Broadband and universal service

Section 254(b)(3) of the 1996 Telecommunications Act established the objective that residents of rural areas should have access to advanced telecommunications and information services comparable to services in urban areas. Pursuant to the passage of the Act, the Federal Communications Commission (FCC) established a new universal fund that provides explicit support to high-cost rural areas. This paper addresses the question of whether people in rural areas have similar access due to the support provided through the Commission's new high-cost fund. This paper focuses on the telephone platform because cable companies often do not serve rural areas due to the high cost of service, and because there is no mechanism for the federal or state government to subsidize the provision of advanced telecommunications services via cable. The Act's objectives are apparently not being met in rural areas served by large companies since people living in these areas are much less likely to have qualified lines that could be used to access advanced telecommunications services. On the other hand, small companies are much closer to satisfying the statutory requirement as a result of the implicit support received through cost sharing.