Fergie's Tech Blog

Cell Phone Subsidies Enrich Telecoms

An AP newswire article by Bob Porterfield, via Yahoo! News, reports that:

Cellular subscribers are paying hundreds of millions of dollars each year to subsidize landline telephone service, enriching big telecommunications companies while providing little or no benefit to cell phone users.

The subsidies are intended to reimburse the companies for providing traditional phone service in rough terrain and rural areas where stringing lines can be costly. But rampant development has transformed some of these backwaters into booming subdivisions, with no real adjustment to the distribution formula; others, like the oceanfront celebrity playground of Malibu, are receiving subsidies simply because of their difficult topography.

Outdated formulas for tabulating the surcharges — coupled with feeble government oversight — have meant a windfall for phone companies, which are fighting to preserve them.

posted by Fergie @ 1/14/2007 10:41:00 AM