Telecommunications providers, such as phone companies, are subject to universal service obligations by the Communications Act of 1934. Section 201(a) provides that:
It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor ...
Section 202(a) further provides:
It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.
However, this seems to leave open the possibility that customers could be banned if they are using the phone service primarily to engage in illegal activities such as prostitution, as the phone company could argue that the customer's request for service is not "reasonable", and that the discrimination against them is "just" and "reasonable". However, I've never heard of something like this happening before, which leads me to suspect that it's not allowed. I suspect that the actual legal situation is that phone companies can only ban people in cases where providing service to them would enable them to abuse the infrastructure itself.
Is it true that phone companies cannot ban potential customers or terminate service even when said customers engage in primarily illegal activities? And if so, then what specific law or laws prevent this?