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 state members of the Federal-State Joint Conference on Advanced Telecommunications Services 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) 413-6044 or Gregory Fogleman at (850) 413-6574 should you have questions or require additional information.

Sincerely,

Lila A. Jaber

State Chair of the Federal-State Joint Conference on Advanced Telecommunications Services

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Enclosure

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In the Matter of: )
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Deployment of Broadband ) Docket No. 011109273-1273-01
Networks and Advanced )
Telecommunications )
)

The state members of the Federal-State Joint Conference on Advanced Telecommunications Services (state members) are pleased to provide comments in response to the National Telecommunications and Information Administration's (NTIA) request regarding the deployment of advanced telecommunications capability. We believe that access for all, technological neutrality, and a consistent regulatory scheme are the key components of a national broadband policy.

The Federal-State Joint Conference on Advanced Services was created by the FCC on October 8, 1999. The FCC gave the group the following charter:

• •examine how best to accelerate the deployment of affordable advanced services to rural and other under-served telecommunications users;
• •conduct an ongoing, cooperative dialogue regarding deployment of advanced services;
• •promote an exchange of information between and among state and federal jurisdictions;
• •explore regulatory and deregulatory mechanisms that will facilitate the widespread availability of advanced services.

ACCESS FOR ALL

The policy goal of access for all Americans to broadband communications services is written in Section 706 of the 1996 Telecommunications Act. We believe that universal access to broadband services must be driven by the marketplace when possible. Access has both a technical and economic component. Broadband services may be technically available to all Americans before consumers are willing or able to pay the cost of that access. Market forces have made broadband available for a majority of Americans, yet subscription levels lag behind. Government's role in ensuring access requires attention to both the technical and economic components of access.

According to recent testimony provided to the U.S. 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 the numbers are projected to increase, with cable modem service being 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. We would note however, that while satellite broadband services provide ubiquitous coverage, frequently there are no other terrestrial facilities-based providers in rural, high-cost areas.

New technology has traditionally entered rural areas at a slower pace than the rest of the country. The government has already stepped in to keep broadband deployment in rural areas apace. For example, we believe that part of the Federal Universal Service program that funds eligible schools and libraries has been successful in stimulating demand in rural communities for broadband services and has provided market based incentives for carriers to deploy facilities. 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. Federal policy measures should continue to focus on ensuring that broadband deployment into unserved and under served areas keeps pace with the rest of the nation.
 

TECHNOLOGICAL NEUTRALITY

Broadband services are now delivered by several technologies in various stages of development and deployment. No one technology is superior to another in every situation. The most economic means of deploying broadband varies depending on geography, customer characteristics, and existing network structure. 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.

In order to encourage deployment, government policies must maintain technological neutrality so that the market can bring the best solution to bear in the areas which are the most difficult to serve. 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 [not] to embrace too quickly any one technology or service."⁽²⁾ Any government policy favoring a particular technology to the exclusion of others may delay deployment by distorting the economics of deployment in challenging markets.
 

CONSISTENT REGULATORY SCHEME

Applying traditional retail rate-regulation 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.⁽³⁾ 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. Inefficient regulation increases not only the cost, but also the uncertainty to providers attempting to compete in an emerging market. On the other hand, a market with no rules would likely be inefficient. Regulation should, therefore, be focused in order to lessen investment risk and to foster marketplace responses to deployment and demand challenges.

A consistent, sufficient regulatory scheme is crucial to removing barriers to deployment, lessening investment risks, and encouraging market responses to consumer demand. 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: GOVERNMENT CAN LEAD BY EXAMPLE

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 consumers want. In February 2001, the General Accounting Office (GAO) reported on its survey of Internet users that approximately 12 percent of survey respondents subscribe to broadband, while 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 who 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.

Overall, these results indicate that consumer demand in the United States for broadband lags 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.

Government can play an important role in increasing the value of broadband services to consumers by making more of its services available on the Internet. To the extent that consumers can receive information about government services, make tax payments, register for state licenses, and electronically perform any of the myriad of tasks citizens do to interact with government, access to broadband becomes more valuable to them. Therefore, government policies should encourage state, federal, and local governments to do their business on the Internet. In addition, government can play a critical role in such areas as demand aggregation, training, and support.⁽⁸⁾
 

NTIA REVIEW OF BARRIERS AT LOCAL LEVEL

Under the Communications Act of 1934, jurisdiction over telecommunications is divided between the Federal Communications Commission at the federal level and public utility commissions in the 50 states and the District of Columbia. As a result of this division of responsibility, statutes and regulations at the state level can effectively thwart or delay national policy initiatives on the deployment of broadband. We encourage the NTIA to study and summarize the issue of state and local government impediments to the deployment of broadband services. Some examples of the type of issues warranting further review would include, but are not limited to, taxes, exclusive franchises, qualifications for entry, franchise fees, and access to rights-of-way and to buildings.

By understanding both the failures and the successes of statewide approaches to facilitating the deployment of broadband services, the NTIA can deduce the potential broadband benefits that can be achieved from coordinated government-wide solutions. Government systems and regulations need to be efficiently interoperable with both the public and private sectors. To the extent these systems and regulations are not interoperable, they are an impediment to the deployment of broadband services.

Whether Federal regulations forbid deploying data networks across random geographic lines or local zoning ordinances interfere with the deployment of new services, we believe that any review of the deployment of broadband must include a comprehensive understanding of the effect of regulatory impediments. While there is some doubt about whether or not government can successfully improve the rate of broadband deployment, there is little doubt that ineffective regulations can slow deployment efforts. Any review of deployment efforts should include a review of both effective and ineffective local and state rules and regulations.
 

CONCLUSION

In conclusion, the state members believe that access for all, technological neutrality, and a consistent regulatory scheme are the key components of a national broadband policy. We encourage the NTIA to study and summarize the issue of state and local government impediments to the deployment of broadband services. As it relates to all aspects of a national policy on broadband, government should facilitate an environment that promotes deployment. Government should lead by example, moving its services to the Internet and thereby increasing the value of broadband access to consumers.

Respectfully submitted on behalf of the state members of the Joint Conference on Advanced Telecommunications Services,
 
 
 
 
 

Lila A. Jaber, Chair

(Florida Public Service Commission)
 

Nanette Thompson

(Regulatory Commission of Alaska)
 

Jo Anne Sanford

(North Carolina Utilities Commission)
 

Irma Muse Dixon

(Louisiana Public Service Commission)
 

Brett A. Perlman

(Texas Public Utility Commission)
 

Bob Rowe, Ex Officio

(Montana Public Service Commission)
 

DATED: December 20, 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, Sep. 6, 2001.

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

3. NRRI, State Regulatory Commission Treatment of Advanced Services, Mar. 2001; http://www.nrri.ohio-state.edu/programs/telcom/pdf/broadband_survey_3-01.pdf and Regulation of Service Quality for Advanced Services, May 2001; http://www.nrri.ohio-state.edu/programs/telcom/pdf/Reg%20of%20QoS.pdf

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

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

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

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

8. In 1999, the 706 Joint Conference held several field hearings across the country to learn and educate about the deployment of advanced telecommunications services at the local and state level. http://www.fcc.gov/jointconference/fieldhearings.html