Broadband Bringing Home the Bits (2002) / Chapter Skim
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5 Broadband Policy and Regulation
5 Broadband Policy and Regulation
Pages 167-215
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From page 167... ...
Enabled by this flexible, general-purpose delivery platform, a multiplicity of applications and content supported through a variety of business models 167
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From page 168... ...
Proposed measures include tax credits, grants, subsidized loans, and other financial incentives for deployment in underserved or rural areas; support for research on broadband technologies for rural areas; grants for community planning efforts; changes in the regulation of incumbent local exchange carriers; and changes in universal service fund rules.2 Viewed through the lens of telecommunications policy, broadband involves a system with players and rules at federal, state, and local levels and a long history of political activity that features industry associations old and new, consumer- and issue-advocacy organizations (and consider1For example, the original schemes for allocating radio and television licenses had a political connection, with licenses allocated geographically. 2Bills that would provide financial incentives include H.R.
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From page 169... ...
Organizations addressing broadband as part of their lobbying activity have proliferated; they range from mainstream telecommunications trade associations (such as the United States Telecom Association, the National Cable and Telecommunications Association, and the Organization for the Promotion and Advancement of Small Telephone Companies) to associations of new telecommunications competitors (e.g., the Association for Local Telecommunications Services and the Competitive Telecommunications Association)
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From page 170... ...
The role of cable operators and companies using terrestrial wireless and satellite means that broadband policy encompasses more than traditional telephone rules. Relevant policy spheres include regulation of retail and wholesale rates; interconnection and unbundling rules; local cable franchising; access to poles, conduit, and other rights-of-way; wireless spectrum licensing; universal service rules; and antitrust law.
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From page 171... ...
In the case of broadband, the marketplace is in its infancy and evolving in uncertain directions. Although major technological changes in the public switched telephone network have occurred, such as the movement from party-line to single-line service or the development and deployment of vertical services, the development and deployment of broadband services are occurring over a much shorter time.
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From page 172... ...
Later, government efforts to open previously closed markets motivated equipment manufacturers and service providers to develop and deploy equipment and facilities that could take advantage of those commercial opportunities.6 Today, for example, literally scores of firms are deploying fiber-optic cables and advanced switches and routers in local and long distance networks to provide voice and data services, a phenomenon that (along with mobile wireless) has been fueled recently by tens of billions of dollars in venture capital.
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From page 173... ...
1lSteps taken include the 1998 establishment of a Technical Advisory Council and the 2001 launch of an agencywide "Excellence in Engineering" initiative, including hiring and training measures. 12Broadband Second Notice of Inquiry, Federal Communications Commission (FCC, 2000, "Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996: Second Report," CC Docket No.
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From page 174... ...
All these observations, therefore, suggest caution in reading too much into the immediate situation and the importance of business strategists and policy makers staying as flexible as possible during this stage. Asymmetrical Regulation and Achieving Technology Neutrality The development of Internet-based services that can operate over both cable and telephone networks has accentuated convergence and technology neutrality.
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From page 175... ...
Cable operators have maintained that the Internet access service offered over their networks is a cable service and, consequently, that they are not required to offer unaffiliated ISPs that wish to reach cable subscribers access to this service. Opponents have claimed that cable operators are engaged in the provision of a telecommunications service when they offer high-speed access to an ISP and, hence, sought to have regulators require cable operators to offer that service on a nondiscriminatory basis to unaffiliated ISPs.
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From page 176... ...
Regulatory legacy and convergence aside, some regulatory issues speak to inherent attributes of a technology, confounding any notion of a technology-neutral policy. Implementing local loop unbundling, for example, involves an intimate understanding of the physical environment of that plant.
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From page 177... ...
COMPETITION The establishment of robust competition among multiple telecommunications providers, including broadband and other providers, is a basic premise of the Telecommunications Act of 1996 (Box 5.1~. This is viewed by many as the desirable way of making broadband as affordable as possible, though the view is not universal.~5 Two principal paths toward competition are contemplated in the present policy regime (1)
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From page 180... ...
Most prominent in the context of broadband deployment is unbundling of the local loop. The ILEC local access facilities have been the subject of unbundling rules designed to enable CLECs to offer voice and data services without having to build their own local access facilities.
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From page 181... ...
Owing to the design of today's cable systems, most notably the shared communications medium, strict unbundling along the lines of loop unbundling for DSL is not practical. The open access arrangements contemplated by the FCC's order in the AOL Time Warner merger (and similar arrangements being explored by other cable operators)
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From page 182... ...
As discussed above, competitive service providers have entered the wholesale DSL business by leasing local loops and coloration space from ILECs. However, CLECs' long-term impact on the competitive landscape is in doubt.
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From page 183... ...
Issues that must be solved include whether and how CLECs should be given access to coloration space in remotely deployed pedestals, equipment vaults, or even equipment located on pole tops. The incumbents have claimed that this level of complexity inhibits investment in new facilities and is a barrier to the progress of broadband deployment.
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From page 184... ...
Facilities-Based Competition Under facilities-based competition, competitors go head-to-head, using independently built and operated local access infrastructure.~7 It is widely believed by economists, policy officials, and consumer advocates ~7Facilities-based competitors may still make use of some facilities such as backhaul circuits that are owned by other telecommunications companies, including the ILECs, and all facilities-based competitors must at some point interconnect with the other ISPs that make up the Internet.
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From page 185... ...
Structural Separation Unbundling and resale mandates are among a range of interventions that could be invoked to address the market power of incumbent telephone companies by facilitating competitors' access to upstream inputs controlled by the incumbent. Several options would involve some sort of separation of the incumbent's lines of business.
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From page 186... ...
Two wireline technolo18This is somewhat analogous to the separation that has occurred with electricity deregulation in a number of states, whereby the electric utility's generation and distribution operations are separated and customers can choose which generation company to purchase power from. 19The FCC has an unbundled network elements (UNE)
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From page 187... ...
Evolution in technology or business strategy could significantly change the nature and terms of competition. For example, even if broadband access is itself reasonably competitive, a shift toward exclusive bundling of content and search services with broadband access could lead to the disappearance of stand-alone ISPs as broadband becomes the dominant mode of Internet access.
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From page 188... ...
Assessing the Degree of Competition Precise data are limited, but the deployment numbers presented in Chapter 1 of this report suggest that facilities-based competition in broadband is beginning to occur in the United States, with ILECs and cable operators undertaking large-scale deployments in many locations across the nation, and overbuilders entering a handful of markets. Wireless is an alternative in several test markets, and satellite services offer another option.
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From page 189... ...
This suggests the ongoing importance of solid data, collected on a systematic basis, to identify where and what level of competition is being created. Open Access and Evolving Complements to Facilities-Based Competition When cable operators began upgrading their systems to provide cable-based broadband services, concerns were raised that they could leverage their established cable television infrastructure and franchises to exercise market power in broadband services.
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From page 190... ...
A central feature in the open access policy debate has been uncertainty about business models for broadband how will cable providers behave, and what do consumers want? In adding Internet services, cable operators have had to evolve both their infrastructure and business models.
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From page 191... ...
In 2000-2001, the nation's two largest cable system operators agreed to provide customers a limited choice of ISPs. The rules under which this will be done were outlined through conditions placed on the AOL Time Warner merger by agreement with the FTC in 2001, which will be moni21See, for example, Center for Media Education, 2001, Broadband Networks and Narrow Visions: The Internet at Risk, CME, Washington, D.C., available online at |
From page 192... ...
Other cable operators may offer similar terms to forestall the long-term threat of federal intervention in the cable broadband business. In addition, overbuilders have begun constructing hybrid fiber coaxial cable systems in some markets that ISPs will be able to use to provide high-speed services.
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From page 193... ...
The committee did not explore the multidwelling unit issue at length, but notes that it is an area of ongoing debate over competition and access, particularly because these typically high-density situations are likely most attractive to would-be overbuilders. Landlord-provider arrangements can both improve the competitiveness of real estate through improved telecommunications services and provide an additional revenue stream through business arrangements with providers.
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From page 194... ...
Because broadband technologies and services will not be deployed everywhere at the same time and some areas will lag in service availability and/or performance, policy makers almost certainly will face claims from different sectors that they should intervene to ensure that broadband services are available in a shorter time frame throughout the country. It is important, therefore, to establish (1)
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From page 195... ...
Both of these concerns, together sometimes referred to as the "digital divide" problem, have received national and global attention.29 Access and use disparities are difficult to gauge, because Internet access is changing comparatively quickly and because multiple, interdependent factors 29Global forums concerned with digital divide issues include the International Telecommunications Union Development Forum, the European Union, and the G-8.
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From page 196... ...
There are many "divides." On the technology supply side, the term may refer to unmet demand for high-capacity long-haul transport facilities, connections to the Internet backbone, as well as highspeed local access facilities (DSL, cable, or wireless)
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From page 197... ...
Other observers argue that it is natural that different types of customers will make different contributions to the common cost of the network.32 Whether one characterizes them as natural rate differen31''Phone Subscribership Holds Steady at 94.4%," Telecommunications Reports, December 18, 2000, p. 21, summarizing the FCC report Telephone Subscribership in the United States, which is available online at |
From page 198... ...
, and it can therefore make sense, even in competitive markets, to set prices that reflect such different valuations.33 · Long distance versus local service. Typically, the largest single cost of providing telephone service is the cost of the loop that connects a customer to the first point of switching in the telephone network, the "local loop," the centerpiece of the last mile.
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From page 199... ...
tecleral and state regulators traditionally have implemented complex cost and price averaging and other policies to maintain prices for basic telephone service in rural and other sparsely populated areas at levels comparable to and often even lower than those paid by subscribers in urban areas.36 State regulators historically required telephone companies to average their rates over large geographic areas so that customers in densely and sparsely populated areas paid the same rates.37 High-cost programs transfer funds for the purpose of providing service in low-density, expensive-to-serve areas. Because they support the upgrade of telephone facilities, high-cost funds can also indirectly contribute to increased DSL availability as well as increasing dial-up modem line speeds.38 35As noted by Richard Civille in his remarks before the committee in June 2000.
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From page 200... ...
Other Mechanisms for Increasing Access to Broadband Loans and Grants One avenue being pursued by governments, foundations, corporations, and civic groups is partnering to leverage resources and carry out programs that expand access for underserved rural and urban populaing bridge taps, and otherwise upgrading the network to support DSL (Rural Task Force, Federal-State Joint Board on Universal Service, 2000, Rural Task Force Recommendation to the Federal-State Joint Board on Universal Service, submitted to the Federal Communications Commission under CC Docket 9645, Sept. 29, available online at |
From page 201... ...
The program is targeted to communities win up to 20,000 residents, and following the FCC lead, uses a 200-kbps transmission threshold to qualify for broadband status.42 Telephone cooperatives provide telephone service and a range of data services in a number of rural areas, and rural telephone companies have been active in deploying broadband services.43 Cooperatives can help aggregate demand across a widely distributed set of customers.44 There are also focused cooperative 39See |
From page 202... ...
for high-speed access for schools, libraries, and health care facilities.46 The e-rate program uses funds raised from taxes levied on particular communications services to expand public access broadband services through these facilities. The program is associated with significant increases in school connectivity, where its influence has been to accelerate, enhance or complement, or enable that connectivity, and there is evidence that it is supporting increases in the bandwidth of connections sought by schools (e.g., movement from "plain old telephone service" to T1 and then T3 lines)
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From page 203... ...
Second, reliance on tax credits to finance broadband deployment would mean that the federal government would have to consider the financing of communications policy goals in the context of the larger set of societal trade-offs that necessarily must be addressed in setting and allocating federal budgets. To the extent that tax credits are used, they would put the financing of communications policy goals squarely within the traditional budgetary process.
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From page 204... ...
, but to which some subset of potential customers in a built-out service area would not subscribe at prices that service providers would have to charge to cover their costs.50 In these circumstances, a voucher can be a highly specific instrument for encouraging subscriptions that would not happen otherwise. It is less clear that vouchers have advantages over direct payments to service providers if the goal is to promote infrastructure deployment in areas that might not otherwise be served.
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From page 205... ...
In the case of narrowband Internet access, NTIA data collected over the past half-decade show that overall access has expanded greatly and that some disparities such as across sex and race/ethnicity have narrowed over time, primarily through expansion of dial-up household access and access in the workplace or public facilities. However, this access has largely leveraged near5~see Divine et aL, ''Access to What?
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From page 206... ...
The development of a comprehensive, national universal service program may well become desirable in the future, once the pace and scope of broadband deployment become clearer. THE LOCAL ROLE IN BROADBAND Seeking to accelerate or enhance the delivery of telecommunications services in their communities, a number of cities, counties, and states have considered or launched initiatives aimed at facilitating, encouraging, or directly building infrastructure for broadband.
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From page 207... ...
Today, communities are exploring how to use these points of leverage as well as other mechanisms and incentives to promote broadband deployment. Local governments have a direct interest in neighborhood, community, municipal, and regional infrastructure, and it is within the community that existing government, corporate, university, and school networks are deployed.
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From page 208... ...
55The community Broadband Deployment Database, established by the National Regulatory Research Institute at Ohio state university for the Federal communications commission, lists more than 200 community broadband programs, covering a range of technologies, target user groups, and funding sources. see |
From page 209... ...
. Typically, some provision is made to lease coloration space for service providers at the fiber termination points.
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From page 214... ...
With some notable exceptions, local governments are less likely to be familiar with the technology and business side of networking than they are with more
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From page 215... ...
Still, industry is not monolithic, and some companies can be expected to favor and others to resist local efforts to foster market entry. Local governments, especially in smaller communities, often have limited capabilities.
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