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Abstract

Universal Service was originally set-up to provide everyone with telephone service -- regardless of their ability to pay. Telephone service is considered vital to health, public safety, governmental involvement, ability to obtain jobs, and to the building of community. Universal Service was paid for through cross-subsidies: businesses were charged more; all customers, regardless of locale were charged the same rate; long distance rates were artificially high and local calls were priced artificially low; phone costs were kept to a nationwide average. In 1982, the divestment of what had been a monopoly, Bell Telephone, was final. In order to continue support of the Universal Service, access charges were partially replaced with monthly flat-rate charge on subscribers. Since then, the Universal Service system has been supported through a combination of explicit and implicit subsidies that have evolved over time. The Telecommunications Act of 1996 includes the requirement that all providers contribute to Universal Service. However, Internet Service Providers have had an exemption to contributing to this fund, and are arguing that their exemption should continue. In the interest of fairness and access, this article concludes that the Federal Communications Commission, who has broad jurisdictional power, should end the Internet Service Providers' exemption, and should require them to contribute to the Universal Service fund.

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