Application Of Slutsky Approach To Universal Service In Telecommunication

Universal Service is as old as the history of telecommunications. At the start of this century it was meant by the interconnection but after the passage of time it had changed its meaning. The present concept of the Universal Service came in picture in the mid of this century. In many countries of the world Universal Service Fund Programs were formed. These US Funds were actually indirect taxation on the consumers of the low cost areas. It is not justified to subsidize the high cost area consumers at the cost of low cost area consumers. This type of the practice is not justified by Economics.Commodity taxation causes the consumer to alter his utility as he is worse off and he will consume less of taxed good and will substitute this taxed commodity with untaxed commodity. It creates deadweight loss. Whereas by implementing the General tax there is no dead weight loss. If the tax is necessary then it should be General tax so as to reduce the community loss or consumer welfare.