Incentives for cost shifting and misreporting: US rural universal service subsidies, 1991–2002

Sanford Berg, Liangliang Jiang and Chen Lin

Information Economics and Policy, 2011, vol. 23, issue 3, 287-295

Abstract: The US high cost loop support (HCLS) program, formerly referred to as the Universal Service Fund (USF), has been a key component of the Federal Communications Commission’s (FCC) program to promote telephone access in rural, high cost areas. This study uses data from 1136 rural telecom firms in 50 states between 1991 and 2002 to test the impact of the HCLS subsidy system on reported costs. Our findings suggest that firms in higher reimbursement threshold tend to report higher costs to the FCC in order to qualify for higher support payments. We also find that the capping of total available subsidy funds increased the incentive to overstate or misclassify costs. Overall, our results suggest that this billion-dollar program deserves closer scrutiny than it receives at present.

Keywords: Telecommunications; High cost subsidies; Universal service (search for similar items in EconPapers)
JEL-codes: H23 L51 L96 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167624511000333
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:23:y:2011:i:3:p:287-295

DOI: 10.1016/j.infoecopol.2011.09.001

Access Statistics for this article

Information Economics and Policy is currently edited by D. Waterman

More articles in Information Economics and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().