Hazlett: Wireless Phones Cheaper for Rural Areas

Rapidly increasing taxes to support the universal service fund, intended to pay for higher costs of serving rural areas, are having the unintended effect of forcing some low-income citizens to eliminate current phone service, says Professor Thomas Hazlett in an economic analysis prepared for the Seniors Coalition, a senior citizen advocacy group.

"It's perverse when shifting tax money around for the universal service fund results in more people leaving the network than joining it," said Hazlett in a Chicago Tribune article.

Wireless phones cheaper for rural areas, study says, Chicago Tribune, July 20, 2006. By Jon Van.

"Hazlett said that reforming the current universal service fund is very difficult because rural phone companies that benefit directly from the plan have political clout in Congress. They beat back efforts in the Senate last month to impose a cap on expenditures.

"Universal service subsidies have become so widespread that rural phone companies on average collect only 27 percent of their revenues from customer payments, Hazlett found. Even so, many rural customers are opting to drop traditional wired service to go wireless.

"'It's cheaper and they like the mobility,' Hazlett said. 'About 5 percent of rural households have dropped fixed-line service to go wireless.'"

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