Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country. An example of this concept is found in the US

Telecommunications Act of 1996 The Telecommunications Act of 1996 is a United States federal law enacted by the 104th United States Congress on January 3, 1996, and signed into law on February 8, 1996, by President Bill Clinton. It primarily amended Chapter 5 of Title 47 of t ...

, whose goals are: *to promote the availability of quality services at just, reasonable, and affordable rates *to increase access to advanced telecommunications services throughout the Nation *to advance the availability of such services to all consumers, including those in low income, rural, insular, and high cost areas at rates that are reasonably comparable to those charged in urban areas Universal service was widely adopted in legislation in Europe beginning in the 1980s and 1990s. For instance, under the EU

Postal Services Directive Postal may refer to: Places * The Italian name for Burgstall, South Tyrol in northern Italy * Postal, Missouri * Postal Square * Postal Museum (Liechtenstein), a postal museum in Vaduz, Liechtenstein People * Fred Postal, former co-owner of ...

(97/67/EC), the Electricity Market Directive (2003/54/EC) and the Telecommunications Directive (2002/22/EC). The language of "universal service" has also been used in proposals by the US

Democratic Party Democratic Party most often refers to: *Democratic Party (United States) Democratic Party and similar terms may also refer to: Active parties Africa *Botswana Democratic Party *Democratic Party of Equatorial Guinea *Gabonese Democratic Party *Demo ...

for the reform of health care.

Origins of concept and term

The ''concept'' of universal service appears to have originated with

Rowland Hill Sir Rowland Hill, KCB, FRS (3 December 1795 – 27 August 1879) was an English teacher, inventor and social reformer. He campaigned for a comprehensive reform of the postal system, based on the concept of Uniform Penny Post and his soluti ...

and the

Uniform Penny Post The Uniform Penny Post was a component of the comprehensive reform of the Royal Mail, the UK's official postal service, that took place in the 19th century. The reforms were a government initiative to eradicate the abuse and corruption of the e ...

which he introduced in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...

in 1837. Though Hill never used the term "universal service", his postal system had the hallmarks of early universal service; postal rates were reduced to uniform rates throughout the nation which were affordable to most Britons, enabled by the

postage stamp A postage stamp is a small piece of paper issued by a post office, postal administration, or other authorized vendors to customers who pay postage (the cost involved in moving, insuring, or registering mail), who then affix the stamp to the fa ...

(first introduced here) and a

General Post Office The General Post Office (GPO) was the state postal system and telecommunications carrier of the United Kingdom until 1969. Before the Acts of Union 1707, it was the postal system of the Kingdom of England, established by Charles II in 1660. ...

monopoly on mail. Hill's reforms were quickly adopted by postal authorities worldwide, including the

United States Post Office Department The United States Post Office Department (USPOD; also known as the Post Office or U.S. Mail) was the predecessor of the United States Postal Service, in the form of a Cabinet department, officially from 1872 to 1971. It was headed by the postmas ...

(now the

United States Postal Service The United States Postal Service (USPS), also known as the Post Office, U.S. Mail, or Postal Service, is an independent agency of the executive branch of the United States federal government responsible for providing postal service in the U ...

) which already held a monopoly through the Private Express Statutes. The service obligations of USPS under current law are commonly referred to as the "universal service obligation" or "USO". Universal service is also a key objective of the

Universal Postal Union The Universal Postal Union (UPU, french: link=no, Union postale universelle), established by the Treaty of Bern of 1874, is a specialized agency of the United Nations (UN) that coordinates postal policies among member nations, in addition to t ...

. The ''term'' "universal service", on the other hand, appears to have originated with

Theodore Newton Vail Theodore Newton Vail (July 16, 1845 – April 16, 1920) was president of American Telephone & Telegraph between 1885 and 1889, and again from 1907 to 1919. Vail saw telephone service as a public utility and moved to consolidate telephone networks u ...

, president of American Telephone & Telegraph (the original AT&T) and head of the

Bell System The Bell System was a system of telecommunication companies, led by the Bell Telephone Company and later by the American Telephone and Telegraph Company (AT&T), that dominated the telephone services industry in North America for over one hundr ...

, in 1907 with the corporate

slogan A slogan is a memorable motto or phrase used in a clan, political slogan, political, Advertising slogan, commercial, religious, and other context as a repetitive expression of an idea or purpose, with the goal of persuading members of the publi ...

"One Policy, One System, Universal Service". It was intended as a contrast to the "dual service" that had become common since the original Bell telephone patents expired in 1894, where

independent telephone companies An independent telephone company was a telephone company providing local service in the United States or Canada that was not part of the Bell System organized by American Telephone and Telegraph. Independent telephone companies usually operated in ...

operated not only in non-Bell System markets, but also as a competitor in Bell markets. These independent phone companies did not interconnect to the Bell System; though modern commentators suggest Bell refused to do so as an excuse for monopolization, it was argued then that phone systems of that day could not interconnect unless all phone companies used the same technology, as the Bell System did. This required many businesses to maintain phones with both companies, or else risk losing customers who subscribed to the other phone company. Vail argued that an interconnected phone system (the Bell System), operated by one company (AT&T) and with rates regulated by the government, would be superior to the dual system and would produce great social benefits, much like Hill's postal reforms. Though largely ignored by modern commentators, Vail did work for the U.S. Post Office Department earlier in his career; thus, he may have been inspired by the U.S. postal system of that day. Eventually, Vail prevailed in his views, first through state laws and ultimately through the

Kingsbury Commitment The Kingsbury Commitment is a 1913 out-of-court settlement of the United States government's antitrust challenge against the American Telephone and Telegraph Company (AT&T) for AT&T's then-growing vertical monopoly in the telephone industry. In retu ...

of 1913, where AT&T agreed to several measures, including interconnection with non-competing independent phone companies, to avoid

antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...

action, thus formalizing the Bell System monopoly. Meanwhile, the Mann-Elkins Act of 1910 made AT&T subject to regulation by the

Interstate Commerce Commission The Interstate Commerce Commission (ICC) was a regulatory agency in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads (and later trucking) to ensure fair rates, to eliminat ...

. Universal service in telecommunications was eventually established as U.S. national policy by the

Communications Act of 1934 The Communications Act of 1934 is a United States federal law signed by President Franklin D. Roosevelt on June 19, 1934 and codified as Chapter 5 of Title 47 of the United States Code, et seq. The Act replaced the Federal Radio Commission with ...

, whose preamble declared its purpose as “to make available, so far as possible, to all the people of the United States, a rapid, efficient, Nationwide, and world-wide wire and radio communication service with adequate facilities at reasonable charges”. The chief purpose of this law was to combine the

Federal Radio Commission The Federal Radio Commission (FRC) was a government agency that regulated United States radio communication from its creation in 1927 until 1934, when it was succeeded by the Federal Communications Commission (FCC). The FRC was established by t ...

with the ICC's wire communications powers, including regulation of AT&T, into a new

Federal Communications Commission The Federal Communications Commission (FCC) is an independent agency of the United States federal government that regulates communications by radio, television, wire, satellite, and cable across the United States. The FCC maintains jurisdiction ...

with greater powers over both radio and wire communications. Though the Bell System divestiture of 1984 dissolved the monopoly that inspired the term (though

SBC Communications The history of AT&T dates back to the invention of the telephone. The Bell Telephone Company was established in 1877 by Alexander Graham Bell, who obtained the first US patent for the telephone, and his father-in-law, Gardiner Greene Hubbard. Bell ...

, one of the

Baby Bell The Regional Bell Operating Companies (RBOC) are the result of '' United States v. AT&T'', the U.S. Department of Justice antitrust suit against the former American Telephone & Telegraph Company (later known as AT&T Corp.). On January 8, 19 ...

s created then, ultimately bought AT&T and assumed its name), universal service remained official U.S. telecommunications policy under the 1934 Act, even as the FCC began to abandon rate regulation. It was further codified by the

, even as it permitted expanded competition in the telecommunications field. The

is actively exploring universal service reform, and the place of universal service to the broadband communications environment.

Funding

Most countries fund their USO by requiring the incumbent operator to be the designated USO provider or USP. USPs often previously held a legal monopoly protection. The USO is thus funded by rates/tariffs, and also by scale and scope economies. The risk of such an approach, while allowing competitive entry, is that a cross-subsidy exists and thus new entrants can potentially cream-skim (enter in only profitable routes or lines). One response is that some countries have a

Universal Service Fund The Universal Service Fund (USF) is a system of telecommunications subsidies and fees managed by the United States Federal Communications Commission (FCC) intended to promote universal access to telecommunications services in the United States. Th ...

and have all their telecommunications industries pay a part of their net earnings into it. This fund has different names in different countries: * Chile has the Telecommunications Development Fund (FDT), * India has the Universal Service Obligation Fund (USOF), * Pakistan has the Universal Service Fund Company (USF Co.), * Taiwan has the Universal Service Fund (USF), * Australia has the Telecommunications Industry Levy (TIL), etc.

Implementation

Though the nomenclature is different the importance of the goal of universal service has been noted by most of the countries and similar methods are being implemented to work towards this end. Each country gives certain service providers Universal Service Provider or Eligible Telecommunications Carrier status. This allows the provider in question to get subsidies from the universal service fund to economically provide the necessary service. The basic concept of Universal service is the below-cost pricing of service to increase the quantity of service as shown in Fig. 1. The figure shows a

demand curve In economics, a demand curve is a graph depicting the relationship between the price of a certain commodity (the ''y''-axis) and the quantity of that commodity that is demanded at that price (the ''x''-axis). Demand curves can be used either for ...

where the region in red shows the extent of the original service and the increase shown by the green area represents the increase in the service area once the subsidy helps reduce the prices. The conclusion is simple, as the prices reduce from P1 to P2 the quantity of customers increases form Q1 to Q2. Thus satisfying allowing universal service. The size of the subsidy paid out to the telecommunication service provider in this case is shown in Fig.2. Since each call in fact costs price P1 and price P2 in the cash flow from the customer, the rest (P1-P2) comes from the Universal Service Fund. This is a simplistic case and most countries have very complex legislation to guarantee the service and have several subsidy mechanisms to implement universal service. The case shows the idea behind universal service not the universal service mechanism actually used in any country.

Efficiency

As seen from the above, the number of potential customers increases as the number of people who can now afford it increases. However service providers need to be able to actually provide that service through their network. This build-out of network is also subsidized by funds like the High Cost Fund in the United States which is also provided for in the

. Service providers also have to make sure the culture that they are supplying meets their specific needs and expectations and they change in almost every culture. Besides services to deprived areas, there is also a " Lifeline" program that subsidizes telephone service to low-income people regardless of location.FCC Lifeline
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References

External links