Order Code RL30719
CRS Report for Congress
Received through the CRS Web
Broadband Internet Access
and the Digital Divide:
Federal Assistance Programs
Updated September 22, 2005
Lennard G. Kruger
Specialist in Science and Technology
Resources, Science, and Industry Division
Angele A. Gilroy
Specialist in Telecommunications
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 “dial-up” Internet access over traditional telephone lines.
Broadband technologies are currently being deployed primarily 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 109th Congress (H.R. 3, H.R. 144, H.R. 146,
H.R. 1479, H.R. 3517, S. 14, S. 497, S. 502, S. 1147, S. 1583) seeks to provide
federal financial assistance for broadband deployment in the form of grants, loans,
subsidies, and tax credits. 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 Underserved Areas . . . . . . . . . . . . . . . . . . . . . 2
Federal Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
State and Local Broadband Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Federal Telecommunications Development Programs . . . . . . . . . . . . . . . . . 9
The Universal Service Concept and the FCC . . . . . . . . . . . . . . . . . . . . 9
Universal Service and the Telecommunications Act of 1996 . . . 10
Universal Service and Broadband . . . . . . . . . . . . . . . . . . . . . . . . 12
Rural Utilities Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Rural Broadband Access Loan and Loan Guarantee Program . . . 13
Community Connect Broadband Grants . . . . . . . . . . . . . . . . . . . 15
Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legislation in the 109th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Is Broadband Deployment Data Adequate? . . . . . . . . . . . . . . . . . . . . . 20
Is Federal Assistance for Broadband Deployment Premature
or Inappropriate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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 series of reports
issued by the Department of Commerce2 (DOC) 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
A Nation Online: Entering the Broadband Age, published in September 2004,
is the sixth Department of Commerce report examining the use of computers, the
Internet, and other information technology. For the first time, the DOC report
focuses on broadband, also known as high-speed Internet access. 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 “dial-up” Internet access over traditional telephone lines.6 The DOC
report found that the proportion of U.S. households with broadband connections grew
from 9.1% in September 2001 to 19.9% in October 2003.7
According to the latest FCC data on the deployment of high-speed Internet
connections (released July 7, 2005), as of December 31, 2004 there were 37.9
million high speed lines connecting homes and businesses to the Internet in the
United States, a growth rate of 17% during the second half of 2004. Of the 37.9
million high speed lines reported by the FCC, 35.3 million serve homes and small
businesses.8 While the broadband adoption rate stands at 25-35% of U.S.
households, broadband availability is much higher. As of December 31, 2004, the
FCC found at least one high-speed subscriber in 95% of all zip codes in the United
States. The FCC estimates that “roughly 20 percent of consumers with access to
advanced telecommunications capability do subscribe to such services.” According
to the FCC, possible reasons for the gap between broadband availability and
subscribership include the lack of computers in some homes, price of broadband
service, lack of content, and the availability of broadband at work.9
Broadband in Rural and Underserved 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
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 U.S. Department of Commerce, Economics and Statistics Administration, National
Telecommunications and Information Administration, A Nation Online: Entering the
Broadband Age, September 2004, p. 1.
8 FCC, High-Speed Services for Internet Access: Status as of December 31, 2004, July
2005. Available at
[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd0705.
pdf]
9 Federal Communications Commission, Fourth Report to Congress, “Availability of
Advanced Telecommunications Capability in the United States,” GN Docket No. 04-54,
FCC 04-208, September 9, 2004, p. 38. Available at
[http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-04-208A1.pdf]

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CRS-3
250,000, and broadband over the telephone network has been deployed in 56% of all
cities with populations over 100,000.10
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.11
March 2005 data from the Pew Internet & American Life Project indicate 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. Pew
found that the percentage of all U.S. adults with broadband at home is 31% for urban
areas, 32% for suburban areas, and only 17% for rural areas.12
According to the latest FCC data on the deployment of high-speed Internet
connections (released July 7, 2005), high-speed subscribers were reported in 99%
of the most densely populated zip codes, as opposed to 75% of zip codes with the
lowest population densities. Similarly, for zip codes ranked by median family
income, high-speed subscribers were reported present in 99% of the top one-tenth of
zip codes, as compared to 83% of the bottom one-tenth of zip codes.13
On the other hand, the FCC’s Fourth Report, while acknowledging that
disparities in broadband deployment exist, asserts that the gap between the broadband
“haves and have-nots” is narrowing:
[T]he Fourth Report also documents the continuation of a positive trend that first
emerged in our last report: namely, the increasing availability of advanced
telecommunications capability to certain groups of consumers – those in rural
areas, those with low incomes, and those with disabilities – who stand in
particular need of advanced services. Consumers in these groups are of special
concern to the Commission in that they are most in need of access to advanced
telecommunications capability to overcome economic, educational, and other
10 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]
11 A Nation Online, pp. 40-41.
12 Horrigan, John B., Pew Internet & American Life Project, Broadband Adoption at Home
in the U.S.: Growing but Slowing, presentation at “Internet Use in the Americas” workshop,
Mexico City, June 2005. Available at
[telecom.cide.edu/include/internet_conference_2005/JHorrigan_Broadband_Adoption.ppt]
See also: Pew Internet &American Life Project, Rural Areas and the Internet. Available
at [http://www.pewinternet.org/pdfs/PIP_Rural_Report.pdf]
13 FCC, High-Speed Services for Internet Access: Status as of December 31, 2004, July
2005, p. 5. Available at
[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd0705.
pdf]

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CRS-4
limitations, they are also the most likely to lack access precisely because of these
limitations. The Fourth Report demonstrates that we are making substantial
progress in closing the gaps in access that these groups traditionally have
experienced.14
The September 2004 Department of Commerce report, A Nation Online:
Entering the Broadband Age, found that a lower percentage of Internet households
have broadband in rural areas (24.7%) than in urban areas (40.4%), and that “while
broadband usage has grown significantly in all areas since the previous survey, the
rural-urban differential continues.”15 The report also found that broadband
penetration rates are higher in the West and Northeast than in the South and
Midwest.16 Race and ethnicity were also found to be significant determinants of
broadband use, with 25.7% of White Americans living in broadband households, as
opposed to 14.2% of Black and 12.6% of Hispanic Americans.17
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 – voice over the Internet protocol (VoIP)
or 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 nineteen years. The study projected that 1.2 million jobs could be
created if next generation broadband technology is rapidly and ubiquitously
deployed.18
Some also argue that broadband is an important contributor to U.S. future
economic strength with respect to the rest of the world. According to the
International Telecommunications Union, the U.S. ranks 16th worldwide in
broadband penetration (subscriptions per 100 inhabitants as of December 2004).19
Similarly, data from the Organization for Economic Cooperation and Development
14 Fourth Report, p. 8-9.
15 A Nation Online: Entering the Broadband Age, pp. 12-13.
16 Ibid., p. 12.
17 Ibid., p. A-1.
18 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]
19 International Telecommunications Union, Economies by broadband penetration, 2004.
Available at [http://www.itu.int/ITU-D/ict/statistics/at_glance/top20_broad_2004.html]

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(OECD) found the U.S. ranking 12th among OECD nations in broadband access per
100 inhabitants as of December 2004.20 By contrast, in 2001 an OECD study found
the U.S. ranking 4th in broadband subscribership per 100 inhabitants (after Korea,
Sweden, and Canada).21
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.”22 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 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.23
20 OECD, Broadband Access in OECD Countries per 100 inhabitants, December 2004.
Available at [http://www.oecd.org/dataoecd/19/42/34082810.xls]
21 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.
22 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]
23 Deployment of Advanced Telecommunications Capability: Second Report, p. 6.

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CRS-6
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.”24 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.25
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.”26 The FCC notes the emergence of new services such as VoIP, and the
significant development of new broadband access technologies such as unlicensed
wireless (WiFi)and broadband over power lines. The FCC notes the future promise
of emerging multiple advanced broadband networks which can complement one
another:
For example, in urban and suburban areas, wireless broadband services may “fill
in the gaps” in wireline broadband coverage, while wireless and satellite services
may bring high-speed broadband to remote areas where wireline deployment may
be costly. Having multiple advanced networks will also promote competition in
price, features, and quality-of-service among broadband-access providers.27
Two FCC Commissioners (Michael Copps and Jonathan Adelstein) dissented
from the Fourth Report conclusion that broadband deployment is reasonable and
timely. They argued that the relatively poor world ranking of United States
broadband penetration indicates that deployment is insufficient, that the FCC’s
continuing definition of broadband as 200 kilobits per second is outdated and is not
comparable to the much higher speeds available to consumers in other countries, and
that the use of zip code data (measuring the presence of at least one broadband
subscriber within a zip code area) does not sufficiently characterize the availability
of broadband across geographic areas.28
While the FCC is currently implementing or actively considering some
regulatory activities related to broadband,29 no major regulatory intervention pursuant
24 Third Report, p. 5.
25 Ibid., p. 5-6.
26 Fourth Report, p. 8.
27 Ibid., p. 9.
28 Ibid., p. 5, 7.
29 See Appendix C of the Fourth Report, “List of Broadband-Related Proceedings at the
(continued...)

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CRS-7
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.30 Statements from Administration officials
indicated that much of the policy would focus on removing regulatory roadblocks to
investment in broadband deployment.31 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, 2004, President Bush endorsed the goal of
universal broadband access by 2007. 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.32
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,33 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
29 (...continued)
Commission,” pp. 54-56.
30 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]
31 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]
32 See White House, A New Generation of American Innovation, April 2004. Available at
[http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf]
33 Available at [http://www.technology.gov/reports/TechPolicy/Broadband_020921.pdf]

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security); promoting telework, distance learning, and telemedicine; pursuing
broadband-friendly spectrum policies, and ensuring access to public rights of way for
broadband infrastructure.34 Meanwhile, “high-tech” organizations such as TechNet,35
the Computer Systems Policy Project (CSPP)36, and the Semiconductor Industry
Association (SIA)37 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. Bills have
been introduced into the 109th Congress which seek to provide federal financial
assistance for broadband deployment in the form of grants, loans, subsidies, and/or
tax credits.
State and Local Broadband Activities. In addition to federal support for
broadband deployment, there are programs and activities ongoing at the state and
local level. Surveys, assessments, and reports from the American Electronics
Association,38 Technet,39 the Alliance for Public Technology,40 the California Public
Utilities Commission,41 and the AEI-Brookings Joint Center42 have explored state
34 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]
35 TechNet represents over 300 senior executives from companies in the fields of
information technology, biotechnology, venture capital, investment banking, and law.
TechNet’s policy document, “A National Imperative: Universal Availability of Broadband
by 2010,” is available at [http://www.technet.org/news/newsreleases/2002-01-15.64.pdf]
36 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]
37 See Semiconductor Industry Association, “Removing Barriers to Broadband
Deployment,” [http://sia-online.org/downloads/Broadband_Combined.pdf]
38 American Electronics Association, Broadband in the States 2003: A State-by-State
Overview of Broadband Deployment, May 22, 2003.
[http://www.aeanet.org/publications/idet_broadbandstates03.asp]
39 TechNet, The State Broadband Index: An Assessment of State Policies Impacting
Broadband Deployment and Demand, July 17, 2003, 48 p. Available at
[http://www.technet.org/resources/State_Broadband_Index.pdf]
40 Alliance for Public Technology, A Nation of Laboratories: Broadband Policy
Experiments in the States, March 5, 2004, 48 p. Available at
[http://apt.org/publica/broadbandreport_final.pdf]
41 California Public Utilities Commission, Broadband Deployment in California, May 5,
2005, 83 p. Available at
[http://www.cpuc.ca.gov/static/industry/telco/broadband_deployment/]
42 Wallsten, Scott, AEI-Brookings Joint Center for Regulatory Studies, Broadband
Penetration: An Empirical Analysis of State and Federal Policies, Working Paper 05-12,
June 2005, 29 p. Available at
(continued...)

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CRS-9
and local broadband programs. A related issue is the emergence of municipal
broadband networks (primarily wireless and fiber based) and the debate over whether
such networks constitute unfair competition with the private sector (for more
information on municipal broadband, see CRS Report RS20993, Wireless
Technology and Spectrum Demand: Advanced Wireless Services).
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.43 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....”44 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
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.45
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.46
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
42 (...continued)
[http://aei-brookings.org/admin/authorpdfs/page.php?id=1161]
43 The section on universal service was prepared by Angele Gilroy, Specialist in
Telecommunications, Resources, Science and Industry Division.
44 Communications Act of 1934, As Amended, Title I sec.1[47 U.S.C. 151].
45 Many states participate in or have programs that mirror FCC universal service
mechanisms to help promote universal service goals within their states.
46 Additional FCC policies such as rate averaging and pooling have also been implemented
to assist high cost carriers.

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CRS-10
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.”
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, $15.3 billion in
funding has been committed over the first seven years of the program with funding
released to all states, the District of Columbia and all territories. Funding
commitments for funding Year 2005, the eighth and current year of the program,
totaled $609.5 million as of September 14, 2005.47
47 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.

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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.48 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 since returned to a $400 million
cap. As of September 13, 2005, covering the first seven years of the program, a total
of $118 million has been committed to 2,660 rural health care providers. The
primary use of the funding is to provide reduced rates for telecommunications and
Internet services necessary for the provision of health care.49
The Telecommunications Development Fund. Section 714 of the 1996 Act
created the Telecommunications Development Fund (TDF). The TDF is a private,
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.50 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 December
48 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.
49 or additional information on this program including funding commitments see the RHCD
website: [http://www.rhc.universalservice.org]
50 The TDF also provides management and technical assistance to the companies in which
it invests.

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CRS-12
31, 2004, the TDF had $50 million under management of which $14million is
committed to thirteen portfolio companies.51

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.
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
51 For additional information on this program see the TDF website at
[http://www.tdfund.com]

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CRS-13
(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-
171.52 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
loans, and $80 million for loan guarantees.53 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
52 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees,”
Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4684-4692.
53 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees
Program,” Federal Register, Vol. 68, No. 20, January 30, 2003, pp. 4753-4755.

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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.54
The Administration’s FY2005 budget proposal requested $9.9 million in
discretionary authority, which would support about $331 million in loan levels
(includes direct treasury rate loans, direct 4% loans, and guaranteed loans). The
mandatory funding provided by the Farm Bill for 2004 and 2005, a total of $40
million, would be rescinded. The FY2005 House Agriculture Appropriations bill,
passed by the House on July 13, 2004 (H.R. 4766; H.Rept. 108-584), provides $9.9
million (representing approximately $464 million in lending authority) for the cost
of broadband treasury rate loans. The FY2005 Senate Agriculture Appropriations bill
(S. 2803; S.Rept. 108-340) approved by the Senate Appropriations Committee on
September 14, 2004, provides $12.78 million for the cost of broadband treasury rate
loans (representing $600 million in lending authority). The FY2005 Consolidated
Appropriations Act (P.L. 108-447) provides $11.715 million for the cost of
broadband loans, representing $550 million in lending authority. On March 4, 2005,
RUS announced the availability of $2.157 billion, consisting of $2.032 billion in
direct cost-of-money loans, $46 million for direct 4 percent loans, and $79 billion for
loan guarantees.55
The Administration’s FY2006 budget proposal requests $10 million in
discretionary authority, which would support about $359 million in loan levels
(includes direct treasury rate loans, direct 4% loans, and guaranteed loans). The
budget proposal would cancel mandatory funding for FY2006 ($10 million) as well
as cancelling unobligated carryover balances from FY2004 and FY2005. The
FY2006 House Agriculture Appropriations bill, passed by the House on June 8, 2005
(H.R. 2744; H.Rept. 109-102), would provide $9.973 million (representing
approximately $464 million in lending authority) for the cost of broadband treasury
rate loans. On June 23, 2005, the Senate Appropriations Committee approved an
appropriation of $11.825 million for broadband loans, which would support $550
54 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees
Program,” Federal Register, Vol. 69, No.60, March 29, 2004, pp. 16231-16232.
55 Rural Utilities Service, USDA, “Rural Broadband Access Loans and Loan Guarantees
Program,” Federal Register, Vol. 70, No.42, March 4, 2005, pp. 10595-10596.

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CRS-15
million in lending authority. Report language (S.Rept. 109-92) directs the RUS “to
reduce the burdensome application process and make the program requirements more
reasonable, particularly in regard to cash-on-hand requirements.” S.Rept. 109-92
also directs USDA to hire more full-time employees to remedy delays in application
processing times.
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,
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. On July 28, 2004, the Secretary of
Agriculture announced the availability of FY2004 funds for broadband grants. The
application period closed on September 13, 2004. Awards were announced on
October 29, 2004.
The Administration’s FY2005 budget proposal requested no funding for
broadband grants. The FY2005 House Agriculture Appropriations bill, passed by the
House on July 13, 2004 (H.R. 4766; H.Rept. 108-584), provides $9 million for
broadband grants. The FY2005 Senate Agriculture Appropriations bill (S. 2803;
S.Rept. 108-340) also provides $9 million for broadband grants. The FY2005
Consolidated Appropriations Act ( P.L. 108-447) provides $9 million for broadband
grants.
The Administration’s FY2006 budget proposal requests no funding for
broadband grants. The FY2006 House Agriculture Appropriations bill, passed by
the House on June 8, 2005 (H.R. 2744; H.Rept. 109-102), would provide $9 million
for broadband grants. On June 23, 2005, the Senate Appropriations Committee
approved an appropriation of $10 million for broadband grants.
Legislation in the 108th Congress
In the 108th Congress, legislation was introduced to provide financial assistance
to encourage broadband deployment (including loans, grants, and tax incentives), and
to allocate additional spectrum for use by wireless broadband applications. The
FY2005 Consolidated Appropriations Act (P.L. 108-447) provides continued funding
in FY2005 for the Rural Broadband Access Loan and Loan Guarantee Program and
the Community Connect Broadband Grants in the Rural Utilities Service (RUS) of
the U.S. Department of Agriculture. Also passed in the 108th Congress was the
Commercial Spectrum Enhancement Act (Title II of P.L. 108-494, signed by the

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President on December 23, 2004), which seeks to make more spectrum available for
wireless broadband and other services by facilitating the reallocation of spectrum
from government to commercial users.
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. 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 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. The following is a complete listing of bills.

H.R. 138 (McHugh)
Rural America Digital Accessibility Act. Provides for grants, loans, research,
and tax credits to promote broadband deployment in underserved rural areas.
Introduced January 7, 2003; referred to Committee on Energy and Commerce,
Committee on Ways and Means, and Committee on Science.
H.R. 340 (Issa)
Jumpstart Broadband Act. Requires the FCC to allocate additional spectrum for
unlicensed use by wireless broadband devices. Introduced January 27, 2003; referred
to Committee on Energy and Commerce.
H.R. 363 (Honda)
Jumpstart Broadband Act. Requires the FCC to allocate additional spectrum for
unlicensed use by wireless broadband devices. Introduced January 27, 2003; referred
to Committee on Energy and Commerce.
H.R. 768 (English)
Amends the Internal Revenue Code of 1986 to provide a broadband Internet
access tax credit. Provides tax credits for five years to companies investing in
broadband equipment. Provides a 10% tax credit for “current generation” broadband
service (defined as download speeds of at least 1 million bits per second) for rural
and low-income areas (both residential and business subscribers), and a 20% tax
credit for “next generation” broadband service (defined as download speeds of at
least 22 million bits per second) for all residential subscribers and business
subscribers in rural and underserved areas. Introduced February 13, 2003; referred
to Committee on Ways and Means.
H.R. 769 (English)
Amends the Internal Revenue Code of 1986 to allow the expensing of
broadband Internet access expenditures. Introduced February 13, 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.

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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.
H.R. 4699 (McHugh)
Establishes a grant program to support broadband-based economic development
efforts. Introduced June 24, 2004; referred to Committee on Transportation and
Infrastructure and to Committee on Financial Services.
H.R. 5419 (Upton)
Commercial Spectrum Enhancement Act. Facilitates the relocation of spectrum from
governmental to commercial users. Introduced November 20, 2004; referred to
Committee on Energy and Commerce. Passed House November 20, 2004. Passed
Senate December 8, 2004. P.L. 108-494 signed by President December 23, 2004.
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 the Senate, May 11, 2004,
as a substitute amendment to H.R. 4520. Senate Conferees appointed July 15, 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.
S. 2577 (Clinton)
Broadband Rural Research Investment Act of 2004. Authorizes $25 million for
the National Science Foundation to fund research on broadband services in rural and
other remote areas. Introduced June 24, 2004; referred to Committee on Commerce,
Science, and Transportation.
S. 2578 (Clinton)
Broadband Expansion Grant Initiative of 2004. 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 June 24, 2004; referred to Committee on
Commerce, Science, and Transportation.
S. 2580 (Clinton)
Technology Bond Initiative of 2004. Provides an income tax credit to holders
of bonds financing the deployment of broadband technologies. Introduced June 24,
2004; referred to Committee on Finance.
S. 2582 (Clinton)
Establishes a grant program to support broadband-based economic development
efforts. Introduced June 24, 2004; referred to Committee on Environment and Public
Works.
Legislation in the 109th Congress
Many of the legislative proposals related to providing financial assistance for
broadband deployment have been reintroduced into the 109th Congress. A complete
listing of bills is provided below.
H.R. 3 (Young, Don)/P.L. 109-59
Transportation Equity Act: A Legacy for Users. Directs the Secretary of
Transportation to conduct a study on the feasibility of installing fiber optic cabling
and wireless communications infrastructure along rural interstate highway corridors;
such study will identify rural broadband access points. Introduced February 9, 2005;
referred to Committee on Transportation and Infrastructure. Passed House on March
10, 2005. Passed Senate on May 17, 2005. Signed into law by President on August
10, 2005.

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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.
H.R. 1479 (Udall)
Rural Access to Broadband Service Act. Establishes a Rural Broadband Office
within the Department of Commerce which would coordinate federal government
resources with respect to expansion of broadband services in rural areas. Directs the
National Science Foundation to conduct research in enhancing rural broadband.
Expresses the Sense of Congress that the broadband loan program in the Rural
Utilities Service should be fully funded. Provides for the expensing of broadband
Internet access expenditures for rural communities. Introduced April 5, 2005;
referred to Committees on Science and on Energy and Commerce.
H.R. 3517 (Andrews)
Greater Access to E-Governance Act (GATE Act). Establishes a grant program in 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 July
28, 2005; referred to Committee on Energy and Commerce.
S. 14 (Stabenow)
Fair Wage, Competition, and Investment Act of 2005. Allows the expensing of
broadband Internet access expenditures. Introduced January 24, 2005; referred to
Committee on Finance.
S. 497 (Salazar)
Broadband Rural Revitalization Act of 2005. Establishes a Rural Broadband
Office within the Department of Commerce which would coordinate federal
government resources with respect to expansion of broadband services in rural areas.
Expresses the Sense of Congress that the broadband loan program in the Rural
Utilities Service should be fully funded. Provides for the expensing of broadband
Internet access expenditures for rural communities. Introduced March 2, 2005;
referred to Committee on Finance.
S. 502 (Coleman)
Rural Renaissance Act. Creates a Rural Renaissance Corporation which would
fund qualified projects including projects to expand broadband technology in rural
areas. Introduced March 3, 2005; referred to Committee on Finance.

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S. 1147 (Rockefeller)
Amends the Internal Revenue Code of 1986 to provide for the expensing of
broadband Internet access expenditures. Introduced May 26, 2005; referred to
Committee on Finance.
S. 1583 (Smith)
Universal Service for the 21st Century Act. Amends the Communications Act
of 1934 to expand the contribution base for universal service and to establish a
separate account – not to exceed $500 million per year – within the universal service
fund to support the deployment of broadband service in unserved areas of the United
States. Introduced July 29, 2005; referred to Committee on Commerce, Science and
Transportation.
Policy Issues
Legislation introduced into the 109th 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) four
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 Fourth Report, the FCC sought comments on specific
proposals to improve the FCC Form 477 data gathering program.56 On November
9, 2004, the FCC voted to expand its data collection program by requiring reports
from all facilities based carriers regardless of size in order to better track rural and
underserved markets, by requiring broadband providers to provide more information
on the speed and nature of their service, and by establishing broadband-over-power
line as a separate category in order to track its development and deployment. The
FCC Form 477 data gathering program is extended for five years beyond its March
2005 expiration date.57
56 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.
57 FCC News Release, FCC Improves Data Collection to Monitor Nationwide Broadband
Rollout, November 9, 2004. Available at
(continued...)

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Is Federal Assistance for Broadband Deployment Premature or
Inappropriate? Related to the data issue is the argument that government
intervention in the broadband marketplace would be premature or inappropriate.
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.58
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.59
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?60 And finally, how might any federal
assistance programs best compliment existing “digital divide” initiatives by the
states, localities, and private sector?
57 (...continued)
[http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-254115A1.pdf]
58 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].
59 See for example: Cooper, Mark, Consumer Federation of America and Consumers Union,
Expanding the Digital Divide & Falling Behind on Broadband, October 2004, 33 pages.
Available at [http://www.consumersunion.org/pub/ddnewbook.pdf]
60 See CRS Issue Brief IB10045 for a detailed discussion of regulatory issues.

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CRS-22
Table 1. Selected Federal Domestic Assistance Programs Related to Telecommunications Development
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
Public
National
Assists in planning, acquisition,
$19.9 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
Grants for Public
Economic
Provides grants to economically
$164.4 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

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CRS-23
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
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,
$248 million
expansion, construction,
(cost of money
acquisition, and operation of
loans);
telephone lines, facilities, or
$125 million
systems to furnish and improve
(FFB Treasury
telecommunications service in
loans)
rural areas
Rural Telephone
Rural Utilities Service,
Provides supplemental financing
$175 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
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
Distance Learning
Rural Utilities Service,
Provides seed money for loans
$25 million
[http://www.usda.gov/rus/telecom/dlt/dlt.htm]
and Telemedicine
U.S. Dept. of
and grants to rural community
(grants)
Loans and Grants
Agriculture
facilities (e.g., schools, libraries,
$50 million
hospitals) for advanced
(loans)
telecommunications systems that
can provide health care and
educational benefits to rural areas
Rural Broadband
Rural Utilities Service,
Provides loan and loan
$2032 million
[http://www.usda.gov/rus/telecom/broadband.htm]
Access Loan and
U.S. Dept. of
guarantees for facilities and
(cost of money
Loan Guarantee
Agriculture
equipment providing broadband
loan)
Program
service in rural communities
46 million
(4% loan)
79 million
(loan
guarantee)

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CRS-25
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
Community Connect
Rural Utilities Service,
Provides grants to applicants
$17.9 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
$4.7 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
Education
Office of Elementary
Grants to State Education
$692 million
[http://www.ed.gov/Technology/TLCF/index.html]
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
$20.8 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

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CRS-26
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
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
Special Education –
Office of Special
Supports development and
$38.8 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
Telehealth Network
Health Resources and
Grants to develop sustainable
$3.75 million
[http://telehealth.hrsa.gov/grants.htm]
Grants
Services
telehealth programs and networks
Administration,
in rural and frontier areas, and in
Department of Health
medically unserved areas and
and Human Services
populations.

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CRS-27
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
Medical Library
National Library of
Provides funds to train
$66.6 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
Homeland Security
Dept. of Homeland
To foster and identify novel uses
$24 million
[http://www.dhs.gov/dhspublic/interapp/editorial/edit
Information
Security
of existing "state-of-the-market"
orial_0454.xml]
Technology and
information technology that will
Evaluation Program
remove barriers and improve
information sharing and
integration of State and local
public safety interoperability
communications.

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CRS-28
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
State Library
Office of Library
Grants to state library
$160.7 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 and
Office of Library
Supports library services
$3.4 million
[http://www.imls.gov/grants/library/lib_nat.asp]
Native Hawaiian
Services, Institute of
including electronically linking
Library Services
Museum and Library
libraries to networks
Services, National
Foundation on the Arts
and the Humanities
Appalachian Area
Appalachian Regional
Provides project grants for
$67 million
[http://www.arc.gov/index.do?nodeId=21]
Development
Commission
Appalachian communities to
support the physical
infrastructure necessary for
economic development and
improved quality of life.

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CRS-29
Web Links for More Information
FY2005
[http://12.46.245.173/cfda/cfda.html]: Go to “All
Program
Agency
Description
(obligations)
Programs Listed Numerically” and search by
program
Denali Commission
Denali Commission
Provides grants through a federal
$120 million
[http://www.denali.gov]
Program
and state partnership designed to
provide critical infrastructure and
utilities throughout Alaska,
particularly in distressed
communities
Prepared by CRS based on information from the Catalog of Federal Domestic Assistance, updated September 2005

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