The Alliance for Public Technology (APT)2 appreciates the opportunity extended to us to participate in this initial hearing of the Federal-State Joint Conference on Advanced Services, which is to be followed by six regional field hearings. We take some pride in being the lead organization to have advanced the need for a Federal-State vehicle to breathe life into the ubiquity commitment of Section 706 to " deploy advanced telecommunications capability to all Americans." We also feel privileged to have been able to work closely with the leadership of NARUC and the Commission in helping to shape the structure and mission of the Joint Conference on Advanced Services. This initial hearing gives us an opportunity to reflect on some of the critical issues and challenges that provide the backdrop for the scheduled field hearings.

In his recent article in the Federal Communication Law Journal entitled "Strategies to Promote Advanced Telecommunications Capability,"3 NARUC President Bob Rowe has made a substantial contribution to the work of the Joint Conference in proclaiming Section 706 "A Call for Action, Not an Invitation for Argument." We are pleased that in outlining the scope of the challenges confronting the Joint Conference, he specifically referenced APT's Section 706 filing4 in early 1998, in which we called for joint federal-state action concerning section 706. In that filing -- in the context of specific recommendations to remove regulatory barriers to facilities-based infrastructure investments in broadband capacity -- we advanced pro-active policy suggestions requiring federal-state collaboration: (a) to encourage the development of social compacts in connection with price cap regulation and the approval of mergers and acquisitions; and (b) to advance community-based partnerships as drivers of competitive investments in infrastructure and life-enhancing applications of the advanced technologies that empower underserved communities as they expand the "effective demand base" for sustainable market building.

More specifically, the focus of my opening remarks is on a recommendation in Part III of our 706 filing5 that perhaps was a little ahead of its time in urging the FCC to get a sharper focus on how the creativity and innovative capacity of the marketplace might be extended to communities marginalized by the very operation of market forces. In urging the Joint Conference to take another look at that section, a brief reference to some relevant text may be helpful:

"APT firmly believes that even as the Commission develops a regulatory scheme that promotes infrastructure investments in accordance with Section 706, "reasonable and timely" deployment of advanced telecommunications capability prescribed in the Act will not occur unless telecommunications companies and service providers perceive that sufficient demand exists. The Commission, therefore, must take decisive and creative steps to ensure that its policies support the development of community-driven mechanisms, especially partnerships of community-based organizations ("CBOs") with competitive providers. These partnerships should focus on applications development and deployment addressing "life's needs" -- in particular applications that help to raise income levels of marginalized communities.

We believe this nurturing of community-based partnerships and other mechanisms should take the form of a federal-state framework for policy implementation that recognizes the essential role communities play in making the telecommunications marketplace work for everyone. In keeping with the concept of devolving policy implementation, the central purpose of such a framework is to bring additional resources to urban and rural municipalities and regional bodies, which feel compelled by the competitive environment to develop telecommunications policies of their own (within the limits of their authority).

[We urge the establishment of] a federal/state policy framework to encourage, facilitate, and support community/provider partnerships and related market-oriented processes which are designed to (a) aggregate effective demand for community-based applications and information technologies, and (b) build a strong "demand pull" base for advanced infrastructure investments to the home."6

I think it is important to remind ourselves that we have embraced the marketplace as the main driver in the deployment of advanced telecommunications and information technologies because of its unmatched capacity for creativity and innovation. Unfortunately, there are few indeed who would accuse the marketplace of having a penchant for egalitarian distribution of all that creativity and innovation. In fact, the Joint Conference, in it regional meetings, should give special attention to overcoming the resistance of market forces to unlocking the creative and innovative capacity of marginalized communities to use the advanced technologies to advance their conditions of life and labor. In this connection, given time constraints, I can only list of few of the challenges that need to be addressed.

1. Realistically explore both the potential and limitations of relying on explicit funding mechanisms for universal service under Section 254 to achieve the goals of Section 706. The vision of universal service under the Act is evolutionary, expanding its definition, as advanced usage becomes dominant. A number of states are pushing in this direction to overcome the digital divide, as Internet usage becomes more pervasive. However, in dealing with the e-rate to expand universal service beyond plain old telephone service or "POTS", we know that explicit funding mechanisms are an invitation to political and competitive gamesmanship, as well as a public policy vehicle to overcome market failures. In short, explicit funding of an evolutionary concept of universal service under Section 254 and the collateral action of states are no match for the creative capacity of the marketplace to leave major sectors of our society in the dust of the digital age. The focus of the commitment of 706 is to make the marketplace work for everyone on an explicit funding base for "universal service" that can be pushed to the limits of political and competitive reality.
2. In many respects (and I say this as a former state regulator myself), we have unleashed the creativity and innovation of the marketplace and dumped the problems of how all that creativity and innovation plays out on our communities, urban and rural. The field hearings should seek to uncover how communities are wrestling with the problems of achieving ubiquity in both infrastructure deployment and applications development where federal and state policies leave them in the lurch. The competition to roll out high capacity bandwidth-whether upgraded cable or telephone networks, either fiber or wireless-all require some consenting authority of local governmental agencies while prohibiting them from frustrating the operation of competitive policies of higher authority. The Joint Conference should explore how urban and rural communities are requiring competitors to support the development and implementation of even-handed policies, for example, to build an infrastructure base among community-based organizations for innovative development and testing of applications that address the priority needs of underserved communities while advancing skills development for employment in the explosive knowledge industry. What are the options for long term commitments of competitors to work in partnership with communities to develop market empowering options to philanthropy dependence?
3. Given the highly skewed distribution of income and wealth in the nation, we appear to be entering a golden age of philanthropy. The Joint Conference should give serious consideration to how both corporate-based and foundation-based philanthropy are being used as an alternative to, or support for, market oriented approaches to bridging the digital divide. President Clinton's active involvement in bridging the divide has brought new hope and encouragement to community technology centers and other community-based organizations and institutions engaged in advancing technology literacy and diffusing the use of digital age technologies as tools of individual and community empowerment. At the same time, the growing focus on the digital divide is fostering some philanthropy-based niche marketing of existing content by making "in kind" donations to community-based organizations, potentially increasing their nurturing capacity to advance technology literacy. Highly creative philanthropy is not to be frowned upon, but its needs to be viewed as an alternative to other uses of philanthropy that are made available as social capital.
4. Philanthropy that is a band-aid for market failures is being viewed with increasing concern by community-based technology centers and non-profits. Good-will corporate grants that leave their mark on a technology facility or program for segmented marketing of a given line of products and services are welcomed, but the Joint Conference should look into how those grants are linked to developing markets for the use of the advanced technologies which have a value-base in the community. Market solutions for bridging the digital divide cannot be developed without addressing applications of the advanced technologies that have value to those on the wrong side of the digital divide.
5. It is in this connection that the Joint Conference might make its most valuable contributions to uncovering some "best practices". The Joint Conference should search for answers to why competitors in the digital age of broadband capability are not pouring R&D funds into product development and marketing of innovative products and services that are crafted to the needs and cultures of marginalized communities. Community technology centers and other community-based organizations have demonstrated beyond doubt the enabling and life-enhancing character of the digital age technologies to develop employable skills, advance educational opportunities, improve health care delivery, open up new options for people with disability, etc. More funds are to be made available for these purposes as in the case of technology diffusion funds negotiated in connection with mergers approved by state regulators. The President is calling for a vast increase in community technology centers. Yet there appears to be reluctance on the part of competitors to invest directly in market development that builds on the experience of the technology diffusion centers. The Joint Conference needs to know why market development in marginalized communities is languishing.
6. APT has no magic bullets to advance. However, it does not take an award-winning economist to know that competitive investments require a reasonable return on capital, measured against alternative investment options. Understandably, competitors are reluctant to invest R&D funds where market demand needs to be nurtured before they can be plucked and alternative market development opportunities are readily exploitable at a high return. Wall Street has no patience with companies that ignore opportunity costs. Their stock goes in the pit. To simply wail about the way market R&D investments are allocated, however, is to ignore how the marketplace actually works. Social values cannot be imposed on a market place that eschews such values-on market theory that has nothing to say about the distribution of income and that assumes income distribution in the society at any given time is optimal. Given this reality, APT urges the Joint Conference to explore how community technology centers are beginning to "network"- and how these centers, as they are expanded, are examining infrastructure linkages so that they may function as integrated community-based domains on the web for developing, beta testing, and marketing of innovative products and services crafted to the needs, priorities, and cultures of marginalized communities. It may feel good at times to criticize the marketplace for its failures, but community groups are beginning to look at how they can organize themselves to make it cost-effective for R&D investments to become the source of empowerment in bridging the digital divide. We urge the Joint Conference to look for these development so that "best practices" may be encouraged and replicated by pro-active policies.

There are many avenues to bridging the digital divide. The above exploratory suggestions barely scratch the surface of the innovative approaches to achieving the ubiquity objectives of Section 706. Much is waiting on the discovery of the Joint Conference. APT wants to be helpful so that your field hearings, in the words of Commissioner Rowe, result in a "call for action."

3Bob Rowe, "Strategies to Promote Advanced Telecommunications Capabilities," Federal Communications Law Journal, Vol. 52, February 2000, p. 383.

4Petition 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, (February 18, 1998).

5Ibid at 28.

6Ibid at 35-38.