Order Code IB10045
CRS Issue Brief for Congress
Received through the CRS Web
Broadband Internet Access:
Background and Issues
Updated May 4, 2004
Angele A. Gilroy and Lennard G. Kruger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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
Legislation in the 107th Congress
H.R. 1542 (Tauzin-Dingell)
P.L. 107-171 (Farm Bill)
Activities in the 108th Congress
LEGISLATION


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Broadband Internet Access: Background and Issues
SUMMARY
Broadband or high-speed Internet access
Commission (FCC) — is seeking to ensure
is provided by a series of technologies that
fair competition among the players so that
give users the ability to send and receive data
broadband will be available and affordable in
at volumes and speeds far greater than current
a timely manner to all Americans who want it.
Internet access over traditional telephone
While the FCC’s position is not to intervene at
lines. In addition to offering speed, broadband
this time, some assert that legislation is neces-
access provides a continuous, “always on”
sary to ensure fair competition and timely
connection (no need to dial-up) and a “two-
broadband deployment.
way” capability, that is, the ability to both
receive (download) and transmit (upload) data
A variety of legislative proposals were
at high speeds. Broadband access, along with
considered by the 107th Congress. H.R. 1542
the content and services it might enable, has
sought to ease certain legal restrictions and
the potential to transform the Internet: both
requirements, imposed by the Telecommuni-
what it offers and how it is used. It is likely
cations Act of 1996, on incumbent telephone
that many of the future applications that will
companies who provide high speed data ac-
best exploit the technological capabilities of
cess. Proponents assert that restrictions must
broadband have yet to be developed.
be lifted to give incumbent local exchange
companies (ILECs) the incentive to build out
There are multiple transmission media or
their broadband networks. Opponents argue
technologies that can be used to provide
that lifting restrictions would allow the ILECs
broadband access. These include cable, an
to monopolize voice and data markets. An
enhanced telephone service called digital
alternative approach, establishing “new tools”
subscriber line (DSL), satellite, fixed wireless,
to ensure that markets are open to competitors,
and others. While many (though not all)
was also 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
residential broadband access.
of open access counter that healthy competi-
tion does and will exist in the form of alter-
From a public policy perspective, the
nate broadband technologies such as DSL and
goals are to ensure that broadband deployment
satellite.
is timely and contributes to the nation’s
economic growth, that industry competes
Finally, legislation in the 108th Congress
fairly, and that service is provided to all sec-
seeks to accelerate broadband deployment in
tors and geographical locations of American
rural and low income areas by providing
society. The federal government — through
loans, grants, or tax credits to entities deploy-
Congress and the Federal Communications
ing broadband technologies.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
In the 108th Congress, legislation has again been introduced to provide financial
assistance to encourage broadband deployment. In January and February 2003 the Senate
Commerce and House Energy and Commerce Committees held hearings on “the health of”
and competition in the telecommunications industry. Broadband deployment and regulatory
issues were prominent topics in all three hearings. What impact the March 2, 2004 decision,
by the DC US Appeals Court, to vacate key provisions of the FCC’s February 2003
“triennial review”order on unbundling, line sharing, and broadband deregulation as well as
the completion on December 3, 2003 of the BOC in-market long distance application process
will have on legislative activity remains to be seen. The Senate Commerce Committee held
two days of hearings, in April, on the 1996 Telecommunications Act in anticipation of
possible reform efforts to be undertaken in the next session of Congress. Meanwhile, on
March 26, 2004, President Bush endorsed the goal of universal broadband access by 2007.
This was followed, on April 26, by the release of an Administration broadband policy
endorsing: a ban on broadband taxes, more spectrum for wireless broadband and standards
for broadband over power lines, and rights-of-way on federal lands for broadband providers.
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 a February 2004 telephone survey conducted by Nielson/NetRatings, 75%
of Americans have some type of online access at home. 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
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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
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, approximately 20-
25% of U.S. households in the United States have broadband access. The 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
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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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.
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 subscriber and the central office.
ADSL technology over a copper wire only works within 18,000 feet (about three miles) of
a central office facility. However, DSL providers are deploying technology to further
increase deployment range. One option is to install “remote terminals” which can serve areas
farther than three miles from the central office.

Satellite. Satellite broadband Internet service is currently being offered by two
providers: Hughes Network Systems and Starband. The service costs between $60 and $70
per month; there are roughly 200 thousand subscribers. 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 facing
the southern sky. 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.
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Additionally, unlicensed spectrum is being increasingly used to provide high-speed short-
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. On
February 12, 2004, the FCC proposed rules for broadband over power lines to promote
broadband service to underserved areas and increase competition.
Status of Broadband Deployment
Broadband technologies are currently being deployed by the private sector throughout
the United States. According to the latest FCC data on the deployment of high-speed
Internet connections (released December 22, 2003), as of June 30, 2003 there were 23.5
million high speed lines connecting homes and businesses to the Internet in the United
States, a growth rate of 18% during the first half of 2003.2 Of the 23.5 million high speed
lines reported by the FCC, 20.6 million serve homes and small businesses. More recent data
exist for broadband subscriptions over telephone lines, cable, and satellite, currently the
principal competing broadband technologies. According to Telecommunications Reports,
as of September 30, 2003, about 28.9% of online customers were using DSL, cable modem,
or high-speed satellite service. The breakdown is as follows: 13.6 million using cable
modem, 9.3 million using DSL, and 216,000 using satellite.3
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
capability [i.e., broadband or high-speed access] is being deployed to all Americans in a
2 FCC, High-Speed Services for Internet Access: Status as of June 30, 2003, December 22, 2003.
Available at
[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd1203.pdf]
3 TR’s Online Census, Third Quarter 2003, p. 1.
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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 On March
17, 2004, the FCC issued a Notice of Inquiry for its Fourth Report pursuant to Section 706.
The Fourth Report is expected to be released in September 2004.
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 have been sought regarding what, if any,
changes should be made in how such carriers should be treated for the provision of such
services. Action on this inquiry is still pending.
Meanwhile, the National Telecommunications and Information Administration (NTIA)
at the Department of Commerce (DOC) was tasked with developing the Bush
Administration’s broadband policy.7 Statements from Administration officials indicated that
much of the policy would focus on removing regulatory roadblocks to investment in
4 FCC News Release, “FCC Issues Report on the Deployment of Advanced Telecommunications
Capability to All Americans,” January 28, 1999.
5 Federal Communications Commission, Third Report, CC Docket 98-146, February 6, 2002, p. 5.
See [http://www.fcc.gov/broadband/706.html]
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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broadband deployment.8 On June 13, 2002, in a 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. President Bush made similar remarks citing the
economic importance of broadband deployment at the August 13, 2002 economic forum in
Waco, Texas. Subsequently, a more formal Administration broadband policy was unveiled
in March and April of 2004. On March 26, President Bush endorsed the goal of universal
broadband access by 2007.9 Then on April 26, 2004, citing that the U.S. now ranks 10th in
the world in broadband deployment, President Bush announced a broadband initiative which
includes promoting legislation which would permanently prohibit all broadband taxes,
making spectrum available for wireless broadband and creating technical standards for
broadband over power lines, and simplifying rights-of-way processes on federal lands for
broadband providers.10
The Bush Administration has also emphasized the importance of encouraging demand
for broadband services. On September 23, 2002, the DOC’s Office of Technology Policy
released a report, Understanding Broadband Demand: A Review of Critical Issues,11 which
argues that national governments can accelerate broadband demand by taking a number of
steps, including protecting intellectual property, supporting business investment, developing
e-government applications, promoting efficient radio spectrum management, and others.
Similarly, the President’s Council of Advisers on Science & Technology (PCAST) was
tasked with studying “demand-side” broadband issues and suggesting policies to stimulate
broadband deployment and economic recovery. The PCAST report, Building Out
Broadband
, released in December 2002, concludes that while government should not
intervene in the telecommunications marketplace, it should apply existing policies and work
with the private sector to promote broadband applications and usage. Specific initiatives
include increasing e-government broadband applications (including homeland security);
promoting telework, distance learning, and telemedicine; pursuing broadband-friendly
spectrum policies, and ensuring access to public rights of way for broadband infrastructure.12
Some assert that legislation is necessary to ensure fair competition and timely
broadband deployment. The debate has centered 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
8 Address by Nancy Victory, NTIA Administrator, before the Alliance for Public Technology
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 Allen, Mike, “Bush Sets Internet Access Goal,” Washington Post, March 27, 2004.
10 See White House, A New Generation of American Innovation, April 2004. Available at
[http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf]
11 Available at [http://www.technology.gov/reports/TechPolicy/Broadband_020921.pdf]
12 President’s Council of Advisors on Science and Technology, Office of Science and Technology
Policy, Building Out Broadband, December 2002, 14 p. Available at
[http://www.ostp.gov/PCAST/FINAL%20Broadband%20Report%20With%20Letters.pdf]
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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. 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 has been the focus of the policy debate.
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.13
As of December 3, 2003 all four BOCs, Verizon, SBC Communications, BellSouth and
Qwest have received approval to enter the in-region interLATA market. Now that the
approval process has been complete the FCC’s role shifts to monitoring to ensure
compliance. Under the terms and conditions of the 1996 Act the FCC is required to monitor
the BOCs to ensure compliance with the terms agreed to when they were granted long
distance approval. If the FCC determines that a BOC is not fulfilling those terms the FCC
is required to order corrections, impose penalties, or suspend or revoke approval. The
independent telephone companies, or non-BOC providers of local service, are not subject to
13 However, the FCC, in a February 2002 decision, 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.
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these restrictions and were not required to file for approval to carry telephone traffic
regardless of whether it crosses LATA boundaries.14
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.
Triennial Review Order. The FCC, in a February 2003 split decision, modified
the regulatory framework regarding how ILECs and competitors interact in the
telecommunications marketplace. The “triennial review”order (TRO) (CC Docket 01-338),
which was released in August 2003, established new guidelines regarding how ILECs must
make their networks available to competitors. Included in the FCC’s decision are provisions
which: no longer require, over a transition period, that line sharing be an unbundled network
element and during each year of the transition increases incrementally the price for the high
frequency portion of the loop; eliminate unbundling for switching for business customers
using high capacity loops, but gives state utility commissions 90 days to rebut the national
finding; gives state commissions nine months to make geographic specific determinations
regarding the availability of unbundled elements and the unbundled network element
platform (UNE-P); removes unbundling requirements on newly deployed hybrid (fiber-
copper) loops but ensures continued access to existing copper and removes unbundling
requirements on all newly deployed fiber to the home. ( A summary of this order can be
found at Federal Register Vol. 68, No. 169, September 2, 2003, p. 52276.)
Court challenges to this order were consolidated (USTA v.FCC) in the U.S. Court of
Appeals, D.C. Circuit. In a March 2, 2004 decision the court vacated a number of key
provisions of the TRO, including those dealing with unbundling and delegation of state
authority. Claiming that the FCC’s conclusions were based on broad assumptions and “...do
not support a non-provisional national impairment finding”and that the FCC’s definition of
impairment “is vague almost to the point of being empty,” the Court vacated provisions that
call for the unbundling of mass market switching. Similarly, the Court also vacated the
FCC’s nationwide impairment findings for dedicated transport(e.g. DS-1, DS-3 and dark
fiber). Provisions in the TRO that delegate to the states the authority to make determinations
regarding the presence of market impairment were also deemed unlawful. According to the
court, Congress in the 1996 Act did not “... delegate to the FCC the authority to subdelegate
to outside parties [the states].” The Court ruled that it was unlawful for the FCC to give to
the states the authority to have such a major role in determining the range of network
elements the CLECs should have access to and the use of the UNE-P. (However, the Court
did uphold the authority given to the states to petition the FCC to waive, for specific markets,
the general “no impairment” finding reached by the FCC over unbundled switching for the
enterprise (large business) market.

14 For a more complete discussion of LATAs and BOC long distance entry see CRS Report
RL30018, Long Distance Telephony: Bell Operating Company Entry Into the Long-Distance Market,
by James R. Riehl.
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The Court, however, upheld the broadband provisions of the order including those that
phase out line sharing and remove unbundling requirements for newly deployed hybrid loops
and fiber- to-the-home. While the Court did concede that some impairment might exist, it
found that “... the Commission [FCC] reasonably found that other considerations [e.g., the
encouragement of facilities based competition, the need to give incumbents greater incentives
to invest in their own infrastructure, and the overall policy goal of Section 706 of the 1996
Telecommunications Act to ensure the nationwide deployment of advanced services]
outweighed any impairment.” While the Court ordered a 60-day stay (until May 3, 2004) of
the ruling pending appeal, the FCC requested and was granted a 45 day extension (until June
15, 2004) during which commercial agreements on network access are to be negotiated
between the parties. To date, some commercial agreements have been announced. A
decision on whether to appeal the ruling to the US Supreme Court has yet to be made and
may depend on the ability to successfully negotiate agreements.
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. Such restrictions, 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. 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 they
state, unbundling and resale discourages the development of facilities based competition,
decreasing the economic growth in jobs and innovation that result from the deployment of
new infrastructure. 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.
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, particularly in markets, such as the residential market, that are less likely to attract
competitive entry. Therefore, they state, modification of 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 could 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. Furthermore, they claim,
the use of resale and unbundling allows CLECs to penetrate markets and develop their own
customer base, subsequently providing the scale economics needed to justify the building of
their own facilities.
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Open Access. Legislation introduced into the 106th Congress (H.R. 1685 and H.R.
1686) 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.15 S. 2863 was the sole measure
containing “open access” provisions that was introduced into the 107th Congress; no further
action was taken on this measure.
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).16 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. However,
on October 6, 2003, the 9th U.S. Appeals Court in San Francisco vacated the FCC’s
Declaratory Ruling that cable modem service is an exclusively “interstate information
service.” The FCC is expected to appeal this ruling. Meanwhile, a Notice of Proposed
Rulemaking will continue to examine cable modem service issues.
Legislation in the 107th Congress
During the 107th Congress, 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, three measures S. 2430, S. 2448, and S. 2863
15 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).
16 See [http://www.fcc.gov/Bureaus/Miscellaneous/Notices/2000/fcc00355.pdf]
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addressing broadband deployment, were introduced in the Senate. S. 2430 sought to
encourage deployment by establishing “regulatory parity” among the various providers of
broadband, while S. 2863 called for market forces to regulate residential broadband services.
S. 2448 provided 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. None of these measures were enacted. However,
the Farm Security and Rural Investment Act of 2002 — signed into law on May 13, 2002 as
P.L. 107-171 — contains a provision authorizing the Secretary of Agriculture to make loans
and loan guarantees to eligible entities for facilities and equipment providing broadband
service in rural communities. S. 2863 was the sole measure containing “open access”
provisions that was introduced into the 107th Congress; no further action was taken on this
measure.
H.R. 1542 (Tauzin-Dingell). During the 107th Congress, H.R. 1542 (Tauzin-Dingell)
was passed by the House, but was not taken up by the Senate. The intent of the bill was 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). Specifically, H.R. 1542 sought to amend
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 sought to lift these restrictions for the
provision of data traffic; restrictions on voice traffic would remain. The bill permits a BOC
to offer high speed data service17 and Internet backbone service18 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 sought to amend Section 251 of the 1996 Act by modifying regulations
regarding unbundling (sharing) requirements and resale obligations. The bill would have
preserved 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
17 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.”
18 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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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 data services but permits the FCC and the states to
reduce the number of elements subject to unbundling.
H.R. 1542 also contained 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
three years. After the three 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 contained 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;19 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 one year of enactment of the legislation; 40 percent within
two years; 70 percent within three years; and 100 percent within five 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 contained 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
19 It appears that further clarification may be needed regarding the specific intent of this amendment
entitled “Prohibition Discriminatory Subsidies”.
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continuing violations. Furthermore the statute of limitations during which the FCC can
investigate complaints against companies is increased from one to two years. Consumer
protection rules on slamming, spamming, and cramming, among others, are also preserved.
P.L. 107-171 (Farm Bill). Much broadband legislation introduced into the 107th
Congress sought to provide tax credits, grants, and/or loans for broadband deployment,
primarily in rural and/or low income areas. The Farm Security and Rural Investment Act
of 2002 (P.L. 107-171) authorized a loan and loan guarantee program to eligible entities for
facilities and equipment providing broadband service in rural communities. Section 6103
makes available, from the funds of the Commodity Credit Corporation, 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 also authorizes any other funds
appropriated for the broadband loan program.20
Activities in the 108th Congress
Many of the legislative proposals related to providing financial assistance for broadband
deployment have been reintroduced into the 108th Congress. In the Jobs and Growth Tax
Relief Reconciliation Act of 2003 (H.R. 2/P.L. 108-27), the Senate inserted a provision
allowing the expensing of broadband Internet access expenditures. However, this provision
was not retained during the House/Senate Conference. The broadband expensing provision
was subsequently attached to S. 1637, the Jumpstart Our Business Strength (JOBS) Act.
In January 2003, the Senate Commerce Committee held a hearing on
telecommunications competition. The Committee also held two days of hearings in April
2004, on the Telecommunications Act of 1996 in anticipation of possible reform efforts to
be undertaken in the next Congress. In February 2003, the House Energy & Commerce
Committee held two hearings on the “Health of the Telecommunications Industry” — one
from the perspective of investors and economists, the other from the perspective of all five
FCC Commissioners. Broadband deployment and regulatory issues were prominent in all
three hearings.
What impact the court’s remand of major portions of the FCC’s February 2003
“triennial review”order on unbundling, line sharing, and broadband deregulation will have
on legislative activity remains to be seen. Congressional reaction to the court remand has
been mixed. House Energy and Commerce Committee Chairman Barton and several other
Committee members have come out against seeking an appeal. However, House Judiciary
Committee Chairman Sensenbrenner and Representative Conyers along with several Senate
Commerce Committee members have come out in support of an appeal. Additional letters,
signed by numerous members of Congress, have been sent in favor or against appealing the
decision to the Supreme Court.
20 For a discussion on how the broadband provision of P.L. 107-171 has been funded in the 108th
Congress, see CRS Report RL30719, Broadband Internet Access and the Digital Divide: Federal
Assistance Programs,
by Lennard G. Kruger, pp. 10-12.
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LEGISLATION
H.R. 138 (McHugh)
Rural America Digital Accessibility Act. Provides for grants, loans, research, and tax
credits to promote broadband deployment in underserved rural areas. Introduced January 7,
2003; referred to Committee on Energy and Commerce, Committee on Ways and Means, and
Committee on Science.
H.R. 340 (Issa)
Jumpstart Broadband Act. Requires the FCC to allocate additional spectrum for
unlicensed use by wireless broadband devices. Introduced January 27, 2003; referred to
Committee on Energy and Commerce.
H.R. 363 (Honda)
Jumpstart Broadband Act. Requires the FCC to allocate additional spectrum for
unlicensed use by wireless broadband devices. Introduced January 27, 2003; referred to
Committee on Energy and Commerce.
H.R. 768 (English)
Amends the Internal Revenue Code of 1986 to provide a broadband Internet access tax
credit. Provides tax credits for five years to companies investing in broadband equipment.
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 (both residential
and business subscribers), and a 20% tax credit for “next generation” broadband service
(defined as download speeds of at least 22 million bits per second) for all residential
subscribers and business subscribers in rural and underserved areas. Introduced February 13,
2003; referred to Committee on Ways and Means.
H.R. 769 (English)
Amends the Internal Revenue Code of 1986 to allow the expensing of broadband
Internet access expenditures. Introduced February 13, 2002; referred to Committee on Ways
and Means.
H.R. 1396 (Markey)
Spectrum Commons and Digital Dividends Act of 2003. Uses proceeds of spectrum
auctions to establish a Public Broadband Infrastructure Investments Program at the National
Telecommunications and Information Administration. Introduced March 20, 2003; referred
to Committee on Energy and Commerce.
H.R. 3089 (Andrews)
Greater Access to E-Governance Act. Directs the Secretary of Commerce to establish
a grant program to provide funds to State and local governments to deploy broadband
computer networks for the conduct of electric governance transactions by citizens in local
schools and libraries. Introduced September 16, 2003; referred to Committee on Energy and
Commerce.
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S. 159 (Boxer)
Jumpstart Broadband Act. Requires the FCC to allocate additional spectrum for
unlicensed use by wireless broadband devices. Introduced January 14, 2003; referred to
Committee on Commerce, Science and Transportation.
S. 160 (Burns)
Amends the Internal Revenue Code of 1986 to allow the expensing of broadband
Internet access expenditures. Introduced January 14, 2002; referred to Committee on
Finance.
S. 305 (Kerry)
Amends the Internal Revenue Code of 1986 to include in the criteria for selecting any
project for the low-income housing credit whether such project has high-speed Internet
infrastructure. Introduced February 5, 2003; referred to Committee on Finance.
S. 414 (Daschle)
Economic Recovery Act of 2003. Provides a 10% tax credit for “current generation”
broadband service (defined as download speeds of at least 1.0 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 February 14,
2003; placed on Senate Legislative Calendar.
S. 905 (Rockefeller)
Amends the Internal Revenue Code of 1986 to provide a broadband Internet access tax
credit. Provides tax credits for five years to companies investing in broadband equipment.
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 (both residential
and business subscribers), and a 20% tax credit for “next generation” broadband service
(defined as download speeds of at least 22 million bits per second) for all residential
subscribers and business subscribers in rural and underserved areas. Introduced April 11,
2003; referred to Committee on Finance.
S. 1637 (Frist)
Jumpstart Our Business Strength Act. Allows the expensing of broadband Internet
access expenditures. Introduced September 18, 2003; referred to Committee on Finance.
Reported by Committee on Finance (S.Rept. 108-192) on November 7, 2003; placed on
Senate Legislative Calendar.
S. 1796 (Coleman)
Rural Renaissance Act. Establishes a Rural Renaissance Corporation which would fund
a variety of types of rural revitalization projects, including a project to expand broadband
technology. Introduced October 29, 2003; referred to Committee on Finance.
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