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Fortnightly Magazine - October 15 1996

CPUC action was received as a new tax for a new service. The media coverage of the CPUC plan neglected the importance of maintaining universal service in a competitive environment. Instead, reporters produced headlines about a pending new customer surcharge.

Misplaced Focus

Not surprisingly, the battle over the size of the fund pitted existing local exchange carriers against the new competitive rivals for local service. The incumbent local carriers drew criticism for wanting too much reimbursement from the fund because they would benefit if no other providers invested in remote areas. And, predictably, the new competitors were criticized for not wanting to contribute enough, because it would add an extra cost to their new competitive strategies.

But these differences again focused attention only on the players (em not on the fact that universal service already exists and anything less than moving its financing toward its real cost will cripple the economic opportunities of real people in real communities.

Basic telephone service isn't all that's at stake in trying to assure adequate funding for universal service. Important opportunities from new information technologies will come eventually to schools, libraries, and health facilities in more remote areas, but only when the new telecommunications competitors seek investment in these seemingly less profitable areas. If it should fund universal service inadequately, the CPUC would provide few incentives for new telecommunications providers to compete and build in many parts of California. This lack of incentives would create redlined areas in which the economy could suffer for want of new services.

Economic indicators continue to demonstrate that small business growth in California will drive the state's overall economy. The greatest employment in the state can still be found among small businesses with fewer than 20 employees. But this growth can continue only if we create an Information Age that remains available to, and can be used by, all California (em not just those customers in profitable areas where new competitors see a quick return for little investment.

It's ironic that a commission should seek to implement a new competitive structure for local telecommunications by scrimping on a program that would enhance the competitiveness of the state's greatest economic base (em small business. Scrimping on universal service in the short term will block the long-term benefits for those areas that most need a state-of-the-art telecommunications infrastructure. And since greater competition is supposed to improve our choices and economies, this short-sighted view could set a bad precedent for future transfers of monopoly programs to more competitive markets.

In 1993, then-CPUC president Daniel Fessler wrote to Gov. Wilson about the importance of California's future infrastructure in telecommunications: "The benefits are clear, establishing advantage for California in an increasingly competitive global marketplace; generating new, higher-paying jobs for the state's citizens as California expands its role as the next century's center of technological innovation; and, of critical importance, delivering the promise of the Information Age to all Californians."

Three years later, these goals remain just as valid, and the future just as promising.

But if we are to truly move from a subsidized network