Newsletter of the Mercurians, in the Society for the History of Technology

Volume 11, No. 1, November 1998

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Universal Service

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Universal Service

Universal Service: Competition, Interconnection, and Monopoly in the Making of the American Telephone System. By Milton L. Mueller Jr. Cambridge, Mass. and Washington D.C.: MIT Press and AEI Press , 1997.  Pp. xiii + 213; illustrations, figures, notes, bibiliography, indexes. $40.00

Milton Mueller's book, Universal Service, is simultaneously a thorough historical account of early twentieth-century telecommunications competition and a cogent critique of the 1996 Telecommunications Act. The first twelve chapters focus on 1894-1934, the period following the expiration of Bell's telephone patents that witnessed fierce competition between the Bell organization and many independent service providers. Mueller reconstructs this era through careful research that relies heavily on documentation from the AT&T Bell Laboratories Archive. He demonstrates that this early period was characterized by competing networks and dual service (Bell and the independents) in many markets.  

Initially, the Bell system and the independent exchanges did not interconnect; a system of access competition held sway. Those unfamiliar with the period before the Bell monopoly will find the discussion of dual, competing networks fascinating. The serious scholar will appreciate the level of detail provided here. In particular, the case study from Louisville, Indiana, (chapter 7) illustrates how communities were segregated into different communication communities depending on which network they belonged to, and how access competition affected the daily lives of local citizens. For the casual reader, however, the level of detail provided in this case and elsewhere may prove a bit overwhelming. 

In the first twelve chapters, Mueller makes two important points that contradict conventional wisdom. First, he demonstrates that access competition played a major role in the achievement of universal service in the U.S. In effect, universal service did not result from a government-industry regulatory bargain, as is commonly believed. Rather, competitive pressure caused the Bell organization and the independents to extend their respective networks by signing up as many subscribers as possible. The more people the network reached, the more attractive it would be to future customers. In short, access competition during the early twentieth century pushed networks into every major region of the United States, thereby creating the foundation for today's universal service.  

Secondly, Mueller concludes that the definition of universal service has changed over time. After 1907, in an attempt to overcome the competition, the Bell organization propagated the idea of "universal service." Initially, this term meant simply a single, unified telecommunications system (to be controlled by Bell, naturally) connecting all users. Mueller convincingly demonstrates that the modern definition of universal service-affordable telephone service through cross-subsidies and rate averaging-did not exist during this period. Thus, he amends the work of other scholars, who have traced the origins of universal service back to the early 1900s, but who failed to realize that the term then had a completely different meaning.  

Mueller's historical narrative is strongest when he presents the strategies and policies of the Bell organization. In particular, the thorough documentation of Bell's strategy, demonstrated by copious footnotes, is admirable. Despite an overall superior analysis, a more straightforward discussion of the collective action problem could have strengthened the discussion of the independent telephone companies. Unlike Bell, the independents were not an integrated organization. Each company had an incentive to defect from a united independent front, once the common policy no longer reflected its interests. This difference in organizational structures-i.e., a loose-knit grass roots independent movement versus the Bell hierarchical organization governed by contractual relations-gave the latter a decided strategic advantage. Bell could pursue long-term strategic goals, whereas the independents relied on ad hoc cooperative agreements. Bell's advantage can be inferred from the case studies and empirical evidence. Unfortunately, however, Mueller does not explicitly address the problem of collective action and its implications in his analysis.  

The final three chapters examine the evolution of the universal service concept in more recent years. Mueller contends that our modern understanding of universal service is the result of historical revisionism by AT&T in the 1970s. In defending itself against emerging competitors, AT&T inaccurately claimed that monopoly and cross-subsidies had promoted universal service. In point of fact, universal service had already been achieved prior to the widespread use of cross-subsidies. "Bell was trying to persuade Congress to preserve the traditional monopoly structure. The Justice Department had just filed the antitrust suit that eventually led to the breakup of AT&T. And MCI had invaded switched long-distance service with its Execunet service in 1975. . . . [During] the ensuing years of antitrust proceedings, 'universal service' became a political weapon for defenders of regulated monopoly and lost its historical meaning" (p. 164).  

In setting the record straight about the original meaning of universal service, Mueller hopes to open further the debate surrounding the merits of current universal service doctrine, a sacred cow for regulators and public interest groups. He does not, however, wholly succeed. The fact that the current universal service conception arose in the 1970s, and not the early twentieth century, does not necessarily diminish the value of the contemporary definition. While Mueller himself may not favor the current universal service doctrine, this doctrine, with all its normative and equitable implications (especially geographic equity and affordability) finds strong support among many constituencies, regardless of its historical roots.  

Mueller further argues that this historically inaccurate understanding of universal service is codified in the 1996 Telecommunications Act (p. 166). Mueller rightly critiques many of the problems with the 1996 Act, including the debate surrounding which services should be included in universal service obligations (e.g., Internet connections for schools and libraries) and the problem of addressing new technologies and rapid technological change within a universal service context.  

Mueller also points out the logical inconsistencies between the 1996 Act's expanded definition of universal service and the principle of open and nondiscriminatory interconnection also encompassed in the Act. His solution to the resulting dilemma is a competitive, unregulated market for interconnection and access that fails to address how new competitors would overcome formidable barriers to entry and the likely predatory practices of an established incumbent in the absence of any interconnection regulation.

Despite the weakness of Mueller's policy suggestions, this book is a strong, well-crafted historical study well worth exploring. I highly recommend this book for anyone interested in universal service or the early history of American telecommunications. 

Jana Harrison is a Ph.D. candidate at the School of International Relations, University of Southern California, in the field of international political economy. A research associate at the Center for Telecommunication Management, USC, she also currently teaches at Western International University, Phoenix, Arizona. Harrison's publications address several topics, including the potential of ADSL technology (Asymmetric Digital Subscriber Line) and the uses of digital technologies in education. <>