Order Code IB10045
CRS Issue Brief for Congress
Received through the CRS Web
Broadband Internet Access:
Background and Issues
Updated March 4, 2002
Angele A. Gilroy and Lennard G. Kruger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
What Is Broadband and Why Is It Important?
Broadband Technologies
Cable
Digital Subscriber Line (DSL)
Satellite
Other Technologies
Status of Broadband Deployment
Policy Issues
Easing Restrictions and Requirements on Incumbent Telephone Companies
Open Access
Activities in the 107th Congress
H.R. 1542
H.R. 1697 and H.R. 1698
LEGISLATION

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Broadband Internet Access: Background and Issues
SUMMARY
Broadband or high-speed Internet access
among the players so that broadband will be
is provided by a series of technologies that
available and affordable in a timely manner to
give users the ability to send and receive data
all Americans who want it. While the FCC’s
at volumes and speeds far greater than current
position is not to intervene at this time, some
Internet access over traditional telephone lines.
assert that legislation is necessary to ensure
In addition to offering speed, broadband ac-
fair competition and timely broadband deploy-
cess provides a continuous, “always on” con-
ment.
nection (no need to dial-up) and a “two-way”
capability, that is, the ability to both receive
One proposal, H.R. 1542, which would
(download) and transmit (upload) data at high
ease certain legal restrictions and require-
speeds. Broadband access, along with the
ments, imposed by the Telecommunications
content and services it might enable, has the
Act of 1996, on incumbent telephone compa-
potential to transform the Internet: both what
nies who provide high speed data (broadband)
it offers and how it is used. It is likely that
access passed (273-157) the House, as
many of the future applications that will best
amended, on February 27,2002. Proponents
exploit the technological capabilities of broad-
assert that restrictions must be lifted to give
band have yet to be developed.
incumbent local exchange companies (ILECs)
the incentive to build out their broadband
There are multiple transmission media or
networks. Opponents argue that lifting restric-
technologies that can be used to provide
tions would allow the ILECs to monopolize
broadband access. These include cable, an
voice and data markets. An alternative ap-
enhanced telephone service called digital
proach, establishing “new tools” to ensure that
subscriber line (DSL), satellite, fixed wireless,
markets are open to competitors, is also being
and others. While many (though not all)
considered.
offices and businesses now have Internet
broadband access, a remaining challenge is
Another proposal would compel cable
providing broadband over “the last mile” to
companies to provide “open access” to com-
consumers in their homes. Currently, a num-
peting Internet service providers. Supporters
ber of competing telecommunications compa-
argue that open access is necessary to prevent
nies are developing, deploying, and marketing
cable companies from creating “closed net-
specific technologies and services that provide
works” and stifling competition. Opponents of
residential broadband access.
open access counter that healthy competition
does and will exist in the form of alternate
From a public policy perspective, the
broadband technologies such as DSL and
goals are to ensure that broadband deployment
satellite.
is timely, that industry competes fairly, and
that service is provided to all sectors and
Finally, legislation seeks to accelerate
geographical locations of American society.
broadband deployment in rural and low income
The federal government — through Congress
areas by providing loans, grants, or tax credits
and the Federal Communications Commission
to entities deploying broadband technologies.
(FCC) — is seeking to ensure fair competition
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
H.R. 1542 (Tauzin-Dingell) was introduced on April 24, 2001. The legislation seeks
to ease certain legal restrictions and requirements on Bell operating companies and other
incumbent local exchange companies (ILECs) providing broadband service. On April 25,
the House Energy and Commerce Committee held a hearing on H.R. 1542; the
Subcommittee on Telecommunications and the Internet held a markup on April 26 passing
the measure, as amended, 19-14. The House Energy and Commerce Committee reported
out, by a 32-23 vote, an amended version of H.R. 1542 on May 24, 2001. H.R. 1542 passed
(273-157) the House, as amended, on February 27,2002. Its fate in the Senate remains
unclear. Two measures, S. 1126 and S. 1127, dealing with broadband deregulation were
introduced in the Senate on June 28, 2001. Alternative measures (H.R. 1697, H.R. 1698,
H.R. 2120) taking a different approach have also been introduced.
BACKGROUND AND ANALYSIS
Broadband or high-speed Internet access is provided by a series of technologies that give
users the ability to send and receive data at volumes and speeds far greater than current
Internet access over traditional telephone lines. Currently, a number of telecommunications
companies are developing, installing, and marketing specific technologies and services to
provide broadband access to the home. Meanwhile, the federal government — through
Congress and the Federal Communications Commission (FCC) — is seeking to ensure fair
competition among the players so that broadband will be available and affordable in a timely
manner to all Americans who want it.
What Is Broadband and Why Is It Important?
The Internet has grown exponentially during the 1990s. According to a June 2001
Gartner Dataquest survey, 61% of U.S. households actively use the Internet. Today, the
majority of residential Internet users access the Internet through the same telephone line that
can be used for traditional voice communication. A personal computer equipped with a
modem is used to hook into an Internet dial-up connection provided (for a fee) by an Internet
service provider (ISP) of choice. The modem converts analog signals (voice) into digital
signals that enable the transmission of “bits” of data.
The faster the data transmission rate, the faster one can download files or hop from Web
page to Web page. The highest speed modem used with a traditional telephone line, known
as a 56K modem, offers a maximum data transmission rate of about 45,000 bits per second
(bps). However, as the content on the World Wide Web becomes more sophisticated, the
limitations of relatively low data transmission rates (called “narrowband”) such as 56K
become apparent. For example, using a 56K modem connection to download a 10-minute
video or a large software file can be a lengthy and frustrating exercise. By using a broadband
high-speed Internet connection, with data transmission rates many times faster than a 56K
modem, users can view video or download software and other data-rich files in a matter of
seconds. In addition to offering speed, broadband access provides a continuous “always on”
connection (no need to “dial-up”) and a “two-way” capability — that is, the ability to both
receive (download) and transmit (upload) data at high speeds.
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Broadband access, along with the content and services it might enable, has the potential
to transform the Internet — both what it offers and how it is used. For example, a two-way
high speed connection could be used for interactive applications such as online classrooms,
showrooms, or health clinics, where teacher and student (or customer and salesperson, doctor
and patient) can see and hear each other through their computers. An “always on” connection
could be used to monitor home security, home automation, or even patient health remotely
through the Web. The high speed and high volume that broadband offers could also be used
for bundled service where, for example, cable television, video on demand, voice, data, and
other services are all offered over a single line. In truth, it is possible that many of the
applications that will best exploit the technological capabilities of broadband, while also
capturing the imagination of consumers, have yet to be developed.
Many (though not all) offices and businesses now have Internet broadband access. A
major challenge remaining (as well as an enormous business opportunity) is providing
broadband over “the last mile” to consumers in their homes. Currently, about 8% of U.S.
households in the United States have broadband access. The vast majority of residential
Internet users today use “narrowband” access, that is, they connect via a modem through their
telephone wire. However, the changeover to residential broadband has begun, as companies
have started to offer different types of broadband service in selected locations. According to
J.P. Morgan, 73% of households have cable modem service available, and 45% of households
have access to DSL. Combined, broadband availability is estimated to be almost 85%.
However, only 12% of households with available access to broadband have chosen to
subscribe.1 Currently, the cost of residential broadband service ranges from about $50 and
upward per month, plus up to several hundred dollars for installation and equipment.
Broadband Technologies
There are multiple transmission media or technologies that can be used to provide
broadband access. These include cable, an enhanced telephone service called digital
subscriber line (DSL), satellite technology, terrestrial (or fixed) wireless technologies, and
others. Cable and DSL are currently the most widely used technologies for providing
broadband access. Both require the modification of an existing physical infrastructure that is
already connected to the home (i.e., cable television and telephone lines). Each technology
has its respective advantages and disadvantages, and will likely compete with each other
based on performance, price, quality of service, geography, user friendliness, and other
factors. The following sections summarize cable, DSL, and other prospective broadband
technologies.
Cable. The same cable network that currently provides television service to consumers
is being modified to provide broadband access with maximum download speeds ranging from
3-10 million bits per second (Mbps), and upload speeds from 128 thousand bits per second
(Kbps) to 10 Mbps. In practice, transmission speeds range from several thousand Kbps to
1.5 Mbps. Because cable networks are shared by users, access speeds can decrease during
peak usage hours, when bandwidth is being shared by many customers at the same time.
1 Remarks of Michael Powell, Chairman, FCC before the National Summit on Broadband Deployment,
October 25, 2001, [http://www.fcc.gov/Speeches/Powell/2001/spmkp110.html]
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Network sharing has also led to security concerns and fears that hackers might be able to
eavesdrop on a neighbor’s Internet connection.
Digital Subscriber Line (DSL). DSL is a modem technology that converts existing
copper telephone lines into two-way high speed data conduits. Data transmission speeds via
range up to 7 Mbps for downloading and 1 Mbps for uploading. Speeds can depend on the
condition of the telephone wire and the distance between the home and the telephone
company’s central office (i.e., the building that houses telephone switching equipment).
Because ADSL uses frequencies much higher than those used for voice communication, both
voice and data can be sent over the same telephone line. Thus, customers can talk on their
telephone while they are online, and voice service will continue even if the ADSL service goes
down. Like cable broadband technology, an ADSL line is “always on” with no dial-up
required. Unlike cable, however, ADSL has the advantage of being unshared between the
customer and the central office. Thus, data transmission speeds will not necessarily decrease
during periods of heavy local Internet use. A disadvantage relative to cable is that ADSL
deployment is constrained by the distance between the home and the central office. ADSL
is only available, at present, to homes within 18,000 feet (about three miles) of a central office
facility. However, DSL providers are currently exploring ways to further increase
deployment range.

Satellite. On November 6, 2000, Starband Communications announced the first two-
way Internet access satellite service for the home, offering 500 Kbps downstream and 150
Kbps upstream. On December 21, 2000, Hughes announced the first shipments of its new
two-way broadband satellite service, with advertised download rates of 400 Kbps and upload
rates of up to 125 Kbps. On August 2, 2001, Hughes announced plans to market its
broadband satellite Internet service (called DirecWay) to DirecTV subscribers. The service
will cost between $60 and $70 per month, in addition to television service cost. Meanwhile,
upgraded two-way high speed Internet satellite systems are expected to follow. Like cable,
satellite is a shared medium, meaning that privacy may be compromised and performance
speeds may vary depending upon the volume of simultaneous use. Another disadvantage of
Internet -over-satellite is its susceptibility to disruption in bad weather. On the other hand,
the big advantage of satellite is its universal availability. Whereas cable or DSL is not
available to many Americans, satellite connections can be accessed by anyone with a satellite
dish. This makes satellite Internet access a possible solution for rural or remote areas not
served by other technologies.

Other Technologies. Other technologies are being used or considered for residential
broadband access. Terrestrial or fixed wireless systems transmit data over the airwaves from
towers or antennas. Though mostly used for businesses, fixed wireless Internet is beginning
to be deployed for residential broadband service. Advantages are the flexibility and lower
cost of deployment to the customer’s home (as opposed to laying or upgrading cable or
telephone lines). Disadvantages are line-of-sight restrictions (in some cases), the
susceptibility of some technologies to adverse weather conditions, and the scarcity of
available spectrum. In FY2000, the FCC began auctioning frequencies currently occupied by
broadcast channels 60-69. These and other frequencies in the 700 MHz band are possible
candidates for wireless broadband applications. A number of wireless technologies,
corresponding to different parts of the electromagnetic spectrum, also have potential. These
include the upperbands (above 24GHz), the lowerbands (multipoint distribution service or
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MDS, below 3 GHz), broadband personal communications services (PCS), wireless
communications service (2.3 GHz), and unlicenced spectrum.
Another broadband technology is optical fiber to the home (FTTH). Optical fiber cable,
already used by businesses as high speed links for long distance voice and data traffic, has
tremendous data capacity, with rates in excess of one gigabit per second (1000 Mbps). The
high cost of installing optical fiber in users’ homes is the major barrier to FTTH. Several
telephone companies are exploring ways to provide FTTH at a reasonable cost. Some public
utilities are also exploring or beginning to offer broadband access via fiber inside their existing
conduits. Additionally, some companies are investigating the feasibility of transmitting data
over power lines, which are already ubiquitous in people’s homes. While enormous data rates
are possible through power lines, significant technical barriers remain.
Status of Broadband Deployment
Broadband technologies are currently being deployed by the private sector throughout
the United States. A September 2001 survey conducted by the Department of Commerce
found that 10.8% of the population and 20.0% of household Internet users have high-speed
Internet connections in their homes.2 The Federal Communications Commission (FCC) Third
Report on advanced telecommunications capability (released February 6, 2002) reported that
as of June 30, 2001 there were 9.6 million high speed lines connecting homes and businesses
to the Internet in the United States, a growth rate of 250% over the numbers reported in the
FCC’s Second Report released eighteen months earlier.3 More recent data are available from
research and consulting firms which track broadband deployment in the telephone and cable
industries. Kinetic Strategies Inc. estimates that 6.2 million households in the United States
subscribed to cable modem services as of September 30, 2001. Meanwhile, according to
TeleChoice Inc., 3.8 million DSL lines were in service in the United States by the end of
September 2001.
Policy Issues
The deployment of broadband to the American home is being financed and implemented
by the private sector. The future of broadband is full of uncertainty, as competing companies
and industries try to anticipate technological advances, market conditions, consumer
preferences, and even cultural and societal trends. What seems clear is that industry believes
that providing broadband services to the home offers the potential of financial return worthy
of significant investment and some level of risk.
From a public policy perspective, the goals are to ensure that broadband deployment is
timely, that industry competes fairly, and that service is available to all sectors and
geographical locations of American society. Section 706 of the Telecommunications Act of
1996 (P.L. 104-104) requires the FCC to determine whether “advanced telecommunications
2 Department of Commerce, A Nation Online: How Americans Are Expanding Their Use of the
Internet, February 2002. Based on a September 2001 Census Bureau survey of 57,000 households.
See: [http://www.ntia.doc.gov/ntiahome/dn/nationonline_020502.pdf]
3 Federal Communications Commission, Third Report, CC Docket 98-146, February 6, 2002 see:
[http://www.fcc.gov/broadband/706.html]
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capability [i.e., broadband or high-speed access] is being deployed to all Americans in a
reasonable and timely fashion.” If this is not the case, the Act directs the FCC to “take
immediate action to accelerate deployment of such capability by removing barriers to
infrastructure investment and by promoting competition in the telecommunications market.”
On January 28, 1999, the FCC adopted a report (FCC 99-5) pursuant to Section 706.
The report concluded that “the consumer broadband market is in the early stages of
development, and that, while it is too early to reach definitive conclusions, aggregate data
suggests that broadband is being deployed in a reasonable and timely fashion.”4 The FCC
announced that it would continue to monitor closely the deployment of broadband capability
in annual reports and that, where necessary, it would “not hesitate to reduce barriers to
competition and infrastructure investment to ensure that market conditions are conducive to
investment, innovation, and meeting the needs of all consumers.” The Commission’s second
Section 706 report (FCC 00-290) was released on August 21, 2000. The report concluded
that advanced telecommunications capability is being deployed in a reasonable and timely
fashion overall, although certain groups of consumers were identified as being particularly
vulnerable to not receiving service in a timely fashion. Those groups include rural, minority,
low-income, and inner city consumers, as well as tribal areas and consumers in U.S.
territories. The FCC acknowledged that more sophisticated data are still needed in order to
portray a thoroughly accurate picture of broadband deployment. The FCC’s third Section
706 report was adopted on February 6, 2002. Again, the FCC concluded that “the
deployment of advanced telecommunications capability to all Americans is reasonable and
timely,”5 adding that “investment in infrastructure for most advanced services markets remains
strong, even though the pace of investment trends has generally slowed.”6
The FCC has also initiated a review to examine policies and rules that affect broadband
deployment. Among those is an inquiry (CC 01-337), launched in December 2001, to
examine the regulatory treatment of incumbent local exchange carriers in the provision of
broadband telecommunications services. Comments are sought regarding what, if any,
changes should be made in how such carriers should be treated for the provision of such
services. Comments are due March 1; replies April 1. Meanwhile, the National
Telecommunications and Information Administration (NTIA) at the Department of
Commerce is in the process of developing the Administration’s broadband policy.7
While the FCC’s position is not to intervene at this time, some assert that legislation is
necessary to ensure fair competition and timely broadband deployment. Currently, the debate
centers on two specific proposals. Those are: 1) easing certain legal restrictions and
requirements, imposed by the Telecommunications Act of 1996, on incumbent telephone
companies that provide high-speed data (broadband) access, and 2)compelling cable
4 FCC News Release, “FCC Issues Report on the Deployment of Advanced Telecommunications
Capability to All Americans,” January 28, 1999.
5 Third Report, p. 5.
6 Ibid., p. 5-6.
7 See speech by Nancy Victory, Assistant Secretary for Communications and Information, before the
National Summit on Broadband Deployment, October 25, 2001,
[http://www.ntia.doc.gov/ntiahome/speeches/2001/broadband_102501.htm]
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companies to provide “open access” to competing Internet service providers. Each course
of action is strongly advocated or opposed by competing telecommunications and/or Internet-
related interests.
Easing Restrictions and Requirements on Incumbent Telephone
Companies. The debate over access to broadband services has prompted policymakers
to examine a range of issues to ensure that broadband will be available on a timely and equal
basis to all U.S. citizens. One issue under examination is whether present laws and
subsequent regulatory policies as they are applied to the ILECs (incumbent local exchange
[telephone] companies such as SBC or Verizon, are thwarting the deployment of such
services. Two such regulations are the restrictions placed on Bell operating company
provision of long distance services within their service territories, and network unbundling
and resale requirements imposed on all incumbent telephone companies. In the 107th
Congress, H.R. 1542 which would modify these restrictions and requirements for high speed
data (broadband) transmission passed ( 273-157) the House, as amended, on February 27,
2002. The debate over whether such requirements are necessary to ensure the development
of competition and its subsequent consumer benefits, or are overly burdensome and only
discourage needed investment in and deployment of broadband services, now shifts to the
Senate. Two other measures (H.R. 1697 and H.R. 1698) introduced in the 107th Congress,
take a different approach than H.R. 1542. Both measures amend the Clayton Act in an
attempt to ensure that markets are open to competition. In the Senate two measures (S. 1126
and S. 1127) dealing with broadband deregulation were introduced on June 28, 2001.
Provision of InterLATA Services. As a result of the 1984 AT&T divestiture, the
Bell System service territory was broken up into service regions and assigned to regional Bell
operating companies (BOCs). The geographic area in which a BOC may provide telephone
services within its region was further divided into local access and transport areas, or LATAs.
These LATAs total 164 and vary dramatically in size. LATAs generally contain one major
metropolitan area and a BOC will have numerous LATAs within its designated service region.
Telephone traffic that crosses LATA boundaries is referred to as interLATA traffic.
Restrictions contained in Section 271 of the Telecommunications Act of 1996 prohibit the
BOCs from offering interLATA services within their service regions until certain conditions
are met. BOCs seeking to provide such services must file an application with the FCC and
the appropriate state regulatory authority that demonstrates compliance with a 14-point
competitive checklist of market-opening requirements. The FCC, after consultation with the
Justice Department and the relevant state regulatory commission, determines whether the
BOC is in compliance and can be authorized to provide in-region interLATA services. To
date two BOCs, Verizon and SBC Communications have received approval to enter the in-
region interLATA market in specific markets. Verizon has received approval to offer in-
region long distance service to its New York state, Connecticut, Massachusetts, Pennsylvania
and Rhode Island customers. SBC Communications has received approval to offer in-region
interLATA services in Texas, Kansas, Oklahoma, Missouri, and Arkansas. The independent
telephone companies, or non-BOC providers of local service, are not subject to these
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restrictions and may carry telephone traffic regardless of whether it crosses LATA
boundaries.8
However, the FCC has established a procedure whereby a BOC can request a limited
modification of a LATA boundary to provide broadband services, particularly in unserved or
underserved areas. In a February 2000 decision, the FCC concluded that it had the authority
“to approve targeted LATA boundary modifications when necessary to encourage the
deployment of advanced services.” The FCC established a two prong test when considering
such requests. The Commission further stated that “particular attention” would be paid to
the views of the state commission on whether the modification would serve the public interest
and that such modifications would be “narrowly tailored.”
Unbundling and Resale. Present law requires all ILECs to open up their networks
to enable competitors to lease out parts of the incumbent’s network. These unbundling and
resale requirements, which are detailed in Section 251 of the Telecommunications Act of
1996, were enacted in an attempt to open up the local telephone network to competitors.
Under these provisions ILECS are required to grant competitors access to individual pieces,
or elements, of their networks (e.g., a line or a switch) and to sell them at below retail prices.
Proponents’ Views. Those supporting the lifting or modification of restrictions claim
that action is needed to promote the deployment of broadband services, particularly in rural
and under served areas. Present regulations contained in Sections 271 and 251 of the 1996
Telecommunications Act, they claim, are overly burdensome and discourage needed
investment in broadband services. According to proponents, unbundling and resale
requirements, when applied to advanced services, provide a disincentive for ILECs to upgrade
their networks, while BOC interLATA data restrictions unnecessarily restrict the development
of the broadband network. ILECs, they state, are the only entities likely to provide these
services in low volume rural and other under served areas. Therefore, proponents claim, until
these regulations are removed the development and the pace of deployment of broadband
technology and services, particularly in unserved areas, will be lacking. Furthermore,
supporters state, domination of the Internet backbone9 market is emerging as a concern and
entrance by ILECs (particularly the BOCs) into this market will ensure that competition will
thrive with no single or small group of providers dominating. Proponents also cite the need
for regulatory parity; cable companies who serve approximately 70 percent of the broadband
market are not subject to these requirements. Additional concerns that the lifting of
restrictions on data would remove BOC incentives to open up the local loop to gain
interLATA relief for voice services are also unfounded, they state. The demand by consumers
for bundled services and the large and lucrative nature of the long distance voice market will,
according to proponents, provide the necessary incentives for BOCs to seek relief for
interLATA voice services.
8 For a more complete discussion of LATAs and BOC entry into the long distance market see CRS
Report RL30018, Long Distance Telephony: Bell Operating Company Entry Into the Long-Distance
Market, by James R. Riehl.
9 An Internet backbone is a very high-speed, high-capacity data conduit that local or regional networks
connect to for long-distance interconnection.
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Opponents’ Views. Opponents claim that the lifting of restrictions and requirements
will undermine the incentives needed to ensure that the BOCs and the other ILECs will open
up their networks to competition. Present restrictions, opponents claim, were built into the
1996 Telecommunications Act to help ensure that competition will develop in the provision
of telecommunications services. Modification of these regulations, critics claim, will remove
the incentives needed to open up the “monopoly” in the provision of local services.
Competitive safeguards such as unbundling and resale are necessary, opponents claim, to
ensure that competitors will have access to the “monopoly bottleneck” last mile to the
customer. Therefore, they state the enactment of legislation to modify these provisions of the
1996 Telecommunications Act will all but stop the growth of competition in the provision of
local telephone service. A major change in existing regulations, opponents claim, would not
only remove the incentives needed to open up the local loop but would likely result in the
financial ruin of providers attempting to offer competition to incumbent local exchange
carriers. As a result, consumers will be hurt, critics claim, since the hoped-for benefits of
competition such as increased consumer choice and lower rates will never emerge. Concern
over the inability of regulators to distinguish between provision of voice only and data
services if BOC interLATA restrictions for data services and ILEC unbundling and resale
requirements for advanced services are lifted was also expressed. Opponents also dismiss
arguments that BOC entrance into the marketplace is needed to ensure competition. The
marketplace, opponents claim, is a dynamic one but proposed deregulation would unsettle
nascent competition in the market.
Open Access. Legislation introduced into the 106th Congress sought to prohibit
anticompetitive contracts and anticompetitive or discriminatory behavior by broadband access
transport providers. The legislation would have had the effect of requiring cable companies
who provide broadband access to give “open access” (also referred to as “forced access” by
its opponents) to all Internet service providers. Currently, customers using cable broadband
must sign up with an ISP affiliated or owned by their cable company. If customers want to
access another ISP, they must pay extra — one monthly fee to the cable company’s service
(which includes the cable ISP) and another to their ISP of choice. In effect, the legislation
would enable cable broadband customers to subscribe to their ISP of choice without first
going through their cable provider’s ISP. At issue is whether cable networks should be
required to share their lines with, and give equal treatment to, rival ISPs who wish to sell their
services to consumers.
Arguments in Favor. Internet service providers not affiliated (or “bundled”) with
a cable service are perhaps the principal supporters of open access provisions. Their support
of open access is driven by the concern that they could lose significant market share if cable
broadband access becomes widely adopted in American homes. Some Internet content
providers, long-distance providers, regional phone companies, and consumer groups have also
expressed support for open access.10 They argue that without open access, competition will
be stifled and cable companies will be in a position to eventually monopolize and control
broadband access to the Internet. Currently, competition is flourishing among an estimated
6,000 ISPs in the United States, with the result of falling prices and rising quality and
diversity of services for consumers. Without this competition in cable broadband services,
10 For a listing of open access supporters, see Web site of OpenNet Coalition:
[http://www.opennetcoalition.org]
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say proponents of open access, the vibrancy, dynamism, and growth of the Internet may
suffer.
Open access proponents further point out that a closed cable network discriminates in
service quality between the cable-owned Internet service providers, whose content is directly
accessible, and independent Internet service providers, whose content is only indirectly
available through the Internet. They also argue that content may be restricted by cable
providers, and point to some cable companies’ stated intention to restrict consumer access
to any video material on the Internet longer than 10 minutes (presumably, say open access
advocates, to prevent Internet delivered video from competing with cable television video
programming).
Finally, an argument of fairness and “maintaining a level playing field” in broadband is
often advanced by open access proponents. Given that telephone companies providing
Internet access are required to allow open and equitable access to all ISPs, why, they argue,
should not the cable industry — which competes with telephone companies for Internet
customers — be subject to the same requirements?
Arguments Against. The cable industry strongly opposes open access provisions,
arguing that the legislation would impose unnecessary government regulation on their
activities. AT&T, Time Warner Cable, and Cox Communications all testified against open
access at congressional hearings in the 106th Congress. Cable providers argue that an open
access mandate would inhibit their ongoing nationwide investment in broadband access.
Government regulation, they argue, would create uncertainty in the market and make it more
difficult to justify the huge capital investments that are necessary. Given that the goal of
public policymakers is the timely availability of affordable broadband service to as many
Americans as possible, an open access mandate, they assert, would slow the industry’s
progress toward achieving this goal.
Additionally, the cable industry representatives reject the argument that without open
access, competition in the Internet access market will be stifled. They maintain that vigorous
competition already exists with competing broadband access technologies (i.e., DSL,
satellite). They point out that it is likely that market forces will eventually dictate that cable
companies open their platform to competing ISPs without the need for government
regulation.11 With broadband deployment currently at a nascent and highly dynamic stage,
they argue, it is not possible for government policymakers or regulators to predict future
market or technological trends with any degree of certainty. Therefore, they assert, any kind
of government intervention into the marketplace would be premature and ill-advised.
The cable companies also dispute the notion that they are creating a “closed network,”
and point out that cable modem users are free to access any content available on the Internet.
In response to criticism regarding the 10-minute limit on video, cable spokespersons state that
the costs of allowing unlimited video downloads are prohibitive at present. However, they
assert, since cable Internet access will be subject to a competitive marketplace, worries about
11 Cable companies have announced access agreements with unaffiliated ISPs either voluntarily (e.g.
AT&T Broadband) or as part of merger approval conditions imposed by the FCC and FTC (e.g. AOL-
Time Warner).
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the effects of restrictive cable practices are unfounded because market forces will ultimately
ensure that consumers will receive the services and content that they demand.
Finally, the cable companies advance their own argument of fairness. The cable industry
has invested enormous amounts of money to build a cable broadband system (estimates range
over $30 billion). A government requirement to modify their equipment to allow open access
to possibly hundreds of ISPs would be technically difficult and expensive, they say. Why,
they ask, should unaffiliated ISPs reap the benefits of cable industry investments?

Local Debate Moves to Federal Level. The arguments for and against open
access have been heard on the local level, as cities, counties, and states have taken up the
issue of whether to mandate open access requirements on local cable franchises. In June
1999, a federal judge ruled that the city of Portland, OR, had the right to require open access
to the Tele-Communications Incorporated (TCI) broadband network as a condition for
transferring its local cable television franchise to AT&T. AT&T appealed the ruling to the
U.S. Court of Appeals for the Ninth Circuit. On June 22, 2000, the Court ruled in favor of
AT&T, thereby reversing the earlier ruling. The court ruled that high-speed Internet access
via a cable modem is defined as a “telecommunications service,” and not subject to direct
regulation by local franchising authorities.

The debate thus moves to the federal level, where many interpret the Court’s decision
as giving the FCC authority to regulate broadband cable services as a “telecommunications
service.” On September 28, 2000, the FCC formally issued a Notice of Inquiry (NOI) which
will explore whether or not the Commission should require access to cable and other high-
speed systems by Internet Service Providers (ISPs).12 Meanwhile, in the 106th Congress,
legislation was introduced (H.R. 1685 and H.R. 1686) that sought to require cable companies
to open their high-speed networks to competing Internet service providers. Similar legislation
has not yet been introduced into the 107th Congress.
Activities in the 107th Congress

In the 107th Congress, H.R. 1542 (Tauzin-Dingell) was introduced on April 24, 2001.
The intent of the bill is to encourage the deployment of broadband services to rural and
underserved areas by easing interLATA (local access and transport area) service restrictions
imposed on the Bell operating companies (BOCs) and loosening unbundling and resale
obligations imposed on ILECs. On April 25, 2001 the House Energy and Commerce
Committee held a hearing on H.R. 1542. The Subcommittee on Telecommunications and the
Internet held a markup on April 26 and passed the measure, as amended, by a vote of 19-14.
The House Energy and Commerce Committee passed an amended version of H.R. 1542, on
May 9,2001 and reported the measure out of Committee, by a vote of 32-23, on May 24,
2001. The House Judiciary Committee was granted a limited referral and by voice vote
reported out an amended H.R. 1542 “unfavorably.” The House passed (273-157) an amended
version of H.R. 1542 on February 27,2002. The measure now awaits action in the Senate
where its fate remains unclear. While it is expected to face opposition from some key
members others have expressed interest in debating the issue.
12 See: [http://www.fcc.gov/Bureaus/Miscellaneous/Notices/2000/fcc00355.pdf]
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In the Senate two measures (S. 1126 and S. 1127) dealing with broadband deregulation
were introduced on June 28, 2001. S. 1126 contains provisions to deregulate ILEC rules
pertaining to collocation, interconnection, and network unbundling, but also contains a 5-
year advanced services (broadband) build-out requirement. S. 1127, a more narrowly focused
measure, provides for broader deregulation of ILEC broadband services, but is confined to
carriers serving rural areas. Both measures were referred to the Senate Commerce, Science,
and Transportation Committee.
H.R. 1542. H.R. 1542, as passed by the House, amends provisions contained in
Sections 271 (BOC entry into interLATA services ) and 251(interconnection) of the 1996
Telecommunications Act (P.L. 104-104). Under present law, Section 271 prohibits the BOCs
from offering interLATA services within their service regions until certain conditions are met.
H.R. 1542 lifts these restrictions for the provision of data traffic; restrictions on voice traffic
remain. The bill permits a BOC to offer high speed data service13 and Internet backbone
service14 across LATAs within its service territory without having to meet Section 271
requirements. However in a concession to Judiciary Committee concerns the measure
considered on the floor was a manager’s amendment in the nature of a substitute that
incorporated modifications to enhance DOJ oversight. The manager’s amendment contained
provisions that would require a BOC to notify the Department of Justice 30 days before it
offered InterLATA high speed data or Internet backbone services in an in-region state where
it had not received Sec. 271 approval. The manager’s amendment also contained provisions
to preserve antitrust oversight by clarifying that the antitrust laws are: “not repealed by, not
precluded by, not diminished by, and not incompatible with, the Communications Act of
1934, this Act or any law amended by either such Act.”
H.R. 1542 also amends Section 251 of the 1996 Act by modifying regulations regarding
unbundling (sharing) requirements and resale obligations. The bill preserves line sharing
agreements, using unbundled network elements, for ILEC copper wires. Competitors may
also purchase capacity on ILEC fiber facilities but the rates will be regulated by the FCC
under rates, terms and conditions that are in accordance with the existing reasonable rate
requirements contained in section 201(b) of the 1934 Communications Act. However, for
such purposes such high speed data service will be deemed a nondominant service. ILECs will
not be required to unbundle fiber loops when these loops are being used for the provisioning
of high speed data services. An ILEC is not required to provide collocation at remote
terminals but the ILEC must give access to its poles, conduits, and rights of way so they may
build their own. The bill also prohibits the FCC and the states from expanding an ILEC’s
obligation relating to providing access to network elements for high speed data services,
collocation for high speed data services, or unbundling for high speed data services but
permits the FCC and the states to reduce the number of elements subject to unbundling.
H.R. 1542 also contains provisions dealing with resale of advanced services. Under the
bill ILECs are required to offer high speed data services for resale at wholesale rates for 3
13 H.R. 1542 defines high speed data services as “information at a rate that is generally not less than
384 kilobits per second in at least one direction.”
14 Internet backbone service is defined as “any interLATA service that consists of or includes the
transmission by means of an Internet backbone of any packets, and shall include related local
connectivity.”
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years. After the 3 year period the ILEC is still obligated to offer these services to competitors
but only on a “reasonable and nondiscriminatory basis.”
While the states are specifically permitted to continue to regulate circuit-switched (voice)
telephone services, the FCC and the states are generally precluded from regulating high speed
data services or the Internet.
H.R. 1542 also contains provisions to provide Internet users with access to the Internet
service provider (ISP) of their choice. The bill requires ILECs to: provide Internet users with
the ability to subscribe to and have access to any ISP that is interconnected to the carrier’s
high speed data service; permit ISPs to acquire the facilities and services necessary to
interconnect with the carrier’s high speed data service for the provision of Internet access
service; and permit equipment collocation to the extent necessary for the provision of Internet
access service.
Additional provisions would: clarify that the BOC’s may not bundle or offer long
distance voice services with high-speed data offerings, even if the voice services were offered
at no charge; prohibit subsidies on high-speed data services ensuring parity with non-local
exchange companies regarding subsidies;15 and prevent the FCC from imposing fees, taxes,
charges, or tariffs on Internet services.
H.R. 1542 requires the BOC’s to meet the following broadband network build-out
schedule: 20 percent of the company’s central offices in a state must be capable of providing
high speed data services within 1 year of enactment of the legislation; 40 percent within
2years; 70 percent within 3 years; and 100 percent within 5 years. An additional provision
ensures that none of the provisions contained in the bill would abrogate or modify any existing
carrier interconnection agreements. Another provision prevents discriminatory treatment
among ISPs with respect to special access. It requires ILECs to provide ISPs with special
access within the same period of time it provides such access to itself or an affiliate.
The bill also contains a provision to increase the FCC’s enforcement powers by
increasing fines and investigatory powers. The maximum fines that the FCC may charge for
a single offense is increased to $10 million up from the present $120,000 and $20 million for
continuing violations. Furthermore the statute of limitations during which the FCC can
investigate complaints against companies is increased from 1 to 2 years. Consumer protection
rules on slamming, spamming, and cramming, among others, are also preserved.
H.R. 1697 and H.R. 1698. Two other measures (H.R. 1697 and H.R. 1698), which
take an alternative approach to the issue of broadband deployment, were introduced on May
3, 2001. These two measures seek to use the antitrust laws to ensure that markets are open
to competition. H.R. 1697 requires a BOC, or its affiliate, to pass a “market power entry
test” before Section 271 interLATA restrictions are lifted. No BOC is permitted to offer
interLATA services in a state where the Department of Justice (DOJ) finds that it provides
telephone service to more than 85 percent of business subscribers or 85 percent of residential
subscribers. H.R. 1697 also eliminates “discriminatory” state and local taxes on broadband
15 It appears that further clarification may be needed regarding the specific intent of this amendment
entitled “Prohibition Discriminatory Subsidies”.
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service providers and authorizes a 5 year $3 billion loan program to help finance the
deployment of broadband services to rural communities and underserved areas. H.R. 1698
clarifies that antitrust laws apply to the telecommunications industry and are not superseded
by the 1996 Telecommunications Act and makes violations of sections 251, 252, 271, and 272
of the 1996 Act per se violations of the antitrust laws.16 Furthermore, the bill prohibits an
ILEC and its affiliates from jointly marketing in such state any advanced telecommunications
service with any other telecommunications or information services if it violates the antitrust
laws. The bill also requires the DOJ to establish a “private, commercial arbitration process”
to settle interconnection disputes. Both measures were referred to the Judiciary Committee
and the Committee on Energy and Commerce. The House Judiciary Committee held a May
22, 2001 hearing on both measures.
Other legislation introduced into the 107th Congress would provide tax credits and
grant/loan guarantees for broadband deployment, primarily in rural and/or low income areas.
For more information on this legislation and federal assistance for broadband deployment,
see CRS Report RL30719, Broadband and the Digital Divide: Federal Assistance Programs.
LEGISLATION
H.R. 267 (English)
Provides tax credits for five years to companies investing in broadband equipment to
serve rural and low-income areas. Provides a 10% tax credit for “current generation”
broadband service (defined as download speeds of at least 1.5 million bits per second), and
a 20% tax credit for “next generation” broadband service (defined as download speeds of at
least 22 million bits per second). Introduced January 30, 2001; referred to Committee on
Ways and Means.
H.R. 1415 (Rangel)
Provides an income tax credit to holders of bonds financing the deployment of
broadband technologies. Introduced April 4, 2001; referred to Committee on Ways and
Means.
H.R. 1416 (LaFalce)
Authorizes $100 million in grants and loan guarantees from the Department of
Commerce for deployment by the private sector of broadband telecommunications networks
and capabilities to underserved rural areas. Introduced April 4, 2001; referred to Committee
on Energy and Commerce.
H.R. 1542 (Tauzin)
Amends the Communications Act of 1934 to prohibit any states or the FCC from
regulating the provision of high speed data services. Lifts restrictions on interLATA data
transmission by Bell operating companies while also removing unbundling and resale
16 Section 251 relates to interconnection, Section 252 relates to procedures for the negotiation,
arbitration, and approval of interconnection agreements, Section 271 places restrictions and conditions
on BOC entry into interLATA services, and Section 272 relates to BOC separate affiliate and other
safeguards.
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requirements for all incumbent telephone companies in the provision of high speed data
services. Requires incumbent local exchange companies to provide any Internet Service
Provider with the right to interconnect with such carrier’s high speed data service.
Introduced April 24, 2001; referred to Committee on Energy and Commerce. Hearing held
April 25; markup held by Subcommittee on Telecommunications and the Internet on April 26;
passed subcommittee, as amended, 19-14.Passed Energy and Commerce Committee, as
amended, by a vote of 32-23, May 9, 2001. Reported out of Commerce Committee (H.Rept.
107-83, Part 1) May 24, 2001. Referred to House Judiciary with limited jurisdiction May 24,
2001. Reported “unfavorably” as amended by House Judiciary (H.Rept. 107-83, Part 2) by
voice vote, June 18, 2001. Passed(273-157) the House, as amended, February 27, 2002, and
referred to the Senate.
H.R. 1693 (Hall)
Authorizes $10 million in each of fiscal years 2002 through 2004 for federal agencies
participating in the Next Generation Internet program to conduct broadband demonstration
projects in elementary and secondary schools. Directs the National Science Foundation to
conduct a study of broadband network access in schools and libraries. Introduced May 3,
2001; referred to Committees on Science and on Education and Workforce.
H.R. 1697 (Conyers)
Amends the Clayton Act to ensure the application of the antitrust laws to local telephone
monopolies; and for other purposes. Authorizes a five-year, $3 billion loan guarantee
program to finance the deployment of broadband services to rural and underserved areas.
Introduced May 3, 2001: referred to Committee on Judiciary and Committee on Energy and
Commerce.
H.R. 1698 (Cannon)
To ensure the application of the antitrust laws to local telephone monopolies; and for
other purposes. Introduced May 3, 2001; referred to Committee on Judiciary and Committee
on Energy and Commerce.
H.R. 2038 (Stupak)
Gives new authority to the Rural Utilities Service in consultation with the National
Telecommunications and Information Administration to make low interest loans to companies
that are deploying broadband technology in rural areas. Introduced May 25, 2001; referred
to Committee on Energy and Commerce and Committee on Agriculture.
H.R. 2120 (Cannon)
To ensure the application of the antitrust laws to local telephone monopolies, and for
other purposes. Introduced June 12, 2001; referred to Committees on the Judiciary and on
Energy & Commerce. Motion to report the measure defeated by House Judiciary, 19-15.
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H.R. 2139 (Smith)
Authorizes the Secretary of Agriculture to make loans for the development of broadband
services in rural areas. Introduced June 12, 2001; referred to Committee on Agriculture and
Committee on Energy and Commerce.
H.R. 2401 (McHugh)
Provides for grants, loans, research, and tax credits to promote broadband deployment
in underserved rural areas. Introduced June 28, 2001; referred to Committee on Energy and
Commerce, Committee on Ways and Means, and Committee on Science.
H.R. 2597 (McInnis)
Allows taxpayer deductions for purchase of broadband equipment and provides tax
credits to providers of next generation broadband service to rural and urban subscribers.
Introduced July 23, 2001; referred to Committee on Ways and Means.
H.R. 2669 (Moran)
Authorizes the Secretary of Agriculture to make loans and grants to improve access to
telecommunications and Internet services in rural areas. Introduced July 27, 2001; referred
to Committee on Agriculture and Committee on Energy and Commerce.
H.R. 2847 (Boswell)
Rural America Technology Enhancement Act of 2001. Provides: tax credits for
broadband facilities development; rural area broadband support through the FCC’s universal
service fund; and loans from the USDA Rural Utilities Service. Introduced September 6,
2001; referred to Committees on Agriculture; Ways and Means; Energy and Commerce; and
Education and the Workforce.
H.R. 3090 (Thomas, Bill)
Economic Security and Recovery Act of 2001. Section 902 (added by Senate Finance
Committee) provides a 10% tax credit for “current generation” broadband service (defined
as download speeds of at least 1 million bits per second) for rural and low-income areas, and
a 20% tax credit for “next generation” broadband service (defined as download speeds of at
least 22 million bits per second). Introduced October 11, 2001. Passed House October 24,
2001. Reported by Senate Finance Committee with an amendment in the nature of a
substitute, November 9, 2001.
S. 88 (Rockefeller)
Provides tax credits for five years to companies investing in broadband equipment to
serve rural and low-income areas. Provides a 10% tax credit for “current generation”
broadband service (defined as download speeds of at least 1.5 million bits per second), and
a 20% tax credit for “next generation” broadband service (defined as download speeds of at
least 22 million bits per second). Introduced January 22, 2001; referred to Committee on
Finance.
S. 150 (Kerry)
Provides tax credits for five years to companies investing in broadband equipment to
serve low-income areas. Provides a 10% tax credit for broadband service delivering a
minimum download speed of 1.5 million bits per second. Introduced January 23, 2001;
referred to Committee on Finance.
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S. 426 (Clinton)
Provides an income tax credit to holders of bonds financing the deployment of
broadband technologies. Introduced March 1, 2001; referred to Committee on Finance.
S. 428 (Clinton)
Authorizes $100 million in grants and loan guarantees from the Department of
Commerce for deployment by the private sector of broadband telecommunications networks
and capabilities to underserved rural areas. Introduced March 1, 2001; referred to
Committee on Commerce, Science, and Transportation.
S. 430 (Clinton)
Authorizes $25 million for the National Science Foundation to fund research on
broadband services in rural and other remote areas. Introduced March 1, 2001; referred to
Committee on Finance.
S. 966 (Dorgan)
Gives new authority to the Rural Utilities Service in consultation with the National
Telecommunications and Information Administration to make low interest loans to companies
that are deploying broadband technology in rural areas. Introduced May 25, 2001; referred
to Committee on Commerce, Science, and Transportation.
S. 1126 (Brownback)
A bill to facilitate the deployment of broadband telecommunications services, and for
other purposes. Introduced June 28, 2001; referred to Committee on Commerce, Science,
and Transportation.
S. 1127 (Brownback)
A bill to stimulate the deployment of advanced telecommunications services in rural
areas, and for other purposes. Introduced June 28, 2001; referred to Committee on
Commerce, Science, and Transportation.
S. 1571 (Lugar)
Farm and Ranch Equity Act of 2001. Section 602 would authorize the Secretary of
Agriculture to make loans and grants to entities providing broadband service to rural areas.
Introduced October 18, 2001; referred to Committee on Agriculture, Nutrition, and Forestry.
S. 1731 (Harkin)
Agriculture, Conservation, and Rural Enhancement Act of 2001. Title VI (Section 605)
would authorize the Secretary of Agriculture to make loans and grants to entities providing
broadband service to rural areas. Introduced November 27, 2001; referred to Committee on
Agriculture, Nutrition, and Forestry. Passed Senate (as H.R. 2646) February 13, 2001.
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