VIA ELECTRONIC MAIL AND AIRBORNE EXPRESS

Ms. Josephine Scarlett
Office of the Chief Counsel
National Telecommunications and Information Administration
Room 4713 HCHB
1401 Constitution Avenue NW
Washington, DC 20230

Dear Ms. Scarlett:

Enclosed are comments of the Florida Public Service Commission in response to your request for comments on deployment of broadband networks and advanced telecommunications in the United States.

You may contact me at (850) 413-6574 or Sue Ollila at (850) 413-6540 should you have questions or require additional information.

Sincerely,

Gregory D. Fogleman
Bureau of Intergovernmental Liaison

GDF:tf

Enclosure

The Florida Public Service Commission (FPSC) is pleased to provide comments in response to the National Telecommunications and Information Administration's (NTIA) request regarding the deployment of advanced telecommunications capability. Our comments relate specifically to what we believe should be the primary policy considerations in formulating broadband policy for the nation, as well as consumer demand for broadband, the definition of broadband services, and whether universal service support is necessary for broadband (Questions A-D). Because of proceedings currently pending before the FPSC, or due to a lack of information filed with this Commission on a particular issue, the FPSC is not able to provide comments to other questions (Questions E-N) at this time. In general, the FPSC believes that access for all (synonymous with availability to all), technological neutrality, and minimal regulation are the key components of a national broadband policy.

ACCESS FOR ALL

Our view of "access for all" is driven by the marketplace and is synonymous with availability. Access for all citizens to broadband service is a laudable goal essential to the economic well-being of the United States and its citizens. We believe, though, that this country is already well on its way to achieving this goal. Broadband providers--in their quest for profits--have made broadband available for a majority of Americans.

According to recent testimony provided to the House of Representatives, over 70 percent of U.S. households currently have access to cable modem service, while digital subscriber line (DSL) service is available to 45 percent of homes. Both of those numbers are projected to increase, with cable modem service expected to be available to over 90 percent of homes and DSL to 74 percent of homes by 2005.⁽¹⁾ Satellite broadband service is available to any consumer with a clear view of the southern sky.

New technology traditionally has entered rural areas at a slower pace than the rest of the country. As far as broadband is concerned, the government has already stepped in. For example, we believe that the part of the Federal Universal Service program which funds eligible schools and libraries has been successful in stimulating demand in rural communities and providing market based incentives for carriers to deploy facilities there. In addition, on November 28, 2001, President Bush signed into law H.R. 2330, funding the Department of Agriculture. This legislation includes about $80 million in direct loans for establishing more high-speed Internet access in rural areas. Other federal legislation is also being considered with the objective of hastening deployment to under served areas.

TECHNOLOGICAL NEUTRALITY

Broadband consists of several technologies in various stages of development and deployment. It is unclear at this stage if one technology is superior to another in a particular circumstance. For example, the benefits of DSL service are unattainable to a consumer whose telephone line is incompatible with DSL service. However, that same consumer may be able to choose between cable modem and satellite broadband service--neither of which is regulated by the FCC. Other consumers may be able to choose between DSL and cable modem service.⁽²⁾

Finally, it is uncertain which technologies, other than satellite broadband service, will successfully meet the challenges of rural deployment. This indicates to us that technological neutrality is of paramount importance in any government policy. As FCC Chairman Michael Powell recently stated, "[G]overnment is a notoriously bad investor. It tends to buy high and sell low when it comes to predicting technology winners and losers. One lesson from all of this is that we should be careful to embrace too quickly any one technology or service."⁽³⁾ Likewise, we believe that the marketplace is much better suited to determine broadband winners and losers.

MINIMAL REGULATION

Regulating broadband will put government in the position of overseeing a new, continually evolving set of technologies, provided by different industries, without any clear idea of what the best technology or technologies may be. Deployment of these technologies requires substantial investment in the face of significant risk. This risk is due, in part, to uncertain consumer demand for broadband service. Regulation increases not only the cost, but also the uncertainty to providers attempting to compete in an emerging market. Regulation should therefore be limited in order to foster marketplace responses to deployment and demand challenges. An example of an appropriate regulatory involvement would include data gathering and market monitoring to insure the deployment of an evolving form of advanced service. Additionally, before deciding on a regulatory model, careful consideration should be given as to whether it should be uniformly applied across all platforms. Chairman Powell recently announced that broadband policy issues such as these will be addressed in an upcoming proceeding before the FCC.⁽⁴⁾

CONSUMER DEMAND FOR BROADBAND

On the demand side, it is important to remember that consumers do not purchase broadband just for faster access. Consumers purchase broadband because it delivers a service or services that they want. In February 2001, the General Accounting Office (GAO) reported on its survey of Internet users. Approximately 12 percent of survey respondents subscribe to broadband, although 52 percent of survey respondents have access to it.⁽⁵⁾ Of those consumers with Internet access, 87.5 percent still use traditional dial-up modems. The remaining 12.5 percent is split between various broadband technologies. Of those broadband technologies, cable modem service is the clear leader with 71 percent of broadband users, followed by DSL at 26 percent, and wireless with 3 percent of broadband users.⁽⁶⁾

Of those consumers that responded that they use conventional dial-up modems, 36.4 percent indicated that they were not willing to pay any more for high-speed Internet access.⁽⁷⁾ This compares to 15.1 percent that were willing to pay less than $5 per month more than their current rate, and 22.5 percent that were willing to pay between $5 and $10 more. This suggests that the majority of consumers with dial-up Internet access are willing to pay little to nothing more to obtain high-speed access.

Our recent surveys of Florida consumers indicate that of the survey respondents with an Internet connection, 28.5 percent subscribe to high-speed Internet access. Our surveys indicate that cable modem is the high speed technology of choice (59 percent), followed by DSL (35 percent), satellite (2 percent), and other technologies (4 percent). Of Floridians without high-speed Internet access, 11 percent surveyed do not subscribe because it is unavailable; 32 percent because they do not want or need it; 32 percent because it costs too much; and 25 percent do not subscribe to it for other reasons.

In its report on the universal provision of DSL services in Florida, the Florida Senate stated that a coalition of rural local exchange providers reported that only 15 percent of customers indicated that they would pay approximately $45 to $49 for DSL, the prevailing average price for this service.⁽⁸⁾

Overall, these results indicate that in the United States consumer demand for broadband lags behind supply. While current economic conditions contribute to this lack of demand, the primary cause appears to be the lack of content or applications for which consumers are willing to pay premium prices to access. We believe this is a temporary phenomenon that market forces will address in time.

To illustrate this point, one need only look to the consumer demand for broadband in South Korea. As of July 2001, 7 million of South Korea's 17 million households have a broadband connection for which they pay approximately $30 per month with an additional $20 or more for the interactive game playing which is apparently driving the demand.⁽⁹⁾ This compares with a cost for cable modem and DSL service in the United States of between $40 to $50 per month. South Korea's high level of broadband demand is striking in a country where the per capita income is less than one-third of America's per capita income, yet the cost of broadband is about the same.⁽¹⁰⁾

South Korea's experience shows that consumers are willing to pay for broadband, even broadband that is relatively more expensive than what American consumers pay, because there is a broadband application that they desire. Proportionately less consumer demand for broadband in the United States may indicate that such a broadband application is lacking here.

As stated previously, the marketplace will eventually deliver broadband-intensive applications that Americans will desire. When desirable applications requiring high-speed access emerge, we believe consumers will be willing to pay more for that access. Until then, consumers may continue to consider dial-up access to be adequate for their needs. Therefore, we believe that government should rely on the marketplace, rather than government intervention, to influence broadband demand and deployment.

We also believe that government can play an important role in creating consumer demand for broadband. Government can lead by example by providing Internet content and applications. Florida has developed several initiatives that, in providing services to its citizens, set an example. Florida has a single, statewide digital portal, MyFlorida.com, through which residents and businesses can conduct business with the state. All Internet users, residents and non-residents alike, can use the site to search for information on Florida. State agencies such as the FPSC are linked to the site, with further opportunities to conduct business electronically. For example, the FPSC's website not only allows for electronic complaint filing, but also allows interested persons to view Commission Agenda conferences.

Additionally, Florida's Information Service Technology Development Task Force created by the Governor and referred to as ITFlorida.com, supported the creation of a major Network Access Point (NAP) in Miami. Moreover, Florida has a program, PowerUP Florida, which is aimed at bridging the digital divide by establishing computer lab sites in underserved areas throughout Florida.

DEFINITION OF BROADBAND

The FCC has distinguished two categories of broadband. "High-speed" is defined as services with a transmission speed of at least 200 kilobits per second (kbps) in one direction (i.e., transmitting or receiving), while "advanced services" or "advanced telecommunications capability" refers to services capable of delivering a speed of at least 200 kbps in both directions (i.e., transmitting and receiving). We believe that consumers are in the best position to define broadband service through their broadband purchases. For example, DSL service speeds range between 128 kbps and 1.5 megabits per second (mbps), while cable modem service speeds range between 100 kbps and 1.5 mbps. Both FCC definitions exclude the lower ranges of DSL and cable modem service, yet consumers are purchasing these services. Therefore, it seems reasonable to us that the FCC's definitions of high-speed and advanced service should merge at the definition of high-speed service, i.e., 200 kbps in one direction. The FPSC believes that this definition can, and should, evolve over time, contingent upon what consumers are purchasing.

UNIVERSAL SERVICE SUPPORT FOR BROADBAND

We do not believe that universal service support is necessary to achieve the goal of broadband access for all. As we stated earlier, our definition of access for all relates to broadband availability to consumers, not universal broadband service. The FPSC has already filed comments with the Federal Communications Commission in opposition to expanding the services supported under federal universal service programs to include advanced services. We do not believe it is necessary at this time for a national broadband policy to be included in the federal universal service programs because insufficient consumer demand fails one of the tests in the Telecommunications Act (Act). Specifically, the Act states that the Federal Communications Commission should consider the extent to which telecommunication services "have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers."⁽¹¹⁾ In addition, were the federal universal service programs to include national broadband policy, we would have concerns about the effect of providing support only to those carriers that provide all of the supported services.

CONCLUSION

In conclusion, the FPSC believes that access for all, technological neutrality, and minimal regulation are the key components of a national broadband policy. We further believe that access for all will be achieved without significant government intervention. A variety of broadband platforms are currently available to the majority of U.S. households. While government incentives will likely play a part in broadband deployment, consumer demand will ultimately drive deployment into unserved and under served areas.

Survey results from the GAO indicate that while consumers have access to broadband, they are not choosing to purchase it in great numbers. This indicates that providers have not yet offered the general public content or applications that stimulate a sense of need or desire for broadband services at current prices. We believe that the marketplace will develop the applications consumers will want and the marketplace, if allowed to do so, will develop and deploy the technologies that deliver them. We also believe that government can play an important role in creating demand by making its services available on the Internet.

Consequently, universal service support is unnecessary and will likely interfere with the market forces that will bring about universal access. Therefore, regulation and subsidization of broadband should be limited so that government is not in the position of choosing the best broadband technology in a particular circumstance. Finally, in keeping with our demand-driven approach, the FCC's definitions of high-speed and advanced service should merge at the definition of high-speed service, i.e., 200 kbps in one direction. We believe that this definition should evolve over time, contingent upon market supply and demand influences.
 

Respectfully submitted,
 
 
 
 
 

Gregory D. Fogleman

Bureau of Intergovernmental Liaison

Division of Policy Analysis & Intergovernmental Liaison
 

DATED: December 19, 2001

1. Testimony of Harris N. Miller, President, Information Technology Association of America (ITAA), before the House Committee on Government Reform, Subcommittee on Technology and Procurement Policy, Hearing on Telecommuting and Federal Agencies, September 6, 2001.

2. In Florida, the majority of high-speed Internet subscribers are users of cable modems.

3. Prepared remarks of FCC Chairman Michael K. Powell at the National Summit on Broadband Deployment, Washington, D.C., October 25, 2001.

4. FCC, Notice of Proposed Rulemaking, Docket No.: CC 01-337, December 12, 2001.

5. "Characteristics and Choices of Internet Users," United States General Accounting Office, February 2001, pp. 6-7.

6. "Characteristics and Choices of Internet Users," United States General Accounting Office, February 2001, p. 16.

7. "Characteristics and Choices of Internet Users," United States General Accounting Office, February 2001, pp. 59-60.

8. The Florida Senate, Committee on Regulated Industries, Interim Project Report 2002-146, Universal Provision of DSL Services in Florida, October, 2001, p. 3.

9. "Discovered: a profitable killer app for broadband," America's Network, November 15, 2001, p. 39.

10. Ibid.

11. 47 U.S.C. § 254(c)(1)(B).