Is Universal Service Justified by the Public Interest? From the Early Days to the Digital Age

Abstract

It is commonly accepted that universal service is clearly justified by reference to the public interest, and this understanding stems from the natural monopoly paradigm. However, telecommunications monopolies have never been ‘natural’, and the alternative to regulation has always been a competitive marketplace. The liberalisation movement had a chance to create a genuinely competitive industry but failed to do so. This article argues that the universal service dogma has played a significant role in the formation of the ordered competition regime of modern telecommunications, and explains this phenomenon in terms of public choice theory.

The Russian Telecommunications Experience: a Positive Outcome of the Competitive Order in the Industry

“…Meanwhile, the common pattern of the Bderegulatory^movement of the 1990s in different places of the world did not assume formation of the competitive order in the industry and eventually chose the Bordered competition^regime (see, e.g., Burton 1997;Trubnikov and Trubnikova 2018). In Europe, for example, there was not only a lack of placement of all services in the competitive environment at the same time, but even competition in the area of telecommunications infrastructure was not allowed in the beginning of the process of Bderegulation^(see, e.g., Larouche 2000).…”

“…It was regulatory granted market power that could be dismissed at the very beginning at the same time with removal of all barriers for competition in all subfields of the industry in order to move the industry into the direction of the competitive order and to force market mechanisms work. However, the understanding of local loops as an example of a natural monopoly, beliefs that the presence of sunk costs leads to underinvestment in telecommunications infrastructure, and desires to promote efficiency of the field and avoid wasteful duplications shaped the policy of the reform and resulted in the choice of the Bordered competition^regime (see, e.g., Burton 1997;Trubnikov and Trubnikova 2018). As a result, the experience of other western European countries was rather similar to the UK template in the efforts of the governments to eschew the competitive order in the industry.…”

The Public Choice View at the “Deregulation” Movement: Analyzing the Experience of European Telecommunications

“…Moreover, the European reform could adopt the ordoliberal views at the competitive order, especially if to take into account the prevailing "mythology" about the ordoliberal nature of EU competition policy (Akman and Kassim 2010), but by that time the ordoliberal principles had been already replaced by the neoliberal outlook of the Chicago school of economics and "efficiency-enhancing rationale" (Bartalevich, 2016). While the ordoliberal school appealed for "creating an economy where production is decentralised and takes place in relatively small units" (Schnyder and Siems 2013), the mainstream ideology did not envisage such a competitive order for the telecommunications sector (Trubnikov and Trubnikova 2018).…”

The political economy of ‘ordered competition’ in European telecoms

“…6 Some examples are given in Section 4. 7 For public choice analysis of the use of the 'digital divide' concept, see Trubnikov and Trubnikova (2018). 8 Burton (1997, p. 169), for example, points out that the possible divestiture of BT before its privatisation was precluded in part by "the power of BT's managementwho opposed any break-up of it".…”

“…For public choice analysis of the use of the ‘digital divide’ concept, see Trubnikov and Trubnikova ().…”