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Monday, July 01, 2019

The Commish feels our burden

Commissioner O'Rielly recently gave a speech about Universal Service at the Hudson Institute, and the topics were quite familiar: the contribution factor is too high, we need an overall cap on the Universal Service Fund (USF) budget, and we need to stop overbuilding.  To which I say not really, no and hell no.

This post will just look at the overall burden on ratepayers.

No question, the Contribution Factor keeps going up, but that is not necessarily bad for consumers.  (For those who don't know, the USF is funded by a fee charged to carriers, set as a percentage of interstate revenues; carriers then pass that fee through to customers.)  Here's a graph of the Contribution Factor (CF) over time:

All other things being equal, that graph looks bad for consumers: the CF has more than quadrupled.  But all other things are not equal.  Consumers do not pay the CF; the fee that carriers charge them is the CF times the interstate charges on their bill.  Here is a the Revenue Base, the total of all eligible charges:

What consumers end up paying to carriers, and the carriers pay into the USF, is the CF times the Revenue Base.  Here's how the product of those 2 numbers has varied over the years:

Still not great, but basically, it doubled by 2011, and has been bouncing around the same level for the last 8 years or so.  So when the Commissioner says we need to protect consumers, I say that the Commission is already doing a good job at protecting consumers.  We've been paying about the same amount for the last 8 years.

I'm going to create separate blog posts about the cap and overbuilding.

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