Universal service, specific services on generic networks, some logic begins to emerge in the policy area

Abstract

It has proved to be difficult to translate the lessons from the literature on universal service into the policy framework because of political interests and regulatory capture. Neither the USA or Europe has made a very good job of devising a clean framework and the WTO agreement is sparing in this area. A number of pressures in the European context have enabled a more systematic approach to emerge, that exploits the academic work. They include the need for the European regulatory framework to encompass E. European countries where network development and income levels are much lower, the desire to encompass Internet within the universal service regulatory framework, a willingness to design a framework that covers all communications networks and remove the telecommunications bias, thereby forcing issues of economic neutrality to the fore. The paper systematically goes through a number of key areas and principles of regulation and how they are being designed to deal with a range of national situations. They include, defining the scope of universal service and the principles by which it might be modified in the light of technological and economic developments; incorporating latitude for intervention outside this defined scope, defining incentive and designation methods to encourage the efficient supply of elements of universal service obligations, interpreting affordability in the context of price and income levels that diverge considerably, requiring both allocative efficiency and competitive neutrality, formulating alternative financing methods including general government financing and value added tax type methods which can co-exist and provide comparative policy yardsticks.