Universal Telephone Service & Rural America

32 Pages Posted: 11 Jul 2004

Date Written: April 2004


The cost of providing local telephone service in many rural areas greatly exceeds rates billed to customers. The Bell companies and other large independent local carriers overcome high rural costs by averaging rates between urban to rural markets. Smaller carriers with largely rural markets are supported through explicit subsidies funded through levies on interstate voice services. We use Decennial Census data at the census block group level to assess the comparative performance of different classes of carrier in rural areas, and to compare the effectiveness of different policy measures.

Telephone penetration has grown significantly since 1990, and the greatest gains are among historically disadvantaged groups. The efficacy of all universal service subsidies is low and declining over time as the programs themselves have grown. Support targeted to individuals remains more effective than support for high cost companies, even in rural areas. Independent carriers' subscribership rates lag the Bell carriers, although the deficit has narrowed significantly since 1990. Rural areas, whether served by Bell companies or Independents, have seen greater subscribership gains since 1990 than urban areas.

Keywords: Universal Service, High Cost, Telephone Regulation, Lifeline

JEL Classification: L96, K53

Suggested Citation

Ryan, Daniel J., Universal Telephone Service & Rural America (April 2004). Available at SSRN: https://ssrn.com/abstract=563122 or http://dx.doi.org/10.2139/ssrn.563122

Daniel J. Ryan (Contact Author)

T-Mobile USA ( email )

No Address Available

HOME PAGE: http://www.danryan.org

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