Reporting Highlights
- Internet Gold Rush: Alaskan companies are getting billions of dollars in public telecom subsidies, yet the state ranks last in internet speed.
- Subsidizing a Ghost Town: The federal government pays one company more than $350,000 a year to provide internet to 300 buildings on an island of 80 people.
- Operating From Prison: The owner of another company operated his telecom business from behind bars and today gets more than $1 million a year despite faster options for consumers.
These highlights were written by the reporters and editors who worked on this story.
At the beginning of his three-year federal prison sentence for felony tax evasion, Roger Shoffstall lost his telephone privileges when a guard caught him running his small Alaska phone company from behind bars.
He’s lost a lot of privileges over the years. Shoffstall, 75, can’t serve on a federal jury. Unlike most Alaskans, he doesn’t receive an annual Permanent Fund dividend check. And he is not allowed to own a gun.
One thing never changes, however: Each year, the federal government sends his company, Summit Telephone, more than $1 million.
The money comes from a special government subsidy program that Congress created to bring fast, affordable phone and internet service to hard-to-reach places. You help pay for it.
Pull up your latest phone bill and look for a line labeled “Universal Service Fund.” Some phone companies list it as a “Universal Connectivity Charge” or fold it into a “Regulatory Programs & Telco Recovery Fee.” It’s all the same thing: a surcharge added to the monthly bill of phone customers throughout the United States.
The federal government and phone companies don’t call it a tax — but it acts like one. Carriers must currently contribute 37 cents of every dollar of their interstate and international phone revenues to the fund.
In Alaska, where many communities can only be reached by plane or boat, the Federal Communications Commission has given telecommunications companies $4.6 billion in these subsidies since 2016. That’s more than $600 per Alaskan per year. More per resident than in any other state.
Yet after all that spending, Alaska still ranks near the bottom for access to the very land-based, high-speed internet service the money was meant to deliver.
Some communities have yet to be wired at all. In others, fiber-optic cables or microwave towers offer internet with speeds that were recently clocked, statewide, as the slowest in the country. Even with the subsidies, the service comes at a steep price to customers: often hundreds of dollars a month for internet one-tenth what the FCC considers broadband quality.
The federal program has kept money flowing to companies like Shoffstall’s whose operators have troubled pasts. It also gives money to companies like Shoffstall’s regardless of how many people use their services. And fewer and fewer Alaskans have done so since low-earth satellites from Starlink entered the market at better prices.