  It has proved to be difficult to translate the lessons from the literature on
universal service into the policy framework because of political interests and
regulatory capture. Neither the USA or Europe has made a very good job of
devising a clean framework and the WTO agreement is sparing in this area. A
number of pressures in the European context have enabled a more systematic
approach to emerge, that exploits the academic work. They include the need for
the European regulatory framework to encompass E. European countries where
network development and income levels are much lower, the desire to encompass
Internet within the universal service regulatory framework, a willingness to
design a framework that covers all communications networks and remove the
telecommunications bias, thereby forcing issues of economic neutrality to the
fore. The paper systematically goes through a number of key areas and
principles of regulation and how they are being designed to deal with a range
of national situations. They include, defining the scope of universal service
and the principles by which it might be modified in the light of technological
and economic developments; incorporating latitude for intervention outside this
defined scope, defining incentive and designation methods to encourage the
efficient supply of elements of universal service obligations, interpreting
affordability in the context of price and income levels that diverge
considerably, requiring both allocative efficiency and competitive neutrality,
formulating alternative financing methods including general government
financing and value added tax type methods which can co-exist and provide
comparative policy yardsticks.
