Order Code IB10045
CRS Issue Brief for Congress
Received through the CRS Web
Broadband Internet Access:
Background and Issues
Updated January 27, 2005
Angele A. Gilroy and Lennard G. Kruger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
What Is Broadband and Why Is It Important?
Broadband Technologies
Cable
Digital Subscriber Line (DSL)
Satellite
Other Technologies
Status of Broadband Deployment
Policy Issues
Easing Restrictions and Requirements on Incumbent Telephone Companies
Open Access
Activities in the 108th and the 109th Congress
Legislation in the 107th Congress
LEGISLATION

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Broadband Internet Access: Background and Issues
SUMMARY
Broadband or high-speed Internet access
economic growth, that industry competes
is provided by a series of technologies that
fairly, and that service is provided to all sec-
give users the ability to send and receive data
tors and geographical locations of American
at volumes and speeds far greater than current
society. The federal government — through
Internet access over traditional telephone
Congress and the Federal Communications
lines. In addition to offering speed, broadband
Commission (FCC) — is seeking to ensure
access provides a continuous, “always on”
fair competition among the players so that
connection (no need to dial-up) and a “two-
broadband will be available and affordable in
way” capability, that is, the ability to both
a timely manner to all Americans who want it.
receive (download) and transmit (upload) data

at high speeds. Broadband access, along with
While President Bush has set a goal of
the content and services it might enable, has
universal broadband availability by 2007,
the potential to transform the Internet: both
some areas of the nation — particularly rural
what it offers and how it is used. It is likely
and low-income communities — continue to
that many of the future applications that will
lack full access to high-speed broadband
best exploit the technological capabilities of
Internet service. In order to address this
broadband have yet to be developed.
problem, the 109th Congress may examine the
scope and effect of federal broadband finan-
There are multiple transmission media or
cial assistance programs (including universal
technologies that can be used to provide
service), and the impact of telecommunica-
broadband access. These include cable, an
tions regulation and new technologies on
enhanced telephone service called digital
broadband deployment.
subscriber line (DSL), satellite, fixed wireless
(including “wi-fi” and “Wi-Max”), broadband

A key issue is whether present laws and
over powerline (BPL), fiber-to-the-home
subsequent regulatory policies as they are
(FTTH), and others. While many (though not
applied to the ILECs (incumbent local ex-
all) offices and businesses now have Internet
change [telephone] companies such as SBC or
broadband access, a remaining challenge is
Verizon) remain necessary and what if any
providing broadband over “the last mile” to
regulations should be applied to new providers
consumers in their homes. Currently, a num-
and services. Whether such requirements are
ber of competing telecommunications compa-
needed to ensure the development of compe-
nies are developing, deploying, and marketing
tition and its subsequent consumer benefits, or
specific technologies and services that provide
are overly burdensome and only discourage
residential broadband access.
needed investment in and deployment of
broadband services, will continue to be a key
From a public policy perspective, the
focus of the policy debate.
goals are to ensure that broadband deployment
is timely and contributes to the nation’s

Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
In the 109th Congress, legislation has been introduced to provide financial assistance to
encourage broadband deployment (H.R. 144 and H.R. 146). The impact of existing laws and
regulatory policies on broadband providers and ultimately broadband deployment continues
to be of Congressional interest. The pending release, by the FCC, of newly crafted rules,
relating to unbundling, line sharing and broadband deregulation is expected shortly and will
play a key role in the broadband debate. Meanwhile, on March 26, 2004, President Bush
endorsed the goal of universal broadband access by 2007. This was followed, on April 26,
2004 by the release of an Administration broadband policy endorsing: a ban on broadband
taxes, more spectrum for wireless broadband, 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
seconds. In addition to offering speed, broadband access provides a continuous “always on”
connection (no need to “dial-up”) and a “two-way” capability — that is, the ability to both
receive (download) and transmit (upload) data at high speeds.
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Broadband access, along with the content and services it might enable, has the potential
to transform the Internet — both what it offers and how it is used. For example, a two-way
high speed connection could be used for interactive applications such as online classrooms,
showrooms, or health clinics, where teacher and student (or customer and salesperson, doctor
and patient) can see and hear each other through their computers. An “always on”
connection could be used to monitor home security, home automation, or even patient health
remotely through the Web. The high speed and high volume that broadband offers could also
be used for bundled service where, for example, cable television, video on demand, voice,
data, and other services are all offered over a single line. In truth, it is possible that many of
the applications that will best exploit the technological capabilities of broadband, while also
capturing the imagination of consumers, have yet to be developed.
Many (though not all) offices and businesses now have Internet broadband access. A
major challenge remaining (as well as an enormous business opportunity) is providing
broadband over “the last mile” to consumers in their homes. 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. While the
broadband adoption rate stands at approximately 25% of U.S. households, broadband
availability is much higher. The FCC estimates that roughly 20 percent of consumers with
access to advanced telecommunications capability actually subscribe. As of June 30, 2004,
the FCC found at least one high-speed subscriber in 94% of all zip codes in the United
States.1
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 frp,
200 thousand bits per second (kbps) to as much as 6 million bits per second (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
1 FCC, High-Speed Services for Internet Access: Status as of June 30, 2004, December 22, 2004,
p. 4-5. Available at
[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd1204.pdf]
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on a neighbor’s Internet connection. The cable industry is developing “next generation”
technology which will significantly extend downloading and uploading speeds.
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
typically range up to 3 Mbps for downloading and 768 kbps 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 (DirecWay) and Starband. 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
some parts of the United States, 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
broadband access. Terrestrial or fixed wireless systems transmit data over the airwaves from
towers or antennas to a receiver. Mobile wireless broadband services (also referred to as
third generation or “3G”) allow consumers to get broadband access over cell phones, PDAs,
or wireless modem cards connected to a laptop. 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. 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. A new and developing
unlicensed wireless broadband technology (called “wiMax”) has the capability to transmit
signals over much larger areas.
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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 transmission speeds up to 500 Mbps shared over a maximum
of 16 subscribers. 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.2
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, 2004), as of June 30, 2004 there were 32.5 million high
speed lines connecting homes and businesses to the Internet in the United States, a growth
rate of 15% during the first half of 2004. Of the 32.5 million high speed lines reported by the
FCC, 30.1 million serve homes and small businesses.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
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
2 For further information, see CRS Report RL32421, Broadband Over Power Lines: Regulatory and
Policy Issues, by Patricia Moloney Figliola.
3 FCC, High-Speed Services for Internet Access: Status as of June 30, 2004, December 22, 2004.
Available at
[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd1204.pdf]
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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
September 9, 2004, the FCC adopted and released its Fourth Report pursuant to Section 706.
Like the previous three reports, the FCC concludes that “the overall goal of section 706 is
being met, and that advanced telecommunications capability is indeed being deployed on a
reasonable and timely basis to all Americans.”7
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.8 Statements from Administration officials indicated that
much of the policy would focus on removing regulatory roadblocks to investment in
broadband deployment.9 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
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 Fourth Report, p. 8.
8 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]
9 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]
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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 2007.10 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
advocates permanently prohibiting all broadband taxes, making spectrum available for
wireless broadband, creating technical standards for broadband over power lines, and
simplifying rights-of-way processes on federal lands for broadband providers.11
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,12 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.13
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. 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.
A related issue, whether and to what degree similar or competing services offered by
different providers should be regulated is also under review.
10 Allen, Mike, “Bush Sets Internet Access Goal,” Washington Post, March 27, 2004.
11 See White House, A New Generation of American Innovation, April 2004. Available at
[http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf]
12 Available at [http://www.technology.gov/reports/TechPolicy/Broadband_020921.pdf]
13 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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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.
The specifics on how this unbundling should be implemented are detailed by the FCC in its
triennial review order.
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 were
provisions which: no longer required, over a transition period, that line sharing be an
unbundled network element and during each year of the transition increased incrementally
the price for the high frequency portion of the loop; eliminated unbundling for switching for
business customers using high capacity loops, but gave 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); removed unbundling requirements on newly deployed hybrid
(fiber-copper) loops but ensured 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.)

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
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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 negotiation of commercial agreements on network access were
undertaken. To date, some commercial agreements have been announced.
A decision by the Solicitor General and the FCC not to appeal the ruling to the US
Supreme Court and a subsequent refusal by the Supreme Court to stay the Appeals Court
ruling have resulted in the FCC’s implementation, with exceptions, of interim rules freezing
current interconnection rates (i.e., those in place as of June 15,2004) and agreements for six
months effective September 13, 2004, or until permanent rules are adopted, if earlier. The
interim order also calls for a second subsequent six month phase, absent the adoption of
permanent rules, that calls for some increase in ILEC rates for existing agreements but calls
for the addition of new agreements at market-based rates. (See Federal Register, Vol. 69, No.
176, September 13, 2004, p.55111.)
In a December 15, 2004 action the FCC adopted final unbundling rules in the TRO
remand proceeding. In a 3-2 vote the FCC clarified the relationship between ILECs and
competitor’s access to the incumbents network elements. Included among these rules are
those that eliminated, after a one-year phase out, unbundling for mass market (i.e., residential
and small business market) local circuit switching (thereby eliminating the UNE-P);
established a test to determine unbundling requirements for DS1 loops and transport; and
dropped dark fiber loops from the list of elements the ILEC’s must share with competitors.
These rules will replace the interim rules released in August 2004. The full text of the rule
is yet to be released and is not anticipated to go into effect until 30 days after publication in
the Federal Register.
The focus has now shifted to three forums: to the FCC as it attempts to establish the
adopted, but yet to be released, permanent rules; to the industry players as they continue to
negotiate access agreements; and to the D.C. U.S. Appeals Court where a petition seeking
to vacate the FCC established interim rules and required implementation of the court’s
March 2004 decision is under review.
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.
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Opponents’ Views. Opponents claim that the lifting of restrictions and requirements
will undermine the incentives needed to ensure that the BOCs and the other ILECs will open
up their networks to competition. Present restrictions, opponents claim, were built into the
1996 Telecommunications Act to help ensure that competition would 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.
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 have enabled cable broadband customers to subscribe
to their ISP of choice without first going through their cable provider’s ISP. At issue was
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.14 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.
14 Cable companies have announced access agreements with unaffiliated ISPs either voluntarily (e.g.
AT&T Broadband) or as part of merger approval conditions imposed by the FCC and FTC (e.g.
AOL-Time Warner).
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The debate thus moved to the federal level, where many interpreted 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) to
explore whether or not the Commission should require access to cable and other high- speed
systems by Internet Service Providers (ISPs).15 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.” Subsequently on August 27, 2004, the FCC and the DOJ filed a joint petition with
the US Supreme Court seeking to overturn the appeals court ruling; a decision, by the
Supreme Court, on whether it will choose to hear the case is not expected before its October
return.
Activities in the 108th and the 109th Congress
In the 109th Congress, legislation has been introduced to provide financial assistance to
encourage broadband deployment (H.R. 144 and H.R. 146). The impact of existing laws and
regulatory policies on broadband providers and ultimately broadband deployment continues
to be of Congressional interest. What impact the adopted, but yet to be released, FCC’s
permanent rules on unbundling, line sharing, and broadband deregulation will have on
legislative activity in the 109th Congress remains to be seen.
Legislative proposals related to providing financial assistance for broadband deployment
were considered by 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. On May 11, 2004, S. 1637 was
passed by the Senate as a substitute amendment to H.R. 4520. However, the broadband
expensing provision was not retained in the final version of H.R. 4520, which subsequently
became public law.
In January 2003, the Senate Commerce Committee held a hearing on
telecommunications competition. The Committee also held three days of hearings in April
and May 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 and followed up with a May 19, 2004 hearing
on technology convergence and implications for a future review of the 1996
Telecommunications Act. Broadband deployment and regulatory issues were prominent in
all hearings.
15 See [http://www.fcc.gov/Bureaus/Miscellaneous/Notices/2000/fcc00355.pdf]
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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
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.
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. 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.16
LEGISLATION
H.R. 144 (McHugh)
Rural America Digital Accessibility Act. Provides for grants, loans, research, and tax
credits to promote broadband deployment in underserved rural areas. Introduced January 4,
2005; referred to Committee on Energy and Commerce and the Committee on Ways and
Means.
H.R. 146 (McHugh)
Establishes a grant program to support broadband-based economic development efforts.
Introduced January 4, 2005; referred to Committee on Transportation and Infrastructure and
to Committee on Financial Services.
16 For a discussion on how the broadband provision of P.L. 107-171 has been funded in the 108th and
the 109th Congress, see CRS Report RL30719, Broadband Internet Access and the Digital Divide:
Federal Assistance Programs, by Lennard G. Kruger.
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