Looking back at the origins of universal service here in the U.S. (Reed Hundt's line:  when we say "universal" here, we mean "American"), it's useful to remember that it's always been used for purposes other than getting communications services to rural/needy areas.

Milton Mueller's fine book makes clear that 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.

Using the slogan "One System, One Policy, Universal Service," Vail managed to get his monopoly established and stamp out competition.

In the modern era, "universal service" is a mysterious conglomeration of implicit subsidies and thinly-related programs, all funded by revenues on various telecommunications services.  The 1996 Act says that it's supposed to be funded by telecommunications carriers providing interstate telecommunications services -- in other words, phone companies.  The phone companies pass the charges on to customers, and no one really pays attention to what's going on.  The school and libraries components of the companies have been particularly prone to graft and corruption.  In general, it's a mess.

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. 

Well.

Instead of fixing the USF program as a whole, and making it rational/coherent/based on providing highspeed access to the internet (rather than subsidizing phone service), the Commission last June adopted an interim approach that charges "interconnected VoIP" with contributing to the same bloated/broken program.  The definition of "interconnected VoIP" will certainly broaden in the future -- right now it means anything that enables real-time voice communications, uses IP equipment, and is capable of allowing users to connect to the traditional phone system.  But in the future, that definition could expand to cover anything that the FCC views as substituting for traditional phone service (like, say, virtual world voice) and the USF obligations imposed by the Commission would continue to apply.  (As usual, the jurisdictional basis for all of this is adventurously shaky -- the FCC refuses to say whether VoIP is an information service or telecommunications service, and waves its hands and says 'ancillary' in a deep voice).

It seems to me that, once again, "universal service" is being used adventitiously.  It no longer is a program under which some phone subscribers underwrite other phone subscribers (the way we used to use long distance revenues to subsidize local phone service).  Instead, it's a program under which new forms of communications are being used to subsidize old ones, with hidden fees and impossible-to-calculate cross-subsidies.  And it's a mess that is expanding irrationally.
 
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?

As it was for the early Bell System, "universal service" is a concept that can be useful in squelching competition.