Doff that cap

As promised, here are my thoughts on Commissioner O'Rielly's recent statements concerning the need for an overall cap on the USF.  I've already blogged about budget caps, but I thought I'd look at the reasons the Commissioner gave in his speech for needing a cap.

The Commissioner gives 4 reasons we need a cap:

1. "to protect the investments of ratepayers who pay for our programs ... especially given the regressive nature of USF fees and their disproportionate burden on lower- and middle-income Americans.... In fact, the lowest-income 10% of households pay 12 times more than the highest-income 10% as a percentage of their income."
2. "force the FCC to consider the whole USF when increasing program spending."
3. "an FCC running up against a cap would have greater incentive to eliminate inefficiencies
   that detract from achieving the program’s mission and value."
4. "a budget would help protect universal service.  ...this NPRM provides plenty for all."

On the first point:
The Commission is already doing a dandy job of protecting ratepayers.  (See the last graph in yesterday's post: the actual fee paid by consumers has been pretty steady for the last 8 years.)

As for the fee being regressive, I have a hard time believing that "the fee is generally spread among consumers on an equal and agnostic basis."  The Contribution Factor (CF) is spread on an equal and agnostic basis, but consumption is not, and the fee is the product of CF and consumer expenditures.  Let's take a look at the data from the Bureau of Labor Statistics, which does an annual survey of consumer expenditures.  I couldn't find exactly the table I needed, but let's look at a table that details 2017 consumer expenditures by quintile.  I pulled out the pertinent data and put it into a smaller table:

	Low 20%	High 20%	Multiple
Income after taxes	$11,933	$149,504	12.53
Telephone services	$706	$2,036	2.88
% of income	5.92%	1.36%	4.34

That still shows that the fee is regressive, but not as extreme as the Commissioner would like it to be.

How could we make the fee less regressive?  Well, we could seek to aggressively expand the Lifeline program, enrolling some of the 72% of eligible people that don't take advantage of the program, and doubling the amount that each recipient gets from $9.25 to $18.50.  (I know, still not enough to cover the cost of a phone line or an Internet connection, but still, a step in the right direction.)

On the second point:
Why should the voracious appetite of the High Cost Fund mean that America's school children get less?  The overall cap just gives weak-willed commissioners an out: "Well, we don't want to cut any of the programs, but we need to stay within our means, and ____ is crucial to the future of America, so we're forced to cut ____."

On the third point:
What?!  The Commission isn't doing all it can to eliminate inefficiencies?  How would a cap provide greater incentive?  As the Commissioner makes clear, if the cap got uncomfortable, the Commission could simply raise it.

On the fourth point:
If the goal of the NPRM is *not* to provide plenty for all.  It is to restrain all.  This is the worst kind of "budget-cutting"; the current Commissioners can take credit now, and all the pain will be felt by future Commissioners.  If budget caps do not limit expenditures, then they are just window dressing.

I remain unconvinced that we need a cap.