Order Code RL30719
CRS Report for Congress
Received through the CRS Web
Broadband Internet Access
and the Digital Divide:
Federal Assistance Programs
Updated May 18, 2004
Lennard G. Kruger
Specialist in Science and Technology
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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Broadband Internet Access and the Digital Divide:
Federal Assistance Programs
Summary
The “digital divide” is a term that has been used to characterize a gap between
“information haves and have-nots,” or in other words, between those Americans who
use or have access to telecommunications technologies (e.g., telephones, computers,
the Internet) and those who do not. One important subset of the digital divide debate
concerns high-speed Internet access, also known as broadband. Broadband is
provided by a series of technologies (e.g. cable, telephone wire, satellite, wireless)
that give users the ability to send and receive data at volumes and speeds far greater
than current Internet access over traditional telephone lines.
Broadband technologies are currently being deployed by the private sector
throughout the United States. While the numbers of new broadband subscribers
continue to grow, studies conducted by the Federal Communications Commission
(FCC), the Department of Commerce (DOC), and the Department of Agriculture
(USDA) suggest that the rate of broadband deployment in urban and high income
areas may be outpacing deployment in rural and low-income areas.
Some policymakers, believing that disparities in broadband access across
American society could have adverse economic and social consequences on those left
behind, assert that the federal government should play a more active role to avoid a
“digital divide” in broadband access. One approach is for the federal government to
provide financial assistance to support broadband deployment in underserved areas.
Others, however, believe that federal assistance for broadband deployment is not
appropriate. Some opponents question the reality of the “digital divide,” and argue
that federal intervention in the broadband marketplace would be premature and, in
some cases, counterproductive.
Legislation introduced into the 107th Congress sought to provide federal
financial assistance for broadband deployment in the form of grants, loans, subsidies,
and tax credits. Similar legislation has been introduced into the 108th Congress. In
assessing this legislation, several policy issues arise. For example, is the current
status of broadband deployment data an adequate basis on which to base policy
decisions? Given the early stages of broadband deployment, is federal assistance
premature, or do the risks of delaying assistance to underserved areas outweigh the
benefits of avoiding federal intervention in the marketplace? And finally, if one
assumes that governmental action is necessary to spur broadband deployment in
underserved areas, which specific approaches, either separately or in combination,
are likely to be most effective?
This report will be updated as events warrant.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Broadband in Rural and Low-Income Areas . . . . . . . . . . . . . . . . . . . . . 2
Federal Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Federal Telecommunications Development Programs . . . . . . . . . . . . . . . . . 7
The Universal Service Concept and the FCC . . . . . . . . . . . . . . . . . . . . 7
Universal Service and the Telecommunications Act of 1996 . . . . 8
Universal Service and Broadband . . . . . . . . . . . . . . . . . . . . . . . . 10
Rural Utilities Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Rural Broadband Access Loan and Loan Guarantee Program . . . 11
Community Connect Broadband Grants . . . . . . . . . . . . . . . . . . . 12
Department of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legislation in the 107th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Is Broadband Deployment Data Adequate? . . . . . . . . . . . . . . . . . . . . . 20
Is Federal Assistance for Broadband Deployment Premature or
Inappropriate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Which Approach is Best? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
List of Tables
Table 1. Selected Federal Domestic Assistance Programs
Related to Telecommunications Development . . . . . . . . . . . . . . . . . . . . . . 22

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Broadband Internet Access and the Digital
Divide: Federal Assistance Programs
Background
The “digital divide” is a term used to describe a perceived gap between
perceived “information haves and have-nots,” or in other words, between those
Americans who use or have access to telecommunications technologies (e.g.,
telephones, computers, the Internet) and those who do not.1 Whether or not
individuals or communities fall into the “information haves” category depends on a
number of factors, ranging from the presence of computers in the home, to training
and education, to the availability of affordable Internet access. A widely cited series
of reports issued by the Department of Commerce2 during the Clinton Administration
argued that a “digital divide” exists, with many rural citizens, certain minority
groups, and low-income Americans tending to have less access to
telecommunications technology than other Americans.3
In February 2002, the Bush Administration’s Department of Commerce
released its first survey report on Internet use, entitled A Nation Online: How
Americans Are Expanding Their Use of the Internet.4 While acknowledging a
disparity in usage between “information haves and have nots,” the report focused on
the increasing rates of Internet usage among traditionally underserved groups:
In every income bracket, at every level of education, in every age group, for
people of every race and among people of Hispanic origin, among both men and
women, many more people use computers and the Internet now than did so in the
recent past. Some people are still more likely to be Internet users than others.
Individuals living in low-income households or having little education, still trail
the national average. However, broad measures of Internet use in the United
States suggest that over time Internet use has become more equitable.5
1 The term “digital divide” can also refer to international disparities in access to information
technology. This report focuses on domestic issues only.
2 See: U.S. Department of Commerce, Falling Through the Net: Toward Digital Inclusion,
released October 2000.
3 Not all observers agree that a “digital divide” exists. See, for example: Thierer, Adam D.,
Divided Over the Digital Divide, Heritage Foundation, March 1, 2000.
[http://www.heritage.org/Press/Commentary/ED030100.cfm]
4 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/index.html]
5 A Nation Online, pp. 10-11.

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CRS-2
One important subset of the digital divide debate concerns high speed Internet
access, also known as broadband. Broadband is provided by a series of technologies
(e.g. cable, telephone wire, satellite, wireless) that give users the ability to send and
receive data at volumes and speeds far greater than current Internet access over
traditional telephone lines.6 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.
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 2003.7 Of the 23.5
million high speed lines reported by the FCC, 20.6 million serve homes and small
businesses. While the broadband adoption rate stands at 20-25% of U.S. households,
broadband availability is much higher. As of June 30, 2003, the FCC found at least
one high-speed subscriber in 91% of all zip codes in the United States.
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.8
Broadband in Rural and Low-Income Areas. While the number of new
broadband subscribers continues to grow, the rate of broadband deployment in urban
and high income areas appears to be outpacing deployment in rural and low-income
areas. In response to a request by ten Senators, the Departments of Commerce and
Agriculture released a report on April 26, 2000, concluding that rural areas lag
behind urban areas in access to broadband technology. The report found that less
than 5% of towns of 10,000 or less have access to broadband, while broadband over
cable has been deployed in more than 65% of all cities with populations over
250,000, and broadband over the telephone network has been deployed in 56% of all
cities with populations over 100,000.9
6 For further information on different types of broadband technologies, including their
respective strengths and limitations, see: CRS Issue Brief IB10045, Broadband Internet
Access: Background and Issues.
7 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]
8 TR’s Online Census, Third Quarter 2003, p. 1.
9 See: U.S. Depts. of Commerce and Agriculture, Advanced Telecommunications in Rural
America: The Challenge of Bringing Broadband Service to All Americans, April 2000, 80
pages. Available at: [http://www.ntia.doc.gov/reports/ruralbb42600.pdf]

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The FCC’s Third Report found that while broadband is being deployed
throughout the United States in a reasonable and timely fashion overall, “certain
factors – such as population density and income – continue to be highly correlated
with the availability of high-speed services.”10 High-speed subscribers were reported
in 99% of the most densely populated zip codes, as opposed to 69% of zip codes with
the lowest population densities. Similarly, for zip codes ranked by median family
income, high-speed subscribers were reported present in 98% of the top one-tenth of
zip codes, as compared to 78% of the bottom one-tenth of zip codes.11
Similarly, the February 2002 report from the Department of Commerce, A
Nation Online: How Americans Are Expanding Their Use of the Internet, found that
12.2% of Internet users in rural areas had high-speed connections, as opposed to
21.2% of Internet users in urban areas. The report’s survey also found, not
surprisingly, that individuals in high-income households have higher broadband
subscribership rates than individuals in lower income households.12
Finally, a study released in February 2004 by the Pew Internet & American Life
Project found that while broadband adoption is growing in urban, suburban, and rural
areas, broadband users make up larger percentages of urban and suburban users than
rural users. Between 2000 and 2003, the study found that while the number of home
broadband users grew from 8% to 36% of the online population in urban
communities, and from 7% to 32% in suburban communities, the number of home
broadband users in rural communities grew from 3% to 19%.13
Some policymakers believe that disparities in broadband access across
American society could have adverse consequences on those left behind. While a
minority of American homes today subscribe to broadband, many believe that
advanced Internet applications of the future – high quality video, for example – and
the resulting ability for businesses and consumers to engage in e-commerce, may
increasingly depend on high speed broadband connections to the Internet. Thus,
some say, communities and individuals without access to broadband could be at risk
to the extent that e-commerce becomes a critical factor in determining future
economic development and prosperity. A 2003 study conducted by Criterion
Economics found that ubiquitous adoption of current generation broadband
technologies would result in a cumulative increase in gross domestic product of
$179.7 billion, while sustaining an additional 61,000 jobs per year over the next
10 Federal Communications Commission, Third Report, “Inquiry Concerning the
Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable
and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section
706 of the Telecommunications Act of 1996,” CC Docket 98-146, February 6, 2002, p. 5.
See: [http://www.fcc.gov/broadband/706.html]
11 FCC, High-Speed Services for Internet Access: Status as of June 30, 2003, p. 4-5.
12 A Nation Online, pp. 40-41.
13 Pew Internet &American Life Project, Rural Areas and the Internet, p. 14. Available at:
[http://www.pewinternet.org/reports/pdfs/PIP_Rural_Report.pdf]

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CRS-4
nineteen years. The study projected that 1.2 million jobs could be created if next
generation broadband technology is rapidly and ubiquitously deployed.14
Some also argue that broadband is an important contributor to U.S. future
economic strength with respect to the rest of the world. A September 2003 report
from the International Telecommunications Union found the U.S. ranking 11th
worldwide in broadband penetration (subscriptions per 100 in habitants as of 2002).15
Similarly, data from the Organization for Economic Cooperation and Development
(OECD) found the U.S. ranking 10th among OECD nations in broadband access per
100 inhabitants as of June 2003.16 By contrast, in 2001 an OECD study found the
U.S. ranking 4th in broadband subscribership per 100 inhabitants (after Korea,
Sweden, and Canada).17
Federal Role. The Telecommunications Act of 1996 (P.L. 104-104) addresses
the issue of whether the federal government should intervene to prevent a “digital
divide” in broadband access. Section 706 requires the FCC to determine whether
“advanced telecommunications 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 its first 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.”18 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.”
14 Crandall, Robert W. et al, The Effect of Ubiquitous Broadband Adoption on Investment,
Jobs, and the U.S. Economy, Conducted by Criterion Economics, L.L.C. for the New
Millennium Research Council, September 2003. Available at:
[http://www.newmillenniumresearch.org/archive/bbstudyreport_091703.pdf]
15 International Telecommunications Union, Birth of Broadband, Executive Summary,
September 2003, p. 5.
16 OECD, Broadband Access in OECD Countries per 100 inhabitants, June 2003, Released
November 18, 2003, available at:
[http://www.oecd.org/document/60/0,2340,en_2825_495656_2496764_1_1_1_1,00.html]
17 OECD, Directorate for Science, Technology and Industry, The Development of Broadband
Access in OECD Countries, October 29, 2001, 63 pages. For a comparison of government
broadband policies, also see: OECD, Directorate for Science, Technology and Industry,
Broadband Infrastructure Deployment: The Role of Government Assistance, May 22, 2002,
42 pages.
18 FCC News Release, “FCC Issues Report on the Deployment of Advanced
Telecommunications Capability to All Americans,” January 28, 1999.
[http://www.fcc.gov/Bureaus/Common_Carrier/News_Releases/1999/nrcc9004.html]

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The FCC’s second Section 706 report was adopted on August 3, 2000. Based
on more extensive data than the first report, the FCC similarly concluded that
notwithstanding risks faced by some vulnerable populations, broadband is being
deployed in a reasonable and timely fashion overall:
Recognizing that the development of advanced services infrastructure remains in its
early stages, we conclude that, overall, deployment of advanced telecommunications
capability is proceeding in a reasonable and timely fashion. Specifically, competition
is emerging, rapid build-out of necessary infrastructure continues, and extensive
investment is pouring into this segment of the economy.19
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.”20 The FCC added:
We are encouraged by the expansion of advanced services to many regions of the
nation, and growing number of subscribers. We also conclude that investment
in infrastructure for most advanced services markets remains strong, even though
the pace of investment trends has generally slowed. This may be due in part to
the general economic slowdown in the nation. In addition, we find that emerging
technologies continue to stimulate competition and create new alternatives and
choices for consumers.21
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
2004.22
While the FCC is currently implementing or actively considering some
regulatory activities related to broadband,23 no major regulatory intervention pursuant
to Section 706 of the Telecommunications Act of 1996 has been deemed necessary
by the FCC at this time. Meanwhile, the National Telecommunications and
Information Administration (NTIA) at the Department of Commerce (DOC) was
tasked with developing the Bush Administration’s broadband policy.24 Statements
from Administration officials indicated that much of the policy would focus on
19 Deployment of Advanced Telecommunications Capability: Second Report, p. 6.
20 Third Report, p. 5.
21 Ibid., p. 5-6.
22 Federal Communications Commission, Notice of Inquiry, “Concerning the Deployment
of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely
Fashion, and possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the
Telecommunications Act of 1996,” FCC 04-55, March 17, 2004.
23 See Section VI of the Third Report, “Actions to Accelerate the Deployment of Advanced
Telecommunications,” pp. 54-66.
24 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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CRS-6
removing regulatory roadblocks to investment in broadband deployment.25 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 2007.26 Then on April 26, 2004, 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.27
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,28 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.29 Meanwhile, “high-tech” organizations such as TechNet,30
25 Address by Nancy Victory, NTIA Administrator, before the Alliance for Public
T e c h n o l o g y 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]
26 Allen, Mike, “Bush Sets Internet Access Goal,” Washington Post, March 27, 2004.
27 See: White House, A New Generation of American Innovation, April 2004. Available at:
[http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf]
28 Available at: [http://www.ta.doc.gov/reports/TechPolicy/Broadband_020921.pdf]
29 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]
30 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
(continued...)

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the Computer Systems Policy Project (CSPP)31, and the Semiconductor Industry
Association (SIA)32 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 policymakers in Congress assert that the federal government should play
a more active role to avoid a “digital divide” in broadband access, and that legislation
is necessary to ensure fair competition and timely broadband deployment. To
accomplish this goal, the Congress considered a number of legislative approaches in
the 107th Congress. First, Congress considered whether to ease certain legal
restrictions and requirements, imposed by the Telecommunications Act of 1996, on
incumbent telephone companies that provide high-speed data (broadband) access.
For more information on this legislation (e.g. H.R. 1542 in the 107th Congress,
popularly referred to as “Tauzin-Dingell”), see CRS Issue Brief IB10045, Broadband
Internet Access: Background and Issues.

Another approach involves federal assistance to support broadband deployment
in underserved areas. Numerous bills have been introduced into the 107th and 108th
Congress seeking to provide federal financial assistance for broadband deployment
in the form of grants, loans, subsidies, and/or tax credits.
Federal Telecommunications Development Programs

Table 1 (at the end of this report) shows selected federal domestic assistance
programs throughout the federal government that can be associated with
telecommunications development. Many (if not most) of these programs can be
related, if not necessarily to the deployment of broadband technologies in particular,
then to telecommunications and the “digital divide” issue generally.
The Universal Service Concept and the FCC.33 Since its creation in
1934 the Federal Communications Commission (FCC) has been tasked with “...
mak[ing] available, so far as possible, to all the people of the United States, ... a
rapid, efficient, Nation-wide, and world-wide wire and radio communications service
with adequate facilities at reasonable charges....”34 This mandate led to the
development of what has come to be known as the universal service concept.
The universal service concept, as originally designed, called for the
establishment of policies to ensure that telecommunications services are available to
30 (...continued)
by 2010,” is available at: [http://www.technet.org/news/newsreleases/2002-01-15.64.pdf]
31 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]
32 See: Semiconductor Industry Association, “Removing Barriers to Broadband
Deployment,” [http://sia-online.org/downloads/Broadband_Combined.pdf]
33 The section on universal service was prepared by Angele Gilroy, Specialist in
Telecommunications Policy, Resources, Science and Industry Division.
34 Communications Act of 1934, As Amended, Title I sec.1[47 U.S.C. 151].

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CRS-8
all Americans, including those in rural, insular and high cost areas, by ensuring that
rates remain affordable. Over the years this concept fostered the development of
various FCC policies and programs to meet this goal. The FCC offers universal
service support through a number of direct mechanisms that target both providers of
and subscribers to telecommunications services.35
The development of the federal universal service high cost fund is an example
of provider-targeted support. Under the high cost fund, eligible telecommunications
carriers, usually those serving rural, insular and high cost areas, are able to obtain
funds to help offset the higher than average costs of providing telephone service.36
This mechanism has been particularly important to rural America where the lack of
subscriber density leads to significant costs. FCC universal service policies have
also been expanded to target individual users. Such federal programs include two
income-based programs, Link Up and Lifeline, established in the mid-1980s to assist
economically needy individuals. The Link Up program assists low-income
subscribers pay the costs associated with the initiation of telephone service and the
Lifeline program assists low-income subscribers pay the recurring monthly service
charges. Funding to assist carriers providing service to individuals with speech
and/or hearing disabilities is also provided through the Telecommunications Relay
Service Fund. Effective January 1, 1998, schools, libraries, and rural health care
providers also qualified for universal service support.
Universal Service and the Telecommunications Act of 1996. Passage
of the Telecommunications Act of 1996 (P.L.104-104) codified the long-standing
commitment by U.S. policymakers to ensure universal service in the provision of
telecommunications services.
The Schools and Libraries, and Rural Health Care Programs. Congress,
through the 1996 Act, not only codified, but also expanded the concept of universal
service to include, among other principles, that elementary and secondary schools
and classrooms, libraries, and rural health care providers have access to
telecommunications services for specific purposes at discounted rates. (See Sections
254(b)(6) and 254(h)of the 1996 Telecommunications Act, 47 USC 254.)
1. The Schools and Libraries Program. Under universal service provisions
contained in the 1996 Act, elementary and secondary schools and classrooms and
libraries are designated as beneficiaries of universal service discounts. Universal
service principles detailed in Section 254(b)(6) state that “Elementary and secondary
schools and classrooms ... and libraries should have access to advanced
telecommunications services...” The Act further requires in Section 254(h)(1)(B) that
services within the definition of universal service be provided to elementary and
secondary schools and libraries for education purposes at discounts, that is at “rates
less than the amounts charged for similar services to other parties.”
35 Many states participate in or have programs that mirror FCC universal service
mechanisms to help promote universal service goals within their states.
36 Additional FCC policies such as rate averaging and pooling have also been implemented
to assist high cost carriers.

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The FCC established the Schools and Libraries Division within the Universal
Service Administrative Company (USAC) to administer the schools and libraries
or “E (education)-rate” program to comply with these provisions. Under this
program, eligible schools and libraries receive discounts ranging from 20 to 90
percent for telecommunications services depending on the poverty level of the
school’s (or school district’s) population and its location in a high cost
telecommunications area. Three categories of services are eligible for discounts:
internal connections (e.g. wiring, routers and servers); Internet access; and
telecommunications and dedicated services, with the third category receiving funding
priority. According to data released by program administrators, $12.5 billion in
funding has been committed over the first six years of the program with funding
released to all states, the District of Columbia and all territories. Funding
commitments for funding Year 2004, the seventh and current year of the program,
totaled $61.1 million as of May 5, 2004.37
2. The Rural Health Care Program. Section 254(h) of the 1996 Act requires
that public and non-profit rural health care providers have access to
telecommunications services necessary for the provision of health care services at
rates comparable to those paid for similar services in urban areas. Subsection
254(h)(1) further specifies that “to the extent technically feasible and economically
reasonable” health care providers should have access to advanced
telecommunications and information services. The FCC established the Rural Health
Care Division (RHCD) within the USAC to administer the universal support program
to comply with these provisions. Under FCC established rules only public or non-
profit health care providers are eligible to receive funding. Eligible health care
providers, with the exception of those requesting only access to the Internet, must
also be located in a rural area.38 The funding ceiling, or cap, for this support was
established at $400 million annually. The funding level for Year One of the program
( January 1998 - June 30, 1999) was set at $100 million. Due to less than anticipated
demand, the FCC established a $12 million funding level for the second year (July
1, 1999 to June 30, 2000) of the program but has returned to a $400 million cap for
the three most recent years. As of May14,2004, covering the first 6 years of the
program, a total of $76.2 million has been committed to 2,088 rural health care
providers. The primary use of the funding is to provide reduced rates for
telecommunications services necessary for the provision of health care.39
The Telecommunications Development Fund. Section 714 of the 1996 Act
created the Telecommunications Development Fund (TDF). The TDF is a private,
37 For information on the status, funding and implementation of the program see CRS Issue
Brief IB98040, Telecommunications Discounts for Schools and Libraries: The “E-Rate”
Program and Controversies, by Angele A. Gilroy.
38 Any health care provider that does not have toll-free access to the Internet can receive the
lesser of $180 in toll charges per month or the toll charges incurred for 30 hours of access
to the Internet per month. To obtain this support the health care provider does not have to
be located in a rural area, but must show that it lacks toll-free Internet access and that it is
an eligible health care provider.
39 For additional information on this program including funding commitments see the RHCD
web site: [http://www.rhc.universalservice.org]

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CRS-10
non-governmental, venture capital corporation overseen by a seven-member board
of directors and fund management. The purpose of the TDF is threefold: to promote
access to capital for small businesses in order to enhance competition in the
telecommunications industry; to stimulate new technology development and promote
employment and training; and to support universal service and enhance the delivery
of telecommunications services to rural and underserved areas. The TDF is
authorized to provide financing to eligible small businesses in the
telecommunications industry through loans and investment capital. At this time the
TDF is focusing on providing financing in the form of equity investments ranging
from $375,000 to $1 million per investment.40 Initial funding for the program is
derived from the interest earned from the upfront payments bidders submit to
participate in FCC auctions. The availability of funds for future investments is
dependent on earning a successful return on the Fund’s portfolio. As of March 11,
2004, the TDF had $50 million under management of which approximately $13-
15million is committed to thirteen portfolio companies.41

Universal Service and Broadband. One of the policy debates surrounding
universal service is whether access to advanced telecommunications services (i.e.
broadband) should be incorporated into universal service objectives. The term
universal service, when applied to telecommunications, refers to the ability to make
available a basket of telecommunications services to the public, across the nation, at
a reasonable price. As directed in the 1996 Telecommunications Act [Section
254(c)] a federal-state Joint Board was tasked with defining the services which
should be included in the basket of services to be eligible for federal universal service
support; in effect using and defining the term “universal service” for the first time.
The Joint Board’s recommendation, which was subsequently adopted by the FCC in
May 1997, included the following in its universal services package: voice grade
access to and some usage of the public switched network; single line service; dual
tone signaling; access to directory assistance; emergency service such as 911;
operator services; access and interexchange (long distance) service.
Some policy makers expressed concern that the FCC-adopted definition is too
limited and does not take into consideration the importance and growing acceptance
of advanced services such as broadband and Internet access. They point to a number
of provisions contained in the Universal Service section of the 1996 Act to support
their claim. Universal service principles contained in Section 254(b)(2) state that
“Access to advanced telecommunications services should be provided to all regions
of the Nation.” The subsequent principle (b)(3) calls for consumers in all regions
of the Nation including “low-income” and those in “rural, insular, and high cost
areas” to have access to telecommunications and information services including
“advanced services” at a comparable level and a comparable rate charged for similar
services in urban areas. Such provisions, they state, dictate that the FCC expand its
universal service definition.
40 The TDF also provides management and technical assistance to the companies in which
it invests.
41 For additional information on this program see the TDF web site at:
[http://www.tdfund.com]

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CRS-11
Others caution that a more modest approach is appropriate given the “universal
mandate” associated with this definition and the uncertainty and costs associated
with mandating nationwide deployment of such advanced services as a universal
service policy goal. Furthermore they state the 1996 Act does take into consideration
the changing nature of the telecommunications sector and allows for the universal
service definition to be modified if future conditions warrant. Section 254(c)of the
Act states that “universal service is an evolving level of telecommunications
services” and the FCC is tasked with “periodically” reevaluating this definition
“taking into account advances in telecommunications and information technologies
and services.” Furthermore, the Joint Board is given specific authority to recommend
“from time to time” to the FCC modification in the definition of the services to be
included for federal universal service support. The Joint Board, in July 2002,
concluded such an inquiry and recommended that at this time no changes be made
in the current list of services eligible for universal service support. The FCC, in a
July 10, 2003 order (FCC 03-170) adopted the Joint Board’s recommendation
thereby leaving unchanged the list of services supported by Federal universal service.
Rural Utilities Service. The Rural Electrification Administration (REA),
subsequently renamed the Rural Utilities Service (RUS), was established by the
Roosevelt Administration in 1935. Initially, it was established to provide credit
assistance for the development of rural electric systems. In 1949, the mission of
REA was expanded to include rural telephone providers. Congress further amended
the Rural Electrification Act in 1971 to establish within REA a Rural Telephone
Account and the Rural Telephone Bank (RTB). The RTB is described as a public-
private partnership intended to provide additional sources of capital that will
supplement loans made directly by RUS. Another program, the Distance Learning
and Telemedicine Program, specifically addresses the needs engendered by passage
of the Telecommunications Act of 1996 (P.L. 104-104). Its passage has contributed
to an increase in demand for telecommunications loans. Currently, the RUS
implements two programs specifically targeted at providing assistance for broadband
deployment in rural areas: the Rural Broadband Access Loan and Loan Guarantee
Program and Community Connect Broadband Grants.
Rural Broadband Access Loan and Loan Guarantee Program. 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 (CCC), 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. On January 30, 2003, the RUS
published in the Federal Register amended regulations establishing the Rural
Broadband Access Loan and Loan Guarantee Program, as authorized by P.L. 107-
171.42 For FY2003, loans totaling $1.455 billion were made available. Of this total,
$1.295 billion was for direct cost-of-money loans, $80 million for direct 4-percent
42 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees,”
Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4684-4692.

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CRS-12
loans, and $80 million for loan guarantees.43 For FY2003, the RUS received over 80
applications requesting loans totaling $1 billion.
In its FY2004 budget request, the Administration proposed cancelling the
mandatory $20 million from the Commodity Credit Corporation (as provided in P.L.
107-171), while providing $9.1 million in discretionary funding through the FY2004
appropriations process. The $9.1 million in discretionary budget authority would
support almost $200 million in loans during FY2004. In addition, the Administration
proposed $2 million for broadband grants in FY2004. The FY2004 House
Agriculture Appropriations bill, passed by the House on July 14, 2003 (H.R. 2673;
H.Rept. 108-193) also cancels the mandatory $20 million from the Commodity
Credit Corporation, while providing $9.1 million in loan subsidies and $8 million for
broadband grants. The Senate Agriculture Appropriations bill, as passed by the
Senate on November 6, 2003, while also blocking the $20 million from the
Commodity Credit Corporation, provides $15.1 million in loan subsidies and $10
million in broadband grants. The Conference Agreement on the FY2004
Consolidated Appropriations Act (H.R. 2673; H.Rept. 108-401) provides $13.1
million in loan subsidies (which will support a loan level of $602 million) and $9
million for broadband grants. The FY2004 Consolidated Appropriations Act was
signed into law on January 23, 2004 (P.L. 108-199).
For FY2004, $38.8 million (mandatory budget authority) is carried over from
prior years and is available to support a direct and guaranteed loan level of $1.6
billion. Additionally, the $13.1 million of discretionary budget authority
(appropriated for FY2004) supports a loan level of $600 million. Therefore, the total
loan level available for FY2004 is about $2.2 billion. On March 29, 2004, RUS
announced the availability of $2.211 billion, consisting of $2.051 billion in direct
cost-of-money loans, $80 million for direct 4 percent loans, and $80 billion for loan
guarantees.44
The Administration’s FY2005 budget proposal requests $9.9 million in
discretionary authority, which would support about $331 million in loan levels. The
mandatory funding provided by the Farm Bill for 2004 and 2005, a total of $40
million, would be rescinded.
Community Connect Broadband Grants. Complementing the broadband
loan program, the RUS has established a broadband pilot grant program which issues
grants to applicants proposing to provide broadband service on a “community-
oriented connectivity” basis to rural communities of under 20,000 inhabitants. The
program targets rural, economically-challenged communities by providing support
for broadband service to schools, libraries, education centers, health care providers,
law enforcement agencies, public safety organizations, residents and businesses. In
the program’s initial year, FY2002, $20 million was made available; RUS received
more than 300 applications requesting a total of $185 million. On May 15, 2003,
43 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees
Program,” Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4753-4755.
44 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees
Program,” Federal Register, Vol. 69, No.60, March 29, 2004, pp. 16231-16232.

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RUS announced 40 awards totaling $20 million for the FY2002 program. On July
18, 2003, RUS announced the availability of $10 million for the FY2003 program;
34 FY2003 grant awards totaling $11.3 million were announced on September 24,
2003.
The FY2004 Consolidated Appropriations Act (P.L. 108-199) provides $9
million for broadband grants in FY2004. The Administration’s FY2005 budget
proposal requests no funding for broadband grants.
Department of Commerce. The Technology Opportunities Program (TOP),
formerly the Telecommunications and Information Infrastructure Assistance Program
(TIAPP), is administered by the National Telecommunications and Information
Administration (NTIA) at the Department of Commerce. TOP gives grants for model
projects demonstrating innovative uses of advanced telecommunications
technologies, especially in rural and underserved communities. Matching grants are
awarded to state, local and tribal governments, health care providers, schools,
libraries, police departments, and community-based non-profit organizations.
Applications include distance learning, telemedicine, and economic development.
Since 1994, TOP has awarded 583 grants, totaling $218.9 million and
leveraging $297 million in local matching funds. As broadband technologies become
increasingly developed and deployed, it is likely that an increasing number of TOP
grants will be related to broadband deployment.
In its FY2003 budget submission, the Administration proposed to terminate the
TOP program. The FY2003 Omnibus Appropriations (P.L. 108-7) provides $15.5
million for TOP. In its FY2004 budget submission, the Administration again
proposed to terminate the TOP program. The FY2004 Consolidated Appropriations
Act (P.L. 108-199) provides $15 million for TOP in FY2004. The Administration’s
FY2005 budget again proposes the termination of TOP.
Legislation in the 107th Congress
A number of bills were introduced in the 107th Congress which sought to
provide financial support for broadband deployment, especially in rural and/or low-
income areas. Some provisions would have authorized funding for loans and grants,
while others would have established targeted tax credits for companies investing in
broadband facilities.45
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 final 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
45 For information on broadband legislation which addresses regulatory issues such as lifting
data transmission restrictions on Bell Operating Companies, and “open access” of cable
systems, please see the CRS Issue Brief IB10045, Broadband Internet Access: Background
and Issues.

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CRS-14
and loan guarantees 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). The Farm Bill was signed into law (P.L. 107-171) on
May 13, 2002.
Meanwhile, a broadband tax credit provision was added to the Senate Finance
Committee version of the economic stimulus bill, H.R. 3090 (Economic Security and
Recovery Act of 2001). Modeled on S. 88 (the Broadband Internet Access Act
introduced by Senator Rockefeller), section 902 of H.R. 3090 would have provided
a 10% credit for deploying “current generation” broadband equipment in rural and
underserved areas and a 20% credit for “next generation” broadband equipment
deployment for rural and underserved areas and for all residential broadband
subscribers. Ultimately, H.R. 3090 was not passed by the Senate.
Subsequently, similar broadband tax credit language was considered as a
possible amendment to the Senate energy bill (S. 517). In the end, this amendment
was not included in the final version of the energy bill passed by the Senate on April
25, 2002.46
The Broadband Telecommunications Act of 2002 (S. 2430) was introduced by
Senator Hollings on May 2, 2002. S. 2448 would provide financial assistance for an
array of programs and initiatives to encourage broadband deployment, particularly
in rural and underserved areas. Specifically, the bill would establish a Broadband
Deployment and Demand Trust Fund financed by monies from the telephone excise
tax. For each of years FY2003 through FY2007, expenditures from the Trust Fund
would be used for a number of purposes, including: grants and loans for broadband
deployment; pilot projects for wireless and other non-wireline broadband
technologies; block grants to States and local governments to encourage and support
broadband deployment; 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; grants to connect underrepresented colleges
and communities to the Internet; grants for digital television conversion by public
broadcasters; and grants for programs aimed at stimulating broadband demand, such
as digitizing library and museum collections, developing consumer applications, and
developing e-government initiatives. In total, S. 2448 would authorize expenditures
of up to $10.87 billion through FY2007 ($2.17 billion per year, FY2003 – FY2007).
The following is a complete listing of bills introduced in the 107th Congress
which sought to provide some form of financial assistance to encourage broadband
deployment:
H.R. 267 (English)
Broadband Internet Access Act of 2001. Provides tax credits for five years to
companies investing in broadband equipment. Provides a 10% tax credit for “current
46 See Senate debate on Broadband Tax Credit Legislation, Congressional Record, April 25,
2002, pp. S3399-S3404.

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generation” broadband service (defined as download speeds of at least 1.5 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 January 30, 2001; referred to Committee on Ways and
Means.
H.R. 1415 (Rangel)
Technology Bond Initiative of 2001. Provides an income tax credit to holders
of bonds financing the deployment of broadband technologies. Introduced April 4,
2001; referred to Committee on Ways and Means.
H.R. 1416 (LaFalce)
Broadband Expansion Grant Initiative of 2001. Authorizes $100 million in
grants and loan guarantees from the Department of Commerce for deployment by the
private sector of broadband telecommunications networks and capabilities to
underserved rural areas. Introduced April 4, 2001; referred to Committee on Energy
and Commerce.
H.R. 1693 (Hall)
Science Education for the 21st Century Act. Authorizes $10 million in each of
fiscal years 2002 through 2004 for federal agencies participating in the Next
Generation Internet program to conduct broadband demonstration projects in
elementary and secondary schools. Directs the National Science Foundation to
conduct a study of broadband network access in schools and libraries. Introduced
May 3, 2001; referred to Committees on Science and on Education and Workforce.
H.R. 1697 (Conyers)
Broadband Competition and Incentives Act of 2001. Authorizes $3 billion for a loan
program administered by the Department of Justice to finance broadband deployment
in rural and low-income areas. Introduced May 3, 2001; referred to Committees on
Judiciary and on Energy and Commerce.
H.R. 2038 (Stupak)
Rural Broadband Enhancement Act. Gives new authority to the Rural Utilities
Service in consultation with the National Telecommunications and Information
Administration to make low interest loans to companies that are deploying broadband
technology in rural areas. Introduced May 25, 2001; referred to Committee on
Energy and Commerce and Committee on Agriculture.
H.R. 2139 (Smith)
Rural America Broadband Deployment Act. Authorizes the Secretary of
Agriculture to make loans for the development of broadband services in rural areas.
Introduced June 12, 2001; referred to Committee on Agriculture and Committee on
Energy and Commerce.
H.R. 2401 (McHugh)
Rural America Digital Accessibility Act. Provides for grants, loans, research,
and tax credits to promote broadband deployment in underserved rural areas.
Introduced June 28, 2001; referred to Committee on Energy and Commerce,
Committee on Ways and Means, and Committee on Science.

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CRS-16
H.R. 2597 (McInnis)
Broadband Deployment and Telework Incentive Act. Allows taxpayer
deductions for purchase of broadband equipment and provides tax credits to
providers of next generation broadband service to rural and urban subscribers.
Introduced July 23, 2001; referred to Committee on Ways and Means.
H.R. 2669 (Moran)
Rural Telecommunications Enhancement Act. Authorizes the Secretary of
Agriculture to make loans and grants to improve access to telecommunications and
Internet services in rural areas. Introduced July 27, 2001; referred to Committee on
Agriculture and Committee on Energy and Commerce.
H.R. 2847 (Boswell)
Rural America Technology Enhancement Act of 2001. Provides: tax credits for
broadband facilities development; rural area broadband support through the FCC’s
universal service fund; and loans from the USDA Rural Utilities Service. Introduced
September 6, 2001; referred to Committees on Agriculture; Ways and Means; Energy
and Commerce; and Education and the Workforce.
H.R. 3090 (Thomas, Bill)
Economic Security and Recover Act of 2001. Section 902 (added by Senate
Finance Committee) provides a 10% tax credit for “current generation” broadband
service (defined as download speeds of at least 1 million bits per second) for rural
and low-income areas, and a 20% tax credit for “next generation” broadband service
(defined as download speeds of at least 22 million bits per second). Introduced
October 11, 2001. Passed House October 24, 2001. Reported by Senate Finance
Committee with an amendment in the nature of a substitute, November 9, 2001.
H.R. 4641 (Markey)
Wireless Technology Investment and Digital Dividends Act of 2002.
Establishes a Broadband Infrastructure Investments Program, funded by a trust fund
financed by revenues from spectrum auctions. Program would make grants to
nonprofit organizations, States, or local governments for broadband deployment in
underserved rural areas and low-income housing and community centers. Introduced
May 2, 2002; referred to Committee on Energy and Commerce.
H.R. 4664 (Smith, Nick)
National Science Foundation Authorization Act of 2002. Directs the National
Science Foundation to conduct a study of broadband network access for schools and
libraries. Passed House June 5, 2002; passed Senate November 14, 2002. Signed by
President, December 19, 2002.
S. 88 (Rockefeller)
Broadband Internet Access Act of 2001. 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 1.5 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 January 22, 2001; referred to Committee on Finance.

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S. 150 (Kerry)
Broadband Deployment Act of 2001. Provides tax credits for five years to
companies investing in broadband equipment to serve low-income areas. Provides
a 10% tax credit for broadband service delivering a minimum download speed of 1.5
million bits per second. Introduced January 23, 2001; referred to Committee on
Finance.
S. 426 (Clinton)
Technology Bond Initiative of 2001. 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)
Broadband Expansion Grant Initiative of 2001. 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)
Broadband Rural Research Investment Act of 2001. 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)
Rural Broadband Enhancement Act. 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. 1571 (Lugar)
Farm and Ranch Equity Act of 2001. Section 602 would authorize the Secretary
of Agriculture to make loans and grants to entities providing broadband service to
rural areas. Introduced October 18, 2001; referred to Committee on Agriculture,
Nutrition, and Forestry.
S. 1731 (Harkin)/P.L. 107-171
Agriculture, Conservation, and Rural Enhancement Act of 2001. Title VI
(Section 605) would authorize the Secretary of Agriculture to make loans and grants
to entities providing broadband service to rural areas. Introduced November 27,
2001; referred to Committee on Agriculture, Nutrition, and Forestry. 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 report ( H.Rept.
107-424) filed in House May 1, 2002. Signed into law May 13, 2002.
S. 2448 (Hollings)
Broadband Telecommunications Act of 2002. Provides loans and grants to
encourage broadband deployment in rural and underserved areas. Also provides

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CRS-18
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.
Legislation 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, which was passed by the
Senate on May 11, 2004. The following is a complete listing of bills. Also included
are bills which would allocate additional spectrum for use by wireless broadband
applications:
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.

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H.R. 769 (English)
Amends the Internal Revenue Code of 1986 to allow the expensing of
broadband Internet access expenditures. Introduced February 13, 2003; 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. Establishes grant program at the
Department of Commerce to provide funds to State and local governments to enable
them to deploy broadband computer networks for the conduct of electronic
governance transactions by citizens in local schools and libraries. Introduced
September 16, 2003; referred to Committee on Energy and Commerce.
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)
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 1.0 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 April 11,
2003; referred to Committee on Finance.

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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. Passed by Senate, May 11, 2004.
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.
Policy Issues
As summarized above, legislation introduced into the 107th and 108th Congress
seeks to provide federal financial assistance for broadband deployment in rural and
underserved areas. In assessing this legislation, several policy issues arise.
Is Broadband Deployment Data Adequate? Obtaining an accurate
snapshot of the status of broadband deployment is problematic. Anecdotes abound
of rural and low-income areas which do not have adequate Internet access, as well
as those which are receiving access to high-speed, state-of-the-art connections.
Rapidly evolving technologies, the constant flux of the telecommunications industry,
the uncertainty of consumer wants and needs, and the sheer diversity and size of the
nation’s economy and geography make the status of broadband deployment very
difficult to characterize. The FCC periodically collects broadband deployment data
from the private sector via “FCC Form 477" – a standardized information gathering
survey. Statistics derived from the Form 477 survey are published every six months.
Additionally, data from Form 477 are used as the basis of the FCC’s (to date) three
broadband deployment reports. The FCC is working to refine the data used in future
Reports in order to provide an increasingly accurate portrayal. In its March 17, 2004
Notice of Inquiry for the upcoming Fourth Report, the FCC announced it will be
seeking comments on specific proposals to improve the FCC Form 477 data
gathering program.47
Some argue that because the overall status of broadband deployment is not yet
adequately understood, government intervention is not appropriate at this time. On
the other hand, advocates of federal assistance for broadband deployment maintain
that the available data indicate clearly enough that rural and low-income areas are
being underserved, and that the risk of delaying assistance to these areas outweighs
the benefit of waiting for more complete data.
Is Federal Assistance for Broadband Deployment Premature or
Inappropriate? Related to the data issue is the argument that government
47 Federal Communications Commission, Notice of Inquiry, “Concerning the Deployment
of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely
Fashion, and possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the
Telecommunications Act of 1996,” FCC 04-55, March 17, 2004, p. 6.

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intervention in the broadband marketplace would be premature or inappropriate. The
FCC currently does not favor significant regulatory intervention, arguing that
broadband deployment is in its early stages, that critical applications and attractive
content for broadband have not yet emerged, and that even in areas where broadband
access is available, it is not yet apparent that many consumers are willing to pay the
average fee of $50 per month for this new service. Some argue that financial
assistance for broadband deployment could distort private sector investment
decisions in a dynamic and rapidly evolving marketplace, and question whether
federal tax dollars should support a technology that has not yet matured, and whose
societal benefits have not yet been demonstrated.48
On the other hand, proponents of financial assistance counter that the available
data show, in general, that the private sector will invest in areas where it expects the
greatest return – areas of high population density and income. Without some
governmental assistance in underserved areas, they argue, it is reasonable to conclude
that broadband deployment will lag behind in many rural and low income areas.
Which Approach is Best? If one assumes that governmental action is
appropriate to spur broadband deployment in underserved areas, which specific
approaches, either separately or in combination, would likely be most effective?
Targeted grants and loans from several existing federal programs have been
proposed, as well as tax credits for companies deploying broadband systems in rural
and low-income areas. How might the impact of federal assistance compare with the
effects of regulatory or deregulatory actions?49 And finally, how might any federal
assistance programs best compliment existing “digital divide” initiatives by the
states, localities, and private sector?50
48 See: Leighton, Wayne A., Broadband Deployment and the Digital Divide: A Primer, a
Cato Institute Policy Analysis, No. 410, August 7, 2001, 34 pp. Available at:
[http://www.cato.org/pubs/pas/pa410.pdf]. Also see: Thierer, Adam, Broadband Tax
Credits, the High-Tech Pork Barrel Begins, Cato Institute, July 13, 2001, available at:
[http://www.cato.org/tech/tk/010713-tk.html].
49 See CRS Issue Brief IB10045 for a detailed discussion of these issues.
50 For more information on state, local, and private sector initiatives, see:
[http://www.digitaldividenetwork.org]

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CRS-22
Table 1. Selected Federal Domestic Assistance Programs Related to Telecommunications Development 51
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Technology
National
Provides grants for model
$12.9 million
[http://www.ntia.doc.gov/otiahome/top/index.html]
Opportunities
Telecommunications
projects demonstrating
Program
and Information
innovative uses of advanced
Administration, Dept.
telecommunications
of Commerce
technologies, especially in rural
and underserved communities
Public
National
Assists in planning, acquisition,
$19.75 million
[http://www.ntia.doc.gov/otiahome/ptfp/index.html]
Telecommunications
Telecommunications
installation and modernization of
Facilities – Planning
and Information
public telecommunications
and Construction
Administration, Dept.
facilities
of Commerce
51 Prepared by CRS based on information from budget documents, agency websites, and the Catalog of Federal Domestic Assistance,
updated May 2004.

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CRS-23
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Grants for Public
Economic
Provides grants to economically
$203.7 million
[http://www.doc.gov/eda/]
Works and Economic
Development
distressed areas for construction
Development
Administration, Dept.
of public facilities and
Facilities
of Commerce
infrastructure, including
broadband deployment and other
types of telecommunications
enabling projects
Rural Telephone
Rural Utilities Service,
Provides long-term direct and
$145 million
[http://www.usda.gov/rus/telecom/index.htm]
Loans and Loan
U.S. Dept. of
guaranteed loans to qualified
(hardship
Guarantees
Agriculture
organizations for the purpose
loans);
of financing the improvement,
$250 million
expansion, construction,
(cost of money
acquisition, and operation of
loans);
telephone lines, facilities, or
$120 million
systems to furnish and improve
(FFB Treasury
telecommunications service in
loans)
rural areas
Rural Telephone
Rural Utilities Service,
Provides supplemental financing
$173 million
[http://www.usda.gov/rus/telecom/rtb/index_rtb.htm]
Bank Loans
U.S. Dept. of
to extend and improve

Agriculture
telecommunications services in
rural areas

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CRS-24
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Distance Learning
Rural Utilities Service,
Provides seed money for loans
$300 million
[http://www.usda.gov/rus/telecom/dlt/dlt.htm]
and Telemedicine
U.S. Dept. of
and grants to rural community
( loans)
Loans and Grants
Agriculture
facilities (e.g., schools, libraries,
$39 million
hospitals) for advanced
(grants)
telecommunications systems that
can provide health care and
educational benefits to rural areas
Rural Broadband
Rural Utilities Service,
Provides loan and loan
$602 million
[http://www.usda.gov/rus/telecom/broadband.htm]
Access Loan and
U.S. Dept. of
guarantees for facilities and
Loan Guarantee
Agriculture
equipment providing broadband
Program
service in rural communities
Community Connect
Rural Utilities Service,
Provides grants to applicants
$9 million
[http://www.usda.gov/rus/telecom/initiatives/index_i
Broadband Grants
U.S. Dept. of
proposing to provide broadband
nitiatives.htm#broadband]
Agriculture
service on a “community-
oriented connectivity” basis to
rural communities of under
20,000 inhabitants.
Community
Office of Vocational
Provides access to computers and
$9.9 million
[http://www.ed.gov/fund/grant/apply/AdultEd/CTC/i
Technology Centers
and Adult Education
technology, particularly
ndex.html]
Program
Dept. of Education
educational technology, to adults
and children in low-income
communities in both urban and
rural areas who otherwise would
lack that access

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CRS-25
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Education
Office of Elementary
Grants to State Education
$700 million
[http://www.ed.gov/Technology/TLCF/]
Technology State
and Secondary
Agencies for development of

Grants
Education, Dept. of
information technology to
Education
improve teaching and learning in
schools
Star Schools
Office of Assistant
Grants to telecommunication
$20.3 million
http://www.ed.gov/programs/starschools/index.html/
Secretary for
partnerships for

Educational Research
telecommunications facilities and
and Improvement,
equipment, educational and
Dept. of Education
instructional programming
Ready to Teach
Office of Assistant
Grants to carry out a national
$14.3 million
[http://www.ed.gov/programs/readyteach/index.html]
Secretary for
telecommunication-based

Educational Research
program to improve the teaching
and Improvement,
in core curriculum areas.
Dept. of Education
Regional Technical
Office of Elementary
Helps states, schools, districts,
$9.9 million
[http://www.ed.gov/programs/rtec/index.html]
Support and
and Secondary
adult literacy centers, pre-service

Professional
Education, Dept. of
providers, and other educational
Development
Education
institutions to use advanced
Consortia for
technologies to improve teaching
Technology
and student achievement
Special Education –
Office of Special
Supports development and
$32.7 million
[http://www.ed.gov/about/offices/list/osers/index.htm
Technology and
Education and
application of technology and
l?src=mr/]
Media Services for
Rehabilitative
education media activities for
Individuals with
Services, Dept. of
disabled children and adults
Disabilities
Education

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CRS-26
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Medical Library
National Library of
Provides funds to train
$50.5 million
[http://www.nlm.nih.gov/ep/extramural.html]
Assistance
Medicine, National
professional personnel;
Institutes of Health,
strengthen library and
Department of Health
information services; facilitate
and Human Services
access to and delivery of health
science information; plan and
develop advanced information
networks; support certain kinds
of biomedical publications; and
conduct research in medical
informatics and related sciences
State Library
Office of Library
Grants to state library
$157.6 million
[http://www.imls.gov/grants/library/lib_gsla.asp#po]
Program
Services, Institute of
administrative agencies for

Museum and Library
promotion of library services that
Services, National
provide all users access to
Foundation on the Arts
information through State,
and the Humanities
regional, and international
electronic networks
Native American
Office of Library
Supports library services
$3.21 million
[http://www.imls.gov/grants/library/lib_nat.asp]
Library Services
Services, Institute of
including electronically linking
Museum and Library
libraries to networks
Services, National
Foundation on the Arts
and the Humanities

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CRS-27
Program
Agency
Description FY2004
Web Links for More Information
funding
[http://www.cfda.gov/public/]: Go to “All
Programs Listed Numerically” and search by
program
Denali Commission
Denali Commission
Provides grants through a federal
$35 million
[http://www.denali.gov]
Program
and state partnership designed to
provide critical infrastructure and
utilities throughout Alaska,
particularly in distressed
communities

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