ST. PAUL, MN 55155

651/296-1424

Comments on Deployment of Broadband Networks and Advanced Telecommunications

National Telecommunications and Information Administration,

U.S. Department of Commerce

II. Questions

A. What should be the primary policy considerations in formulating broadband policy for the country? Please discuss the relative importance of the following: access for all; facilities-based competition; minimal regulation; technological neutrality; intra-modal competition; inter-modal competition; and any other policy consideration.

The primary policy consideration should be the availability and affordability of broadband service in all areas of the country. Broadband service is becoming an essential community infrastructure, equivalent to roads and utilities. A community without broadband service will be severely disadvantaged when attempting to compete in the world economy. Broadband service must be considered an essential component of universal service, much like dial tone service is today. Because this service can be provided through different technologies, it must be technology neutral. Competition is key in insuring it is affordable.

The only true competition is facilities-based. This should be easier to accomplish since broadband service can be provided using wireline, wireless and satellite technologies. This will help loosen the “last mile” stranglehold that an ILEC currently possesses with its local loop. In areas of the country where population density is too low to economically deploy wireline-type technology to provide broadband service, wireless and satellite technologies may be the most appropriate.

Minimal regulation is preferred. However, regulation may be necessary where there is no competition and broadband service is being provided by a supplier that is a monopoly. Regulation may be required to ensure that there is a level playing field between prospective providers.

B. How should broadband services be defined? Please discuss (1) what criteria should be used to determine whether a facility or service has sufficient transmission capacity to be classified as "broadband;" (2) how the definition should evolve over time; and (3) the policy implications of how the term is defined.

A definition of broadband services must be extremely flexible in order to reflect the rapid pace of changing technology and applications. Bandwidth capacity that is considered “broadband” today may be incapable of handling the applications of tomorrow. Technological improvements offer greater bandwidth at lower cost, which is leading to the development of advanced applications that in turn require this higher speed. The cycle then repeats. The definition of broadband service therefore must be based on the bandwidth requirement of current and future applications utilizing it. If the definition of bandwidth is inflexible, then the infrastructure that would be deployed to provide “broadband service” would be obsolete and inadequate, and fail to meet the bandwidth needs of applications that are under development.

C. Several studies indicate that the rate of deployment of broadband services is equal to or greater than the deployment rates for other technologies. What is the current status of (1) supply and (2) demand of broadband services in the United States? When addressing supply, please discuss current deployment rates and any regulatory policies impeding supply. When addressing demand, please discuss both actual take rates and any evidence of unserved demand. Please also address potential underlying causes of low subscribership rates, such as current economic conditions, price, cost-structure, impediments to the development of broadband content, or any other factor. To what extent has the growth in competition for broadband and other services been slowed by the existing rates and rate structures for regulated telecommunications services?

In the major metropolitan areas of Minnesota (Twin Cities, Rochester, St. Cloud & Duluth), telephone companies and cable companies have both deployed broadband service using DSL and cable modem technology respectively, however, there are still pockets in these communities where just one or none is available. In rural areas of the state, the smaller independent telephone companies have deployed DSL service to approximately 70 percent of their exchange areas. Some of their motivation may be the fact that their future is closely tied to the future of these small communities that they serve. The larger telephone companies have not invested in DSL in rural areas. Qwest, the largest incumbent telephone company, has deployed DSL in only 9 percent of its exchanges in rural Minnesota; most of these are in the larger towns.

A study by the Minnesota Telephone Association (MTA) shows that DSL service is available to approximately 55 percent of the subscribers in these rural exchanges because of distance limitations. Extending service beyond these limitations (12,000 feet) would be cost prohibitive on a wireline basis, according to the MTA study. Several cable companies have deployed cable modem service in rural towns and provide a competitive broadband service to DSL, positively influencing affordability. However, most cable systems rarely go beyond the city limit. For areas beyond these service territories, an alternate technology such as wireless is probably the most cost effective technology for providing broadband service.

The telephone companies have stated that the subscriber take rate in most rural areas is between 2 percent and 5 percent. Numerous reasons are likely the cause of this, including poor economic conditions, cost and the perceived lack of value of the service. The latter may be due to a lack of understanding of possible uses (applications) for broadband service, or a lack of applications for which the subscriber has a keen interest in using and is willing to pay the additional cost. Two areas in the future that will directly impact value are IP video and downloading music over the Internet. Subscribers who have a dial-up connection today and are using it primarily for e-mail will require broadband service to effectively use these two applications.

In communities where the telephone company also owns the cable company, there is no broadband competition and only one type of broadband service (DSL or cable modem) is installed. This definitely can impact the affordability and price of the service.

D. Should government adopt as a goal "access for all" to broadband service? What would be the costs of such a goal? What policy initiatives, if any, should be considered to achieve that goal? Are there areas or persons that are unlikely to be served through marketplace forces?

Government should adopt as a goal “access for all” to broadband service. In Minnesota, Governor Jesse Ventura’s “Big Plan” has a goal of an Information Highway which leaves no community excluded. To provide access for all will require the use of multiple technologies dependant on geographic area and population density. A study by the Minnesota Telephone Association indicates that it would cost over $2 billion to extend wireline infrastructure (using primarily fiber) to connect all subscribers, including farms, in the state. This would be unaffordable to subscribers in these areas. A wireless or satellite technology would probably be a better solution and cost considerably less in these sparsely populated areas. Any policy initiatives must focus on broadband service and must be technology neutral to allow the use of the most cost effective technology for providing service. In sparsely populated areas, there will be areas or individuals that due to cost and affordability will be unserved.

E. Do the interconnection, unbundling, and resale requirements of the Telecommunications Act of 1996 reduce incumbent local exchange carriers' (ILECs') incentives to invest in broadband facilities and services?

It has been our experience that the larger ILEC’s, in particular Qwest, have not invested in broadband facilities and services in rural Minnesota simply because they have limited capital dollars and believe they can receive a greater return through investing in other areas. Qwest has invested a substantial amount of money in provisioning DSL service in the metro areas of the state, so it doesn’t appear that the Telecom Act of 1996 has been a factor.

F. Some have suggested that a regulatory dividing line should be drawn between legacy "non-broadband" facilities and/or services and new "broadband" facilities and/or services. Is this a feasible approach? If so, how would it work?

This approach should only be used in areas where there is no competition and which is currently unserved or underserved by broadband service. It could be used as an incentive for the incumbent to deploy such service, since this investment could be outside of those regulated for a period of time. This infrastructure and associated investment would be specifically identified and kept separate from the incumbent’s regulated assets, while the rate of return from that investment would remain unregulated. Regulatory oversight would be required to insure that monopoly services, including voice, are kept separate and are not used to subsidize unregulated service.

G. To what extent have competitive firms deployed their own (a) transport, (b) switching, and (c) loop facilities? Are those investments limited to particular areas of the country or to particular portions of communities and metropolitan areas? What market characteristics must exist for competitors to make facilities-based investments? Do competitors have the ability to deploy their facilities in ways that minimize costs and facilitate efficient network design?

In the metropolitan area, competitive firms have placed their own infrastructure primarily to serve a limited number of business customers, rather than residential customers. In rural Minnesota, competitive firms have overbuilt ILEC facilities in approximately 25 communities. Qwest serves 21 of these, with the remaining four served by Frontier, Sprint and GTE. The competitive firms based their decision to overbuild on the poor service and the poor condition of the infrastructure of the ILEC. These firms believed that they could install new fiber optic facilities and provide better service at a lower price than the ILEC. None of the ILECs were offering broadband service.

H. What cable companies are currently conducting trials to evaluate giving multiple Internet service providers access to broadband cable modem services? Describe the terms and conditions of ISP access in such trials. What technical, administrative, and operational considerations must be addressed to accommodate multiple ISP access? How can cable firms manage the increased traffic load on their shared distribution systems caused by multiple ISPs?

We are unaware of any trials by cable companies at this time. We do not believe that multiple ISP’s should be a factor regarding the shared distribution system. The traffic on the shared system is determined by number of users and their usage, rather than the number of ISP connections. The multiple ISPs connect at the head-end or hub location and the traffic is separated at that point. Management of the traffic load is the same if there are multiple ISPs or if the cable company is the ISP. To manage the traffic load, cable firms would be required to reduce the number of cable modem users per leg of the distribution system connected to their router hub in order to provide sufficient capacity to each.

I. What problems have companies experienced in deploying broadband services via wireless and satellite? What regulatory changes would facilitate further growth in such services? Is available spectrum adequate or inadequate? What additional spectrum allocations, if any, are needed?

Two years ago, the state of Minnesota created a catalyst grant program that provided funding to local governments who partnered with wireless ISPs to deploy high-speed wireless Internet service in rural parts of the state. A total of 14 grant proposals were received, with 10 awards made. Most of the applicants utilized LMDS (Local Multipoint Distribution System) technology and 2.4 GHz spectrum. One used MMDS technology. The main problem appears to be the cost of providing the service and the low take rate by subscribers. MCI WorldCom has deployed fixed wireless Internet access using MMDS technology in the Twin Cities, but is only offering this service to businesses. MCI indicated that even though the cost for the technology is falling rapidly, it is still prohibitive for rural areas because of low population densities and current take rates. As these costs drop, the service should become more attractive to subscribers and will be in demand in rural areas. This will quickly absorb all capacity of existing frequencies and require additional spectrum.

J. How should the broadband product market be defined? What policy initiatives would best promote intra-modal and inter-modal broadband competition?

The market should be defined by urban and rural. There is also a distinction between large business, small business and residential markets. In addition, applications may require different features or characteristics of broadband service. For example, a higher quality of broadband service may provide a guaranteed bandwidth (QoS) on the network for video use by the subscriber. This premium service would cost more than bandwidth without a guarantee and could be subject to congestion at certain times during the day.

K. Would it be appropriate to establish a single regulatory regime for all broadband services? Are there differences in particular broadband network architectures (e.g., differences between cable television networks and traditional telephone networks) that warrant regulatory differences? What would be the essential elements of a unified broadband regulatory regime?

It is important that any regulation include the “broadband service” and not the technology used to provide it. Regulation must be technology neutral. It is also important that any regulation, or lack thereof, assure that there is a level playing field among competitors regardless of technology and as long as they are providing the same “service.”

L. Are there local issues affecting broadband deployment that should be addressed by federal policies? Please provide specific information or examples regarding these problems. Should fees for rights of way and street access reflect costs in addition to the direct administrative costs to the municipalities affected? To what extent do state laws and regulations limit municipalities' ability to establish nondiscriminatory charges for carriers' use of public rights-of-way? Please discuss the most appropriate relationship between federal, state, and local governments to ensure minimal regulation while removing disincentives or barriers to broadband deployment.

This is a regulatory issue that falls under the authority of the Minnesota Department of Commerce.

M. Are there impediments to federal lands and buildings that thwart broadband deployment? Please provide specific data. What changes, if any, may be necessary to give service providers greater access to federal property?

Unknown.

N. With respect to any proposed regulatory changes suggested in response to the above questions, can those changes be made under existing authority or is legislation required?

Unknown.