Big Subsidies for Big Phone Companies

Senator Trent Lott, R-Miss., left, confers with Rep. Chip Pickering, R-Miss., at the state Legislature in the Capitol in Jackson, Miss., in this Jan. 4, 2006, file photo. Mississippi's competitive cellular carriers received more than $314 million in federal funds from a telephone tax from 2003 through the first four months of 2007, the most of any state, according to an Associated Press analysis of more than 20,000 disbursement records. Pickering, a former member of Lott's staff, helped shape the 1996 telecommunications law, according to his congressional biography. (AP Photo/Rogelio Solis, File) (Rogelio Solis - Associated Press)

The most highly compensated company, according to AP's analysis, was Little Rock, Ark.-based Alltel Communications Corp. Alltel collected at least $386 million over the study period for wireless services. Second was Western Wireless Corp., bought by Alltel in 2005, with $274 million.

Those two companies, combined with Midwest Wireless, also bought by Alltel, account for 30 percent of all funds paid to competitive carriers over the study period.

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.

Problems are no surprise

The system's potential flaws have been well documented since it was created.

The federal-state board recommended in 1996 that the subsidy be limited to a single connection per household, but the FCC at first disagreed.

By November of 2002, however, the agency took notice of the growing problem and asked the joint board how to fix it. The board again recommended, in February 2004, a one-line-per-household solution. But before the FCC could act, a handful of senators from rural states used their budget power to block implementation.

A trade group that represents rural carriers singled out Sens. Byron Dorgan, D-N.D.; Conrad Burns, R-Mont., and Ted Stevens, R-Alaska (representing the 48th, 44th and 47th most-populous states, according to the Census Bureau) for playing instrumental roles in blocking the provision.

The maneuver occurred during a House-Senate conference committee hearing on Nov. 22, 2004. The same scenario played out a year later, with rural telephone company trade groups again singling out Dorgan and Stevens for their "extraordinary efforts" to block the FCC from enacting the changes.