Several rural telco groups have banded together to challenge the findings of a white paper from The Technology Policy Institute, which found that 59 cents of every dollar awarded to telcos from the Universal Service high-cost fund went toward general and administrative expenses.

“Faulty assumptions and erroneous calculations led the paper to overstate dramatically the portion of USF that supports such expenses,” wrote the National Exchange Carriers Association (NECA), the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), the Rural Alliance and the Western Telecommunications Alliance (WTA) in a press release issued yesterday.

The telco groups noted that the Federal Communications Commission’s recently released notice of proposed rulemaking observes that corporate expenses account for only 13% of high-cost loop support—not 59% as the white paper states.

According to the telco groups, the white paper author apparently assumed all of a small telco’s general and administrative expenses were covered through the high-cost fund. “The fatal flaw of the paper is its incorrect assumption that all expenses incurred by USF recipients are actually supported by USF,” the release states.

According to the rural telco industry, the Technology Policy Institute went looking for an outrageous statistic it could seize upon to illustrate its belief that the rate of return system eliminates the incentive for firms to operate efficiently. But it apparently did so without a full understanding of how the system works, which certainly calls into question any assertions and recommendations made in the paper about the high-cost program, argues this rural telecom coalition.

As the release from the telco groups notes, “The paper ignores that USF recipients are in fact required to run their businesses efficiently precisely because they do not receive full recovery of all expenses through USF.”