Harnessing Competitive Forces to Foster Economical Universal Service

This paper reviews a key issue that the Federal Communications Commission face while considering universal service reform - the distribution of support to competing carriers - and explains how the FCC can structure this support to achieve key universal service goals while harnessing the proven benefits of industry competition. This paper offers three principal recommendations. First, the competitive process, not regulatory pre-selection of a single universal service provider, is the best means to ensure the delivery of supported telecommunications services at minimum cost to consumers. Among the many benefits of competition is its ability to constantly motivate industry suppliers to reduce their operating costs over time, and thereby limit the total support required to ensure the delivery of high quality services at affordable rates. Second, because regulators unavoidably lack access to the enormous amount of information required to implement asymmetric per-line support and to continually administer such support efficiently, symmetric per-line support policies should be adopted. Symmetric support policies will ensure that the most efficient suppliers deliver supported services, so that industry costs and support levels will be minimized on an ongoing basis. Excessive support also can be avoided by eliminating duplicative support and, if necessary, by capping total support. Third, arguments advanced by some parties in favor of asymmetric per-line support can be better addressed by defining supported services appropriately, by de-averaging support across relevant geographic regions, and by implementing a reasonable sharing of any true burdens that arise from any asymmetric carrier-of-last-resort obligations.