TELRIC vs. Universal Service: A Takings Violation?

While the Telecommunications Act of 1996 has had a profound positive impact on many sectors of the communications industry in the United States, local phone companies have recently faced a serious dilemma under a provision of the Act known as TELRIC. In this article, Stuart Buck presents a current analysis of the position of the telephone company and its struggle to meet costs under the TELRIC structure. The author argues that by forcing regional phone operators to grant wholesale pricing to competitors under TELRIC, while simultaneously maintaining Universal Service requirements of reduced-rate phone access to remote customers, the local phone companies may be unable to remain profitable. The first section of this article analyzes the history and nature of TELRIC. This discussion is followed by a review of Universal Service Fee requirements from state and federal perspectives. The author concludes by explaining the potential strengths and weaknesses associated with “Takings Clause” lawsuits and the ways in which such lawsuits may prove to be beneficial for struggling telephone companies