roundtable: In-Kind contributions to Universal Service Fund

roundtable: In-Kind contributions to Universal Service Fund

In-Kind contributions to Universal Service Fund

Michael Ward (mike@essential.org)
Thu, 24 Feb 1994 17:52:15 -0500 (EST) 

Date: Thu, 24 Feb 1994 17:52:15 -0500 (EST)
From: Michael Ward <mike@essential.org>
Subject: In-Kind contributions to Universal Service Fund
To: telcomreg@relay.adp.wisc.edu
Message-Id: <Pine.3.85.9402241604.A6133-0100000@essential>


The attached memo outlines the problems of allowing in-kind contributions 
to the Universal Service Fund.  Both the Clinton/Gore Administration and 
the Hollings Bill (S1822) support this type of contribution.


                                MEMORANDUM

From:     James Love, Taxpayer Assets Project
Re:       In-Kind Contributions to Universal Service Fund

Date:     February 24, 1994

Four Arguments Against In-Kind Contributions to the Universal 
Service Fund

The Clinton/Gore Administration says it wants telecommunications
providers to provide money, service obligations, or in-kind
contributions to a universal service fund.  This approach is also
taken in S. 1822.  While we support the concept of a universal
service fund which receives monetary contributions, and we also
support the right of states to place certain service obligations
on providers (such as 911 service), we are opposed to the use of
in-kind contributions to satisfy obligations to the universal
service fund.  

There are four problems with in-kind contributions.

1.   In-Kind Services are Difficult to Value

Companies will have incentives to exaggerate the value of 
in-kind contributions.  Companies can unload outdated or surplus
equipment, excess bandwidth, or other items, and claim top dollar
as credits toward the universal service fund.  We know that some
people claim large tax deductions when they donate used underwear
to the poor.  We don't need to have the FCC or their state
commissions auditing these issues -- they have more important
things to do.

2.   Companies can use in-kind donations as anti-competitive
     weapons

Carriers can "compete" against rivals by providing "discounts" on
services (unbundling packages, with some "free" in-kind
services), that can be used to compete unfairly for customers in
markets where competition exits.  These "discounts" will cost the
carrier nothing, since they will count as contributions to the
universal service fund.

3.   The Government, not the Company, should pick projects

We should not rely upon the telephone companies to pick the
projects to receive in-kind support.  Officials at Bell Atlantic,
NYNEX, and other companies may be qualified to run a telephone
company, but they are not particularly qualified to determine
what libraries and schools should be wired.  What if Bell
Atlantic wants to build a very expensive high speed connection to
the school where the executives of Bell Atlantic have enrolled
their children, while other schools in other neighborhoods
receive inferior equipment.  Who should be making these
decisions?  How will these decisions be debated?  Will the public
be able to participate in the decision making process?  These
decisions are profoundly public, and should not be made by a
private corporation.

4.   The Telephone Company doesn't need another slush fund.

The telephone industry already wields enormous political power,
showering politicians with millions of dollars in campaign
contributions.  If the telephone companies decide who gets what
out of the universal service fund, they can punish or reward
politicians who please or displease them.  Do we really want to


--------------------------|
Michael Ward
Taxpayer Assets Project
Domain: mike@essential.org

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