Universal Service Fraud: Bailouts for billionaires

You've got to hand it to those Mafia wiseguys, they know a good scam when they see one. From 1996 through last year, the Gambino crime family bilked the Universal Service Fund out of some $22 million by fraudulently creating CassTel, a rural telephone company purportedly serving the 2,600 denizens of the town of Peculiar, Mo.

CassTel received USF dollars thanks to the outrageous incompetence of the FCC, which supposedly oversees how USF funds are spent. Exactly how many brain cells does it take to figure out that funneling $22 million into a town of 2,600 people equates to nearly $8,500 per person?

As far as I know, the telcos of Jackson Hole, Wyo., have no connections to the Mob, but they've got a scam of their own. Jackson Hole is no poverty-stricken rural enclave. The average family income is more than $85,000, and 51% of the houses cost $300,000 or more. Yet Silver Star Communications this summer tapped the USF to extend telephone services to remote homes in and around Jackson Hole.

The justification? Silver Star wants to keep rich folks on the Wyoming side of the Idaho/Wyoming border by improving their phone service. Seems that locals complain "the billionaires are pushing the millionaires over to Idaho."

Last I checked, the rationale for the USF was to extend services to schoolchildren and the needy - not line the pockets of mobsters or bring broadband to billionaires.

For an example closer to home, a reader wrote in to say his ISP recently began charging him USF taxes on his Internet connection - even though it's not being used for voice services, and competitive carriers in his region (including AT&T, SBC, MCI and XO Communications) don't charge USF taxes on Internet services. After contacting the FCC and getting nowhere, this reader concludes, "It makes me wonder if the USF hasn't outlived its usefulness. Basically, the end consumer like me, small-business owner, [pays] the bill for large corporate America in addition to the people that the USF was originally supposed to aid. . . . Not only should we keep an eye on the carriers, we need to keep an eye on the FCC, too."

Couldn't have said it better myself. The USF is broken. As Tad DeHaven, columnist for the conservative magazine National Review, puts it : "Most free-market advocates have long considered the USF to be little more than an inefficient tax and redistribution scheme. . . . Why should a single mother in New York City have to subsidize phone service for a wealthy rancher living in Montana?"

And the FCC has fallen down on the job. Its failure to effectively oversee how the $14 billion USF collected in the past eight years from American businesses has been spent amounts to nothing less than gross negligence. Or as Rep. James Greenwood (R-Pa.), chairman of the House Energy and Commerce Committee's oversight subcommittee, said last year, FCC oversight is "benign neglect at best and reckless indifference at worst."

Amen, brother.

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