Whether by pressures of the hearings held by the House Select Committee on
Aging, direct pressures from their own constituents, or general frustration with
their failure to execute a single telecommunications policy proposal, in July
1983 the key House and Senate committees (the House Energy and Commerce
Committee and the Senate Committee on Commerce, Science, and Technology)
took action to overturn the FCC Access Charge Decision. Members of both
committees separately introduced legislation designed to protect universal service
by shifting a major portion of local telephone service costs back onto the
interstate rate base. Both bills (S. 1660 and H.R. 3621) carried the same name,
The Universal Telephone Service Preservation Act of 1983.

The technical question addressed by both bills was how to replace the
revenues lost to local telephone companies by the demise of the system of
separations and settlements which had prevailed under the Bell System
monopoly. Although consistently in dispute, the separations process was
generally credited with having transferred substantial revenues generated in the
long distance market to local telephone companies to constitute a subsidy which
kept local rates artificially low. Moreover, Bell System representatives and
some state PUC members also charged that tariffs for new telephone equipment
and services had been inflated over actual costs as a means of keeping basic
telephone rates low. Hence, with the divestiture and the unbundling of costs and
repricing of services and equipment, the sheltering of local rates was no longer
possible.

Yet there was no acknowledgment by many of the key players in the policy
debate that anything had occurred or would occur which would provoke
substantial increases in local rates. Despite its early contention that competition

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