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Is Universal Phone Service a Sleeper Issue to Watch in 2013?

There are conflicting pressures on the universal service fee to maintain “plain old telephone service” on one hand and help pay for a broadband future on the other.

“The whole phone deal right now has become a little cutthroat,” says Melvin “Kip” Holden, the mayor-president in this city-parish on the Mississippi River that serves as the capital of Louisiana.

High-speed broadband contributed to the city’s fast economic growth over the past decade, and Holden is optimistic about the telecommunications industry’s multibillion dollar investments in digital fiber networks that combine voice, data and video. Still, with 40 percent of city residents living at or below the federal poverty level, he is also concerned about ensuring basic phone services for people with limited income.

Against a backdrop of aggressive modernization, Holden is focused on practical concerns at the street level. He says it is too easy to assume that everybody knows or can figure out how to operate increasingly sophisticated mobile phones, which have the potential to confuse people who have only known the once-ubiquitous landline telephone service.

“We have not paid enough attention to it,” says Holden. “Sometimes, unless you live those circumstances, you tend to ignore the realities. There has to be a universal conversation about where we are, what are the obstacles in the way and how can we overcome them.”

Telephony is unique among technologies, with its social contract created a century ago to provide a safety net in the name of “universal service.” It was at once a high-minded ideal, a public policy compromise to justify a historic monopoly (the original AT&T), and a funding mechanism to ensure affordable, reliable phone service for all users regardless of population, geography or cost.

Today, there are conflicting pressures on the universal service fee (that unexplained item on our phone bills) to maintain “plain old telephone service” (POTS) on one hand, and help pay for a broadband future with what the industry calls “pretty awesome new services” (PANS) on the other.

A total of $8.1 billion was disbursed through universal service funding in 2011, half of which was allocated for high-cost subsidies. That puts the universal service fee -- itself under threat from the decline of landline subscribers -- in the crosshairs of a high stakes gambit between the past and future.

Just north of Louisiana, in Arkansas, the conflict between new trends and old service needs is apparent. State CTO Claire Bailey has just completed a term as president of the National Association of State Technology Directors. Back home, she serves on the board of Connect Arkansas, a private, nonprofit corporation created by the Legislature to guide broadband deployment in the state.

Bailey says they are following the demand curve. “When we did our analysis, 35 percent of Arkansans, or 3 million people, are wireless only. They don’t use POTS, and they are getting their broadband over their mobile devices. So we not only have to look at the fee structure but even the concept of wires. What are we truly trying to do there?”

It may portend a new digital divide. The original problem was access to the Internet. Ironically, the new problem seems strangely retrograde in that it shores up voice connectivity as part of a converged future. “Our strategy is to focus on affordable, available and adequate,” says Bailey.

Even as the debate over the future of POTS and PANS gets louder, it is much more than simply a discussion of policy or technology or even economic development. Bailey reminds us that it is ultimately a conversation about core values and modernizing the social contract. “Whenever you talk affordability, you are hitting on sacred ground. It has to be a discussion for all of us.”

Caroline Cournoyer is GOVERNING's senior web editor.
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