Following the Money in the Pickering Case

Given the rash of political sex scandals in the last two years -- or even the last two months -- it's natural for the media to focus on the more salacious aspects of the Pickering v Byrd case.

I would draw attention to the public implications instead. Consider this AP story from two years ago, discussing the little-known "Universal Service Fund," which, as I understand it, takes funds generated from a surcharge on telephone charges and, among other things, gives direct subsidies to companies providing cellular coverage in rural areas.

The story explains:

Congress ordered that consumers - including those in "rural, insular and high-cost areas" - have access to telecommunications and information services at rates comparable to those charged in urban areas. That was to be financed by a fee added to long-distance bills. The charge may only be a few dollars per month, but it adds up fast.

In 2006, the fund collected $6.6 billion, money that flows to four programs. About $1.7 billion paid for schools and libraries to connect to the Internet; two smaller funds subsidized telephone service for the poor and rural health care facilities.

The largest chunk - about $4.1 billion [in 2006] - flows to the aptly named "high cost" program, the source of the current controversy. That money is paid directly to telephone companies that do business in mostly rural areas where the cost of delivering service is high.

In the early years of the fund, subsidies went almost exclusively to old-fashioned wired phone companies - large and small - that had served rural areas for decades. To spur competition, Congress wanted to make subsidies available to other carriers.

Initially, the lure of a handout wasn't enough to attract new entrants. But the dramatic growth of the cellular telephone industry changed all that.

Wireless providers discovered that the subsidy - based on what the wired companies were getting per customer - would cover their costs and then some.

* * * *

Of the $2.45 billion that has been paid to competitive carriers from 2003 through April 2007, 75 percent of the cash went to 10 companies, according to AP's analysis.

Alltel, which recently announced the sale of the company, reported a $230 million profit in the first three months of 2007, a total boosted by the $65 million to $70 million in universal service funds the company says it receives each quarter.

"We are the largest wireless recipient of (universal service funding) because we are the largest rural carrier," company spokesman Andrew Moreau told the AP in an e-mailed response to questions.

Next on the list of recipients is AT&T Inc. with $239 million, followed by U.S. Cellular Corp. at $212 million and Mississippi's Cellular South Inc. with $156 million.

* * * *
In Mississippi, the top recipient of cash among cellular providers is Cellular South Inc., a 900-employee private company, whose executives have been prolific in their giving. Officers of the company and its corporate parent have dealt at least $142,550 in contributions to federal campaign committees, according to records.

Favorites include Mississippi Republican Rep. Charles E. "Chip" Pickering and Sen. Trent Lott. Pickering is a former member of Lott's staff and helped shape the 1996 telecommunications law, according to his congressional biography.

The "High Cost Support" Program is alive and well. See http://www.scribd.com/doc/17445104/Universal-Service-Fund-Report

Now, the idea of paying subsidies to companies to provide services in under-served areas makes sense to me. But is it uncomfortable to anyone else that Representative Pickering, as Vice Chair of the House Commerce Committee before his retirement, had jurisdiction over the Universal Service Fund that had paid hundreds of millions of dollars to his alleged mistress' company?