Killing with Kindness: Fatal Flaws in the $5.7 Billion Universal Service Funding Mission and What Should Be Done to Narrow the Digital Divide

Abstract

This paper will examine the flaws, defects and political accommodations existing in the current universal service funding process with an eye toward proposing a new workable system that can support broadband infrastructure development and operate in a digital environment where few carriers may offer traditional telecommunications services on a stand alone basis. The paper will propose a system that spreads the financial burden among all operators that offer services originating and/or terminating over networks accessible from and to telephone handsets. Additionally the paper will identify best practices in government strategies for stimulating innovation, infrastructure development and increased penetration of both basic and advanced telecommunications services. Lastly the paper will address what compromises and tradeoffs that the FCC and possibly Congress must impose on incumbent universal service beneficiaries, such as local exchange carriers and users.