Traditional Telecommunications Networks The International Handbook of Telecommunications Economics, Volume I
The International Handbook of Telecommunications Economics, Volume I
Edited by Gary Madden
11. Universal service James H. Alleman and Paul N. Rappoport INTRODUCTION Digital divide, digital inclusion, universal service, universal service obligation (USO), and national information infrastructure (NII) initiative. These expressions all have the sound of virtue. Who could be against closing the digital divide or expanding universal service? But in fact when one explores the meaning of these terms in greater detail and, more importantly, the manner in which they are implemented and funded the concepts become much less virtuous. These are basically political clichés that have clouded the economic goals that underlie the terms. In this chapter it is argued that what is addressed by these phrases is really a resource allocation issue. The programs designed to implement these allocation goals have for the most part been unsuccessful. For clarity and expository purposes the notion of universal service and the digital divide are separated into: the desired goals; the available implementation methods – the instrument used and those proposed; and the funding mechanisms utilized. The deﬁnition and the rationales oﬀered for universal service (including: increasing telephone penetration, network externalities, income redistribution and infrastructure development) are explored. The rationales are judged against economic theory, empirical evidence, the instruments used to obtain these goals and the eﬃcacy of the mechanism itself. All are found deﬁcient. Original and received empirical analyses support this conclusion. Although a global policy this chapter concentrates on its treatment in the United States (USA) because of the availability of data and the changing nature...
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