8. Per-Capita Income Test as a Criterion to Limit Subsidy Funds
As another possible tool to target subsidy support only to those lines where necessary to meet the goals of universal service, we solicited comments concerning the merits of targeting subsidy funds more narrowly by excluding high-income households from eligibility for B-Fund support through a "means test" applied to individual customers. As noted in the OIR, residents in a number of California counties have per-capita income in excess of the statewide median value.
8.1 Parties' Positions
Sprint and Time Warner Telecom favor the use of a means test for customers whose lines are subject to CHCF-B funding. Sprint offers no suggestion, however, as to how such a means test would be implemented.152 Time Warner Telecom argues that a means test is appropriate because the system for assessing the CHCF-B is regressive and a means test would enable the Commission to ensure that telephone lines to vacation homes would not be subsidized.
Other parties who commented upon the concept of a means test opposed it.153 AT&T, Verizon, SureWest and Cox argue that a means test would add unnecessary complexity to calculating the CHCF-B. AT&T characterizes a means test as creating an "administrative nightmare" where different customers, in the same street or neighborhood, could be charged different rates. A means test would involve modifications to billing systems and the implementation of income verification processes.
8.2 Discussion
We agree that a test based upon per-capita income is not a practical tool for limiting the size of the B-Fund, and that the administrative difficulties of establishing one would outweigh any benefits. We conclude that the revised threshold that we have adopted herein provides for a more simplified and practical tool to target subsidies to truly high cost areas in a more streamlined manner. The use of average household expenditures, as we discussed above, offers a more feasible basis to set affordability criteria in order to meet universal service goals.
152 Sprint, p. 2.
153 Verizon, p. 14; AT&T, p. 18; SureWest, p. 9-10; Cox, p. 9.
