Policy Responses by Administrative Rulings
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