The Interplay Between Regulation and Competitions: The Case of Universal Service Obligations

Regulators have long been aware of the social aspects of communication. In the past, regulated monopolists have provided Universal Service Obligations, typically funded via a system of cross-subsidies. In this paper, we first review the rationale for imposing Universal Service Obligations, based both on theoretical arguments and empirical results. We then address some of the new questions raised by the ongoing liberalisation process. Regulators now face the challenging problem of organising the provision and financing of universal service in a competitive environment.universal service obligations, regulation, competition

TELRIC vs. Universal Service: A Takings Violation?

While the Telecommunications Act of 1996 has had a profound positive impact on many sectors of the communications industry in the United States, local phone companies have recently faced a serious dilemma under a provision of the Act known as TELRIC. In this article, Stuart Buck presents a current analysis of the position of the telephone company and its struggle to meet costs under the TELRIC structure. The author argues that by forcing regional phone operators to grant wholesale pricing to competitors under TELRIC, while simultaneously maintaining Universal Service requirements of reduced-rate phone access to remote customers, the local phone companies may be unable to remain profitable. The first section of this article analyzes the history and nature of TELRIC. This discussion is followed by a review of Universal Service Fee requirements from state and federal perspectives. The author concludes by explaining the potential strengths and weaknesses associated with “Takings Clause” lawsuits and the ways in which such lawsuits may prove to be beneficial for struggling telephone companies

Rethinking universal service for a next generation network environment

There is a clear need, in view of significant competitive, technological and service changes taking place in the telecommunications sector, to review universal service obligations, their coverage, how they are financed and who is responsible for providing them. In many OECD countries, a primary longer term issue is how to provide universal service in the new competitive environment where voice is ubiquitous and cheap, voice revenues low and where voice has become just one of many applications provided on networks. Access too is changing, with more choice in platforms available that allow access to voice applications. This paper overviews the main issues that need to be examined in such a review with a view to the reform of universal service in a way consistent with emerging technological realities and competitive circumstances. [Introduction