have more faith in our government to be fiscally responsible, but I always hear about evidence of the contrary.

telco squirrel says:

Universal Service Fund

Though it is not explicitly for such services as 911 support, etc., you have to figure that most of the excess is being tapped to support such infrastructure improvements as to support all the spying that is done.

the 911 upgrade paid for a lot of the caller id stuff, which is used for tracing, but you know that the phone companies were forced to put this crap in to the phone system and they weren’t about to do it on their tab.

so they have to make up a term other than “spy tax” to do it under. and the whole bill obviously would not go under the 911 upgrade stuff.

the funny thing to watch now is the same mob of spies trying to get the voip telco people to do the same. with peer to peer skype, etc, about the only thing you can really do is maybe tap the supernode transactions, but it probably is near impossible to capture the whole thing with the internet technology, and some reasonable encryption.

if the networks are not allowed to pick and choose on what traffic they carry and from what to what, then maybe there will be a bit of hope for lasting privacy in communication.

I suspect that is the real reason that there is such a high amount of pressure in the various power centers (law, telco, consumers, politicans) and the stakes were never higher.

ANI Man says:

Re: Universal Service Fund

ICLID or CallerID is not a recent development, and its not related to 911.

ANI or Automatic Number Identification has been a part of the phone system LONG before 911 even existed. 911’s use of the ANI of the phone network is a by product of 800# service which has had ANI and ALI for years before 911 existed. So your way off base on this.

Wire Cramped (user link) says:

What kills me...

We will as a people start a riot over a ruling about unfair police beatings until the govenrment reacts. We will fight people in other lands over things that dont affect us, for “humanitarian” reasons.

While these things have their reasons and I think they are important for those people, why dont we raisw a riot or go to war over some things we get screwed on daily???? like taxes??


I make 10.00 today they take 20% for taxes. = 2.00

I take my remaining 8.00 to store and buy 5.00 worth of crap and they tax it 8% = 0.40 total to taxes 2.40…

The store gets taxed income for that 5.00 to the tune of 40% equals 2.00 (this includes income tax and employee taxes and SS taxes they pay) tally thus far??? 4.40 to taxes.

I buy phone service and another 5% tax, I pay for misc crap that has small taxes each rounding this to another 5% combine these two and thats 10% more of my remaining 3.00 = to taxes 4.70 of every 10.00 made by the average person or 47% of every dollar earned in America.

These figures are skewed I am sure but this is simple math of tracking the dollar. I was wondering when I would not be double taxed ever and now you want to tax me for “virtual travel” on a wire that I paid an electric tax on already and the company with the website already paid an income tax on for revenues, from dollars I paid them from my paycheck that I paid taxes on?

Is everyone FREAKING MAD??? Lets simply say no as one voice!?!?!?! We can vote out the USF and wait heres one we can demand that the fund be used for specific things like!!! and watch this!!!! new wires laid everywhere owned by the communities that compete with the TELCOS! that would make the 7billion well spent each year!

Brad (user link) says:

Re: What kills me...

While your screaming at the government via a message board is entertaining, you seem to have a very flimsy, high-school level understanding of macroeconomics.

Let me explain: The first a foremost error you make (and many people make) is that there is a finite amount of wealth in the country/world/universe. This is in fact false. If this were true everyone would feel ripped off roughly half the time, because in order for one person to increase their wealth someone else would have to lose it. THIS IS NOT HOW ECONOMICS WORKS.

Everytime you engage in a transaction, the cumulative wealth increases. For example: the bread you buy has more value to you than the $5 you spent, otherwise you wouldn’t have bought it. To the person selling the bread, your $5 has more value than the bread. Both people are “wealthier” than when the transaction started. Economic transactions are not a zero-sum game. In fact, most people increase their wealth by at least 100% everytime they engage in a transaction. So despite that the government takes a relatively small portion of that, we get in return things like roads, police, fire departments, corrupt politicians, government subsidies on research (like the stuff that led to the technology that you’re using to bitch and whine this very moment on), and so forth.

Despite what the Libretarian view would say (note this is different from the “Liberal” that has become a bad word in america lately) the dissolution of government, refusal to pay taxes, etc does not result in companies stepping in to “fill the void”. No, what you’d find is a return to the Dark Ages, where might makes right. Do you really think you can stop the guy who worked in a tank factory the last 20 years? I don’t.

And if you don’t believe me, look at the difference between the GDP and Income from Taxes for any country. You won’t find that it’s 47%, it’s much closer to 20% Though this isn’t terribly accurate (it must be weighted against opportunity costs and a wide range of other factors) the money you pay out is not the only measure of wealth, any more than the taxes are.

So go study economics before you bitch about paying too many taxes. Or go live in a European country where tax rates actually ARE 45% or higher.

source: cia world factbook, link in my name.

John Marshall says:

Re: Re: What kills me...

You must have slept through your economics classes and now with only half a brain you are unable to get it right.

Transactions do not make wealth. Transactions themselves are a zero-sum game, you trade things of equal value. It is the work you do, the product you make or service you perform, to earn the $5 that increases the cumulative wealth.

What people bitch about is not that government takes our money and provides certain products and services, but rather that it is so inefficient, wasteful and corrupt in the process.

Anonymous Coward says:

Re: What kills me...

The store gets taxed income for that 5.00 to the tune of 40% equals 2.00

I hate taxes as much as the next guy, but if we’re going to whine about it, let’s at least get it right.

One significant flaw in your calculation is the tax paid by the store where you spend your $5. The store might, if it is well managed make a net (taxable) profit of 1% on your $5.00 (after paying wages, etc.) So even if they did pay income tax of 40%, that would only be .4*.01*5 = $0.02

Wire Cramped (user link) says:

Re: Re: How long

ya know I was going to write something long and tired but when i started to investigate this I was blown away at the fact that everyone who benefits from the fund gets denied and everyone who collects on it is rich as hell if you want to debate this I will back it up but here is the primer.

now click each link in right menu quickly review some items from 06 and 05 and see what I mean then see that they are actually these guys

whom by the way are the Telco’s look at the board and see who runs it.

and one more step in the links dig this!

all telecom directors

sooo Neca by tag line simplyfies telecom and they direct the USF that charges us to pay a fee for recipents that dont get it unless they say so and in the rullings its benefactors – 0 and telecoms – 489 in the rulings for help/assistance/permission to the telecoms or schools/libraries/etc

Now I have a war!

AlwaysThere says:

My Phone may be one of those $13K lines. Four years ago we finally got phone service that we don’t have to drive a mile to get a weak cell tower for. It took laying eleven miles of fiber optic cable, plus the construction of a telephone exchange building powered by solar with a propane generator backup since there is not commercial power. All that to serve ten houses may seem like more than its worth, but it’s already saved one person’s life when we successfully dialed 911 after a nasty accident.

Dodgey says:

More expectations from the gov...

You people CHOOSE to live in rural areas. Purposefully away from technology. Then you EXPECT the gov to come in and provide you with all of the modern stuff of today’s world, but you don’t want to pay for it because you live in no-man’s land.

Great. Explain to me why I have to pay taxes to pay for a phone line for the rural rednecks that CHOSE to live where they live? Anyone?

While we’re at it, you need us to wipe your ass for you?

Mark Kitchen (user link) says:

Re: More expectations from the gov...

Choose to live in rural areas? I believe families did more than toss coins – didn’t we (Government) give 200 Acre plots to families to move West?

And wasn’t there something just recently in the news about the Kansas and Wyoming government giving grants to move?

Either way you look at it, I think we all agree – Billions have been paid to USF – I for one would like to see the nationwide outcome!

Nate K says:

Re: More expectations from the gov...

Dodgy, take a chill pill.. Those people who choose to live in the middle of nowhere are often times farmers, they work their asses off for a no more than an average living. Farms, those are those things where our food is grown, ya know? That place that your beef and pork is grown? They include *MILES* of fields upon fields upon fields, houses are spread out accross the various farms which take up multiple square miles each.

Yes, they do deserve to have a phone system that they do not have to drive miles to get to. They deserve a reliable connection to emergency services such as 911 so that when bobby gets hit by the tractor he doesnt die from an otherwise simple wound.

And the $8 your spending isnt going to kill you to make sure they don’t have to pay what would be well over 13k per month for a phone line (either that or a couple hundred thousand to get service installed)

People have been living rural since the beginning of this country, in a large part it’s kinda how the country was formed and spread out in the beginning. They don’t deserve to get bashed because you seem to think that your big city lifestyle is better than theirs.

I have always lived in the city, but I can still see the purpose of some people living outside of the city, it just makes sense for alot of them, would be a pain in the ass to have to drive an hour to get to the pigs you have to feed at 5am!

jime says:

Re: More expectations from the gov...

uh, dodgey? where do you think the food ya get in the stores comes from?

ya don’t like rural, nor rednecks, quit eatin’, and YOU won’t need to wipe YOUR ass, let alone worry bout those of us who prefer to smell nature, not the neighbors burps, farts, etc………..

lemme add one other thing: if TSHTF, where you gunna bring yer citified punk self? the rural area’s ( provided ya live long enough to get outta town ), right?

try to live off the land? well, make sure ya ID yerself as the person who doesn’t like rural folks, you’ll still get fed, but you WILL be expected to work for it, and you hit my rural spot? i’m gunna charge you out the ass to use my tech i bought and paid for with NO government/taxpayer subsidies, as well as the food ya eat while yer here….

wanna watch my pigs play? i’ll charge ya for that as well (-;

PopeRatzo says:

Re: More expectations from the gov...


That may have been the dopiest comment I’ve ever read on Techdirt.

Providing communications infrastructure may be one of the most valid services that a government can provide. Why should I be taxed to pay for the roads you drive on? Or why should I be paying for the disability payments you get for your “bad back”? Or the SSI you collect?

I mean no disrespect, but you are a horse’s ass.

Larry Mackey says:

USF Phone service

I used to work on a ship with a crew of 70+ people. We had a satellite phone system that included telephone, fax and 64Kbps internet connection for email, etc.

Our “phone bill” for the month averaged $5K. That included everyone sending and receiving daily emails from home, and conducting the business of operating the ship every day.

Seems like someone is

sad2beinUS says:

even fiber

even the fiber speeds verizon offers don’t compare for the prices they charges. they have 5down/2up for $35 then 15down/2up for $45 then 30down/5up for $180, these prices are with a 1year agreement.


even in canada u get 10down/10up for that 15down/2up..i’d give up the extra 5 down for that extra 8up…internet in us is too damn slow and we’re paying for it

August West says:

E-rate and the USF

E-rate is a government program where the US Government assists schools in getting technology (high speed links to the internet, networks between schools, servers etc. So there is more equality in technology for kids, no matter the median income of their parents or the tax base for their parents’ county of residence. In western North Carolina, E-rate has assisted/is assisted in setting up networks for the schools in Mitchell, Graham and Cherokee counites, and others are in the works. The USF fund finances this. So there is a lot of good that comes from this. Anybody can find waste and fraud in our government is they look (remember the 700 dollar coffeepots and the $80 screwdrivers?). The USF is not to blame for this.

ElectricMayhem says:


All this talk of taxes and micro economics is all bullshit…….money be it $$ ££ €€ ¥¥ is all meaningless….just bits of paper…or figures in a computer….it’s not actually worth ANYTHING!! 100 years ago $5000 was considered a shed load…would buy you a small town…..50 years ago it was enough to buy a house…….25 years ago it was a fat wad in your pocket ….today it’s a reasonable lunch and a cab fare home….My first wage packet it 1969 £12 ($24) did everything i needed and more, my first rent on my apartment was £2 10 shillings a week….huge and in one of the best parts of london….now i would be lucky if that would buy me a coffee and a doughnut…..

we don’t earn any more than we used to we just think we do….a loaf of bread is still a loaf of bread and has to go through exactly the same process as it did 5,000 years ago from seed to table……

Governments will tax anything and everything to suck money from the Populous to spend on anything and everything…….the poor will still be poor and the rich will still be rich….nothing will change….

you can gvetch about a tax and possibly get it rescinded but it will only pop up elsewhere… (supposedly) gives reality to the fantasy that we are actually doing and achieving something….it’s all a lie…a con……

we either get rid of it entirely and go back to basics…or get on with it and stop whinging about not having enough or how much we are taxed or all the other moans we have about it!!

Jim (user link) says:

Typical Bureaucracy

The USF is just another program of our bureaucrats that they hide under the name of public services that does nothing more than line the pockets of our “entitled” government officials that ends up paying for their trips and boats and hookers. WE ARE IN A CRISIS AMERICA!. In fact, unless we have the courage to “unplug” from the entire system and refuse to pay for these services that really are never justified, courage to do without our SUVs and 4 TVs and McDonald’s burgers and EZ chairs and ATMs and 6-course-5-star meals and start helping our neighbors next door & in remote areas ourselves the govts foot will squash us.

Yes, even if one life is saved because of the USF it is worth it….but WE as individuals must sacrifice and come up with solutions ourselves to correct some of these problems…

DO GOTO and spend an hour or so to find out some truths that need to be on our NBC, ABC, CBS nitely newscasts..(not that I ever watch that crap). I use TV for entertainment, I get my news from NPR C-Span or do my own research…

This system is CENTURIES old and controled by the Rothchilds, Rockefellers, Dulleses, Morgans, Bushes, Duponts, and a few other Masonic Chosen few.

    People, we will NEVER gain control of Big Brother, all we can do is restrict our own buying into it..!!

gwyndion says:

the ultimate truth

Someone once said that the only thing guaranteed is Death and Taxes, but lately there has been a codicil attached to this statement. If you are rich enough, or corrupt enough you can delay one or both of these, usually at the cost of someone else. As for the “economics” angles that so many people are using, the simple truth is we, as a people, are economic vampires. We stick our fangs into something whether a job, or a grant, or whatever. We bleed it dry then move on to the next meal. If we are lucky, we fight a fatter blood pack then the one before. Someone mentioned the finiteness of wealth. I believe there is a finite amount of wealth in the world. People are vampires to business and government, Bus and Gov are vampires to the people, both are vamps to the technological and natural world, the natural and technological worlds are vamps to each other, etc..The problem is there are no true blood banks for all these. This is a little off the orginal topic, but I’ll relate. The telcos are bleeding the people basing it on the subsidy. The subsidy is bleeding the gov’t, and they are in turn bleeding the people again. We are running out of blood people. Either grow some thick skin or be bled to death by taxes.

sinmon says:

what about satelite phone

in those rural areas, u can get’em an emergency satelite phone service, way cheeper then optical fiber, woops, did they just laid optical fiber for 10 houses ?

well, to build an cell phone system would have been cheeper, and a DECT system more appropiate for small comunity with less costs over a direct satelite phone connection

Matthew K. Minerd (user link) says:

More expectations for the gov

Any heated rhetoric in this discussion should not be directly aimed at the rural user but instead to a government that encourages an entitlement attitude. Whenever these taxes were passed years ago, most (hopefully all) of the representatives involved weren’t wringing their hands saying, “Good, just another way we can steal from the taxpayer.” They really wanted to help the American people.

The issue at hand, though, is that it doesn’t help the American people to monopolize the plan for such an infrastructure. The government’s role should be to guarantee that the market can remain free for competition and primarily take that role. When it comes to addressing an important issue like getting telephone lines to everyone, the forces of competition will encourage efficiency. Ultimately, those representatives who were not directly trying to steal from the American public really end up doing such because excess money will always be taken by taxes. If there isn’t enough, it will just be raised. That does not encourage much fiscal responsibility. In this case, so much money is wasted where it could be used by the public to reflect the progress desired by the American people when they use the forces of their buying power.

Perhaps if any action should be taken by the government, it should offer tax cuts to the people who are willing to take the risk to wire in these rural areas. This too has to be watched, though, so as to be proactive and not just an empty check to the businesses. Another factor is that phone companies, in an open market, could ask for an extra dollar or two voluntarily. I know that my gas bill allow for this to help subsidize the very poor. Such a donation could function the same for phone companies to subsidize the bills of the very poor.

A truly noble government does not make the righteous decisions for people but enables people to make righteous decisions on their own. Of course I think that taxes can do a lot of good and can even reflect the righteousness of a people. However, they are not the only answer. People do not always have to work en masse but can also work together as individuals. Ultimately, the truly just society will do just that.

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