The economics of local phone service.

David Weinberger is blogging the Bellhead Nethead conference, and posted this panel discussion about the Universal Service fee and whether it should be required of VoIP phones as well. The goal of the Universal Service fee was to provide access to advanced telecommunications services to all consumers at rates that are reasonably comparable to those charged in urban areas.

One of the participants comments that “One reason we’re 15th in broadband adoption is that our dialup rates (isp and phone service) are so cheap.” I beg to differ. I lived in a small rural town about 35 minutes outside of Boston where neither the phone company or cable companies felt there was sufficient revenue to be generated from broadband access. A small provider filled the gap at an initial cost of $500, and $60 per month, versus the more reasonable $40 per month in urban areas. That eventually changed when AT&T sold its cable division.

I’m in the process of moving to VoIP myself, but that is for home use. The truth is that I use my mobile phone far more than my home phone, and that is the number I give to people. I just forward the phone if need be. And throughout Europe, the penetration of cell phones is far higher. I expect that in the future my kids won’t even have home phones, which will alter the economics of local phone service as we know it.