Coalition: Plan by FCC Chair Martin Could Cost 16 Million of America's Most Vulnerable Consumers $400 Million

Martin Scheme for Universal Service Fund 'Reform' Seen as Zapping

Worst-Off Low-Income, Senior Consumers; Groups Call for Focus

on Pro-Consumer 'Fair Share' Plan

Nov 17, 2005, 00:00 ET from Keep Universal Service Fund Fair Coalition, Washington, DC

    WASHINGTON, Nov. 17 /PRNewswire/ -- A controversial plan backed by Federal
 Communications Commission (FCC) Chairman Kevin Martin would result in higher
 federal phone taxes (or forced phone bill hikes) of as much as $707 million
 for 43 million low-volume long-distance user households in the United States,
 according to a new report by the Keep Universal Service Fund (USF) Fair
 Coalition.  Of greatest concern within the group of harmed consumers:  the
 most vulnerable of Americans -- 16 million households of primarily low-income
 and elderly individuals -- who currently can afford few or no long-distance
 phone calls, but would have to pay up to $383 million in higher USF taxes
 under the Martin scheme.
     Entitled "Losing Numbers:  How America's Most Vulnerable Consumers Could
 Suffer Under Universal Service Fund (USF) 'Reform,'" the report notes:  "The
 currently consumer-friendly 'pay for what you use' approach to funding the
 Universal Service Fund would be replaced under the Martin plan with a
 regressive, flat-fee arrangement of $1-$2 or more per phone line -- regardless
 of whether or not consumers even make a long-distance call.  For a consumer
 who now dials only a handful of long-distance calls per year and pays
 correspondingly low USF taxes, the effective tax rate under the Martin plan
 would soar by more than 1,000 percent on an annual basis! With low-income and
 elderly consumers already socked with high gas prices, the prospect of soaring
 winter heating bills and continued inflation in medical prescriptions, the
 wide range of diverse groups in the Keep USF Fair Coalition are opposing the
 Martin 'numbers' based plan.  These groups caution against balancing USF
 finances on the backs of the very consumers who use long-distance the least
 and are unable to afford phone bills that would rise under 'numbers' simply in
 order to subsidize high-income/high-volume callers."
     Consumer Action Director of National Priorities Linda Sherry said:  "One
 of the most alarming aspects of the numbers-based proposal is that no one has
 yet produced an estimate of the effect of the change on low-income consumers,
 including the poor and seniors on fixed incomes.  It does not make sense for
 the FCC or Congress to change the collection of USF funding without first
 taking a long, hard look at who would pay the piper for the so-called
 simplicity of a numbers based plan. At least give us some hard facts."
     The Senior's Coalition Chairman of the Board Mary M. Martin said:
 "Chairman Martin's plan is bad news for older consumers, who would make up
 most of the 16 million Americans paying more into the USF fund than they
 currently do. At a time when the basic costs of living - including the costs
 of healthcare and prescription drugs - present a major burden to these seniors
 on limited income, an arbitrary tax hike is the last thing seniors are
 prepared to handle.  A 'numbers'-based methodology for USF would place an
 unfair, and unnecessary strain, on our nation's seniors -- the customers that
 account for the smallest part of telecommunications activity or revenues -- in
 order to underwrite price reductions for customers who are better able to
 afford long-distance service.  You can't say 'on average' that consumers will
 be taken care of when you have to balance your 'reform' on the backs of those
 who are the least able to pay."
     One clear sign of the controversial nature of the Martin plan:  U.S.
 consumers have sent 530,781 emails and letters to federal lawmakers through
 the Keep USF Fair Coalition Web site at  One of
 the citizens who has spoken out against the Martin plan is Juanita Brown, a
 disabled nurse living on a fixed income in Lookout, West Virginia.
     Appearing at the Coalition news conference today, Ms. Brown said:  "I can
 barely afford long distance as it is now.  I depend on my phone to stay in
 touch with my children and grandchildren.  On my fixed income, I have to worry
 about keeping a roof over my head and paying for the heat, so the last thing I
 want to think about is having to give up my long-distance service because the
 rates have been jacked up by the federal government.  I am here today to ask
 that I don't get socked with a charge I can't afford for telephone calls that
 I haven't even made.  Where is the fairness in that?"
     In reviewing the public record on USF and phone-use volume trends, the
 Keep USF Fair Coalition made the following estimates:
     * "No volume" long-distance users.  The roughly 16 million consumer
 households who use no long-distance services in a typical month might pay an
 extra $192 million (under $1-a-line USF charge) to $383.1 million (under $2-a-
 line USF charge). Research data make it clear that virtually all of these
 consumers would be low-income individuals, with the largest number accounted
 for as senior citizens on fixed incomes.  An estimated 15 percent of phone
 users make no long distance calls.  Of those with incomes below $10,000, 40
 percent report no long distance expenditures.  A fifth of those with incomes
 between $10,000 and $20,000 report no long distance expenditures.
     * "Low-volume" long-distance users.  27 million additional consumer
 households who are low-volume users might pay an extra $162 million ($1 line)
 to $324 million ($2 a line).  This estimate takes into account that there are
 more than 43 million U.S. consumer households who are low-volume phone users
 making fewer than 10 minutes of long distance telephone calls per month,
 including the estimated 16 million who make no calls.
     Taken together, the preliminary Keep USF Fair Coalition estimate is that
 some 43 million of what are predominantly America's most vulnerable consumers
 would pay $354 million to $707 million in higher federal phone taxes or rate
 hikes that would have to be imposed by companies forced to cover USF costs.
     The Keep USF Fair Coalition recognizes that there are limitations to its
 preliminary estimates on the consumer harm resulting from the Martin plan.
 However, the Coalition believes that the most important piece of information
 is an estimate that can be used as a starting point in this important public
 debate.  As the new report notes, the Coalition urges that no move to
 "numbers" methodology for USF be undertaken until a full and complete study of
 consumer impacts takes place.  It is critical to know who would be hurt and
 how badly before any overhaul of the Universal Service Fund contribution
 method is imposed.
     The chief argument advanced for the Martin "numbers" plan incorrectly
 assumes that there is no alternative approach to addressing potential USF
 solvency concerns.  In reality, Keep USF Fair Coalition members and other
 groups concerned about the threat posed to America's most vulnerable consumers
 by a "numbers" based approach are coalescing around the "Fair Share Plan,"
 which would eliminate the need for radical changes that would be injurious to
 vulnerable consumers. The Plan assumes the following, common-sense reforms to
 improve the USF contributions process to ensure sufficient funds:
     * Expand the USF contribution base to include revenues derived from all
 telecommunications, including services provided using Voice over the Internet
 Protocol (VoIP) technology.
     * Establish a contribution factor cap to be applied to the revenue-based
 approach, e.g., somewhere between 12 and 15 percent of revenues derived from
 interstate telecommunications (including VoIP).
     * Carriers would still be assessed based on revenues up to that cap
 amount, and would still have the right to charge their end users a USF
 recovery charge not to exceed the capped amount.
     The Plan would benefit those low-income users who make few interstate
 calls. They would be subject to flat assessments for their wireline and
 wireless telephone numbers, but the level of those assessments would be
 measured in cents, not the $1.00 or more anticipated under a "connection" or
 "numbers" based funding plan.
     The Keep USF Fair Coalition ( is committed to
 keeping the Universal Service Fund collection method fair, and opposing
 proposals to move to a regressive, per-line flat fee.  Now counting more than
 108,000 members in its ranks, The Keep USF Fair Coalition was formed in April
 2004. Current members include Alliance for Public Technology, Alliance For
 Retired Americans, American Association Of People With Disabilities, American
 Corn Growers Association, American Council of the Blind, Black Leadership
 Forum, Consumer Action, Deafness Research Foundation, Gray Panthers, Latino
 Issues Forum, League Of United Latin American Citizens, Maryland Consumer
 Rights Coalition, National Association Of The Deaf, National Grange, National
 Hispanic Council on Aging, National Native American Chamber of Commerce, The
 Seniors Coalition, Virginia Citizen's Consumer Council and World Institute On
     The NAACP is a supporter of the Keep USF Fair Coalition, and is among the
 many national organizations that have filed comments with the FCC in support
 of a non-regressive USF collection method. Keep USF Fair also has received
 support through a resolution passed in 2005 by the National Association of
 Consumer Agency Administrators (NACAA). The resolution recognizes that a
 "restructuring effort of the Universal Services Fee must find a fair method,
 competitively neutral, that takes into consideration new technologies," and
 says that a "flat fee or exclusively numbers-based plan would be unfair to
 millions of consumers, especially lower call volume users if they would now
 pay the same fee as high volume, business users."
     EDITOR'S NOTE:  A streaming audio replay of a related telenews event will
 be available on the Web as of November 17, 2005 at

SOURCE Keep Universal Service Fund Fair Coalition, Washington, DC