Universal service
Looking back at the origins of universal service here in the U.S. (Reed Hundt's line: when we say “universal” here, we mean “American”), it's useful to remember that it's always been used for purposes other than getting communications services to rural/needy areas.
Milton Mueller's fine book makes clear that when the Bell System's Theodore Vail made up the term “universal service” in 1907 what he was really trying to do was squelch competitive phone networks — there were a lot of them, and they were doing very well, and Vail wanted to convince everyone that one phone system would be a far better idea. So the idea behind universal service in the early 20th century wasn't spreading phone connectivity (competition had been doing a good job at that) or underwriting costs (because costs were being pushed lower by competition). It was, instead, the notion that being able to reach everyone on a single, centrally-managed phone network was a good idea.
Using the slogan “One System, One Policy, Universal Service,” Vail managed to get his monopoly established and stamp out competition.
In the modern era, “universal service” is a mysterious conglomeration of implicit subsidies and thinly-related programs, all funded by revenues on various telecommunications services. The 1996 Act says that it's supposed to be funded by telecommunications carriers providing interstate telecommunications services — in other words, phone companies. The phone companies pass the charges on to customers, and no one really pays attention to what's going on. The school and libraries components of the companies have been particularly prone to graft and corruption. In general, it's a mess.
About nine months ago now [pdf], the FCC both extended the contribution base for universal service (a program that spent $6.5 billion in 2005) to “interconnected VoIP” revenues and raised the expected contributions for wireless carriers. This is the third leg of the “let's get VoIP” scheme — E911, CALEA, and now universal service. Patient visitors to this blog have heard me talk about the E911 and CALEA elements of this program in the past.
Well.
Instead of fixing the USF program as a whole, and making it rational/coherent/based on providing highspeed access to the internet (rather than subsidizing phone service), the Commission last June adopted an interim approach that charges “interconnected VoIP” with contributing to the same bloated/broken program. The definition of “interconnected VoIP” will certainly broaden in the future — right now it means anything that enables real-time voice communications, uses IP equipment, and is capable of allowing users to connect to the traditional phone system. But in the future, that definition could expand to cover anything that the FCC views as substituting for traditional phone service (like, say, virtual world voice) and the USF obligations imposed by the Commission would continue to apply. (As usual, the jurisdictional basis for all of this is adventurously shaky — the FCC refuses to say whether VoIP is an information service or telecommunications service, and waves its hands and says 'ancillary' in a deep voice).
It seems to me that, once again, “universal service” is being used adventitiously. It no longer is a program under which some phone subscribers underwrite other phone subscribers (the way we used to use long distance revenues to subsidize local phone service). Instead, it's a program under which new forms of communications are being used to subsidize old ones, with hidden fees and impossible-to-calculate cross-subsidies. And it's a mess that is expanding irrationally.
Surely we can do better. If universal service means supporting internet access for all in this country, it should be a straightforward program that is paid for out of general revenues rather than out of a tax on innovative VoIP services. Why punish VoIP? Why support a program that is widely viewed as being entirely broken?
As it was for the early Bell System, “universal service” is a concept that can be useful in squelching competition.
Comments
3 Responses to “Universal service”
Got something to say?
It seems as if you are mixing a couple of different issues together: (1) is the universal service fund as a whole structured in the most efficient or rational way? and (2) is it appropriate to treat VOIP the same as circuit-switched voice service for purposes of USF fund contributions? It may be that the USF is administered inefficiently, or that its goals should be pursued through a tax on general revenues instead of a charge on providers or users (although in this age of politicians running screaming from anything with the word “tax” in it, query whether any insistence on funding a policy goal via a “tax” rather than some other mechanism may be tantamount as a practical matter to simply de-funding the policy goal). But the question of whether USF could be administered better, or whether it should exist at all, ought to be analyzed separately from the question of whether the difference between VOIP and circuit switched voice service somehow justifies one participating in USF and the other not. It is unclear that the public interest is served if consumers deciding whether to obtain voice services via VOIP or via traditional circuit switched systems are incentivized to choose one or the other based on the fact that for one they would pay a USF charge and the other not. Presumably if VOIP is a better or more efficient choice than circuit-switched for voice service it should stand as such on its merits and not based on a cost advantage that would merely be a function of differential USF treatment. Maybe USF charges are bad policy generally (or maybe not), but if they are applicable to one form of voice service, why not both?
thanks — I'm suggesting that the question of who should be paying for universal service should be secondary. We should first figure out why we have it, what it's for, and how it should be supported. It seems backwards to take a broken program and shore it up by having VoIP providers fund it. Susan
There's a telling analysis of Universal Service (and Universal Access) programs around the globe that was done last year by Intelcom Research (potentially biased as it was paid for by the GSM Association). The report is here http://www.gsmworld.com/documents/universal_access_full_report.pdf .
My summary http://blogs.nmss.com/communications/2006/10/mobile_networks.html is: these programs are broken in almost every country where they have been instituted (Uganda and Columbia are rare exceptions).