Benton Comments to Federal-State Joint Board on Universal Service July 2007

In a Public Notice issued by the Federal Communications Commission on May 1, 2007, the Federal-State Joint Board on Universal Service sought public comments whether universal service funding should be used to promote broadband deployment.

Based upon the research developed in collaboration with Pennsylvania State University, the Benton Foundation urges the Federal-State Joint Board (Joint Board) to recommend to the full Federal Communications Commission (FCC) to add broadband to the list of Universal Service Fund (USF) supported services. Benton pointed out that there are no legal or statutory barriers to the Joint Board allowing USF support to be used to increase broadband deployment and affordability throughout the country and it is critical that the United States not fall further behind in broadband deployment.

The nearly 70-year commitment Congress and this nation have had to universal service has been indispensable in providing the same opportunities for rural and low income Americans to participate in the nation's economy. Universal service programs have helped deliver essential communications services to rural areas, the poor, schools, libraries, and rural health care clinics. It has made the telephone an ubiquitous communications tool in the U.S. and enhanced the value of the public network to all users. This unparalleled level of communication has helped to foster economic productivity and increase our quality of life in immeasurable ways. The vital importance of this program is clear to anyone who has ever lived rural in America or struggled to make ends meet. Just as rural electrification in the 1930s led to a surge of economic growth and raised living standards across rural America, universal, affordable broadband service can play the same role in the Internet era.

Benton's arguements make seven main points:

I. USF IS AT A CROSSROADS AND MUST BE MODERNIZED TO INCLUDE EXTENSION OF SUPPORT TO BROADBAND

• The amount needing to be paid out of USF is growing.
• The number of recipients has grown 20-fold in just 4 years.
• The revenue base is shrinking.
• The contribution factor has doubled since 2000.
• Immediate Reform is needed.
• Competition plays an important role in ensuring universal service.

II. THE JOINT BOARD AND THE FCC HAVE AUTHORITY TO EXTEND USF SUPPORT TO BROADBAND PURSUANT TO THE EXPLICIT AUTHORITY PROVIDED IN SECTIONS 254(C) AND 706 OF THE TELECOMMUNICATIONS ACT OF 1996.

III. BROADBAND MEETS THE STATUTORY CRITERIA FOR SERVICES ELIGIBLE FOR USF SUPPORT

A) Broadband is essential to education, public health, and public safety

• Broadband is essential to education.
• Broadband is essential to public health.
• Broadband is essential to public safety.
  • Broadband is essential for Homeland Security.
  • Broadband is essential for Public Safety.
  • Broadband is essential for Government Continuity.

B) Broadband has, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers

C) Broadband deployment in public telecommunications networks by telecommunications carriers

D) Support for broadband is consistent with the public interest, convenience, and necessity.

• Broadband is essential for the economy.
• Broadband is essential for telecommuters.
• Broadband is essential for Americans with disabilities.
• Broadband is essential for the environment.

IV. DESPITE BROADBAND PENETRATION PROGRESS, AND ITS REACH TO A MAJORITY OF AMERICANS, TOO MANY AMERICANS ARE GETTING LEFT BEHIND

• The Gap Between Rural and Urban America Persists.
• A Persistent Digital Divide Separates Americans.

V. COST NEED NOT BE A BARRIER

VI. CURRENT USF RULES ACT AS A DETERRENT TO UNIVERSAL, AFFORDABLE BROADBAND

VII. THE E-RATE PROGRAM IS A MODEL FOR ADDRESSING BROADBAND INEQUITY AND ACHIEVING UNIVERSAL SERVICE GOALS

Read Benton's filing.

Links to attachments:

Attachment 1: Regaining the Lead: Universal Service for a Globally Competitive America by Jorge Schement, Pennsylvania State University.
The writers outline how universal broadband can put consumers in the driver's seat and enable new choices. For many years, universal telephone service meant ubiquitous black phones. But broadband is different. It moves decisions that were once made in the core of the network to the edge of the network. Once a consumer has broadband, they can eventually choose the voice, video and other services of their choice - not from the network owner but from a competitive and broadband marketplace. Control can shift from providers to users. Communications no longer has to be a scarce centrally controlled resource; it can be pervasive and abundant. But too often today's consumers don't have choices. Universal services should be about enabling universal choice. But its not just choices in service, it helps enable choices in life. Schement et al show that broadband is about political participation, economic participation, and social participation. As broadband enables more user-created content, people can actively shape the content of universal service for themselves.

Attachment 2: Universal access in the information economy: Tracking policy innovations abroad by Krishna Jayakar and Harmeet Sawhney, Pennsylvania State University and Indiana University.
Krishna Jayakar and Harmeet Sawhney examine several successful national broadband strategies developed by countries that have overtaken the U.S. in per capita broadband deployment. They find that many embrace "ubiquitous" broadband for the competitive advantages it offers (not just a societal goal), and embrace universal goals that extend beyond mere physical connectivity to fostering the "arenas of innovation" that drive broadband adoption and drive demand for it. Many policies focus on enabling broadband innovation (applications, services, and devices) that make broadband more valuable and drive its uptake are also key components in these effective national strategies i.e. promoting digital literacy and providing incentives for broadband service innovation.

Attachment 3: "From all my teachers I have grown wise, and from my students more than anyone else:" What Lessons can the U.S. learn from Broadband Policies in Europe? by Amit M. Schejter, Pennsylvania State University.
Schejter looks at how Europeans may be on the way to taking a more innovative and effective approach to universal service, by considering the adoption of a universal broadband goal. Europeans have quickly moved ahead of the U.S. on broadband. They have embraced, perfected, and are benefiting from the open competitive network concepts first developed by U.S. policymakers but later abandoned in the U.S. The combination of competition between broadband providers and a universal service broadband goal have proven effective in Europe.

Attachment 4: Networking for Better Care: Health Care in the Information Age Looks closely at the ways new communications technologies are transforming health care, describing both the promise and pitfalls.

Attachment 5: Universal Service and the Disability Community: The Need for Ubiquitous Broadband Deployment by Frank Bowe, Hofstra University.
This paper explores the need to expand the base of universal service to include broadband, which has become vital for the disability community. Universal service is the bedrock upon which functionally equivalent service for Americans with disabilities has developed. Relay services, accessibility of telecommunications equipment, and hearing-aid compatibility all rest upon the universal service doctrine that was first articulated in the Communications Act of 1934. Today, however, the high-speed, always-on, voice/video data services known as broadband increasingly are required for full and equal access to communications for people with disabilities. Universal service does not reach broadband services and products. Bridging the gap, that is, extending universal service to encompass broadband, will require legislation. This paper explores the benefits of taking that step, including those related to independent living, social interaction, health care, and employment.

Attachment 6: Universal Service and Rural America by Sharon Strover, University of Texas at Austin.
Once connected to broadband we are no longer limited by the borders on a map or the geography of where we live, the only limits we face in this broadband world are the limits of our own imaginations. In a digital world, borders can begin to function more as bridges than barriers, and geography can be spanned. However, as Sharon Strover points out in her paper, rural America is far behind in its broadband access compared to urban areas - yet stands to benefit most by bridging geography. She finds rural connectivity is vital to cultivating economic vitality in rural areas. But the FCC's rural broadband data, reliant on zip codes that span vast areas in rural America, provides a poor tool for gauging the pervasiveness of broadband subscribership in rural America. In July 2006, FCC data showed that 99% of zip codes have at least one high-speed service provider. But if one person in a zip code has access to broadband, the FCC counts everyone in the zip code as having broadband. Its like counting everyone in a zip code as driving a Lexus if just one person does. This abysmal data provides a weak platform upon which policymakers must plan the nation's future. The Government Accountability Office (GAO) took a close look at the efficacy of the FCC's broadband data. In Kentucky, for example, the GAO relied on extensive state-level data to conclude that 77 percent of residents had broadband access as of mid-2005. However, FCC zip code data from the end of 2004 showed 96 percent of Kentucky households had broadband access. Instead of declaring mission accomplished, American needs better intelligence on the availability, take-up, speeds, and prices on a much more granular basis. There is, however, a preponderance of evidence that rural Americans are indeed being left behind, as are rural small businesses. Broadband in these rural and remote regions offers extraordinary benefits. Strover finds that broadband can help empower people thru improved access to health care, better education, and access to more jobs - lifting rural economies and connecting their success to the rest of the country.

Attachment 7: Time for Change: Transforming Funding for Broadband Universal Service by Richard D. Taylor, Pennsylvania State University.
Broadband opens up a whole new frontier in communications. As the paper points out, soon voice, video and everything else will be delivered over IP networks. Former FCC Commissioner Abernathy characterized it as a move towards "Everything Over IP" (EOIP). In the world of EOIP, it all becomes just delivering packets of bits - a commodity service. In the EOIP world, "voice" capability is being integrated into many applications, and will not manifest merely as VoIP. It will be part of messaging (IM), games, "push to talk," and likely will be a basic feature of next generation operating systems. It will be available in many ways at no separate charge. It may be ad supported, or free, or bundled. In the EOIP world, there is not a need for a separate voice network. Charging consumers based on criteria such as time of call, time of day, distance of call, local vs. long-distance, and length of conversation will no longer make sense as communication enters the global internet that no longer usage sensitive or distinguishes between local and long distance or between voice and data. It takes moving to a more competitive USF model where prices to customers would more realistically reflect the cost of providing them service, where competitors can compete to provide the service to the consumer and win the support as well, ensuring a reasonable parallelism between those who are required to contribute and those who can apply for distributions from the USF. USF has generally supported infrastructure. Thus, contributions from broadband providers and connection providers to broadband and connection providers makes parallel sense. The physical infrastructure is the piece that often costs more over greater distances and the piece that we need to connect people to. However, if other broadband enabled services are important enough to be required to pay in, then those type of services are also important enough that rural and lowincome Americans should benefit by accessing them through universal service support.

Attachment 8: Strategies for Repairing the Universal Service Fund by Rob Frieden, Pennsylvania State University.
Frieden examines the flaws, defects, and accommodations that exist in the current universal service funding process with an eye toward proposing a new workable system that can support broadband infrastructure development. Frieden argues that consumers deserve more from their sizeable investment in the universal service program. Because of its blanket approach, USF provides financial benefits to some consumers who are entirely capable of paying the full cost of their telecommunication services while at the same time imposing contribution obligations on consumers, including the working poor and others not well equipped to absorb the financial burden. He points out that the emphasis on promoting basic telephone penetration has a negative effect on broadband penetration. The current USF system creates several constituencies keen on maintaining the status quo regardless of its efficacy and efficiency and potentially thwarting broadband goals. The USF system largely accepts as a given whatever costs carriers report regardless of whether carriers could operate more efficiently and whether newer technologies might offer lower costs, possibly without significant recurring operational costs. In order to sustain future USF funding in a changing telecom environment, a connection based contribution mechanism would prove more equitable and sustainable over the long run. While the expansion of USF to include broadband could create financial challenges in the near term, it can also help create a more efficient and versatile USF mechanism in the long run. Frieden argues for several alternative means for transitioning from a usage based mechanism to a non-usage based mechanism including greater reliance on competitive grants, project specific funding, and reverse auctions.

Attachment 9: The Future of Universal Service Fund Support for Organizations: Schools, Libraries and Rural Health Care Providers by Heather E. Hudson, Professor and Director, Communications Technology Management Program, University of San Francisco.
Some may ask whether we can take a 20th century solution and apply it to a 21st century problem. This paper explains how the Telecommunications Act of 1996 took an important first step in linking universal service and broadband access. The Act created the E-Rrate program as part of the universal service fund to make broadband universally available in every school, classroom, and library in America. The E-Rate, not without its detractors, has been an enormous success in improving broadband access for libraries and schools. In 1996, only 28 percent of public library systems offered public Internet access. Today, thanks to increased resources and the E-Rate, nearly all library buildings offer public access computing, and 14 million Americans regularly use these computers at no fee. Further, only three percent of instructional classrooms were wired in 1994. As of 2003, 93% of instructional classrooms are wired. Between 1998 (when the E-Rate launched) and 2003, statistics show that classroom Internet access disparities between rural, urban, and suburban schools and high and low-poverty districts have been dramatically reduced. A former FCC Chair calls the e-rate the biggest new investment in education since the creation of the GI Bill of Rights.

Attachment 10: Libraries as Universal Service Providers by Nancy Kranich, KS Consultants and Fomer President, American Library Association.
The paper by Nancy Kranich finds that thanks to the USF's E-Rate program and other investments, 99% of public libraries are now wired—many with broadband and wireless services—and offer free public access to the Internet. Libraries are now the number one point of access for the public outside the home, school, and work, leveling the playing field for those left behind in the digital age. But the success of the E-Rate program goes well beyond Internet access - it now is helping provide a communication outlet of last resort in a crisis. Both 9/11 and Katrina demonstrated the power of public access broadband in libraries for providing alternative communication channels. Continuing the success of the E-Rate and expanding the goals of universal service to broadband could similarly have broad and unmistakable impacts well beyond just increasing Internet access rates.