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62 Federal Communications Law Journal 119 (2010)


The concept of universal service, providing affordable telecommunications to all citizens, has a long and changing history in the United States. Prior to the Telecommunications Act of 1996, efforts to achieve universal service were largely based on a complex web of implicit subsidies to basic landline local exchange residential service. The Act expanded and codified the concept of universal service and made the subsidies largely explicit. This Article evaluates the possible economic rationales for subsidizing voice communications and find them lacking. This Article argues that the weak rationale for subsidizing basic voice communications makes it critical that U.S. universal-service policy be competitively neutral with respect to firms and technologies in order to minimize distortions of market processes. However, past regulatory policies have favored wireline vis-A-vis mobile technologies. Moreover, four recent regulatory events threaten to perpetuate and exacerbate the asymmetric treatment of mobile technologies. The recent appointment of three new FCC commissioners may provide an opportunity for more economically rational and competitively neutral policy and funding mechanisms in the future.