DATA: CONSUMERS IN 12 STATES WOULD PAY A LOT MORE IN TAXES UNDER CONTROVERSIAL FEDERAL PHONE TAX HIKE PLAN

Number-Based Universal Service Fund (USF) Fee Would Mean Biggest Taxes Increases for Consumers in CA, FL, IL, MD, MA, MI, MN, NY, OH, PA, TX and VA.

WASHINGTON, DC (March 30, 2006) -- A warning today for consumers in California, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio, Pennsylvania, Texas and Virginia: You stand to be the biggest losers under a widely criticized plan by Federal Communications Commission (FCC) Chairman Kevin Martin to shift who bears the burden of paying for the federal “Universal Service Fund”(USF) fee on long-distance phone bills, according to new data from the Keep USF Fair Coalition.

Consumers in 10 of the 12 states – all but Texas and Minnesota – already pay more in federal USF taxes than their states get back for schools, hospitals and rural connectivity, and that disparity would grow even wider by billions of dollars under the plan that has been criticized by AARP, NAACP, Consumer Action, The Seniors Coalition, LULAC and many other groups.

Based on 2004 USF contribution data and state-by-state spending levels, the likely impact for all 50 states of a $1 and $1.50 per month USF charge per line is set out in the attached chart.

The Coalition emphasized that the “biggest loser” state calculations are conservative, since the $1 line charge would only cover about $6.5 billion of the $7.1 billion currently being spent out of the Universal Service Fund. At the more likely $1.50 per-line charge level, all 50 states would end up paying in more than they are getting back. Even at the more modest $1 per-line level, only consumers in Alaska, North Dakota, South Dakota, Wyoming, Mississippi, Montana, Oklahoma, New Mexico, West Virginia, South Carolina and Connecticut would get more out of the USF than they are paying into it.

Maureen Thompson, executive director, Keep USF Fair Coalition, said: “The Martin plan for the Universal Service Fund is bad news for consumers because it would significantly worsen the inequities in terms of who foots the bill for USF and who reaps the benefits of the Fund. The data we are releasing today points out again how no one at the FCC has taken the time to explore the implications for consumers of changing the USF funding scheme. We have been asking the FCC since last year to produce the data to show who wins and who loses under the Martin plan. It is increasingly obvious that they have not been forthcoming with this information because it paints such a damning portrait of switching to ‘numbers’ or line-based funding methodology.”

Andrew Galli, executive director, Maryland Consumer Rights Coalition, said: “When you look at who would pay more in USF taxes under the Martin plan, you see right away that it is older Americans, low-income families and other vulnerable consumers. Consumers in Maryland and elsewhere need to understand that shifting to a line-based approach for USF means that you are deliberately balancing the Fund on the backs of the consumers who not only are least able to pay ? but also are supposed to be among the beneficiaries of the USF. It is hard to imagine a more anti-consumer approach in this situation.”

On November 17, 2005, the Keep USF Fair Coalition released a report entitled “Losing Numbers: How America’s Most Vulnerable Consumers Could Suffer Under Universal Service Fund (USF) ‘Reform’”. That report concluded: “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, higher home energy costs and the prospect of soaring summer cooling 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.”

ABOUT THE COALITION
The Keep USF Fair Coalition (http://www.keepusffair.org) 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 115,000 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 Disability. 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.

CONTACT: Ailis Aaron, (703) 276-3265, or aaaron@hastingsgroup.com.

EDITOR’S NOTE: A streaming audio replay of the related telenews event is available at mms://www.hastingsgroupmedia.com/KUSFF/033006USFlosers.wma