Chapter 11: Universal Service, and the Transition from State Control to State-Monitored Competition
1 Jon M. Peha A critical objective in any national telecommunications policy is advancing universal service: making telecommunications services available and affordable to a greater fraction of the population. Similar issues can arise with other services that a government wishes to make widely available, such as electric power, broadcast radio or TV, or health clinics. Universal service is easy when services are provided by a government agency or governmentcontrolled monopoly. Government can decide where to build and what to charge customers irrespective of actual costs, provided that total revenues (plus any government subsidies) are sufficient to cover total costs. However, in country after country, experience in the telecommunications sector has shown that competing profit-seeking carriers are more willing than government ministries to minimize costs, expand the infrastructure and customer base, lower prices, and improve quality of service. This provides strong motivation for privatization and deregulation. But will profit-seeking carriers advance universal service? The problem is particularly acute in developing countries, where there are often large regions with little or no basic telephone infrastructure. Developed nations may face similar issues with newer and more expensive services, like broadband Internet. This chapter proposes a novel universal service policy for countries (a) with entire regions that lack adequate infrastructure for the desired service, and (b) where multiple privatesector firms are capable of providing this service. The policy is invoked when dispensing cash, licences, or resources to the private sector. This occurs during privatization, the introduction of competition, the release of spectrum, or the...
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