Where the Free Press Got it Wrong on Broadband “Tax”

[Commentary] I don’t always agree with the Free Press. But even when my interpretation of facts differs, I’ve usually found the information the group puts forth to be credible – that is until a recent op-ed piece titled “Taxing Broadband – An Idea Whose Time has Not Come,” that ran on the Ars Technica site.

In the piece, the Free Press research director argues that the high-cost Universal Service program, which helps cover part of the cost of delivering communications services to rural areas, is a “corporate slush fund.” To back up his position, he cites two studies that have been demonstrated to be inaccurate. He references a “2010 audit of the rural USF program [which] found that one out of every four dollars sent to participating phone companies was an ‘overpayment.’” But if you read the audit (which was actually done in 2008), you will find that if a phone company was missing any documentation for the USF monies it collected, the Government Accountability Office assumed all payments to that telco were an overpayment. I spent a considerable amount of time going through the GAO numbers when they came out – and I estimated that it was unlikely that telcos had been overpaid by more than 4% or 5%– if that.