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The "State" of Universal Service

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Author Info

  • Rosston, G.R.
  • Wimmer, B.S.
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    Abstract

    The introduction of competition forces regulators to address the historical practice of using of implicit cross subsidies to maintain uniformly low local telephone service rates. The Federal Communications Commission recently adopted rules to remove a portion of these implicit subsidies by adopting an explicit universal service program. This program, however, only addresses a small portion of the problem and leaves to the states problems associated with intrastate cross subsidies. In this paper we examine several alternative universal service programs that states may adopt. Overall, we find that universal service programs that base subsidy dollars on the cost of providing service have little effect on telephone penetration rates and result in large taxes, which distort market outcomes and drive those paying into the system from the network. Large universal service programs also cause competitive distortions. Furthermore, we find that cost-based mechanisms do an equally poor job when we use normative criteria, such as the effect the programs have on the distribution of income.

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    Bibliographic Info

    Paper provided by United Nations World Employment Programme- in its series Papers with number 99-018.

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    Length: 17 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fth:unwoem:99-018

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    Postal: International Center for Economic Growth, 243 Kearny Street, San Francisco, California 94108.

    Related research

    Keywords: REGULATION ; TELECOMMUNICATIONS COMPETITION;

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    Cited by:
    1. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
    2. Tobler, Amy L. & Komro, Kelli A., 2011. "Contemporary options for longitudinal follow-up: Lessons learned from a cohort of urban adolescents," Evaluation and Program Planning, Elsevier, vol. 34(2), pages 87-96, May.
    3. Ramiro Losada, 2004. "On The Definition Of Affordable Prices Under Universal Service Obligations," Economics Working Papers we044015, Universidad Carlos III, Departamento de Economía.
    4. Clarke, George R.G. & Wallsten, Scott J., 2002. "Universal(ly bad) service - providing infrastructure services to rural and poor urban consumers," Policy Research Working Paper Series 2868, The World Bank.
    5. Calzada, Joan, 2009. "Universal service obligations in the postal sector: The relationship between quality and coverage," Information Economics and Policy, Elsevier, vol. 21(1), pages 10-20, February.
    6. Chattopadhyay, Pradip, 2004. "Cross-subsidy in electricity tariffs: evidence from India," Energy Policy, Elsevier, vol. 32(5), pages 673-684, March.
    7. Eric P. Chiang & Janice A. Hauge, 2007. "Funding Universal Service: The Effect of Telecommunications Subsidy Programs on Competition and Retail Prices," Working Papers 07-08, NET Institute, revised Aug 2007.

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