Texas PUC Approves Universal Service Fund Cut

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The Texas Public Utility Commission has unanimously approved a rules change that will reduce the state's Universal Service fund by $144 million over the next four years.

The cut represents a 36.5% reduction in the funds, collected from consumers and distributed to large operators such as Verizon, AT&T and Embarq. The funds help those operators with the expense of delivering phone services to rural users.

But the amount of the fund was challenged by the USF Reform Coalition, the members of which include Time Warner telecom divisions in the state and Sprint Nextel Corp. Funds collected by those companies from consumers helped constitute the pool that was redistributed to the larger operators for the rural subsidy.

The competitors argued that the USF, currently at 4.4%, had not been recalculated in several years and that the amount given to the large operators doesn’t reflect the current cost of delivering rural service. They also complained that they collected the tax, but were not eligible to receive funds from it.

“The Texas Universal Service Fund was long overdue for reform,” said Kristie Ince, vice president of regulatory affairs, Time Warner Telecom of Texas, in a prepared statement. “These reforms will help level the playing field and promote competition in Texas' telecommunications market by eliminating unnecessary subsidies to the largest phone companies.”

The large carriers may recoup a portion of the diminished USF funds through higher residential phone rates, according to the ruling.

A review of the USF fund was mandated in SB5, the telecommunications reform bill passed by the legislature in 2005, which also moved authority for cable franchising to the state PUC from cities and counties.

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