Communities Initiatives. Economy Initiatives. Education Initiatives. Environment Initiatives. Family Initiatives. Foreign Policy Initiatives. Health Initiatives. Livability Initiatives. Reinvention Initiatives.
Technology Initiatives. Welfare Initiatives. This is historical material, "frozen in time. Universal Service The President and Vice President want to ensure that all Americans have access to the benefits of the information superhighway. It ruled that DBS service, like cable modem service, is an information service and therefore not subject to any of the access requirements in Title II of the Communications Act. It also adopted a non-binding policy statement consisting of four principles: consumers are entitled to access the lawful Internet content of their choice; consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; consumers are entitled to connect their choice of legal devices that do not harm the network; and, consumers are entitled to competition among network providers, application and service providers, and content providers.
Critics have challenged Mr. Powell's proposal—and, by extension, the FCC's August 5, , order and policy statement—on several grounds. They point to the many documented instances of usage restrictions placed on end users as proof that, left unregulated, market forces are not robust enough to ensure unrestricted access. They argue that the search for the killer application that might drive investment in both infrastructure and applications is more likely to be successful in a regulatory regime that fosters network neutrality than in a regime that allows the few broadband network providers to determine the direction of the network.
They argue that it is impossible to undo harm after it has occurred and that, in light of the identifiable reasons why network providers might have both the incentive and the ability to restrict access, it is dangerous to move forward based on non-mandatory principles that the network providers have not, in any case, endorsed.
Critics also claim that antitrust laws, which generically address monopoly behavior and anticompetitive practices, are inefficient vehicles for addressing the impediments to competition and innovation that are most common in communications markets.
These critics argue that there is abundant empirical evidence that there are greater opportunities for firms to erect barriers to entry in "network" markets than in traditional markets and that as a result relying primarily on ex post antitrust enforcement leaves consumers subject to unnecessary risk.
They also oppose elimination of the public interest standard. Currently, in most locations, the incumbent local exchange carrier "ILEC" and the local cable company are the only broadband network providers serving the mass market. Wireless including satellite carriers, cable overbuilders, or power companies may provide a relatively ubiquitous third broadband connection some time down the road, but in the next few years are likely to offer mass market customers a competitive option in scattered locations at most.
Nor have the ILECs demonstrated tangible plans to extend their broadband networks beyond their current service areas to compete head-on with other ILEC broadband providers. It appears that the competition that is developing between telephone and cable providers is taking the form of "triple play" offerings of voice, data, and video services. At present and in the near future, some telephone companies will bundle re-sold satellite video services with their voice and DSL services to compete with cable companies' triple play.
But the largest ILECs and even many small rural carriers have begun to upgrade their networks to have the bandwidth capacity to offer video services themselves.
A key will be to offer a broadband connection with sufficient bandwidth to accommodate whatever service becomes the killer application, or at least an important application. As explained earlier, these broadband networks actually consist of two parts: the last-mile local network privately owned and operated by the broadband network provider and the inter-network that is jointly operated by multiple Internet backbone providers.
Success for any broadband network provider will depend on the bandwidth, security, and service quality it can ensure over its local network. Although currently all ubiquitous broadband networks provide hard wires into the customer premise, the various network providers are each deploying unique network architectures. Most of the large cable companies have upgraded their coaxial cable networks and now are offering video, data, and voice services in many areas of the country, especially in urban areas.
Their cables into customers' premises often have sufficient bandwidth to "broadcast" to customers' premises hundreds of video channels for the customers to choose among and their set-top boxes allow customers to select video on demand, although the video choices available at any particular point in time may be limited. Currently deployed cable modem technology, however, requires clustered customers to share bandwidth capacity, so that connection speeds fall as more neighbors use the network.
This requires a truck roll to physically replace the copper with fiber. But that fiber has such high capacity that it is likely to allow Verizon to bring as much or more bandwidth to the home as cable systems, thus allowing Verizon to simultaneously "broadcast" a large number of video channels and offer video on demand.
At the customer premise, the viewer will use the remote control to the set-top box to choose the channel to be watched at any point in time, just as is done for cable service today. Also like cable, the signals for premium channels will be "broadcast" in coded form, and households that do not subscribe to particular premium channels will not be able to decode the signals. Verizon will use a particular wavelength on their fiber to implement QAM, a cable protocol used as a transport mechanism.
This architecture appears to be consistent with the definitions of "cable service" and "cable system" in Section of the Communications Act. Instead, to make sure there is sufficient bandwidth between the neighborhood node where the optical fiber terminates and the household premise, it will upgrade the DSL equipment currently at those nodes and in households with VDSL technology.
That signal will be sent over the same bandwidth used for data and VoIP service. Telephone wires currently enter the house and then the inside wiring goes to the various telephones.
But television sets may not be located near the telephones. It may be that only those homes within a couple of thousand feet of the neighborhood node will be able to be fully served. On the other hand, Verizon's choice of deploying optical fiber all the way to the home, which requires a very large investment in optical cable, labor-intensive truck rolls, and in some cases digging up of land to replace the copper with optical cable, will be far more expensive per household served and thus may be constrained both by limits on Verizon's capital budget and by customer resistance to digging up their yards to lay fiber.
Some observers have questioned whether Verizon's fiber to the home approach can prove out financially, even as they concede that the huge bandwidth provided could give it a leg up in the long run.
Fiber to the home technology does not incorporate line powering, so Verizon might have to provision the optical interface at its customers' premises with back-up batteries.
But even then, the batteries would probably last at most 8 to 16 hours, less time than might be needed in case of natural disruptions such as hurricanes. In both cases, customers might have to rely on wireless telephone service during time of electric power loss. The marketplace will determine which of these network strengths and weaknesses are most important to end users.
These architectural differences, in addition to creating competing platforms for triple play service, offer platform diversity to independent applications providers. Where the competing networks have distinct characteristics that better meet the needs of some sets of applications and are less effective for other sets of applications, applications providers are not constrained in their product development to the characteristics of a single platform.
Thus, competing distinct broadband networks fosters applications innovation. To the extent such advantage would artificially raise the relative costs or otherwise harm competing broadband network providers, or otherwise weaken them, then their ability to foster innovation by providing a unique alternative broadband platform could be undermined. Verizon has agreed that it is subject to franchise requirements, but argues that a streamlined statewide or nationwide franchising process is needed because the extremely time consuming process of negotiating literally thousands of individual franchise agreements could slow down its entry into video by years and could endanger its planned upgrade to a broadband network.
For example:. In the debate among proponents of the various approaches to regulation of broadband networks—structural requirements, ex ante non-discrimination rules, ex post adjudication of abuses, and reliance on antitrust law and non-binding principles—the only point of agreement is that end users would benefit, and the need for regulation might be reduced, if customers had more than two broadband networks to choose among. In almost all geographic markets today, however, the mass market broadband market structure is characterized by duopoly provision of broadband network services cable modem service from the local cable system or DSL service from the local telephone company , plus competition among independent applications service providers and the two vertically integrated broadband network providers for the provision of broadband applications services.
Most parties agree that the dynamics in both the network market and the applications market would likely change if there were three or more widely available broadband network options. For example, as discussed earlier, network providers face countervailing incentives. On one hand, due to indirect network externalities, they have the incentive to minimize restrictions on independent applications providers' access to their networks.
On the other hand, they sometimes have the incentive to restrict such access when to do so would yield them first-in advantages or other strategic advantages in the applications market or would aid in their ability to bolster profits through price discrimination.
Given the high sunk up-front costs and initially low scale economies, however, a new entrant is less likely to be able to provide strong price competition, even if its underlying cost structure when operating closer to capacity were lower than that of the incumbents. Also, if the new entrant can succeed in gaining end-user customers—and thus also independent applications provider customers—primarily because of its nomadic, portable, or mobile feature, it may have the same market incentives as any other network provider enjoying its middle position in a two-sided market.
Once the new entrant has acquired end-user customers, independent applications providers may have no choice but to interconnect with the new entrant's broadband network at terms, conditions, and rates over which they have little or no leverage, with possible harmful implications for competition in the applications market. Thus, it is not certain whether entry by a third network provider would eliminate the need for regulation.
Still, entry by a third broadband network provider could threaten the profits of incumbent wireline and cable broadband network providers to the extent they lose customers to the entrant and to the extent a third network reduces their negotiating strength vis-a-vis independent applications providers and end users.
The incumbent network providers might benefit, however, if such entry justified the easing of regulatory requirements. The incumbents have argued that regulation of their networks inevitably introduces inefficiencies, distortions, and unnecessary costs. If entry of a third broadband network created market forces that decreased both the perceived and the actual need for regulation of the broadband networks, and if such regulation did indeed impose those inefficiencies on network providers, then regulatory relief induced by competitive entry could benefit the incumbents.
There appears to be consensus that one objective of U. But any actions to foster deployment should not take the form of industrial policy favoring any specific wireless technology, since there are a variety of technologies that can offer broadband capability.
Nor should it provide wireless technology an artificial advantage over other broadband technologies. Wireless broadband can be provided using fixed or portable technologies such as Bluetooth or ultra-wide band for short-range communications, Wi-Fi for medium-range, and WiMAX for longer-range or by using mobile technologies such as those used for third-generation "3G" or forthcoming fourth-generation "4G" mobile cellular service.
Currently, Wi-Fi primarily provides wireless Internet access for laptop computers and personal digital assistants; WiMAX expands networks with wireless links to fixed locations; and 3G brings Internet capabilities to wireless mobile phones. The short and medium range technologies share unlicensed spectrum with other technologies.
Proponents of each of these technologies share the concern that there may be insufficient unfettered spectrum available for their technologies to be developed to full market potential though recent FCC actions have at least started the process for making such spectrum available. It is not yet clear whether these various wireless technologies ultimately will be competing for customers or complementing one another by providing a broader base and greater choice of devices for wireless communications and networking.
Wi-Fi, or wireless fidelity, is the most widely employed of the family of Institute of Electrical and Electronics Engineers "IEEE" standards for frequency use in the unlicensed 2. Those are the bands on which wireless local area networks operate. The FCC's Wireless Broadband Access Task Force and others have identified a variety of actions to foster Wi-Fi usage, including managing spectrum in a fashion that eliminates artificial restrictions on the availability of unlicensed spectrum, promoting voluntary frequency coordination efforts by private industry, considering increasing the power limits in certain bands available for use by unlicensed devices in order to improve their utility for license-exempt wireless Internet service providers.
WiMAX is an industry coalition of network and equipment suppliers that have agreed to develop interoperable broadband wireless based on IEEE standard It can transmit data up to 30 miles and may ultimately be used to provide the broadband "last mile" to end users, that is, a means to provide fixed and portable wireless services to locations that are not connected to networks by cable or high-speed wires.
WiMAX uses multiple frequencies around the world, an impediment to interoperability. It now appears that the successful bidders in the recent auction for the Advanced Wireless Service AWS Spectrum will use that spectrum to provide mobile wireless services rather than fixed and portable service using WiMAX. Another spectrum band that could be used for WiMAX is the 78 MHz of spectrum in the MHz band—18 MHz of which has already been auctioned off and the remaining 60 MHz of which will be auctioned off in as part of the transition of broadcast television from analog to digital technology.
Moreover, that spectrum is viewed as the equivalent of "Riviera beachfront property," that will be sought by multiple bidders, many of which would not intend to use it for WiMAX service.
Today's mobile wireless networks can only provide voice and limited data service. The next major advance in mobile technology, referred to as 3G, has been deployed overseas and is beginning to be introduced in the United States. It dramatically increases communications speed. Fourth generation networks, which may be available in the near future, are expected to deliver wireless connectivity at speeds up to 20 times faster than 3G.
Some U. Third generation and future developments in wireless technology will be able to support many services for business and consumer markets, such as: enhanced Internet links, digital television and radio broadcast reception, high-quality streaming video, and mobile commerce, including the ability to make payments.
The reallocation of spectrum to make more available for advanced wireless services is a specific example of a broader public policy objective: the management of spectrum in a fashion that promotes its efficient use to provide innovative services to Americans. There is a very lively debate about how best to manage the spectrum to maximize consumer welfare. There has been much criticism that legacy command-and-control regulation of spectrum—under which spectrum is assigned to specific uses and access to that spectrum for other uses is prohibited—does not take into account advances in technology that have created the potential for systems to use spectrum more intensively and to be much more tolerant of interference than in the past.
The debate about how best to allocate spectrum, however, is beyond the scope of this report. Some observers have suggested that a third network provider might have less incentive to provide strong price and service competition—to challenge the network access status quo—if it shared ownership or a strategic alliance with one of the incumbent networks. On the other hand, there appear to be strong incentives for any broadband wireless network provider, even if it were owned by a telephone company or in a marketing relationship with a cable company, to be an aggressive competitor.
First, wireless service is growing faster than wireline service, so it would not seem to be in a company's long term strategic interest to constrain its wireless activities to protect its wireline business. Second, the broadband wireless networks are likely to extend geographically beyond the geographic reach of any telephone company or cable company network and therefore wireless providers will in many instances not be competing against an affiliated network.
It would be difficult for a national wireless carrier to strategically provide two levels of competition: aggressive competition outside an affiliated network's region and passive within. Much of the criticism of the Act has focused on those provisions that attempted to facilitate the transition from monopoly to competitive provision of telecommunications services, most notably the provisions requiring the incumbent local exchange carriers to make elements of their networks available to new entrants under certain conditions.
Those provisions were intended to foster intramodal competition with the understanding that new entrants could not instantaneously build out ubiquitous networks like those of the incumbent monopolies.
Ten years after enactment of the Act, no intramodal entrant has been able to construct a ubiquitous network. It has not proven viable to replicate the local loop "last mile" connection between a network's switch and a customer's premise, except in the case of large business customers whose traffic volume is sufficient to justify deploying a large pipe to the premise. As a result, the competitive local exchange carriers' "CLECs" networks typically consist largely of fiber rings in business areas that connect directly to their major customers' locations.
Nor has it proven viable for the CLECs to fully replicate the RBOCs' transport networks, the connections between the nodes in their networks, through which aggregated traffic is routed. Rather, they continued to rely on the RBOCs for transport facilities on many routes. Competitive provision of broadband services to large business market customers therefore is most likely to be intramodal.
In approving those mergers, the Department of Justice and the FCC set a number of conditions intended to retain competitive options for enterprise and Internet customers, including the divestiture of some key facilities and ensuring CLECs and ISPs access to certain facilities or services at set rates for at least two years. It therefore might not be wise to simply replace the statutory provisions fostering intramodal competition with provisions fostering intermodal competition on the expectation that intermodal competition will always be effective.
Intramodal competition will remain important, especially for large business markets. But given the inability of facilities-based CLECs to attain the economies of scale needed to support ubiquitous transport networks, there might be reason to maintain some of the current statutory provisions intended to foster that competition.
The Act includes an "antitrust savings clause" stating that neither the act nor any amendments made by it "shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws. The Court found that "the act does not create new claims that go beyond the existing antitrust standards.
Congressional reaction to the Trinko decision was mixed. House Judiciary Committee Chairman Sensenbrenner stated concern that the decision not be "perceived as giving a green light to all manner of anticompetitive behavior by the Bells The Committee on the Judiciary It may be that, when Congress inserted the "antitrust savings" clause in the Act, many Members believed that the clause was preserving an unlimited private right of action on the part of other-than-directly affected parties to sue under the antitrust laws.
Given the Verizon decision, there are at least three congressional options that might have the effect of providing the breadth of private action some members of Congress apparently thought they had assured. First, Congress could amend the savings clause to clarify that the phrase, "the antitrust laws," means the literal words of the statutory provisions, but excludes any judicial interpretation of them.
Second, Congress could amend the "enforcement" provisions of the Act so that even if there had already been regulatory action, certain provisions of the act would remain enforceable by private individuals who are not competitors of local exchange carriers, but, rather, their customers or customers of would-be or actual competitors.
Third, Congress could characterize a violation of any or some mandatory, competitive obligation s of the act as prima facie evidence of violation of the antimonopoly provision of the antitrust laws 15 U.
Congress could also choose to allow the current law to remain unchanged. Since the value of access to a network or of a network service, such as a telecommunications service, increases as the number of other parties connected to the network increases, new entrants would have a very difficult time entering the market if they could not interconnect their networks with those of the incumbent carriers under nondiscriminatory terms and conditions.
Thus a key provision of the Act set obligations for incumbent carriers and new entrants to interconnect their networks with one another, imposing additional requirements on the incumbents because they might have the incentive and ability to restrict competitive entry by denying such interconnection or by setting terms, conditions, and rates that could determine the ability of the new entrants to compete.
With multiple networks interconnecting to provide service, a necessary component of a competitively neutral regulatory regime is nondiscriminatory intercarrier compensation—the payments that interconnected carriers make to one another when more than one carrier's network must be used to complete a call or other electronic communication.
But that system of intercarrier compensation was implemented on a piecemeal basis, as specific existing telecommunications services were opened to competitive provision or providers offering entirely new services such as wireless service were allowed to interconnect with the public switched telephone network. Today, these intercarrier compensation payments vary widely, depending on the following:. As shown in Figure 1 , a chart prepared by the Intercarrier Compensation Forum "ICF" , today the average intercarrier compensation rate ranges from 0.
Given the wide variation in intercarrier compensation rules applied to carriers and technologies that are now competing with one another, the FCC adopted a Further Notice of Proposed Rulemaking in February to review and reform its rules with the goal of constructing a unified intercarrier compensation regime.
In , the FCC opened a rulemaking proceeding and adopted a Notice of Proposed Rulemaking seeking information on how to develop a unified intercarrier compensation regime. At the same time, in some quarters there is resistance to comprehensive intercarrier compensation reform because of concerns that some carriers and some consumers may be harmed by the changes.
In this view:. The universal availability of basic telecommunications service at affordable rates has been a fundamental element of telecommunications policy in the United States since the enactment of the Communications Act in To achieve this, a universal service subsidy system has been employed to keep end user rates affordable for low-income households and for households and small businesses in high-cost areas and, since , to provide discounts to schools and libraries for telephone service, Internet access, and internal network wiring, and to public and non-profit rural health care providers for telecommunications services and installations and for long distance Internet connections.
This policy goal can be fully compatible with the development of a competitive market for telecommunications services, including the last mile into customers' premises, so long as the universal service funding mechanism is constructed in a competitively neutral and efficient fashion. That cannot be accomplished if any of the universal service subsidy is hidden in above-cost rates for certain services that are intended to subsidize the below cost rates for other services.
In that situation, a competitor could successfully enter the market by undercutting the above-cost prices for those services whose rates are raised to include implicit subsidies, but could not compete in the provision of those services whose rates are set below cost. The policy goal also cannot be achieved if the universal service subsidy is not available on the same basis to all competitors in the market.
This is especially important today, with competing wireline, cable, mobile wireless, and fixed wireless technologies all potentially able to offer service to rural customers. In addition, if the universal service funding mechanism is not efficient—and therefore requires more resources than is necessary to provide universal availability—it will place an unnecessary burden on telecommunications markets or on the general public, if supported by general tax revenues. The Act took a major step in the direction of reconciling universal service with competitive markets by requiring that "[a]ny such support should be explicit and sufficient to achieve the purposes Although competitive market forces have driven some above-cost rates down toward cost, especially for business services, and an explicit Federal Universal Service Fund "FUSF" funding mechanism has been created that provides a significant portion of total universal service subsidies, many rates continue to be set above cost in order to include hidden universal service subsidies for example, the intrastate access charges of many rural telephone carriers discussed earlier in the section on intercarrier compensation.
One of those principles is: "Access to advanced telecommunications and information services should be provided in all regions of the Nation. To date, the Joint Board and the FCC have not included advanced services in the definition of universal service. But there has been considerable national discussion of the role of broadband networks in stimulating economic development and some Members of Congress believe the time is ripe to debate the inclusion of access to a broadband network in universal service.
If Congress wants to expand the scope of universal service to include universal access to a broadband network at affordable rates, it must address a number of issues. Most basically, how "broad" is the "broadband" that should be provided as part of universal service?
Bigger may be better, but only at an associated cost. As explained earlier, one of the primary drivers of broadband deployment has been network providers' desire to bring sufficient bandwidth to customer premises to support the triple play of voice, data, and subscription video services.
Of these three applications, video is the one that requires the most bandwidth, but it also is the one that has the least nexus to public safety or economic development.
Thus, it may be difficult to establish a public interest justification for subsidizing the additional bandwidth needed for video. On the other hand, one of the principles in the universal service section of the Act states that "Consumers in all regions of the Nation Also, the sparse population and longer distances in rural areas translate into low density of demand, limited economies of scale, and hence higher costs, such that there is uncertainty whether even a single broadband network can be sustained.
Is it possible, then, to construct a universal service subsidy program that is open to all competing technologies and thus competitively neutral without creating incentives for the deployment of multiple networks, none of which can exploit economies of scale to constrain costs? Historically, universal service has been limited to basic telephone service, but the subsidy has been given to the provider, rather than to the end user. The latter might be accomplished in the form of a voucher that could be used to reduce a cost-based rate to an affordable rate.
Since wireline, wireless, and cable companies all may offer local telephone service in a particular high-cost area, all three can potentially qualify as "eligible telecommunications carriers" "ETCs" in that locality and receive universal service funds. The competing carriers only receive funds for those customers they capture, but since a customer can elect to obtain service from more than one carrier at the same time, more than one carrier can receive universal service funding for serving that customer.
Typically, customers do not receive basic voice service from both the local telephone company and the local cable operator, so it is unlikely that those two carriers would each receive universal service funds for serving the same customer.
But many customers do receive both fixed telephone service from a telephone company or a cable operator and mobile telephone service from a wireless carrier , and in that case both the fixed and the mobile telephone service provider would receive the universal service subsidy. Thus, competitive entry in that situation will increase the total size of the universal service fund. Data from the and annual reports of the Universal Service Administrative Corporation "USAC" , which administers the federal universal service fund, corroborates this.
The potential growth in the size of the federal universal service fund from customers being able to subscribe for services from multiple carriers, with more than one of those carriers becoming eligible for FUSF payments, might be exacerbated if the scope of universal service were expanded to include advanced services or the connection access to a broadband network.
One possible way to limit the increase in subsidy requirements would be to expand the definition of universal service to include the connection to a broadband network, but, at the same time, to require each customer in a high-cost area eligible for universal service support to choose a single broadband provider as its "principal" provider and only that chosen provider would be eligible for the subsidy.
But it also likely would reduce the total flow of subsidy dollars to rural areas and might distort the market by encouraging consumers to choose broadband service even if they do not seek it. Having invested in a broadband network, each network provider will seek to maximize its return from that investment, most likely by enticing its customers to choose bundled packages of "value added" services for which it can charge prices that reflect that value.
Network providers are likely to avoid the alternative pricing strategy of setting separate charges for the network connection access and for individual services for several reasons: 1 most consumers prefer a single bill; 2 there is risk that network access could become a low-markup commodity if competing networks eventually are deployed and the revenues generated by value-added applications then might flow to independent services providers; and, 3 it might not be easy to set up a discriminatory pricing scheme for access that would allow them to maximize their profits.
This raises an interesting issue. This article was originally published in Consumer Federation of America, Consumers Union. Phillips, Victoria F. Simon, Donald R. Revere-Corn, Robert. Lewis, Peter H. Greenhouse, Linda. Ruth Ann Strickland. Telecommunications Act of [electronic resource]. Want to support the Free Speech Center? Donate Now. Farber, Daniel A.
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