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Texas PUC Set To Cut Carrier Subsidy

Supporters of an effort to decrease Universal Service Fund fees in Texas believe they have scored a victory, as a proposed final order is on its way to the state's Public Utility Commission recommending that providers, including Verizon and AT&T, get less money from telephone customers.

According to the settlement agreement reached among the PUC staff, the Office of Public Utility Council, Verizon, Windsteam, Embarq, AT&T, several rural local exchange carriers and the USF Reform Coalition, the subsidy to the phone companies will be reduced by $144 million.

The reduction will be implemented during a three-year period. The large carriers may raise their residential basic rates to recoup the reduction in USF subsidies, according to the proposal.

The USF Reform Coalition, which includes Sprint Nextel Corp. and Time Warner telephone divisions as members, has lobbied utility regulators to lower the fee charged to all telephone users.

The Universal Service Fund collects a 4.4% tax from all landline and cellular users, and the largest share of the proceeds, an estimated $395 million annually, is given to the large carriers to support low-cost basic phone service to high-cost rural areas.

A review of the fund was ordered in SB5, the 2005 telecommunications reform bill that assigned cable franchising to the state PUC. Members of the coalition argued in the review proceedings that the actual cost to serve rural areas had decreased while the USF subsidy had not.

The agreement must still be voted upon by the PUC board on April 25.