The ITU Draft also suggests language requiring all licensed or authorized operators or service providers to contribute to the Fund. $ ^{78} $ However, there is no discussion of whether this approach leads to pro-competitive market solutions. Perhaps to counter this statement, the ITU Draft goes on to say that USF funds should not be used to the competitive advantage or disadvantages of any one private operator. In emphasizing market oriented, non-discriminating principles it proposes the following sample language:

“To the greatest extent possible, USF funds will be employed to facilitate investment in market-oriented, sustainable operations, which will not require public subsidy following initial start-up funding.” $ ^{79} $

Again this stresses the temporary nature of the USF. The ITU Draft does suggest that the most competitively neutral practice is to require all market participants to contribute an “equivalent” amount by setting a fixed percentage of designated revenues. However, the ITU does not consider the anti-competitive effects of this policy. The practice of requiring the private sector firms that compete against the universal service provider in competitive markets to fund its USO subsidy can distort market signals with respect to the services provided by each. This distortion occurs by sending inaccurate price signals to consumers deciding whether to use competitive services in place of the regular postal offered by the universal service provider, thereby resulting in inefficiencies and higher overall costs for all.

Additionally, requiring funding from private market participants has the effect of amplifying any cross-subsidization by the universal provider to the detriment of competition in the competitive markets. This occurs where the universal service provider competes against the private companies in the competitive markets with artificially low prices that are cross-subsidized from the USO fund, while the private companies themselves must bear the additional cost of contributing to the USO fund. Throughout the ITU Draft, there is no attention paid to the costs of the USF and from where it is drawn. Indeed, it is almost as if the ITU Draft’s principles are based on the notion that the USF is virtually costless, which of course is a fallacy.

The ITU Draft does call for careful accounting procedures, but again nowhere does the ITU document deal properly with the risk that USF monies may be used to cross subsidize services in competitive markets.

In looking at the costs side of the equation, the Australian experience is instructive. The costs must be only those in producing standard service and payphones. In the Australian case, non-standard services are excluded from the costs calculation. The Chilean case is instructive because it shows that the USO can be bid out competitively.

The Chilean approach is interesting in the telecoms area because, unlike electricity and water, it is universal access, not universal service that is contemplated. In the telecoms context, universal access is achieved by the creation of a Telecommunications Development Fund. The Fund's mission was to promote the installation of payphones, available 24 hours a day in areas where there was limited or low telephone density. This in contrast with some countries that have focused on