Released: February 09, 2006

Many Latino consumers will pay more if USF surcharge is changed

Universal Service Fund flat-fee collection idea talked about by FCC Chair needs study

Contact: Linda Sherry, 202-544-3088 or Joseph Ridout (Spanish speaker), 415-777-9648

Editor's Note: A streaming audio recording of a news event held today will be available as of 6 p.m. ET on February 9, 2006 on the Keep USF Fair web site. Millions of Latino and Hispanic long-distance phone customers in the United States would be socked with higher federal fees on their phone bills under a widely criticized proposal by the Federal Communications Commission (FCC) Chairman to force phone users who make few long-distance calls or use pre-paid wireless phones to either start paying or pay more into the Universal Service Fund (USF), according to a warning from Consumer Action, League of United Latin American Citizens (LULAC) and the Latino Issues Forum. The three groups are members of the Keep USF Fair (KUSFF) Coalition. Other than older Americans, Latinos and Latinos account for the largest number of Americans who would end up paying more under the FCC Chairman's plan for USF. A report by the Keep USF Fair report published in November 2005 concluded that the Martin plan would result in higher federal phone taxes (or forced phone bill hikes) of as much as $707 million for 43 million low-volume long-distance user households in the United States. Of greatest concern within the group of harmed consumers: the most vulnerable of Americans—16 million households of primarily low-income and elderly individuals—who currently can afford few or no long-distance phone calls, but would have to pay up to $383 million in higher USF taxes under the Martin scheme. Three to five million Hispanic and Latino households in the United States could be included among the 43 million Americans would pay more in federal phone fees under the Martin plan. As of July 1, 2003, the total US population was estimated at 290.8 million, including 40.5 million Hispanics in the continental United States and another 3.9 million in Puerto Rico. As such, the number of US Hispanics far outpaced African Americans at 34.7 million and Asian American at 12.2 million. Census Bureau data indicate that Hispanics have the second lowest median income of all racial/ethnic groups. The Hispanic Association on Corporate Responsibility and FCC estimates that Hispanic households collectively spend close to $8 billion dollars on telephone services and individually average $833 a year. Industry reports show that Hispanic are about twice as likely to buy pre-paid wireless phones as are white Americans (14 percent versus 8 percent), according a 2002 survey from the CPR Group. Consumer Action Director of National Priorities Linda Sherry said: "One of the most alarming aspects of the proposal for USF is that no one has yet produced an estimate of the effect of the change on low-income consumers, including seniors on fixed incomes, the poor, Hispanics and other segments of the American population. It does not make sense for the FCC or Congress to change the collection of USF funding without first taking a long, hard look at who would pay the piper. We need some hard facts before a change like this is made." Dr. Gabriela Lemus, director of policy and legislation, League of United Latin American Citizens, said: "In addition to unfairly impacting minorities generally who may be low-volume long distance users, consumers on low or fixed incomes, or have multiple phones; a switch to a connection-based methodology for USF would impact a special category of Latinos who rely heavily on pre-paid cell phones as their preferred choice or their only option for wireless service, including: Latino families who have children and teenagers; Latino elderly who may live alone or travel; Latino seasonal workers or students in the U.S.; Latinos who want cell phones for emergency or security purposes; Latinos who are on public assistance or fixed incomes; and Latinos who cannot meet credit or security deposit requirements." LULAC adds: "A drastic shift in USF funding support would hardest hit low-income residential and low-volume long distance users, a disproportionate number of whom are Latino. The proposed change in] USF funding support from usage basis to subscriber base would mean that residential customers would pay the same as business customers and low volume callers would pay the same as high volume callers, which is particularly unfair and burdensome to consumers on fixed-incomes who may see their phone bills increase even when they budget to make few or no long distance calls." Ana Montes, director of technology and consumer education, Latino Issues Forum, said: "We believe that all users of communications should pay their fair share to the USF. Latino and other predominantly low-volume and low-income phone users should not be disproportionately burdened by USF. This turns the current system on its head in a way that would unfairly disadvantage millions of Latino consumers." Hit hardest under the flat fee plan would be Latino and Hispanic consumers in eight states with the 20 cities containing the highest concentrations of Hispanic phone consumers: New York (New York City); California (Los Angeles, San Diego, San Jose, Santa Ana, Fresno, Long Beach); Illinois (Chicago); Texas (Houston, San Antonio, El Paso, Dallas, Austin and Laredo); Arizona (Phoenix and Tucson); Florida (Miami and Hialeah); New Mexico (Albuquerque); and Colorado (Denver). Losing Numbers: How America's Most Vulnerable Consumers Could Suffer Under Universal Service Fund (USF) Reform, the November 2005 report by the Coalition, notes: The currently consumer-friendly 'pay for what you use' approach to funding the Universal Service Fund would be replaced with a regressive, flat-fee arrangement of $1-$2 or more per phone line —regardless of whether or not consumers even make a long-distance call. For a consumer who now dials only a handful of long-distance calls per year and pays correspondingly low USF taxes, the effective tax rate would soar by more than 1,000 percent on an annual basis. With low-income and elderly consumers already socked with high gas prices, the prospect of soaring winter heating bills and continued inflation in medical prescriptions, the wide range of diverse groups in the Keep USF Fair Coalition are opposing the flat fee plan. These groups caution against balancing USF finances on the backs of the very consumers who use long-distance the least and are unable to afford the higher phone bills. In reality, these consumers would subsidize high-income/high-volume callers.

About the Coalition

The Keep USF Fair Coalition works to keep the Universal Service Fund collection method fair, and opposes proposals to move to a per-line flat fee. The Keep USF Fair Coalition was formed in April 2004 and now counts more than 115,000 members. Current members include Alliance for Public Technology, Alliance For Retired Americans, American Association Of People With Disabilities, American Corn Growers Association, American Council of the Blind, Black Leadership Forum, Consumer Action, Deafness Research Foundation, Gray Panthers, Latino Issues Forum, League Of United Latin American Citizens, Maryland Consumer Rights Coalition, National Association Of The Deaf, National Grange, National Hispanic Council on Aging, National Native American Chamber of Commerce, The Seniors Coalition, Virginia Citizen's Consumer Council and World Institute On Disability. The NAACP is a supporter of the Keep USF Fair Coalition, and is among the many national organizations that have filed comments with the FCC in support of a non-regressive USF collection method. Keep USF Fair also has received support through a resolution passed in 2005 by the National Association of Consumer Agency Administrators (NACAA). The resolution recognizes that a "restructuring effort of the Universal Services Fee must find a fair method, competitively neutral, that takes into consideration new technologies," and says that a "flat fee or exclusively numbers-based plan would be unfair to millions of consumers, especially lower call volume users if they would now pay the same fee as high volume, business users."