Eliminate Cell Phone Subsidies in the Universal Service Fund

  • Potential 10 Year Savings: $5 Billion
  • Sponsor: Rep. Blake Farenthold
  • Legislation: H.R. 3118
  • Status: Introduced

The Universal Service Fund (USF) imposes a tax on telephone bills in order to ensure that all areas of the nation have accessible telephone service. A portion of the tax supports the "Lifeline/Link-up" program that subsidizes telephone service for qualified low-income customers. In 2008, a private wireless carrier company parlayed this federal subsidy into developing a commercial product offering free cell phones and wireless service to low-income consumers, paid for exclusively by taxpayers. Not surprisingly, participation in the program significantly increased, and spending jumped dramatically from $802 million annually in 2008 to $1.32 billion in 2010. Officials estimate costs will continue growing as this free option becomes available in more states. Meanwhile, the GAO recently released a report warning Congress about the potential for waste, fraud, and abuse, concluding that the program lacks effective internal controls. This proposal would eliminate taxpayer-subsidized free cell phone giveaways and save $500 million annually.