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States slow to grab subsidies for telecom service

While industry leaders boast of the benefits of a high-speed Net for commerce and education, more than 6 million people in the United States can't even afford basic phone service.

While industry leaders boast of the benefits of a high-speed Net for commerce and education, surfing the Internet isn't even an option for more than 6 million people in the United States who can't afford basic phone service.

Congress has made millions of dollars available to help address this problem. But many state governments aren't taking advantage of funds designed to bring low-income citizens onto even the lowest rung of the communications ladder, let alone give them the access to the Internet, according to a study released today by consumer advocate groups.

The struggle over subsidizing phone service has long been a political tug-of-war in the United States, with state and federal governments, as well as local and long distance phone companies, all picking up part of the tab. But now this universal service system is in the middle of an overhaul, as policymakers and advocates try to prevent subsidies from being lost in the rush toward telecommunications deregulation and market consolidation.

Congress has already expanded the subsidy system to include Net service for schools and libraries, and some policymakers have suggested supporting consumer Net service through the universal service fund as well. But advocates note that people need a basic phone connection before they can even think about getting online.

Federal regulators acted today to ease some concerns by nearly doubling the amount of subsidy money available to large carriers like BellSouth and US West to help provide service in rural regions.

This funding is important--but the big telephone companies have managed to win subsidies even as they turn their attention to data and high-speed Net services, often at the expense of ordinary phone service, critics say.

"The irony is that the first guys to get this money is the fat cats," said Mark Cooper, telecommunications analyst for the Consumer Federation of America. BellSouth, which will be one of the primary recipients of the new federal money, yesterday reported solid earnings based in large part on revenues from data and Internet services, he noted.

The companies' push toward more lucrative businesses like data and Net services makes it even more critical for state governments to take advantage of every funding source possible to support their citizens' basic telecommunications services, advocates say.

"The [Federal Communications Commission] has not done enough urging states to take advantage of this funding," said Jeff Chester, executive director of the Center for Media Education. "We need to focus on this problem. If we're ever going to have an equitable society, we have to ensure that the folks on the bottom get in right away."

Money up for grabs
According to a recent Department of Commerce report, more than 6 million U.S. homes lack basic telephone service--almost six times the number of people who currently have high-speed Internet connections at home.

Some of these people are not wired by choice, but consumer advocates say many are from rural areas, generally elderly or low-income residents who simply can't afford a monthly bill.

As a part of the 1996 Telecommunications Act, Congress and federal regulators decided to increase the amount of money available to help give these low-income citizens basic telephone connections. In 1997, the FCC raised the amount of money available per line to nearly to the full price of phone service itself in some states.

See related newsmaker: William Kennard The trouble is that many states haven't taken advantage of the new policy, according to the study.

Only two states--Maine and Tennessee--have taken full advantage of the subsidy funds. Four states, including Arkansas, Mississippi, Oklahoma, and South Dakota, received failing grades from the study, meaning they did not have any subsidy program in place, or contributed only minimal funds toward the policy.

This is troubling news, the study's authors say. Despite the increased funds available, the number of people supported by the low-income subsidy fund has stayed almost flat over the last two years, Chester noted.

"This unprecedented attention in the telecom policy area has pushed low income people further down the digital totem pole," Chester said. "Clearly when it comes to low income people, the Telecommunications Act has been a failure."

The reasons for states' failure to step up to the financial plate vary, ranging from distracted public utilities commissions to local political battles.

In Mississippi, one of the states that scored most poorly in the study, funding has been caught partly in partisan battles between legislators and the governor. Sen. Willie Simmons, a Democrat leader in health and welfare issues, said he would try to carve his state's share of funding out of a recent settlement with tobacco companies and other new funding sources.

"I am concerned that we see various funding sources available for the poor, and yet we don't access these," Simmons said. "I see this telecommunications one as being a critical issue, since we have a lot of elderly and poor people in our rural areas."