Windows Phone Thoughts: US telecommunications industry regulation needs a serious rethink

If you've read my rant on phone subsidies, you'll know where I stand on this issue - consumers are getting a raw deal due to uncompetitive practices endemic in the industry. Turns out, some of it is actuall federally mandated:

http://news.yahoo.com/s/ap/20070722/ap_on_bi_ge/telephone_tax

Here's the short version. The Universal Service Fund was set up in 1996 to help encourage rural access to telecommunications. Funding is through a surcharge on long distance calls, and the money goes to helping rural scholls and libraries get internet access, help the poor gain access to telecoms, help fund rural healthcare and compensate carriers for costs arising from establishing rural networks. Sounds good in theory, doesn't it?

Here's where it gets bizarre - compensation is paid irrespective of how many carriers are present in a locality, and compensation is on a subscriber basis. To top it off, the compensation is based on wired/fixed line network establishment costs - wireless carriers get more on a net basis because their network setup costs are way cheaper (think the difference between setting up base stations, as opposed to miles of telephone wire and poles). How much does this compensation cost? $4.1 billion in 2006.

This amounts to giving a free ride to anybody willing to build a rural network, all at the expense of the consumer. Worse, reform of the system is being blocked by senators with vested interests. I'm staggered.