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Universal Service To Universal Access
© 1995 - International Research Center


Historical Context:

The term "Universal Service" was introduced in 1907 by Theodore Vail, then President of AT&T. However, in the early twentieth century it had quite a different meaning in practice. Due to basic incompatibility or a lack of interconnection, competing local phone companies could often not connect their respective customers to each other. "Dual service" or subscribing to both services with the attendant duplicate wiring and equipment was common, especially for businesses. Thus, Universal Service at first meant compatibility and interconnectivity of competing phone services that we today take for granted. It was only later that the term "Universal Service" became associated with a social compact to connect those disadvantaged by geography, income or other factors.

The Mann-Elkins Act of 1910 gave regulatory jurisdiction for interstate telecommunications to the Interstate Commerce Commission (ICC), defining telephone companies as "common carriers" who were "to provide service on request at just and reasonable rates, without unjust discrimination or undue preference." The Communications Act of 1934, though not naming "Universal Service" specifically, lays out its basic tenets "so as to make available, so far as possible, to all people of the United States a rapid, efficient, nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges." Establishing the separate Federal Communications Commission, the act gave the commission new powers to regulate tariffs and services but expressly limited federal authority to interstate service. In 1994, the sixtieth anniversary of the Communications Act of 1934, President Bill Clinton said:

When President Franklin D. Roosevelt signed this historic legislation so many years ago, few realized the dramatic changes in communications that the future would hold. Yet that stroke of the pen ushered in the beginnings of the Information Age, an era in which vast amounts of knowledge flow freely across continents and circle the globe in a matter of seconds.

Today, as we celebrate the vision of the authors of the Communications Act, we are still defining the role that telecommunications technology will play in our society. With a universe of electronic information at our fingertips, we can better educate our people, promote democracy, save lives, and create jobs across America. As we work to enhance the partnership between the public and private sectors, we continue to draw inspiration from the original Communications Act, which has long served to benefit all of our citizens and to propel our nation into the future.

(Federal Communications Law Journal, Vol. 47, No. 2, December, 1994)

There subsequently developed a series of programs, structures and protocols to encourage and enforce the expectation that basic local and long distance telephone service be available to all. The major components insuring ubiquitous availability of plain old telephone service (POTS) and other consumer services such as "free" broadcasting have been as follows:

Universal Service Fund (USF):

The Federal Communications Commission (FCC), anticipating the breakup of the Bell System, established the National Exchange Carrier Association (NECA) in 1983 as a membership association of local telephone companies. NECA is a non-profit company directly regulated by the FCC to establish and administer interstate access revenues, access charge pooling and administer the Universal Service Fund (USF) to provide assistance to telephone companies in high-cost areas (primarily rural, but defined as those with costs in excess of 115 percent of the national average). The funds are collected from major long distance carriers and administered and dispensed by NECA. The funds are used to extend telephone service to previously unserved areas, help pay for system extensions and to keep basic rates low.

Due to concerns about the Universal Service Fund's overall growth rate and annual growth fluctuations, the FCC adopted interim rules in December 1993 imposing an indexed cap on Fund payments for 1994 and 1995 pending completion of a broader proceeding on reforming the high cost area telephone assistance program. The USF expense adjustment for 1994 was projected as $741.5 million, however it was limited by a cap of $725.4 million. The USF expense adjustment for 1995 was projected as $777 million and capped at $749.2 million. The Arizona USF assistance for 1995 (capped) is $14.5 million.

NECA has had a policy of encouraging the investments of small telephone companies in new technologies. In their most recent study of telecommunications infrastructure (1993) covering 1194 small telephone companies, NECA tracked the deployment of fiber optics, digital switching and digital services. The study revealed that, despite their limited customer base and fairly broad service areas, NECA member companies continue a high rate of investment in modern central office switching, outside plant and signaling systems. Over 65 percent of these small telephone company customers had equal access to competitive long distance carriers up from 35 percent in 1991 (the FCC reports in February 1995 a 90% conversion for independent phone companies) and over 91 percent had access to digital switching.

An evolving definition of Universal Service should be the foundation of a future national telecommunications policy. With technological advances making new services more affordable, subscribers are no longer content with "plain old telephone service." No community should be denied the opportunity to participate in and benefit from this exciting new network of the future. NECA 1993 Study - Building the Telecommunications Infrastructure of Rural America

Lifeline Assistance Programs - SLC Waivers and Link-Up America:

The Lifeline Assistance Programs are designed to aid low income residential subscribers. Again, funds are collected from long distance carriers and administered by NECA. Each state decides whether to participate and its public utility commission sets policies and guidelines governing the specific program implementation in that state.

As of April, 1989, the Subscriber Line Charge (SLC) for all residential subscribers to the public switched network rose from $1.00 to $3.50. To prevent subscribers from being forced off the network, the FCC established an SLC waiver program in 1985 where those customers meeting a state determined means test would have the full SLC charge waived if the state provided an equal reduction in either local service charges, connection charges or deposit requirements. NECA reports that in 1994, the SLC waiver fund was $123.4 million providing an average $2.34 per month in assistance to 4.4 million subscribers in the 35 participating states, the District of Columbia and the Virgin Islands. In Arizona, 9,146 subscribers benefited from $308,402 in SLC waiver subsidies last year.

The second program, Link-Up America, attempts to reduce the entry barrier for new low income subscribers by paying half the cost of telephone installation and connection charges up to $30. Though the participants must again qualify under a state determined means test, the state is not required to further contribute to reducing the hookup costs. A second part of the program covers the interest charges for any deferred payment plan on installation and startup costs that the telephone company provides (within specified limits). NECA reports that in 1994, the Link-Up America program fund of $18.6 million covered 839,470 subscribers in the 48 participating states, the District of Columbia, Puerto Rico, and the Virgin Islands. In Arizona, 367 subscribers benefited from $8,533 in Link-Up America subsidies last year.

Various studies have shown that these Lifeline Assistance programs have indeed had positive effects in getting subscribers onto the networks and in keeping them connected. States not participating in either program have shown lower level of total subscribership, especially for those households on public assistance.

U.S. Department of Agriculture Rural Telecommunications Financing:

Since 1949, the Rural Electrification Administration (REA) of the United States Department of Agriculture (USDA) has provided loans to small telephone companies serving rural areas to assure the availability of affordable, high quality service. Approximately 950 loans have been provided at interest rates below market, even below the cost of money to the government. This has led to over 96 percent of U.S. farms having telephone service and allowed the formation and survival of many small rural telephone companies as cooperatives. These coops would otherwise be unlikely to raise sufficient capital to initially build or modernize without access to such subsidized loans. If original qualified borrowers are acquired by larger telephone companies, these firms can continue to receive subsidized capital to modernize their rural areas.

Still, for the estimated 65 million Americans living in rural communities, problems remain with access to advanced telecommunications services. Most rural Americans still find online and Internet access prohibitively expensive since they must pay for a long-distance call to the nearest "point of presence." Further, while almost 80% of libraries in cities over 250,000 inhabitants have some Internet connectivity, only 17% of rural libraries do. The availability of high speed connections (i.e. - ISDN, frame relay, T-1, T-3) for rural institutions and businesses usually lags urban availability within a region, though some small LECs are upgrading faster than the BOCs.

The USDA's Rural Utilities Service (RUS) in FY 1994, used $12.2 million in funds to generate more than $500 million in Federal loans and loan guarantees, which in turn leveraged $2 billion in private investment in rural telecommunications infrastructure. In a typical year, RUS borrowers provide initial telecommunications services to over 62,000 families, install 6,000 miles of fiber optic cable, and purchase over 200 new digital switches. RUS also has a Distance Learning and Medical Link Grant Program which in FY 1994 made $10 million in grants to rural schools and health care providers to connect them to the National Information Infrastructure leveraged with an additional $15 million of private investments. They have proposed a new $100 million loan program for FY 1996 to further finance their goals of rural connectivity. The U.S. Department of Health and Human Services (HHS) also has a Rural Telemedicine Grant Program managed by their Office of Rural Health Policy. (Source: USDA RUS publications)

In addition, the USDA is developing a new Rural Business Telecommunications Partnership Loan Program to leverage government loans with rural investment capital to fund locally shared, end-user telecommunications facilities. The purpose of this program is to provide access to advanced telecommunications services and computer networks to improve rural job opportunities, stimulate local economies, and give rural businesses the opportunity to compete nationally and globally. An industry trade association, the National Rural Telecom Association (NRTA) has as its primary role the preservation of REA's role as the major provider of funds for rural telephone services.

Rate Averaging and Internal Cross-Subsidization:

State Public Utility Commissions require Local Exchange Carriers to charge the same rate for residences located throughout the often large geographic areas that each serves. This reallocates the actual costs to equalize or average rates across the LEC's service area independent of customer density and distance from switching offices, in effect subsidizing high-cost rural customers.

The Local Exchange Carriers are also closely regulated by the states as to approved tariffs, price caps and rate of return on their investments. LECs are allowed to charge fees above their cost for providing access to long distance carriers and the toll services charged to residential subscribers, with these revenues used to hold down the cost of basic residential service.

Assistive Technology for the Disabled:

Many Americans have physical disabilities which require special consideration in telecommunications as well as in other areas. With the growing percentage of older Americans, it's likely that the need for enhanced services and assistive technology will grow. In 1990, Congress passed the Americans with Disabilities Act (ADA) mandating the availability of interstate and intrastate telecommunications relay services to aid individuals with hearing and speech disabilities. In 1994, the Technology-Related Assistance Act was reauthorized. The United States has established the principles of a disability policy that stress inclusion, not exclusion; independence, not dependence; and empowerment, not paternalism.

The FCC adopted standards for Telecommunications Relay Service (TRS) providers, set forth a state certification program and appointed the National Exchange Carrier Association (NECA) to administer a fund. All common carriers contribute to the TRS fund on the basis of their interstate revenues. TRS providers then draw from the fund and include local telephone companies, long distance companies, state relay agencies and non-profit agencies operating state TRS programs. In operation, the individual with hearing or speech disability uses a text telephone (TTY) to call a toll-free TRS provider. A Communications Assistant (CA) then acts as speaking intermediary in placing the call to the intended destination and mediating the communication between the parties. States often oversee the availability and distribution of TTY terminals. Also, in most states, there are reduced telephone rates for handicapped subscribers and directory assistance charges are waived.

The FCC has long required that pay phones and emergency phones be compatible with hearing aids. Under a current proposal, most business telephones would be required to be hearing aid compatible by January 1, 2000 and existing business phone systems upgraded by 2005. Because this compatibility refers to the placement of an electromagnetic coil in telephone handsets, it is only effective with the estimated 1.8 million users of hearing aids containing a complementary electromagnetic coil (T-Coil). It does nothing for the balance of the 6 million hearing aid users (out of a total of 28 million Americans with hearing loss), but volume amplification controls and other technological solutions can offer some assistance.

The mandating of closed-captioning capability for most new television sets also aids the hearing impaired with the textual display of a programs audio content for an increasing proportion of the television programming delivered. A side benefit of such text displays can be the teaching or augmentation of reading skills to those not proficient in the English language.

Broadcast Radio and Television:

Broadcast radio followed by television has primarily been sent out to the public at no cost, being supported by advertisers (or in the case of public radio and television by government, public institutions, sponsors and listeners). Once one bought the receiving radio or television, the only residual cost was a modest amount of electrical power. Some of the same rural availability issues remain, but by and large, consumers have had free access to an enormous wealth (some would say dearth) of programming material. The advent of cable television altered the model, charging a basic fee for connection and programming as well as premium fees for extended services, however local broadcast options have remained free and available. Satellite broadcasting to consumers with dishes now down to 18 inches in size and sold for less than $600, helps solve rural access by equalizing access costs (though the entry barrier still remains too high for the economically disadvantaged). Though not part of the formal definition of Universal Service, and largely unidirectional in information and entertainment delivery, these broadcast mediums have set the stage for consumer expectations, broad media and visual literacy, and more advanced, interactive services to come.

Libraries as Public Repositories and Access Points:

As we approach the 21st century, a momentous telecommunications revolution is taking place. Electronic technology can help you find a job in another state or read the Congressional Record online. It can connect a student to the local library or the Library of Congress.

But what if that child's parents or school can't afford a computer? What if you don't have one in your home or don't know how to use one? The information superhighway promises vast riches of information, but it also threatens to widen the gulf between "information rich" and "information poor." Our forefathers and mothers knew it made good sense to invest in libraries as a shared community resource for books. It makes even more sense to support libraries in acquiring the powerful and expensive technology needed to obtain electronic information.

Nothing is more important to the future of democracy than ensuring public access to information. That is why we need our nation's public, school, college and university libraries online. The technological revolution is happening now. And now is the time to support your library and all libraries in their efforts to ensure equity on the information superhighway.
-- Betty J. Turock, President, 1995-96, American Library Association (ALA)

Public libraries have long supported the continuing education of the common man and the essential values of lifelong access to informational resources for education, business pursuits and literary entertainment. In recent years, libraries have increasingly automated access to their "card catalogs" allowing more accurate and versatile entry to their wealth of resources. In many cases, they have or will soon have public dial-in (and/or Internet) access to their card catalogs and other online resources, so one may explore a libraries holdings remotely before one visits. Trends in recent years have been to enhance publicly available collections with both audio and video material for loan, but also to have CD-ROM or other computer accessible information resources available to the visiting public at terminals and computer workstations or even by remote dial-in access. Hard copy serial collections are frequently reduced to pay for electronic versions of journals and magazines, but often a broader range of materials become available as the access becomes more precise and efficient. In the future, government entities will make increasing volumes of public information available but may or may not provide the means of access (i.e.- public kiosks), thus libraries seem the most logical venue to invest in and develop so as to support and expand public access to advanced information resources.