Who’ll Define ‘Universal Service’?

A term from the early days of the telephone may bring communications monopolies or widespread rural broadband service -- or both. Two scholars look at how competing interests have wrangled over "universal service."

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Today, most of us think of “universal service” as a right — a moral, and frequently legal guarantee of a nation’s citizenry to be provided with access to basic technological goods and services like electricity, telephone and, now, broadband.

Yet the notion of universal service itself is not, in fact, universal.  Not only has our nation’s technological infrastructure changed dramatically throughout the past 150 years, so too have the rationales and interests of what universal service means. With Congress potentially set to redefine the legal criteria for universal service early next year, we might pause for a moment to reflect on the term’s changing meanings and consider how universal service should be refashioned for the 21st century to best serve the pressing needs of rural communities.

The concept a universal service originated in the early days of the telephone industry, between 1894 and 1912, after Alexander Graham Bell’s patents had expired and before the federal government granted the Bell company “natural monopoly” protections. As Martin Mueller points out in his book “Universal Service,” during this period of open competition, scores of telephone providers raced to set up networks and overcome Bell’s considerable lead.  But Bell refused to connect its networks with those of the independent providers; as a result, subscribers found themselves unable to connect with subscribers from other competing local exchanges.  At the time, the only way to resolve this division was to subscribe to both the Bell network and the local independent network. This solution (of sorts), known as “dual service,” was generally affordable only for businesses.

In 1907, there was a push to force interconnection between these proprietary networks. That was the first meaning of “universal service.” 

Somewhat surprisingly, this term was coined not by a politician seeking regulation of the telephone industry, nor by an independent telephone operator seeking fair competition, but by Theodore Vail, the president of American Telephone and Telegraph (as the Bell Company had been renamed). Vail turned the phrase “one system, one policy, universal service” into a mantra, repeated throughout the company’s 1907-1914 annual reports.

Theodore Vail, at right, president of AT&T inaugurated the first transcontinental phone line from his home on Jekyll Island, SC, in 1915

For Vail, universal service “meant consolidating competing telephone exchanges into local monopolies so that all telephone users could be interconnected.”  Because of AT&T’s commanding lead in telephone service and equipment manufacturing, Vail believed his firm would clearly be the one best suited to provide the nation with a standardized system of telephone service.

In its original sense, then, “service” referred to the telecommunications infrastructure itself, not to any moral imperative to provide access to end-users.  Moreover, AT&T’s original use of “universal service” served only as a rhetorical strategy to advance its interests.

Over time, subscribers became increasingly frustrated with the inconveniences of dual service, and AT&T maintained a near-monopoly in the telephone industry.  In 1934, the Communications Act formalized the company’s status as a regulated monopoly; there was still no formal stipulation or commitment to “universal service” in the bill. Instead, there was only the vague suggestion that one goal of the legislation was “to make available, so far as possible, to all the people of the United States, a rapid, efficient, nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.” Then “universal service” disappeared; from the 1920s through the 1970s, the term was not commonly used. AT&T’s monopoly status was secure, and the issue of interconnection was a relic from a distant, competitive past.

4th grader’s art/via Monique Martin
AT&T had kept costs of local service low by charging high rates for long distance — until MCI and Sprint entered the picture.

In the 1970s, though, the Federal Communication Commission’s decided to allow MCI and Sprint to operate long-distance services, threatening to disrupt AT&T’s financial structure. AT&T had kept the cost of long-distance and business rates high as a way to lower the cost for local service. MCI and Sprint were attacking the older company’s source of profit.

Desperate to maintain its profit structures, AT&T revived and rechristened the notion of “universal service,” arguing that the 1934 Act had mandated the provision of low-cost telephone services to all Americans, a service whose future was threatened, they claimed, by the rise of low-cost long distance services such as MCI and Sprint. MCI and Sprint had cherry-picked the more expensive (and, for AT&T, more lucrative) long distance business and was driving costs down, without providing local phone service. The second time around, “universal service” became AT&Ts mantra to maintain its pricing system and its monopoly in order to meet “an industry-government commitment to put a telephone in every home.”

AT&T ultimately lost the battle to maintain its monopoly status. But this revised notion of universal service gained currency in the newly deregulated telecom industry, as policymakers debated how to ensure that the nation’s citizenry received affordable and accessible phone service.

Some twenty years later, the 1996 Telecommunications Act revised and adopted AT&T’s 1970s-era definition of universal service. The Act emphasized the “universal” part of universal service to an unprecedented degree.

And, Congress included Internet connectivity for schools and libraries.

Legislators were aware of what they were doing, noting in a committee report that “the new section [was] intended to make explicit the current implicit authority of the FCC and the States to require common carriers to provide universal service.”  Under the 1996 Act, the FCC was explicitly tasked with ensuring that such basic telephone services should be available “at just, reasonable, and affordable rates,” and that the list of services covered under the universal service provision be periodically updated to reflect new technological developments.  The 1996 Act also acknowledged the uneven geographic distribution of services and sought to correct this inequality by stipulating that consumers in rural areas be provided with telecommunications services at a level of quality and at rates “reasonably comparable” to those available in urban areas.

While the current definition of universal service is limited solely to telephony, there have been numerous calls over the past few years to broaden the scope of universal service to include broadband access as well, especially with the visibility of the e-rate program funding schools’ and libraries’ Internet access under universal service.

Kindergarten student’s art/via Monique Martin
The U.S. Congress likely will take up the issue of ‘universal service’ in 2010. Rural customers need to consider what definition will best benefit their communities.

Expanding the notion of universal service to include broadband would undoubtedly be a crucial step in ensuring greater access and affordability for rural areas. But, as with everything else, we must be careful what type of universal service we ask for.

If proprietary, privately-held infrastructures are favored over net neutrality and shared infrastructure with multiple ownership types (allowing for a mix of municipal, private, and co-operative ownership structures), the 21st century version of universal service might become eerily similar to that of the early 20th century. The rhetoric of universal service’s parity would serve primarily to advance centralized, monopolistic interests.

New definitions of universal service should be designed to provide quality, affordable telephone and broadband access to those citizens overlooked by the logic of the marketplace. We must ensure that universal service does not again simply become an empty slogan that legally protects and perpetuates the status quo.

 

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