Disaggregation and Targeting of Universal Service Support

Abstract

Introduction The actual cost of providing telecommunications services in rural America is generally higher, per customer, than is the cost of providing these services in urban areas. This difference is due in part to the lower density of population of rural areas. Rural carriers, in contrast to urban carriers, have fewer customers to share basic fixed costs (for example, switches) and these customers are separated by greater distances, increasing outside plant costs, than are their urban counterparts. The disparity in costs is also related to the economies of scale and economies of skill enjoyed by large urban carriers that are not available to rural carriers. For example, the Federal Communications Commission’s forward-looking economic cost model shows a cost of $866.27, without adjustment for overhead costs, to provide a local loop in a Wyoming wire center, compared to a cost of $9.97 to provide a local loop in a New York City wire center.