PHILADELPHIA -- A coalition of consumer groups is trying to block a plan to revamp the Universal Service Fund, which this year will provide about $6.5 billion to subsidize phone service for low-income and rural residents, and discount Internet access for schools and libraries.
Although Federal Communications Commission Chairman Kevin J. Martin hasn't made a formal proposal, he has said the universal-service system is suffering because of sweeping changes in telecommunications since it was last altered less than a decade ago.
In a speech this summer, Martin proposed changing the way companies collect universal-service funds from their customers by switching from a formula based on a percentage of interstate calls to a per-line charge, perhaps $1 or $2 a month.
The groups opposing the change say the change could hurt some of the people the fund is supposed to help. At a news conference yesterday, the coalition released a study estimating that a $1- to $2-a-month charge could add $350 million to $700 million a year in costs borne by the four in 10 U.S. households that rarely or never make long-distance calls.
Linda Sherry of the San Francisco group Consumer Action said federal officials should take "a long, hard look at who would pay the piper for the so-called simplicity of a numbers-based plan" to support the fund, often referred to by the acronym USF.
Sherry's organization is one of about 20 groups that formed the Keep USF Fair Coalition last year. Others include groups representing the elderly, the blind and the disabled; the National Grange; and the Alliance for Public Technology.
TracFone, which sells prepaid wireless service through retailers such as Wal-Mart, has told the FCC that a $1-a-month charge would raise its universal-service contribution from less than $10 million a year to about $60 million a year.
The way the USF is designed, phone companies pay a percentage of their revenue from interstate calls into the fund. For the last quarter of 2005, the rate was set at 10.2 percent.
Companies typically pass the charges along to customers. The system has become increasingly complicated by innovations such as bundled services, free long-distance plans, and flat monthly fees from wireless carriers and Internet-based phone calling.
Opponents of a flat-fee system agree that the current system is problematic. Because cell-phone billing often does not distinguish long-distance from local calls, the USF assessment assumes that 28.5 percent of cell-phone revenues count as chargeable interstate calls, even though 27 million households typically make 10 minutes or less of such calls each month.