Universal Service, the digital divide, and Internet pricing

Universal service is a concept deeply rooted in the U.S. telecom industry, and is often cited in other countries, notably South Africa. For decades, the government and phone companies have promised to make phone service available to as many people as possible. They have accomplished this by subsidizing basic local service in a number of ways, notably through so called “access charges” on long-distance calls, amounting to about six cents per minute. During the late 1999 election period, Bill Clinton and Al Gore made a number of public statements about the importance of universal service (concerning which the term “digital divide” has become popular). The Benton Foundation offers a page on the history of universal service.

The Telecommunications Act of 1996 actually incorporated universal service into law for the first time. A small—but politically charged—expression of universal service is its “E-Rate” subsidy for schools, libraries, and rural health clinics. By the time the first submissions were being made for this small boost to poor children and families, it became the target of a campaign by local phone companies (using such high-visibility tactics as listing the subsidy as a separate fee on phone bills) and naturally enough of complaints by conservative Congressmen, who liked calling it the “Gore tax.” The first disbursements were cut to about 60% of the original plan, and submissions are now being accepted for the second year. In June 1999, Chairman Kennard of the FCC also asked local telephone company executives to meet with the FCC and explain what they are doing to help bring high-speed services to rural areas at affordable rates.

Now universal service is undergoing challenges on many fronts: first, suggestions in the Telecommunications Act that it be extended to “advanced services” (possibly including Internet access); and second, technological innovations such as Internet telephony that eventually will let users bypass the access charges. The Cato Institute has issued a classic libertarian critique of universal service.

The Federal Communications Commission (FCC) has reduced access charges on long-distance phone calls, which pay for universal service. Computer and Internet users will be most interested in Internet-related proposals. New rules could raise costs for Internet Service Providers, perhaps forcing a new pricing structure that would replace the historically liberating flat-rate use with per-minute charges (called “usage-based charges”). So far, the FCC has been vigilant in keeping Internet access from being classified in such as way to permit usage-based charges. But several recent rulings come dangerously close to the edge, such as one classifying Internet access as an interstate call but not a long-distance call—if you find that confusing, you’re joined by plenty of industry experts.

CPSR joined NetAction and other organizations in submitting comments opposed to price changes. The FCC has written a fact sheet to allay fears, and FCC staff member Kevin Werbach has written an excellent paper on regulation issues.

But complaints by major local phone companies such as Pacific Bell and Bell Atlantic, vigorously opposed by the computer companies, indicate that debate about pricing for Internet use will continue. The FCC is considering a reclassification of Internet providers to make them pay into a universal service fund that pays for Internet access in schools, libraries, and health clinics.

With the passage of the Telecommunications Act, key decisions about the public interest will be made by the FCC. We have archived comments from the American Libraries Association, the Consumer Project on Technology, the Center for Civic Networking, the National Public Telecomputing Network, and the Learning and Information Networks for Community Telecomputing Coalition.

Back to Cyber Rights home page.

Last updated: June 9, 2000

Suggestions to: cyber-rights-owner@cpsr.org