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Regulatory Governance and the Implementation of Universal Service: A Comparative Study of the US and Japan
Unformatted Document Text:  Tracking Number: ICA-1-11804 Regulatory Governance and Universal Service 11 improve the post-divestiture system of universal service support by making subsidies transparent and competitively neutral. Finally, the Act broadens the area of universal service including telecommunications and information services in schools, health care facilities, and libraries (§ 254(g) and (h)). In sum, the Act effectively codified the universal service provision explicitly taking away the rationale of regulatory monopoly and is notable for going beyond the old universal service regime “embracing the manipulation of telecommunications policies and rates to favor designated constituencies” (Mueller, 1997, pp.170-171). Universal Service at the Federal Level As described above, the Telecommunications Act of 1996 confirmed that the authority for the implementation of universal service programs was shared between the federal government and the states. At the federal level, universal service has two distinct funding mechanisms. As I explained before, one is aimed at the financing of access deficits (i.e. the difference between access costs and access revenues). In 2000, the FCC revised this method moving towards levels that reflect costs and set the appropriate level of interstate access charges for the next five years through its Universal Service Report and Order (2000). 10 This is to accelerate competition by removing implicit subsidies found in access charges and changing the subsidies hidden in interstate access charges into explicit, portable, and sufficient universal service support. The FCC intends to provide regulatory stability for the industry so that it can make longer range investment decisions. The other, universal service funds, has the objective of the promotion of universal service in higher cost areas. A central high-cost service fund has been established towards which all carriers contribute in proportion to their share of interstate revenue. The contributions are paid into the Universal Service Administration Company (USAC), an independent fund administrator. This fund supports three principal federal programs which are 1) High-Cost Support that provides funds to rural carriers in high-cost areas to finance their access deficit; 2) Local Switching Support that provides additional support to LECs with fewer than 50,000 lines for traffic sensitive switching costs; and 3) Long Term Support that allows high cost providers to have the same CCLC rate level as other carriers. These programs also finance low-income support programs such as LinkUp 11 or Lifeline 12 for eligible subscribers (Intven, pp.49-50). 10 FCC (2000), Universal Service Report and Order, CC Docket No. 00-193. 11 The LinkUp program helps qualified low-income consumers to connect, or hook up, to the telephone network. This federal program offsets one-half of the initial hook-up fees, up to $30. The program also includes a plan to encourage local telephone companies to offer low-income telephone subscribers a

Authors: Park, Namkee.
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Tracking Number: ICA-1-11804 Regulatory Governance and Universal Service 11
improve the post-divestiture system of universal service support by making subsidies transparent
and competitively neutral. Finally, the Act broadens the area of universal service including
telecommunications and information services in schools, health care facilities, and libraries (§
254(g) and (h)). In sum, the Act effectively codified the universal service provision explicitly
taking away the rationale of regulatory monopoly and is notable for going beyond the old
universal service regime “embracing the manipulation of telecommunications policies and rates
to favor designated constituencies” (Mueller, 1997, pp.170-171).
Universal Service at the Federal Level
As described above, the Telecommunications Act of 1996 confirmed that the authority for the
implementation of universal service programs was shared between the federal government and
the states. At the federal level, universal service has two distinct funding mechanisms. As I
explained before, one is aimed at the financing of access deficits (i.e. the difference between
access costs and access revenues). In 2000, the FCC revised this method moving towards levels
that reflect costs and set the appropriate level of interstate access charges for the next five years
through its Universal Service Report and Order (2000).
10
This is to accelerate competition by
removing implicit subsidies found in access charges and changing the subsidies hidden in
interstate access charges into explicit, portable, and sufficient universal service support. The FCC
intends to provide regulatory stability for the industry so that it can make longer range investment
decisions.
The other, universal service funds, has the objective of the promotion of universal service
in higher cost areas. A central high-cost service fund has been established towards which all
carriers contribute in proportion to their share of interstate revenue. The contributions are paid
into the Universal Service Administration Company (USAC), an independent fund administrator.
This fund supports three principal federal programs which are 1) High-Cost Support that provides
funds to rural carriers in high-cost areas to finance their access deficit; 2) Local Switching
Support that provides additional support to LECs with fewer than 50,000 lines for traffic sensitive
switching costs; and 3) Long Term Support that allows high cost providers to have the same
CCLC rate level as other carriers. These programs also finance low-income support programs
such as LinkUp
11
or Lifeline
12
for eligible subscribers (Intven, pp.49-50).
10
FCC (2000), Universal Service Report and Order, CC Docket No. 00-193.
11
The LinkUp program helps qualified low-income consumers to connect, or hook up, to the telephone
network. This federal program offsets one-half of the initial hook-up fees, up to $30. The program also
includes a plan to encourage local telephone companies to offer low-income telephone subscribers a


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