Universal Service Considered Harmful

Fine-sounding slogans are fine ways to hide restraint of trade:
…when the Bell System’s Theodore Vail made up the term “universal service” in 1907 what he was really trying to do was squelch competitive phone networks — there were a lot of them, and they were doing very well, and Vail wanted to convince everyone that one phone system would be a far better idea. So the idea behind universal service in the early 20th century wasn’t spreading phone connectivity (competition had been doing a good job at that) or underwriting costs (because costs were being pushed lower by competition). It was, instead, the notion that being able to reach everyone on a single, centrally-managed phone network was a good idea.

Universal service, by Susan Crawford, Susan Crawford blog, Tue 13 Mar 2007 09:33 PM EDT

In other words, interconnectivity. But with a centralized aspect, which wasn’t necessary technically, yet was optimal for building a monopoly. Thus the notion was used to squelch small competitors.

And as in the past, so in the present:

About nine months ago now [pdf], the FCC both extended the contribution base for universal service (a program that spent $6.5 billion in 2005) to “interconnected VoIP” revenues and raised the expected contributions for wireless carriers. This is the third leg of the “let’s get VoIP” scheme — E911, CALEA, and now universal service. Patient visitors to this blog have heard me talk about the E911 and CALEA elements of this program in the past.
All that plus patent thickets.

As usual, Susan sums it up:

Surely we can do better. If universal service means supporting internet access for all in this country, it should be a straightforward program that is paid for out of general revenues rather than out of a tax on innovative VoIP services. Why punish VoIP? Why support a program that is widely viewed as being entirely broken?
Well, if Congress were to direct the FCC to serve the people, something better could happen.