Before the
                FEDERAL COMMUNICATIONS COMMISSION
                     Washington, D.C.  20554

In the Matter of        )
                                                 )
Amendment of the Commission's          )         CC Docket No. 95-115
Rules and Regulations to Increase )         
Subscribership and Usage of the   )
Public Switched Network           )


                      REPLY COMMENTS OF THE
    NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION



Larry Irving                 Barbara S. Wellbery
Assistant Secretary for      Chief Counsel
 Communications & Information          
 
                             
Bernadette McGuire-Rivera     Phyllis Hartsock
Acting Deputy Assistant       Deputy Chief Counsel
Secretary 


Kathryn C. Brown               Lisa Socket            
Associate Administrator        Attorney-Advisor          
Tim Sloan
Jim McConnaughey
Laverne James
Office of Policy Analysis
 and Development


National Telecommunications
and Information Administration    
U.S. Department of Commerce
Room 4717
14th Street and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 482-1816                              



                                                      March 29, 1996


                        TABLE OF CONTENTS

Section                                                              Page


I.                 INTRODUCTION AND SUMMARY OF POSITION. . . .  1

II.                THE COMMISSION SHOULD ESTABLISH A NATIONAL SUBSCRIBERSHIP GOAL TO
                   BE ACHIEVED BY THE YEAR 2000  . . . . . . .  4

III.               THE COMMISSION AND THE STATES SHOULD WORK JOINTLY TO DEVELOP
                   PROGRAMS AND POLICIES TO ACHIEVE THE NATIONAL SUBSCRIBERSHIP GOAL
                   . . . . . . . . . . . . . . . . . . . . . .  8

IV.                AMONG THE MANY WAYS TO INCREASE TELEPHONE SUBSCRIBERSHIP, TWO
                   APPROACHES MERIT PARTICULAR ATTENTION . . . 10

                   A.   A No-Disconnect Policy Can Boost Subscribership 10

                   B.   Policymakers Should Explore Increasing Connection Assistance
                        Under the Link Up Program. . . . . . . 18

V.                 THE COMMISSION AND THE JOINT BOARD SHOULD GIVE PROPER WEIGHT TO
                   THE IMPORTANCE OF ACCESS TO ADVANCED SERVICES 19

                   A.   Policymakers Should Monitor Access by Under-Represented Groups to
                        Advanced Services as Well as to POTs . 19

                   B.   In Implementing the 1996 Act's Universal Service Provisions, the
                        Commission, the States, and the Joint Board Should Consider the
                        Importance of Community Access Centers in Providing Universal
                        Access to Advanced Services. . . . . . 22

VI.                CONCLUSION. . . . . . . . . . . . . . . . . 26

APPENDIX A

APPENDIX B         

                            Before the
                FEDERAL COMMUNICATIONS COMMISSION
                     Washington, D.C.  20554

In the Matter of                  )
                                                 )
Amendment of the Commission's          )         CC Docket No. 95-115
Rules and Regulations to Increase )         
Subscribership and Usage of the   )
Public Switched Network           )

                      REPLY COMMENTS OF THE
    NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION

                   The National Telecommunications and Information Administration
(NTIA), which is part of the Department of Commerce, is the
Executive Branch agency responsible for the development of
domestic and international telecommunications and information
policy on behalf of the President.  NTIA respectfully replies to
comments submitted in response to the Commission's Notice of
Proposed Rulemaking (Notice) in the above-captioned
proceeding.[1]

I.                 INTRODUCTION AND SUMMARY OF POSITION
                   For more than six decades, the United States has been committed
to universal service -- the idea that every American household
that desires it should have telephone service.  As the Commission
points out, however, "universal service policies may now have
greater societal consequences than in the past."[2]  Today, a
telephone line does not merely connect an individual to neighbors
and loved ones; with the addition of a computer and a modem, it
furnishes a pathway to the Information Age, offering enhanced
employment and educational opportunities, promising more
effective delivery of health care and other social services, and
improving communication between citizens and their governments. 
In this environment, households without telephone service will
not only be denied access to valuable information, services, and
products that can improve their lives, they may be relegated to
an "information ghetto," out of the mainstream of American
culture and commerce, and walled off still further from economic
and social advancement.  For these reasons, the Commission and
the States should place a high priority on devising programs and
strategies to increase telephone penetration.   
  
                   NTIA has conducted two empirical studies that bear on two aspects
of the subscribership debate.  First, in a July 1995 report
entitled Falling Through the Net: A Survey of the "Have Nots" in
Rural and Urban America, NTIA used November 1994 Census data to
construct an expansive profile of universal service in America
that includes not only telephone subscribership, but computer and
modem ownership as well.  NTIA found, among other things, that
despite the nation's high level of telephone penetration in the
aggregate, subscribership levels among certain parts of American
society -- particularly among the poor and minority groups -- are
substantially below the national average. Second, an econometric
analysis of that Census data reveals a positive and significant
relationship between telephone penetration and a State's adoption
of a "no-disconnect" policy, which bars local exchange carriers
from disconnecting local telephone service for nonpayment of long
distance charges.  This relationship is particularly pronounced
among low-income households.    

                   Because universal service policies implicate interstate services
that are subject to regulation by the Commission, as well as
intrastate services that are subject to regulation by the States,
development of those policies should be a collaborative effort
between the Commission and the States.  NTIA urges Federal and
State regulators to take the following steps:

                  First, the Commission should set as a national goal that within
                   each State by the year 2000 average telephone penetration rates
                   for all households, including in particular several designated
                   economic, racial, ethnic, and geographic categories, will be at
                   or above the national average that existed as of November 1996.

                  Second, the Commission and the States should promote cost
                   effective ways to increase telephone subscribership.  States need
                   to have broad latitude in developing and implementing policies
                   and programs designed to meet the national subscribership goal. 
                   If the national subscribership goal has not been achieved by the
                   turn of the century, the Commission should reopen this proceeding
                   and determine whether Federal action is necessary to accomplish
                   that objective.
                  Third, among the many possible ways to expand telephone
                   penetration, two policies should be given particular attention:

                        The Commission and the Joint Board should encourage all States to
                        bar local exchange carriers from disconnecting local telephone
                        service for nonpayment of interstate long distance charges.

                        The Commission, in conjunction with the States, should explore
                        changes in the Link-Up program that would make subsidized
                        connection available to low-income households more frequently.

                  Fourth, the Commission and the Joint Board should address, in the
                   context of subscribership, issues concerning access to advanced
                   services, such as the extent to which under-represented groups
                   have access to computers and modems, and the ability of all
                   Americans to connect to critical information sources via
                   Community Access Centers.

II.                THE COMMISSION SHOULD ESTABLISH A NATIONAL SUBSCRIBERSHIP GOAL TO
                   BE ACHIEVED BY THE YEAR 2000                    

                   As of November 1995, approximately 94 percent of all U.S.
households had a telephone in their home, one of the highest
penetration rates in the world.[3]  Though impressive, the
nation's overall rate of telephone penetration masks a number of
troubling disparities among certain groups in American society. 
Those disparities were highlighted in NTIA's July 1995 report
Falling Through the Net: A Survey of the "Have Nots" in Rural and
Urban America (Falling Through the Net),[4] which provided an
expansive profile of universal service in America of not only
telephone subscribership, but also computer and modem
penetration.[5]  By cross-tabulating subscribership data
collected in the Census Bureau's November 1994 Current Population
Survey ("CPS") according to several demographic variables (i.e.,
income, race, ethnicity, age, educational attainment, and region)
and three geographic categories (rural, urban, and central city),
NTIA confirmed and more specifically pinpointed the discrepancy
among geographic, economic, and racial groups in this country
with respect to telephone subscribership.[6]

                   As detailed in Falling Through the Net, households without
telephones are found disproportionately among the poor and
minorities, and within those groups, in rural areas and central
cities in particular.  For example, measured against the
nationwide average for telephone penetration of 93.9 percent,
large differentials exist on the basis of income and race/ethnic
origin by area.  As a group, the very poor in central cities
trail the U.S. average by 14 percentage points and those in rural
areas are more than a dozen points behind.  Even rural and
central-city households with earnings in excess of $20,000 fall
below the national figure, on average. (See Chart 1, Appendix B.)

                   When the profile is developed by race/ethnic origin and area, the
data reveal that several groups are significantly disadvantaged. 
In rural areas, almost one-quarter of American Indians, Aleuts,
and Eskimos as a group are without phones, and approximately one-fifth of Hispanics and Black non-Hispanics are similarly
phoneless.  And their central city counterparts are also well
below the national average. (See Chart 2, Appendix B.)  
                   Using age as the metric, the single most disadvantaged group
consists of the youngest households (under 25 years),
particularly in rural areas.  Not surprisingly, the least
educated households have the lowest telephone penetration rates;
for a given level of education, central city households generally
rank last.  Among regions, households in Northeast central cities
have the lowest penetration rates.    

                   These discrepancies in subscribership across geographic areas,
income levels, and racial and ethnic groups threaten more than
ever the economic, cultural, and educational cohesiveness of the
nation.  Not only do more than 6 million American households lack
a telephone for basic needs such as 911 emergency services,
access to the workplace, commerce, and each other, they are
increasingly in danger of being cut off from the numerous social
and economic benefits promised by access to the Information
Superhighway.  

                   For this reason, NTIA urges the Commission to establish the
following "National Subscribership Goal":  By the end of the year
2000, in each State, the average level of telephone penetration
among households meeting certain designated demographic and
geographic characteristics should be no less than the nationwide
average that exists as of November 1996.  In our view, the
National Subscribership Goal would provide a lodestar for the
Commission and the States as they develop policies and programs
to increase subscribership and lend urgency to that task.  As
importantly, such a goal will establish a well-defined benchmark
for assessing the success of those initiatives in achieving their
intended objectives.

                   The Commission should determine which characteristics should be
used to identify the U.S. households that will be the focus of
government efforts to increase subscribership.  NTIA believes,
however, that the designated characteristics should include, at a
minimum:  income, educational attainment, race/ethnic origin,
age, household ownership (i.e., home owners versus renters), and
geographic location (i.e., rural, urban, central city).  CPS data
regularly gathered by the Census Bureau can be used to calculate
average telephone penetration among households satisfying any one
of the designated categories, or any combination thereof, as well
as to track the movements in those levels over time.

III.               THE COMMISSION AND THE STATES SHOULD WORK JOINTLY TO DEVELOP
                   PROGRAMS AND POLICIES TO ACHIEVE THE NATIONAL SUBSCRIBERSHIP GOAL 
                                                   

                   The recently enacted Telecommunications Act of 1996 (the "1996
Act") evinces Congress' intent that the development of universal
service policy should be a collaborative effort between Federal
and State regulators.[7]  Although the 1996 Act does not
specifically address the subscribership issues raised in this
Notice, it provides that universal service issues should
initially be considered by a Federal-State Joint Board.  The 1996
Act directs the Board to give the Commission specific
recommendations, which, in turn, may form the basis for 
Commission decisions on the definition and funding of universal
service.  The 1996 Act authorizes States to adopt their own
universal service rules so long as those rules do not conflict
with or burden the Commission's new rules.

                   The 1996 Act recognizes that universal service policies are most
often implemented and affected positively or negatively at the
State level.  Being closer to telephone subscribers and the
companies that serve them, as well as more familiar with local
market conditions, State commissions often have better knowledge
about which policies are most effective in raising subscribership
levels.  In addition, States are often effective "laboratories"
for testing out new subscribership programs and policies.  The
record in this Notice demonstrates that many State commissions,
together with the companies they regulate, have developed
forward-looking programs and service offerings to help vulnerable
households in American society obtain and retain telephone
service.  

                   For these reasons, NTIA believes that the Commission should work
jointly with the States, both through the Joint Board and other
means, to find the most effective ways to achieve a universally-accepted goal -- making telephone service available and
affordable to all Americans.  As part of that process, the
Commission should encourage States to implement already tested
policies and programs that appear especially promising in their
effect on subscribership, but it should also afford States
latitude to pursue other innovative solutions.

                   As noted above, the National Subscribership Goal should be the
standard by which we measure the success of this collaborative
Federal-State process.  The Commission should first try to
achieve that goal without detailed national rules and mandates. 
On the other hand, if the goal has not been reached by the year
2000, the Commission should determine whether Federally-mandated
regulations are needed to raise telephone subscribership to the
desired levels.


IV.                AMONG THE MANY WAYS TO INCREASE TELEPHONE SUBSCRIBERSHIP, TWO
                   APPROACHES MERIT PARTICULAR ATTENTION                

                   Although the Commission, the States, and the Joint Board should
explore the full range of alternatives for increasing telephone
subscribership, NTIA believes that they should give particular
attention to two approaches that could have a significantly
positive impact on subscribership.  First, the Commission should
encourage all States to adopt a no-disconnect policy, which would
bar local exchange carriers (LECs) from terminating local
telephone service because of a subscriber's failure to pay
interstate long distance charges.  Second, the Commission and the
States should explore changes in the Link-Up program that would
make subsidized connections available to low-income households
more frequently.

                   A.   A No-Disconnect Policy Can Boost Subscribership

                   Of the issues raised in the Notice, none sparked more controversy
than the Commission's questions concerning the adoption of a
nationwide no-disconnect policy.[8]  Many LECs and long distance
companies strenuously oppose such a policy, arguing that its
implementation will not significantly improve subscribership
levels.[9]  NTIA believes, based on an analysis of data from the
Census Bureau's November 1994 CPS, that the opposite is true.  As
indicated in Tables 1 through 3, telephone subscribership appears
to be consistently higher in States with a no-disconnect policy,
even after controlling for such important factors as income,
race/ethnicity, home ownership, and employment status.  The
positive relationship between that policy and penetration is
especially prominent at lower income levels and dissipates at the
higher income levels.  In other words, the benefits of a no-disconnect policy appear to be concentrated among the low-income
households that would likely have the most difficulty obtaining
and retaining telephone service.

                             TABLE 1

  Telephone Penetration in Households That Own Their Home, Earn
      Less Than $5,000 Annually, and Whose Head Is Employed




                              States
                            Permitting
                          Disconnection
                              States
                             Barring
                          Disconnection


                       White, Non-Hispanic
                              96.3%
                              97.6%


                       Black, Non-Hispanic
                              90.9%
                              94.3%


                        Native American, 
                           Non-Hispanic
                              71.0%
                              75.0%


                       Asian, Non-Hispanic
                              97.6%
                              98.7%


                             Hispanic
                              90.0%
                              93.5%



                             TABLE 2

  Telephone Penetration in Households That Own Their Homes, Earn
 Between $7,500 and $10,000 Annually, and Whose Head Is Employed




                              States
                            Permitting
Disconnection
                              States
                             Barring
                          Disconnection


                       White, Non-Hispanic
                              91.4%
                            84.8%[10]


                       Black, Non-Hispanic
                              96.0%
                              100.0%


                        Native American, 
                           Non-Hispanic
                              66.7%
                              100.0%


                       Asian, Non-Hispanic
                               76.9%
                              100.0%


                             Hispanic
                              89.9%
                              100.0%



                             TABLE 3

  Telephone Penetration in Households That Own Their Homes, Earn
      More Than $75,000 Annually, and Whose Head Is Employed



                              States
                            Permitting
                          Disconnection
                              States
                             Barring
                          Disconnection


                       White, Non-Hispanic
                              99.2%
                              99.2%


                       Black, Non-Hispanic
                              98.0%
                              100.0%


                        Native American, 
                           Non-Hispanic
                              100.0%
                              100.0%


                       Asian, Non-Hispanic
                               99.4%
                            98.1%[11]


                             Hispanic
                              99.1%
                              100.0%

Source:            November 1994, Current Population Survey, U.S. Census Department

                   To assess the picture painted by the foregoing tables more
closely, NTIA employed a binary logit regression ("logit") on the
CPS data.[12]  The logit enabled us not only to determine whether
the relationship between telephone penetration and each of a set
of independent variables is positive or negative, but also to
estimate its magnitude.

                   NTIA's model used three separate types of independent variables: 
i) price; ii) demographic; and iii) policy.  For price variables,
we used data developed by Brooks Albery for his paper on
telephone penetration -- the average rate per State charged by
the Bell Operating Companies (BOCs) for residential dialtone
service; the BOCs' average connection charge per State for
residential dialtone service; and the combined interstate and
intrastate subscriber line charge per State.[13]  Demographic
variables of surveyed households included race/ethnicity, income,
level of education, employment, marital status of the head of the
household, and whether the dwelling was owned or rented.  The
policy variables identified whether or not the relevant State had
a no-disconnect policy, a Lifeline program, or a Link Up program.

                   The results of the logit strongly support the notion that a no-disconnect policy will have a significant effect on telephone
subscribership.[14]  The coefficient associated with the no-
disconnect policy (DISCDUM) variable (.115) is both positive and
statistically significant at the 95 percent confidence level,
which indicates that as the value of DISCDUM increases (e.g.,
from 0 (a State permits disconnection) to 1 (a State bars
disconnection)), the likelihood that a household in that State
will have telephone service increases as well.  The estimated
magnitude of that relationship is given by the odds ratio
associated with DISCDUM (1.122).  That figure implies that a
State's adoption of a no-disconnect policy will increase the odds
that a household in that State will have telephone service by a
multiplicative factor of 1.122.

                   The results of the logit can be used to estimate the likelihood
that a household or households meeting certain demographic
characteristics will have a telephone.  Table 4 presents
predicted penetration levels for four different types of
households.  Each household shares several fundamental
characteristics:  the occupants are married, employed, and live
in a State that permits disconnection of local service for
nonpayment of long distance charges.  For simplicity's sake, we
further assume that the State has adopted no Lifeline or Linkup
programs.  The connection charge and monthly bill for residential
phone service in that State are assumed to be $35.00 and $15.00,
respectively.  The second column gives the predicted penetration
for each type of household, given the underlying assumptions. 
The third column indicates how that penetration would change if
the State were to adopt a no-disconnect policy.

                             TABLE 4

                        Characteristics of
                            Household
                            Predicted
Penetration if
                          State Permits
                          Disconnection
                            Predicted
Penetration if
                            State Bars
                          Disconnection


                       White, Non-Hispanic
                        Annual Income Less
                            Than $5,000
                        Rents Home        

                              79.1%

                              81.0%


                       Black, Non-Hispanic
                        Annual Income     
                          $10,000-13,000
                        Rents Home        

                              81.8%

                              83.5%


                         Native American
                          Annual Income 
                            $40-50,000
                          Rents Home    

                              90.8%

                              91.7%


                        Hispanic          
                        Annual Income Over
                             $75,000
                        Owns Home         

                              99.6%

                              99.7%



                   Thus, a more exacting analysis of the CPS data confirms the
conclusions suggested by Tables 1-3.  There is, in fact, a
positive and significant relationship between a no-disconnect
policy and telephone penetration.  Moreover, as the examples
demonstrate, that relationship grows weaker as income increases. 
More importantly, the potential gains in subscribership
attributable to a no-disconnect policy will most likely be
concentrated among those households most at risk of being or
becoming phoneless.  It is those households (which doubtless
number in the hundreds of thousands) who today should be the
focus of universal service policymaking.[15]


                   B.   Policymakers Should Explore Increasing Connection Assistance
                        Under the Link Up Program              

                   The Commission notes that current policies discounting
installation charges may be inadequate to ensure reconnection to
the network for highly mobile individuals.  For example, the
Federal Link Up program, which is administered in conjunction
with the States, allows States to reduce telephone installation
charges for qualified households by paying up to half of the
first $60 of connection charges.  The Commission notes that time
limits placed on the receipt of this subsidy by some States (of
once a year, for example) may undermine the benefit of the
subsidy for highly mobile individuals.[16]    

                   NTIA agrees with the Commission that further study of expanding
Link Up to address the needs of low income, highly mobile
individuals is appropriate.  Such a study should be undertaken in
coordination with the States.  As noted by one commenter, there
may be more low income, highly mobile populations in urban areas
than in rural areas.[17]  Any changes to the Link Up program,
therefore, must allow States flexibility to address their own
particular subscriber demographic situations.  Furthermore, any
expansion of the program should produce benefits that outweigh
the costs of such expansion.[18]  To keep costs down it may be
appropriate to allow subscribers to receive more frequent
assistance with installation charges only if they are also
willing to take long-distance blocking options.[19]  

V.                 THE COMMISSION AND THE JOINT BOARD SHOULD GIVE PROPER WEIGHT TO
                   THE IMPORTANCE OF ACCESS TO ADVANCED SERVICES

                   A.   Policymakers Should Monitor Access by Under-Represented Groups to
                        Advanced Services as Well as to POTs                             

                   Passage of the 1996 Act brings a new dimension to the concept of
universal service in this country.  As recognized in the 1996
Act, the United States must go beyond our traditional focus on
telephone penetration as the sole barometer of the nation's
progress towards universal service.[20]  Clearly, the necessity
of a telephone for safety, economic, and social reasons remains
strong.  Today, however, with the many economic, cultural, and
social benefits associated with being connected to a vast network
of information resources, policymakers also should be monitoring
Americans' ability to access advanced services.      
                   In Falling Through the Net, NTIA developed a profile of universal
service in America that went beyond telephone service to include
computer and modem ownership.[21]  At NTIA's request, the Census
Bureau included a series of questions on computer/modem ownership
and use in its CPS for November 1994.  The data gathered reflect
many of the same geographic and demographic disparities that
exist with respect to telephone subscribership.  For example,
although the national average for personal computer penetration
is 25.5 percent of all households, only those households with
incomes of $35,000 or more exceed this average.  (See Chart 3,
Appendix B.)  Viewed by race/origin, all groups in rural areas --
including white non-Hispanics -- except for Asians or Pacific
Islanders fail to match or better the U.S. figure.  In central
city areas, where such penetration is generally much higher, the
rates for Black non-Hispanics and Hispanics still fall far short. 
(See Chart 4, Appendix B.)
 
                   The national penetration level for computer households with a
modem is 45.5 percent, and again certain segments of the
population have not kept up.  Strikingly, in rural areas, only
those with household incomes greater than $50,000 generally
surpass the nationwide average.  In central city households,
levels are generally much higher, but not until household incomes
reach $35,000 is the national figure exceeded, on average.  (See
Chart 5, Appendix B.)  While some race/origin categories exhibit
rather high penetration rates, many do not, and almost no
minority groups manage to beat the U.S. rate.  (See Chart 6,
Appendix B.)

                   These disparities in the ownership of the equipment needed to
exploit the benefits of the information superhighway threaten
more than ever the economic, cultural, and educational
cohesiveness of the nation.  While the Commission has long
monitored telephone subscribership numbers on a highly-disaggregated basis, the time has come for this effort to be
expanded to include computers and modems.  In view of the
directives in the 1996 Act, NTIA recommends that the Commission
and the States undertake an effort to monitor access to such
equipment at both a national and detailed disaggregated level
along the lines described in Falling Through the Net.  NTIA and
the Census Department stand ready to provide any assistance in
this effort that will be necessary.  Accurate statistics of this
type will help Federal and State regulators develop appropriate
policies to ensure that all Americans have access to increasingly
important information networks.     

                   B.   In Implementing the 1996 Act's Universal Service Provisions, the
                        Commission, the States, and the Joint Board Should Consider the
                        Importance of Community Access Centers in Providing Universal
                        Access to Advanced Services                     

                   The Census data also indicates that seven in eight households do
not have both a computer and a modem and are, therefore, unable
to access more advanced information networks, such as the
Internet or other on-line services, from home.  In light of the
importance access to information services is having on the
ability of individuals to compete and prosper, NTIA believes that
transitional steps should be taken to promote such access. 
Ideally, all Americans that desire access should have it and
individual household connections to the information superhighway
should remain a long-term national goal.  For the immediate
future, however, NTIA believes that "community access centers"
(CACs) are a viable, important interim solution.  This belief is
shared by a number of States, the National Information
Infrastructure Advisory Council (NIIAC), and a variety of private
sector organizations.[22] 

                   CACs are community institutions where the public can access
advanced telecommunications networks or services.  Schools and
libraries historically have served as CACs for education and
community development and have an integral role to play in
advancing the universal service goals embodied in the 1996 Act. 
The 1996 Act has given impetus to the Administration's goal of
connecting the nation's schools, libraries, and hospitals by the
year 2000 by requiring telecommunications carriers to provide
services to such institutions at discounted rates set by the
Commission and the States.[23]  The Commission and the States
should move swiftly to implement that critical provision of the
1996 Act, to ensure that these vital institutions are connected
to the Information Superhighway.

                   In addition to their traditional roles, NTIA envisions schools
and libraries as the "hub" for wider community networks that will
play a fundamental role in furthering universal access to
advanced telecommunications and information services.  Over the
past two years, NTIA's Telecommunications Information and
Infrastructure Assistance Program (TIIAP) has provided matching
funds to 210 projects throughout the country to promote a vast
array of community-based network infrastructure development. 
Through grass-roots, public-private partnerships, many TIIAP
grantees have used schools and libraries as platforms to reach
additional sites as diverse as senior citizen clubs, community
centers, housing projects, and police depots.  At these "outreach
posts" on the network, people who otherwise would have no access
to advanced services have been able to enjoy their benefits.

                   In Newark, New Jersey, for example, the local elementary school,
concerned about the health needs of its students, created a
community network connecting the school, the low-income housing
project where its students and their parents live, and the area's
major teaching hospital.  Through this information network,
twenty families who formerly did not know each other and had
little experience with computer technology can now communicate
on-line with each other, with school personnel, and with doctors
at the hospital about pressing educational and health concerns. 
This small-scale project serves as a model on how to use the
school as a resource for a wider network designed to address
difficult community problems.

                   In Charlotte, North Carolina, "Charlotte's Web" links more than
2,000 computers located in libraries, classrooms, and offices in
13 elementary schools, 8 middle schools, 7 high schools, and 4
administrative areas.  During 1995, Charlotte's Web conducted
Internet workshops for media specialists, teachers, and
vocational directors.  It designed an on-line school of the
future and provided information to the community at unprecedented
levels.

                   NTIA recommends that the Commission and the States, in
implementing the universal service provisions of the 1996 Act,
recognize that schools and libraries (like those in Newark and
Charlotte) can serve their communities in ways that extend well
beyond their traditional functions and operating hours.  They can
serve as backbones of wider community networks, thereby advancing
the fundamental goal of expanding affordable access to advanced
services.  As the Commission anticipates in its Notice of
Proposed Rulemaking on universal service, mechanisms to defray
the costs of service connections for schools and libraries should
be explored fully.[24]  NTIA recommends, further, that the
Commission and the States also acknowledge the potential of those
institutions in fostering the development of more extensive
community networks.

VI.                CONCLUSION
                   For the foregoing reasons, NTIA respectfully requests that the
Commission adopt the recommendations contained herein.

   Respectfully submitted,
Larry Irving                                             
Assistant Secretary for           Barbara S. Wellbery
 Communications & Information          Chief Counsel
 
                             
Bernadette McGuire-Rivera                                
Acting Deputy Assistant           Phyllis Hartsock
Secretary                                   Deputy Chief Counsel


Kathryn C. Brown                                                  Associate Administrator               Lisa Sockett                
Tim Sloan                                   Attorney-Advisor
James McConnaughey
Laverne James
Office of Policy Analysis
 and Development


National Telecommunications
and Information Administration    
U.S. Department of Commerce
Room 4717
14th Street and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 482-1816                                   March 29, 1996                       CERTIFICATE OF SERVICE

                   I, Cheryl A. Kinsey, do hereby certify that I have this 29th day
of March, 1996, mailed by first class United States mail, postage
prepaid, copies of the foregoing Reply Comments to the parties of
record in this proceeding.



                                                                            ____________________________________
Cheryl A. Kinsey


March 29, 1996                            APPENDIX A                            APPENDIX B
                                ENDNOTES

[1]                Amendment of the Commission's Rules and Policies to Increase
Subscribership and Usage of the Public Switched Network, 10 FCC
Rcd 13003 (1995) (Notice).  Unless otherwise noted, all
subsequent citations to "Comments" shall refer to pleadings filed
on September 27, 1995 in the foregoing docket.

[2]                Id. at 13004,  4.

[3]                See Alexander Belinfante, Federal Communications Commission,
Telephone Subscribership in the United States at 5, Table 1 (FCC
Industry Analysis Div., Feb. 1996) (data as of November 1995)
(Telephone Subscribership).

[4]                Jim McConnaughey, Cynthia Nila, and Tim Sloan, National
Telecommunications and Information Administration, Falling
Through the Net: A Survey of the "Have Nots" in Rural and Urban
America (July 1995) (Falling Through the Net) (A copy of this
report is attached hereto as Appendix A).

[5]                The report's findings with respect to computer and modem
penetration and their policy implications are discussed below in
Section V.

[6]                NTIA also conducted field hearings on universal service in
Albuquerque, New Mexico (December 16, 1993); Los Angeles,
California (February 16, 1994); Durham, North Carolina (April 27,
1994); Sunnyvale, California (May 13, 1994); and Indianapolis,
Indiana (July 12, 1994).

[7]                See Telecommunications Act of 1996, Pub. L. No. 104-104 (the 1996
Act),  101, 110 Stat. 56 (1996) (to be codified at 47 U.S.C. 
254).

[8]                According to the Commission, at least 10 States have adopted a
no-disconnect policy.  Notice, 10 FCC Rcd at 13005 n.12.  We
note, however, that while the Commission identifies the State of
Nevada as adopting a no-disconnect policy, Pacific Telesis
asserts that Nevada has never had such a prohibition.  See
Comments of Pacific Telesis at 16 n.24.

[9]                See, e.g., Comments of BellSouth Telecommunications, Inc. at 3;
Comments of Southwestern Bell Telephone Company at 15.  Those
objections are not universally shared among LECs, however.  US
West, for instance, "does not generally disconnect for non-payment of interexchange carrier charges in any of its states,"
Comments of US West at 4-5, even though only five of the
commissions in the States in which the company operates have
enacted a no-disconnect policy.  Similarly, a group of small,
rural LECs that commented in this proceeding did not object to a
no-disconnect policy.  See Comments of Montana Independent
Telecommunications Systems, Inc. at 7.

[10]               Although subscribership is not uniformly higher in States with a
no-disconnect policy, Tables 1-3 indicate that a positive
relationship exists between such a policy and subscribership in
most instances.

[11]               See supra note 10.

[12]  A logit regression is a statistical tool that allows one to
estimate the probability that a household with certain
characteristics (defined in the regression by a set of
independent variables) will make a particular choice (in this
instance, to take telephone service).  The logit employed is
binary because the household may choose between only two
alternatives (i.e., to subscribe or not to subscribe).  For a
detailed discussion of logit models, see R.S. Pindyk and D.L.
Rubinfeld, Econometric Models and Economic Forecasts 247-254
(1976).    

[13]               See Brooks Albery, What Level of Dialtone Penetration Constitutes
"Universal Service"?, Telecom Pol'y, Vol. 19, 1995 (attached to
Comments of Sprint).  Because Albery used only BOC rates, his
data on residential rates and connection charges are subject to
criticism that they are not fully representative of LECs as a
whole.  His approach is nevertheless a reasonable and defensible
solution to the difficult problem of developing data on such
rates for use in a penetration model.  Albery's analysis also
included a weighted price index for interstate and intrastate
toll service, based on figures contained in the Commission's
periodic reports Trends in Telephone Service.  That index does
not vary from State to State, however.  That was not a problem
for Albery because his work was a time-series analysis.  Because
NTIA's analysis rests on cross-sectional data (i.e., data from a
single year that varies from State to State), the lack of
variation in Albery's toll index in any year means that NTIA
could not include it in our model. 

[14]               The model's rho-squared, which tests how well the model explains
the variation in the independent variables, is .204.  Values
between .20 and .40 are very satisfactory.  See Dan Steinberg and
Phillip Colla, LOGIT:  A supplementary module by Salford Systems
17 (San Diego, CA, Salford Systems 1994) (citing David Hensher
and Lester Johnson, Applied Discrete Choice Modeling (1981)).

[15]               If, in the future, the Commission determines that a nationwide
no-disconnect policy would be in the public interest, NTIA
believes that Public Service Commission of Maryland v. FCC, 909
F.2d 1510 (D.C. Cir. 1990), gives the Commission ample authority
to preempt the States.  We emphasize, however, that preemptive
Federal action in this area is permitted because disconnection of
local service for nonpayment of interstate long distance charges
has two essential characteristics:  (1) it impinges on Federal
interests by denying a household's ability to receive Federally-regulated communications; and (2) the reasons for local service
cutoff lie in the subscriber's actions or inactions with respect
to that Federally-regulated service.  If, on the other hand,
termination of local service is triggered by a subscriber's
conduct concerning a service wholly within the State's
jurisdiction (such as a failure to pay intrastate toll charges),
Federal preemption would not be justified, even though such
disconnection would indirectly affect Federal interests.  See id.
at 1515 n.6.

                   Bell Atlantic contends that the Maryland decision bars the
Commission from adopting a national no-disconnect policy.  See
Comments of Bell Atlantic at 10-11.  That argument, however,
rests on a selective quotation of footnote six of the court's
opinion.  Read in its entirety, that passage makes plain that the
court looked askance only at Commission preemption of State
disconnect policies motivated exclusively by actions and
interests entirely within a State's jurisdiction under the
Communications Act.  The tenor of the court's opinion, and its
ultimate holding, indicate that the court would likely have
upheld a Commission decision barring disconnection of local
service for nonpayment of Federally-regulated long distance
charges.

[16]               Notice at 13012,  38.      

[17]               See Comments of Montana Independent Telecommunications Systems at
8.

[18]               In 1994, about 840,000 households received $18.5 million in Link
Up assistance.  Notice at 13008,  23.  See also Comments of U.S.
West at 9 (recommending a cost-benefit analysis before expanding
the Link Up program).     

[19]               See Comments of the National Telephone Cooperative Association at
12.  

[20]  The 1996 Act states, for example, that "Universal service
is an evolving level of telecommunications services that the
Commission shall establish periodically . . . taking into account
advances in telecommunications and information technologies and
services."  See the 1996 Act,  101.  The 1996 Act also directs
the Commission and the States to encourage the deployment of
advanced telecommunications capability to all Americans through
various methods.  See the 1996 Act,  706.

[21]  See Falling Through the Net, supra note 4.  

[22]               The NIIAC, which counsels the Administration's Information
Infrastructure Task Force, is a thirty-six member advisory panel
comprised of representatives of the private sector; State and
local governments; and community, public interest, education, and
labor groups.  The NIIAC has stated that a "short term national
goal should be set to deploy NII access and service capabilities
to all community-based institutions that serve the public, such
as schools and libraries, by the year 2000."  See NIIAC, Common
Ground:  Fundamental Principles for the National Information
Infrastructure, March 1995, p.8.  Even those who strongly
advocate that NII access to all homes is far superior to any
other arrangement still acknowledge the usefulness of access to
public institutions "as a transitional step towards full in-home
access."  See, e.g., Comments of Alliance for Public Technology
at 1, in NTIA's Inquiry on Universal Service and Open Access
Issues (submitted Dec. 14, 1994).        

[23]               See the 1996 Act,  101.  

[24]               Federal-State Joint Board on Universal Service, Notice of
Proposed Rulemaking and Order Establishing Joint Board, CC Docket
No. 96-45, FCC 96-93,  107-111 (released Mar. 8, 1996).