Digital technology has led to increased competition for telephone service providers as well as demand for new types of services. These trends have put pressure on traditional universal service arrangements. This paper examines the interplay between market structure, technological innovation, the ubiquity of telephone service, and the development of new communication services. It shows that competition in telephony has helped, not hindered, progress toward universal service, not only in the historical period of telephone competition (1894-1920) but also since the divestiture of AT&T in 1984.
The paper further illuminates the role of technological change in answering the questions of what services should be universal and how that universality can best be achieved. Given the continuous development of new services, we need to focus more on the process that can lead us to the result of universality, when that result makes sense. We should work on enabling continual innovation and cost reduction in the provision of all communication services, including newer data and video services as well as traditional voice telephony. Competitive markets foster innovation, but competition alone is not enough. We must also establish architectural guidelines for both markets and technology that will allow our infrastructure to keep pace with technological change. The paper recommends the following policies:
* Encourage competition wherever possible in telecommunications.
* Make explicit subsidies available directly to low-income users if they would otherwise not be able to afford essential services.
* Refrain from defining immature services as essential.
* Follow the guidelines for a competitive communications market structure described further in (Lampson, Tennenhouse and Gillett, 1994). These include: separating services from distribution in the regulation of communication networks; enforcing open interconnect at both the customer and service provider ends of the local network; and encouraging brokerage and resale of services.
* Favor architectures and technologies that are digital, scalable, and extensible.
The paper concludes that these policies would enhance widespread access to both old and new communication services.
