Gee, it's a good thing we have that universal phone service thing, since so many people don't have phones...

The FCC has recently ruled that VOIP companies must contribute around 10% of revenues to the Universal Service Fund.

For those who aren't familiar with it, VOIP is Voice Over Internet Protocol. Basically, it's a way of transmitting phone calls over internet broadband connections - you plug a POTS (plain ol' telephone service) phone into a converter box and can make calls over your DSL or cable connection, thus bypassing long-distance fees. The Universal Service Fund is an FCC program that phone providers pay in that is used for discounts on phone service for the poor, to expand service to rural and high-cost areas, and to fund internet for schools.

It was started in the '30's, when it wasn't cost-effective to run phone lines to rural areas. I think it's safe to say that that goal was accomplished a long time ago - and thanks to cell phones, it's possible for people to get phone service in areas where running wires wouldn't be cost-effective - it's a lot easier to put up some towers than to run copper or fiber everywhere. In fact, some countries, like South Africa, have basically skipped POTS service and have gone straight from no phone lines to cell phones.

The same is true for phone service for the poor - thanks to prepaid cell phones, everyone can get a cell phone for emergencies - they can buy it at 7-11 or Wal-Mart with no credit check.

As far as internet for schools, it's a noble goal, but it's worth asking why it should be done at a federal level, and why it should be paid for by phone companies and by the people who use phones and networked communications.

The Universal Service Fund is a great example of why goverment programs and the expansion of government should be opposed, even when the goal seems noble - because goverment programs never die, they just grow and change. If they fulfill their purpose, they find a new purpose.

I've never been a fan of attempts to use taxes to fulfill a social goal - I think trying to use taxes to promote a certain type of behavior or punish another is something that the government should avoid doing - that taxes should be used to collect money to do the things that government needs to do. Thus, I've never been a fan of pigovian taxes or sin taxes - and not just because I like to drive, and occasionally smoke a cigar or drink a beer. When government tries to use taxes to reward or punish behavior, it has to start making judgement calls about what is good or bad, and often does without data or research. It also tends to overcorrect, to tax more heavily than the actual costs, and to stay in place after the problem is solved.

But the Universal Service Fund isn't a Pigovian tax. It's just the opposite. Instead of a tax to punish people for doing something bad, like smoking, it punishes people for something good - having a phone or an internet connection. The government seems to think that communication is a good thing - or it wouldn't spend the revenue from the Universal Service Fund on increasing it. But the tax also punishes people for using technology, from having a phone or a cell phone - and with the VOIP expansion of the tax, it also punishes people for trying a new technology, for being early adopters. I wonder how many people there are who aren't poor or rural enough to qualify for the programs that the USF pays for, but can't afford or struggle more to pay their phone bills because they have to pay the USF. I wonder how many people have not gotten DSL or a cell phone or a second phone line for this reason. In an effort to increase technology, the FCC is punishing people who use technology, and inhibiting it's growth.

It's time for us to admit that we've done pretty well with making sure everyone who wants a phone has it - more through the profit-driven actions of private companies than thru the government - and get rid of the Universal Service Fund.