The Universal Service Fund: A Regulatory Subsidy Case Study

In order to provide an example of how regulations may provide subsidies, Subsidyscope commissioned the George Washington University Regulatory Studies Center to examine a specific regulation. This study, authored by Gerald Brock, a professor of economics and telecommunications at GWU's Trachtenberg School of Public Policy and Public Administration, and April Corbett, a former Graduate Research Assistant at the Trachtenberg School, provides a case study of the Universal Service Fund (USF). The USF is a regulatory cross-subsidy system applying to long distance telephone and cell phone service that is determined by the rules of the Federal Communications Commission (FCC).

The paper is based on data through 2008 and thus does not incorporate a recent 2011 FCC rulemaking, which among other changes altered the program substantially by creating a new fund to replace the high-cost support mechanisms and setting a firm budget for the program. The case study thus serves as an historical analysis of the evolution of a regulatory subsidy. Subsidyscope has no position on this issue.

Read the executive summary or the full paper for more information.