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Communications Government United States

FCC Rural Phone Subsidies Reach As High As $3,000 Per Line 372

jfruh writes "The FCC's Universal Service Fund has a noble goal: using a small fee on all U.S. landlines to subsidize universal phone coverage throughout the country. But a recent report reveals that this early 20th centuryy program's design is wildly at odds with 21st century realities: Its main effect now is that poor people living in urban areas are subsidizing rich people living in the country. The FCC says that it's already enacted reforms to combat some of the worst abuses in the report — like subsidies to rural areas that add up to $24,000 per line — but even the $3,000 per line cap now in place seems absurd."
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FCC Rural Phone Subsidies Reach As High As $3,000 Per Line

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  • by i kan reed ( 749298 ) on Thursday July 11, 2013 @12:23PM (#44251801) Homepage Journal

    That's not unique to phones. It also applies to highways, minor airports, housing tax incentives, and a number of other "American Dream" elements that really have nothing to do with having a successful society.

    • by nospam007 ( 722110 ) * on Thursday July 11, 2013 @12:27PM (#44251855)

      "That's not unique to phones. It also applies to highways, minor airports, housing tax incentives, and a number of other "American Dream" elements that really have nothing to do with having a successful society."

      So it's not socialism? Damn!

      • by Anonymous Coward on Thursday July 11, 2013 @12:29PM (#44251893)

        It's rural areas being a drain on the nation's resources. They're anti-tax but demand huge government spending, just for them.

        • I guess I'm going to have to keep posting this every couple of months until you brilliant urbanists catch up with the early nineteenth century on the economics of cities.

          There's a book - a dry book, I'll grant, but a damned fine one - called Nature's Metropolis: Chicago and the Great West []. Its author, William Cronon, talks in an early chapter about the work of Johann Heinrich von Thünen []. von Thünen recognized that cities function as concentrators of wealth that is fundamentally generated in thei
    • To "subsidize" the government-provide items you listed, you need to pay taxes. By and large, the "urban poor" do not pay much in taxes (except perhaps local sales taxes or use fees). The only reason "subsidize" makes any sense in the original article is that many poor people pay for telecommunications services out of their own pockets.

      • You say that, but you're only thinking of federal taxes. There's a huge poor tax in the form of things like sales tax, which hits basically every dollar poorer people see, but not the wealthier people in the world. I should also point out that while I'm an urban person, I'm not poor, and I pay quite typical income taxes.

        • Wealthy people don't pay sales tax?
            • by ATestR ( 1060586 )

              That article was specifically addressing Washington state. While other states will also have a tax burden on the poor, it will vary from place to place.

              Of course the rich pay local and sales taxes as well. The main point your are trying to make is that they may not have to buy as much of the taxed items to live comfortably. But almost everyone I know spends all of their money on something, and it is fairly difficult to find places to buy things now were you don't pay taxes. I will tell you that when I b

              • But almost everyone I know spends all of their money on something

                Almost everyone you know is far from rich. A wealthy individual will invest a considerable proportion of their income instead of spending it. It's not that they're buying items exempt from sales tax; they're not buying things period.

                A poor person spends all of their income. This necessarily prevents them from accumulating wealth, or becoming rich. The rich, by definition, did not spend all of their income, enabling them to accumulate wealth, or become rich. Any of the income that they didn't spend (i.e. a

                • A jurisdiction has a certain sales tax rate, say X%.
                  A poor person, Mr. A, spends all his money. X% of his net income goes towards sales tax.
                  An upper middle class person, Mr. B, spends half his money and invests the other half. X/2% of his net income goes towards sales tax.
                  A truly wealthy person, Mr. C, spends one percent of his money and invests the remainder. X/100% of his net income goes towards sales tax.
                  Why would we, as a society, support a tax that has a poor person paying 100 times more, as a percentage of his net income, than a truly wealthy person?

                  1% is an unrealistic number, the lowest I've seen is the ultra rich spending 3% of their money, so I've used that instead.

                  Well let's fill those numbers in, and fix your gaping holes -- I'm pulling numbers from Illinois State.
                  A jurisdiction has a certain sales tax rate, say 10% (Chicago, and 1% on food, magazines, etc).
                  A poor person, Mr. A, spends all his money ($10000). 100% ($10,000) of his net income goes towards sales tax, most of it toward. ($1000)
                  An upper middle class person, Mr. B, spends half his mon

            • Re: (Score:3, Insightful)

              by operagost ( 62405 )
              And the poor pay 0 federal tax, or even get a few grand back, while the "rich" (everyone who makes more than you) pay 10-40% of their income. So?
          • Wealthy people can afford to avoid taxes, like sales taxes. In California, we have a fairly high sales tax, which has driven much of the commerce outside the state, and online. People shop online for everything simply to avoid paying almost 8% in taxes when they spend money.

            Guess what else happens, businesses close, people lose their jobs. And liberals are dumbfounded why.

            Taxes are a necessary evil, not a way to raise funds to correct the evils people see in society. IF you want to fix the evils in society,

        • They said:

          (except perhaps local sales taxes or use fees)

          It's just that they didn't realize how much a percentage of the poor's income this represents (just about the same percentage as the sales tax rate itself).

      • by hedwards ( 940851 ) on Thursday July 11, 2013 @12:58PM (#44252299)

        Anybody paying for phone service pays for this subsidy via the USF. []

        It's also worth noting that because of the way that the poverty level is calculated, people that are in urban areas don't qualify when they would be pretty well off in more rural areas, if they were making the same amount of money. Which makes subsidies to the poor at the federal level disproportionately favor the freeloading states over the states that actually contribute to the pot of money being used to provide the subsidies.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Airports and housing incentives may not be necessary for rural areas, but a certain base level of road infrastructure is absolutely necessary. It even makes sense for urban areas to subsidize roads in rural areas.

      After all, how the hell else is the food going to get from the fields to the cities?

      • I'm not going to argue with you. "Transportation is a necessary element of a post-industrial society" is so obvious as to be incontestable.

      • Re: (Score:2, Troll)

        by hedwards ( 940851 )

        Easy, we ship the food in from overseas in exchange for things that we produce in urban areas. Or we use the railroads that are more cost effective anyways. Leaving the rural folks to actually pay their own way for the infrastructure that's primarily used by rural folks.

        Honestly, this extreme level of arrogance and greed on the part of rural folks needs to stop. Service cuts disproportionately affect urban areas, even though urban tax payers contribute most of the money that pays for those services.

    • Re: (Score:2, Troll)

      by TWiTfan ( 2887093 )

      Just another example of those slick country con-men taking advantage of good innocent city-folk.

    • and vice versa (Score:4, Interesting)

      by stenvar ( 2789879 ) on Thursday July 11, 2013 @01:11PM (#44252507)

      It also works the other way around: rural folks subsidizing ridiculously overpriced housing, education, public safety, and other services that the "urban poor" use. Many of the "urban poor" are likely poor because they are "urban" in the first place. And what about the rural poor who really do need these subsidies?

      That's the whole problem with all these "great society" programs: nobody really knows what the money should be spent on. Once you go down this road, you lose yourself in ever more complex and wasteful schemes of economic central planning, rent seeking, and outright corruption.

  • Government math (Score:2, Insightful)

    by intermodal ( 534361 )

    Much like other government regulations, these subsidies were written with certain assumptions that haven't been reassessed over the years. In this case, the assumption that a couple copper wires were the primary driving factor in whether someone had access to modern telecommunications. Today, wires aren't actually necessary in most cases in the first place. The land line for dedicated voice service at home is rapidly fading into obscurity, and even home access to Internet services in some rural areas is

    • Re:Government math (Score:5, Insightful)

      by rahvin112 ( 446269 ) on Thursday July 11, 2013 @12:51PM (#44252183)

      Land line is most certainly required in rural areas if for nothing else than emergency services. When you are 20 minutes to an hour away from a medical facility you don't want to run into a situation where you can't get a cell signal or the cell service is down. I would wager 95% of rural residents pay for a copper wire even if they don't use it so they have it in an emergency. At least all the ones I know do.

      • Then they can pay for it themselves. I don't understand why urban areas have to subsidize rural areas at the expense of our priorities. If they can't figure out how to make their lifestyle choices cost effective, then perhaps they need to learn how to be self reliant.

        • Re:Government math (Score:4, Insightful)

          by SydShamino ( 547793 ) on Thursday July 11, 2013 @01:28PM (#44252729)

          If they can't figure out how to make their lifestyle choices cost effective, then perhaps they need to learn how to be self reliant.

          Farming is not cost effective. The self reliant method would be for them to stop farming and move into the cities with you, where you can buy all your food from Mexico and China while American fields sit fallow. And then, in the next famine brought about by climate change, you and your family starve to death because America is no longer self reliant for food.

          I don't like the idea of subsidizing rich people who want to live in the country, but the idea of subsidizing farmers so that American food products are cost effective (without the troublesome alternative, tariffs on imported foods) makes perfect sense, and part of that includes ways to let farmers collaborate and communicate. How else are they going to access

    • Where my dad lives, there is no cell phone coverage at all. He does have a phone line though. Where my mom lives, they only got a cell phone tower maybe like 3 years ago. But they have had phone lines for a long time. Personally, I would rather see them build cell phone towers than phone lines. But, if we are subsidizing phone lines, then all endpoints where a phone will be connected should be required to have an open public wifi access point if they are getting DSL or a cable modem. That way, the res
  • So the Universal Service Fund is very well funded but the balance in the "Move Closer if You Want 21st Century Infrastruction, You Rich Dumbass" or "MCIYTFCIYRD Fund" is still at a balance of $0. It turns out though that $0 is sufficient money to fund that program. They should really cancel the USF then, huh?
  • by Bob9113 ( 14996 ) on Thursday July 11, 2013 @12:43PM (#44252079) Homepage

    Its main effect now is that poor people living in urban areas are subsidizing rich people living in the country.

    Uhhh, I grew up way out in farm country in Ohio. I have lived in five different major metro areas. The people in the country are not rich. What kind of bullshit psy-ops lobby-funded advertising is this, and why is it being parroted blindly here? Let's just do a quick bullshit check. One web search, second hit, talks about a study done in Oregon:

    In 2011, the (per capita personal income) in non-metro counties was $31,383 and in the metro counties it was $39,267; a difference of $7,884 (25 percent). The difference was due primarily to the difference in earnings from work.

    Obviously that's just one data point, feel free to do more comprehensive research yourself. I'll tell you from personal experience; people in the country make less money on average than people in the city. This report is some assholes like the Koch brothers, a lobby called "Alliance for Generational Equity," trying to create infighting so they can drown the government in the bathtub. Let's not start being their lickspittle mouthpieces, parroting their easily debunked lies.

    • by rahvin112 ( 446269 ) on Thursday July 11, 2013 @12:54PM (#44252233)

      So earnings are 25% higher but cost of living is 50% lower. Land and homes are cheap in rural areas. In the town of 600 my Wife is from you can rent a 4 bedroom home for $200 a month, and that was the price as of last labor day.

      Yea, there are few jobs and the jobs that do exist are primarily crappy and low paid, but overall the poor rural resident is far better off than the poor city dweller.

      • by Bob9113 ( 14996 ) on Thursday July 11, 2013 @01:07PM (#44252441) Homepage

        So earnings are 25% higher but cost of living is 50% lower.

        First, no, it's not 50% lower. Land and homes are cheaper, but they are not the majority of your cost of living. Electricity, food, and consumer goods are much closer to parity price (though retail markup is higher in the city, of course). Gas is very close to parity, and you have to use more of it because everything is further away. There's no public transit, and people in the country lose efficiencies of scale in police, fire, and education services. So sure, there's an effect from cost of living, but it is nothing like 50%. I gave you numbers in my post -- you want to counter it with some ridiculous claim, you show me something to back it up or you're just a blowhard.

        And even if it is big enough to balance the 25% difference in income, that still doesn't make rural folks rich. That term being wielded by a lobby to describe people making $32k in the US is pure bullshit regardless of the relative cost of living.

    • by Todd Knarr ( 15451 ) on Thursday July 11, 2013 @12:58PM (#44252303) Homepage

      I think the objection here is to paying that high subsidy to provide service to the vacation homes of people rich enough to maintain 2 homes, who should reasonably be able to foot the bill themselves. IMO the subsidy ought to only be paid on lines serving a primary residence, ie. no vacation homes and the like.

    • by hjf ( 703092 )

      Not only they make less money, they also have less access to...well, everything. Living on a city you can get groceries at, basically any time of the day. On an emergency you can be in the hospital within minutes. Your cell phone works. You can get very fast and cheap internet. Power is reliable and water is available.

      Out in the country, the only "equal" service is satellite TV. Anything else is more expensive.

    • by kerashi ( 917149 )

      This. I live in a rural area, and I'm fairly well-off, but there are people out here who are far less fortunate. But this isn't really an issue of rich vs. poor. This is an issue of everyone needing access to essential services. Land lines remain an essential service in rural areas, especially since there are areas out here that do not have any cell phone coverage at all. Land lines are also often the only source of internet access besides satellite - I'm fortunate enough to have DSL, but I know people

      • Land lines remain an essential service in rural areas, especially since there are areas out here that do not have any cell phone coverage at all.

        So why not subsidize cell coverage for rural areas, and forget the "running wire to every house in the hills" crap?

    • by alen ( 225700 )

      a lot more poor people in the cities are paying the USF to support a few people in rural areas

  • by JDG1980 ( 2438906 ) on Thursday July 11, 2013 @12:44PM (#44252087)

    I really wish that the press releases of shadowy "think tanks" (and consulting firms, for that matter) were treated with a little less credulity and more scrutiny. This study was published by a group calling itself the "Alliance for Generational Equity". Who are these people and who do they represent? We don't know. I did some Googling to see if I could find out more about them, but didn't find much. No Wikipedia article, nothing on SourceWatch. Nothing about their funding sources appears to be public. How do we know this "think tank" isn't just another sockpuppet of the Koch Brothers?

    I was able to find some information about Thomas Hazlett, one of the authors whose name is on the study. He's a professor at the GMU Law School, which is not an encouraging sign (that law school is a notorious den of right-wing crackpots). Hazlett is also against net neutrality []. This man is not on your side; he's a shill for rich plutocrats. Listen to anything he has to say at your peril.

  • But, urban areas do subsidize rural areas. I live in Kansas and it's amazing how remote and sparse humanity gets just 5 miles outside of the KC metro. There was a stat from I think the 2004 Prez election where, except for 2 exceptions (Texas and Colorado?), every red state was a net consumer of tax revenue and every blue state was a net producer.

    When I riding my motorcycles over hundreds of miles through farmland where there's hardly any traffic and hardly any houses, you still see immaculately maintained

  • by elfprince13 ( 1521333 ) on Thursday July 11, 2013 @12:58PM (#44252297) Homepage
    I'm not at all in favor of government subsidies, but I just needed to point out that....well....I dunno what rural-rich they're talking about. Sure we have the occasional successful author or entrepreneur, but they're vastly outnumbered by those living in poverty. Rural poverty looks completely different from urban poverty, but it's poverty nonetheless.
    • Re: (Score:3, Interesting)

      It's all part of the current zeitgeist that seeks to portray rural Americans as some sort of evil alien life form, totally unrelated to us good people who live in cities and ride bikes on the bike trails. Who cares if the stereotypes are accurate? That's not the point.
  • by KYPackrat ( 52094 ) on Thursday July 11, 2013 @12:58PM (#44252305)

    In the early 90s, an older couple in Eastern Kentucky decided to break down and pay for a landline telephone. GTE offered to drag them a line for $5000 or so (I forget the exact amount). Outraged, they appealed to the Kentucky Service Commission. The Commission discovered that GTE was going to have to pay almost $25k to get the line to them, and was already eating much more of the cost than could be demanded under the law. The couple chose not to get their phone line.

    A friend of my father ran a lucrative contracting business that bid on GTE contracts. He kept mule drivers under contract, because they were often the only way to drag poles around certain parts of the Appalachians.

    These days, this exact same couple would be able to pay $40 to $80 a month to get a cell phone. The tower will be a couple of hills over, with a microwave feed back to the home network and a small diesel generator on-site. For the cost of one phone line, an entire area can get phone and internet service.

    The same economics are working in India and Africa. Excluding possibly power, there will be significant portions of the world that will never, ever be wired.

    • You state that there are parts of the world that will never be wired, which I don't doubt, but when you are talking about in the US, why? Almost all rural areas are served by electric coops. There is nothing stopping using those same power lines to carry voice/data/media, other than adding filters at the transformers. Of course, the cable and phone companies don't want that to happen. Nor do the ham radio operators who do have a legitimate beef in that using the power lines disrupts ham radio operations. Bu

  • As someone who lives in a rural area, even though I'm not rich, I can tell you that the quality of phone lines in rural areas are pretty much crap and you're better off going with a mobile phone. If the phone companies are being paid per active line, this whole thing will go away in a few years anyway.

    • As someone who lives in a rural area, even though I'm not rich, I can tell you that the quality of phone lines in rural areas are pretty much crap and you're better off going with a mobile phone. If the phone companies are being paid per active line, this whole thing will go away in a few years anyway.

      You underestimate the power of lobbyists.

  • The summary states that the program has devolved to poor people in urban areas subsidizing rich people in the country. While that may be true, Would not the rich people in urban areas also be subsidizing the poor people in the country? Last time I checked, urban areas had a lot of people of different classes and while there are definitely some wealthy people in the country, in the vast areas known as fly over country, the wealthy are far and few between. But, if you are talking about the rural areas of CA

  • by bdwoolman ( 561635 ) on Thursday July 11, 2013 @01:19PM (#44252627) Homepage

    But... reading the paper I smelled a preconceived agenda. The paper was sponsored by Americans for Generational Equity an ostensibly bipartisan group concerned with the fact that the "Pig in the Python" is getting closer to the snake's cloaca. And the group worries that said meal is (or soon will) be providing less nourishment than it takes to digest it. Read: The Boomers are greying and will suck the life out of the country before they become python excrement. Think of the children.

    A look at the group's composition [] reveals a majority of Republican notables with a sprinkle of moderate Democrats. The FCC is a bipartisan body and fairly judicious by nature IMHO. I have to wonder what is really going on here. There are hundreds of more fruitful places to look fo WF&A. As for real waste? Check out the US military. []

  • Bullshit study (Score:5, Interesting)

    by Charliemopps ( 1157495 ) on Thursday July 11, 2013 @01:22PM (#44252645)

    I work for a telco. We're required by law to provide phone service to everyone... period. In some counties we're required by law to keep 911 service working regardless of if they residents even want a phone, or even if the building is abandoned! We've got houses on top of mountains, we've got houses at the bottom of the grand canyon on Indian reservations that require microwave dishes to link the bottom of the canyon with the top. Or techs have to hitch rides on helicopters to service some of these people. The vast majority of whom are not rich at all. Rich people like to live in the countryside around cities or small towns, not in the Appalachians where these subsidies have the greatest affect.

    Not that all the government subsidies are perfect. The most recent, the Rural Broadband initiative, is total pork. But the standard tax on lines that allows rural customers to get basic phone service? No, that's probably one of the most important programs in US history. If hadn't been enacted most of the country (geographically) would still be without service. If they were to drop it all together, rural customers would get cutoff almost immediately. We're talking entire towns. And before you start talking about cellphones, how do you think all the cellphone providers get their data links for those towers? The phone companies.

  • by nbauman ( 624611 ) on Thursday July 11, 2013 @02:11PM (#44253283) Homepage Journal

    And who's paying them ~$100,000 a year? []

    Their web site is down

    Another question is, who the fuck is C. McClain Haddow, the guy who's running Alliance for Generational Equity? []

    Mother Jones has a hint.

    The Artful Codger
    Trashing the AARP with Grandma Green.
    By Michael Scherer
    July/August 2005 Issue []

    The real pedigree of the group Green represents is hidden under layers of PR and politics. The Seniors Coalition was cofounded in 1989 by conservative activist Dan C. Alexander Jr., three years after he was sent to prison for arranging construction kickbacks as an Alabama school-committee member. Today, its top outside lobbyist is C. McClain Haddow, a former Health and Human Services official who spent time in prison with Alexander for failing to file a timely ethics waiver when he gave his wife a government contract. Haddow has also lobbied for generic-drugs manufacturer Mylan Pharmaceuticals.

    The organization’s Washington activities regularly blur the needs of seniors with the agendas of corporate donors. After it took money from Microsoft in 1999, the coalition lobbied on antitrust litigation, and after it took money from in 2000, it lobbied on a bill that would restrict Internet gambling. Money also poured in from the American Petroleum Institute and the American Public Power Association—just as the coalition spoke out against the Kyoto Protocol and lower gas-mileage standards.

    The Seniors Coalition is especially tied to the drug industry. PHRMA, the pharmaceutical industry’s trade group, gave the organization $2.2 million between 1999 and 2000 (the only two years for which full financial disclosure is available). Other drug industry sources funneled the group an additional $300,000 during that time. But Tom Moore, the coalition’s chief operating officer, writes in an email that only 22 percent of his organization’s funding comes from industry, and that the group “retains its complete independence in developing [its] legislative agenda.” []

    There is some interest group behind this that is going to save a lot of money if they eliminated the Universal Service Fund (which has its pros and cons), and this outfit is crying crocodile tears over the urban poor. Or generational equity. I'd take them more seriously if they were up front with their real agenda.

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