`Universal Service' Is No Longer So Simple

New technology poses policy questions about Americans and their telephones

FOR three generations, the United States supported a simple tenet of technology policy: Everyone ought to be able to afford a home telephone.

This policy, called ``universal service,'' helped build the world's most dynamic telephone infrastructure and enjoys wide support today. But new technology and competition are posing awkward questions.

Does universal service still mean a low-cost home phone? Or is it something more? Should government ensure that all Americans can log onto the Internet (an information highway prototype)? Or is interactive television the new standard?

``We're entering a whole new world of multimedia,'' says Alex Mandl, executive vice president with AT&T. ``Now, all of a sudden, what becomes universal service? It's probably more than just a touch-tone telephone.''

At one end of the spectrum, technology optimists are pushing for a sweeping redefinition of the term.

``We decided it was important for the economy and the society that everybody should have access to a telephone,'' says Susan Hadden, a public policy professor at the University of Texas at Austin. The new model, she argues, should be interactive video communications to the home. This link would give all levels of society face-to-face contact with services ranging from health care to job training to long-distance learning.

The Clinton administration has talked of something similar. Its National Information Infrastructure would bring such interactive service to every public school and library. But Professor Hadden says she would go even further. ``It's a lovely goal, but I hope it's not the final goal,'' she says. ``Nobody is going to watch TV if they have to go to the library to watch. It has to come to the home to be effective.''

Many policy analysts take a much more conservative approach.

``I'd prefer to see these decisions about what people want to consume made by the consumers themselves,'' says J. Gregory Sidak, resident scholar at the American Enterprise Institute, a conservative think tank in Washington. ``Instead of having an economy car, maybe we're mandating a Lear jet. That can be very wasteful.''

Tied into this question of universal service is another problem: Who will pay for it? Old formulas do not work anymore.

Originally, the idea was a quid pro quo. The federal government gave AT&T a monopoly business; in return, AT&T would provide low-cost residential telephone service. The company charged higher-than-cost rates for long-distance calls to make local calls cheap. When competitors began chipping away at the long-distance market, a federal judge broke up AT&T and modified the equation. Subsidies then flowed from long-distance companies to the new ``Baby Bells'' in the form of access fees. Also, business users paid more for local service so residential users could pay less.

Even this setup is under attack. Competition is coming to local telephone service, and new technology is finding ways around the access fees. So Congress is grappling with new funding mechanisms. In this area, there seems to be broad consensus in the industry. All telecommunications providers - even cable television companies, if they jump into the business - should help pay to subsidize residential service.

Teleport Communications Group, which competes with Bell companies to provide local service to businesses, suggests what it calls Universal Service Assurance (USA). The idea is that any telecommunications company that provides residential service ought to be eligible for federal subsidies - not just the Baby Bells. That way, Teleport Communications argues, competition will give residential customers more choice and drive down costs.

``There is very broad recognition that you must change universal service because it enhances competition,'' says Gail Garfield Schwartz, vice president of government affairs for Teleport, based in Staten Island. ``You can't have one without the other.'' The idea that competition will enhance access is quite new. Traditionally, government has ensured universal service by passing more regulation, not less. Analysts are skeptical that the deregulation plans now before Congress will work.

``Opening up local phone service to competition most likely means deregulation, and deregulation means that competing telcos [telephone companies] won't have incentives to provide universal service,'' says Jeff Johnson, chairman of Computer Professionals for Social Responsibility, a national organization concerned with the social implications of computer technologies. ``Instead, they'll tend to go for the `low-hanging fruit high-volume business customers and high-income residential customers who use fancy services - and ignore the rest.''

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