WARNING TO TEXAS CONSUMERS: 
NEARLY $350 MILLION FEDERAL PHONE BILL TAX HIKE
FOR STATE NOW BEING PUSHED BY PHONE COMPANIES

AUSTIN, TX. (August 3, 2006) A warning today for consumers in Texas:  You stand to be among the biggest losers under a widely criticized plan to shift the burden of who pays the federal "Universal Service Fund" (USF) tax on long-distance phone bills.  A proposal backed by America's biggest telephone companies could saddle Texans with a $343 million annual tax hike, according to the urgent warning from the Keep USF Fair Coalition, the Texas Consumer Association, and the Texas Migrant Council.

Under a major push now being mounted in Washington by AT&T, BellSouth, USTelecom, Verizon, IDT Corporation and others, Texas stands to be one of the two biggest "loser" states (topped only by California) under the anti-consumer proposal to shift the USF from a consumer-friendly, pay-for-what-you-use tax on long-distance to a regressive per-connection charge that would be imposed on every phone line whether or not consumers made any long-distance calls at all.  According to Keep USF Fair Coalition research, senior, Latino, low-income and rural consumers in Texas and elsewhere would pay the most in additional USF taxes under the controversial per-connection approach. 

For Texas, the change in USF to a per-connection tax would mean an increase in taxes of $103 million per year at the rate of $1 per connection or, as would be more likely, $343 million at the rate of $1.50 per connection.  Texans currently pay $376.9 million annually in federal USF phone taxes.  Under the industry plan, only California would get stiffed with a higher tax-increase bill of $582.4 million.  For full state-by-state data, see the chart at:
http://keepusffair.org/KeepUSFFair/release_033006_graph.html.

Sandra Haverlah, president, Texas Consumer Association, Austin, TX: "We support the Universal Service Fund, but that certainly does not mean that we want to see the funding shift to a system that disadvantages Texas seniors, rural residents, Latinos, the poor and others.    It is critically important that USF funding remain on a basis where those who use the most long distance pay their fair share.  It makes no sense to start taxing Texas consumers for long-distance service when many of them are not even using it."

Mary Capello, CEO, Texas Migrant Council, Laredo, TX:   "We believe that all users of communications in Texas should pay their fair share to the USF.  Latino and other predominantly low-volume and low-income phone users should not be disproportionately burdened by USF.  This turns the current system on its head in a way that would unfairly disadvantage millions of Latino consumers in Texas and around the nation."

Maureen Thompson, executive director, Keep Universal Service Fund Fair Coalition, Washington, D.C., said: "The plan of big telephone companies 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 for Texas points out again how no one in the industry has really taken the time to explore the implications for consumers of changing the USF funding scheme. 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.  It also is important to make sure that the extensive waste and inefficiency in the USF is stamped out so that the money that is spent actually reaches those who need it."

The Keep USF Fair Coalition emphasized that the "biggest loser" calculations for Texas consumers and those in other states are conservative, since the $1-per-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.

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 ? (connections-based) 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 ? (connections-base) 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."

On February 9, 2006, the Keep USF Fair Coalition reported:  "Millions of Latino and Hispanic long-distance phone customers in the United States would be socked with higher federal fees on their phone bills under a widely criticized proposal ? to force phone users who make few long-distance calls or use pre-paid wireless phones to either start paying or pay more into the Universal Service Fund ? Other than older Americans, Latinos and Hispanics account for the largest number of Americans who would end up paying more under the Martin plan for USF ? Three to five million Hispanic and Latino households in the United States could be included among the 43 million Americans paying more in federal phone fees ?"

ABOUT THE GROUPS

Based in Austin, the Texas Consumer Association is a nonprofit organization representing consumers on pocketbook issues.

The Texas Migrant Council, located in Laredo, is an Affiliate of the National Council of LaRaza (NCLR).

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 Consumers League, 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:   Patrick Mitchell, (703) 276-3266 or pmitchell@hastingsgroup.com.

EDITOR'S NOTE:  A streaming audio replay of a related news event may be found on the Web at http://www.noflatfee.org as of 3 p.m. CT/4 p.m. ET on August 3, 2006.