Below, the Alliance for Public Technology (APT) responds to issues and observations raised by some of the more than 80 commenters that have participated thus far in the above-captioned inquiry. The number and diversity of these comments from present and potential advanced service providers and consumers clearly demonstrate the significance of this proceeding. Despite the varying views, commenters invariably, emphasized the importance of the Commission’s obligation under Section 706 of the Telecommunications Act of 1996 (the 1996 Act) to encourage the "reasonable and timely" deployment of "advanced telecommunications capability to all Americans."

APT is a non-profit consumer interest organization that has long championed this principle of "advanced universal service" embodied in Section 706. The Alliance’s organizational and individual members seek affordable, equitable access to advanced telecommunications networks and services to help improve the quality of life for the senior citizens, rural and inner city residents, people with disabilities, low income families, small business owners, and minorities whose interests they represent. Even before passage of the 1996 Act, APT envisioned the regulatory framework it believed necessary to support development of a broadband telecommunications platform capable of providing every home with access to multiple channels of switched interactive voice, data and video communications. The framework that APT advocated would:

• assure universal service for two-way interactive video services
• assure interoperability of public and private networks
• safeguard privacy and intellectual property
• encourage planning for security and reliability1
• promote fair competition
• promote affordable services
• break out of the current regulatory approach that distinguishes among providers of old technologies
• establish guidelines for levels or performance and reliability

Although now more than five years old, APT’s suggested regulatory framework remains pertinent to the Commission’s present evaluation of its rules’ impact on advanced telecommunications deployment to all Americans. Indeed, in the Notice of Inquiry released in this docket on August 7, 1998 (NOI), the Commission solicits views on a variety of issues, including some that were among APT’s early concerns.2 In these reply comments, APT broadly addresses some of these issues and the various comments on its proactive recommendations for promoting ubiquitous telecommunications infrastructure investment. APT also renews its endorsement of Chairman Kennard’s proposal to convene field hearings to supplement the record in this examination of the progress of advanced telecommunications deployment throughout the nation.3

The Commission readily acknowledges that its currently regulatory scheme results in "uneven" treatment of technologies because it maintains "separate regimes for wireline, wireless, local and long distance, telecommunications, broadcast and cable television, and so on." Because packet switching and digitization may "one day lead these industries to compete with each other" the Commission observes that "[a]t some point, it may distort the performance of the market to have separate regimes of regulation for competitors in a converging market."4

APT agrees with commenters who contend that competition between cable modems and asymmetric supscriber line (ADSL) is beginning to erode the "last mile" bottleneck to consumers’ homes.5 Investment analysts have reached a similar conclusion.6 In addition, wireless carriers, satellite companies, and utility companies are all developing alternative broadband technologies that will offer consumers a greater choice of providers.7

Technological convergence thus ameliorates the necessity of disparate regulation as more high-speed, broadband competitors emerge. ILECs, which have the potential to accelerate mass market deployment of advanced services, are unable to do so because they remain supject to regulation aimed at curtailing their exercise of monopoly power of the public switched telephone networks. In the developing market for advanced telecommunications, providers have not yet established dominance justifying the heavy regulation of the past. Bell Atlantic complains that such regulation, which cannot keep pace with rapidly changing technology, eventually rendered videodialtone irrelevant, slowed its ISDN deployment and now threatens to delay its plans to roll out ADSL.8 Similarly, US WEST asserts that the high cost of regulation has forced it to limit high bandwith deployment to the 43 largest cities in its service area, although the location of existing facilities, its experience and mass market focus would otherwise permit it to serve markets "not readily served by others."9

NTCA has stated unequivocally that "stable and predictable ‘hands-off’ regulatory policies" contributed to the cable industry’s rapid broadband deployment.10 The association warned that imposing "unbundling and resale obligations on cable operators for the benefit of entities that chose not to construct their own networks would turn Section 706 on its head by suppressing cable’s incentives to invest in new broadband technology. Congress and the Commission have historically limited the application of such obligations to ‘dominant’ common carriers with market power."11 Although AT&T supports the existing disparate treatment of broadband providers from different industries, it also points out that the "hands off" regulatory approach to Internet service providers (ISPs) and commercial mobile radio services (CMRS) produced flourishing markets.12

With facilities-based competition between wireline telephone and cable companies developing and a variety of other providers poised to offer broadband capability, APT and other commenters urge the Commission to "level the laying field" by eliminating the distorting effects of outmoded regulation. As various commenters point out, Section 706’s mandate that the FCC "remove barriers to infrastructure investment" requires that it facilitate participation by all possible broadband providers.13 Persistent "uneven" regulatory treatment that deters investment by important segments of the telecommunications industry contravenes the provision’s technological neutrality and jeopardizes the ubiquitous broadband deployment that Congress intends. Indeed the possibility that the Commission might consider extending to the cable industry the unbundling and resale requirements now applicable to ILECs, caused NTCA to admonish against such a course.

APT is pleased that the Commission recognizes the inevitability of converging technologies and the potential of its industry-specific regulatory models to disrupt market performance.14 Therefore, to mitigate against this adverse impact and to promote the facilities-based competition that will benefit all consumers, APT asks the Commission to reexamine its previous recommendations that the Commission not apply Section 251 (c)’s requirements to ILECs’ advanced data networks in the first instance or, alternatively, establish a sunset period for them and phase out the UNE/TELRIC regime over a reasonable time period.15

Recognizing that the Commission must work with Congress to help reconcile various aspects of its various regulatory regimes, APT recommends that the Commission implement as quickly as possible, APT’s recommendations for methods affirmatively to promote investment in advanced telecommunications capability that is accessible, affordable and available to everyone in the nation.

Several commenters responded to Commission request for views on APT’s proactive proposals that the agency: 1) work with states to adjust the productivity factor in the respective federal and state price cap formulas to hasten infrastructure investment by ILECs through social contracts committing a portion of their efficiency savings to infrastructure deployment in underserved areas; 2) condition approval of telecommunications mergers on a requirement that the merged companies deploy infrastructure to residential and other less attractive markets; and 3) establish a federal-state policy framework that encourages community-based organizations and telecommunications providers to create partnerships in which the parties identify technology applications that address the life needs of marginalized communities and leverage the organizations’ aggregated demand to pull investment there. As the Commission pursues the deregulatory and procompetitive goals of the 1996 Act, APT believes that the Commission must adopt proactive policies like these to ensure that large segments of our society are not cast into the "digital divide" without access to advanced networks. The recommendations offer a market-oriented approach to the challenge of preserving advanced universal service in a competitive market.

A.Productivity Factor Adjustments to Stimulate Wider Deployment

Although MCI/WorldCom opposed decreasing ILECs’ productivity factor, claiming instead that regulators should increase it,16 two state commissions support price cap regulation as an incentive for infrastructure investment.17 In fact, the DC PSC specifically endorsed APT’s proposal to adjust the productivity factor as a way of stimulating investment in advanced telecommunications infrastructure for "the least connected populations."18 The Commission has already successfully promoted cable plant modernization through social contracts that give cable operators pricing flexibility for new unregulated services if they upgrade their networks. APT believes that price-capped ILECs will find productivity factor adjustments to be similarly attractive incentives for broadband deployment to areas they might otherwise bypass as they develop new advanced digital networks.

2. Condition Merger Approval on Commitments to Deploy Advanced Capability to Underserved Communities

Despite AT&T’s skepticism of the effectiveness of merger conditions to obtain enforceable commitments from merging parties,19 APT, the DC PSC, Plugged In and Information Renaissance suggest that the Commission condition its merger approval on the merged company’s use of a portion of the resulting "synergy savings" to achieve wider deployment of high capacity infrastructure.20 The Universal Service Alliance, which includes a number of non-profit groups and community leaders serving low income, disabled, elderly and rural residents throughout California, notes that the community partnership agreement resulting from the merger of Pacific Telesis Group and SBC Communications establishes a $50 million Technology Fund to advance universal service and to educate community residents about emerging telecommunications technologies.21 Although the partnership agreement between SBC and nine coalitions arose from mergers conditions imposed by the California Public Utility Commission, the Universal Service Alliance urges the Commission to consider similar measures. It also suggests that the Commission proscribe such conditions not only in transactions involving ILECs, but also in mergers of CLECs and IXCs.22 APT endorses this suggestion and asks that the Commission routinely include in its "public interest" analysis an examination of whether any proposed combination promotes the advanced universal service objective of Section 706.

C.Federal-State Policies to Encourage Partnerships that Nurture Community-

In seeking comments on this proposal, the Commission’s NOI asks whether "the great shortage envisioned by APT [is] likely to occur? Comments from representatives of cities and low-income consumers,23 rural communities,24 senior citizens and people with disabilities,25 all fear that their constituents will not obtain the life enhancing and empowering benefits of the sophisticated digital networks now under construction. These commenters understand the realities of competition and the probability that their communities will not gain access to the Information Superhighway unless the Commission and the states adopt policies that help them to work in partnership with telecommunications providers. With competitors seeking to maximize profits by marketing to large business customers and affluent residential consumers, the health care, distance education, job training, independent living and other social service needs of some of our most vulnerable citizens are going unmet. This is so despite the existence of high-speed, digital applications that might assist them if broadband networks were available to deliver those useful applications.

Plugged In in East Palo Alto, California and Information Renaissance in Pittsburgh, Pennsylvania provide wonderful examples of ways in which two communities have undertaken initiatives to meet the needs of its citizens. Both of these former Telecommunications Information Infrastructure Assistance Program (TIIAP) grantees endorse APT’s partnership recommendation and through their success demonstrate the effectiveness of demand aggregation for telecommunications services.

At Plugged In, low income residents obtain computer and Internet access through four programs including one for children after school, a webpage design business operated by teen entrepreneurs, a community technology center for adolescents and adults, and evening computer classes. Plugged In states that "[p]rograms like ours provide a place where demand for these technologies can be aggregated, where people can receive technical assistance, and where hand-on applications that will benefit people’s lives are made available to everyone."26 In addition, its partnership with SBC will enable the program to offer reasonably priced telecommunications services, showcase advanced technologies, including ADSL to inform residents of the ways such technologies can benefit them, while at the same time helping SBC to learn how to market its products effectively within the community. Similarly, a local cable operator, which offers modems to Palo Alto area residents, donates such access to Plugged In for the purpose of marketing this service to East Palo Alto’s low income consumers.27

As a coordinator for community groups and residents to help establish community Internet access points, Information Renaissance helps to promote the development of shared public infrastructure through the pooled demand of various public sector users. This demand attracts telecommunications providers to the region as the program builds the skills of residents who might not otherwise gain access to advanced technologies that can help them to improve their lives. This program’s partnership experience involves working with foundations, government and corporations to obtain funding and computer network hardware, and the collaborating with community groups for access sites and personnel to sustain the operations. Information Renaissance concludes that "incentives for the establishment of shared public networking infrastructure could greatly increase the scope of municipal partnerships involving schools, libraries, government agencies and community groups."28 It suggests the "institutional network" incentive model contained in many cable franchise agreements.29 In addition, the commenter offered sound recommendations for the composition and operation of the proposed federal/state joint "task force," including ensuring community participation through task force membership and public input.30

Communities across the nation are seeking ways to ensure that their citizens gain access to the digital networks that can provide opportunities for economic development, education, health care, independent living, telecommuting and many others prospects that are vital to community-building. APT and its supporters contend that by adopting policies supporting meaningful partnerships between all advanced services providers within a community and the community-based organizations located there, federal and state regulators can help the partners nurture sufficient, sustainable demand for broadband technology. Proponents of this recommendation are confident that the resulting aggregated demand of people empowered by life enhancing technology will pull infrastructure investment into communities at risk of further social and economic disintegration.

III.Section 706 and Universal Service

Section 254 (c) states specifically that "[u]niversal service is an evolving level of telecommunications services that the Commission shall establish periodically … taking into account advances in telecommunications and information services." The provision specifies criteria for Commission and Joint Board use in determining the services eligible for funding support to the extent that they are: essential to public health or safety; taken by a supstantial majority of residential consumers exercising market choice; available on telecommunications’ carriers public networks; and consistent with the public interest. As APT observed in its initial Petition, advanced capability deployment to all Americans under Section 706 provides the migratory path for meeting the criteria for universal service support.31 Accordingly, as critical education, public health and safety services delivered over public telecommunications networks become widely used by residential supscribers, their accepted importance in everyday life will necessitate that every citizen have access to them and the Commission and Joint Board will consider their eligibility for supsidy support. This support will help to ensure that the least fortunate in our society do not suffer irreparably from lack of access to a minimally acceptable level of telecommunications services, which becomes increasingly sophisticated as technological advances occur.

In preparing to undertake its review of universal service in 2001, APT renews its recommendation from the initial universal service proceeding that the Commission consider its obligations under Section 706 to encourage nationwide deployment of advanced networks.32 Former Common Carrier Bureau Chief Kathleen Wallman agrees, stating that

Finally, as the Commission implements Section 706 and considers action to "accelerate" broadband capability deployment to all Americans, APT urges the agency to adopt a flexible definition of "telecommunications services" under Section 255 to ensure that people with disabilities attain access to the advanced products and services that Congress promised to everyone. These technologies can significantly enhance education, job training, health care delivery, independent living and employment opportunities for everyone, but particularly for people with disabilities.34

The Commission has embarked on an historic course to determine the nation’s future telecommunications capability and the extent to which people of the nation will participate in the Information Age. The nation will realize the promise of this bright future only if each of us is connected is connected to all of us as Congress prescribes in Section 706. Accordingly, APT respectfully urges the Commission to implement the proposed recommendations as set forth most fully in the Alliance’s Petition.

Respectfully supmitted,

Maureen A. Lewis
General Counsel

Alliance for Public Technology
901 15th Street, N.W., Suite 230Washington, DC 20038-7146
(202)408-1403

October 9, 1998

Footnotes:

1 "Connecting Each to All: A Telecommunications Platform for the Information Age," Alliance for Public Technology, Washington, DC (1993) at 11.

2 See, e.g., NOI at paras. 3-5.

3 APT NOI Comments at 9.

4 NOI at para. 4.

5 See Bell Atlantic NOI Comments at 8-9; and National Cable Television Association (NTCA) NOI Comments at ii.

6 See "ADSL Has the Potential to Solve the Bandwidth Bottleneck and Add to Large LEC Income Growth," by Guy W. Woodlief and Michael D. Carruthers, Telecommunications Services Industry Report, Prudential Securities (August 27, 1998).

7 See NTCA NOI Comments at 17-19; Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) NOI Comments at 7-8.

8 Bell Atlantic NOI Comments at 10-11.

9 US WEST NOI Comments at 15.

10 NTCA NOI Comments at 2.

11 Id. at 25.

12 AT&T NOI Comments at 41.

13 See Petition of the Alliance for Public Technology Requesting Issuance of Notice of Inquiry and Notice of Proposed Rulemaking to Implement Section 706 of the 1996 Telecommunications Act, Docket No. 9244 (February 18, 1998) at 15-19; Kiesling Consulting LLC's NOI Comments at 2, 9; Cellular Telecommunications Industry Association (CTIA) NOI Comments at 4; Progress and Freedom Foundation NOI Comments at 52-54; and New York Department of Public Service (NY DPS) at 2. See also OPASTCO NOI Comments at 3.

14 NOI at para. 77.

15 APT Petition at 15-22.

16 Joint NOI Comments of MCI Communications Corporation and WorldCom Inc. at 25; but cf. Progress and Freedom Foundation NOI Comments at 47 contending that higher productivity factors are disincentives to ILEC broadband deployment.

17 District of Columbia Public Service Commission (DC PSC) NOI Comments at 8-9; NY DPS NOI Comments at 2.

18 DC PSC NOI Comments at 8-9.

19 AT&T NOI Comments at 34-35.

20 APT Petition at 33-34; APT NOI Comments at 5-6; DC PSC Comments at 9; Plugged In NOI Reply Comments at 2-3; and Information Renaissance NOI Comments at 13.

21 Universal Service Alliance NOI Comments at 7-8.

22 Id. at 12.

23 DC PSC NOI Comments at 3-7; Information Renaissance NOI Comments at 5; and Plugged In Reply Comments at 1, although its unique proximity to Silicon Valley made advanced infrastructure available that otherwise might not be.

24 American Library Association NOI Comments at 6-7; Rural Policy Research Institute NOI Comments at 2; National Telephone Cooperative Association NOI Comments at 5;

25 Universal Service Alliance NOI Comments at 3-6; Campaign for Telecommunications Access NOI Comments at 1.

26 Plugged In NOI Comment at 3.

27 Id. at 2.

28 Information Renaissance NOI Comments at 15.

29 Id. at 16.

30 Id.

31 APT Petition at 6-7.

32 Comments of the Alliance for Public Technology In the Matter of Federal-State Joint Board on Universal Service; CC Docket No. 96-45 (April 12, 1996) at 2-3.

33 The Telecommunications Act of 1996:Congress' New Vision for Universal Service for Rural America," by Kathleen Wallman, Organization for the Promotion and Advancement of Small Telecommunications Companies, Washington, DC (1998) at 19-20.

34 Reply Comments of the Alliance for Public Technology In the Matter of Implementation of Section 255 of the Telecommunications Act of 1996, WT Docket No. 96-198 (August 14, 1998).