Universal service and the Telecommunications Act of 1996. The fact after the act

Three goals of the 1996 Telecommunications Act are competition, efficiency, and explicit mechanisms to further universal service. The new universal service policies violate these goals. I review the policies (support for highcost and rural areas, low-income subscribers, and educational and medical institutions, and the funding mechanism) and detect the influence of various interest groups and the regulators' desire to protect their policies from public scrutiny. The new policies will require $4–12 billion per year to fund and create inefficiency of $1.2–4.0 billion per year from revenue taxation. A more efficient tax scheme would increase total surplus.     

Broadband and universal service

Section 254(b)(3) of the 1996 Telecommunications Act established the objective that residents of rural areas should have access to advanced telecommunications and information services comparable to services in urban areas. Pursuant to the passage of the Act, the Federal Communications Commission (FCC) established a new universal fund that provides explicit support to high-cost rural areas. This paper addresses the question of whether people in rural areas have similar access due to the support provided through the Commission's new high-cost fund. This paper focuses on the telephone platform because cable companies often do not serve rural areas due to the high cost of service, and because there is no mechanism for the federal or state government to subsidize the provision of advanced telecommunications services via cable. The Act's objectives are apparently not being met in rural areas served by large companies since people living in these areas are much less likely to have qualified lines that could be used to access advanced telecommunications services. On the other hand, small companies are much closer to satisfying the statutory requirement as a result of the implicit support received through cost sharing.     

Universal service in China and India: Legitimating the state?

This paper examines the contrast between China's and India's universal service policies as manifestations of the two states' differing self-conceptualizations and legitimation strategies. We examine the timeline of universal service policies in the two countries, differentiating between the territorial, demographic and layered dimensions of universal service. The analysis reveals many similarities between the two countries, as well as some differences primarily related to the mode of funding universal service programs and the lead China has taken in deploying informatization services. We identify some of the proximate causes that resulted in these policy decisions. But in addition, we also examine how universal service policies are related to contrasting models of state legitimation.     

Loop density and telephone company cost: Panel data evidence

The assumption that telephone company loop costs are determined significantly by loop density has been a bedrock assumption relied on in the development and implementation of several telecommunications programs including federal and state universal service programs. Increasingly telecommunications program development and implementation have focused on this relationship to the exclusion of all others. This article examines embedded loop cost data from a panel of Illinois telephone companies in order to examine the relationship between the costs that these companies report incurring and their respective loop densities. The analysis turns up little evidence that density is the sole driver of embedded costs.     

Regional universal telecommunication service provisions in the US: Efficiency versus penetration

Universal service, the long time goal of telecommunications regulation, is under new scrutiny by stakeholders. The Telecommunications Act of 1996 eliminated the barriers to competition implemented in the transitional Modified Final Judgment of 1984. The FCC is now setting up a new universal service plan, which extends its scope to schools, libraries and health care providers. At the same time, however, concerns about the effectiveness of the universal service are increasing. This article reports on a study which first investigates the growth patterns in the number of house-holds by income groups in states, and then examines the effectiveness and efficiency of the universal service policy on low-income households at the state level.     

Impact of school district demographics and financial status on E-Rate funding: Analysis of Pennsylvania data for 1999 and 2004

The E-Rate program was mandated by the 1996 Telecommunications Act to bridge the gap in telecommunications and internet access between rich and poor communities in the United States. Though the funding process embraces specific formulas to direct support at the most needy schools and school districts, a concern has been raised that the complex, multi-stage application process may prevent some school districts from availing themselves of E-Rate funds due to lack of technical expertise and administrative support. The objective of the paper is to assess the cumulative impact of these two contradictory effects. Changes in funding patterns over time are also examined. Data on all E-Rate projects where the recipient is a school district were collected for two years, 1999 and 2004, for the state of Pennsylvania. Results show that E-Rate funding was significantly positively correlated with the poverty rate and percentage of minority students fulfilling the policy intent, but school districts receiving more revenue per student also obtained higher E-Rate support. Location too was found to be a significant predictor of E-Rate funding. The policy implications of these findings are discussed in the conclusion.     

Rural internet connectivity

This research investigates Internet connectivity in rural regions, looking specifically at four states in the US. Access to the Internet has assumed new significance for commercial and political reasons, and remote and sparsely populated areas typically lack the telecommunications infrastructure for reliable and fast Internet connections. Even as government programs such as the federal E-rate provisions bring Internet connectivity for institutions such as schools and libraries under the government's universal service umbrella, more general Internet access to a broader community constituency has not been addressed within policy circles. Even the deployment of so-called “national” Internet services favors urban regions.Research associates Kyle Nicholas and Lisa Parker were instrumental in undertaking this research, as was financial support from Southwestern Bell and the Rural Policy Institute. The comments of an anonymous reviewer helped greatly.     

Corporations vs. communities: Evolution of wireless services in the US and the devolution of local control

The Telecommunications Act of 1996 opened the way for rapid expansion of wireless services in the United States. Industry was well-positioned to exploit new opportunities in placing towers and antennas across the American landscape. However, communities were not prepared for the legal battles needed to protect their local zoning and land use decisions. Portraying communities as anti-progress, impatient corporate interests mounted a successful campaign for federal preemption of all local moratoriums that communities had used to buy more time to assess issues, risks, and opportunities. In response, communities (fueled by senators and congressmen) have launched a national grassroots movement to protect their interests.     

Entry in Local Telecommunication Markets

In this paper, we explore the determinants of recent entry into local exchange service, and the role that regulatory policies have had in aiding this policy objective. Our results suggest that the 1996 Telecommunications Act did lead to some entry, but that strategic non-price behavior by incumbents may have offset this impact to some extent. We also find that regulatory policies and market fundamentals play an important role in determining entry. Clearly, market size (measured in various ways) is an important determinant of entry, while there is empirical support for the role of more flexible regulatory mechanisms in promoting new entry.     

A rotten deal for schools? An assessment of states’ success with the National School Lunch Program’s in-kind food benefit

The National School Lunch Program (NSLP) is one of the United States’ largest domestic food aid programs. The NSLP provides states with both cash and commodity foods for school meals. This research assessed the success of the school commodity program by comparing states’ available annual funding to the value of foods that states actually received from 2001 to 2009. Results indicate that an in-kind food funding system is not desirable for schools; states failed to receive entitled commodity food value in most years, resulting in annual funding losses for schools of $35–87 million. Inconsistent funding inhibits schools’ ability to improve meals and, ultimately, child nutrition outcomes. In light of these results, it is recommended that a cash benefit should replace the National School Lunch Program’s commodity food program.     

Universal service subsidies and cost overstatement: Evidence from the U.S. telecommunications sector

Utility subsidies are often defended as promoting universal service. However, specific support formulas may be poorly targeted and/or designed. The U.S. high-cost loop support (HCLS) program (formerly referred to as the Universal Service Fund (USF)), has been a key component of the FCC's USF program. With proposed initiatives for universal access to broadband, it is useful to critically evaluate how the HCLS creates a moral hazard problem. This study finds that companies receiving HCLS subsidies have an incentive to report high costs to the FCC in order to qualify for still higher support payments. Using data from 1136 rural telecom firms in 50 states (1992-2002), this study shows that some companies respond to current incentives by overstating costs (or incurring higher costs) as they approach the subsidy cutoff points. Compared to the no-subsidy group, companies at the point of greatest subsidy jump appear to overstate costs more due to larger marginal benefits. Such perverse incentives need to be recognized in future universal service initiatives.     

我国电力普遍服务问题研究

首先提出了电力普遍服务的定义与内涵,对电力普遍服务的必要性和资金来源进行了详细讨论;接着分析了我国电力普遍服务的发展历程、现状和存在的问题;最后明确提出,我国应该构建与电力体制改革和市场化改革相适应的、具有中国特色的新型电力普遍服务机制,对普遍服务的责任主体和资金来源、阶段目标、实施主体和实现方式、服务对象和业务范围、管理机制和成本补偿机制进行明确,为我国电力普遍服务提供法律保障。     

Impacts of the 1996 Telecommunications Act on the US model of telecommunications policy

The 1996 Telecommunications Act provides mechanisms for all parties to pursue their interests. For instance, the Act incorporates two different and complementary approaches: (a) it authorizes all operators to operate in businesses from which they were previously excluded. (b) it incorporates some legal procedures and regulatory constraints, that provide parties with tools to defend their territories, excluding other operators. A striking example is the ‘competitive checklist’ for RBOCs to enter the interLATA long distance market.The undesired result of this approach is both the creation of enormous business opportunities for lawyers and a stalemate, because all parties have been quite successful in adopting defensive strategies to block others’ initiatives. This has happened to the detriment of offensive moves that, as everyone hoped, would have increased competition in all markets and, as a consequence, the availability of innovative high quality services for the public at low prices.Analysis of the US regulatory model in the telecommunications sector, and in particular the specific studies carried out in three States, have led to a series of conclusions that can provide guidelines on the type of issues and some possible solutions with regard to telecommunications liberalization, relationships between different levels of regulation (e.g. federal/State), operator’ strategic moves in response to regulation. The analysis of the US model, even though it is very much related to country-specific conditions, allows us to isolate some issues that other countries, and among them Italy, will be likely to face in the short term.     

Economics at the FCC, 2016–2017: Auction Designs for Spectrum Repurposing and Universal Service Subsidies

The Federal Communications Commission is responsible for federal regulation in the telecommunications and electronic media sectors, and for management of the nation’s non-federal radio frequency spectrum. During the past year, Commission economists contributed to the agency’s ongoing efforts to use market-based mechanisms—such as auctions—to allocate spectrum and distribute universal service subsidies efficiently. This includes repurposing broadcast television spectrum for more efficient use by wireless service providers through the recently concluded Broadcast Incentive Auction and structuring auction mechanisms to promote efficient allocation of universal service subsidies for the increased build-out of mobile wireless and fixed broadband service in unserved and underserved areas.     

Nutrition research policy : US progress in the past decade

Human nutrition research is receiving a great deal of attention from the media, consumers and the US government. This article focuses on policy problems facing the government in the development and implementation of the federal human nutrition research programme: establishment of priorities, organization and funding. The background leading up to the present situation is developed, and the political bodies and federal agencies participating in the debate are described. The authors identify the policy issues, and discuss progress towards their resolution.     

Whose call is it? Targeting universal service programs to low-income households’ telecommunications preferences

Do universal service programs give customers what they want? This paper uses new survey data to study low-income households’ telecommunications choices in the United States and to consider the degree to which such households’ preferences are addressed by existing universal service programs. The research shows that households that choose only one form of telecommunications increasingly are choosing a mobile phone, while those that choose to have both modes of communications are shifting their usage towards their mobile phones. These trends are less pronounced among higher-income households. One implication for universal service policy is that traditional subsidies for landline phones are increasingly ineffective in reaching low-income households such subsidies are designed to help; subsidies for acquiring and using mobile phone services might be more beneficial to low-income households than traditional subsidies for landline phones.     

Estimating the impact of low-income universal service programs

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasi-maximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for households below the poverty line. Our results suggest that automatic enrollment programs are important and that Linkup is more cost-effective than Lifeline, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.     

What level of dialtone penetration constitutes ‘universal service’?

This paper focuses on estimating whether a natural level of non-penetration exists, and if so, what the maximum attainable penetration rate is. Universal service penetration levels have steadily increased over the last decade. This paper hypothesizes that penetration levels will level off over time at some point below 100%. Econometric models have been created to estimate penetration rates as a function of several explanatory variables, including per capita personal income, price changes for residential local service, price changes for toll services, and the existence of lifeline programs. The modeling results also provide information on cross-elasticities between toll and local service and the effects of the FCC's subscriber line charges and lifeline programs on the universal service policy goal. In summary, this research provides new information on the topic of what constitutes universal service and provides considerable data regarding own-price and cross-price elasticities associated with residential local service.     

Demand for telecommunication services in developing countries

Living standards and economic growth in developing countries are invariably linked to the availability and use of telecom services. Effective policy decisions require the best estimates of the drivers of these services. In this paper, telecommunications demand is estimated in models for residential mainline and mobile telephone service for developing countries for the period 1996–2003. The paper tests for cross-price effects between mainline and mobile service and its findings have important policy implications. It finds residential monthly price elasticity to be insignificant for developing countries, but the connection elasticity is larger than generally found in the literature. Mobile monthly price elasticities are very large. A new and important empirical finding is that although wireline phones are substitutes in the mobile market, the contrary is not true—mobile phones are not substitutes in the wireline market, and in fact may be considered complements. This lack of symmetry has important implications for properly defining telecom markets. Universal service subsidies and competitive market initiatives should be reevaluated in light of the paper's elasticity estimates. Increased competition, income growth and enhanced education may be the ultimate universal service promoters.     

From citadels to clusters: the evolution of regional innovation policies in Australia

In Australia, the federal (central) and State (regional) governments share constitutional responsibility for aspects of science and innovation policy. In practice, the federal government has tended to overshadow the States both in funding and policy for research and innovation. It can be argued that we are now seeing the strong rebirth of regionalism (at least at the State level) as far as government support for science, technology and knowledge-based industries is concerned. The paper traces the growth of regional innovation policies through examples of initiatives from South Australia and other regions and examines the respective contributions of the State and federal governments. The character of State government support has evolved over the last 15 years, from sponsoring grand 'technology citadels' to today's strategies that take a more bottom-up approach to building intense innovation environments, local clusters and knowledge hubs. Some of these trends reflect the influence of the global knowledge economy on regional industries, while others (notably the relative decline of the federal government as an R&D performer) are peculiarities of the Australian innovation system. The outcome is a significant evolution in Australia's innovation system, one which parallels responses to globalisation in other countries and suggests a different – but not diminished – role for public sector innovation policy.