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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 20 will be checked and scrutinized by several tiers of government institutions as well as criticized by the market players. Also, the electoral system of the US makes the policymakers in Congress be concerned about welfare of consumers. Due to these reasons, the characteristic of the US regulation on universal service is pro-competitive in the sense that government authorities including the FCC create competition in telecommunications services markets where competition is not likely to arise naturally. If we examine the regulatory model for universal service in the US, it is likely to belong to the category of ‘broad regulatory oversight with explicit, unbundled funding mechanism’ (Tyler, 1994). 20 Regulation tends to focus on providing the framework of economic incentives to guide autonomous decision-making by the universal service provider(s), without detailed intervention by the regulator about the provider(s)’ management. It means that the regulatory model of the US in universal service is to encourage fair competition between the carriers and guarantee a level playing field. Also, the methods of providing universal service are based on cost-based pricing 21 and the costs are financed by rate-rebalanicng, access charge, or universal service funds. As a consequence, such regulation focuses on accounting information, cost analysis and pricing. Here, the costs of universal service may be identified explicitly and an unbundled mechanism of cross-subsidy funding of these cost be justified by the estimated costs of meeting specific universal service obligations. Moreover, the unbundled payment may be a single payment in connection with all types of universal service obligations or there may be further unbundling with different payments related to different kinds of universal service obligations (Tyler, 1994, pp.65-67). In the US there is a remarkably high degree of unbundling in the implementation of universal service. Separate levies are paid by all long distance service providers through the universal service fund and the Lifeline Assistance Program, which respectively support the cost of activities of the LECs related to service in rural areas, and to providing service to low income users on concessionary provisions. However, there are also substantial cross-subsidies to rural areas as the separate access charges paid by long distance carriers for network interconnection. Thus, there is a bundled as well as an unbundled cross-subsidy (Tyler, p.68). In sum, universal 20 Tyler classifies several regulatory models of universal service based on the relative roles of governments, the available policy choices, and the overall structure of specific countries’ telecommunications services industry. 21 For the specific benefits and its beneficiaries, see Rosston and Wimmer (2000).

Authors: Park, Namkee.
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Tracking Number: ICA-1-11804 Regulatory Governance and Universal Service 20
will be checked and scrutinized by several tiers of government institutions as well as criticized by
the market players. Also, the electoral system of the US makes the policymakers in Congress be
concerned about welfare of consumers. Due to these reasons, the characteristic of the US
regulation on universal service is pro-competitive in the sense that government authorities
including the FCC create competition in telecommunications services markets where competition
is not likely to arise naturally.
If we examine the regulatory model for universal service in the US, it is likely to belong
to the category of ‘broad regulatory oversight with explicit, unbundled funding mechanism’
(Tyler, 1994).
20
Regulation tends to focus on providing the framework of economic incentives to
guide autonomous decision-making by the universal service provider(s), without detailed
intervention by the regulator about the provider(s)’ management. It means that the regulatory
model of the US in universal service is to encourage fair competition between the carriers and
guarantee a level playing field. Also, the methods of providing universal service are based on
cost-based pricing
21
and the costs are financed by rate-rebalanicng, access charge, or universal
service funds. As a consequence, such regulation focuses on accounting information, cost
analysis and pricing. Here, the costs of universal service may be identified explicitly and an
unbundled mechanism of cross-subsidy funding of these cost be justified by the estimated costs of
meeting specific universal service obligations. Moreover, the unbundled payment may be a
single payment in connection with all types of universal service obligations or there may be
further unbundling with different payments related to different kinds of universal service
obligations (Tyler, 1994, pp.65-67).
In the US there is a remarkably high degree of unbundling in the implementation of
universal service. Separate levies are paid by all long distance service providers through the
universal service fund and the Lifeline Assistance Program, which respectively support the cost
of activities of the LECs related to service in rural areas, and to providing service to low income
users on concessionary provisions. However, there are also substantial cross-subsidies to rural
areas as the separate access charges paid by long distance carriers for network interconnection.
Thus, there is a bundled as well as an unbundled cross-subsidy (Tyler, p.68). In sum, universal
20
Tyler classifies several regulatory models of universal service based on the relative roles of governments,
the available policy choices, and the overall structure of specific countries’ telecommunications services
industry.
21
For the specific benefits and its beneficiaries, see Rosston and Wimmer (2000).


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