Universal Service: How Much Is Enough?

By Loube, Robert | Journal of Economic Issues, June 2003 | Go to article overview

Universal Service: How Much Is Enough?


Loube, Robert, Journal of Economic Issues


The Telecommunications Act of 1996 dramatically altered the regulatory environment of the telecommunications industry. The purpose of the act was to exchange regulatory pricing principles for market prices. Regulators would no longer establish just and reasonable rates for retail customers. Instead, they would promote competition and reduce regulation. The competitive marketplace would ensure lower prices, higher quality services, and the rapid deployment of new technologies.(1)

Conventional wisdom held that pressure from the newly released market forces would destroy existing cross subsidies among ratepayers that supported universal service prior to the passage of the act (FCC 1999, 10). Anticipating these events, the act expanded the Federal Communications Commission's role in preserving and advancing universal service. The act required the Universal Service fund to be explicit and sufficient. (2) Since the passage of the act, the FCC has significantly increased universal service funding. (See table 1.) However, it is still not clear if the current funding is sufficient. The purpose of this paper is to review the definition of sufficiency and to use the definition to determine sufficient expenditure levels. Three dimensions of sufficiency will be addressed. First, programs associated with ensuring that households can afford telephone service will be investigated. Second, the types of services that are supported will be examined. Finally, the funding for large carriers serving rural and high-cost areas will be reviewed.

Programs for Households

Universal service occurs when telephone service is provided to all households independent of income, race, and other demographic factors. In the context of this definition, universal service is measured by the telephone penetration rate, which measures the percentage of households with telephone service. A sufficient amount of support would ensure that the goal of serving all households is met. A lesser but still significant goal would be to raise the low-income household penetration rate to the national average rate.

The national average penetration rate in the United States has increased from 91.8 percent in 1984 to 94.5 percent in 2001. The low-income penetration rate increased from 80.1 percent to 876, while the penetration rate for medium and high-income consumers remained constant. Even with this change, the low-income rate lags far behind the rate for other income groups. (See table 2.) To achieve the goal of raising the low-income penetration rate would require providing telephone service to an additional L6 million low-income households (Belinfante 2002, tables 5 and 6).

Federal Communications Commission efforts to increase the low-income penetration rate began in 1985. Under the Lifeline program, the FCC waived the subscriber line charge if a state agreed to match that reduction with a lower monthly state rate (FCC 1985, 6). In 1998, the Link-up program was initiated. Link-up helps low-income consumers begin telephone service by paying half of the connection charge but not more than $30 per household (FCC 1987, 17).

The 1998 Universal Order (FCC 1997) enhanced the Lifeline program. Federal support for low-income consumers was increased from $3.50 to $5.25 without state matching funds, and if states match the federal subsidy, a qualifying customer can receive up to $7.00 in federal aid and $3.50 in state aid for payment of the monthly local telephone bill and the subscriber line charge. In addition, all companies wishing to participate in federal universal service programs must offer a low-income program (FCC 1997, 341-363). Following the CALLS Order, the Lifeline program was revamped so that the available support would increase with the scheduled increases in the subscriber line charge (FCC 2000, 95-96). Currently an eligible consumer can receive up to a $13 monthly subsidy for telephone service. At that rate, bringing service to the additional 1. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Universal Service: How Much Is Enough?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.