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Phone Call Subsidies Put On Hold Fcc To Redirect Payments To Those In Greatest Need

Thu., July 13, 1995

Wealthy Boca Raton, Fla., with its million-dollar waterfront homes, is just one of many communities where residents receive a subsidy for local telephone service. Now federal regulators are seeking ways to target the subsidy to places that really need it.

Designed to keep local phone rates affordable, the subsidy goes to local telephone companies that serve “high-cost” areas around the country.

The subsidies, administered by federal and state regulators, add up to $750 million a year. The assistance does not come from the government but from payments made by long-distance companies - and ultimately their customers.

Because income is not a factor in determining eligibility, people who live in affluent communities like Boca Raton end up getting the same financial assistance for local phone service as those living in Liberty City, a poor section of Miami, regulators say.

The Federal Communications Commission today plans to make some tentative recommendations on how the subsidy may be distributed more fairly.

“We’re looking at whether the current system of running the fund makes sense - whether it could be better targeted,” said Kathleen Wallman, chief of the FCC’s Common Carrier Bureau.

Under the current system, all communities in a defined geographic area - which can be as large as a state or as small as a town - may benefit from a subsidy provided to a local phone company. Companies qualify for assistance when the cost of providing local service throughout that geographic area is 15 percent higher than the national average.

For instance, BellSouth, the main provider of local phone service in Florida, gets a monthly subsidy of 28 cents for each of the 5.3 million lines it owns in the state. That subsidy lowers the average charge for local phone service to Boca Raton as well as other communities in the state to $23.32 a month, federal regulators say.

The FCC is considering a number of changes to the 11-year old subsidy program. They include:

Giving schools and libraries more financial assistance.

Eliminating or scaling back assistance to the biggest local phone companies.

Giving assistance only to rural areas.

Redefining the costs used to determine assistance.

Making the smallest companies eligible for the most assistance.

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