1. Comparative Telecommunications Law Spring, 2007 Prof. Karl Manheim 10: Universal Service Copyright © 2007

2. Spring 20072 Universal Service in US Communications Act of 1934, § 1 “To make available, so far as possible, to all the people of the US, without discrimination … a rapid, efficient, Nationwide, & world-wide wire & radio communication service with adequate facilities at reasonable charges…” Mechanism Implicit (hidden) cross-subsidies by AT&T  Business subsidized residential; IX subsidized local  Due to horizontally & vertically integrated monopoly Does this work in a competitive market?

3. Spring 20073 Universal Service in US Telecommunications Act of 1996, § 254 “Quality services should be available at just, reasonable, and affordable rates Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services… that are reasonably compar-able to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.”

4. Spring 20074 Basic Principles of Univ. Service 47 USC § 254 (b) Quality services should be affordable Subsidized access in rural & high cost areas and by low-income consumers Equitable contribution by all telecom providers Explicit (transparent) and stable support mechanisms (collection, administration) Telecom servcs (including Internet) by schools, libraries, and rural health care facilities (e-rate) Can these work in a competitive environment?

5. Spring 20075 Who Pays for Univ. Service? Telcos providing interstate telecom services All LECs, IXCs, Wireless, other large telcos  Internet Telephony (VoIP)? Yes (Order, 21 June 2006)Order, 21 June 2006  Information service providers (ISPs, ESPs)? No “Contribution Factor” for Q1 2007 = 9.7%Q1 2007  Adjusted quarterly based on outlay (2006 = $7.3B)  Goes into USF (Universal Service Fund) Consumers Telcos can (usually do) pass costs through Surcharges on all telecommunications services

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8. 8 Who Receives Univ. Service? Telcos § 102: “A common carrier … shall be eligible to receive universal service support … and shall … offer the services that are supported by Federal universal service support mechanisms” Benefits passed on to eligible consumers  Eligibility an evolving concept Who gets Universal Service What services are included

9. Spring 20079 What Services 47 USC § 2549(c) Universal Service is an evolving level of telecom services that the FCC shall establish periodically, taking into account advances in telecom & information technologies that  are essential to education, public health, or public safety  have been subscribed to by a substantial majority of residential customers  are being deployed in public telecom networks  are consistent with the public interest, convenience and necessity Lifeline and Linkup

10. Spring 200710 Federal-State Joint B d on UnivSvc TCA § 254: “the Commission shall institute and refer to a Federal-State Joint Board … in order to implement [UService], including the definition of the services that are suppor-ted by Federal universal service support mechanisms” FSJBUS Makes recommendations to FCC Administered by Universal Service Admin Co.Universal Service Admin Co.

11. Spring 200711 Services Authorized by FSJBUS Access to PSTN voice grade single party service  access to IX  operator/directory/emergency services DTMF (dual tone multi frequency) Advanced services no for high cost areas and low-income users yes for schools, libraries, rural health care  internet, on-line data services  eRate

12. Spring 200712 The eRate Schools & Libraries Support Mechanism Eligible services:  Telecommunications Services (telephony)  Internet Access (broadband)  Internal Connections (routers, wiring) Application Process Cumbersome & Expensive  All specifications and bids must be included  Many schools failed to apply The US Army Corps of Engineers did it for LAUSD

13. Spring 200713 Universal Service in EU Universal Service Directive (2002/23/EC) Telco obligation to provide minimum set of services to all locations at affordable price  How does this differ from US approach? How are designated telcos compensated?  Special & Common tariffs Geographical averaging Minimum set of services (compare Lifeline)  Public funding  Levies on competitors/users (sector specific funding) Technologically neutral, so as not to distort convergence

14. Spring 200714 Universal Service in EU Universal Service Directive (2002/23/EC) Compare the EU compensation schemes to US  How can distributional equity be achieved in a competitive system?  How can it be achieved without market distortion? Leased Line Service Special Directive (92/44/EEC, et al)  Telcos with SMP must provide leased lines at cost  A form of Universal Service to facilitate ecommerce

15. Spring 200715 Universal Service in EU Services covered Single Fixed Connection and Access to PSTN  Voice and (slow) data services (dial-up Internet)  DTMF (tone dialing) urged but not required Operator, Directory & Emergency Services - 112 Public Telephones Disabled Access (quality of service not yet defined) Beyond Wireline Telephony Interoperability for Digital TV “Must Carry” of TV & radio programming

16. Spring 200716 Universal Service in EU Keeping Prices Affordable A la carte options Contract & tariff transparency Itemized billing Number portability (not including wireless) Consumer Protection  Dispute resolution  No disconnect to essential services How do these differ from the US method?

17. Spring 200717 Universal Service in EU Implementation UK Regulations (2003 No. 33) Periodic Review under Art. 15 2006 Review by EC (7/4/2006) 2006 Review by EC  Declines to extend to mobile phones 2G market is sufficiently competitive to keep prices low  Declines to extend to Internet access “Take-up” not yet a majority of consumers  Declines to change scope of universal service Pay phones still required (despite cost inefficiency)

18. Spring 200718 Wireless Universal Service Not in EU US - on Tribal Lands Services covered  Wireless local loop (WLL) or mobile wireless Rationale  Low penetration rate on reservations (18-60%)  Wireless is cost efficient vs. wireline & incremental Compensation for Telco providers  Bidding credits (public treasury)