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USF Reform Should Include Low-Income Subsides, Competitive Auctions

USF Reform Should Include Low-Income Subsides, Competitive Auctions

Wallsten, Rosston Urge Experimentation in Transitioning USF to Broadband

Contact: Amy Smorodin
(202) 828-4405

April 18, 2011 – Transitioning the use of universal service funds to subsidize broadband creates a unique opportunity to reform the program. Reforms should include a focus on low-income subsides and competitive bidding in high-cost service areas, explain Scott Wallsten and Gregory Rosston in “The Path to Universal Broadband: Why We Should Grant Low-Income Subsides, and Use Auctions and Experiments to Determine the Specifics” recently published by The Economists’ Voice.

In the article, Wallsten, TPI Senior Fellow and Vice President for Research, and Rosston, Deputy Director of the Stanford Institute for Economic Policy Research, explain that the current USF program “is inefficient in both its collection mechanisms and in what it supports.” Therefore, focusing support on buildout of wired broadband in high-cost areas would fail to significantly raise penetration rates because many people who place a high value on internet access already subscribe to a satellite broadband service. Instead, adoption rates could be increased by focusing on low-income subsidies to people to whom broadband is available, but who do not currently subscribe.

Rosston and Wallsten also state that even if the fund continues to subsidize high-cost areas, firms should be allowed to compete to provide broadband service at the lowest cost. Such universal service auctions have been used successfully in other countries and should be considered a viable option for policymakers focused on USF reform.

The Path to Universal Broadband: Why We Should Grant Low-Income Subsides, and Use Auctions and Experiments to Determine the Specifics,” is available on the Economists’ Voice website.

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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