California’s Public Utilities Commission has reduced a telephone surcharge aimed at subsidizing telecom infrastructure in rural areas, on the grounds that growing urbanization and technological advances have reduced the need for such subsidies.

Regulators reduced the tax, which applies to all local and long distance telephone bills in California, from 1.3% to 0.5%. This change will be effective in January, and should save Californians approximately $315.4 million per year, partially offsetting a scheduled 2.36% hike in AT&T and Verizon phone rates.

PUC Commissioner, Rachelle Chong noted that a number of high-cost rural areas have experienced growth since the universal service fund was established in 1996. The reduced subsidy will generate enough revenue to offset the cost of covering a few truly out-of-the-way parts of California.