Order Code IB10045
Issue Brief for Congress
Received through the CRS Web
Broadband Internet Access:
Background and Issues
Updated June 25, 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
S. 2430
S. 2448
P.L. 107-171 (Farm Bill)
S. 2582
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
assert that legislation is necessary to ensure
lines. In addition to offering speed, broadband
fair competition and timely broadband deploy-
access provides a continuous, “always on”
ment.
connection (no need to dial-up) and a “two-
way” capability, that is, the ability to both
One proposal, H.R. 1542, would ease
receive (download) and transmit (upload) data
certain legal restrictions and requirements,
at high speeds. Broadband access, along with
imposed by the Telecommunications Act of
the content and services it might enable, has
1996, on incumbent telephone companies who
the potential to transform the Internet: both
provide high speed data access. H.R. 1542
what it offers and how it is used. It is likely
passed (273-157) the House, as amended, on
that many of the future applications that will
February 27,2002. Proponents assert that
best exploit the technological capabilities of
restrictions must be lifted to give incumbent
broadband have yet to be developed.
local exchange companies (ILECs) the incen-
tive to build out their broadband networks.
There are multiple transmission media or
Opponents argue that lifting restrictions would
technologies that can be used to provide
allow the ILECs to monopolize voice and data
broadband access. These include cable, an
markets. An alternative approach, establishing
enhanced telephone service called digital
“new tools” to ensure that markets are open to
subscriber line (DSL), satellite, fixed wireless,
competitors, is also being considered.
and others. While many (though not all)
offices and businesses now have Internet
Another proposal would compel cable
broadband access, a remaining challenge is
companies to provide “open access” to com-
providing broadband over “the last mile” to
peting Internet service providers. Supporters
consumers in their homes. Currently, a num-
argue that open access is necessary to prevent
ber of competing telecommunications compa-
cable companies from creating “closed net-
nies are developing, deploying, and marketing
works” and stifling competition. Opponents
specific technologies and services that provide
of open access counter that healthy competi-
residential broadband access.
tion does and will exist in the form of alter-
nate broadband technologies such as DSL and
From a public policy perspective, the
satellite.
goals are to ensure that broadband deployment
is timely, that industry competes fairly, and
Finally, legislation seeks to accelerate
that service is provided to all sectors and
broadband deployment in rural and low in-
geographical locations of American society.
come areas by providing loans, grants, or tax
The federal government — through Congress
credits to entities deploying broadband tech-
and the Federal Communications Commission
nologies.
(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), a measure to ease certain legal restrictions and
requirements on Bell operating companies and other incumbent local exchange companies
(ILECs) providing broadband service, passed (273-157) the House, as amended, on
February 27,2002. In response, two measures S. 2430 and S. 2448, both addressing
broadband deployment, have been introduced in the Senate. S. 2430 seeks to encourage
deployment by establishing “regulatory parity” among the various providers of broadband,
while S. 2448 provides for loans to spur broadband deployment in underserved areas. Two
other measures, S. 1126 and S. 1127, dealing with broadband deregulation were previously
introduced in the Senate on June 28, 2001.
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?
According to an April 2002 Harris Interactive report, 66% of all adults in the U.S. now
have access to 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.
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
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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. Network sharing has also led to security concerns and fears that hackers might be able
to eavesdrop on a neighbor’s Internet connection.
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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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. The FCC is planning to auction frequencies currently occupied by
broadcast channels 52-69. 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
MDS, below 3 GHz), broadband personal communications services (PCS), wireless
communications service (2.3 GHz), digital television broadcasting, and unlicenced spectrum.
Additionally, unlicensed spectrum is being increasingly used to provide high-speed short-
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distance wireless access (popularly called “wi-fi”) to local area networks, particularly in
urban areas where wired broadband connections already exist.
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 8.1 million households
in the United States subscribed to cable modem services as of March 31, 2002. Meanwhile,
according to TeleChoice Inc., 4.9 million DSL lines were in service in the United States by
the end of March 2002.
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 Bush Administration’s
broadband policy.7 While a formal broadband policy has not yet been unveiled, statements
from Administration officials indicate that much of the policy will focus on removing
regulatory roadblocks to investment in broadband deployment.8 On June 13, 2002, in a
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]
8 Address by Nancy Victory, NTIA Administrator, before the Alliance for Public Technology
(continued...)
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speech at the 21st Century High Tech Forum, President Bush declared that the nation must
be aggressive about the expansion of broadband, and cited ongoing activities at the FCC as
important in eliminating hurdles and barriers to get broadband implemented.
The Bush Administration has also emphasized the importance of encouraging demand
for broadband services. Accordingly, the President’s Council of Advisers on Science &
Technology (PCAST) has been tasked with studying “demand-side” broadband issues, such
as whether reforms are necessary regarding intellectual property or digital rights management
in order to spur the availability of “killer-applications” on broadband networks. Meanwhile,
“high-tech” organizations such as TechNet9 and the Computer Systems Policy Project
(CSPP)10 have called on the federal government to adopt policies toward a goal of 100 Mbs
to 100 million homes by the end of the decade.
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 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. In the Senate two measures (S. 2430 and S. 2448) taking different approaches were
8 (...continued)
B r o a d b a n d S y m p o s i u m , F e b r u a r y 8 , 2 0 0 2 ,
[http://www.ntia.doc.gov/ntiahome/speeches/2002/apt_020802.htm]
9 TechNet represents over 300 senior executives from companies in the fields of information
technology, biotechnology, venture capital, investment banking, and law. TechNet’s policy
document, “A National Imperative: Universal Availability of Broadband by 2010,” is available at:
[http://www.technet.org/news/newsreleases/2002-01-15.64.pdf]
10 CSPP is composed of nine CEOs from computer hardware and information technology
companies. See: “A Vision for 21st Century Wired & Wireless Broadband: Building the Foundation
of the Networked World,” [ http://www.cspp.org/reports/networkedworld.pdf]
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introduced in response to House passage of H.R. 1542. Two additional bills (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 three BOCs, Verizon, SBC Communications, and BellSouth 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, Maine,
Massachusetts, Pennsylvania, Rhode Island and Vermont customers. SBC Communications
has received approval to offer in-region interLATA services in Texas, Kansas, Oklahoma,
Missouri, and Arkansas. BellSouth has received approval to offer in-region interLATA
services in Georgia and Louisiana. The independent telephone companies, or non-BOC
providers of local service, are not subject to these restrictions and may carry telephone traffic
regardless of whether it crosses LATA boundaries.11
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.
11 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.
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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. BOC interLATA data restrictions, they state, 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 backbone12 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 , according to proponents, provide the
necessary incentives for BOCs to seek relief for interLATA voice services.
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 (H.R. 1685 and H.R.
1686) sought to prohibit anticompetitive contracts and anticompetitive or discriminatory
12 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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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.13 To date, “open access” legislation has
not been introduced into the 107th Congress.
Open access has been debated 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).14 On March 14, 2002, the FCC adopted
a Declaratory Ruling which classified cable modem service as an “interstate information
service,” subject to FCC jurisdiction and largely shielded from local regulation. Because the
ruling concluded that cable modem service should not be classified as a cable or
telecommunications service, the likelihood of FCC-imposed open access rules seems remote.
A Notice of Proposed Rulemaking will continue to examine cable modem service issues.

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 incumbent local exchange carriers (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, 2001 and passed the
measure, as amended, by a vote of 19-14. The House Energy and Commerce Committee
13 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).
14 See: [http://www.fcc.gov/Bureaus/Miscellaneous/Notices/2000/fcc00355.pdf]
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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. The
Senate Commerce Committee, on March 20,2002, held a hearing on the issue of local
competition in the telecommunications market in general including H.R. 1542. While H.R.
1542 faces opposition from some key members, interest in debating the issue of broadband
deployment in general continues. Two measures (S. 2430 and S. 2448) both addressing
broadband deployment have been introduced and the Senate Commerce Committee held
a second hearing on broadband and local competition on May 22, 2002.

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 service15 and Internet
backbone service16 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
competitors 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
15 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.”
16 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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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
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;17 and prevent the FCC from imposing fees,
taxes, charges, or tariffs on Internet services.
H.R. 1542 also 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.

S. 2430. The Broadband Regulatory Parity Act of 2002 was introduced by Senator
Breaux on April 30, 2002. S. 2430 seeks to establish regulatory parity among the providers
of broadband access and services. The measure requires the FCC to implement regulations
17 It appears that further clarification may be needed regarding the specific intent of this amendment
entitled “Prohibition Discriminatory Subsidies”.
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to ensure that providers of broadband services and access services, including the facilities
and equipment that provide such services, are subject to the same regulatory requirements.
Regulations to establish parity of treatment are required to be issued within 120 days of the
bill’s enactment and cannot subject an entity to increased regulation. Additional provisions
give the FCC exclusive regulatory jurisdiction, thereby preempting the states, over broadband
and broadband access service and requires ILEC’s to provide ISPs access to their subscribers.
The bill does not affect present interLATA restrictions i.e.,it does not modify existing Sec.
271 regulations regarding BOC interLATA restrictions and does not affect present ILEC
obligations regarding services and unbundling requirements pertaining to voice services.
S. 2448. The Broadband Telecommunications Act of 2002 was introduced by Senator
Hollings on May 2, 2002. In contrast to the deregulatory approach of H.R. 1542 and S. 2430,
S. 2448 would provide loans and grants to encourage broadband deployment (particularly in
rural and underserved areas), demand, and technology development. Specifically, the bill
would use monies from the telephone excise tax to finance grants and loans for broadband
deployment; establish pilot projects for wireless and other non-wireline broadband
technologies; provide grants to the National Institute of Standards and Technology (NIST),
NTIA, the National Science Board, and universities to conduct research on next-generation
broadband technologies; provide grants to connect underrepresented colleges and
communities to the Internet; and provide grants for programs aimed at stimulating broadband
demand, such as digitizing library and museum collections, developing consumer
applications, and developing e-government initiatives.
P.L. 107-171 (Farm Bill). The Senate version of the farm bill, S. 1731 (Harkin),
contained language authorizing the Secretary of Agriculture to provide grants and loans to
eligible entities providing broadband service in rural areas. Subsequently, the farm bill
conference agreement (H.Rept.107-424; H.R.2646/S. 1731, the Farm Security and Rural
Investment Act of 2002) authorizes the Secretary of Agriculture to make loans and loan
guarantees to eligible entities for facilities and equipment providing broadband service in
rural communities. Section 6103 authorizes a total of $100 million through FY2007 ($20
million for each of fiscal years 2002 through 2005, and $10 million for each of fiscal years
2006 and 2007). P.L. 107-171 was signed into law on May 13, 2002.
S. 2582. The National Broadband Strategy Act of 2002 was introduced by Senator
Lieberman on June 5, 2002. The bill requires the President to submit a report to Congress
setting forth a comprehensive strategy for the nationwide deployment of high speed
broadband Internet telecommunications services.
Other legislation introduced into the 107th Congress would provide tax credits, grants,
and/or loans for broadband deployment, primarily in rural and/or low income areas. For a
complete listing of legislation regarding 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”
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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. 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
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. 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. 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.

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
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minimum download speed of 1.5 million bits per second. Introduced January 23, 2001;
referred to Committee on Finance.
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. 1731 (Harkin)
Agriculture, Conservation, and Rural Enhancement Act of 2001. Title VI (Section 605)
authorizes the Secretary of Agriculture to make loans to entities providing broadband service
to rural areas. Introduced November 27, 2001; referred to Committee on Agriculture,
Nutrition, and Forestry. Committee report (S.Rept. 107-117) filed December 7, 2001.
Incorporated into H.R. 2646 as an amendment and passed by Senate February 13, 2002.
Conference agreement (H.Rept. 107-424) passed House May 2, 2002. Signed into law May
13, 2002 (P.L. 107-171).
S. 2430 (Breaux)
Provides for parity in regulatory treatment of broadband service providers and of
broadband access service providers, and for other purposes. Introduced April 30, 2002;
referred to Committee on Commerce, Science, and Transportation.
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S. 2448 (Hollings)
Broadband Telecommunications Act of 2002. Provides loans and grants to encourage
broadband deployment in rural and underserved areas. Also provides grants to foster
broadband demand and technology development. Introduced May 2, 2002; referred to
Committee on Commerce, Science, and Transportation.
S. 2582 (Lieberman)
National Broadband Strategy Act of 2002. Requires the President to submit a report to
Congress setting forth a comprehensive strategy for the nationwide deployment of high speed
broadband Internet telecommunications services. Introduced June 5, 2002; referred to
Committee on Commerce, Science, and Transportation.
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