basic local service is what should be bearing the subsidy burden and it should be cross-subsidizing long-distance service.
NOLL: Well, to defend Eli, he was not attempting to defend any particular cross-subsidization. What he was saying is that if a "philosophy king" who also happened to be an economist descended upon the earth and decided he wanted to raise X dollars in tax revenue, what would he tax? The answer is he would tax only the most inelastic demanded things, and basic access to the telephone network is about as inelastic a demand item as there is. That is all he meant.
OLIVER: So by that logic, if you could, you would tax oxygen and food?
NOLL: No. It was discovered at the time of the Doomsday Book that the right way to tax people is proportional to the heads they have.