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Should universal service be scrapped?

July 16, 1998
Web posted at: 9:00 AM EDT

by David Rohde, columnist, Network World


(IDG) -- It's a good thing fax machines can't read what's coming over them. If they did, the fax machine in our Washington, D.C. bureau would shut down from shock and embarrassment.

We've received endless faxed denunciations from Capitol Hill blaming just about everyone - AT&T, the Bells, Al Gore, "special interests" and the Federal Communications Commission - for user surcharges to pay for universal service.

What if the whole mess turns out to be Congress' fault? Most users are stuck with a 4.9% surcharge for interstate voice and data traffic because carriers don't want to eat the cost of new programs such as subsidized Internet access at schools and libraries.

A new study from the Cato Institute argues the problem isn't figuring out who should pay. The real problem, according to study author Lawrence Gasman, is the whole concept of universal service. Congress should just get rid of it. Among Gasman's arguments:

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  • The idea that universal service dates back to the Communications Act of 1934 is a myth. That law didn't use the term and did not require subsidies for rural phone lines or residential telephony in general. That idea grew up in the 1950s and was finally codified in the Telecom- munications Act of 1996.
  • It's not fair to blame the FCC exclusively for the huge financial scope of the E-rate program. In the 1996 law, Con- gress ordered regulators to ensure that schools get "special rates and other concessions" for "advanced telecommunications and information services."
  • It's no wonder new local carriers compete for large customers in urban areas, not small customers in rural areas. Who could beat the phone companies' already subsidized rates?
  • Politicians stoking fears about "information have-nots" are putting communications technology on a pedestal where it doesn't belong. "Poor people can afford less than rich people, whether the commodity in question is telecommunications or anything else," Gasman said.
  • Finally, Gasman argued that making a big deal about Internet access in schools may defeat the very equalizing purpose it's supposed to serve. "Several recent studies suggest that Internet access may increase the gap between low- and high-achieving students because the resource is most eagerly used by white males."

I'm not sure the government's hang-up about providing universal service is all bad. After all, a public network is more useful the more people you can get on it. You should know the Cato Institute is a libertarian think tank whose studies always seem to line up just enough facts to favor government nonintervention.

Gasman's arguments are yet another corrective against politicians who insist they have to "do something" about information technology without thinking through the consequences. Gasman's study avoids regulatory jargon in favor of clear presentation. Check out the study at

Rohde is Network World senior editor, Carriers & ISPs.
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  • FCC leaves ISPs free from telco-access fees (InfoWorld Electric)
  • FCC may change position on Internet-access fees (Computerworld)
  • 1996 Telecom Act faces court disputes (InfoWorld Electric) Related sites:

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