1. University of Colorado Centris Temple University & Centris Copyright © 2009 James Alleman. All Rights Reserved. Universal Service: A New Definition? James Alleman Aniruddha Banerjee Paul N. Rappoport

2. James Alleman University of Colorado  Issues  Policy Framework  Auctions  Conclusions Agenda

3. James Alleman University of Colorado  Need for Universal Service?  Definition of USO?  What Technology? Issues

4. James Alleman University of Colorado  Need for Universal Service?  Externalities?  Broadband?  Economic development? Issues

5. James Alleman University of Colorado  Externalities?  Not an issue in developing world  Issue is developing world  Economic Development  Not proven -- neither BB or NB  Best allocation of resources? Need for Universal Service?

6. James Alleman University of Colorado  Need for Universal Service? ...  Definition of USO?  Narrow band  Broadband  Voice/data connectivity  Video connectivity Issues

7. James Alleman University of Colorado Definition of USO?  Narrow band  Traditional  Easier to implement  Broadband  Costly, fixed  Less expensive, wireless  Economic contribution?

8. James Alleman University of Colorado  Need for Universal Service? ...  Definition of USO? ...  Technology  Fixed?  Mobile?  Wireless, all types? Issues

9. James Alleman University of Colorado  Fixed?  Traditional  Wireless substitutes for  Mobile?  Less costly  Ubiquitous  Wireless, all types? Technology

10. James Alleman University of Colorado Mobiles/main lines

11. James Alleman University of Colorado (partial list)  Nokia 3250  Nokia 5500 Sport  Nokia 5700  Nokia 6110 Navigator  Nokia N95  Nokia N95 8GB  Nokia N96 ... VoIP Compatible Phones

12. James Alleman University of Colorado 3G plus WiFi TrueMove iPhone (announced in 16.01.2009) 3G plus WiFi

13. James Alleman University of Colorado  Issues  Policy Framework Agenda

14. James Alleman University of Colorado Agenda  Policy Framework  Goal: Universal Service  Efficiency Concerns  Cross-Subsidies  Instrument  Financing/Funding

15. James Alleman University of Colorado Policy Framework Universal Service Obligation: Network Connectivity/Service

16. James Alleman University of Colorado  Economic Efficiency  Distributional Impact/Equity  Externalities Addressed?  High market penetration of exchange service in DC's  High mobile penetration in LDC's Policy Framework: Concerns

17. James Alleman University of Colorado  Not Addressed  Incidence  Penetration  Needs/Means Test  What are the Social Goals? Policy Framework

18. James Alleman University of Colorado Demand Patterns User Subsidy Service Subsidy Incidence

19. James Alleman University of Colorado Universal Service Obligation  Cross-subsidies: Inefficient  Not marginal subscribers  Not targeted  If targeted ° Externality addressed ° Comports with efficient pricing: High access charge & usage charge Closer to Marginal Cost

20. James Alleman University of Colorado QQ ' Price Quantity AC, MC P ' P A B Service Subsidy

21. James Alleman University of Colorado Universal Service Obligation  Inefficient  Not marginal subscribers  Not targeted  Not desired  Demand relationships

22. James Alleman University of Colorado Demand Relationships  Subscriber Access: Derived Demand  Exchange usage  Toll usage  Mobile usage  Other services

23. James Alleman University of Colorado Demand Relationships  Access Is Derived Demand  Demand Cross-elasticities  Access demand has a cross- elasticity with toll demand  Mobile demand has a cross- elasticity with traditional service

24. James Alleman University of Colorado  Economic Efficiency  Distributional Impact/Equity  Externalities Addressed?  High market penetration of exchange service in DC's Policy Goals: Concerns

25. James Alleman University of Colorado Efficiency Concerns  Inefficient  Not marginal subscribers  Not targeted  Not desired  Demand relationships  Companies Subsidized

26. James Alleman University of Colorado  No Market Test  Inefficient  Inhibits Competition  Expensive  Preemptive Cross-Subsidies

27. James Alleman University of Colorado QQ ' A B Price Quantity AC, MC P ' P Efficient Entrant's MC Preemptive

28. James Alleman University of Colorado Price AC, MC P ' P Efficient Entrant's MC Efficient entrant excluded from the market Preemptive

29. James Alleman University of Colorado Recommendations Subsidies  No Cross-Subsides  Targeted Subsidies, if any  Government Financed

30. James Alleman University of Colorado  Issues  Policy Framework  Auctions Agenda

31. James Alleman University of Colorado Auctions  Auctions:  Assign Value  Minimize Payments  Voluntary Actions  Discipline Regulator  Efficient Entry & Investment

32. James Alleman University of Colorado Assign Value  Market Mechanism  Not Cost-of-service Based  Eliminates Cost Debates

33. James Alleman University of Colorado Minimize Payments  Market Determined  Self-determined market structure  Replaces exclusive franchise

34. James Alleman University of Colorado Auctions  Assign Value  Minimize Payments  Voluntary Actions  Discipline Regulator

35. James Alleman University of Colorado Discipline Regulator  No Regulatory Gaming  No Regulatory Determination:  Who is subsidized or  The size of the subsidy

36. James Alleman University of Colorado Auctions  Assign Value  Minimize Payments  Voluntary Actions  Discipline Regulator  Efficient Entry & Investment

37. James Alleman University of Colorado Auctions  Assign Value  Minimize Payments  Voluntary Actions  Discipline Regulator  Efficient Entry & Investment

38. James Alleman University of Colorado  Issues  Policy Framework  Auctions  Conclusions Agenda

39. James Alleman University of Colorado Conclusions  Define USO Objectives  Service Neutral  Fund via Government  Auctions Fulfill Policy Goals  Technological/service neutral  Cost minimizing  No regulatory gaming

40. James Alleman University of Colorado Contact Information Dr. James Alleman 2491 Twenty-third Street Boulder, CO 80304-3707 phone: +1 303 443-4465 mobile: +1 917 294-1688 e-mail: James.Alleman@Colorado.edu http://www.colorado.edu/engineering/alleman/

41. University of Colorado Centris Temple University & Centris Copyright © 2009 James Alleman. All Rights Reserved. Universal Service: A New Definition? James Alleman Aniruddha Banerjee Paul N. Rappoport