Discussion Papers

John D. Borrows, Phyllis A. Bernt, Raymond W. Lawton

Universal Service in the United States: Dimensions of the Debate
Nr. 124 / März 1994

Summary

Universal service is a widely used but not fully understood concept that policymakers and regulators have relied upon to provide guidance for a number of issues. In the stable predivestiture period, universal service meant rotary dial and voice grade service. Affordability was generally not a dominant concern during this time. Additionally, although telephone service had a recognized role in economic growth and development, few envisioned telecommunications as a leading economic sector.

Changes in technology, customer demands, and market structure are the main reasons why the universal service concept offers somewhat less guidance than it did in the past. Digital switching, radio technology, and fiber cable have allowed different portions of the public switched telecommunications networks to be revaluated and selected by firms as sites of competitive activity. Cellular and personal communications systems, for example, hold some promise for bypassing the local loops. Fiber technology allows great traffic concentration, which increases the economic efficiency of the network. Competitive access providers, cable television companies, and local exchange companies have all acted to build efficient and high-volume subnetworks using fiber.

Market structure was significantly affected by regulatory changes that have allowed competition in customer premises equipment (CPE), toll, local loop, switching, and customer services. Previously, the revenues for each of these services were collected by the monopoly local exchange carrier (LEC). These revenues were used for various purposes including the promotion of rural telephone service. With the advent of competition in each of these areas, revenues once used to support universal service may no longer be available.

This report identifies and analyzes various funding mechanisms and identifies telecommunications services that have been used in the United States to promote universal service. The effort to promote universal service has occurred at the federal and state level. This report also identifies newer universal service concerns associated with services to disabled citizens, cellular communications, and competition.

The report develops the concept that universal service has two components. The first is universal basic service. The second is universally available service. In the predivestiture period, very little difference existed between universal basic and universally available service. Tone dialing was one example of a universally available service that was generally not considered as a part of the basic voice-grade telephone source.

In recent times the variety of universally available services has greatly increased due to the great number possible from the digital switching platform. Filings of the Regional Bell Holding Companies for open network architecture (ONA) produced lists of hundreds of new services that could be available.

Consumers, regulators, and policymakers know that not all available services should be included in the set of basic services. This report examines the common carriage concept and various service offerings used in its analysis of the definition of universal service for the 1990's. Several listings and frameworks are identified that present sets of services that define universal basic service. The principles and assumptions underlying the frameworks are also examined.

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