What a strange idea. The poor family in the rotting urban core of a city have to pay a tax on their phone line to keep a wealthy family’s ski mansion in the hills connected. Anyway, today’s sermon is not about social justice, just about the logic of universal service funds.
The USA has long been concerned with rural telecom, with its huge distances and relatively recent intense urbanisation. These pressures are also showing up now in densely populated western Europe, where universal voice service was achieved long ago, but broadband access remains an issue.
As always, the end-to-end issue is affecting all forms of regulation, and exposing assumptions from long-ago that may no longer hold. There are two problems with universal service funds: they aren’t anything to do with service, and are only universal in a very limited sense.
The cost of stringing a wire, glass fiber or microwave link across the nation is roughly proportional to the distance covered. That means network access in rural areas is considerably more expensive. In the past, you also needed more switches and repeaters out in the field too. But those days are gone: the distance to your application server is more constrained by the speed of light than network geography. So the cost of service is uncorrelated with the location of the subscriber. We want universal access, not universal service.
I would therefore propose that any “universal service” fund that persists in future be re-structured, and it be hypothecated for unbundled access. Indeed, I would go one stage further, and insist it only be used to provide Internet access. Why have a public subsidy for a dead-end network technology like the PSTN?
Now, you might argue that people in rural areas with low incomes need a subsidy for service too. Perhaps they can’t afford Vonage. But that’s a general social engineering problem, not a telecom problem. If you want so subsidise habitation in remote or sparsely populated areas, there are much better ways of doing it than taxing urban telephony.
Indeed, hypothecated taxes for telecom subsidy create a dead loss on the recipients. Rural subscribers may control the spending of that money indirectly through the ballot box, but ideally they would be able to individually chose how to spend it. Some people might prefer a better private track to their mountain retreat than a new phone line.
The second problem is that the resulting service is not very universal. Companies like Western Wireless are happy to dip into my tax dollars to build wireless networks on the borders of Indian reservations to cover nearby freeways and towns. But I get zero benefit when I’m out in those rural areas. It’s only universal in terms of geography, not people. I want a universal service to provide total access to everyone, everywhere; not just some people in some places.
My second proposal, therefore, is that a condition of dipping into a universal access fund is a forced contribution back to the access commons. All subsidised access points would be free to re-distribute their access. Violation of end-to-endism would also be prohibited; no NAT, filters, discriminatory QoS, etc. The countryside would have no lack of open WiFi networks!
Finally, there is no reason for one communications application (voice telephony) to be singled out for taxation. Otherwise, you should also be taxing email, IM, peer-to-peer, etc. — and we all know that has zero feasibility. I suggest the obvious answer (if you insist on cross-subsidy) is to tax access, not service.
The PSTN is part access, part service. It isn’t hard to do an economic analysis that decomposes its value into each bucket. Only tax the access part. Similarly, cable, satellite and DSL access would get taxed. The tricky part is sizing the tax in a way that is neutral between access technologies, and is fair and minimally distorting to the market. It should not discriminate against adoption of broadband. These seem to me to be mutually possible objectives.
This will also have an unexpected benefit. Regulatory fees have driven people off the PSTN towards VoIP. Likewise, access taxes will help to encourge the use of mesh networking and access sharing. For example, if I have a cable modem, my neighbour has a DSL line, and we both have a smart wireless router, then we should between us get fantastic uptime.
The revenue base of PSTN universal access funds is going to wither as quickly as PSTN users disappear. If we wait too long, only the weak and stupid will be left on the PSTN, and the political pressure will be enormous. Wrong choices then become inevitible. The time to change is now, while we can experiment and learn.
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