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 Federal  Communications  Commission  FCC  02-  33 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications 
 Capability  to  All  Americans  in  a  Reasonable  And  Timely  Fashion,  and  Possible  Steps 
 To  Accelerate  Such  Deployment  Pursuant  to  Section  706  of  the 
 Telecommunications  Act  of  1996 


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 CC  Docket  98-  146 


 THIRD  REPORT 
 Adopted:  February  6,  2002  Released:  February  6,  2002 
 By  the  Commission:  Chairman  Powell,  Commissioner  Abernathy,  and  Commissioner  Martin  issuing  separate  statements;  Commissioner  Copps  dissenting  and  issuing  a 
 statement.  Paragraph 


 I.  INTRODUCTION  ...............................................................................................................  1 
 II.  EXECUTIVE  SUMMARY..................................................................................................  7 
 III.  WHAT  IS  ADVANCED  TELECOMMUNICATIONS  CAPABILITY?  ...........................  8 
 IV.  IS  ADVANCED  TELECOMMUNICATIONS  CAPABILITY  BEING  DEPLOYED  TO  ALL  AMERICANS?.............................................................................  13 


 A.  Overview  of  the  Networks  Used  to  Provide  Advanced  Services...........................  14 
 B.  Presentation  of  Commissions  Data  Collection.....................................................  17  1.  Geographic  Distribution  of  High-  Speed  Deployment................................  21 


 2.  Demographic  Variables..............................................................................  32  3.  Survey  Data  By  Last  Mile  Technologies  ...................................................  42 


 C.  Investment  in  High-  Speed  Access  Technologies...................................................  61 
 D.  Overview  of  Trends  in  Developing  Technologies  .................................................  79 
 V.  IS  DEPLOYMENT  REASONABLE  AND  TIMELY?.....................................................  89 
 A.  Patterns  of  Deployment  ..........................................................................................  92 
 B.  Subscription  Rates................................................................................................  118 
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 C.  International  Deployment.....................................................................................  125 
 VI.  ACTIONS  TO  ACCELERATE  DEPLOYMENT  OF  ADVANCED  TELECOMMUNICATIONS  CAPABILITY..................................................................  133 


 A.  Overview..............................................................................................................  133 
 B.  Recent  Commission  Actions  ................................................................................  135 
 C.  Commission  Actions  Under  Consideration..........................................................  148 
 D.  Additional  Actions  ...............................................................................................  169 
 VII.  ORDERING  CLAUSE.....................................................................................................  178 


 Appendix  A:  Section  706  of  the  Telecommunications  Act  of  1996  Appendix  B:  Network  Overview 
 Appendix  C:  Commissions  Subscribership  Data  as  of  June  30,  2001  Appendix  D:  List  of  Commenters 


 I.  INTRODUCTION 
 1.  In  this  Third  Report,  the  Commission  concludes  its  third  inquiry  into  the  availability  of  advanced  telecommunications  capability  in  the  United  States.  1  Overall,  we  find 


 that  advanced  telecommunications  is  being  deployed  to  all  Americans  in  a  reasonable  and  timely  manner.  We  are  encouraged  that  the  advanced  services  market  continues  to  grow,  and  that  the 
 availability  of  and  subscribership  to  advanced  telecommunications  has  increased  significantly.  We  also  conclude  that  although  investment  trends  have  slowed  recently,  investment  in 
 infrastructure  for  advanced  telecommunications  remains  strong.  We  are  also  encouraged  by  technological  and  industry  trends,  which  indicate  that  alternative  and  developing  technologies 
 will  continue  to  be  made  available  to  consumers.  Furthermore,  we  emphasize  our  commitment  to  providing  the  appropriate  regulatory  framework  that  will  help  promote  deployment  for  all 
 Americans. 
 2.  Congress  directed  the  Commission  and  the  states,  in  section  706  of  the  Telecommunications  Act  of  1996,  to  encourage  deployment  of  advanced  telecommunications 


 capability  to  all  Americans  on  a  reasonable  and  timely  basis.  The  widespread  deployment  of  advanced  services  has  become  a  central  communications  policy  goal  for  the  Commission.  2  In 


 1  This  inquiry  is  required  by  section  706  of  the  Telecommunications  Act  of  1996  (1996  Act).  See    706,  Pub.  L.  104- 
 104,  Title  VII,  Feb.  8,  1996,  110  Stat.  153,  reproduced  in  the  notes  under  47  U.  S.  C.  157;  see  Appendix  A. 
 2  See  47  U.  S.  C.    254(  b)(  2)  and  (6),  added  to  the  Communications  Act  of  1934  (47  U.  S.  C.    151,  et.  seq.)  by  the 


 1996  Act.  On  August  10,  2001,  the  Commission  issued  a  Notice  of  Inquiry  (NOI)  under  section  706  of  the  1996  Act 
 into  whether  advanced  telecommunications  capability  is  being  deployed  to  all  American  in  a  reasonable  and  timely  fashion.  Pursuant  to  the  statute,  the  Commission  must  issue  its  Report  180  days  after  issuance  of  the  NOI.  Inquiry 


 Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  and 
 Timely  Fashion  and  Possible  Steps  to  Accelerate  Such  Deployment  Pursuant  to  Section  706  of  the 
 (continued....) 
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 conjunction  with  this  objective,  Congress  instructed  the  Commission  to  conduct  regular  inquiries  concerning  the  availability  of  advanced  telecommunications  capability  and,  based  on  our 
 findings,  to  take  action  to  accelerate  deployment,  if  necessary.  3  The  Commissions  first  and  second  inquiries  concluded  that  the  deployment  of  advanced  telecommunications  capability  was 
 reasonable  and  timely  on  a  general,  nationwide  basis.  4 
 3.  The  Commissions  Second  Report  cautioned,  however,  that  certain  groups  of  consumers  might  be  particularly  vulnerable  to  not  receiving  timely  deployment  of  advanced 


 telecommunications  capability.  5  In  particular,  the  Commission  identified  several  groups  of  consumers  as  being  particularly  vulnerable,  including  low-  income  consumers,  those  living  in 
 sparsely-  populated  areas,  minority  consumers,  consumers  living  on  tribal  lands,  persons  with  disabilities,  and  those  living  in  the  U.  S.  territories.  6  Over  the  last  18  months,  we  have  monitored 
 each  of  these  groups,  and  we  are  pleased  to  report  that  the  availability  of  advanced  services  appears  to  be  more  widely  available  among  almost  all  of  the  segments  of  consumers  than  it  was 
 at  the  time  of  our  Second  Report.  Nevertheless,  we  will  continue  to  monitor  deployment  to  determine  whether  these  consumers  continue  to  enjoy  reasonable  and  timely  deployment  of 
 advanced  services. 
 4.  In  conducting  this  third  inquiry,  the  Commission  used  its  previous  inquiries  as  a  framework  for  our  information  collection  and  analysis.  First,  we  solicited  information  relating  to 


 four  primary  questions  :  1)  What  is  advanced  telecommunications  capability?  2)  Is  advanced  telecommunications  capability  being  deployed  to  all  Americans?  3)  Is  deployment  reasonable 
 and  timely?  4)  What  actions  can  accelerate  deployment?  7  Second,  we  gathered  standardized  information  from  providers  of  advanced  telecommunications  capability  in  the  United  States, 
 including  wireline  telephone  companies,  cable  providers,  terrestrial  wireless  providers,  satellite  providers,  and  any  other  facilities-  based  providers  of  advanced  telecommunications  capability.  8 
 Third,  we  continued  our  dialogue  with  the  Joint  Federal-  State  Conference  on  Advanced  Services  (Joint  Conference).  9 


 (...  continued  from  previous  page)  Telecommunications  Act  of  1996,  CC  Docket  No.  98-  146,  Notice  of  Inquiry,  16  FCC  Rcd  15515  (2001)  (Third 
 Notice  of  Inquiry). 
 3    706(  b)  of  the  1996  Act. 


 4  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  and  Timely  Fashion, 
 CC  Docket  No.  98-  146,  Report,  14  FCC  Rcd  2398  (1999)  (First  Report);  Deployment  of  Advanced 
 Telecommunications  Capability  to  All  Americans  in  a  Reasonable  and  Timely  Fashion,  CC  Docket  No.  98-  146,  Report,  15  FCC  Rcd  20913  (2000)  (Second  Report). 


 5  Second  Report,  15  FCC  Rcd  at  20918. 
 6  Id. 
 7  Third  Notice  of  Inquiry,  16  FCC  Rcd  at  15515. 
 8  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Report  and  Order,  15  FCC  Rcd  7717  (2000) 
 (Data  Gathering  Order). 
 9  Federal-  State  Joint  Conference  on  Advanced  Telecommunications  Services,  Order,  14  FCC  Rcd  17622  (1999). 


 The  Federal-  State  Joint  Conference  on  Advanced  Services,  which  is  comprised  of  federal  and  state  representatives, 
 was  convened  by  the  Commission  on  October  8,  1999,  to  further  the  vision  of  section  706  of  the  1996  Act. 
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 5.  As  noted  by  the  Commission  in  the  Second  Report,  section  706  directs  the  Commission  to  focus  on  the  availability  of  advanced  telecommunications  capability.  10 
 Accordingly,  in  this  Report  we  consider  various  market,  investment,  and  technological  trends  in  order  to  assess  whether  infrastructure  capable  of  supporting  advanced  services  is  being  made 
 available  to  all  Americans.  We  examine  where  advanced  services  are  being  deployed,  so  that,  where  necessary,  we  can  develop  appropriate  public  policies  that  may  stimulate  the  deployment 
 of  advanced  services  to  unserved  locations  or  consumers.  In  addition,  we  believe  that  it  is  appropriate  to  emphasize  availability  because  we  do  not  believe  that  adoption  rates  should 
 necessarily  drive  government  responses.  Although  regulators  can  play  an  important  role  in  educating  consumers  about  the  availability  and  capability  of  advanced  services,  consumers  and 
 service  providers,  interacting  in  the  marketplace,  are  ultimately  best  suited  to  determine  how  and  when  advanced  services  should  be  produced  and  purchased.  Consumer  responses  to  advanced 
 services  applications  and  technologies  are  continuing  to  evolve,  and  we  believe  that  market  participants  should  resolve  challenges  through  technological  innovations,  marketing,  creative 
 financing  and  other  skills. 
 6.  In  the  following  sections,  we  address  the  four  basic  questions  asked  in  the  Commissions  Third  Notice  of  Inquiry.  11  We  also  make  our  judgment  as  to  whether  deployment 


 of  advanced  services  to  all  Americans  is  reasonable  and  timely  by  looking  at  three  major  factors:  availability,  and  how  it  has  changed  since  the  Second  Report;  levels  of  investment  and 
 projections  of  future  growth  with  advanced  telecommunications  capability;  and  finally,  various  advances  in  advanced  services  technology.  Although  we  reach  the  conclusion  in  this  Report  that 
 the  deployment  of  advanced  telecommunications  capability  is  reasonable  and  timely,  we  emphasize  that  the  further  deployment  of  advanced  services  is  one  of  the  Commissions  highest 
 priorities.  Accordingly,  we  are  actively  engaged  in  removing  barriers  and  encouraging  investment  in  advanced  telecommunications.  In  this  Report,  we  highlight  some  of  our  current 
 efforts  to  establish  a  rational  regulatory  framework  for  these  services,  to  promote  investment  through  competition  and  the  administration  of  our  universal  service  support  mechanisms,  make 
 efficient  use  of  available  spectrum  and  ensure  that  lack  of  access  to  the  public  rights-  of-  way  do  not  slow  deployment. 


 II.  EXECUTIVE  SUMMARY 
 7.  This  Report  answers  the  four  basic  questions  we  set  forth  in  the  Third  Notice  of  Inquiry. 


 1.  What  is  advanced  telecommunications  capability? 
   Consistent  with  prior  Reports,  we  will  use  the  terms  advanced  telecommunications  capability  and  advanced  services  to  describe  services  and  facilities  with  an  upstream 


 (customer-  to-  provider)  and  downstream  (provider-  to-  customer)  transmission  speed  of  more  than  200  kbps  in  this  Report. 


 10  See  Second  Report,  15  FCC  Rcd  at  20916-  20917. 
 11  See  Third  Notice  of  Inquiry,  16  FCC  Rcd  at  15515. 
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   We  will  also  use  the  term  high-  speed  to  describe  services  with  over  200  kbps  capability  in  at  least  one  direction.  In  addition,  we  will  maintain  our  prior  finding  that  a  service  may  have 
 asymmetrical  upstream  and  downstream  paths  and  still  be  advanced  telecommunications  capability  as  long  as  both  paths  provide  speeds  in  excess  of  200  kbps  to  the  network 
 demarcation  point  at  the  subscribers  premises. 
 2.  Is  advanced  telecommunications  capability  being  deployed  to  all  Americans? 


   In  determining  whether  advanced  telecommunications  capability  is  being  deployed  to  all  Americans,  we  discuss  the  data  reported  by  providers  who  participated  in  our  data  collection 
 program.  While  our  data  focuses  on  subscribership,  we  believe  that  it  is  a  useful  tool  to  determine  where  services  are  being  made  available,  given  that  customers  can  only  subscribe 
 where  high-  speed  networks  have  been  deployed.  In  addition,  we  consider  industry  and  analyst  assessments  of  investment  and  various  competitive  market  trends.  Finally,  we  take 
 note  of  various  emerging  technologies  and  how  they  may  affect  availability. 
   Comparison  with  data  on  high-  speed  subscribership  included  in  the  Second  Report  suggests  that  there  has  been  appreciable  growth  in  the  deployment  of  high-  speed  services  to 


 residential  and  small  business  consumers  in  the  past  eighteen  months.  Moreover,  these  figures  reveal  that  high-  speed  services  are  available  in  many  parts  of  the  country  and  suggest 
 that  certain  factors  --  such  as  population  density  and  income  --  continue  to  be  highly  correlated  with  the  availability  of  high-  speed  services  at  this  time. 


   Subscribers  to  high-  speed  services  were  reported  in  each  of  the  fifty  states,  the  District  of  Columbia,  Puerto  Rico,  and  the  Virgin  Islands  and  in  78  percent  of  all  the  zip  codes  in  the 
 United  States.  Our  data  further  indicate  that  97  percent  of  the  countrys  population  lives  in  those  zip  codes  where  high-  speed  subscribership  was  reported.  We  conclude  that  there  were 
 a  total  of  approximately  7.8  million  high-  speed  (including  advanced  services)  residential  and  small  business  subscribers,  as  of  June  2001.  Approximately  4.3  million  of  these  residential 
 and  small  business  customers  subscribed  to  services  that  meet  the  Commissions  definition  of  advanced  services. 


   With  respect  to  investment,  overall,  analysts  observe  that  carriers  have  continued  to  invest  in  this  sector  in  a  substantial  way  resulting  in  increased  availability  of  various  high-  speed  and 
 advanced  services  platforms  for  consumers  throughout  the  nation.  They  predict  this  trend  will  continue. 


   There  have  been  a  number  of  developments  in  the  technologies  capable  of  supporting  advanced  services  since  the  Second  Report.  Many  of  these  technologies,  including  satellite 
 and  3G  wireless,  appear  to  have  significant  potential  for  expanding  the  availability  of  advanced  telecommunications  to  more  Americans. 


 3.  Is  deployment  reasonable  and  timely? 
   Overall,  we  conclude  that  the  deployment  of  advanced  telecommunications  capability  to  all  Americans  is  reasonable  and  timely.  We  are  encouraged  by  the  expansion  of  advanced 


 services  to  many  regions  of  the  nation,  and  growing  number  of  subscribers.  We  also  conclude  that  investment  in  infrastructure  for  most  advanced  services  markets  remains 
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 strong,  even  though  the  pace  of  investment  trends  has  generally  slowed.  This  may  be  due  in  part  to  the  general  economic  slowdown  in  the  nation.  In  addition,  we  find  that  emerging 
 technologies  continue  to  stimulate  competition  and  create  new  alternatives  and  choices  for  consumers. 


   While  we  focus  on  the  availability  of  advanced  services  in  this  Report,  we  acknowledge  that  subscription  rates  may  influence  business  and  investment  decisions  and  may  consequently 
 have  an  effect  on  the  further  deployment  of  advanced  telecommunications.  We  consider  a  variety  of  factors  which  may  be  relevant  to  the  overall  subscription  rate  for  advanced 
 services,  including:  computer  ownership,  cost,  the  lack  of  applications  which  require  advanced  telecommunications  capability,  and  marketing  techniques. 


   We  believe  that  the  successful  deployment  of  advanced  telecommunications  capability  in  other  nations  may  be  instructive  to  our  efforts  to  provide  access  to  advanced 
 telecommunications  services  to  all  Americans.  We  acknowledge,  however,  that  some  of  the  results  may  be  of  limited  value  due  to  unique  circumstances  in  a  particular  nation.  A  recent 
 report  indicates  that  in  June  2001  the  United  States  had  a  broadband  penetration  rate  of  3.24  per  100  inhabitants.  Only  three  other  nations  had  higher  broadband  penetration  rates  -- 
 Korea  at  13.91,  Canada  at  6.22,  and  Sweden  at  4.52. 
 4.  What  actions  by  the  Commission  will  accelerate  deployment? 
   We  have  initiated  an  effort  to  establish  an  appropriate  regulatory  framework  to  promote  investment  in  infrastructure  and  increase  access  to  advanced  telecommunications  services  for 


 all  Americans.  This  effort  is  largely  encompassed  in  four  proceedings  before  the  Commission. 


   First,  the  Cable  Modem  NOI,  which  considers  the  definitional  question  of  the  regulatory  classification  under  the  Act  of  cable  modem  service;  second,  the  Broadband  NPRM,  which 
 will  initiate  an  inquiry  relating  to  the  statutory  classification  of  wireline  broadband  Internet  access  services;  third,  the  Incumbent  LEC  Broadband  Telecommunications  Services  NPRM 
 which  examines  the  appropriate  regulatory  requirements  for  the  incumbent  LECs  provision  of  domestic  broadband  telecommunications  services,  including  what  regulatory  safeguards 
 and  carrier  obligations,  if  any,  should  apply  when  a  carrier  that  is  dominant  in  the  provision  of  traditional  local  exchange  and  exchange  access  services  provides  broadband  service;  and 
 fourth,  the  Triennial  Review  NPRM,  which  considers  the  incumbent  LECs  wholesale  obligations  under  section  251  to  make  their  facilities  available  as  unbundled  network 
 elements  to  competitive  LECs. 
   We  will  promote  investment  in  advanced  services  infrastructure  through  our  examination  of  competitor  access  to  remote  terminals,  our  examination  of  national  performance  measures, 


 and  our  consideration  of  enhancement  of  our  rules  on  the  use  of  cable  inside  wiring. 
   We  will  continue  to  examine  the  role  of  our  universal  service  policies  through  the  Joint  Boards  inquiry  into  the  definition  of  core  services  that  are  eligible  for  universal  service 


 support,  and  our  continuing  efforts  to  improve  the  Schools  and  Libraries  and  Rural  Health  Care  Programs. 
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   We  are  examining  ways  to  make  more  radio  spectrum  available  for  advanced  services,  as  well  as  ways  to  enable  the  increased  use  of  radio  spectrum,  such  as  the  use  of  DBS  spectrum, 
 through  our  proposals  to  encourage  a  secondary  market  for  radio  spectrum. 
   We  are  considering  the  appropriate  roles  and  practices  of  federal,  state,  and  local  governments  with  respect  to  rights-  of-  way  management,  consistent  with  applicable  legal 


 constraints. 
 III.  WHAT  IS  ADVANCED  TELECOMMUNICATIONS  CAPABILITY? 
 8.  In  this  section,  we  address  the  first  question  asked  in  our  Third  Notice  of  Inquiry:  What  is  advanced  telecommunications  capability?  On  a  basic  level,  consumers  have  generally 


 come  to  expect  that  advanced  telecommunications  capability  will  allow  fast  access  to  a  wide  range  of  information  and  services.  More  specifically,  section  706(  b)  of  the  1996  Act  describes 
 advanced  telecommunications  capability  as  high-  speed,  switched,  broadband  telecommunications  capability  that  enables  users  to  originate  and  receive  high-  quality  voice, 
 data,  graphics,  and  video  telecommunications  using  any  technology.  12 
 9.  At  this  time,  we  believe  that  the  200  kbps  and  2  Mbps  transmission  speeds  (in  technical  terms,  bandwidth)  previously  designated  by  the  Commission  continue  to  serve  as 


 appropriate  benchmarks  to  assess  the  deployment  of  advanced  services.  13  As  a  result,  we  have  continued  using  the  current  data  collection  using  those  speeds  as  measuring  points  for  our 
 progress.  14  In  addition,  consistent  with  prior  Reports,  we  will  use  the  terms  advanced  telecommunications  capability  and  advanced  services  to  describe  services  and  facilities  with 
 an  upstream  (customer-  to-  provider)  and  downstream  (provider-  to-  customer)  transmission  speed  of  more  than  200  kbps  in  this  Report.  15  We  will  also  use  the  term  high-  speed  to  describe 
 services  with  over  200  kbps  capability  in  at  least  one  direction.  16  Thus,  high-  speed  is  a  larger 


 12    706(  b)  of  the  1996  Act. 
 13  See  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Report  and  Order,  15  FCC  Rcd  7717, 
 7752-  7753  (2000)  (Data  Gathering  Order)(  [  W]  e  require  respondents  to  report  two  items  of  information  about  the  portion  of  total  lines  and  wireless  channels  they  provide  that  are  particularly  "fast."  We  decide  we  need  this 


 information  to  assist  us  in  evaluating  the  evolving  market  for  such  services.  We  require  respondents  to  report, 
 specifically,  the  percent  of  broadband  lines  and  wireless  channels  they  provide  with  information  carrying  capacity  greater  than  200  Kbps  in  both  directions,  and  also  the  percent  of  broadband  lines  and  wireless  channels  they  provide 


 with  information  carrying  capacity  greater  than  2  Mbps  in  both  directions.  We  understand  that,  in  future  years,  the 
 appropriate  definition  of  broadband  service  may  change  as  technology  improves  and  consumer  demand  grows  for  more  features  and  functions  from  residential  broadband  service.  We  believe  that  services  at  speeds  over  200  Kbps 


 and  2  Mbps  are  currently  available  through  traditional  wireline  offerings  --  though  most  often  deployed  to 
 businesses  --  and  we  conclude  that  the  information  we  require  respondents  to  report  will  enable  us  to  detect  the  evolution  of  supply  and  demand  for  such  future  generations  of  broadband.) 


 14  See  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Second  Notice  of  Proposed 
 Rulemaking,  16  FCC  Rcd  2072  (2000)  (Data  Gathering  Second  NPRM). 
 15  First  Report,  14  FCC  Rcd  at  2406-  2408;  Second  Report,  15  FCC  Rcd  at  20919-  20921.  As  we  previously  noted, 


 our  inclusion  of  all  technology  used  for  delivery  of  advanced  and  high-  speed  services  in  our  assessment  of  advanced 
 telecommunications  capability  does  not  implicate  any  determination  by  this  Commission  as  to  the  treatment  of  these  services  for  regulatory  purposes  under  the  Act.  Second  Report,  15  FCC  Rcd  at  20928.  Many  of  these  questions  are 


 the  subject  of  other  proceedings  currently  before  the  Commission.  See  infra,  paras.  148  -  168. 
 16  Id. 
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 category  than  advanced  telecommunications,  and  high-  speed  consists  of  those  services  and  facilities  with  a  transmission  speed  of  more  than  200  kbps  in  at  least  one  direction.  We  also 
 maintain  our  prior  finding  that  a  service  may  have  asymmetrical  upstream  and  downstream  paths  and  still  be  advanced  telecommunications  capability  as  long  as  both  paths  provide  speeds  in 
 excess  of  200  kbps  to  the  network  demarcation  point  at  the  subscribers  premises.  17 
 10.  We  acknowledge  that  there  is  reasonable  debate  over  what  speed  should  be  considered  as  advanced  telecommunications  capability  and  what  speeds  will  be  demanded  by 


 consumers  in  the  long  run.  18  We  emphasize  that  the  speeds  we  have  designated  for  data  collection  and  as  points  of  reference  for  this  Report  are  not  intended  to  be  viewed  as  an  ultimate 
 goal.  Instead,  they  are  intended  to  measure  what  is  happening  in  the  current  market,  not  to  drive  the  market.  Nor  do  these  definitions  drive  any  regulatory  result  outside  of  this  Report,  beyond 
 giving  us  a  relatively  static  point  at  which  to  gauge  the  progress  and  growth  in  the  advanced  services  market  from  one  Report  to  the  next.  As  stated  in  our  prior  Reports,  we  anticipate  that 
 our  measure  of  advanced  telecommunications  capability  and  advanced  services  may  change  as  technology  continues  to  evolve.  19  In  fact,  we  recognize  that  products  are  beginning  to  emerge 
 that  require  high-  bandwidth  capability,  such  as  high-  definition  video.  20  At  this  time,  however,  consumer  expectations  relating  to  these  products  are  continuing  to  develop.  21  The  Commission 
 has  launched  a  number  of  proceedings  that  will  consider  the  advanced  telecommunications  market  including  any  necessary  definitional  issues.  22  We  anticipate  that  these  proceedings  may 
 inform  whether  it  will  be  appropriate  to  adjust  the  points  at  which  we  gauge  advanced  telecommunications  capability  in  the  future. 


 11.  In  the  First  Report,  the  Commission  stated  several  reasons  for  choosing  200  kbps  as  a  benchmark.  23  First,  it  appeared  that  Congress  intended  advanced  telecommunications 


 17  First  Report,  14  FCC  Rcd  at  2406-  2407  (advanced  telecommunications  capability  must  be  two-  way  and  switched, 
 but  upstream  and  downstream  paths  need  not  be  in  the  same  self-  contained  offering;  advanced  telecommunications  capability  includes  facilities  that  have  been  upgraded  or  otherwise  altered  in  ways  that  make  them  capable  of  high-speed 


 bandwidth);  Second  Report,  15  FCC  Rcd  at  20921. 
 18  See,  e.  g.,  NRTC  Comments  at  1  (  NRTC  believes  that  the  FCC  should  revise  its  current  definition  to  encourage 


 the  growth  of  faster-  than-  dial-  up,  packet-  switched  Internet  technologies  that  do  not  fall  under  the  current  advanced 
 telecommunications  capability  definition.);  Intertainer,  Inc.  Comments  at  1  (  we  would  suggest  that  the  definition  of  advanced  telecommunications  capability  be  revised  to  a  bandwidth  in  excess  of  700  kilobits  per 


 second.) 
 19  See  First  Report,  14  FCC  Rcd  at  2407-  2408;  Second  Report,  15  FCC  Rcd  at  20921. 


 20  See,  e.  g.,  Intel  Comments  at  3  (  transmission  of  video  requires  higher  speed  access  than  is  available  to  most 
 households  with  current  generation  of  broadband  access.);  Corning  Comments  at  5  (  Corning  recommends  that 
 the  FCC  define  advanced  telecommunication  capability  as  4  Mbps  upstream  and  downstream.). 
 21  See  Progress  &  Freedom  Foundation  Comments  at  15  (  Perhaps  more  bandwidth  than  the  200  kbps  in  both 


 directions  that  the  Commission  identified  a  few  years  ago  will  be  required,  although  no  one  knows  with  any 
 certainty  what  elements  will  make  up  this  new  value  proposition.);  Michael  Ching  and  Tal  Liani,  Merrill  Lynch,  Broadband  Access    Speed  is  of  the  Essence,  May  15,  2001,  at  10  (  Video  over  the  Internet  represents  only  a 


 miniscule  amount  of  the  traffic  being  carried  over  the  Internet.  But  if  it  were  to  gain  wider  acceptance,  or  if  any 
 other  high  intensity  application  were  to  gain  traction,  this  would  substantially  increase  bandwidth  requirements.). 
 22  See  infra  paras.  151-  154. 


 23  First  Report,  14  FCC  Rcd  at  2406.  We  note  that  the  Commission  used  the  terms  broadband  and  broadband 
 services  in  the  First  Report.  In  the  Second  Report,  the  Commission  determined  that  the  terms  broadband  and  (continued....) 
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 capability  to  be  faster  than  Basic  Rate  ISDN  service,  which  operates  at  a  data  rate  of  144  kbps  and  was  widely  available  at  the  time  of  the  1996  Act.  24  Second,  200  kbps  is  enough  to  provide 
 the  most  popular  applications,  including  web-  browsing  at  the  same  speed  as  one  can  flip  the  pages  of  a  book.  25  Finally,  the  Commission  required  that  both  upstream  and  downstream  paths 
 have  this  capability  because  section  706(  b)  uses  the  words  originate  and  receive.  26  Following  adoption  of  the  First  Report,  the  Commission  established  a  comprehensive  reporting  requirement 
 for  providers  of  high-  speed  and  advanced  services  in  order  to  track  the  growth  of  advanced  telecommunications  capabilities.  27  Consistent  with  the  initial  measuring  point  designated  in  the 
 First  Report,  service  providers  are  required  to  provide  the  Commission  with  information  about  lines  that  are  capable  of  providing  service  at  200  kbps  in  one  direction,  200  kbps  in  both 
 directions,  and  2  Mbps  in  both  directions.  In  the  Second  Report,  the  Commission  was  able  to  use  this  data  to  help  examine  the  growth  of  availability  of  200  kbps,  or  faster,  speeds  in  both  the 
 upstream  and  downstream  paths  of  the  last  mile.  28 
 12.  We  recognize  that  the  speed  at  which  we  define  advanced  telecommunications  capability  has  major  implications  for  our  analysis  of  deployment.  Were  we  to  use  a  transmission 


 speed  higher  than  200  kbps  to  define  advanced  telecommunications  capability,  we  would  find  a  correspondingly  lower  level  of  availability.  The  level  of  availability  of  higher  transmission 
 speeds,  in  turn,  may  have  implications  for  adoption  rates.  As  mentioned,  certain  applications,  such  as  some  video  products,  require  transmission  speeds  in  excess  of  200  kbps.  Some  argue 
 that  such  applications,  or  others  that  require  speeds  in  excess  of  200  kbps,  are  the  kind  of  content  that  will  lead  consumers  to  adopt  advanced  telecommunications  capability  in  greater  numbers. 
 As  technology  continues  to  evolve,  and  with  it,  consumer  expectations,  it  may  be  appropriate  to  adopt  a  higher  threshold  for  advanced  telecommunications  capability  and  revisit  our  analysis  of 
 deployment.  We  will  continue  to  closely  monitor  this  issue. 
 IV.  IS  ADVANCED  TELECOMMUNICATIONS  CAPABILITY  BEING  DEPLOYED 
 TO  ALL  AMERICANS? 


 13.  In  this  section,  we  address  the  second  question  that  we  asked  in  our  Third  Notice  of  Inquiry:  Is  advanced  telecommunications  capability  being  deployed  to  all  Americans?  As  an 


 initial  matter,  we  provide  a  brief  overview  of  the  networks  used  to  provide  advanced  services  and  the  technologies  employed  in  those  networks.  The  network  components  and  technologies  are 


 (...  continued  from  previous  page)  broadband  services  had  come  to  include  a  much  broader  range  of  services  and  facilities  and  decided  to  use  the 
 terms  advanced  telecommunication  capability  and  advanced  services.  Second  Report,  15  FCC  Rcd  at  20930. 
 24  First  Report,  14  FCC  Rcd  at  2406,  n.  13. 


 25  In  comparison,  typical  business  teleconferencing  services  are  120-  250  kbps,  conventional  televisions  are  750  kbps 
 to  1  Mbps,  videocassette  tapes  are  1.5  Mbps,  and  movie  theatre  images  are  several  Mbps.  First  Report,  14  FCC  Rcd 
 at  2406. 
 26  Section  706(  b)  of  the  1996  Act;  First  Report,  14  FCC  Rcd  at  2406-  07  &  n.  17. 


 27  See  Data  Gathering  Order,  15  FCC  Rcd  at  7717.  The  Commission  requires  semi-  annual  reports  by  any  facilities-based 
 firm  that  provides  at  least  250  high-  speed  service  lines  or  wireless  channels  in  a  given  state  or  that  has  at  least  250  high-  speed  customers  in  a  given  state.  See  also  Local  Competition  and  Broadband  Reporting  Form,  OMB 


 3060-  0816  (Sep.  2001)  (Form  477). 
 28  Second  Report,  15  FCC  Rcd  at  20920. 
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 discussed  in  greater  detail  in  an  attached  appendix.  29  We  then  discuss  the  data  reported  by  providers  who  participated  in  our  data  collection  program.  30  This  information  is  a  tool  that  we 
 use  to  help  assess  the  availability  and  location  of  high-  speed  capable  infrastructure.  Following  the  presentation  of  data,  we  discuss  industry  and  analyst  assessments  of  investment  and  various 
 competitive  market  trends.  Finally,  we  provide  an  overview  of  emerging  technology  and  how  it  may  affect  availability. 


 A.  Overview  of  the  Networks  Used  to  Provide  Advanced  Services 
 14.  Advanced  services  are  provided  using  a  variety  of  public  and  private  networks  that  rely  on  different  network  architectures  and  transmission  paths.  31  Some  of  these  networks  are 


 public  in  the  sense  that  access  to  the  network  is  open  to  all  users.  Other  networks,  like  those  built  and  maintained  by  corporations  for  their  internal  use,  are  private  in  the  sense  that  access  to 
 the  network  may  be  restricted  to  a  particular  class  of  users,  often  the  corporations  employees.  Moreover,  depending  on  the  network,  data  may  travel  from  the  sender  to  the  recipient  over 
 various  architectures  and  transmission  paths  such  as  copper  wire,  cable,  terrestrial  wireless  radio  spectrum,  satellite  radio  spectrum,  or  a  combination  of  these  and  other  media.  In  addition,  data 
 may  be  transmitted  using  different  communications  protocols  that  manage  and  direct  traffic  at  different  layers  of  a  particular  network.  32 


 15.  Although  advanced  services  are  provided  over  myriad  combinations  of  public  and  private  networks  using  a  variety  of  transmission  paths  and  protocols,  for  the  purposes  of  this 
 Report,  we  focus  on  the  physical  components  of  the  network  infrastructure.  For  simplicity,  we  have  divided  network  infrastructure  into  four  general  categories:  long  haul  communications 
 transport  facilities,  33  middle  mile,  last  mile,  and  last  100  feet.  In  addition,  we  refer  to  the  points  of  connection  between  these  components  of  the  network  as  connection  points.  These  network 
 components  are  useful  for  organizing  our  analysis;  however,  we  recognize  that  because  of  the  wide  variety  of  network  architectures  and  transmission  media  that  deliver  advanced 
 telecommunications  capabilities,  some  of  these  categories  may  overlap  or  be  absent  in  a  specific  situation. 


 16.  Long  haul  communications  transport  facilities  provide  a  long-  distance,  high-capacity,  high-  speed  transmission  path  for  transporting  massive  quantities  of  data.  34  Most  long 
 29  See  Appendix  B. 
 30  See  Form  477. 
 31  See  Second  Report,  15  FCC  Rcd  at  20922-  20939. 
 32  For  instance,  the  Internet  Protocol  (Transmission  Control  Protocol/  Internet  Protocol  suite)  supports 
 interconnections  across  any  physical  transport  medium,  including  wireline,  terrestrial  wireless  and  satellite,  at 
 various  rates,  and  can  support  various  applications.  Other  transmission  protocols  such  as  asynchronous  transfer  mode  (ATM)  or  frame  relay  exist  within  other  networks  capable  of  supporting  advanced  telecommunications 


 capabilities. 
 33  In  our  prior  Report,  we  used  the  term  backbone  to  refer  to  long  haul  communications  transport  facilities.  This 


 led  to  some  confusion  as  to  whether  we  were  referring  to  high-  speed  physical  transport  specific  to  the  Internet  backbone.  The  Internet  backbone  uses  high-  speed  fiber  infrastructure,  but  so  do  other  applications,  including 


 conventional  voice.  See  Second  Report,  15  FCC  Rcd  at  20923-  20924.  In  this  Report,  we  use  the  term  long  haul  communications  transport  facilities  to  refer  to  high-  speed  physical  transport,  that  includes,  but  is  not  limited  to, 
 facilities  used  to  support  the  Internet  backbone. 
 34  See  Appendix  B  at  paras.  2-  4;  Second  Report,  15  FCC  Rcd  at  20922. 
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 haul  transport  facilities  consist  of  fiber  optic  lines,  either  buried  under  the  ground  or  laid  under  the  sea.  In  addition,  some  of  these  facilities  can  be  provided  using  satellite  systems  and  radio 
 spectrum.  As  its  name  suggests,  middle  mile  facilities  provide  relatively  fast,  large-  capacity  connections  between  long  haul  facilities  and  last  mile.  35  Middle  mile  facilities  can  range  from  a 
 few  miles  to  a  few  hundred  miles.  They  are  often  constructed  of  fiber  optic  lines,  but  microwave  and  satellite  links  can  be  used  as  well.  The  last  mile  is  the  link  between  the  middle  mile  and  the 
 last  100  feet  to  the  end-  users  terminal.  36  A  last  mile  with  advanced  telecommunications  capability  provides  speeds  in  excess  of  200  kbps  in  each  direction.  Last  miles  may  consist  of 
 hybrid  fiber-  coaxial  cable,  37  copper  wire,  38  or  wireless  channels  used  in  terrestrial  39  or  satellite  systems.  40  Some  last-  mile  segments  --  for  example  those  on  certain  satellite  systems  --  provide 
 faster  downstream  speeds  than  upstream  speeds  either  because  their  network  configurations  will  not  support  the  higher  upstream  speed  or  because  they  rely  on  a  telephone  return  path.  The  last 
 100  feet  is  the  link  between  the  last  mile  and  the  end-  users  terminal.  41  The  last  100  feet  includes  the  in-  house  wiring  found  in  a  consumers  residence,  the  wiring  in  an  apartment  or 
 office  building,  the  more  complex  wiring  in  a  wireline  local  area  network,  or  the  wireless  links  in  a  local  wireless  network.  Finally,  connection  points  are  the  places  at  which  the  various 
 components  of  the  network  interconnect,  often  with  the  aid  of  an  electronic  or  optical  device  (e.  g.,  switches  and  routers  between  the  middle  mile  and  national  communications  transport 
 facilities),  so  that  data  can  move  across  the  network.  42 
 B.  Presentation  of  Commissions  Data  Collection 
 17.  In  this  section  of  the  Report,  we  discuss  data  obtained  through  the  Commissions  data  collection  program.  43  This  program  requires  any  facilities-  based  firm  that  provides  250  or 


 more  high-  speed  service  lines  (or  wireless  channels)  in  a  given  state  to  report  basic  information  about  its  service  offerings  and  customers  twice  yearly.  44  As  part  of  the  Commissions  data 
 collection,  providers  report  the  total  number  of  high-  speed  lines  (or  wireless  channels)  --  broken  down  by  type  of  technology  --  for  each  state  in  which  they  exceed  the  reporting  threshold.  For 
 each  of  these  "technology  subtotals,"  providers  report  additional  detail  concerning  the  percentage  of  lines  that  are  connected  to  residential  and  small  business  users  (as  opposed  to  large  business 
 and  institutional  users)  and  the  percentage  of  lines  that  meet  the  Commissions  definition  of  advanced  services  (as  opposed  to  one-  way  high-  speed  lines),  along  with  the  number  of  lines  that 


 35  See  Appendix  B  at  paras.  5-  8;  Second  Report,  15  FCC  Rcd  at  20922. 
 36  See  Appendix  B  at  para.  9;  Second  Report,  15  FCC  Rcd  at  20923. 
 37  See  Appendix  B  at  paras.  10-  23. 
 38  Id.  at  paras.  24-  30. 
 39  Id.  at  31-  44. 
 40  Id.  at  45-  49. 
 41  See  Appendix  B  at  50;  Second  Report,  15  FCC  Rcd  at  20923. 
 42  See  Appendix  B  at  51;  Second  Report,  15  FCC  Rcd  at  20923. 
 43  See  Data  Gathering  Order,  15  FCC  Rcd  at  7717  (adopting  FCC  Form  477  as  a  vehicle  for  collecting  this 
 information).  The  Commission  has  requested  comments  on  whether  various  modifications  should  be  made  to  this  data  collection.  See  Data  Gathering  Second  NPRM,  16  FCC  Rcd  2072. 


 44  See  Form  477,  available  at  <http://  www.  fcc.  gov/  formpage.  html>.  Filings  of  December  31  data  are  due  the 
 following  March  1,  and  filings  of  June  30  data  are  due  the  following  September  1. 
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 are  capable  of  providing  speeds  of  2  Mbps.  45  Finally,  these  providers  also  report  a  list  of  the  zip  codes  where  they  have  at  least  one  customer  of  high-  speed  service.  46 
 18.  Using  data  from  Commissions  data  collection,  in  combination  with  publicly-available  data  from  high-  speed  service  providers  themselves,  financial  analysts,  and  the  Census 
 Bureau,  we  are  able  to  develop  our  understanding  of  the  current  deployment  of  high-  speed  services.  The  snapshots  derived  from  our  data  collection  shed  light  on  the  availability  of  high-speed 
 services  in  different  parts  of  the  country  and  across  different  demographic  variables,  such  as  population  density  and  income.  In  this  Report,  we  compare  data  as  of  June  30,  2001,  with 
 similar  information,  as  of  December  31,  1999,  presented  in  the  Second  Report.  Comparison  with  data  on  high-  speed  subscribership  included  in  the  Second  Report  suggests  that  there  has  been 
 appreciable  growth  in  the  deployment  of  high-  speed  services  to  residential  consumers  in  the  past  eighteen  months.  We  detail  these  findings,  below. 


 19.  Some  participants  in  the  Commissions  data  collection  request  non-  disclosure  of  all  or  portions  of  their  data,  asserting  that  it  contains  competitively-  sensitive  information.  47  In 
 the  Data  Gathering  Order,  the  Commission  agreed  to  publish  in  its  regular  reports  high-  speed  data  only  once  it  has  been  aggregated  such  that  it  does  not  reveal  individual  company  data.  48 
 Accordingly,  the  data  is  presented  here,  and  in  the  statistical  summary  that  we  are  releasing  simultaneously  with  this  Report,  in  a  manner  that  does  not  reveal  individual  company  data.  49 


 20.  There  may  be  limitations  to  the  conclusions  we  are  able  to  draw  based  on  data  from  the  Commissions  data  collection  program.  Indeed,  the  Commission  is  currently 
 considering  whether  certain  modifications  should  be  made  to  its  data  collection  program,  in  order  to  develop  more  fully  our  understanding  of  the  deployment  and  availability  of  advanced 
 telecommunications.  50  In  particular,  the  Commission  sought  comment  on  how  to  best  collect  data  on  the  availability  of  advanced  services  to  discrete  geographic  areas  and  among  distinct 


 45  Providers  also  reported  information  about:  the  percentage  of  lines  that  were  provided  solely  over  their  own 
 facilities  (as  opposed  to  over  leased  facilities)  and  the  percentage  of  lines  that  they  billed  directly  to  the  end  user  (as 
 opposed  to  another  provider  or  reseller). 
 46  Reflecting  concerns  about  regulatory  burden  on  firms  providing  high-  speed  services,  the  Commission  did  not 


 require  providers  to  report  the  specific  number  of  subscribers  in  a  particular  zip-  code  or  detailed  breakdowns  by 
 speed  or  type  of  customer.  Nor  did  the  Commission  require  firms  to  report  data  concerning  states  where  they  provided  fewer  than  250  high-  speed  lines.  Therefore,  our  data  concerning  areas  where  there  are  many  small 


 providers  may  understate  deployment.  In  each  of  our  four  data  collections  to  date,  about  40  entities  have  made 
 voluntary  filings,  representing  less  than  0.1  percent  of  total  reported  high-  speed  lines. 
 47  Cf.  47  C.  F.  R.    0.459(  d). 


 48  See  Data  Gathering  Order,  15  FCC  Rcd  at  7760. 
 49  High-  Speed  Services  for  Internet  Access:  Subscribership  as  of  June  30,  2001  (Ind.  Anal.  Div.  rel.  Feb.  6,  2002) 
 (Appendix  C),  available  at  <http://  www.  fcc.  gov.  Bureaus/  CommonCarrier/  Reports/  FCC-  StateLink/  comp.  html>.  We  note  that  Hughes  Network  Systems  has  filed  a  petition  for  declaratory  ruling  seeking  to  clarify  how  the  Commission 


 will  ensure  the  non-  disclosure  of  information  submitted  in  the  FCC  Form  477  that  filers  identify  as  competitively-sensitive  and  proprietary.  Petition  for  Declaratory  Ruling  on  Local  Carrier  and  Broadband  Reporting  Requirement, 
 CC  Docket  99-  301,  Petition  for  Declaratory  Ruling,  filed  May  15,  2000.  We  do  not  address  Hughes'  petition  here. 
 In  this  Report,  and  in  the  statistical  summary  released  simultaneously,  the  Commission  uses  statistical  methods,  such  as  suppression  and  aggregation,  to  ensure  that  individual  company-  filed  broadband  data  obtained  from  the 


 Commissions  data  collection  program  will  not  be  revealed  through  the  use  of  released  information. 
 50  See  Data  Gathering  Second  NPRM,  16  FCC  Rcd  at  2072. 
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 demographic  groups.  51  At  the  same  time,  the  Commission  sought  comment  on  ways  to  eliminate  any  unnecessary  or  unduly  burdensome  aspects  to  the  data  collection  program.  52 
 1.  Geographic  Distribution  of  High-  Speed  Deployment 
 21.  Overview  and  methodology.  By  analyzing  the  zip  codes  where  there  are  actual  high-  speed  subscribers,  we  can  gain  useful  insight  into  the  deployment  and  location  of  high-speed- 


 capable  infrastructure.  53  Subscribership  necessarily  reflects  a  combination  of  factors  including:  availability  of  infrastructure,  service  offerings  that  are  tailored  to  meet  consumers 
 needs,  and  affordable  pricing.  We  believe  that  our  data  is  a  useful  tool  in  determining  where  services  are  being  made  available,  given  the  close  association  between  deployment  and 
 subscription,  and  can  help  us  identify  issues  of  concern  for  further  exploration.  For  instance,  the  data  show  areas  where  at  least  one  customer  receives  high-  speed  service  in  the  last  mile  to  the 
 customer  premises.  As  a  result,  consumers  in  zip  codes  with  no  reported  subscribers  may  be  differently  situated,  and  therefore  may  require  different  solutions  to  bring  them  access  to 
 services,  than  consumers  in  zip  codes  where  last  mile  infrastructure  exists  but  other  barriers  prevent  them  from  accessing  high-  speed  services. 


 22.  A  substantial  majority  of  the  zip  codes  reporting  high-  speed  subscribership  contained  services  that  rely  on  infrastructure  that  is  generally  available  to  more  than  a  single 
 customer  at  a  time.  For  instance,  cable  operators  generally  do  not  upgrade  their  networks  on  a  piecemeal  basis:  an  upgraded  cable  network  can  provide  high-  speed  service  to  all  of  the  homes 
 that  it  passes.  54  Accordingly,  the  presence  of  a  few  --  or  even  one  --  cable  modem  subscribers  on  a  particular  system  likely  indicates  that  other  subscribers  to  the  same  system  could  obtain  similar 
 service.  Similarly,  much  of  the  infrastructure  work  necessary  to  provide  DSL  service  occurs  in  the  carriers  central  office.  55  Once  that  work  has  taken  place,  most  customers  served  by  that 
 central  office  typically  can  obtain  DSL  service  without  great  additional  difficulty.  56  The  presence  of  satellite  service  also  indicates  the  likely  availability  of  the  signal  to  nearby 
 customers.  57 


 51  Id. 
 52  Id. 
 53  As  noted  above,  the  most  recently  collected  zip  code  data  depict  where  actual  high-  speed  subscribers  are  located 
 as  of  the  end  of  June  2001. 
 54  We  note  that  the  boundaries  of  zip  codes  and  cable  service  areas  and  wire  center  boundaries  are  not  identical. 


 Accordingly,  the  presence  in  one  zip  code  of  a  high-  speed  subscriber  does  not  conclusively  indicate  the  availability 
 of  similar  service  to  other  residents  of  that  zip  code. 
 55  We  note,  however,  that  LECs  must  also  condition  each  end-  users  line  by  removing  the  load  coils  and  bridged 


 taps,  while  increasing  the  strength  of  the  signal  to  maintain  the  quality  of  the  lines  voice  traffic.  The  amount  of 
 conditioning  necessary  may  influence  a  carriers  ability  to  provide  advanced  services  to  customers  served  by  the  same  central  office. 


 56  In  this  regard,  DSL  service  contrasts  with  T1  service,  subscription  to  which  does  not  necessarily  indicate  the 
 availability  of  supporting  infrastructure  within  the  area  surrounding  a  single  subscriber. 
 57  We  note  that  high-  speed  satellite  services  are  currently  being  offered  in  all  50  states.  See  Q&  A  StarBand  Facts 


 (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  faq/  starbandfacts.  htm#  available2>  (  The  StarBand  service  is 
 currently  available  only  in  the  48  contiguous  U.  S.,  Alaska  and  Hawaii.). 
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 Federal  Communications  Commission  FCC  02-  33 
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 23.  Zip  code  data  from  our  data  collection  show  the  presence  of  high-  speed  subscribership  and,  to  some  extent,  the  presence  of  high-  speed-  capable  last  miles.  These  data  do 
 not  purport  to  show  all  of  the  infrastructure  that  is  high-  speed  capable.  By  collecting  data  on  actual  subscribers,  we  capture  part  of  the  overall  infrastructure  (namely,  the  last  mile)  that  is 
 currently  used  to  provide  high-  speed  services.  58  We  also  know  that  many  providers  are  deploying  or  upgrading  last  mile  facilities  that  will  soon  be  capable  of  providing  high-  speed 
 services.  We  attempt,  in  other  areas  of  this  Report,  to  describe  the  capital  investment  in  high-speed  infrastructure,  plans  for  growth,  and  analyst  projections  for  the  deployment  of  high-  speed 
 infrastructure.  In  future  years,  this  investment  will  be  reflected  in  increased  subscribership,  which  will  be  captured  in  our  future  data  collections,  including  in  the  zip  code  data.  59 


 24.  The  results  of  our  data  collection  give  two  perspectives  into  the  geographic  distribution  of  high-  speed  services.  First,  we  are  able  to  calculate  the  number  of  high-  speed  and 
 advanced  service  lines  in  each  state,  the  District  of  Columbia,  Puerto  Rico,  and  the  U.  S.  Virgin  Islands  --  all  of  which  report  at  least  some  level  of  high-  speed  service.  60  Second,  the  zip  code 
 data  present  an  elementary  view  of  where  high-  speed  service  subscribers  are  located  on  a  more  granular  basis.  The  providers  reported  a  list  of  each  zip  code  in  which  they  had  at  least  one  high-speed 
 service  subscriber.  These  data  give  insight  into  whether  there  are  high-  speed  service  subscribers  and  to  some  extent  facilities  in  any  given  zip  code. 


 25.  In  order  to  minimize  the  burden  associated  with  the  data  collection,  the  Commission  did  not  require  providers  to  report  the  number  or  type  of  high-  speed  service 
 subscribers  in  each  zip  code,  but  only  to  identify  the  zip  codes  in  which  they  had  at  least  one  high-  speed  service  subscriber.  Therefore,  we  cannot  determine  from  our  data  the  full  extent  to 
 which  the  presence  of  high-  speed  service  in  a  given  zip  code  indicates  that  high-  speed  services  are  widely  available,  or  whether  they  are  restricted  to  a  few  customers.  Similarly,  providers  did 
 not  distinguish  whether  the  high-  speed  subscribers  in  a  given  zip  code  are  residential  or  business  users.  Thus,  in  some  zip  codes,  high-  speed  services  may  be  available  to  some  large,  primarily 
 business  users,  but  not  be  available,  affordable  or  marketed  to  residential  users.  In  addition,  service  could  be  marketed  to  limited  neighborhoods,  or  very  localized  infrastructure  barriers 
 such  as  inside  wiring  issues  could  prevent  some  customers  in  a  zip  code  from  accessing  services  available  to  other  customers  in  the  same  zip  code. 


 58  For  example,  the  map  derived  from  FCC  Form  477  data  in  Appendix  C  illustrates  the  location  of  high-  speed 
 subscribers  and  does  not  attempt  to  illustrate  the  presence  of  backbone  and  middle  mile  facilities  used  to  transport 
 high-  speed  services  or  the  last  mile  facilities  that  may  be  high-  speed  capable  at  some  point  in  the  future.  See  Appendix  C. 


 59  We  note  that  high-  speed  providers  will  complete  and  file  FCC  Form  477,  again,  on  March  1,  2002,  and  semi-annually 
 thereafter  during  the  term  of  the  program.  The  Commission  adopted  a  five-  year  sunset  provision,  which  will  terminate  the  program  in  2005  unless  the  Commission  takes  affirmative  steps  to  preserve  the  program.  See 


 Data  Gathering  Order,  15  FCC  Rcd  at  7746. 
 60  The  Commissions  Data  Gathering  Order  requires  any  provider  of  high-  speed  services  to  report  data  for  each 


 state  in  which  it  meets  the  specified  reporting  thresholds.  Under  section  3(  40)  of  the  Act,  the  term  state  includes  the  District  of  Columbia  and  the  Territories  and  possessions.  47  U.  S.  C.    153(  40).  Accordingly,  the  Data 


 Gathering  Order  applies  to  data  on  broadband  services  that  are  provided  in  the  District  of  Columbia  and  the 
 territories  and  possessions  as  well  as  the  fifty  states.  In  the  FCC  Form  477  filings  to  date,  broadband  data  has  been  filed  for  the  fifty  states,  the  District  of  Columbia,  Puerto  Rico  and  the  Virgin  Islands. 
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 Federal  Communications  Commission  FCC  02-  33 
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 26.  The  scope  of  our  data  collection  reflects  the  Commissions  understanding  that  a  data  collection  that  required  highly  detailed  reporting  at  such  fine  geographic  levels  would  have 
 created  an  appreciable  regulatory  burden  for  the  firms  providing  high-  speed  service  and  a  significant  administrative  burden  for  firms  with  a  national  scope,  given  that  there  are  over  30,000 
 zip  codes  in  the  United  States.  State  commissions  and  private  institutions  may  be  best  positioned  to  collect  highly  detailed  data  in  discrete  geographic  areas  and  among  particular  communities  of 
 the  population.  As  noted  above,  we  are  exploring  that  question  and,  more  generally,  whether  some  of  this  additional  granularity  should  be  incorporated  into  our  data  collection.  61 


 27.  High-  Speed  Subscribers  Across  the  Country.  Results  of  our  most  recent  data  collection  indicate  that  there  was  at  least  one  customer  for  high-  speed  service  in  each  of  the  fifty 
 states,  the  District  of  Columbia,  Puerto  Rico,  and  the  Virgin  Islands  and  in  78  percent  of  all  the  zip  codes  in  the  United  States.  The  number  of  high-  speed  lines  reported  in  each  state  varies 
 significantly,  with  reported  high-  speed  subscribership  ranging  from  a  high  of  1.7  million  lines  in  California  to  a  low  of  less  than  15,000  lines  in  four  states.  62  Reported  line  counts  on  a  state-  by-state 
 basis  appear  in  the  statistical  summary,  prepared  by  the  Industry  Analysis  Division  of  our  Common  Carrier  Bureau,  that  we  also  release  today.  63  Similarly,  in  some  states  there  are  many 
 providers  reporting  --  with  20  or  more  reporting  in  12  states  --  and  in  other  states  there  are  only  one  or  two  providers  reporting.  The  state-  by-  state  number  of  reporting  providers  also  appears  in 
 the  statistical  summary  released  today.  64 
 28.  Again,  looking  broadly  for  the  presence  of  high-  speed  services,  the  data  we  collect  show  that  78  percent  of  the  zip  codes  in  this  country  have  at  least  one  subscriber  to  high-speed 


 services.  65  Those  zip  codes  are  shown  in  the  map  that  appears  in  Appendix  C.  66  The  map  shows  that  high-  speed  service  is  deployed  in  many  areas  in  the  United  States.  Our  analysis 
 further  shows  that  nearly  all  of  the  population  of  the  United  States  tends  to  be  concentrated  in  those  78  percent  of  zip  codes  where  high-  speed  subscribers  are  located.  More  precisely,  97 
 percent  of  the  countrys  population  lives  in  those  zip  codes  where  high-  speed  subscribership  was  reported. 


 29.  To  better  gauge  where  competition  for  high-  speed  services  may  be  developing,  the  map  in  Appendix  C  also  shows  the  number  of  high-  speed  providers  reporting  data  for  given 
 zip  codes.  As  indicated  by  the  shadings  in  the  map,  there  are  competing  suppliers  --  sometimes  as  many  as  18  in  a  zip  code  --  in  the  major  population  centers  of  the  country.  Multiple  providers 
 of  high-  speed  services  reported  having  subscribers  in  58  percent  of  the  nations  zip  codes  in  June 


 61  See  Data  Gathering  Second  NPRM,  16  FCC  Rcd  2072. 
 62  In  addition,  we  do  not  report  the  number  of  high-  speed  lines  in  two  states,  Puerto  Rico,  and  the  Virgin  Islands  in 
 order  not  to  reveal  individual  provider  data. 
 63  See  Appendix  C.  Again,  we  note  that  some  charts  and  tables  contain  data  that  have  been  aggregated  or 


 suppressed  to  prevent  the  release  of  information  that  may  be  deemed  competitively-  sensitive. 
 64  Id.  As  noted  above,  we  expect  that  there  many  be  many  other  providers  that  did  not  meet  the  reporting  threshold 


 for  given  states  and  that  did  not  choose  to  file  on  a  voluntary  basis. 
 65  Id.  at  Tbl.  9. 


 66  The  map  follows  Tbl.  9  in  Appendix  C.  Areas  with  shading  indicate  the  presence  of  at  least  one  high-  speed 
 subscriber  in  a  zip  code.  Id. 
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 Federal  Communications  Commission  FCC  02-  33 
 16 
 2001,  compared  to  34  percent  eighteen  months  earlier.  67  During  that  period,  the  share  of  zip  codes  in  which  five  or  more  providers  reported  having  customers  increased  from  6  percent  to  19 
 percent. 
 30.  Residential  and  Small  Business  Subscribership.  68  We  note  that  growth  in  subscribership  for  residences  and  small  businesses  is  consistent  with  the  high  level  of  availability 


 indicated  by  the  Commissions  data.  Results  of  the  Commissions  data  collection  show  that  there  were  a  total  of  approximately  7.8  million  high-  speed  residential  subscribers,  as  of  June  30, 
 2001.  69  We  estimate  that  approximately  4.3  million  of  these  residential  customers  subscribed  to  services  that  meet  the  Commissions  definition  of  advanced  services.  70  By  comparison,  we 
 stated  in  the  Second  Report  that  there  were  approximately  1.8  million  high-  speed  residential  subscribers  at  the  end  of  1999.  We  estimated  that  approximately  1.0  million  of  these  residential 
 customers  subscribed  to  services  that  meet  the  Commissions  definition  of  advanced  services.  71  As  a  result,  penetration  of  advanced  services  quadrupled  from  1.0  percent  of  households  at  the 
 end  of  1999  to  3.8  percent  at  the  end  of  June  2001.  72  Looking  more  broadly  at  all  high-  speed  services  (i.  e.,  not  only  advanced  services),  the  residential  penetration  rate  was  7.0  percent  at  the 
 end  of  June  2001. 


 67  These  figures  are  the  percentage  of  zip  codes  in  which  more  than  one  high-  speed  service  provider  reported  having 
 at  least  one  customer.  See  id.  for  additional  detail. 
 68  The  data  from  the  Commissions  data  collection  program  concerning  deployment  of  high-  speed  lines  to  residential 


 customers  includes  not  only  residential  users,  but  also  home  office  and  small  business  users.  See  Data  Gathering  Order,  15  FCC  Rcd  at  7760.  Thus,  in  this  Report,  we  combine  small  business  and  residential  customers  and  refer  to 


 them  collectively  as  "residential  customers.  We  note  that  we  similarly  combined  small  business  and  residential  customers  in  the  First  and  Second  Reports.  First  Report,  14  FCC  Rcd  at  2409;  Second  Report,  15  FCC  Rcd  at 
 20941.  The  Commissions  data  collection  program  generally  collects  data  on  high-  speed  lines  or  wireless  channels, 
 rather  than  customers,  per  se.  Our  estimates  of  the  number  of  residential  customers,  therefore,  rely  on  the  assumption  that  most  residential  high-  speed  subscribers  tend  to  purchase  only  one  high-  speed  line,  in  contrast  to 


 many  business  customers  that  may  purchase  multiple  high-  speed  lines. 
 69  At  the  end  of  June  2001,  of  the  7.8  million  residential  customers  who  subscribed  to  high-  speed  services, 
 approximately  5.0  million  subscribed  to  services  using  hybrid  fiber-  coaxial  (HFC)  technology  (such  as  cable  modem  service),  approximately  2.5  million  subscribed  to  ADSL  services,  while  the  balance  subscribed  to  other  media, 


 including  satellite  and  fixed  wireless  services.  See  Appendix  C,  Tbl.  3. 
 70  See  Appendix  C,  Tbl.  4.  Of  the  4.3  million  residential  and  small  business  subscribers  to  advanced  services,  there 


 were  approximately  3.1  million  residential  customers  subscribed  to  cable-  based  services  and  approximately  0.9  million  residential  customers  subscribed  to  ADSL,  with  the  balance  subscribing  to  other  media.  These  figures  show 


 cable  companies  increasing  their  residential  advanced  services  subscribership  by  261  percent  in  eighteen  months  and  local  exchange  carriers  increasing  their  residential  DSL  subscription  to  advanced  services  by  683  percent.  We  note 
 that  our  estimates  of  residential  ADSL  subscribers  do  not  include  any  symmetric  forms  of  DSL,  which  are  typically 
 purchased  by  business  customers. 
 71  Second  Report,  15  FCC  Rcd  at  20941. 


 72  As  of  March  2001,  there  were  about  107  million  households  in  the  United  States  FCC  Industry  Analysis  Division, 
 Telephone  Subscribership  in  the  United  States,  Tbl.  1  <http://  www.  fcc.  gov/  Bureaus/  Common_  Carrier/  Reports/  FCC-State_ 
 Link/  IAD/  subs0301.  pdf>  (Nov.  2001).  At  all  pertinent  times,  there  have  been  about  4  million  small  businesses  (establishments  with  1-  4  employees)  in  the  U.  S.  U.  S.  Census  Bureau,  Statistical  Abstract  of  the  United 


 States  559,  No.  881  (1999)  &  547,  No.  872  (2000). 
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 Federal  Communications  Commission  FCC  02-  33 
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 31.  Business  Subscribership.  73  In  accord  with  the  growth  in  availability  of  high-  speed  and  advanced  services,  our  data  also  indicates  that  the  number  of  large  businesses  that  subscribe 
 to  high-  speed  and  advanced  services  has  increased.  In  the  Commissions  data  collection,  providers  reported  there  were  approximately  1.8  million  high-  speed  service  (including  advanced 
 service)  lines  in  service  to  large  business  and  institutional  customers  at  the  end  of  June  2001.  74  We  estimate  that  almost  all  of  these  lines  satisfy  our  definition  of  advanced  services;  75  thus,  we 
 conclude  that  there  were  approximately  1.7  million  advanced  service  lines  in  service  to  business  customers  at  the  end  of  June  2001.  76  By  comparison,  in  the  Second  Report  we  estimated  there 
 were  approximately  1.0  million  high-  speed  in  service  to  business  customers  at  the  end  of  1999,  and  that  approximately  0.9  million  of  those  lines  satisfied  our  definition  of  advanced  services.  77 


 2.  Demographic  Variables 
 32.  In  this  section,  we  use  zip  code  data  from  our  data  collection  in  conjunction  with  demographic  data  to  try  to  discern  relationships  between  the  presence  of  high-  speed  service  and 


 the  demographic  characteristics  of  areas  that  have  some  level  of  high-  speed  subscribership.  78 


 73  The  Commissions  data  collection  allows  only  a  partial  view  into  deployment  of  high-  speed  services  to  large 
 business  and  institutional  customers.  Second  Report,  15  FCC  Rcd  at  20943.  For  methodological  reasons,  the  Form  477  does  not  collect  data  about  all  of  the  high-  speed  service  offerings  that  are  targeted  at  large  business  and 


 institutional  users.  It  collects  data  solely  concerning  high-  speed  services  that  connect  end-  users  to  the  Internet  or  other  public  data  networks.  This  focus  excludes  high-  speed  services  that  are  used  as  part  of  private  networks  --  so-called 
 private  line  broadband  services.  Many  businesses  and  educational  and  healthcare  institutions  have  for  some 
 time  used  such  private  lines  as  part  of  their  internal  networks  and  realized  significant  benefits  from  those  high-  speed  services. 


 74  For  simplicity,  we  refer  to  these  customers  as  business  customers  in  this  Report. 
 75  Filers  of  Form  477  do  not  report  directly  the  number  of  advanced  services  lines  provided  to  residential  and  small 
 business  users,  as  opposed  to  large  business  users.  In  estimating  these  advanced  service  counts,  staff  assume  that  reported  advanced  service  lines  were  more  likely  to  be  delivered  to  large  business  users  first  and  residential  and 


 small  business  users  second.  This  methodology  provides  the  most  conservative  estimate  of  the  number  of  residential 
 advanced  service  lines  reported.  To  get  the  most  precision,  estimates  are  conducted  at  the  individual  Form  477  level.  Staff  conduct  a  sensitivity  analysis  against  an  alternative  methodology,  which  would  allocate  lines  to 


 residential  users  first.  This  sensitivity  analysis  shows  that  the  two  methodologies  vary  by  less  than  1  percent  of  total 
 advanced  service  lines  reported. 
 76  The  number  of  advanced  service  lines  in  service  to  large  business  customers  is,  for  each  technology  category,  the 


 difference  between  total  advanced  service  lines  (see  Appendix  C,  Tbl.  2)  and  the  estimated  number  of  advanced 
 service  lines  to  residential  and  small  business  customers  (see  Appendix  C,  Tbl.  4).  Of  the  estimated  1.7  million  advanced  service  lines  in  service  to  larger  business  customers  at  the  end  of  June  2001,  slightly  over  82,000  were 


 ADSL  service,  almost  950,000  were  other  wireline  services,  and  almost  650,000  were  other  media,  including  optical 
 carrier,  services.  By  comparison,  in  the  Second  Report  we  estimated  that  of  the  0.9  million  advanced  service  lines  for  larger  business  customers,  advanced  services  delivered  over  approximately  70,000  ADSL  lines,  560,000  other 


 wireline  service  lines,  and  slightly  over  300,000  other  media,  including  optical  carrier,  services.  Second  Report,  15 
 FCC  Rcd  at  20944. 
 77  Second  Report,  15  FCC  Rcd  at  20943. 


 78  We  emphasize  that  the  data  in  this  section  are  presented  in  a  preliminary  and  descriptive  fashion.  Many  of  the 
 statistics  discussed  here  indicate  how  or  to  what  extent  variables  are  associated  with  each  other.  We  caution  readers  that  such  associations  do  not  establish  cause-  and-  effect  relationships  between  variables  and  we  decline  to  draw 


 conclusions  about  the  statistical  significance  of  these  demographic  variables.  Demographic  data  was  obtained  from 
 Demographic  Power  Pack,  Current  Year  Survey,  MapInfo  Corporation  (2000  issue). 
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 Federal  Communications  Commission  FCC  02-  33 
 18 
 33.  We  acknowledge  that  reliance  on  marketplace  forces  may  yield  deployment  that  varies  by  demography  at  any  given  point  in  time.  Yet  the  language  and  sprit  of  the  Act  require 
 that  we  promote  advanced  services  deployment  within  a  framework  that  relies  significantly  on  market  forces.  Information  relating  to  various  demographic  variables  does  not,  by  itself, 
 determine  whether  deployment  is  reasonable  and  timely.  As  a  result,  if  we  are  to  rely  on  a  market-  based  system  to  provide  advanced  telecommunications  capability,  the  evaluation  of 
 whether  deployment  is  reasonable  and  timely  must  account  for  some  demographic  variation.  Thus,  some  amount  of  demographic  variation  in  deployment,  particularly  if  it  is  not  persistent, 
 may  not  be  inconsistent  with  reasonable  and  timely  deployment.  Nevertheless,  we  agree  that  it  is  important  to  continue  to  monitor  demographic  relationships  in  order  to  identify  drivers  of 
 deployment  in  the  event  government  or  non-  governmental  action  is  warranted. 
 34.  Again,  by  examining  the  Commissions  data,  we  seek  to  gain  understanding  about  the  availability  of  advanced  telecommunications  infrastructure.  As  discussed  above,  the  zip  code 


 data  do  not  allow  us  to  determine  how  many  customers  are  subscribing  to  high-  speed  service  or  have  access  to  it  in  a  given  zip  code.  79  Despite  these  limitations,  the  zip  code  data  provide  a 
 simple,  and  to  our  knowledge,  unique  source  of  information  about  where  high-  speed  services  are  being  delivered  and  where  high-  speed-  capable  last  miles  are  deployed. 


 35.  Population  Density.  Our  data  suggest  that  there  is  a  great  disparity  in  high-  speed  subscribership  at  different  population  densities  with  high-  speed  services  reported  more  often  in 
 high-  density  areas  than  in  less  dense  areas.  Table  11  shows  the  percentage  of  zip  codes  with  high-  speed  subscribers  by  deciles  based  on  population  density.  80  As  it  indicates,  high  population 
 density  has  a  strong  positive  correlation  with  the  presence  of  high-  speed  subscribership  and  low  population  density  has  a  strong  negative  correlation.  Nearly  all  the  most  densely  populated  zip 
 codes  (well  over  90  percent)  have  one  or  more  high-  speed  subscribers,  but  fewer  than  40  percent  of  the  most  sparsely  populated  zip  codes  have  high-  speed  subscribers.  81  We  note  that  this 
 correlation  may  be  accentuated  by  the  fact  that  high-  speed  service  providers  only  report  when  they  have  250  or  more  subscribers  in  a  given  state.  Thus,  many  smaller  providers  that  serve 
 discrete  communities  in  sparsely-  populated  areas  may  not  have  reported,  thereby  creating  the  impression  that  there  is  less  high-  speed  service  in  rural  areas  than  there  may  actually  be.  82 


 36.  Reporting  of  high-  speed  subscribership  increased  notably  between  December  1999  and  June  2001  in  more  sparsely  populated  zip  codes.  The  increase  was  17  percentage 
 points  (from  19.9  percent  to  36.8  percent)  for  the  least  densely  populated  zip  codes,  compared  to 


 79  Nor  do  the  zip  code  data  allow  us  to  determine  whether  high-  speed  subscribers  in  a  given  zip  code  are  residential 
 or  business  customers. 
 80  See  Appendix  C,  Tbl.  11.  Deciles  are  created  by  sorting  the  zip  codes  into  ascending  order  based  on  population 


 density.  The  zip  codes  are  then  placed  into  ten  groups  (i.  e.,  deciles)  containing  equal  numbers  of  zip  codes. 
 81  Id.  See  Table  11  for  a  more  detailed  illustration  of  the  relationship  between  population  density  and  the  presence 


 of  high-  speed  service.  As  illustrated  there,  even  within  the  most  sparsely-  populated  zip  codes,  density  appears  to  be  a  major  positive  factor,  with  high-  speed  service  deployed  in  those  areas  where  the  bulk  of  the  population  is 


 concentrated. 
 82  For  example,  the  National  Telephone  Cooperative  Association  (NTCA)  reports  that  small,  rural  telephone 


 companies  are  deploying  broadband  to  rural  America  in  a  reasonable  and  timely  manner.  In  addition,  the  NTCA  states  that  almost  80  percent  of  respondents  to  a  recent  survey  of  its  members  are  offering  high-  speed  services  to  all 


 public  centers  in  the  carriers  service  territory.  See  NTCA  Comments  at  2. 
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 2  percentage  points  (from  96.1  percent  to  98.1  percent)  for  the  most  densely  populated  zip  codes.  For  zip  codes  in  the  mid-  range  of  population  density,  the  reported  improvement  was  24 
 percentage  points.  83 
 37.  In  our  collection  of  data  as  of  the  end  of  June  2001,  the  largest  number  of  high-speed  providers  reported  in  any  single  zip  code  was  18.  Though  the  large  concentrations  of 


 high-  speed  providers  tend  to  be  located  in  high-  density  areas,  several  of  the  most  sparsely  populated  zip  codes  have  almost  as  many  high-  speed  providers.  Indeed,  some  of  these  zip  codes 
 may  have  few  people  living  in  them,  but  are  highly  industrialized  sections  of  major  metropolitan  areas.  84  For  example,  several  of  these  low  density  zip  codes  with  many  providers  are  located  in 
 the  business  districts  of  large  cities,  where  business  demand  exists,  but  there  are  few,  if  any,  residents.  These  areas  exhibit  high  demand  for  high-  speed  services  --  which  may  or  may  not  be 
 consistent  with  the  demand  exhibited  by  the  residents  of  these  areas  --  and  are  able  to  attract  competition  for  high-  speed  services.  At  the  same  time,  the  availability  of  high-  speed  to  business 
 users  in  these  areas  does  not  necessarily  indicate  availability  of  high-  speed  to  any  residents  of  these  areas. 


 38.  Household  Income.  Table  12  shows  the  percentage  of  zip  codes  with  high-  speed  subscribers  by  deciles  based  on  median  household  income.  85  Of  the  highest  income  zip  codes, 
 96  percent  have  high-  speed  subscribers,  while  of  the  lowest  income  zip  codes,  59  percent  have  high-  speed  subscribers.  86  By  contrast,  eighteen  months  earlier  these  percentages  were  91  percent 
 and  42  percent,  respectively.  Again,  as  we  observed  with  the  population  density  data,  some  of  the  low-  income  zip  codes  that  have  high-  speed  subscribers  include  businesses  or  industrial  areas 
 of  major  cities  that  have  large  demand  for  high-  speed  services.  Thus,  high-  speed  availability  for  residential  low-  income  residents  in  these  zip  codes  may  actually  be  less  prevalent  than  suggested 
 here. 
 39.  Small  Towns.  Publicly  available  demographic  data,  in  conjunction  with  our  data  collection,  allow  some  general  insight  into  the  presence  of  providers  of  high-  speed  services  in 


 small  towns.  In  particular,  by  constructing  a  sample  of  zip  codes  that  appear  to  contain  small  towns,  87  we  estimate  that  86  percent  of  zip  codes  in  small  towns  have  at  least  one  high-  speed 
 services  subscriber.  These  data  do  not  allow  us,  however,  to  estimate  with  confidence  the  percentage  of  the  U.  S.  small-  town  population  that  resides  in  such  zip  codes.  In  addition,  results 
 of  our  data  collection  indicate  that,  even  in  rural  areas,  population  centers  are  different  than  outlying  areas.  As  of  June  2001,  61  percent  of  the  population  of  the  most  sparsely-  populated  zip 


 83  This  improvement  is  the  average  improvement  for  zip  codes  in  the  fifth  and  sixth  deciles  of  zip  codes.  See 
 Appendix  C,  Tbl.  11  for  additional  detail. 
 84  These  primarily  business  districts  demonstrate  that  sparsely  populated  areas  are  not  necessarily  rural  or  under-developed. 


 85  See  Appendix  C,  Tbl.  12. 
 86  We  treat  as  the  highest  income  zip  codes  those  that  fall  into  the  top  decile  when  zip  codes  are  ranked  by  median 
 income.  Similarly,  the  lowest  income  zip  codes  are  those  that  fall  into  the  bottom  decile  when  zip  codes  are  ranked  by  median  income. 


 87  We  consider  a  small  town  to  be  a  locale  with  a  zip  code  that  meets  the  following  criteria:  1)  between  1,000  and 
 15,000  in  population;  2)  between  the  25  th  percentile  and  75  percentile  in  population  density;  3)  no  adjacent  zip  codes  have  more  than  10,000  population;  and  3)  adjacent  zip  codes  have  no  more  than  80  percent  of  the  population  density 


 of  the  small  towns  zip  code.  Our  zip  code  data  do  not  distinguish  among  communities  within  a  zip  code. 
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 codes  resided  in  a  zip  code  in  which  there  was  at  least  some  high-  speed  subscribership.  The  comparable  figure  eighteen  months  earlier  was  39  percent.  88  For  zip  codes  in  the  mid-  range  of 
 population  density,  95  percent  of  the  population  resided  in  zip  codes  with  high-  speed  subscribership  as  of  June  2001,  compared  to  78  percent  eighteen  months  earlier.  89 


 40.  Indian  -  Tribal  Areas.  Our  data  also  show  that  there  is  at  least  one  subscriber  to  high-  speed  services  in  71  percent  of  the  zip  codes  that  contain  tribal  territories.  90  This  remains 
 below  the  national  figure  of  78  percent,  described  above.  91 
 41.  As  noted  above,  demographic  information  can  provide  useful  insight  to  the  Commission  on  deployment  drivers  to  various  categories  of  consumers.  Because  the  availability 


 of  many  products  and  services  vary  with  these  same  demographic  variables,  however,  we  do  not  rely  on  this  information  alone  to  determine  whether  advanced  telecommunications  capability  is 
 being  made  available  in  a  reasonable  and  timely  manner. 
 3.  Survey  Data  By  Last  Mile  Technologies 
 42.  We  report,  below,  available  figures  on  high-  speed  services  by  last  mile  technology  based  on  our  data  collection  and,  where  indicated,  on  publicly-  available  sources. 


 These  data  show  that  there  are  multiple  paths  for  high-  speed  service  in  the  last  mile.  Some  are  clearly  still  in  the  early  stages  of  deployment  but  others  --  such  as  cable  and  certain  wireline 
 technologies  --  are  more  firmly  established.  In  addition  to  data  on  subscribership,  the  data  may  reflect  different  strategies  for  deployment  and  the  strengths  and  weakness  of  these  last  mile 
 technologies.  For  example,  our  data  collection  shows  that  cable  high-  speed  services  are  delivered  primarily  to  residential  and  small  business  customers,  while  high-  speed  services  over 
 fiber  and  other  traditional  wireline  technologies  still  tend  to  be  delivered  to  large  business  and  institutional  customers. 


 43.  We  also  report  data  on  the  percentage  of  lines  billed  directly  to  end-  user  customers,  as  opposed  to  another  provider  or  retailer,  and  we  report  data  on  the  percentage  of 
 high-  speed  lines  that  providers  deliver  over  their  own  facilities,  as  opposed  to  facilities  that  they  lease  from  another  provider.  These  data  reveal  that  most  reporting  firms  are  selling  directly  to 
 end-  user  customers  and  that  most  firms  provide  high-  speed  services  over  their  own  facilities. 


 88  These  figures  are  for  the  least  densely-  populated  decile  of  zip  codes.  See  Appendix  C,  Tbl.  11. 
 89  Id.  These  figures  are  the  average  for  the  fifth  and  sixth  zip  code  deciles. 
 90  For  purposes  of  this  proceeding,  we  consider  tribal  areas,  tribal  lands,  or  tribal  territories  to  be  American 
 Indian  Reservations,  as  identified  by  the  Bureau  of  Indian  Affairs  (BIA).  American  Indian  Reservations  are  legal  entities  having  boundaries  established  by  treaty,  statute,  and/  or  executive  or  court  order  over  which  a  federally 


 recognized  American  Indian  tribal  group  has  jurisdiction.  American  Indian  Reservations  do  not  include  any  of  the  other  types  of  "Indian  lands"  such  as  Alaska  Native  Village  Statistical  Areas,  Alaska  Native  Regional  Corporations, 
 Public  Domain  Allotments,  Trust  Lands,  and  other  designated  statistical  areas.  The  source  of  the  BIA  Indian 
 reservation  boundaries  are  the  Census  Bureau  TIGER/  Line  files.  The  2000  version  of  the  TIGER/  Line  Files  can  be  found  at  <http://  www.  census.  gov/  geo/  www/  tiger/  tiger2k/  tiger2k.  pdf>  (visited  Feb.  5,  2002). 


 91  See  supra  para.  27. 
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 a.  Cable  HFC  Systems 
 44.  According  to  our  data  collection,  high-  speed  lines  delivered  over  cable  HFC  systems  in  the  last  mile  account  for  54  percent  of  the  total  high-  speed  lines  as  of  the  end  of  June 


 2001,  compared  to  the  51  percent  we  reported  in  the  Second  Report.  92  More  specifically,  cable  companies  report  almost  5.2  million  high-  speed  lines  in  service  using  cable  modem  technology 
 at  the  end  of  June  2001,  compared  to  1.4  million  at  the  end  of  1999.  Of  the  5.2  million  lines  reported  for  June  2001,  64  percent  meet  the  Commissions  definition  of  advanced  services, 
 compared  to  62  percent  eighteen  months  earlier.  As  noted  above,  our  data  show  the  number  of  advanced  service  lines  provided  over  cable  technology  to  residential  customers  nearly 
 quadrupled  between  December  1999  and  June  2001. 
 45.  Combining  our  data  with  publicly-  available  sources  about  the  availability  of  cable  modem-  ready  plant,  the  5.2  million  cable  high-  speed  lines  reported  represents  a  penetration  rate 


 of  approximately  8  percent  of  cable  modem  capable  homes  as  of  mid-  year  2001.  93  By  contrast,  in  the  Second  Report,  we  reported  a  cable  modem  penetration  rate  of  approximately  3  percent  as 
 of  the  beginning  of  2000.  94  Residential  and  small  business  subscribers,  not  surprisingly,  account  for  over  96  percent  of  the  reported  high-  speed  lines  delivered  over  cable  systems.  This  is 
 consistent  with  our  understanding  that  most  cable  systems  are  currently  deployed  in  primarily  residential  areas. 


 46.  In  addition,  our  data  collection  shows  that  high-  speed  services  using  cable  technology  (such  as  cable  modems)  are  reported  in  49  states  and  the  District  of  Columbia.  95  As 
 we  illustrated  in  the  Second  Report,  96  publicly  available  information  indicates  that  cable  systems  capable  of  providing  cable  modem  service  97  tend  to  be  located  in  more  densely  populated  areas, 


 92  See  Second  Report,  15  FCC  Rcd  at  20952.  The  FCC  Form  477  collects  information  on  high-  speed  lines  delivered 
 over  coaxial  carrier  systems  including  hybrid  fiber-  coaxial  systems.  In  this  Report,  we  refer  to  these  lines  as  being  delivered  over  cable  modem  technology. 


 93  NCTA  estimates  that,  as  of  July  2001,  more  than  60  million  households  were  passed  by  high-  speed  cable  modem 
 service.  NCTA  Comments  in  the  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  CS  Docket  No.  01-  129,  Eighth  Annual  Report,  FCC  01-  389  (rel.  Jan.  14,  2002)  (2001  MVPD 


 Competition  Report),  at  27.  However,  based  on  Morgan  Stanley  year-  end  estimates,  cable  modem  service  was 
 available  to  as  many  as  68  million  households  as  of  July  2001.  See  also  Richard  Bilotti,  Benjamin  Swinburne,  and  Megan  Lynch,  The  Marquis  de  Broadbandbury    Part  Deux,  Morgan  Stanley  Dean  Witter,  Jul.  3,  2001,  at  46 


 (Morgan  Stanley    Broadband  Part  Deux).  Penetration  is  the  number  of  subscribers  divided  by  homes  passed  by 
 cable  modem-  ready  plant. 
 94  See  Second  Report,  15  FCC  Rcd  at  20952. 


 95  See  also  Appendix  C,  Tbl.  6. 
 96  See  Second  Report,  15  FCC  Rcd  at  20954. 
 97  As  we  noted  in  our  Second  Report,  the  Commission  entered  into  social  contracts  with  several  large  cable 
 operators  between  1995  and  1997,  which  generally  required  operators  to  upgrade  the  majority  of  their  systems  to  at 
 least  550  MHz  and  to  ensure  that  at  least  50  percent  of  their  subscribers  were  served  by  systems  having  a  capacity  of  at  least  750  MHz.  Pursuant  to  these  social  contracts,  operators  further  agreed  to  provide  free  cable  modems  and 


 high-  speed  Internet  service  to  public  and  private  schools,  and  to  public  libraries  passed  by  their  systems.  See  Second 
 Report,  15  FCC  Rcd  at  20953,  n.  126. 
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 especially  in  the  East,  the  Midwest,  and  on  the  West  Coast.  Publicly  available  sources  estimate  that  cable  modem  service  is  now  available  to  about  70  percent  of  U.  S.  homes.  98 
 47.  Although  cable  modem  service  typically  delivers  information  to  end-  user  customers  at  speeds  in  excess  of  2  Mbps,  essentially  none  (0.3  percent)  of  these  connections 
 carry  information  from  customers  to  the  Internet  at  those  speeds.  99 
 b.  ADSL  and  Other  Traditional  Wireline  Technologies 
 48.  In  this  section  we  have  divided  traditional  wireline  technologies  into  three  categories.  First,  we  look  at  ADSL  100  service,  the  most  popular  residential  offering.  Second,  we 


 examine  other  traditional  wireline  services,  including  both  T1  and  symmetric  DSL  (SDSL)  101  services.  This  category  is  primarily  used  by  business  customers.  Third,  we  review  optical  fiber 
 services,  which,  because  of  their  very  high-  speed  and  substantial  expense,  are  of  interest  mostly  to  large  business  users.  Together  these  LEC-  delivered  services  represent  a  significant  share  of 
 high-  speed  subscribers  nationwide.  As  a  consequence  of  its  high  rate  of  growth  from  a  relatively  small  base,  ADSL  accounted  for  28  percent  of  all  high-  speed  lines  as  of  the  end  of  June  2001, 
 compared  to  13  percent  eighteen  months  earlier.  102  Other  traditional  wireline  high-  speed  services  accounted  for  11  percent  of  all  high-  speed  lines,  compared  to  22  percent  at  the  end  of 
 1999.  103  Optical  fiber  accounted  5  percent  of  all  high-  speed  lines,  compared  to  11  percent  eighteen  months  earlier.  104 


 49.  ADSL.  Our  data  collection  shows  that  there  were  2.7  million  ADSL  lines  in  service  in  the  United  States  at  the  end  of  June  2001,  compared  to  just  under  0.4  million  eighteen 


 98  See  Morgan  Stanley    Broadband  Part  Deux  at  46  (estimating  73  percent  availability  as  of  the  end  of  2001); 
 NCTA  estimates,  based  on  separate  Morgan  Stanley  estimates,  that  cable  modem  service  could  be  available  to  as  many  as  81  million  households  (of  about  106  million  total  households)  at  the  end  of  2001.  NTCA  Comments  in  the 


 2001  MVPD  Competition  Report  at  27;  Communications  Daily,  Nov.  2,  2001,  at  10,  cites  a  Yankee  Group  estimate 
 that  cable  modem  service  would  reach  66  percent  of  U.  S.  households  at  the  end  of  2001  (compared  with  45  percent  for  DSL  services). 


 99  Based  on  discussions  with  cable  modem  service  providers,  we  understand  that  the  services  marketed  to  consumers 
 generally  offer  upload  speeds  that  do  not  exceed  1  Mbps.  This  is  a  clarification  to  information  presented  in  the  Second  Report.  See  Second  Report,  15  FCC  Rcd  at  20953. 


 100  We  use  the  term  ADSL  in  this  Report  to  refer  simply  to  asymmetric  DSL  services,  not  to  any  particular 
 protocol  or  standard  for  DSL  technology.  Asymmetric  refers  to  the  asymmetry  of  up  end  download  speeds. 
 101  We  use  the  term  SDSL  in  this  Report  to  refer  simply  to  symmetric  DSL  services,  not  to  any  particular  protocol 


 or  standard  for  DSL  technology. 
 102  This  includes  all  lines  purchased  to  deliver  transmissions  at  speeds  in  excess,  in  at  least  one  direction,  of  200 


 kbps. 
 103  We  note  that  the  number  of  traditional  wireline  high-  speed  lines  increased  from  almost  610,000  lines  in 


 December  1999  to  almost  1.1  million  in  June  2001.  The  overall  percentage  of  traditional  wireline  high-  speed  lines  in  service  decreased  only  relative  to  the  tremendous  growth  in  other  types  of  technology,  such  as  cable  and  ADSL. 


 104  These  are  lines  in  service  to  end-  user  customers  in  which  optical  fiber  extends  completely  to  the  subscribers 
 premises.  Again,  we  note  that  the  number  of  optical  fiber  high-  speed  lines  increased  from  about  312,000  lines  in  December  1999  to  almost  456,000  in  June  2001.  The  overall  percentage  of  optical  fiber  high-  speed  lines  in  service 


 decreased  only  relative  to  the  tremendous  growth  in  other  types  of  technology,  such  as  cable  and  ADSL. 
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 months  earlier.  105  Approximately  37  percent  of  these  2.7  million  lines  meet  the  Commissions  definition  of  advanced  services.  These  services  were  reported  in  50  states,  the  District  of 
 Columbia,  Puerto  Rico,  and  the  Virgin  Islands.  The  number  of  reporting  providers  was  86,  compared  to  28  providers  eighteen  months  earlier. 


 50.  Of  the  approximately  2.7  million  reported  ADSL  lines,  estimates  provided  by  the  reporting  providers  indicate  that  92  percent  (about  2.5  million  lines)  serve  residential  or  small 
 business  customers.  A  reported  88  percent  of  these  lines  are  sold  directly  to  end-  user  customers,  compared  to  the  90  percent  figure  we  reported  in  the  Second  Report.  106  Approximately  93 
 percent  are  delivered  solely  over  facilities  owned  by  the  reporting  provider,  as  we  also  reported  in  the  Second  Report.  107  Almost  none  (0.2  percent)  of  the  ADSL  lines  were  reported  to  provide 
 an  information  carrying  capacity  in  excess  of  2  Mbps  in  both  directions. 
 51.  Our  data  collection  shows  that  incumbent  LECs  serve  approximately  93  percent  of  ADSL  subscribers,  while  the  competitive  LECs  serve  about  7  percent.  108  In  the  Second 


 Report  we  illustrated  that  DSL  deployment  closely  mirrors  reported  DSL  subscribership.  By  contrast  to  the  Second  Report,  in  which  we  noted  that  competitive  LECs  appeared  to  be  adding 
 customers  for  DSL  services  at  a  faster  rate  than  incumbent  LECs,  109  publicly  available  data  indicate  that  incumbent  LECs  added  customers  at  a  faster  rate  than  competitive  LECs  between 
 the  third  quarter  of  2000  and  the  third  quarter  of  2001.  110  Publicly  available  sources  estimate  that  ADSL  service  is  now  available  to  about  45  percent  of  U.  S.  homes,  compared  to  about  25  percent 
 of  homes  at  the  end  of  1999.  111 


 105  By  comparison,  and  as  an  example  of  publicly  available  estimates,  research  firm  TeleChoice  reports  3.3  million 
 DSL  lines  in  service  in  the  U.  S.  at  the  end  of  June  2001.  See  TeleChoice  DSL  Deployment  Summary    Updated  11/  27/  01  (visited  Feb.  5,  2002)  <http://  www.  xdsl.  com/  content/  resources/  deployment_  info.  asp>  (TeleChoice 


 Deployment  Statistics).  Note,  however,  that  our  count  includes  only  ADSL  lines  purchased  to  deliver  transmissions  at  speeds  that  exceed,  in  at  least  one  direction,  200  kbps.  The  250-  lines-  per-  state  reporting  threshold  in  our  data 
 collection  also  tends  to  reduce  our  count,  as  smaller  LECs  that  provide  DSL  service  may  not  meet  the  reporting 
 threshold. 
 106  See  Second  Report,  15  FCC  Rcd  at  20956. 


 107  Id. 
 108  See  Appendix  C,  Tbl.  5,  for  shares  of  lines  provided  by  various  types  of  carriers,  for  the  other  line  technology 
 categories  discussed  in  this  Report. 
 109  See  Second  Report,  15  FCC  Rcd  at  20956. 


 110  For  example,  data  compiled  by  TeleChoice  indicate  that  customers  of  the  incumbents  LECs  and  the  competitive 
 LECs  both  increased  by  over  40  percent  during  the  third  quarter  of  2000.  Each  group  of  providers  experienced  declining  rates  of  growth  in  succeeding  quarters,  but  competitive  LEC  customer  growth  was  down  to  6  percent  in 


 the  third  quarter  of  2001,  compared  to  16  percent  for  incumbent  LECs.  In  the  first  quarter  of  2001,  the  number  of  competitive  LEC  customers  actually  declined.  See  TeleChoice  Deployment  Statistics,  supra  note  105. 
 111  Yankee  Group  estimates  DSL  availability  to  45  percent  of  U.  S.  homes  at  the  end  of  2001.  See  supra  note  98. 
 Morgan  Stanley  estimates  49  percent  as  of  the  end  of  2001  and  reports  25  percent  availability  as  of  the  end  of  1999.  See  supra  note  98.  Also,  the  Pinkham  Group  reports  that  over  70  percent  of  U.  S.  households  are  served  by  an 


 incumbent  LEC  central  office  equipped  to  offer  DSL  service,  but  that  over  one  third  of  these  same  households  can 
 not  utilize  DSL  due  to  distance  and  technical  limitations,  which  implies  an  availability  rate  of  about  46  percent.  See  Broadband  Market  Study  -  DSL  Current  Deployment  and  Availability  Q3,  2001  (visited  Feb.  5,  2002) 


 <http://  www.  pinkhamgroup.  com/  c_  reports.  htm>. 
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 52.  Other  Wireline.  Providers  reported  1.1  million  high-  speed  lines  in  this  category,  which  includes  services  such  as  T1  and  SDSL  services,  compared  to  0.6  million  lines  reported  in 
 the  Second  Report.  Of  that  total,  100  percent  of  these  lines  meet  the  Commissions  definition  of  advanced  services.  These  services  were  reported  in  every  state,  the  District  of  Columbia,  Puerto 
 Rico,  and  the  Virgin  Islands. 
 53.  Approximately  87  percent  of  high-  speed  lines  over  other  traditional  wireline  technologies  were  reported  to  serve  larger  business  and  institutional  users.  Reporting  providers 


 indicate  that  68  percent  of  their  lines  are  billed  directly  to  end-  users,  with  the  balance  billed  to  other  providers  or  retailers.  A  reported  75  percent  of  these  lines  are  provided  over  the  reporting 
 providers  own  facilities,  indicating  that  the  provider  uses  its  own  local  loop  facilities  (or  the  wireless  equivalent)  to  deliver  the  service  to  its  customer.  112  Finally,  our  data  show  that  16 
 percent  of  these  lines  deliver  an  information  carrying  capacity  in  excess  of  2  Mbps  in  both  directions. 


 54.  Optical  Carrier  (i.  e.,  Fiber  to  the  End-  User  Premises).  Approximately  460,000  high-  speed  lines  over  optical  fiber  systems  are  reported  in  our  data  collection,  compared  to  the 
 range  of  250,000  to  350,000  lines  that  we  reported  in  the  Second  Report.  113  Essentially,  all  of  these  lines  meet  the  Commissions  definition  of  advanced  services,  and  26  percent  are  reported 
 to  be  faster  than  2  Mbps  in  both  directions.  A  very  small  percentage  (0.6  percent)  of  these  lines  are  reported  to  be  in  service  to  residential  customers.  Almost  all  (81  percent)  are  billed  directly 
 to  end-  user  customers  and  virtually  all  (98  percent)  are  delivered  over  facilities  owned  solely  by  the  reporting  provider. 


 c.  Terrestrial  Fixed  Wireless  Technologies 
 55.  We  do  not  release,  at  this  time,  specific  line  counts  for  high-  speed  services  delivered  over  terrestrial  fixed  wireless  technologies.  These  numbers  are  aggregated  with  totals 


 for  high-  speed  lines  delivered  over  satellite  technology  to  address  confidentiality  concerns.  114  In  lieu  of  a  precise  subscribership  total,  we  report  that  terrestrial  fixed  wireless  technology  accounts 
 for  between  50,000  and  150,000  high-  speed  lines.  By  contrast,  in  the  Second  Report  we  reported  that  wireless  service  represented  fewer  than  50,000  subscribers.  115  Of  these  lines,  89  percent  are 
 reported  to  meet  the  Commissions  definition  of  advanced  services.  Most  of  the  reported  terrestrial  fixed  wireless  high-  speed  lines  (85  percent)  serve  residential  or  small  business 
 customers.  According  to  our  data  collection,  virtually  none  (0.1  percent)  are  reported  to  deliver  information  carrying  capacity  in  excess  of  2  Mbps  in  both  directions. 


 56.  Confidentiality  concerns  preclude  us  from  providing  more  detailed  analyses  from  the  collected  terrestrial  fixed  wireless  data  and  from  producing  a  map  based  on  zip  codes  where 


 112  As  an  example  of  a  facilities-  based  provider  that  does  not  use  its  own  facilities  to  deliver  service,  as  reported 
 in  our  data  collection,  a  competitive  LEC  might  deliver  SDSL  service  to  its  customer  by  placing  its  own  electronic  equipment  on  a  local  loop  that  it  leases  from  an  incumbent  LEC  as  an  unbundled  network  element  (UNE)  loop. 


 113  See  Appendix  C,  Tbl.  1;  Second  Report,  15  FCC  Rcd  at  20958. 
 114  To  prevent  the  release  of  information  that  may  be  deemed  competitively  sensitive,  we  may  aggregate  or  suppress 
 data  in  some  charts  and  tables  that  we  release.  In  other  cases,  data  may  be  presented  as  a  range  of  numbers  rather  than  as  an  exact  number. 


 115  See  Second  Report,  15  FCC  Rcd  at  20958. 
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 terrestrial  fixed  wireless  subscribers  exist.  Publicly  available  information,  however,  indicates  that  terrestrial  fixed  wireless  high-  speed  systems  are  scattered  throughout  the  country.  In 
 addition,  our  data  collection  indicates  that  the  nine  companies  with  high-  speed  terrestrial  fixed  wireless  subscribers  reported  such  subscribers  in  a  total  of  25  states. 


 57.  Public  estimates  of  the  extent  of  terrestrial  fixed  wireless  high-  speed  deployment  differ  markedly  and  some  industry  analysts  estimates  generally  exceed  our  reported  figure.  116 
 For  instance,  Strategis  Group  estimates  that  there  were  roughly  100,000  terrestrial  fixed  wireless  high-  speed  subscribers  in  the  United  States  as  of  mid-  2001.  117  Cahners  In-  Stat  believes  there  are 
 currently  about  300,000  terrestrial  fixed  wireless  subscribers,  including  businesses,  in  the  United  States.  118 


 58.  Within  the  MDS  sector,  Yankee  Group  estimated  that  there  were  approximately  20,000  MDS-  based  high-  speed  Internet  access  subscribers  in  the  United  States  at  the  end  of 
 2000,  119  and  that  this  number  will  have  grown  to  87,000  by  the  end  of  2001.  120  Yankee  Group  also  believes  that  MDS  systems  currently  reach  55  percent  of  the  United  States  population.  121 
 Based  on  various  public  information  sources,  it  appears  that  at  least  28  companies  were  offering  high-  speed  Internet  access  via  MDS  in  approximately  44  separate  markets  as  of  the  end  of 
 2000.  122 
 59.  In  addition,  many  local  and  regional  ISPs  use  unlicensed  spectrum  to  offer  terrestrial  fixed  wireless  high-  speed  Internet  access  in  a  small  number  of  markets  apiece. 


 Estimates  of  the  number  of  companies  using  unlicensed  spectrum  for  this  service  vary.  One  equipment  manufacturer  estimates  there  are  around  800,  123  while  another  believes  there  are  50  to 
 100.  124  One  industry  analyst  estimates  there  are  just  under  200.  125  Based  on  obtainable, 
 116  Several  factors  may  explain  these  differences.  Not  all  wireless  providers  met  the  reporting  threshold,  either  in 
 terms  of  the  number  of  high-  speed  subscribers  in  a  state,  or  the  transmission  speed  of  their  service.  Business  customers  utilizing  wireless  under  private  contractual  arrangements  similar  to  private  line  services  are  generally  not 


 captured  in  our  data.  Wireless  services  with  transmission  speeds  of  128  kbps  may  be  included  in  some  analysts 
 estimates. 
 117  Alex  Salkever,  Broadband's  Next  Wave:  Wireless?,  Business  Week  Online,  May  17,  2001  (citing  Peter  Jarich  of 


 Strategis  Group). 
 118  Eve  Tahmincioglu,  For  High-  Speed  Access  to  the  Web,  a  Dish-  to-  Dish  Route,  New  York  Times,  Oct.  11,  2001,  at 


 G9  (citing  Cahners  In-  Stat  Group). 
 119  Michael  Bartlett,  Fixed  Wireless  System  To  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001 


 (citing  Yankee  Group). 
 120  Denise  Pappalardo,  Worldcom  Adds  Wireless  MMDS  Area,  Network  World,  Aug.  20,  2001,  at  23  (citing  Lindsay 


 Schroth,  an  analyst  at  The  Yankee  Group). 
 121  Michael  Bartlett,  Fixed  Wireless  System  To  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001 


 (citing  Lindsay  Schroth,  an  analyst  with  Yankee  Group). 
 122  See  Implementation  of  Section  6002(  b)  of  the  Omnibus  Budget  Reconciliation  Act  of  1993,  Annual  Report  and 


 Analysis  of  Competitive  Market  Conditions  with  Respect  to  Commercial  Mobile  Services,  Sixth  Report,  16  FCC  Rcd 
 13350,  13452  (2001). 
 123  Unlicensed  Update    The  Service  Providers,  Broadband  Wireless  Business,  June/  July  2000,  at  25  (citing  Tom 


 Walusek,  BreezeCOM).  According  to  Walusek,  the  800  includes  ISPs  with  only  one  functioning  link.  Id. 
 124  Id.  (citing  Scott  Plumlee,  C-  Spec). 


 125  Id.  (citing  Andy  Fuertes,  Allied  Business  Intelligence). 
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 publicly-  available  information,  the  Commission  estimates  there  are  at  least  241  different  companies  using  unlicensed  spectrum  to  provide  high-  speed  terrestrial  fixed  wireless  Internet 
 access  in  approximately  503  different  counties.  126 
 d.  Satellite  Technologies 
 60.  Our  data  collection  confirms  that  provision  of  high-  speed  services  over  satellite  technology  is  still  in  the  early  stages  of  deployment  with  less  than  four  providers  reporting. 


 High-  speed  service  over  satellite  technology  accounted  for  between  50,000  and  150,000  high-speed  lines  as  of  June  2001.  127  We  note  that  virtually  all  of  these  lines  are  provided  to  residential 
 and  small  business  users,  and  are  billed  directly  to  end-  user  customers.  We  also  note  that  none  of  these  lines  satisfies  the  Commissions  definition  of  advanced  services.  Again,  confidentiality 
 concerns  prevent  us  from  providing  information  from  our  data  collection  on  the  geographic  distribution  of  satellite  service  subscribers.  Publicly  available  information,  however,  indicates 
 that  there  are  satellite  high-  speed  subscribers  in  every  state.  StarBand  Communications  announced  that  by  the  end  of  2001  it  had  installed  nearly  40,000  paying  subscribers  in  all  50 
 states,  and  Hughes  Network  Systems  said  it  had  over  100,000  subscribers  for  its  DIRECTWAY  satellite  service.  128 


 C.  Investment  in  High-  Speed  Access  Technologies 
 61.  Overview.  This  section  reviews  the  analyses  and  predictions  of  various  industry  analysts  with  respect  to  investment  in  the  high-  speed  and  advanced  services  sector.  Overall, 


 analysts  observe  that  carriers  have  continued  to  invest  in  this  sector  in  a  substantial  way  resulting  in  increased  availability  of  various  high-  speed  and  advanced  services  platforms  for  consumers 
 throughout  the  nation.  According  to  one  analyst,  about  75  percent  of  households  will  have  high-speed  Internet  access  available  from  either  DSL  or  cable  modem  service  by  the  end  of  2001,  up 
 from  60  percent  in  2000.  129  Another  analyst  estimates  as  of  the  first  quarter  of  2000,  that  81  percent  of  households  had  available  DSL  or  cable  modem  service.  130  The  analyst  further 
 estimates  that  94  percent  of  households  will  have  available  DSL  or  cable  modem  service  by  2005.  131  In  addition,  it  appears  that  other  services,  such  as  fixed  wireless  and  satellite,  have 
 significantly  expanded  availability  to  a  large  percentage  of  the  United  States.  For  example,  high- 


 126  See  Implementation  of  Section  6002(  b)  of  the  Omnibus  Budget  Reconciliation  Act  of  1993,  Annual  Report  and 
 Analysis  of  Competitive  Market  Conditions  with  Respect  to  Commercial  Mobile  Services,  Sixth  Report,  16  FCC  Rcd 
 13350,  13444  (2001). 


 127  Fixed  wireless  and  satellite  high-  speed  services,  together,  represent  200,000  high-  speed  lines  as  of  the  end  of 


 June  2001,  compared  to  50,000  at  the  end  of  1999.  See  Appendix  C,  Tbl.  1. 
 128  StarBand  Wraps  Up  2001  as  Americans  Leading  Consumer  Satellite  Internet  Provider,  Press  Release,  Jan.  7, 


 2001  (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  whoweare/  pr/  010702.  htm>;  DIRECTWAY  Subscribers  Break  100,000  Mark,  Press  Release,  Jan.  9,  2002  (visited  Feb.  5,  2002) 


 <http://  www.  hns.  com/  corporate/  news/  pr/  pr9999487460002.  htm>. 
 129  See  Broadband  Will  be  Available  to  75  percent  of  US  Homes  by  Year-  Says  New  Yankee  Group  Report,  Yankee 


 Group  News  Releases,  Nov.  1,  2001  (Yankee  Group  Release). 
 130  Morgan/  McKinsey  Broadband  Report  at  43. 


 131  Id.  at  52. 
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 speed  satellite  services  are  now  available  in  all  50  states,  132  and  MMDS  systems  currently  reach  55  percent  of  the  population.  133  The  percentage  of  the  population  reached  by  MMDS  is  expected 
 to  grow  to  90  percent  by  the  end  of  2004.  134  Analysts  generally  predict  this  trend  will  continue.  Likewise,  they  observe  that  subscription  to  these  services  is  increasing  at  a  significant  rate  and 
 predict  it  will  continue  to  do  so  in  the  future.  Increases  in  subscribership  suggest  a  stronger  incentive  to  invest  to  make  high-  speed  and  advanced  services  available  to  even  more  consumers. 


 62.  As  the  Commission  noted  in  the  Second  Report,  industry  investment  in  infrastructure  to  support  high-  speed  and  advanced  services  has  increased  dramatically  since 
 1996.  135  Analysts  forecasted  at  that  time  that  this  upward  trend  would  continue,  spurred  by  the  introduction  of  competition  into  the  market.  136  Although  analysts  still  generally  expect  this  trend 
 to  continue,  they  observe  that  there  has  been  a  recent  slowdown  in  investment  caused  by  the  economic  downturn  generally  and,  more  particularly,  over-  building  by  carriers,  over-manufacturing 
 by  vendors,  over-  capitalization  by  financial  markets,  coupled  with  unrealistic  market  expectations  by  investors.  137  They  conclude  that,  although  it  will  take  some  time  for  the 
 industry  to  absorb  excess  bandwidth  capacity  and  increase  utilization  of  existing  assets,  the  recent  slowdown  in  investment  has  not  been  caused  by  a  slowdown  in  consumer  demand.  138  In 
 addition,  they  conclude  that  the  current  contraction  in  the  competitive  LEC  market,  in  particular,  will  likely  continue  in  the  near  term  because  the  economic  opportunity  for  targeting  small-  to-medium 
 business  markets  as  an  entry  strategy,  which  is  where  competitive  LECs  have  focused  much  effort,  is  not  as  great  as  originally  expected.  139 


 63.  The  Commission  also  noted  in  the  previous  Report  that  an  equally  significant  factor  driving  infrastructure  investment  was  the  rapidly  rising  demand  for  high-  speed  services.  140 
 This  factor  continues  to  be  true.  Access  to  computers  and  high-  speed  Internet  access  has  grown  dramatically.  According  to  a  government  survey,  53.9  million  households  (or  50.5  percent  of  all 


 132  See,  e.  g.,  Q&  A  StarBand  Facts  (visited  Feb.  5,  2002) 
 <http://  www.  starband.  com/  faq/  starbandfacts.  htm#  available2>  (  The  StarBand  service  is  currently  available  only  in  the  48  contiguous  U.  S.,  Alaska  and  Hawaii.). 


 133  Michael  Barlett,  Fixed  Wireless  System  to  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001 
 (citing  Lindsay  Schroth,  an  analyst  with  Yankee  Group). 
 134  Id. 


 135  See  Second  Report,  15  FCC  at  20983. 
 136  Id. 
 137  U.  S.  Communications  Infrastructure  at  a  Crossroads:  Opportunities  Amid  the  Gloom,  McKinsey  &  Company, 
 Goldman,  Sachs  &  Co.,  Aug.  2001,  at  1,  5-  7,  11,  37-  40.  (McKinsey/  Goldman  Infrastructure  Report);  TeleChoice 
 Sees  Slower  but  Still  Substantial  Growth  in  DSL  Market  (visited  Feb.  5,  2002) 
 <http://  xdsl.  com/  content/  tcarticles/  wp081101.  asp>;  Yankee  Group  Forecasts  2002  DSL  Revenues  at  Over  $3.3  Billion,  Yankee  Group  New  Releases,  Jan.  11,  2002. 


 138  Id. 
 139  Sizing  Up  the  CLECs:  A  Companion  Piece  to  Broadband  2001,  J.  P.  Morgan  Securities,  Inc.,  Equity  Research, 
 Apr.  2,  2001,  at  1  (Morgan  CLEC  Report) 
 140  Second  Report,  15  FCC  Rcd  at  20983. 
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 households)  had  Internet  access  as  of  September  2001.  141  The  percentage  of  homes  with  household  Internet  access  increased  rapidly  from  the  44.5  percent  penetration  rate  in  August 
 2000.  142  Analysts  predict  that  the  number  of  on-  line  households  will  continue  to  increase.  Currently,  the  vast  majority  (80.0  percent)  are  narrowband  connections,  but  the  percentage  of 
 high-  speed  connections  should  increase,  so  that  in  the  next  five  years,  55.7  percent  of  access  connections  are  projected  to  be  high-  speed  or  advanced.  Analysts  predict  for  residential  high-speed 
 or  advanced  service  subscribership  to  increase  from  1.9  million  at  the  beginning  of  2000  to  40  million  at  the  end  of  2005.  143  By  2004,  analysts  expect  28.9  percent  of  households  will 
 access  the  Internet  through  cable  modem  services,  21.1  percent  through  DSL  and  5.7  percent  through  wireless  and  satellite  technologies.  144 


 64.  Analysts  predict  that  new  and  unforeseen  capacity  hungry  applications  that  require  advanced  service  platforms  will  drive  demand,  and  in  turn  deployment,  in  the  future. 
 One  report  forecasts  that  in  2005,  the  average  broadband  household  will  download  about  70  megabits  of  files,  consume  more  than  20  minutes  of  streaming  per  day,  and  download  three  two-hour 
 long  movies  per  month  .  145  As  these  new  services  come  on  line,  analysts  expect  that  the  use  of  the  Internet  will  evolve.  For  example,  they  speculate  that  Internet  dot-  com  web-  page  traffic 
 will  decline  in  relative  importance  as  new  demand  such  as  enterprise  driven  machine-  to-  machine  and  streaming  (audio  and  video)  traffic  rises.  146 


 65.  Cable:  Recent  investment  in  cable  infrastructure  has  been  significant.  In  2000,  the  cable  industry  spent  a  total  of  $15.5  billion  on  the  construction  of  new  plant,  upgrades, 
 rebuilds,  new  equipment,  and  maintenance  of  new  and  existing  equipment.  147  This  represents  a  45.9  percent  increase  over  the  $10.6  billion  spent  in  1999.  148  Analysts  expect  that  operators  will 
 have  spent  an  estimated  $14.7  billion  in  2001.  149  Moreover,  it  appears  that  the  amount  invested  in  cable  infrastructure  has  remained  at  high  levels  over  the  past  several  years  and  has  resulted  in 
 increased  availability  of  cable  modem  service.  As  of  year-  end  2000,  cable  modem  service  was 
 141  U.  S.  Department  of  Commerce,  Economics  and  Statistics  Administration,  National  Telecommunications  and 
 Information  Administration,  A  Nation  Online:  How  Americans  Are  Expanding  Their  Use  of  the  Internet  (Feb.  2002)  (A  Nation  Online). 


 142  Id. 
 143  Broadband  2001,  A  Comprehensive  Analysis  of  Demand,  Supply,  Economics,  and  Industry  Dynamics  in  the  U.  S. 
 Broadband  Market,  J.  P.  Morgan  Chase  &  Co.  and  McKinsey  &  Company,  Inc.,  Apr.  2,  2001,  at  1. 
 (Morgan/  McKinsey  Broadband  Report);  TeleChoice  Deployment  Statistics,  supra  note  105;  Morgan  Stanley    Broadband  Part  Duex  at  46. 


 144  Id. 
 145  IP!    Summary:  How  Changes  in  the  Internet  are  Disrupting  the  Telecom  Services  Industry,  JPMorgan  H&  Q  and 
 McKinsey  &  Company,  May  11,  2001,  at  1,  16-  19,  28-  29  (JPMorgan/  McKinsey  IP  Report) 
 146  Id. 


 147  Paul  Kagan  Assocs  .,  Inc.,  Estimated  Capital  Flows  in  Cable  TV,  The  Broadband  Cable  Financial  Databook 
 2001,  Jul.  2001,  at  138.  "New  builds"  are  the  construction  of  new  cable  plant  where  none  existed  before,  primarily  newly  built  homes.  "Rebuilds"  are  improvements  to  existing  systems  that  do  not  retain  much  of  the  old  system  plant 


 and  equipment.  Instead,  they  consist  of  mostly  new  plant  and  equipment.  "Upgrades"  are  improvements  to  existing  cable  systems  that  do  not  require  the  replacement  of  the  entire  existing  plant  and  equipment. 
 148  Id. 
 149  Id. 
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 available  to  58.5  million  homes,  as  compared  to  35.5  million  in  1999.  150  In  2001,  cable  modem  services  are  estimated  to  be  available  to  77.5  million  homes.  151  Recent  progress  in  network 
 upgrades  has  allowed  cable  operators  to  provide  two-  way  service  to  the  vast  majority  of  cable  modem  ready  homes.  152  One  analyst  predicts  that  by  2003  investment  spending  is  expected  to 
 result  in  the  upgrade  of  substantially  all  of  the  U.  S.  cable  infrastructure  (more  than  99.9  million  homes)  to  enable  the  delivery  of  new  bandwidth-  intensive  services.  153  According  to  one  analyst, 
 once  the  upgrade  is  completed,  the  capital  expenditures  will  likely  remain  high,  but  should  decline.  154 


 66.  Subscribership  to  cable  modem  service  is  also  increasing.  At  the  end  of  2000  there  were  approximately  3.9  million  cable  subscribers.  155  By  year-  end  2001,  an  industry  analyst 
 estimates  that  cable  modem  subscriptions  will  almost  double,  to  7.5  million  subscribers.  156  In  addition,  that  same  analyst  expects  that  over  the  next  five  years,  cable  modem  subscriptions  will 
 continue  to  increase  dramatically,  reaching  an  average  estimate  of  28-  30  million  by  2006  and  forecast  penetration  rates  for  cable  modems  to  increase  to  40  percent  by  2006.  157 


 67.  Analysts  expect  that  deployment  of  other  cable-  based  advanced  services  will  accelerate  in  the  next  few  years.  For  example,  analysts  expect  that  subscriber  demand  for  video-on- 
 demand  (VOD)  services,  which  allow  viewers  to  access  TV  programming  on  demand  from  a  remote  video  server  and  have  full  VCR  functionality,  such  as  pausing,  rewinding,  and  fast 
 forwarding,  will  increase  substantially  over  the  next  few  years.  158  Analysts  predict  VOD  services  may  reach  60  percent  of  total  basic  cable  subscribers,  or  42  million  units  by  2005-  06.  159 
 According  to  one  analyst,  VOD  will  generate  revenues  of:  more  than  $65  million  by  year-  end  2001;  $420  million  in  2002;  $970  million  in  2003;  $1.43  billion  in  2004;  and  will  reach  $1.98 
 billion  by  year-  end  2005.  160  According  to  another  analyst,  VOD  subscribers  are  forecasted  to  grow  from  17,000  in  2001  to  365,000  in  2006.  161 


 150  Morgan  Stanley    Broadband  Part  Duex  at  46. 
 151  Id. 
 152  See  NCTA  Comments  in  the  2001  MVPD  Competition  Report  at  26;  see  also  Comcast  Comments  in  the  2001 
 MVPD  Competition  Report  at  7;  CableLabs  DOCSIS  Primer  (visited  Feb.  5,  2002) 
 <http://  www.  cablemodem.  com/  docsisprimer.  html  >. 
 153  Richard  Bilotti,  Benjamin  Swinburne,  and  Megan  Lynch,  Broadband  Cable  Television,  The  Past  is  Prologue  to 


 the  Future  ,  Morgan  Stanley  Equity  Research,  Oct.  4,  2001,  at  33  (Morgan  Stanley  Broadband  Cable  Report). 
 154  Id.  at  42. 


 155  See  Morgan  Stanley    Broadband  Part  Duex  at  46. 
 156  Morgan  Stanley  Broadband  Cable  Report  at  28-  30. 
 157  Id. 
 158  Spencer  Wang,  John  Martin,  Thomas  Sheehan,  Mark  Holmes,  Return  on  Bandwidth  (ROB)  Analysis:  Interactive 
 TV  and  Cable  Television,  ABN-  AMRO,  Jun.  2001,  at  30  (ABN-  AMRO  Report). 
 159  Morgan  Stanley  Broadband  Cable  Report  at  16. 


 160  Video-  on-  Demand  Will  Generate  Revenues  of  Nearly  $2  Billion  in  2005,  Yankee  Group  News  Releases,  Jun.  25, 
 2001. 
 161  ABN-  AMRO  Report  at  33. 
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 68.  DSL:  Analysts  project  continued  growth  for  DSL  advanced  services  technologies  and  investment.  While  widespread  deployment  of  DSL  began  later  relative  to  deployment  of 
 cable  modem  service,  overall  deployment  of  DSL  is  catching  up.  Analysts  differ,  however,  as  to  which  technology  will  ultimately  take  the  lead.  DSL  deployment  began  in  response  to  the  1996 
 Act  and  the  presence  of  competitive  access  providers. 
 69.  Overall,  carriers  are  investing  substantially  in  the  nations  telecommunications  network,  including  the  deployment  of  DSL  technologies.  In  2000,  incumbent  LECs  invested 


 almost  $29.4  billion  in  infrastructure.  162  As  substantial  portion  of  this  investment  is  in  high-speed  or  advanced  data  services.  For  example,  Verizon  estimates  that  25  percent  of  capital 
 expenditures  in  2001  have  been  on  telecommunications  data  up  from  22  percent  in  2000.  163  Competitive  LECs  have  made  substantial  capital  expenditures,  spending  about  $17  billion  in 
 1999,  $22.6  billion  in  2000,  and  an  estimated  $14.2  billion  in  2001.  164  Venture  capital  funding  for  competitors  has  also  been  significant.  For  example,  competitive  LECs,  integrated 
 communications  providers,  DSL,  and  fiber  companies  received  $3.4  billion  of  such  funding  during  the  first  three  quarters  of  2000.  165  One  analyst  predicts,  however,  that  competitors  will 
 face  economic  challenges  as  funding  for  infrastructure  investment  has  become  scarce.  166  It  notes  that  with  some  stock  prices  down  90  percent  or  more  from  their  highs,  the  industry  has  lost  an 
 estimated  $100  billion  in  equity  capitalization  from  its  peak.  167 
 70.  There  have  been  tremendous  recent  increases  in  availability  of  DSL  due  to  investments  in  deployment.  For  example,  one  analyst  estimates  availability  to  51.5  million 


 homes  in  2001,  as  compared  to  a  reported  37.6  million  in  2000  and  25.8  in  1999.  168  Incumbent  LECs  have  increased  the  number  of  customers  who  now  have  the  opportunity  to  obtain  DSL 
 service  from  44  percent  in  1999  and  to  an  estimated  64  percent  in  2001.  169  Some  incumbent  LECs  have  been  aggressively  investing  in  their  networks  to  make  more  homes  DSL 
 addressable.  Incumbent  LECs  have  chosen  a  variety  of  rollout  strategies  for  DSL  as  a  consequence  of  differences  in  outside  plant.  One  such  strategy,  for  example,  is  SBCs  Project 
 Pronto,  at  a  cost  of  $5  billion.  170  Likewise,  Covad  Communications  had  deployed  a  network  that 


 162  Multimedia  Telecommunications  Association,  2001  Multimedia  Telecommunications  Market  Review  and 
 Forecast  at  65  (this  is  total  capital  investment,  only  portions  of  which  are  allocable  to  the  provision  of  DSL). 
 163  See  Verizon  Communications,  2000  Annual  Report  (2001)  (visited  Feb.  5,  2002) 


 <http://  investor.  verizon.  com/  annual/  00VZ_  AR.  pdf>.  In  addition,  Qwest  reports  that  of  total  capital  investment  in  2001,  11  percent  was  for  local  broadband  and  15  percent  was  for  data.  The  company  projects  that  in  2002,  9 


 percent  will  be  for  local  broadband,  and  20  percent  will  be  for  data.  See  Afshin  Mohebbi,  Presentation  at  Qwest  2001  Investment  Community  Conference  (Dec.  13,  2001)  (visited  Feb.  5,  2002) 
 <http://  www.  qwest.  com/  about/  investor/  meetings/  Mohebbi.  pdf>. 
 164  Unpublished  estimate  provided  by  New  Paradigm  Resources  Group,  Chicago,  Illinois  (Jan.  2002). 


 165  Association  of  Local  Telecommunications  Services,  Report  on  the  State  of  the  Local  Telecom  Industry  (2001) 
 (visited  Feb.  5,  2002)  <http://  www.  alts.  org/  Filings/  022001AnnualReport.  pdf>. 
 166  Morgan  CLEC  Report  at  8. 


 167  Id.  at  14. 
 168  Morgan  Stanley    Broadband  Part  Duex  at  46. 
 169  Morgan/  McKinsey  Broadband  Report  at  40-  42. 
 170  Id.  at  68-  69,  82. 
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 currently  reaches  approximately  40  to  45  percent  of  all  homes  and  businesses  in  the  United  States.  171 
 71.  Subscription  grew  as  well  in  2000  by  1.9  to  2.4  million  subscribers,  representing  annual  growth  of  over  427  percent  compared  to  1999  subscription  rates.  172  While  DSL  growth 
 has  been  robust,  it  has  slowed  somewhat  recently.  One  analyst  notes  that  during  the  first  two  quarters  of  2001,  growth  in  DSL  subscriptions  has  slowed  to  14  to  20  percent  due  to  three 
 factors:  competitive  service  provider  failures,  increased  service  pricing,  and  the  general  downturn  of  economic  conditions.  173  Another  analyst  anticipates,  however,  that  surviving 
 service  providers  will  continue  to  add  customers.  174  In  particular,  an  analyst  predicts  that  over  the  next  three  years,  residential  DSL  subscription  will  grow  to  13.4  million  in  2004,  a  21.2 
 percent  penetration  rate.  175 
 72.  Wireless:  The  fixed  wireless  industry  provides  television  programming  (in  the  Multi-  channel  Multi-  Point  Distribution  Service  (MMDS)  and  Local  Multi-  Point  Distribution 


 Service  (LMDS)),  Internet  access,  data  transfer  services,  interactive  services  and  advanced  telecommunications  services  over  a  terrestrial  microwave  platform.  Despite  the  setbacks  that  the 
 fixed  wireless  industry  has  faced  during  the  past  year,  including  financial  problems  and  halting  of  deployment  plans  by  major  operators,  analysts  believe  that  the  industry  still  has  the  potential 
 to  grow  and  become  a  successful  vehicle  for  offering  high-  speed  services.  176  One  analyst  estimates  that  the  number  of  fixed-  wireless  high-  speed  subscribers  in  the  United  States  will  grow 
 from  100,000  today  to  4.7  million  by  2005,  and  that  fixed-  wireless  technology  will  account  for  15  to  20  percent  of  the  U.  S.  high-  speed  market  at  that  time.  177  Another  analyst  estimates  there 
 are  currently  about  300,000  fixed  wireless  subscribers,  including  businesses,  in  the  United  States,  and  that  that  figure  will  grow  to  two  million  by  2005.  178  In  addition,  one  analyst  reports  that 
 MMDS  systems  currently  reach  55  percent  of  the  U.  S.  population,  but  will  be  available  to  90  percent  of  the  population  by  2004.  179  At  the  end  of  2000,  there  were  approximately  20,000 


 171  Covad  Communications,  Form  10-  Q  Consolidated  Balance  Sheet  (Nov.  2001)  (visited  Feb.  5,  2002) 
 <http://  www.  covad.  com/  companyinfo/  investorrelations/  documents/  COVD-  10-  Q-  11-  14-  2001.  pdf>. 
 172  Morgan  Stanley    Broadband  Part  Duex  at  46. 


 173  TeleChoice  Sees  Slower  but  Still  Substantial  Growth  in  DSL  Market  (visited  Feb.  5,  2002) 
 <http://  xdsl.  com/  content/  tcarticles/  wp081101.  asp>. 
 174  Id. 
 175  Morgan/  McKinsey  Broadband  Report  at  44;  Morgan  Stanley  Broadband  Cable  Report  at  31. 
 176  Fixed  Wireless  No  Wipeout,  Despite  Recent  Troubles,  Network  World,  Jun.  4,  2001,  at  38  (citing  Insight 
 Research:  Despite  the  high-  profile  failures  weve  seen,  we  think  this  is  a  temporary  setback.    Providers  are 
 definitely  going  to  implement  more  broadband  wireless.);  Wireless  Expected  To  Challenge  Cable,  DSL  For  SOHO  Customers,  Business  Communications  Review,  Jun.  1,  2001,  at  8  (citing  Allied  Business  Intelligence:  Broadband 


 wireless  technology  is  a  potential  challenger  to  cable  modems  and  DSL  for  small  office/  home  office  (SOHO) 
 customers.). 
 177  Alex  Salkever,  Broadband's  Next  Wave:  Wireless?,  Business  Week  Online,  May  17,  2001  (citing  Peter  Jarich  of 


 Strategis  Group). 
 178  Eve  Tahmincioglu,  For  High-  Speed  Access  to  the  Web,  a  Dish-  to-  Dish  Route,  New  York  Times,  Oct.  11,  2001,  at 


 G9  (citing  Cahners  In-  Stat  Group). 
 179  Michael  Bartlett,  Fixed  Wireless  System  To  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001 


 (citing  Lindsay  Schroth,  an  analyst  with  Yankee  Group). 
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 subscribers  in  the  United  States  in  the  MMDS  sector.  180  Another  analyst  expects  that  there  will  be  87,000  subscribers  by  the  end  of  2001,  181  and  that  this  number  will  grow  to  about  890,000 
 MMDS  fixed  wireless  subscribers  by  2006.  182 
 73.  Many  analysts  believe  that  fixed  wireless  carriers  are  awaiting  the  availability  of  next-  generation  technologies  that  will  not  require  a  direct  line-  of-  sight  between  subscribers 


 antennas  and  their  receivers  before  making  further  deployments  because  these  new  technologies  will  lower  their  costs  and  increase  their  service  options  significantly.  183  One  analyst  stated, 
 MMDS  is  not  readily  available  because  service  providers  are  waiting  for  next-  generation  equipment  to  come  to  market.  184  Another  analyst  claims,  Combining  cellularization  with  non-line- 
 of-  sight  technologies  could  lower  the  cost  of  providing  MMDS  service  significantly.  185  Analysts  conclude,  however,  these  technologies  will  not  be  ready  for  full-  scale  deployment  until 
 at  least  2003.  186 
 74.  Given  the  severe  financial  reversals  of  three  major  fixed  wireless  carriers  (Teligent,  Inc.,  WinStar  Communications,  Advanced  Radio  Telecommunications),  the  phasing 


 out  of  fixed  wireless  service  by  AT&  T,  and  the  halting  of  new  deployments  while  waiting  for  newer  equipment  by  Sprint  Broadband,  capital  expenditures  within  the  fixed  wireless  sector  have 
 declined  during  2001.  One  analyst  predicts,  however,  that  subscriber  growth  should  create  a  fixed  wireless  equipment  market  in  the  U.  S.  worth  $10.4  billion  and  a  revenue  stream  of  $825 


 180  Michael  Bartlett,  Fixed  Wireless  System  To  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001 
 (citing  Yankee  Group). 
 181  Denise  Pappalardo,  Worldcom  Adds  Wireless  MMDS  Area,  Network  World,  Aug.  20,  2001,  at  23  (citing  Lindsay 


 Schroth,  an  analyst  at  The  Yankee  Group). 
 182  Id. 


 183  Wireless  Expected  To  Challenge  Cable,  DSL  For  SOHO  Customers,  Business  Communications  Review,  Jun.  1, 
 2001,  at  8  (citing  Allied  Business  Intelligence:  Technology  breakthroughs  that  allow  for  non-  line-  of  sight  applications  are  being  introduced,  boosting  the  prospects  for  multichannel  multipoint  distribution  service  (MMDS) 


 and  broadband  wireless  access  (BWA)  systems.);  The  Yankee  Group  Projects  That  Worldwide  Market  for  High 
 Frequency  Fixed  Wireless  Solutions  Will  Grow  to  $1.9  Billion  in  2006,  Business  Wire,  Nov.  8,  2001  ([  D]  espite  the 
 disillusionment  caused  by  slow  growth  in  2001,  there  is  a  market  for  high-  frequency  (HF)  point-  to-  multipoint  products.  However,  the  market  for  HF  PMP  solutions  is  still  emerging,  and  there  are  issues  yet  to  be  resolved  by 


 both  vendors  and  carriers  that  use  this  technology);  Michael  Bartlett,  Fixed  Wireless  System  To  Join  Broadband  Access  Race    Study,  Newsbytes,  Aug.  29,  2001  (citing  Lindsay  Schroth,  an  analyst  with  Yankee  Group:  [  L]  ine-  of-sight 
 restrictions  are  hampering  deployment  of  MMDS  fixed  wireless  systems.  One  technology  that  might  help 
 overcome  next-  generation  products  overcome  these  restrictions  is  orthogonal  frequency  division  multiplexing  (OFDM).  Schrath  believes  that  OFDM  has  spectral  efficiency  and  that  several  vendors  are  working  on  next-generation 


 technologies  that  address  the  limitations  of  MMDS  fixed  wireless  systems.). 
 184  Denise  Pappalardo,  Worldcom  Adds  Wireless  MMDS  Area,  Network  World,  Aug.  20,  2001,  at  23  (citing  Lindsay 


 Schroth,  an  analyst  at  The  Yankee  Group). 
 185  Michael  Grebb,  Can  Broadband  Save  MMDS?,  Cablevision,  May  28,  2001,  at  32  (citing  Andy  Fuertes,  senior 


 vice  president  of  communications  technology  at  Allied  Business  Intelligence.  He  also  states  that  with  non-  line-  of-sight  technology,  theres  the  potential  for  more  self-  install.  That  takes  the  massive  cost  of  the  truck  roll  out  of 


 there.  Fuertes  predicts  that  self-  installs  will  be  commonplace  in  MMDS  operations  within  two  years.) 
 186  Sinead  Carew,  Could  Fixed  Wireless  Still  Have  Its  Day?,  ComputerWire,  Oct.  30,  2001  (citing  Lindsay  Schroth, 


 an  analyst  at  Yankee  Group);  Denise  Pappalardo,  Fixed  Wireless  Takes  Some  Lumps,  Network  World,  Nov.  5,  2001,  at  33  (citing  Maribel  Dolinov,  senior  analyst  at  Forrester  Research);  Denise  Pappalardo,  Worldcom  Adds  Wireless 


 MMDS  Area,  Network  World,  Aug.  20,  2001,  at  23  (citing  Lindsay  Schroth,  an  analyst  at  The  Yankee  Group). 
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 million  within  five  years.  187  Another  forecasts  that  high-  speed  wireless  revenue  in  North  America  will  increase  from  $963  million  during  2000  to  over  $14  billion  by  2006.  188 
 75.  Some  analysts  believe  that,  while  fixed  wireless  has  the  potential  to  compete  with  DSL  and  cable  modem  service,  the  technology  is  best-  suited  for  rural  and  underserved  markets 
 where  these  services  are  not  available.  189  Other  analysts  claim  that  the  technology  will  be  deployed  mainly  to  residential,  not  business,  customers.  190 


 76.  During  2001,  the  Commission  authorized  the  use  of  MMDS  and  Instructional  Television  Fixed  Service  191  (ITFS)  spectrum  for  mobile,  in  addition  to,  fixed  use  by  licensees. 
 Analysts  and  industry  players  generally  believe  the  decision  gives  fixed  wireless  carriers  and  equipment  vendors  additional  flexibility  and  may  help  to  revive  the  industry.  192 


 77.  Satellite:  High-  speed  service  is  available  today  by  satellite  in  most  areas  of  the  U.  S.  193  Hughes  provides  high  speed  service  under  its  DIRECWAY  and  DirecPC  brands,  and 
 StarBand,  which  has  strategic  partnerships  with  Gilat  Satellite  Networks,  Microsoft  Corporation  and  EchoStar  Communications,  began  operation  in  2000  and  launched  its  service  in  late  2000.  194 


 187  Alex  Salkever,  Broadband's  Next  Wave:  Wireless?,  Business  Week  Online,  May  17,  2001  (citing  Peter  Jarich  of 
 Strategis  Group). 
 188  Fixed  Wireless  No  Wipeout,  Despite  Recent  Troubles,  Network  World,  Jun.  4,  2001,  at  38  (citing  Insight 


 Research). 
 189  Sinead  Carew,  Could  Fixed  Wireless  Still  Have  Its  Day?,  ComputerWire,  Oct.  30,  2001  (citing  Lindsay  Schroth, 


 an  analyst  at  Yankee  Group:  Fixed  wireless  is  not  going  to  be  the  market  that  people  thought,  but  there  will  still  be 
 a  place  for  it,"  she  said.  Rather  than  pitching  their  wares  against  DSL  or  cable,  operators  should  go  after  niche  markets  like  rural  areas  outside  of  the  reach  of  DSL.). 


 190  Fixed  Wireless  No  Wipeout,  Despite  Recent  Troubles,  Network  World,  Jun.  4,  2001,  at  38  (citing  Peter  Jarich,  an 
 analyst  with  The  Strategis  Group:  We  see  the  technology  as  being  primarily  residential.  Were  not  seeing 
 business  as  the  right  way  to  go.    Business  users  have  a  range  of  connectivity  options  to  choose  from,  and  theyre  more  concerned  about  quality  of  service  and  reliability  than  are  residential  users.;  and  citing  Chris  Whitely  of 


 Insight  Research:  When  businesses  decide  to  go  with  a  fixed  wireless  link,  its  often  as  a  back-  up  connection,  or  for 
 less  critical  traffic  only.). 
 191  ITFS  are  wireless  services  supplied  by  holders  of  spectrum  created  for  educational  and  related  community 


 purposes. 
 192  Jim  Barthold,  Fixed  Wireless  Eyes  Mobile  Future,  Telephony,  Oct.  1,  2001.  (John  Schwartz,  president  of  the 


 Instructional  Telecommunications  Foundation  and  a  representative  of  The  National  ITFS  Association,  stated,  We  do  have  an  evolution  to  make  now.;  Leo  Cyr,  president  and  chief  operating  officer  of  Clearwire  Technologies, 


 which  serves  ITFS  licensees,  said,  It  gives  you  some  new  service  possibilities,  especially  with  portability.;  Charles  Riggle,  vice  president  of  marketing  and  business  development  at  NextNet  Wireless:  This  ruling  really  plays  into 
 our  hands    Were  uniquely  positioned  to  take  advantage.;  Peter  Jarich,  director  of  Global  Broadband  Research 
 for  The  Strategis  Group:  It  doesnt  look  like  [Sprint  PCS  and  WorldCom]  are  committed  to  fixed.    In  fact,  everyone  wonders  if  theyre  [both]  going  to  stick  with  their  MMDS  fixed  wireless  plans  or  move  to  deploy  3G.). 


 193  We  note  that  high-  speed  satellite  services  are  widely  available  in  the  United  States.  See,  e.  g.,  Q&  A  StarBand 
 Facts  (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  faq/  starbandfacts.  htm#  available2>  (  The  StarBand  service  is  currently  available  only  in  the  48  contiguous  U.  S.,  Alaska  and  Hawaii.). 


 194  See  DIRECWAY,  Frequently  Asked  Questions,  (visited  Feb.  5,  2002) 
 <http://  www.  hns.  com/  direcway/  for_  home/  learn_  more/  faq.  htm.>,  and  the  DirecPC  System  For  Your  Home  (visited  Feb.  5,  2002)  <http://  www.  direcpc.  com/  athome/  serviceplanstxt.  html>.  See  also  Q&  A  StarBand  Facts  (visited  Feb. 


 5,  2002)  <http://  www.  starband.  com/  faq/  starbandfacts.  htm>;  What  is  StarBand?  (visited  Feb.  5,  2002) 
 <http://  www.  starband.  com/  whatis/  index.  htm>;  (visited  Feb.  5,  2002)  (continued....) 
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 Several  satellite  providers  project  deployment  of  additional  systems  using  the  Ka-  band  that  will  be  capable  of  providing  residential  and  business  advanced  services  over  the  next  several  years.  195 
 78.  Subscriber  projections  for  satellite  high-  speed  systems  vary  significantly.  Several  recent  projections  estimate  subscription  rates  of  from  4  to  5  million  by  2005.  196  Several  analysts 
 suggest  that  there  are  20  to  30  million  U.  S.  homes  that  are  unlikely  to  ever  have  DSL  or  cable  modem  access  and  consequently  that  satellite-  based  consumer  services  should  make  significant 
 headway  in  the  market  for  high-  speed  connectivity.  197  Some  analysts  predict  that  satellite  high-speed  systems  will  become  the  dominant  means  of  delivering  high-  speed  data  and  Internet  to 
 users  outside  urban  areas  and  in  areas  of  low  subscriber  density,  and,  within  ten  years,  may  capture  between  5  and  10  percent  of  high-  speed  access  subscribers.  198  Salomon  Smith  Barney 
 projects  revenue  from  high-  speed  satellite  Services  to  reach  $3.6  billion  in  2005.  199  Bank  of  America  Securities  estimates  that  high-  speed  satellite  service  revenues  will  grow  from  $694 
 million  in  2001  to  $4.486  billion  in  2005  and  $7.489  billion  in  2008.  200  In  2000,  ING  Barings  estimated  total  investment  in  U.  S.-  based  satellite  high-  speed  projects  over  the  next  ten  years  to 
 be  $28.55  billion.  201  Aggregate  revenue  estimates  for  the  next  eight  to  ten  years  range  from  $15  to  over  $30  billion.  202 


 D.  Overview  of  Trends  in  Developing  Technologies 
 79.  Since  the  Second  Report,  there  have  been  a  number  of  developments  in  the  technologies  capable  of  supporting  advanced  services.  Many  of  these  technologies  appear  to 


 have  significant  potential  for  expanding  the  availability  of  advanced  telecommunications  to  more  Americans.  In  addition,  some  of  these  developments  may  improve  the  speed  and  the  range  of 


 (...  continued  from  previous  page)  <http://  www.  starband.  com/  whoweare/  index.  htm>.  See  also  StarBand  Communications  Launches  Nations  First 
 Consumer  Two-  Way  High  Speed  Internet  Service  Via  Satellite,  StarBand  Press  Release,  Nov.  6,  2000. 
 195  For  example,  two  Ka-  band  services  plan  introduction  of  service  in  2003:  WildBlue,  an  independent  company 


 with  ties  to  EchoStar  and  News  Corp.,  and  Spaceway,  to  be  provided  by  Hughes.  Armand  Musey,  The  Satellite 
 Model  Book  ,  Salomon  Smith  Barney,  Jun.  4,  2001,  at  24  (Satellite  Model  Book  ). 
 196  Salomon  Smith  Barney  projects  broadband  satellite  service  subscribers  to  grow  to  4  million  by  year-  end  2005.  Id. 


 at  23.  Bank  of  America  Securities  projects  5  million  broadband  satellite  services  subscribers  by  2005.  Armand 
 Musey,  Satellite  Communications  Industry  Overview,  Bank  of  America  Securities  (First  Quarter  2001)  at  21  (Satellite  Industry  Overview).  In  2000,  ING  Barings  predicted  that  the  number  of  residential  subscribers  would 


 increase  from  close  to  100,000  estimated  in  1999  to  over  39  million  by  the  end  of  2008.  David  B.  Kesternbaum, 
 Michael  K.  French,  and  Eric  Lentini,  The  Satellite  Communications  Industry:  Efficient  Infrastructure  2000,  ING  Barings,  Mar.  2000,  at  13  (ING  Barings). 


 197  Satellite  Model  Book  at  23.;  Marc  E.  Nabi,  Eye  in  the  Sky,  2Q01  Preview,  Merrill  Lynch,  Jul.  3,  2001,  at  47. 
 198  Thomas  W.  Watts  and  William  W.  Pitkin,  Global  Satellite  Marketplace  99:  Clearing  the  Hurdles:  The  Satcom 
 Industry  Focuses  on  Execution,  Merrill  Lynch,  Apr.  14,  1999,  at  99-  101  (Global  Satellite  Marketplace). 
 199  Satellite  Model  Book  at  23. 


 200  Satellite  Industry  Overview  at  22. 
 201  ING  Barings  at  24. 
 202  In  addition,  ING  Barings  Broadband  Growth  Forecast  predicts  $20  billion  in  service  revenue  by  2009.  ING 
 Barings,  ING  Barings  at  13.  Satellite  Industry  Overview  at  60;  Global  Satellite  Marketplace  at  101. 
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 services  offered  to  consumers  through  various  technological  platforms.  In  the  following,  we  take  notice  of  several  of  these  trends  and  consider  technologies  that  may  emerge  in  the  near  future.  203 
 80.  3G  Wireless.  Providers  are  beginning  to  deploy  third  generation  wireless  (3G)  systems.  Third  generation  wireless  generally  refers  to  high-  speed  advanced  mobile  services  and 
 the  next  generation  of  technologies    beyond  the  current  first  generation  (analog  cellular  and  paging  systems)  and  second  generation  (digital  systems,  such  as  digital  cellular  and  PCS).  These 
 3G  systems  are  expected  to  provide  support  of  multimedia  services  and  capabilities,  including  fixed  and  variable  bit  rate  traffic;  bandwidth  on  demand;  asymmetric  data  rates  in  the  forward 
 and  reverse  links;  multimedia  mail  store  and  forward;  and  access  to  advanced  services.  204  The  International  Telecommunication  Union  (ITU)  has  developed  worldwide  standards  for  3G 
 wireless  devices  that  specify  that  these  systems  must  be  capable  of  supporting  circuit  and  packet  data  at  rates  of  2  Mbps  or  higher  for  indoor  traffic,  384  kbps  for  pedestrian  traffic,  and  144  kbps 
 or  higher  in  high  mobility  (vehicular)  traffic.  205  In  addition,  many  commercial  mobile  radio  service  licensees  are  beginning  to  deploy,  or  have  developed  plans  to  deploy,  3G  services  within 
 their  existing  spectrum.  The  successful  deployment  of  3G  wireless  services  may  significantly  expand  availability  of  advanced  services,  especially  to  consumers  that  are  currently  unserved  by 
 wireline  connections. 
 81.  Cable  Modem  Standard.  The  current  cable  modem  specification,  DOCSIS  1.0,  accounts  for  almost  all  cable  modem  services.  206  Recently,  the  cable  industry  began  adopting  a 


 new  standard,  DOCSIS  1.1.  DOCSIS  1.1  delivers  some  capabilities  to  support  tiered  services,  multimedia,  telephony  and  PacketCable;  enhanced  security;  increased  upstream  performance; 
 and  additional  features  that  make  data-  over-  cable  platforms  easier  to  manage.  The  cable  industry  also  recently  announced  the  development  of  DOCSIS  2.0.  207  DOCSIS  2.0  will  add  an  advanced 
 physical  layer  for  DOCSIS  cable  modems  and  headend  Cable  Modem  Termination  System  (CMTS)  products.  DOCSIS  2.0  will  allow  cable  operators  to  provide  improved  voice  over 
 Internet  protocol  and  videoconferencing  offerings  for  homes  and  businesses.  In  addition,  DOCSIS  2.0  may  provide  increased  transmission  reliability  and  protect  against  reverse  path 
 noise  impairments.  DOCSIS  2.0  is  backward  compatible  with  the  DOCSIS  1.0  and  1.1  specifications  meaning  that  cable  modems  conforming  to  any  of  the  three  specifications  will  be 
 able  to  interoperate  with  cable  modem  termination  systems  supporting  DOCSIS  2.0.  As  a  result,  the  implementation  of  the  new  cable  modem  standards  may  improve  reliability  on  the  cable 
 network  and  expand  the  types  of  available  applications  for  consumers  who  subscribe  to  cable  services. 


 203  We  emphasize  that  this  overview  is  not  intended  to  endorse  or  advocate  any  particular  platform  or  system. 
 204  See  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3GHz  for  Mobile  and  Fixed 
 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless  Systems, 
 ET  Docket  No.  00-  258,  Notice  of  Proposed  Rulemaking  and  Order,  16  FCC  Rcd  596,  604  (2001).  This  proceeding  is  exploring  the  possible  use  of  frequency  bands  below  3  GHz  to  support  the  introduction  of  new 


 advanced  wireless  services,  including  third  generation  (3G)  as  well  as  future  generations  of  wireless  systems. 
 205  Id. 


 206  One  exception  is  proprietary  modem  services. 
 207  KC  Neel,  Terayon  Gets  DOCSIS  2.0  Boost  New  Cable-  Modem  Standard  Should  Increase  Bandwidth,  Cable 
 World,  Sep.  10,  2001  (  With  DOCSIS  2.0,  cable  operators  should  be  able  to  gain  additional  revenues  through  upstream-  intensive  applications  including  voice  over  Internet  protocol,  peer-  to-  peer  networking,  video  conferencing, 


 Web  hosting,  video-  on-  demand,  online  gaming  and  application  services.). 
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 82.  Broadband  Passive  Optical  Networking.  SBC  recently  announced  that  it  plans  to  use  broadband  passive  optical  networking  (BPON)  to  provide  direct  fiber  service  to  smaller 
 businesses  and  residences.  208  BPON  uses  splitters  to  replicate  a  wavelength  division  multiplexed  signal,  which  is  then  distributed  over  multiple  fibers  to  customers  locations.  The  BPON  system 
 planned  for  use  by  SBC  can  serve  up  to  38  residences  or  small  businesses.  SBC  is  targeting  consumers  that  currently  have  multiple  T1  lines  that  are  deployed  using  repeaters.  Because  T1 
 signals  can  interfere  with  DSL,  the  company  believes  that  shifting  T1  repeater  customers  to  BPON  would  improve  the  range  and  service  quality  of  other  DSL  customers.  By  moving  fiber 
 closer  to  the  home,  consumers  will  have  significantly  greater  amounts  of  available  bandwidth,  capable  of  supporting  emerging  applications  such  as  video-  on-  demand. 


 83.  DSL  Extension.  DSL  extension  products  have  been  developed  to  serve  subscribers  who  are  located  beyond  the  range  of  the  central  office  or  who  are  blocked  by  a 
 digital  loop  carrier  that  cannot  be  modified  with  a  remote  access  multiplexer  or  remote  DSLAM.  209  For  example,  GoDigital  Networks  recently  introduced  the  Xcel-  4a  ADSL  extender 
 which  provides  ADSL  up  to  25  miles  from  the  DSLAM  with  an  estimated  downstream  transmission  speed  of  1.5  Mbps  and  a  guaranteed  upstream  speed  of  384  kbps.  210  Because  the 
 extender  is  able  to  support  four  DSL  customers  over  a  single  copper  pair,  the  company  estimates  that  carriers  can  provide  DSL  for  outlying  areas  for  $600  to  $900  a  port.  211  In  addition,  2Wire 
 recently  demonstrated  a  loop  extender  technology  that  uses  loop-  extender  line  cards  to  replace  load-  coil  cards  every  6000  feet  in  a  network.  212  According  to  reports,  the  technique  supports  5.8 
 Mbps  downstream  for  over  24,000  feet.  The  installation  of  loop-  extender  devices  may  bring  consumers,  especially  those  in  low-  density  areas,  within  range  for  DSL  services. 


 84.  G.  SHDSL.  The  ITU  Telecommunications  Standards  Sector  recently  announced  a  new  DSL  standard,  G.  SHDSL.  213  It  is  a  symmetric,  multi-  rate  DSL  that  may  be  used  to  provide 
 symmetrical  voice,  data,  and  Internet  DSL  services.  According  to  reports,  the  new  standard  reaches  up  to  2.3  Mbps  in  both  directions,  and  can  be  deployed  nearly  twice  as  far  from  the 
 central  office  than  SDSL,  which  is  limited  to  18,000  feet.  Because  of  the  high  rate  of  symmetric  transfer,  vendors  providing  G.  SHDSL  anticipate  that  business  customers  will  be  interested  in 
 adopting  the  new  standard.  As  a  result,  this  new  standard  would  not  only  increase  the  available  bandwidth  for  consumers,  but  would  also  extend  DSL  capability  to  consumers  that  are  currently 
 beyond  the  reach  of  the  central  office. 
 85.  Two-  way  Satellite  Platform.  Satellite  service  providers  recently  started  offering  residential  service  on  a  two-  way  platform,  with  both  the  downstream  and  upstream  paths 


 208  See  SBC  Comments  at  4;  Stephen  Lee,  SBC  Sees  Bright  Future  for  Home  Broadband,  InfoWorld  Daily  News, 
 Oct.  5,  2001;  Eric  Krapf,  Fiber  Access:  The  Slog  Continues,  Business  Communications  Review,  Aug.  1,  2001. 
 209  Donny  Jackson,  Shifting  Gears,  Telephony,  Jul.  2,  2001,  at  60. 


 210  Id. 
 211  Id. 
 212  Id. 
 213  See  Jim  Thompson,  G.  SHDSL:  New  and  Improved  DSL,  ISP-  Planet  (Jun.  19,  2001)  (visited  Feb.  5,  2002) 
 <http://  www.  isp-  planet.  com/  technology/  dsl/  ghdsl.  html  >. 
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 provided  by  satellite.  214  Previously,  only  a  one-  way  platform  was  available  for  satellite  Internet  access.  A  one-  way  platform  provided  the  downstream  path  by  satellite  and  the  upstream  path 
 was  often  provided  by  a  standard  dial-  up  telephone  connection.  Two-  way  platform  satellite  service  provides  high-  speed  service  in  the  downstream  direction  at  speeds  ranging  up  to  400 
 kbps.  Service  providers  claim  that  upstream  transmissions  range  between  40  and  60  kbps  during  off-  peak  hours.  215  In  addition,  satellite  service  providers  have  also  announced  plans  to  deploy  a 
 new  generation  of  satellite  services  that  will  provide  advanced  telecommunications  services  at  significantly  greater  speeds.  216  Some  service  providers  claim  that  the  new  generation  of  satellite 
 service  will  be  capable  of  downstream  speeds  of  up  to  30  Mbps  and  upstream  speeds  starting  at  512  kbps,  up  to  tens  of  Mbps.  217  Because  satellite  services  are  widely  available  in  most,  if  not 
 all,  of  the  United  States,  the  successful  deployment  of  the  new  generation  of  satellite  service  has  the  potential  to  extend  the  availability  of  advanced  services  to  almost  all  Americans. 


 86.  Helios.  Researchers  recently  tested  Helios,  an  unmanned,  solar-  powered  aircraft  that  can  provide  the  transmission  of  advanced  services.  218  The  plane  is  designed  to  fly  in  the 
 stratosphere  for  six-  month  periods  of  time,  and  can  supply  consumers  with  advanced  services  at  speeds  between  1.5  Mbps  and  125  Mbps.  219  Helios  is  promoted  to  be  a  possible  alternative  to 
 wireless  towers  and  satellites.  Specifically,  developers  claim  that  the  Helios  transmission  services  can  run  more  efficiently  than  wireless  towers  and  the  aircraft  will  cost  less  than 
 satellites.  Conventional  communications  satellites  are  estimated  to  cost  about  $200  million  each,  whereas  the  Helios  aircraft  are  anticipated  to  cost  $10  million  each.  220  Researchers  believe  that 
 Helios  could  be  used  to  provide  advanced  services  in  regions  that  are  currently  unserved  by  wireline  technologies,  or  could  stimulate  competition  in  more  dense  regions  as  an  alternative 
 platform. 
 87.  Free  Space  Optics.  Free  Space  Optics  (FSO)  uses  laser-  guided  beams  of  light  to  transmit  advanced  services.  221  Specifically,  FSO  transmits  light  pulses  through  the  air  to 


 receivers  that  are  less  than  a  kilometer  away  and  within  the  line-  of-  sight  of  a  base  terminal,  which  is  connected  to  fiber-  optic  cable.  222  Developers  claim  that  the  system  can  support  point- 


 214  See  Hughes  Comments;  StarBand  Comments.  See  also,  e.  g.,  Larry  Barrett,  New  High-  Speed  Net  Service  from 
 Space,  CNET  News.  com  (Jun.  22,  2001)  (visited  Feb.  5,  2002)  <http://  news.  cnet.  com/  news/  0-  1004-  200-  6354160.  html?  tag=  cd_  mh  >. 


 215  See  StarBand  Comments  at  11. 
 216  See  Hughes  Comments  at  5. 
 217  Id. 
 218  Patrick  Houston,  A  Bird?  No,  a  Plane.  And  Its  Broadband  Plus  More  News,  AnchorDesk  from  ZDWire,  Aug. 
 13,  2001. 
 219  Max  Smetannikov,  NASA  Flies  to  Broadband  Rescue,  Interactive  Week  from  ZDWire,  Aug.  14,  2001. 


 220  Id. 
 221  Tony  Waltham,  Of  Free  Space  Optics  and  the  Laws  of  Telecom,  Bangkok  Post,  Nov.  7,  2001  (  His  technology 
 fills  a  gap,  as  it  were,  where  a  fiber  optic  or  broadband  link  is  desired  for  point-  to-  point  or  point-  to-  multipoint,  even 
 multipoint-  to-  multipoint  communications,  but  is  impractical  for  geographical  or  for  right-  of-  way  reasons.) 
 222  Robert  Vosper,  The  Magic  Potion,  Americas  Network,  Dec.  1,  2001  (  All  a  company  needs  to  do  is  plug  a  4  foot 


 receiver  into  its  LAN,  place  it  near  a  window  and  wait  for  the  receiver  to  capture  a  laser  beam  carrying  up  to  one 
 gigabit  of  data  a  section  through  the  air.). 
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 to-  point  connections  at  rates  up  to  1.55  Gbps  and  costs  around  $9000.  223  As  a  result,  because  FSO  does  not  require  spectrum  or  the  installation  of  wire  or  cable,  the  system  may  be  a  cost-effective 
 alternative  for  the  provision  of  advanced  services  to  businesses. 
 88.  I-  Burst  Wireless  Internet.  The  I-  Burst  wireless  system  uses  5-  10  MHz  of  spectrum  to  provide  advanced  telecommunications  capability  within  a  network  coverage  area.  Consumers 


 can  use  portable  or  stationary  devices  to  connect  to  the  network,  which  is  designed  to  allow  users  to  move  between  coverage  areas,  similar  to  mobile  telephone  networks.  224  I-  Burst  is  capable  of 
 providing  connections  of  about  1  Mbps  per  user.  In  2001,  the  Commission  issued  an  experimental  license  to  test-  market  the  wireless  Internet  system.  225 


 V.  IS  DEPLOYMENT  REASONABLE  AND  TIMELY? 
 89.  We  now  consider  the  third  question  presented  in  our  Third  Notice  of  Inquiry:  is  deployment  reasonable  and  timely?  226  In  determining  whether  deployment  is  reasonable  and 


 timely,  we  have  examined  various  aspects  of  the  deployment  of,  and  market  for,  advanced  services.  Based  upon  our  analysis,  we  conclude  that  the  deployment  of  advanced 
 telecommunications  capability  to  all  Americans  is  reasonable  and  timely.  We  find  that  there  is  continued  and  rapid  growth  in  subscription  to  high-  speed  and  advanced  services  on  a  nationwide 
 basis,  which  is  indicative  of  the  increased  availability  of  advanced  services.  We  are  encouraged  by  the  expansion  of  advanced  services  to  many  regions  of  the  nation,  and  growing  number  of 
 subscribers.  Nevertheless,  we  will  continue  to  monitor  deployment  to  certain  categories  of  consumers  so  that  if  deployment  to  such  customers  ceases  to  be  reasonable  and  timely  in  the 
 future,  we  will  recognize  that  development  early.  We  also  conclude  that  investment  in  infrastructure  for  most  advanced  services  markets  remains  strong,  even  though  the  pace  of 
 investment  trends  has  generally  slowed.  It  is  important  to  mention,  however,  that  some  of  the  decline  in  investment  may  be  simply  be  the  result  of  the  general  economic  slowdown  in  the 
 nation.  In  addition,  we  find  that  emerging  technologies  continue  to  stimulate  competition  and  create  new  alternatives  and  choices  for  consumers.  Based  on  these  findings,  we  believe  that 
 advanced  services  are  being  made  available  in  a  reasonable  and  timely  manner. 
 90.  We  will  continue  to  use  this  assessment  as  the  basis  for  the  development  of  public  policies  that  promote  and  support  the  ubiquitous  deployment  of  advanced  services.  In  our  prior 


 report,  we  stressed  that  the  high-  speed  market  is  still  early  in  development,  and  it  is  even  earlier  in  the  development  of  the  services  and  infrastructure  with  speeds  of  over  200  kbps  in  both 
 directions.  227  Although  investment  trends  have  gone  through  a  period  of  transition  over  the  past 
 223  Cliff  Grassmick,  Louisville,  Colo.,  Firm  Offers  Solution  to  Broadbands  Last  Mile,  Knight-  Ridder  Tribune 
 Business  News,  Nov.  30,  2001. 
 224  ArrayComm  Keeps  I-  Burst  Trials  Under  Wraps,  Wireless  Today,  Sep.  17,  2001;  Dee  McVicker,  Bandwidth 


 Boom:  Wireless  Bandwidth  for  the  Net  is  Way  Too  Narrow  and  Real  Improvements  are  Still  Years  Away,  Internet 
 Week,  Sep.  11,  2000  (  I-  Burst  is  like  traditional  cellular  in  setup:  Mobile  users  can  move  freely  within  a  cell  coverage  area,  usually  two  to  six  miles  in  radius.  But  unlike  traditional  cellular  networks,  I-  Burst  is  an  open 


 architecture  system  like  the  Internet.  It  could  operate  as  a  wireless  feature  on  a  handset  or  it  could  be  added  to  a 
 laptop  or  desktop,  similar  to  adding  a  modem  card.) 
 225  See  Experimental  License  No.  0067-  EX-  ML-  2000  (granted  Jan.  29,  2001). 


 226  Third  NOI  at  para.  19. 
 227  Second  Report,  15  FCC  Rcd  at  20992. 
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 18  months,  deployment  has  continued  to  grow  at  an  impressive  rate  for  both  high-  speed  and  advanced  services.  In  the  near  future,  we  expect  that  the  market  will  continue  to  expand  and 
 availability  will  increase.  As  the  advanced  services  market  matures,  however,  we  anticipate  that  the  rate  of  growth  will  eventually  begin  to  slow,  due  to  widespread  availability  among 
 consumers. 
 91.  In  the  following  section,  we  consider  patterns  of  deployment,  so  that  if  deployment  to  such  customers  ceases  to  be  reasonable  and  timely  in  the  future,  we  will  recognize 


 that  development  early.  We  pay  particular  attention  to  businesses,  residential  consumers,  rural  communities,  elementary  and  secondary  schools,  and  persons  with  disabilities  in  our 
 determination.  Following  our  review  of  the  availability  of  advanced  services,  we  also  discuss  subscription  rates,  and  how  they  may  impact  the  growth  of  advanced  technology.  In  addition,  we 
 review  and  compare  various  international  deployment  trends,  in  order  to  further  explore  patterns  of  deployment  that  may  be  useful  to  our  own  nations  efforts  to  provide  ubiquitous  advanced 
 telecommunications  capability. 
 A.  Patterns  of  Deployment 
 92.  There  are  three  primary  components  to  our  assessment.  First,  we  examine  availability,  as  indicated  by  the  Commissions  data  collection  on  subscribership  and  industry 


 assessments  of  availability.  We  focus  both  on  how  it  has  changed  over  the  last  year  and  how  it  is  projected  to  change  in  the  future.  By  examining  our  data  collection,  we  seek  a  verifiable  count 
 of  exactly  how  much  high-  speed  service  is  being  delivered  and  purchased  in  the  marketplace.  Our  subscribership  data  necessarily  reflects  a  combination  of  factors  including  availability  of 
 infrastructure,  service  offerings  tailored  to  customers  needs,  and  affordable  pricing.  Consequently,  we  believe  that  this  is  a  potentially  useful  indicator  of  the  state  of  high-  speed 
 deployment.  Second,  we  consider  investment  in  the  infrastructure  necessary  to  support  advanced  services.  Third,  we  review  trends  in  the  alternatives  available  to  consumers  of  advanced 
 services.  This  includes  both  assessing  the  number  of  providers  offering  service  through  a  particular  technology  and  the  different  technological  options  that  consumers  have  for  obtaining 
 advanced  services.  Through  our  analysis,  we  hope  to  identify  any  groups  that  may  not  obtain  access  to  advanced  services  in  a  timely  manner. 


 a.  Businesses 
 93.  After  reviewing  trends  in  the  availability  of  advanced  services  for  businesses,  we  conclude  that  advanced  telecommunications  capability  is  being  made  available  to  business 


 customers  in  a  reasonable  and  timely  manner.  Subscription  rates  for  large  business  and  institutional  customers  have  increased  considerably  since  the  Second  Report  and  groups, 
 especially  local  communities,  continue  to  invest  in  infrastructure  for  advanced  telecommunications.  In  addition,  technology  trends  indicate  that  new  generations  of  equipment 
 and  technology  are  being  developed  that  may  be  beneficial  to  the  business  community. 
 94.  Our  data  indicate  that  18.8  percent  of  high-  speed  lines  are  serving  business  customers,  which  represents  over  1.8  million  lines  in  service.  228  This  is  over  0.8  million  more 


 228  We  note,  however,  that  the  actual  number  of  lines  serving  business  customers  may  be  substantially  higher,  since 
 our  survey  does  not  take  into  account  private  lines  or  internal  networks  serving  business  customers. 
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 lines  than  reported  in  the  Second  Report,  an  increase  of  over  80  percent.  229  We  note  that  the  overall  percentage  of  high-  speed  lines  serving  business  customers  has  dropped  from  35  percent 
 to  18.8  percent  of  the  reported  high-  speed  lines.  This  is  due  to  the  significant  growth  of  high-speed  services  for  residences  and  small  businesses  and  the  fact  that  high-  speed  services  were 
 widely  available  for  most  businesses  in  1999.  230  Independent  sources  support  our  conclusion  as  well.  For  example,  in  one  recent  survey  that  asked  business  customers  to  prioritize  barriers  to 
 adopting  high-  speed  services,  business  customers  selected  no  barriers  exist  (27  percent)  more  than  any  other  alternative.  231 


 95.  In  accord  with  the  growth  in  high-  speed  lines  serving  businesses,  advanced  telecommunications  are  becoming  increasingly  incorporated  into  the  conduct  of  business  and  our 
 economy.  Businesses  use  advanced  telecommunications  to  quickly  send  and  receive  large  documents,  such  as  blueprints  and  customer  databases,  keep  in  contact  with  customers,  by 
 marketing  and  receiving  orders  for  products  on-  line,  and  track  inventory  and  receipts  in  a  real-time  fashion.  Thus,  some  communities  fear  that  a  lack  of  infrastructure  to  support  advanced 
 services  could  prevent  communities  from  attracting  businesses  and  pursuing  economic  development  opportunities.  232 


 96.  In  response,  some  communities  have  taken  specific  steps  intended  to  stimulate  economic  development  in  their  areas  such  as  building  high-  speed  networks,  or  aggregating 
 demand.  233  For  example,  Butler  County,  Ohio,  recently  announced  the  development  of  a  fiber  optic  network  connecting  businesses,  schools,  and  government  offices  that  is  designed  to 
 promote  economic  development  in  the  region.  234  Another  example  is  the  state  of  North  Dakota,  which  constructed  a  statewide  telecommunications  network,  connecting  194  cities  in  the  state.  235 
 This  is  a  trend  that  we  noted  in  our  Second  Report,  that  appears  to  be  continuing  on  an  increasingly  frequent  basis.  236 


 97.  We  note,  however,  that  we  are  not  aware  of  any  specific  data  on  the  impact  that  the  availability  of  advanced  services  has  on  a  particular  locations  ability  to  attract  or  retain 
 businesses.  Indeed,  most  existing  businesses  appear  to  have  some  options  for  the  provision  of 


 229  Second  Report,  15  FCC  Rcd  at  20943. 
 230  Id.  at  20994-  20995. 
 231  Cahners  Report  at  35-  38.  Other  alternatives  included:  monthly  cost  (25  percent);  low  service  reliability  (14 
 percent);  availability  (12  percent);  and  security  concerns  (5  percent). 
 232  Jim  Hopkins,  In  Rural  Areas,  Fast  Net  Service  Vital  but  Elusive;  Speed  Needed  to  Attract  Businesses,  USA 


 Today,  Nov.  12,  2001,  at  E4  (  Economic  development  leaders  view  broadband  as  important  as  sewer,  gas  and 
 other  utilities  when  attracting  firms.  Thats  because  lack  of  high-  speed  service  makes  it  tougher  for  rural  areas  to  create,  recruit  and  keep  firms  that  benefit  from  fast  Internet  access.). 


 233  See  Second  Report,  15  FCC  Rcd  at  20980-  20981. 
 234  Quantum  Bridge  to  Supply  Networking  Equipment  to  Ohios  Government,  Fiber  Optics  Weekly  Update,  Nov.  23, 
 2001. 
 235  Alexia  Bowie,  Success  Stories  from  the  States,  Rural  Telecommunications,  Jan.  1,  2001  (At  a  press  conference 


 announcing  the  network,  North  Dakotas  chief  information  officer  was  quoted,  All  business  will  need  broadband  access  to  be  competitive  The  simple  reality  is,  businesses  will  go  where  higher  speed  access  is  available,  period.). 


 236  See  Second  Report,  15  FCC  Rcd  at  20926  (  Additional  examples  of  middle  mile  networks  include  statewide 
 networks  such  as  the  fiber  optic  network  in  South  Dakota);  Id.  at  20994. 
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 advanced  services,  regardless  of  location.  As  a  result,  other  factors  may  limit  a  business  ability  to  subscribe  to  advanced  services.  For  instance,  the  high  cost  associated  with  obtaining 
 advanced  services  in  some  locations  may  be  a  primary  factor.  For  example,  business  customers  in  rural  or  remote  areas  may  be  able  to  obtain  advanced  telecommunications  capability  as  a 
 technical  matter,  but  the  cost  of  such  services  may  be  prohibitively  high.  Our  data  reflects  that  most  areas  outside  of  major  cities  do  not  have  multiple  advanced  service  providers.  237  Therefore, 
 these  communities  may  not  see  the  benefits  of  price  competition. 
 98.  We  also  note  that  technology  is  continuing  to  emerge  that  will  be  particularly  useful  for  the  business  market.  For  example,  service  providers  anticipate  the  new  DSL  standard, 


 G.  SHDSL,  will  be  attractive  to  business  customers  because  of  the  high  rate  of  symmetric  transfer.  In  addition,  the  successful  deployment  of  the  new  generation  of  3G  Wireless  and 
 satellite  services  may  also  be  attractive  to  business  customers,  given  the  high  speeds  that  these  services  appear  to  be  capable  of  providing.  As  a  result,  the  successful  development  of  these  new 
 platforms  may  result  in  increased  competition  in  the  advanced  services  market  and  new  options  for  businesses. 


 b.  Residential  Customers  and  Small  Businesses 
 99.  Overall,  we  conclude  that  advanced  telecommunications  capability  is  being  made  available  to  residential  and  small  business  customers  in  a  reasonable  and  timely  manner.  We  are 


 pleased  that  our  data  demonstrate  strong  growth  in  the  availability  of  advanced  services  for  residential  and  small  business  customers.  238  In  addition,  service  providers  continue  to  invest  in 
 facilities  capable  of  supporting  advanced  telecommunications  for  residential  and  small  business  customers.  We  are  also  encouraged  by  recent  developments  in  technology  that  has  significantly 
 expanded  the  reach  of  high-  speed  services. 
 100.  Our  data  indicate  that  there  are  almost  4.3  million  residential  and  small  business  subscribers  to  advanced  services  in  the  nation,  up  from  1.0  million  in  the  Second  Report.  239  Over 


 the  past  year  alone,  this  number  has  increased  by  149  percent.  Additionally,  a  variety  of  technological  options  appear  to  be  available  for  most  residential  and  small  business  consumers, 
 with  cable  modem  and  ADSL  services  providers  reporting  the  highest  number  of  high-  speed  lines  in  service.  As  of  June  2001,  there  were  almost  5.0  million  residential  and  small  business 
 high-  speed  cable  modem  lines  in  service,  and  almost  2.5  million  residential  and  small  business  high-  speed  ADSL  lines  in  service.  In  the  Second  Report,  those  numbers  were  1.4  million  and  0.4 
 million,  respectively.  240  As  of  June  2001,  we  also  report  0.2  million  satellite  and  fixed  wireless  high-  speed  lines  in  service,  up  from  0.05  million  at  the  time  of  the  Second  Report. 


 101.  As  we  discuss  in  further  detail  below,  our  data  illustrates  that  advanced  services  are  becoming  more  available  for  almost  all  segments  of  residential  customers,  including  many  of 
 237  We  note  that  high-  speed  satellite  services  are  widely  available  in  the  United  States.  See  supra,  note  57. 
 238  As  we  previously  noted,  the  Commissions  data  collection  program  reflects  this  grouping  and  combines  both 
 residential  and  small  business  customers.  The  Commission  has  a  pending  inquiry  relating  to  our  data  collection 
 program  and  how  we  could  improve  the  data  we  collect  on  high-  speed  and  advanced  services.  See  Data  Gathering  Second  NPRM,  16  FCC  Rcd  2072. 


 239  Second  Report,  15  FCC  Rcd  at  20995. 
 240  Id.  at  20943. 
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 the  groups  that  we  previously  identified  as  being  vulnerable  to  not  receiving  timely  access  to  advanced  services.  241  We  believe  that  it  is  important  to  continue  to  closely  monitor  these  groups, 
 in  order  to  ensure  that  advanced  services  are  being  made  available  in  a  timely  fashion.  Specifically,  we  consider  rural  customers  (who  we  discuss  in  further  detail  in  the  following 
 section),  low-  income  customers,  and  persons  with  disabilities. 
 102.  Among  residential  consumers,  advanced  services  appear  to  be  more  widely  available  to  households  in  low-  income  zip  codes  since  the  Second  Report.  In  the  Second  Report, 


 42  percent  of  zip  codes  with  the  lowest  median  household  income  reported  a  high-  speed  subscriber.  242  As  of  June  2001,  59  percent  of  the  zip  codes  with  the  lowest  household  income 
 reported  a  high-  speed  subscriber.  Our  data  also  indicate  that  there  is  a  high-  speed  service  provider  in  96  percent  of  zip  codes  with  the  highest  median  household  income,  up  from  91 
 percent.  Although  our  data  reveals  that  there  has  been  growth  in  subscribership  for  low-  income  zip  codes  and  that  the  gap  between  low-  and  high-  income  zip  codes  appears  to  be  closing,  there 
 continues  to  be  a  strong  correlation  between  household  income  and  subscription  to  advanced  services.  243  The  correlation  between  income  and  subscription  to  advanced  services  is  consistent 
 with  other  sources  of  data,  indicating  that  penetration  is  associated  with  income.  244  While  customers  in  these  zip  codes  may  have  infrastructure  available,  there  is  evidence  that  other 
 barriers  to  subscription  persist.  For  example,  as  of  September  2001,  about  16.6  percent  of  online  households  with  income  under  $15,000  had  high-  speed  services,  245  whereas  25.1  percent  of 
 online  households  with  income  over  $75,000  had  high-  speed  services.  246 
 103.  As  emphasized  by  the  Commission  in  the  Second  Report,  advanced  services  have  the  potential  to  provide  significant  opportunities  for  persons  with  disabilities.  247  Widespread 


 deployment  of  high-  speed  services  to  persons  without  disabilities  may  ultimately  promote  the  corresponding  deployment  to  persons  with  disabilities.  Advanced  telecommunications  may 
 enable  individuals  that  have  difficulty  leaving  their  home  to  shop  for  clothing  or  groceries  on-line,  or  telecommute  for  a  job.  In  addition,  advanced  services  may  enable  the  hearing  impaired 
 to  communicate  freely  with  friends  and  relatives  or  allow  persons  with  disabilities  to  research  medical  questions  or  receive  medical  care  at  telemedicine  facilities.  Although  the  Commissions 
 data  collection  program  does  not  specifically  address  the  availability  of  advanced  services  for  persons  with  disabilities,  we  note  that  persons  with  disability  could  face  significant  impediments 
 to  their  ability  to  access  to  advanced  services.  248  Some  of  the  relevant  facts  include:  low  rates  of  computer  ownership  among  people  with  disabilities;  prohibitive  costs  for  computers  and  Internet 


 241  Id.  at  20991-  21003. 
 242  Id. 
 243  Id.  at  21001-  21002. 
 244  Based  on  calculations  from  National  Telecommunications  and  Information  Administration  staff  (relying  on 
 unpublished  census  data).  We  note  that  some  of  the  services  did  not  possess  speeds  in  excess  of  200  kbps. 
 245  Id. 


 246  Id.  A  study  released  in  April  2001  estimates  that  25  -  35%  of  online  users  subscribe  to  high-  speed  services  in 
 some  areas.  Morgan/  McKinsey  Broadband  Report  at  4. 
 247  See  Second  Report,  15  FCC  Rcd  at  21000. 


 248  See,  e.  g.,  AFB  Comments  at  1  (  people  who  are  blind  or  visually  impaired  are  being  left  out  of  the  advanced 
 telecommunications  revolution.);  APT,  AAPD,  and  ACB  Comments;  APT  and  WID  Comments  at  6. 
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 access  services;  249  the  lack  of  adaptive  hardware,  software,  and  Internet  content;  and  lack  of  training.  Almost  60  percent  of  persons  with  disabilities  have  never  used  a  computer,  compared 
 to  25  percent  of  persons  without  disabilities,  250  and  people  with  disabilities  are  significantly  less  likely  to  have  Internet  access  as  those  without  disabilities.  251  Reported  low-  income  and 
 employment  rates  among  persons  with  disabilities  may  further  limit  their  ability  to  acquire  computers  or  Internet  access.  252  Thus,  we  will  continue  to  monitor  deployment  to  persons  with 
 disabilities  closely,  so  that  we  can  quickly  assess  whether  additional  government  or  non-government  action  is  necessary. 


 104.  Adaptive  technologies  may  offer  persons  with  disabilities  innovative  ways  to  access  the  Internet,  and  increase  the  availability  of  advanced  services.  Indeed,  in  addition  to 
 ensuring  that  investment  in  network  infrastructure  capable  of  providing  advanced  services  is  done  consistent  with  section  255  of  the  Act  and  other  statutes  directed  towards  ensuring  access  to 
 people  with  disabilities,  253  it  may  be  necessary  to  encourage  the  development  of  accessible  user  platforms  and  applications  in  order  to  make  advanced  services  available  to  persons  with 
 disabilities.  254  For  example,  some  companies  have  begun  to  adapt  their  web-  sites  by  magnifying  content  and  installing  sensitive  hyperlinks,  in  order  to  be  more  accessible  to  individuals  with 
 disabilities.  255  In  addition,  AT&  T  recently  announced  the  release  of  a  commercial  product  that  has  a  text-  to-  speech  engine  that  turns  written  words  into  natural-  sounding  speech.  256  We  note, 
 however,  that  the  development  of  adaptive  technologies  appears  to  be  on  a  limited  basis  and  that  it  is  frequently  associated  with  additional  purposes,  which  make  the  application  more  cost-effective 
 for  the  developer.  For  instance,  AT&  T  states  that  its  text-  to-  speech  application  could  be  used  by  businesses  that  operate  call  centers,  or  by  service  providers  that  create  voice 
 portals.  257 
 105.  Investment  trends  indicate  that  service  providers  continue  to  focus  investments  on  the  residential  market,  and  that  service  providers  are  deploying  new  facilities  capable  of 


 supporting  advanced  services  for  residential  and  small  business  consumers.  Since  the  Second  Report,  our  data  demonstrate  that  new  facilities  have  expanded  the  reach  of  advanced 


 249  See  NAD  Comments  at  1. 
 250  US  Department  of  Commerce,  Economics  and  Statistics  Administration,  National  Telecommunications  and 
 Information  Administration,  Falling  Through  the  Net:  Toward  Digital  Inclusion  (Oct.  2000)  at  61.  See  also  TDI  Comments  at  2  (  individuals  with  disabilities  are  far  less  likely  than  the  general  population  to  have  access  to 


 computers  and  the  Internet.) 
 251  See  H.  Stephen  Kaye,  Computer  and  Internet  Use  Among  People  with  Disabilities,  United  States  Department  of 


 Education,  National  Institute  on  Disability  and  Rehabilitation  Research  (Mar.  2000)  at  5,  Tbl.  A. 
 252  See  TDI  Comments  at  2. 


 253  See  47  U.  S.  C.    255. 
 254  See  AFB  Comments  at  2. 
 255  Anna  Marie  Kukec,  A  Gurnee  Firm  Offers  Next-  Generation  Accelerators  to  Enhance  Some  PC  Games,  Chi. 
 Daily  Herald,  Oct.  8,  2001  (  Chicago-  based  Infinitec  Inc.  has  revamped  its  site  to  provide  easier  access  for  people  with  disabilities.  Content  can  be  magnified  and  accommodate  all  browser  types  for  those  with  vision  impairments. 


 Ultra-  sensitive  hyperlinks,  called  hovers,  allow  those  with  limited  mobility  who  use  alternative  mouse  equipment  to  activate  the  link  just  by  coming  within  range.) 
 256  AT&  T  Comments  at  12;  AT&  T  Labs  Launches  Natural  Voices,  PR  Newswire,  Jul.  31,  2001. 
 257  Id. 
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 telecommunications  and  the  percentage  of  zip  codes  with  high-  speed  lines  in  service  has  jumped  from  60  percent  to  78  percent.  258  Our  data  also  indicate  that  there  is  increased  choice  among 
 service  providers.  In  particular,  we  note  that  more  than  two  service  providers  were  reported  in  about  41  percent  of  zip  codes,  whereas  only  18  percent  of  zip  codes  had  more  than  two  service 
 providers  in  December  1999.  259  Additionally,  there  are  approximately  160  providers  of  high-speed  lines  in  the  nation,  compared  to  105  in  the  Second  Report.  260 


 106.  We  acknowledge,  however,  that  capital  expenditures  in  infrastructure  have  slowed  in  recent  months,  especially  within  the  competitive  LEC  market.  Analysts  report  that  this 
 slow-  down  is  a  result  of  excess  capacity  of  infrastructure  in  the  market,  and  anticipate  that  rising  demand  will  increase  the  utilization  of  existing  assets.  As  a  result,  the  provision  of  advanced 
 services  may  become  more  cost-  effective  for  service  providers  as  revenues  increase  and  overall  subscription  rates  rise.  Therefore,  the  reduction  in  the  growth  rate  of  investment  does  not 
 necessarily  imply  a  reduction  in  the  growth  of  subscription  to  high-  speed  services.  As  we  discuss  in  further  detail  below,  however,  service  providers  have  indicated  that  low  subscription 
 rates  may  have  an  impact  upon  whether  they  can  afford  to  expand  services  to  new  consumers.  We  note  that  service  providers  recently  raised  prices  in  an  effort  to  increase  net  revenues,  which 
 may  have  also  affected  penetration  for  residential  customers.  For  example,  SBC  and  Verizon  raised  their  basic  residential  rates  for  DSL  from  $40  per  month  to  $50  earlier  this  year.  261  In 
 addition,  some  cable  modem  service  providers  announced  a  price-  hike  in  May  2001.  AT&  T  Broadband  raised  monthly  rates  by  $6  and  Cox  Communications  raised  monthly  rates  by  $5.  262 


 107.  Advances  in  technology  continue  to  make  advanced  services  more  accessible  to  residential  customers.  In  particular,  the  development  of  two-  way  satellite  services  has  extended 
 the  availability  of  high-  speed  services  to  almost  all  residential  customers  in  the  United  States.  Other  new  technological  developments,  such  as  3G  Wireless,  Helios,  and  DSL  extenders,  may 
 extend  the  footprint  of  available  advanced  services  to  new  residential  consumers.  263  In  addition,  the  successful  deployment  of  new  generations  of  technology,  such  as  DOCSIS  2.0,  may  provide 
 residential  consumers  with  a  new  range  of  applications  that  some  technologies  are  capable  of  supporting.  264 


 c.  Rural  Communities,  Insular  Areas,  and  Tribal  Lands 
 108.  Since  the  Second  Report,  the  Commission  has  continued  to  monitor  the  deployment  trends  in  rural  areas,  so  that  we  will  be  able  to  promptly  recognize  if  deployment 


 258  Second  Report,  15  FCC  Rcd  at  20946.  See  also  revised  data  reported  in  Appendix  C,  Tbl.  9. 
 259  See  revised  data  reported  in  Appendix  C,  Tbl.  9. 
 260  Second  Report,  15  FCC  Rcd  at  21017. 
 261  See  Morgan/  McKinsey  Broadband  Report  at  21. 
 262  Cable  Notes,  Warrens  Cable  Regulation  Monitor,  May  7,  2001  (  AT&  T  said  it  would  increase  rate  for  data 
 service  plus  modem  rental  15  percent  to  $45.95  per  month.);  Carolyn  Shapiro,  Area  Cable  Company  Increases  Internet  Rates,  Knight-  Ridder  Trib.  Bus.  News,  May  24,  2001  (  Cox@  Home  plans  to  raise  its  rates  for  high-  speed 


 Internet  access  by  $5  a  month,  narrowing  the  price  gap  between  the  dominant  cable  provider  and  competing  telecommunications  companies.) 
 263  See  supra  paras.  78-  88. 
 264  Id. 
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 ceases  to  be  reasonable  and  timely  to  such  consumers.  We  are  encouraged  that  our  data  indicate  that  advanced  and  high-  speed  services  are  becoming  more  widely  available  in  rural  areas.  In 
 addition,  although  investment  trends  for  services  providers  in  low-  density  regions  appear  to  be  in  a  period  of  transition,  it  appears  that  new  facilities  for  advanced  services  continue  to  be 
 deployed.  In  particular,  developments  in  technology,  such  as  satellite  services  and  DSL  extenders,  have  expanded  the  reach  of  high-  speed  services  to  previously  unserved  areas. 


 109.  In  the  Second  Report,  our  data  demonstrated  that  there  was  at  least  one  subscriber  to  high-  speed  services  in  65  percent  in  our  sample  of  small  town  zip  codes,  and  20  percent  265  of 
 the  most  sparsely-  populated  outlying  areas.  266  Availability  appears  to  have  increased  considerably,  and  high-  speed  services  are  now  being  reported  in  86  percent  of  our  sample  of 
 small  town  zip  codes,  and  37  percent  of  sparsely-  populated  outlying  areas.  267  Despite  the  upward  trend  in  subscription  rates  for  rural  communities,  we  note  that  a  positive  correlation 
 persists  between  population  density  and  the  presence  of  high-  speed  subscribers.  In  addition,  there  continues  to  be  a  significant  disparity  in  access  to  advanced  services  between  those  living 
 in  rural  population  centers  and  those  living  in  sparsely-  populated  outlying  areas.  As  a  result,  we  believe  that  it  is  important  to  closely  monitor  the  availability  of  advanced  services  for  rural 
 Americans,  especially  those  living  outside  of  the  rural  population  centers,  in  order  to  ensure  that  they  receive  timely  access  to  advanced  services. 


 110.  Our  data  indicate  that  advanced  services  are  being  made  more  widely  available  on  tribal  lands.  268  At  the  end  of  1999,  at  least  one  subscriber  to  high-  speed  services  was  reported  in 
 49  percent  of  the  zip  codes  that  contain  tribal  territories.  269  As  of  June  2001,  the  number  had  risen  to  71.3  percent.  Despite  this  promising  growth,  unique  and  challenging  issues  relating  to 
 the  provision  of  advanced  services  on  tribal  lands  remain.  As  the  Commission  noted  previously,  many  territories  lack  phone  service  and  basic  telecommunications  infrastructure.  270 
 Consequently,  tribal  communities  have  begun  to  consider  wireless  and  satellite  advanced  services  in  order  to  improve  the  availability  of  advanced  services  in  tribal  territories.  For 


 265  In  the  Second  Report,  the  Commission  estimated  that  approximately  57  percent  of  zip  codes  that  include  small 
 towns  and  19  percent  of  the  most  sparsely-  populated  decile  of  zip  codes  reported  a  high-  speed  line  in  service.  Second  Report,  15  FCC  Rcd  at  20996.  Based  on  revised  data  filed  since  the  Second  Report,  we  now  calculate  that 


 65  percent  of  the  zip  codes  that  included  small  towns  and  20  percent  of  the  most  sparsely-  populated  decile  of  zip 
 codes  reported  high-  speed  lines  in  service  at  the  end  of  1999. 
 266  We  consider  sparsely-  populated  outlying  areas  to  be  the  least  densely-  populated  decile  of  zip  codes  in  our  data 


 collection.  See  Appendix  C,  Tbl.  11. 
 267  We  note  that  the  availability  of  advanced  services  in  rural  areas  may,  in  fact,  be  higher  than  the  Commissions 


 data  reflect,  because  small  providers  (with  fewer  than  250  full  or  one-  way  broadband  lines)  are  not  subject  to  the  Commissions  Form  477  reporting  requirements.  See,  e.  g.,  OPASTCO  Comments  at  3  (  there  is  not  doubt  that 


 the  true  level  of  deployment  in  these  areas  is  higher  than  portrayed  [by  the  Commissions  Form  477  data].);  Texas  PUC  Comments  at  2  (  the  threshold  of  250  broadband  customers  before  reporting  is  required  may  have  prevented 
 collection  of  sufficient  information  on  broadband  service  in  rural  and  sparsely  populated  areas,  given  that  many  such 
 areas  are  served  by  relatively  small  incumbent  local  telephone  and  cable  television  companies.) 
 268  See  supra  note  90. 


 269  In  the  Second  Report,  the  Commission  estimated  that  approximately  44  percent  of  zip  codes  that  include  tribal 
 territories  reported  a  high-  speed  line  in  service.  Second  Report,  15  FCC  Rcd  at  20997.  Based  on  revised  zip  code  lists  filed  since  the  Second  Report,  we  now  calculate  that  49  percent  of  the  zip  codes  that  contained  tribal  lands 


 reported  high-  speed  lines  in  service  at  the  end  of  1999. 
 270  Id. 
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 example,  the  Broadband  Wireless  International  Corporation  recently  announced  that  the  company  successfully  installed  and  tested  a  high-  speed,  broadband  wireless  network  service 
 offering  across  the  Hopland  Band  of  Pomo  Indians  reservation  in  three  days.  271  In  addition,  StarBand  Communications  and  Northern  Arizona  University  are  working  to  provide  satellite-based 
 Internet  access  to  120  locations  within  the  Navajo,  Hopi,  and  Havasupai  reservations.  272 
 111.  We  are  particularly  concerned  that  no  service  providers  reported  high-  speed  lines  in  service  in  the  Pacific  Insular  Islands.  In  response  to  our  Inquiry,  the  Commonwealth  of  the 


 Northern  Mariana  Islands  reports  that  advanced  telecommunications  capability  is  not  being  deployed  to  either  business  or  residential  consumers  in  the  Commonwealth.  273  Although  our 
 own  data  does  not  conclusively  reveal  the  availability  of  advanced  services  in  the  Pacific  Insular  Islands,  we  are  aware  that  economic  forces  make  the  deployment  of  advanced  services  difficult. 
 As  a  result,  the  deployment  of  advanced  telecommunications  capability  in  the  Pacific  Insular  Islands  may  be  limited  until  demand  increases  among  consumers  that  have  available  advanced 
 services. 
 112.  We  also  note  that  resources  continue  to  be  made  available  to  help  support  the  deployment  of  advanced  telecommunications  for  medically  underserved  rural  communities. 


 Additionally,  the  Rural  Health  Care  Program,  administered  by  the  Universal  Service  Administrative  Company  (USAC),  has  committed  over  $21  million  to  help  provide  assistance  for 
 remote  communities,  so  that  rural  areas  may  have  the  necessary  advanced  telecommunications  capability  to  connect  to  health  care  facilities.  274  According  to  estimates  from  the  Rural  Health 
 Care  Division  (RHCD)  of  USAC,  the  program  has  provided  funding  for  about  585  health  care  providers  to  receive  advanced  telecommunications  services  during  the  first  three  years  of  the 
 program.  275  In  addition,  about  450  health  care  providers  requested  and  received  support  for  lower  speed  services  (56  kbps  to  128  kbps),  such  as  ISDN.  Interest  in  the  program  appears  to  be 
 escalating,  the  RHCD  also  reports  a  50  percent  increase  in  the  number  of  applicants  for  the  fourth  program  year  (2001). 


 113.  Investment  trends  in  the  rural  market  are  continuing  to  unfold,  as  service  providers  attempt  to  establish  viable  business  plans.  Indeed,  many  rural  service  providers  appear 
 to  be  in  the  process  of  evaluating  deployment  alternatives  in  order  to  consider  what  segments  of  the  rural  market  may  be  cost-  effective  for  the  services  that  they  offer.  Some  carriers  suggest  that 
 investment  in  rural  areas  appears  to  be  slowing.  For  example,  a  recent  survey  identified  several  major  barriers  to  expanding  advanced  services  in  rural  areas,  including:  the  length  of  the  loop; 
 the  high  cost  of  deployment;  low  demand  by  consumers;  and  the  lack  of  cost-  effective  equipment 


 271  Broadband  Wireless  Network  Installation  Completed  in  Northern  California;  Tribal  Network  Rollout  Completed 
 in  Three  Days,  PR  Newswire,  Aug.  13,  2001. 
 272  Ruth  Suarez  Zane,  Unwired  Tribal  Lands  Poised  For  Wireless  Innovation,  Wireless  Insider,  Jun.  18,  2001. 


 273  See  Northern  Mariana  Islands  Comments. 
 274  The  estimates  are  based  on  completed  applications  as  of  December  3,  2001.  As  of  December  3,  2000,  RHCD  had 
 received  95  percent  of  the  expected  program  year  3  applications  (2000)  and  4  percent  of  the  expected  program  year  4  (2001)  applications. 


 275  The  RHCD  considered  networks  that  were  capable  of  supporting  bandwidth  of  256  kbps  or  greater,  well  above 
 the  bandwidth  that  the  Commission  considers  to  be  advanced  services. 
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 scaled  for  smaller  companies.  276  Based  on  current  subscription  rates,  it  concluded  that  the  deployment  in  additional  regions  is  not  likely,  and  that  about  25  percent  to  30  percent  of  rural 
 telephone  subscribers  are  not  likely  to  have  access  to  high-  speed  services  in  the  near  future.  277 
 114.  One  analyst  predicts  that  the  rural  local  exchange  carrier  industry  will  undergo  a  dynamic  change  over  the  next  few  years,  through  consolidation  and  the  introduction  of  new 


 financial  plans  that  focus  on  generating  higher  revenues  and  returns  for  investors.  278  A  study,  considering  the  cost  of  transporting  Internet  traffic  from  an  Internet  Service  Provider  to  an 
 Internet  Backbone  Provider,  concluded  that  the  provision  of  high-  speed  DSL  Internet  service  may  not  be  economically  viable  in  many  rural  areas  for  rural  telephone  carriers.  279  In  particular, 
 the  study  indicates  that  estimated  revenue  shortfalls  may  actually  increase  with  higher  market  penetration,  rising  from  $9.7  million  per  year  at  0.5  percent  penetration  to  $33.6  million  per  year 
 at  5  percent  penetration.  280  The  decision  of  Regional  Bell  Operating  Companies  (RBOCs)  to  sell  numerous  rural  local  exchanges  may  be  consistent  with  this  trend.  Other  carriers,  however, 
 appear  prepared  to  serve  rural  or  less-  dense  communities  and,  analysts  believe,  these  carriers  are  more  likely  to  make  the  necessary  capital  investments  to  upgrade  networks  so  that  they  can 
 support  advanced  services.  281  We  note  that  one  local  exchange  carrier,  VALOR,  determined  that  it  was  only  cost-  effective  to  provide  DSL  services  at  exchanges  with  5000  lines,  or  at  least  75 
 customers  requesting  DSL.  282 
 115.  Despite  certain  economic  and  distance-  related  challenges  for  wireline  service  providers  in  the  rural  market,  it  appears  that  advances  in  technology,  such  as  the  successful 


 deployment  of  a  two-  way  platform  for  satellite  high-  speed  services  in  all  50  states,  will  continue  to  drive  up  availability  in  rural  areas.  283  Other  technology  developments,  such  as  DSL  extenders, 


 276  National  Telephone  Cooperative  Association,  NTCA  2001  Internet/  Broadband  Availability  Survey  Report  (Dec. 
 2001)  (NTCA  Survey).  The  survey  inquired  542  of  the  National  Telephone  Cooperative  Association  (NTCA)  members  on  broadband  and  Internet  services.  248  members  (48  percent)  responded. 


 277  Id.  at  4.  The  NTCA  estimates  that  its  members  serve  almost  2.9  million  lines.  As  a  result,  between  720,000  and 
 865,000  lines  are  not  likely  to  have  high-  speed  services  in  the  near  future. 
 278  McKinsey/  Goldman  Infrastructure  Report  at  37-  40. 


 279  National  Exchange  Carrier  Association,  Middle  Mile  Broadband  Study  (2001)  (NECA  Middle  Mile  Study). 
 280  Id.  at  36-  37. 
 281  Reshaping  Rural  Telephone  Markets,  Legg  Mason  Research  (2001)  (Legg  Mason  Report)  at  33.  In  fact,  we  have 
 considered  numerous  study  area  waiver  requests  from  rural  carriers  purchasing  local  exchanges  from  RBOCs  that 
 contend  that  they  will  make  investment  in  advanced  telecommunications.  See,  e.  g.,  Citizens  Telecommunications  Company  of  Wyoming  and  Qwest  Corporation  Joint  Petition  for  Waiver  of  the  Definition  of  Study  Area 


 Contained  in  the  Part  36  Appendix-  Glossary  of  the  Commissions  Rules,  CC  Docket  No.  96-  45,  Joint  Petition  for 
 Waiver,  16  FCC  Rcd  3563  (2001)  (  In  its  petition,  Citizens  states  its  intent  to  invest  approximately  $4.5  million  in  the  five  exchanges  it  is  purchasing  during  the  first  three  years  of  ownership,  using  some  of  the  capital  investment  to 


 upgrade  the  network  to  provide  enhanced  services.  According  to  Citizens,  it  also  will  provide  broadband/  digital 
 subscriber  line  services  when  there  is  sufficient  demand  to  make  it  possible  to  provide  these  services  at  an  affordable  rate.);  Citizens  Telecommunications  Company  of  Colorado,  Inc.  and  Qwest  Corporation  Joint  Petition  for  Waiver 


 of  the  Definition  of  Study  Area  Contained  in  the  Part  36  Appendix-  Glossary  of  the  Commissions  Rules,  CC 
 Docket  No.  96-  45,  Joint  Petition  for  Waiver,  15  FCC  Rcd  31  (2000). 
 282  Legg  Mason  Report  at  64-  65. 


 283  See  supra  para.  85;  StarBand  Brings  High-  Tech,  High-  Speed  Surfing  to  Hawaii,  Press  Release,  Oct.  23,  2001 
 (visited  Feb.  5,  2002)  <www.  starband.  com/  whoweare/  pr/  102301.  htm>. 
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 may  allow  local  exchange  carriers  to  improve  the  range  at  which  they  are  able  to  offer  advanced  services.  284  As  a  result,  carriers  may  be  able  to  serve  additional  customers,  making  the  provision 
 of  advanced  services  more  cost-  effective.  We  also  note  that  service  providers  are  continuing  to  develop  innovative  means  to  serve  the  rural  advanced  services  market,  such  as  public  utilities 
 that  provide  services  over  power  lines  in  their  rights  of  way.  For  example,  in  Washington,  the  Grant  County  Public  Utility  District  (a  local  power  company)  has  installed  over  7,000  miles  of 
 fiber  optics  in  order  to  provide  high-  speed  services  to  rural  utility  customers.  285  There  is  evidence  that  emerging  technologies  and  providers  will  develop  into  viable  alternatives  for 
 segments  of  the  rural  community  that  remain  unserved.  286 
 d.  Elementary  and  Secondary  Schools 
 116.  While  we  do  not  have  specific  statistics  from  our  data  collection  relating  to  the  speed  of  connections  being  used  in  schools,  we  are  encouraged  by  the  fact  that  almost  all  schools 


 have  access  to  the  Internet.  As  of  late  2000,  about  98  percent  of  public  schools  had  connections  to  the  Internet.  About  77  percent  of  public  schools  with  Internet  access  connected  to  the  Internet 
 with  dedicated  lines,  287  and  24  percent  of  schools  used  other  continuous  connections.  288  Only  11  percent  of  schools  used  dial-  up  connections  to  access  the  Internet,  down  from  15  percent  in 
 1999.  289  Because  dedicated  lines  tend  to  support  higher-  speed  services,  we  believe  that  high-speed  and  advanced  telecommunications  services  are  becoming  more  widely  available  in  our 
 nations  schools. 
 117.  The  Commissions  Schools  and  Libraries  Program  helps  to  finance  the  deployment  of  infrastructure  that  supports  advanced  services  in  our  nations  schools.  As  of  July 


 2001,  SLD  has  committed  approximately  $6  billion  in  funds  for  telecommunications  and  information  services  for  the  first  three  funding  years.  290  In  particular,  the  Schools  and  Libraries 
 Program  contributed  significantly  to  providing  schools  with  assistance  for  information  services.  During  the  first  three  funding  years,  about  $3.4  billion  was  committed  for  internal  connections-  - 
 the  majority  of  which  supports  high-  speed  access.  In  fact,  program  funding  for  internal 
 284  See  supra  para.  83. 
 285  See  AT&  T  Comments  at  8. 
 286  See,  e.  g.,  SIA  Comments  at  2  (  SAI  believes  that  satellite  systems  present  the  only  practical  near-  term  alternative 
 to  provide  broadband  services  in  rural  and  other  underserved  areas.);  Grange  Comments  at  6  (  new  terrestrial  based  fixed  wireless  technologies  (such  as  microwave,  wireless  fidelity  and  MMDS  systems)  offer  promising 


 opportunities  to  reach  some  rural  communities,  especially  when  they  are  combined  with  existing  cable,  DSL  or  fiber  optic  networks.) 
 287  Percentages  add  to  more  than  100  percent  because  schools  may  use  more  than  one  type  of  connection.  Office  of 
 Educational  &  Research  Improvement,  U.  S.  Department  of  Education,  Pub.  No.  2001-  071,  Internet  Access  in  U.  S.  Public  Schools  and  Classrooms:  1994    2000  (May  2001)  at  6  (NCES  Study).  NCES  defined  dedicated  lines  to  be 


 56K,  T1/  DS1,  fractionalized  T1,  T3/  DS3,  and  fractionalized  T3  lines.  We  note  that  56  kbps  lines  do  not  meet  our 
 definition  of  advanced  or  high-  speed  service. 
 288  Id.  Other  connection  types  are  considered  to  be  ISDN,  wireless  connections,  and  cable  modems  (ISDN). 


 Again,  we  note  that  some  of  these  connections  may  not  satisfy  the  Commissions  definition  of  advanced  or  high-speed 
 capability. 
 289  Id. 


 290  See  Federal  Universal  Support  Mechanisms  Fund  Size  Projections  for  the  Fourth  Quarter,  available  at 
 <http://  www.  universalservice.  org/  overview/  filings/  default.  asp>  (filed  by  USAC  Aug.  2,  2001). 
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 connections  helped  bring  Internet  access  to  77  percent  of  public  school  instructional  rooms,  compared  to  only  14  percent  in  1996.  291  By  comparison,  as  of  September  2001,  50.5  percent  of 
 households  in  the  United  States  had  Internet  access.  292  In  addition,  as  of  the  beginning  of  2000,  SLD  estimates  that  funds  were  used  to  install  high-  speed  services  in  about  170,000  school  and 
 library  buildings.  293  SLD  further  estimates  that  as  of  September  2002,  that  number  will  increase  more  than  17  percent,  to  200,000. 


 B.  Subscription  Rates 
 118.  While  we  focus  on  the  availability  of  advanced  services  in  this  Report,  we  acknowledge  that  subscription  rates  may  influence  business  and  investment  decisions  regarding 


 advanced  telecommunications.  Therefore,  it  is  useful  for  this  analysis  to  identify  factors  that  affect  consumers  decisions  to  purchase  advanced  services.  For  example,  a  survey  from  rural 
 local  exchange  carriers  recently  concluded  that  the  current  take  rates  among  customers  may  limit  their  expansion  plans  for  advanced  services.  294  More  specifically,  in  this  section  we  consider  a 
 variety  of  factors  which  may  be  relevant  to  the  overall  subscription  rate  for  advanced  services,  including:  computer  ownership,  cost,  the  lack  of  applications  which  require  advanced 
 telecommunications  capability,  and  marketing  techniques.  Each  of  these  factors  may  have  varying  degrees  of  consequence  for  subscription  rates. 


 119.  Our  data  indicates  that  7.0  percent  of  American  households  subscribe  to  high-speed  services.  295  This  is  a  substantial  increase  from  the  1.  6  percent  residential  penetration  rate 
 cited  in  the  Second  Report.  296  By  comparison,  analysts  estimate  that  high-  speed  Internet  access  is  available  in  about  75  percent  to  80  percent  of  US  households  via  DSL  and  cable  modem 
 service.  297  These  estimates  are  consistent  with  the  Commissions  data  collection,  which  indicates  that  as  of  June  2001,  high-  speed  service  subscribers  were  reported  in  78  percent  of  the 
 zip  codes  in  the  United  States.  298 
 120.  We  believe  that  computer  ownership  is  a  significant  factor  to  subscription  for  consumers  with  available  advanced  services.  Although  advanced  services  may  be  used  by 


 technologies  other  than  computers,  most  use  of  these  services  today  centers  on  the  use  of  computers  to  access  the  Internet.  The  Department  of  Commerce  reports  that  about  56.5  percent 
 of  households  in  America  have  computers.  299  Because  consumers  without  computers  currently 
 291  NCES  Study  at  4. 
 292  A  Nation  Online  at  5. 
 293  This  information  is  based  on  estimates  from  staff  of  the  Schools  and  Libraries  Division  of  the  Universal  Service 
 Administrative  Company. 
 294  See  NTCA  Survey. 


 295  The  Department  of  Commerce  indicates  that  10.8  percent  of  the  population  subscribes  to  high-  speed  services. 
 See  A  Nation  Online  at  39-  40. 
 296  Second  Report,  15  FCC  Rcd  at  20942. 


 297  See  Broadband  Will  be  Available  to  75  percent  of  US  Homes  by  Year-  Says  New  Yankee  Group  Report,  Yankee 
 Group  News  Releases,  Nov.  1,  2001;  Morgan/  McKinsey  Broadband  Report  at  43  (  approximately  80%  of  the  U.  S.  is  reached  today  by  upgraded  Cable  or  xDSL.). 


 298  See  supra  para.  27. 
 299  A  Nation  Online  at  5. 
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 have  little  or  no  reason  to  subscribe  to  advanced  services,  we  can  easily  conclude  that  computer  ownership  has  a  direct  relationship  with  penetration  rates  for  advanced  services.  We  also  note 
 that  computer  ownership  trends  appear  to  vary  significantly  based  on  certain  factors,  such  as  income  and  race.  300  Accordingly,  high-  speed  penetration  rates  also  appear  to  vary  with  income 
 and  race.  301  Of  consumers  with  computers  who  are  already  on-  line,  the  percentage  of  subscribers  is  significantly  greater  than  the  overall  subscription  rate.  A  recent  study  indicates  that  25-  35 
 percent  of  online  users  subscribe  to  high-  speed  services  in  some  areas.  302 
 121.  The  cost  of  such  services  may  also  be  a  factor  in  consumers  decisions  to  purchase  advanced  service  lines.  According  to  a  survey  from  the  Strategis  Group,  more  than  30  percent  of 


 online  customers  were  willing  to  purchase  advanced  services  at  $25  per  month,  whereas  only  12  percent  were  willing  to  pay  $40  per  month.  303  Consequently,  cost  appears  to  be  closely 
 associated  with  the  number  of  consumers  willing  to  subscribe  to  advanced  services.  Another  survey  reports  a  similar  conclusion,  stating  that  36  percent  of  dial-  up  users  were  interested  in 
 advanced  services,  but  not  at  current  prices.  304 
 122.  In  addition,  some  consumers  and  industry  participants  believe  that  it  is  important  to  focus  on  the  development  of  a  killer  application,  which  would  require  higher  bandwidths 


 and  generate  wide-  spread  interest  in  advanced  services  for  new  subscribers.  305  They  suggest  that  a  killer  application  will  make  advanced  telecommunications  capability  not  just  desirable,  but 
 essential  for  most  consumers.  For  example,  video-  on-  demand,  Internet  gaming,  306  and  voice  over  Internet  Protocol  have  received  a  significant  amount  of  attention.  Content-  related 
 applications,  however,  such  as  video-  on-  demand,  appear  to  have  some  legal  barriers  to  full  deployment  due  to  copyright  infringement  concerns  and  current  related  restrictions  on  content 


 300  For  example,  23.4  percent  of  households  with  income  less  than  $15,000  per  year  own  computers  and  89.0  percent 
 of  households  with  income  over  $75,000  per  year  own  computers.  In  addition,  households  of  different  ethnic  and  racial  backgrounds  report  varying  rates  of  computer  ownership  controlling  for  income.  For  instance,  households 


 with  income  under  $15,000,  52.5  percent  of  Asian  American  and  Pacific  Islander  households  report  owning  a 
 computer,  along  with  26.9  percent  of  White  households,  18.1  percent  of  Hispanic  households,  and  13.3  percent  of  Black  households.  Data  are  based  on  calculations  from  National  Telecommunications  and  Information 


 Administration  staff  (relying  on  unpublished  census  data). 
 301  See  supra  para.  102;  As  of  September  2001,  22.9  percent  of  Asian  American  and  Pacific  Islander  households 


 with  Internet  access  report  high-  speed  Internet  access,  along  with  19.3  percent  of  White  households,  17.0  percent  of  Hispanic  households,  and  16.0  percent  of  Black  households.  Race  data  controlling  for  income  is  not  available. 


 Again,  data  are  based  on  calculations  from  National  Telecommunications  and  Information  Administration  staff  (relying  on  unpublished  census  data). 
 302  Morgan/  McKinsey  Broadband  Report  at  4. 
 303  Information  Technology  Association  of  America,  Building  a  Positive,  Competitive  Broadband  Agenda  (Oct. 
 2001)  (ITTA  Study)  (citing  survey  from  the  Strategis  Group). 
 304  Broadband  Too  Pricey  for  Dial-  up  Users,  Survey  Says,  Communications  Daily,  Nov.  30,  2001  (citing  survey 


 from  Hart  Research  and  The  Winston  Group). 
 305  See,  e.  g.,  John  Sullivan,  What  Can  We  Learn  From  Watching  TV?,  Broadband  Networking  News,  Dec.  4,  2001 


 (  Its  been  argued  that  a  major  reason  for  broadbands  malaise  is  the  absence  of  a  compelling  killer  app.);  Steve 
 Gold,  3Gs  Success  Hinges  on  Girls,  Newsbytes,  Dec.  14,  2001  (  third-  generation  (3G)  wireless  services  wont  take  off  until  the  networks  start  coming  up  with  killer  applications  for  users.) 


 306  Grahame  Lynch,  Discovered:  A  Profitable  Killer  App  for  Broadband,  Americas  Network,  Nov.  15,  2001 
 (noting  that  on-  line  gaming  has  helped  drive  the  broadband  market  in  Korea). 
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 availability  by  content  owners.  307  As  the  market  continues  to  develop  and  these  issues  are  resolved,  we  anticipate  that  innovative  applications  may  drive  consumer  demand  and 
 subscription  rates. 
 123.  Another  factor  for  subscription  may  be  the  fact  that  consumers  are  unaware  of  available  alternatives  in  advanced  services  and  have  not  yet  become  familiar  with  the  benefits  of 


 high-  speed  access  to  the  Internet.  308  Accordingly,  service  providers  have  begun  experimenting  with  marketing  techniques  in  order  to  increase  subscribership.  For  example,  satellite  providers 
 and  cable  modem  providers  have  recently  begun  offering  subscriptions  to  high-  speed  services  at  retail  outlets  and  report  that  consumers  have  responded  favorably.  309 


 124.  Overall,  we  note  that  the  penetration  of  advanced  services  is  generally  comparable,  or  higher,  than  the  historical  rates  of  penetration  for  other  technologies,  such  as  the 
 telephone  or  television.  For  example,  the  telephone  took  36  years  and  the  television  took  17  years  to  reach  30  percent  of  Americans.  310 


 C.  International  Deployment 
 125.  We  believe  that  it  is  instructive  to  monitor  the  deployment  of  advanced  services  in  the  international  community  to  determine  if  there  are  lessons  to  be  learned  from  their  experience. 


 For  instance,  experiences  in  other  countries  suggest  that  the  United  States  is  most  likely  to  rapidly  deploy  high-  speed  or  advanced  services  when  we  encourage  competition  among  services 
 providers  in  the  advanced  telecommunications  market.  Nevertheless,  we  acknowledge  that  some  of  the  results  may  be  of  limited  value  due  to  unique  circumstances  in  a  particular  nation.  Factors 
 such  as  geography,  population  concentration,  industry  structure,  and  government  subsidies  may  all  influence  the  effectiveness  of  deployment  techniques  employed  by  various  countries.  As  a 
 result,  while  we  believe  that  it  is  a  useful  exercise  to  consider  the  deployment  techniques  of  other  nations,  we  believe  that  any  international  comparisons  should  be  made  with  caution.  In  the 
 following,  we  provide  a  short  overview  of  reports  relating  to  international  deployment,  and  briefly  take  note  of  a  variety  of  factors  that  may  have  influenced  penetration  rates  for  high-  speed 
 services  in  several  nations. 


 307  See  Dan  Mitchell,  Can  Technology  Save  Copy  Protection?,  Cable  World,  Apr.  9,  2001  (  The  movie  studios  often 
 blame  a  lack  of  copyright  protection  for  their  reluctance  to  make  content  available  for  video-  on-  demand  and  other  advanced  television  services.);  Christopher  Boyd,  Video  on  Demand  Ready  to  Hit  Home,  Orlando  Sentinel  at  A1 


 (  Analysts  say  copyright  and  fee  issues  need  to  be  resolved  before  video-  on-  demand  libraries  contain  great  numbers 
 of  new  releases.);  Dick  Kelsey,  Movies  Will  Cause  Broadband  Explosion    Valenti,  Newsbytes  News  Network,  Aug.  21,  2001  (  The  extraordinary  potential  of  on-  demand  entertainment  on  the  Internet  was  illustrated  by  music 


 download  site  Napster,  which  was  ordered  to  block  copyrighted  songs  made  available  through  its  peer-  to-  peer 
 technology.) 
 308  Covad  Comments  at  3  (  Consumers  are  slowly  realizing  the  benefits  of  broadband,  but  havent  yet  been 


 convinced  in  large  number  to  adopt  the  technology.  That  is  an  issue  for  sales  and  marketing  arms  of  broadband 
 providers,  not  for  regulators.) 
 309  AT&  T  states  that  its  high-  speed  data  service  can  be  purchased  at  115  Best  Buy  stores,  75  Gateway  stores,  and 


 120  Circuit  City  stores  and  that  year-  to-  date  sales  through  these  retail  outlets  have  already  exceeded  sales  for  all  of 
 2000.  See  AT&  T  Comments  at  10  (AT&  T  Comments  were  dated  September  24,  2001).  In  addition,  StarBand  announced  that  it  plans  to  have  an  in-  store  demo  in  up  to  5,000  MSN/  RadioShack  stores  by  the  end  of  2001.  See 


 StarBand  Comments  at  15. 
 310  See  ITAA  Study  at  14. 
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 126.  A  recent  report  to  the  Office  of  Economic  Cooperation  and  Development  (OECD)  discusses  broadband  developments  and  penetration  rates  in  30  OECD  countries,  including  the 
 United  States.  311  This  report  provides  a  comprehensive  review  of  the  deployment  of  high-  speed  services,  and  may  reflect  a  variety  of  regulatory  structures  in  each  of  the  countries  it  considers. 
 According  to  this  report,  in  June  2001  the  United  States  had  a  broadband  penetration  rate  of  3.24  per  100  inhabitants.  Three  countries  had  higher  broadband  penetration  rates  than  the  United 
 States:  Korea  at  13.91,  Canada  at  6.22,  and  Sweden  at  4.52.  Additional  OECD  countries  with  June  2001  broadband  penetration  rates  above  2.0  included  the  Netherlands  at  2.74,  Austria  at 
 2.36,  Denmark  at  2.33  and  Belgium  at  2.27.  Several  other  countries  that  one  might  have  expected  to  have  high  broadband  penetration,  but  that  were  lower  than  2.0,  included  Germany 
 1.03,  Japan  at  0.94,  France  at  0.59,  Australia  at  0.59  and  United  Kingdom  at  0.09.  312 
 127.  An  important  question  to  consider  is  why  Korea,  Canada,  and  Sweden  report  a  broadband  penetration  level  significantly  higher  than  the  United  States.  According  to  the  OECD 


 report,  the  rapid  roll-  out  of  high-  speed  Internet  access  in  Korea  is  a  result  of  competition  between  companies  using  different  technologies  and  different  infrastructures.  By  the  end  of 
 2000,  Korea  Telecom  was  able  to  offer  DSL  service  to  92  percent  of  the  Korean  population,  which  was  due  in  part  to  the  fact  that  a  high  percentage  of  Koreans  live  in  apartment  buildings. 
 Cable  modem  service  was  introduced  into  Korea  in  July  1998,  before  DSL  service  was  available.  IP  telephony  may  have  also  been  an  important  source  of  broadband  growth.  IP  telephony  was 
 introduced  by  Serome  Technology  in  January  2000,  and  by  December  2000  apparently  4.3  million  users  had  signed  up  for  the  service.  Serome  Technology  offers  a  DialPad  service  that 
 allows  users  to  signal  that  they  are  online.  313  In  conjunction  with  advanced  telecommunications  capability,  it  removes  one  of  the  barriers  to  computer-  to-  computer  use  of  IP  telephony.  In 
 addition,  broadband  growth  may  also  be  driven  by  the  fact  that  a  wide  range  of  content  is  available  to  Korean  consumers.  314  The  Korean  Government  has  set  a  target  to  wire  84  percent  of 
 Koreas  households  with  services  at  20  Mbps  by  2005.  315 
 128.  Canada  ranked  second  in  broadband  penetration  in  June  2001.  316  Competition  between  different  companies  using  different  networks  has  been  important  in  Canada  as  well. 


 311  Office  of  Economic  Cooperation  and  Development,  Directorate  for  Science,  Technology  and  Industry, 
 Committee  for  Information,  Computer  and  Communications  Policy,  Working  Party  on  Telecommunications  and  Information  Service  Policies,  The  Development  of  Broadband  Access  in  OECD  Countries  (Oct.  29,  2001)  (OECD 


 Report).  The  OECD  Report  defines  broadband  as  downstream  access  at  256  kbps  and  higher  speeds,  and  upstream 
 access  at  significantly  lower  speeds,  apparently  as  slow  as  64  kbps,  in  order  to  include  ADSL  within  the  broadband  definition. 


 312  Id.  at  14. 
 313  Id.  at  33. 
 314  Speedcast  Partners  with  Worlds  Largest  Broadband  Provider,  Asia  Pulse,  Nov.  1,  2001  (  Korea  Telecom 
 subscribers  will  now  be  able  to  access  SpeedCast  Multimedia  live  streaming  video  and  audio  content  directly  from 
 their  PC  This  multimedia  content  ranges  in  subject  matter  from  business  and  finance,  to  news  and  entertainment,  lifestyle,  as  well  as  a  variety  of  ethnic  programs  in  many  languages.);  Kim  Gilmour,  Survival  of  the  Quickest: 


 Broadband  Will  Change  Your  Life,  They  Say,  Internet  Magazine,  Dec.  1,  2001  (  Abundant  broadband  availability 
 and,  just  as  importantly,  appealing  content  and  rock-  bottom  access  prices  have  given  South  Koreans  an  insatiable  appetite  for  broadband  recreation.) 


 315  Korean  Trailblazers,  CommunicationsWeek  International,  Sep.  10,  2001. 
 316  OECD  Report  at  24-  25. 
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 Some  cable  networks  began  introducing  commercial  cable  modem  services  as  early  as  November  1996.  Telephone  carriers  responded  to  the  availability  of  cable  modem  service  by  offering  DSL 
 service. 
 129.  As  of  June  2001,  Sweden  had  a  broadband  penetration  rate  of  4.52.  The  Swedish  government  has  a  goal  of  ensuring  that  broadband  reaches  98  percent  of  towns  and  villages  by 


 2004  or  2005.  317  We  also  note  that  a  majority  of  the  Swedish  population  rents  apartments  in  multi-  tenant  buildings,  and  cable  operators  generally  have  agreements  with  the  building  owners 
 that  give  them  exclusive  access  to  tenants  for  25  years  or  longer.  318 
 130.  As  mentioned  above,  several  other  OECD  countries  had  broadband  penetration  levels  above  2.0  in  June  2001,  even  though  they  were  below  the  estimated  United  States  level  of 


 3.24.  The  Netherlands  has  one  of  the  highest  penetration  rates  for  cable  modems  among  OECD  countries.  At  the  end  of  2000,  cable  modem  penetration  in  the  Netherlands  was  only  second  to 
 Canada  and  Korea.  The  OECD  Report  indicates  that  the  divestiture  of  the  cable  network  incumbent  may  have  assisted  investment  in  upgrading  cable  networks  in  the  Netherlands.  319  In 
 Austria,  consumers  are  beginning  to  purchase  cable  modems,  and  Telekom  Austria  is  in  the  process  of  upgrading  its  network  to  provide  DSL.  320  In  Denmark,  rollout  of  high-  speed  Internet 
 has  been  relatively  slow.  This  may  be  explained  in  part  by  the  fact  that  the  incumbent  telecom  carrier  owns  the  largest  cable  system  and  in  1999  had  a  61  percent  share  of  total  Denmark  cable 
 subscribers.  321 
 131.  In  most  of  the  brief  examples  listed  above,  a  particularly  important  factor  that  encouraged  the  relatively  rapid  build  out  of  broadband  access  was  the  level  of  competition 


 between  cable  TV  systems  and  local  telephone  companies.  Where  such  competition  was  diminished  because  the  local  telephone  provider  was  also  a  significant  owner  of  cable  networks, 
 the  level  of  competition  and  the  growth  of  high-  speed  access  on  both  cable  and  using  DSL  on  the  telephone  network,  appears  to  be  significantly  slower.  As  a  result,  we  believe  that  this  may 
 support  our  conclusion  in  the  Second  Report  that  competition  among  service  providers  increases  the  quality  of  services  made  available  to  consumers.  322 


 132.  As  we  noted  above,  the  successful  deployment  of  advanced  telecommunications  capability  in  other  nations  may  be  instructive  to  our  efforts  to  provide  access  to  advanced 
 telecommunications  services  to  all  Americans.  We  emphasize,  however,  that  this  exercise  may  be  useful  only  to  the  extent  that  we  recognize  that  there  are  numerous  differences  among  nations, 
 and  that  certain  comparisons  may  be  of  limited  value. 


 317  Id.  at  39-  40. 
 318  BDRC  Ltd.,  The  Development  of  Broadband  Access  Platforms  in  Europe:  Technologies,  Services,  Markets,  Full 
 Report  (Aug.  2001)  (BDRC  Report)  at  114-  118. 
 319  OECD  Report  at  35. 


 320  BDRC  Report  at  23. 
 321  Id.  at  25. 
 322  See  Second  Report,  15  FCC  Rcd  at  21004. 
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 VI.  ACTIONS  TO  ACCELERATE  DEPLOYMENT  OF  ADVANCED 
 TELECOMMUNICATIONS  CAPABILITY 


 A.  Overview 
 133.  In  the  Second  Report,  we  identified  the  three  main  factors  linked  to  the  deployment  of  advanced  telecommunications  capability  as  sufficient  demand  in  a  particular 


 locality,  the  presence  of  competition  among  advanced  services  providers,  and  the  strength  of  local  community  efforts  to  increase  the  level  of  deployment.  323  Given  the  Commissions  role  in 
 the  telecommunications  marketplace,  we  focused  our  recommendations  on  steps  that  will  increase  competition  in  the  market  for  advanced  services.  We  stated  that  competition,  not 
 regulation,  holds  the  key  to  stimulating  further  deployment.  324  This  continues  to  be  our  view.  We  believe  that  a  minimal  regulatory  framework  will  promote  competition  and  thus  encourage 
 investment  in  advanced  telecommunications  capability.  This  framework  should  be  as  comprehensive  as  possible,  while  recognizing  that  there  may  be  important  legal,  policy, 
 technological,  or  other  differences  among  classes  of  providers  that  require  disparate  regulatory  treatment  for  such  providers.  Our  recent  and  recommended  actions  are  designed  to  promote 
 competition  and  investment  through  limiting  regulatory  cost  and  regulatory  uncertainty  by  establishing  a  regulatory  framework  for  the  evolving  broadband  market. 


 134.  In  the  following  sections,  we  discuss  the  steps  that  we  have  taken  to  encourage  investment  and  further  the  deployment  of  advanced  telecommunications  capability.  We  also 
 discuss  actions  the  Commission  is  considering,  along  with  pending  proceedings,  that  may  improve  the  availability  of  advanced  telecommunications  capability.  Finally,  we  take  note  of 
 several  suggestions  that  are  designed  to  promote  access  to  advanced  telecommunications  capability  and  may  be  relevant  to  entities  other  than  the  Commission. 


 B.  Recent  Commission  Actions 
 135.  Section  706  states,  among  other  things,  that  the  Commission  shall  encourage  the  deployment  on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to 


 all  Americans  by  utilizing  price  cap  regulation,  regulatory  forbearance,  measures  that  promote  competition  in  the  local  telecommunications  market,  or  other  regulating  methods  that 
 remove  barriers  to  infrastructure  investment.  325  In  order  to  meet  this  requirement,  the  Commission  has  implemented  a  wide  range  of  actions  aimed  at  encouraging  the  growth  and 
 development  of  the  advanced  services  market.  More  recently,  we  have  turned  our  focus  to  establishing  the  appropriate  comprehensive  regulatory  framework  that  will  promote  investment 
 in  infrastructure  and  increase  access  to  advanced  telecommunications  capability  for  all  Americans.  In  keeping  with  our  belief  that  robust  competition,  minimal  regulation,  and 
 regulatory  certainty  create  the  best  environment  for  increased  availability  for  advanced  telecommunications  capability,  we  have  taken  actions  to  advance  these  goals.  Highlights  of  our 
 significant  actions  are  detailed  below. 


 323  Id.  at  21003    21004. 
 324  Id.  at  21004. 
 325    706(  a)  of  the  1996  Act,  reproduced  in  the  notes  under  47  U.  S.  C.  157. 
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 1.  Promoting  Investment  Through  Competition 
 136.  Revised  Collocation  Rules.  In  August  2001,  we  adopted  revised  collocation  rules.  326  Collocation  is  a  crucial  means  by  which  some  competitors  provide  advanced  services  to 


 customers.  The  revised  rules  are  designed  to  advance  the  statutory  goals  of  promoting  investment,  competition,  and  technological  innovation  in  all  telecommunications  markets, 
 including  advanced  services,  while  protecting  incumbent  LEC  property  interests  against  unnecessary  takings.  327  These  rules  make  clear  that  a  competitive  LEC  may  collocate  equipment 
 if  an  inability  to  deploy  that  equipment  would,  as  a  practical,  economic,  or  operational  matter,  preclude  the  requesting  carrier  from  obtaining  interconnection  or  access  to  unbundled  network 
 elements  as  contemplated  in  sections  251(  c)(  2)  and  251(  c)(  3)  of  the  Act.  328  With  regard  to  multifunctional  equipment,  we  found  that  the  primary  function  of  such  equipment  must  satisfy 
 this  test  in  order  to  be  eligible  for  collocation.  In  addition,  we  required  that  an  incumbent  LEC  must  provide  cross-  connections  between  collocated  carriers  upon  reasonable  request.  329  We  also 
 established  principles  to  ensure  that  an  incumbent  LEC  assigns  and  configures  physical  collocation  space  in  accord  with  its  statutory  duty  to  provide  for  physical  collocation  on  rates, 
 terms,  and  conditions  that  are  just,  reasonable,  and  nondiscriminatory.  330 
 137.  Encouraged  Competitive  Delivery  of  DSL  Services  Through  Line  Sharing.  Line  sharing  permits  competitive  LECs  to  provide  DSL-  based  services  over  lines  that  are  already 


 served  by  an  incumbent  LEC  for  local  voice  service.  331  In  January  2001,  we  rejected  requests  to  reconsider  the  requirement  that  incumbent  LECs  provide  unbundled  access  to  the  high  frequency 
 portion  of  the  local  loop  through  line  sharing.  332  We  also  clarified  the  Commissions  policy  requiring  incumbent  LECs  to  facilitate  line  splitting,  where  two  competitive  LECs  share  a 
 single  local  loop  to  provide  an  end-  user  both  local  voice  and  broadband  services. 
 138.  Encouraged  Further  Competition  in  the  International  Submarine  Cable  Market.  In  November  2001,  the  Commission  adopted  a  Report  and  Order  that  will  promote  competition 


 in  the  Internet-  driven  submarine  cable  market  and  further  streamline  our  licensing  process. 
 326  The  rules  were  revised  in  response  to  a  D.  C.  Circuit  decision  remanding  for  further  consideration  certain  aspects 
 of  the  Commissions  prior  collocation  rules.  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  No.  98-  147,  Fourth  Report  and  Order,  16  FCC  Rcd  15435  (2001) 


 (Collocation  Remand  Order),  petitions  for  review  filed  sub  nom.  Verizon  California,  Inc.,  et  al.  v.  FCC  and  USA,  No.  01-  1371  (D.  C.  Cir.  filed  Aug.  23,  2001);  see  also  GTE  Service  Corp.  v.  FCC,  205  F.  3d  406  (D.  C.  Cir.  2000). 
 327  See  Collocation  Remand  Order  at  15443. 
 328  Id.  at  15443-  15464. 
 329  Id.  at  15464-  15479. 
 330  Id.  at  15478-  15486. 
 331  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  Nos.  98-  147 
 and  96-  98,  Third  Report  and  Order  in  CC  Docket  No.  98-  147  and  Fourth  Report  and  Order  in  CC  Docket  No.  96-  98, 
 14  FCC  Rcd  20912,  20913,  para.  4  (1999). 


 332  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability  and  Implementation  of  the 
 Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  Nos.  98-  147,  96-  98,  98-  147,  and 
 96-  98,  Third  Report  and  Order  on  Reconsideration  in  CC  Docket  No.  98-  147,  Fourth  Report  and  Order  on  Reconsideration  in  CC  Docket  No.  96-  98,  Third  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  98-  147, 


 Sixth  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  96-  98,  16  FCC  Rcd  2101  (2001). 
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 These  changes  reflect  our  response  to  recent  growth  in  the  number  and  capacity  of  new  submarine  cables  and  our  recognition  of  the  need  to  move  with  the  swift  pace  of  the  market.  In 
 addition,  we  seek  to  tailor  the  Commissions  licensing  processes  to  encourage  rapid,  facilities-based  entry  by  multiple  firms  that  can  bring  increased  capacity  to  the  market.  333 


 2.  Universal  Service 
 139.  Encouraged  Investment  in  Infrastructure  in  High-  Cost  Areas.  The  Commission  recently  modified  its  rules  for  providing  intrastate  high-  cost  loop  support  to  rural  carriers,  based 


 on  proposals  made  by  the  Rural  Task  Force  and  recommended  by  the  Federal-  State  Joint  Board  on  Universal  Service.  334  This  five-  year  plan  will  encourage  investment  in  rural  America  by 
 providing  rural  carriers  with  certainty  and  stability.  Among  other  things,  the  Rural  Task  Force  plan  increases  the  total  amount  of  high-  cost  loop  support  available  to  rural  carriers  and,  in  certain 
 circumstances,  provides  support  for  additional  investment  that  they  make  in  their  infrastructure.  The  Commission  also  explained  that  use  of  universal  support  to  invest  in  infrastructure  capable 
 of  providing  access  to  advanced  services  does  not  violate  section  254(  e),  which  mandates  that  support  be  used  only  for  the  provision,  maintenance,  and  upgrading  of  facilities  and  services  for 
 which  the  support  is  intended.  335  Thus,  although  the  high-  cost  loop  support  mechanism  does  not  support  the  provision  of  advanced  services,  the  modified  support  mechanism  will  not  impede 
 the  deployment  of  modern  plant  capable  of  providing  access  to  advanced  services. 
 140.  Reformed  Access  Charges  for  Rate-  of-  Return  Telephone  Companies.  In  October  2001,  the  Commission  modified  its  rules  to  help  provide  certainty  and  stability  for  rate-  of-  return 


 carriers,  thereby  encouraging  investment  in  infrastructure  --  including  infrastructure  that  may  be  used  to  provide  advanced  services  --  in  rural  America.  Rate-  of-  return  carriers  are  typically 
 small,  rural  telephone  companies.  336  In  particular,  the  Commission  modified  its  interstate  access  charge  rules  and  universal  service  support  system  for  rate-  of-  return  incumbent  local  exchange 
 carriers.  337  Specifically,  the  Commission  created  a  universal  service  support  mechanism  to  replace  implicit  support  in  the  interstate  access  charges  collected  by  rate-  of-  return  carriers,  with 
 explicit  support  that  is  portable  to  all  eligible  telecommunications  carriers.  The  new,  uncapped  support  mechanism  will  provide  stability  by  ensuring  that  rate  structure  modifications  do  not 
 affect  overall  recovery  of  interstate  access  costs.  338  In  addition,  the  Commission  permitted  small 
 333  Review  of  Commission  Consideration  of  Applications  Under  the  Cable  Landing  License  Act,  IB  Docket  No.  00- 
 106,  Report  and  Order,  FCC  01-  332  (rel.  Dec.  14,  2001). 
 334  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Fourteenth  Report  and  Order  and 


 Twenty-  Second  Order  on  Reconsideration,  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of  Interstate 
 Services  of  Non-  Price  Cap  Incumbent  Local  Exchange  Carriers  and  Interexchange  Carriers,  CC  Docket  No.  00- 
 265,  Report  and  Order,  16  FCC  Rcd  11244  (2001)  (Rural  Task  Force  Order). 
 335  Rural  Task  Force  Order,  16  FCC  Rcd  at  11320-  11323. 


 336  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of  Interstate  Services  of  Non-  Price  Cap  Incumbent  Local 
 Exchange  Carriers  and  Interexchange  Carriers,  Federal-  State  Joint  Board  on  Universal  Service,  Access  Charge  Reform  for  Incumbent  Local  Exchange  Carriers  Subject  to  Rate-  of-  Return  Regulation,  Prescribing  the  Authorized 


 Rate-  of-  Return  for  Interstate  Services  of  Local  Exchange  Carriers,  CC  Docket  Nos.  00-  256,  96-  45,  98-  77,  and  98- 
 166,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  00-  256,  Fifteenth  Report  and  Order  in  CC  Docket  No.  96-  45,  and  Report  and  Order  in  CC  Docket  Nos.  98-  77  and  98-  166,  FCC  01- 


 304,  para.  4  (rel.  Nov.  8,  2001),  reconsideration  pending. 
 337  Id. 


 338  Id.  at  para.  12. 
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 and  mid-  sized  local  telephone  companies  that  serve  rural  and  high-  cost  areas  to  continue  to  set  rates  based  on  a  rate-  of-  return  of  11.25  percent.  339  Furthermore,  the  Commission  agreed  that 
 universal  service  policies  should  not  inadvertently  create  barriers  to  the  provision  of  access  to  advanced  services.  340 


 3.  Efficient  Use  of  Spectrum 
 141.  Authorized  Voluntary  Clearing  of  Upper  700  MHz  Bands.  In  a  series  of  decisions  regarding  the  747-  762  and  777-  792  MHz  bands  (Upper  700  MHz),  341  the  Commission  made 


 portions  of  this  band  available  for  next  generation  mobile  and  high-  speed  broadband  services,  among  other  possible  uses.  In  particular,  the  Commission  authorized  voluntary  band-  clearing 
 agreements  between  incumbent  broadcasters  and  new  commercial  wireless  interests.  The  Upper  700  MHz  auction  (Auction  No.  31)  is  scheduled  to  begin  June  19,  2002.  342 


 142.  Adopted  Service  Rules  for  Lower  700  MHz.  As  part  of  the  digital  television  transition,  the  Commission  adopted  service  rules  for  the  698-  746  MHz  band  (Lower  700  MHz) 
 to  enable  the  introduction  of  wireless  services.  343  Like  the  Upper  700  MHz  band,  wireless  licenses  to  use  the  spectrum  will  be  awarded  via  competitive  bidding.  Potential  uses  of  the 
 spectrum  include  next  generation  mobile  and  high-  speed  broadband  services. 
 143.  Took  Actions  to  Identify  Appropriate  3G  Spectrum.  In  an  effort  to  implement  the  International  Telecommunications  Unions  (ITU)  International  Mobile  Telecommunications 


 2000  initiative  (IMT-  2000),  the  FCC,  in  conjunction  with  the  National  Telecommunications  and  Information  Administration  (NTIA)  and  the  White  House,  has  taken  a  series  of  actions  to 
 identify  appropriate  spectrum  for  potential  reallocation  to  third  generation  (3G)  wireless  services.  344 


 144.  Authorized  Ka-  band  Satellites.  In  August  2001,  the  Commission  authorized  the  deployment  of  11  new  Ka-  band  systems  that  have  the  potential  to  provide  a  variety  of  services, 
 including  broadband,  interactive,  direct-  to-  home  and  digital  services  to  all  parts  of  the  country. 
 339  Id.  at  paras.  206-  210. 
 340  Id.  at  para.  12. 
 341  See  Service  Rules  for  the  746-  764  and  776-  794  MHz  Bands,  and  Revisions  to  Part  27  of  the  Commissions  Rules, 
 WT  Docket  No.  99-  168,  Third  Report  and  Order,  16  FCC  Rcd  2703  (2001);  Order  on  Reconsideration  of  Third  Report  and  Order,  FCC  01-  258  (rel.  Sep.  17,  2001). 


 342  Auction  of  Licenses  for  747-  762  and  777-  792  MHz  Bands  (Auction  No.  31)  Scheduled  For  June  19,  2002,  Public 
 Notice,  DA  01-  2394  (rel.  Oct.  15,  2001). 
 343  Reallocation  and  Service  Rules  for  the  698-  746  MHz  Spectrum  Band  (Television  Channels  52-  59),  GN  Docket 


 No.  01-  74,  Report  and  Order,  FCC  01-  364  (rel.  Jan.  18,  2002). 
 344  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3  GHz  for  Mobile  and  Fixed 


 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless 
 Systems,  ET  Docket  No.  00-  258,  Notice  of  Proposed  Rulemaking  and  Order,  16  FCC  Rcd  596  (2001); 
 Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  66  Fed.  Reg.  47618-  01  (2001);  First  Report  &  Order  and  Memorandum  Opinion  and  Order,  FCC  01-  256  (rel.  Sep.  24,  2001).  By  ITU  standards,  3G 


 services  for  pedestrian  and  indoor  traffic  are  high-  speed  services,  capable  of  supporting  circuit  and  packet  data  at  384  kbps  for  pedestrian  traffic  and  2  Mbps  of  higher  for  indoor  traffic.  For  high  mobility  (vehicular)  traffic,  the  3G 
 standard  includes  services  capable  of  speeds  of  144  kbps  or  higher.  Accordingly,  some  services  satisfying  the  ITUs 
 standard  are  not  high-  speed. 
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 Specifically,  the  Commission  authorized  11  second  round  Ka-  band  applicants  to  provide  fixed-satellite  service  from  geostationary  satellite  systems  located  in  a  total  of  34  orbit  locations.  345 
 145.  Expanded  Over-  the-  Air  Reception  Devices  Rule.  The  Commission  took  steps  to  minimize  interference  with  the  installation,  maintenance,  or  use  of  antennas  used  for  high-  speed 
 services.  As  directed  by  Congress,  the  Commission  in  1996  adopted  the  Over-  the-  Air  Reception  Devices  Rule  (OTARD)  prohibiting  governmental  and  non-  governmental  restrictions  that  impair 
 installation,  maintenance  or  use  of  certain  antennas.  346  The  rule  applies  to  antennas,  including  TV  antennas,  and  fixed  wireless  and  satellite  antennas  that  are  less  than  one  meter  in  diameter,  or 
 any  size  in  Alaska.  The  rule  was  expanded,  effective  in  May  2001,  to  apply  to  fixed  wireless  antennas  used  to  transmit  or  receive  data,  voice  and  other  non-  video  services.  Thus,  in  addition 
 to  its  application  to  video  antennas,  the  rule  now  applies  also  to  providers  that  offer  high-  speed  access.  347  The  rule  applies  if  the  antenna  user  has  a  direct  or  indirect  property  interest  and 
 exclusive  use  or  control  of  the  location  where  the  antenna  is  installed. 
 146.  Commenced  Rolling  One-  Day  Filing  Window  for  MDS  and  ITFS  Licensees.  In  1998,  the  Commission  adopted  technical  rule  changes  to  provide  MDS  and  ITFS  licensees 


 flexibility  to  fully  employ  digital  technology  in  delivering  two-  way  communication  services,  including  high-  speed  and  high-  capacity  data  transmission  and  Internet  service.  348  An  initial 
 filing  window  for  two-  way  service  was  held  from  August  14-  18,  2000.  Following  this  initial  filing  window,  on  April  16,  2001,  the  Bureau  commenced  a  rolling  one-  day  filing  window 
 process,  which  permits  current  licensees  to  apply  for  upstream  and  downstream  authorizations.  This  process  provides  protection  to  previously  proposed  applications.  349  To  date,  approximately 
 1,600  of  those  applications  have  been  granted. 
 147.  Added  Mobile  Allocation  to  the  2500-  2690  MHz  Band.  On  September  24,  2001,  the  Commission  adopted  a  First  Report  and  Order  and  Memorandum  Opinion  and  Order  (First 


 R&  O)  in  the  New  Advanced  Wireless  Services  proceeding.  350  The  First  R&  O  adds  a  mobile 


 345  Second  Round  Assignment  of  Geostationary  Satellite  Orbit  Locations  to  Fixed  Satellite  Service  Space  Stations 
 in  the  Ka-  Band,  Order,  DA  01-  1693  (rel.  Aug.  3,  2001). 
 346  47  C.  F.  R.    1.4000. 


 347  Promotion  of  Competitive  Networks  in  Local  Telecommunications  Markets,  Wireless  Communications 
 Association  International,  Inc.  Petition  for  Rulemaking  to  Amend  Section  1.4000  of  the  Commission's  Rules  to 
 Preempt  Restrictions  on  Subscriber  Premises  Reception  or  Transmission  Antennas  Designed  to  Provide  Fixed  Wireless  Services, 
 WT  Docket  No.  99-  217,  First  Report  and  Order,  15  FCC  Rcd  22983  (2000). 
 348  Amendment  of  Parts  21  and  74  to  Enable  Multipoint  Distribution  Service  and  Instructional  Television  Fixed 


 Service  Licensees  to  Engage  in  Fixed  Two-  Way  Transmissions,  MM  Docket  No.  97-  217,  13  FCC  Rcd  19112  (1998),  recon., 
 14  FCC  Rcd  12764  (1999),  further  recon.,  15  FCC  Rcd  14566  (2000). 
 349  Mass  Medial  Bureau  Provides  Further  Information  regarding  Grants  of  ITFS  and  MDS  Two-  Way  Applications, 


 Certain  ITFS  Major  Modification  Applications,  and  the  Rolling  One-  Day  Filing  Window  Procedure,  Public  Notice, 
 DA  01-  751  (rel.  Mar.  26,  2001). 
 350  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3  GHz  for  Mobile  and  Fixed 


 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless  Systems  and  Amendment  of  the  US  Table  of  Frequency  Allocations  to  Designate  the  2500-  2520/  2670-  2690  MHz 


 Frequency  Bands  for  the  Mobile-  Satellite  Service,  ET  Docket  No.  00-  258  and  RM-  9911,  First  Report  &  Order  and 
 Memorandum  Opinion  and  Order,  FCC  01-  256  (rel.  Sep.  24,  2001). 
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 allocation  to  the  2500-  2690  MHz  band  351  to  provide  additional  near-  term  and  long-  term  flexibility  for  use  of  this  spectrum,  thereby  making  this  band  potentially  available  for  advanced 
 mobile  and  fixed  terrestrial  wireless  services,  including  3G  and  future  generations  of  wireless  systems.  The  Commission  decided  not  to  relocate  the  existing  licensees  or  otherwise  modify 
 their  licenses. 
 C.  Commission  Actions  Under  Consideration 
 148.  We  recently  initiated  several  major  initiatives  relating  to  promotion  of  advanced  services,  which  will  limit  regulatory  costs  and  regulatory  uncertainty  by  creating  a  broad 


 framework  for  the  developing  advanced  services  market.  These  proceedings  will  enable  the  Commission  to  explore  how  regulatory  policy  should  evolve  in  a  manner  that  is  complementary 
 to  the  advanced  services  marketplace.  In  addition,  these  initiatives  are  designed  to  remove  barriers  to  deployment  of  advanced  telecommunications  capability  by  promoting  competition  in 
 the  telecommunications  market. 
 149.  As  we  discuss  in  more  detail  below,  the  Commission  has  initiated  four  proceedings  that  focus  on  a  comprehensive  regulatory  treatment  of  broadband  services.  First,  the 


 Commission  launched  the  Cable  Modem  Notice  of  Inquiry  that  considers  the  definitional  question  of  the  regulatory  classification  under  the  Act  of  cable  modem  service,  which  is  used  as 
 a  broadband  platform.  352  Second,  we  plan  to  initiate  a  Broadband  NPRM,  where  we  examine  the  legal  and  policy  issues  associated  with  broadband  offerings  by  wireline  carriers  and  universal 
 service  issues  associated  more  broadly  with  all  broadband  offerings.  Third,  in  the  Incumbent  LEC  Broadband  Telecommunications  Services  NPRM,  we  examine  the  appropriate  regulatory 
 requirements  for  the  incumbent  LECs  provision  of  domestic  broadband  telecommunications  services,  including  what  regulatory  safeguards  and  carrier  obligations,  if  any,  should  apply  when 
 a  carrier  that  is  dominant  in  the  provision  of  traditional  local  exchange  and  exchange  access  services  provides  broadband  service.  353  Fourth,  in  the  Triennial  Review  NPRM,  we  address, 
 among  other  things,  the  incumbent  LECs  wholesale  obligations  under  section  251  to  make  their  facilities  available  as  unbundled  network  elements  to  competitive  LECs  for  the  provision  of 
 broadband  services.  354 


 351  There  are  currently  thirty-  three  6  MHz  channels,  or  198  MHz  of  spectrum,  allocated  to  MDS  and  ITFS.  In  the  top 
 fifty  markets  in  the  country,  MDS  utilizes  two  6  MHz  channels  in  the  2150  to  2162  MHz  band.  In  the  rest  of  the  country,  the  6  MHz  MDS  2  channel  is  replaced  by  a  4  MHz  MDS  2-  A  channel  (2150  to  2160  MHz).  In  addition, 


 both  MDS  and  ITFS  share  spectrum  in  the  2500  to  2686  MHz  band.  In  this  band,  ITFS  licensees  are  allotted  twenty  6  MHz  channels  (120  MHz  of  spectrum),  and  MDS  licensees  are  allotted  eleven  6  MHz  channels  (66  MHz  of 
 spectrum)  . 
 352  Inquiry  Concerning  High-  Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities,  GN  Docket  No.  00-  185, 


 Notice  of  Inquiry,  15  FCC  Rcd  19287  (2000)  (Cable  Modem  NOI). 
 353  Review  of  Regulatory  Requirements  for  Incumbent  LEC  Broadband  Telecommunications  Services,  CC  Docket 


 No.  01-  337,  Notice  of  Proposed  Rulemaking,  FCC  No.  01-  360  (rel.  Dec.  20,  2001)  (Incumbent  LEC  Broadband  Telecommunications  Services  NPRM). 


 354  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  CC  Docket  No.  01- 
 338,  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  96-  98,  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  Notice  of  Proposed 


 Rulemaking,  CC  Docket  No.  98-  147,  FCC  01-  361  (rel.  Dec.  20,  2001)  (Triennial  Review). 
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 150.  At  the  same  time,  the  Commission  is  currently  considering  other  actions  that  are  intended  to  promote  the  build-  out  of  advanced  telecommunications  capability.  In  particular,  we 
 take  note  of  actions  that  the  Commission  is  currently  considering  that  are  designed  to  promote  competition.  As  noted  in  our  Second  Report,  the  existence  of  competition  among  providers 
 benefits  consumers  by  increasing  the  range  and  quality  of  service  offerings,  while  reducing  the  price  of  services.  355  We  also  take  note  of  several  Commission  actions  relating  to  universal 
 service.  In  addition,  we  consider  the  efficient  and  fair  use  of  limited  public  resources,  such  as  spectrum  and  the  public  rights  of  way.  Furthermore,  we  emphasize  that  we  will  continue  to  use 
 the  enforcement  authority  available  to  us  to  ensure  that  any  advanced  services  or  components  of  advanced  services  are  provided  in  a  manner  that  is  consistent  with  the  Act  and  relevant 
 Commission  rules  and  orders.  We  will  continue  to  coordinate  our  efforts  with  the  Joint  Conference  on  Advanced  Services  and  other  groups  interested  in  promoting  deployment. 


 1.  Establishing  a  Regulatory  Framework 
 151.  Cable  Modem  Notice  of  Inquiry.  On  September  18,  2000,  we  initiated  a  proceeding  through  a  Notice  of  Inquiry  to  consider  the  policy  and  legal  issues  surrounding  high-speed 


 Internet  services  offered  over  cable  and  other  facilities.  356  The  Cable  Modem  NOI  seeks  comment  on  the  proper  regulatory  classification  for  cable  modem  service  and/  or  the  cable 
 modem  platform,  including  whether  the  service  should  be  classified  as  a  cable  service,  a  telecommunications  service,  an  information  service,  or  some  other  category  of  service.  357 
 Consistent  with  the  Commissions  directive  in  the  Second  Report,  the  Cable  Modem  NOI  seeks  comment  on  whether  there  should  be  a  national  policy  for  multiple  ISPs  access  to  cable 
 operators  infrastructure  for  delivery  of  advanced  services.  358  The  Cable  Modem  NOI  asks  whether  current  market  forces  are  working  to  achieve  multiple-  ISP  access,  or  whether 
 government  intervention  is  desirable  and/  or  necessary  to  achieve  that  goal.  359 
 152.  Broadband  NPRM.  We  plan  to  initiate  an  inquiry  relating  to  the  statutory  classification  of  wireline  broadband  Internet  access  services.  We  will  explore  what  regulations, 


 if  any,  are  appropriate  if  wireline  broadband  Internet  access  services  are  found  to  be  information  services  or  other  services  subject  to  Title  I  of  the  Act.  Specifically,  we  plan  to  examine 
 implications  for  universal  service,  access  and  interconnection,  and  other  core  communications  policy  objectives.  Finally,  we  will  examine  whether  providers  of  broadband  Internet  access 
 services  provided  over  wireline  and  other  platforms  should  be  required  to  contribute  to  universal  service. 


 153.  Incumbent  LEC  Broadband  Telecommunications  Services  NPRM.  In  light  of  the  market  changes  that  are  occurring  in  telecommunications,  we  are  considering  whether  the 
 various  regulatory  frameworks  to  measure  and  respond  to  the  development  of  competition  in  markets  previously  served  by  a  monopoly  provider,  established  by  the  Commission  in  prior 


 355  See  Second  Report,  15  FCC  Rcd  at  21004. 
 356  Cable  Modem  NOI. 
 357  Id.  at  19293-  19298. 
 358  Id.  at  19298-  19306;  Second  Report,  15  FCC  Rcd  at  21010. 
 359  Cable  Modem  NOI,  15  FCC  Rcd  at  19306-  19308. 
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 proceedings,  continue  to  have  relevance  today.  360  We  initiated  a  review  of  the  current  regulatory  requirements  for  incumbent  LECs  broadband  telecommunications  services.  We  seek  comment 
 on  what  changes,  if  any,  the  Commission  should  make  to  its  traditional  regulatory  requirements  on  incumbent  LEC  broadband  service. 


 154.  Triennial  Review  of  Unbundled  Network  Elements.  We  initiated  our  first  Triennial  Review  of  the  Commission's  policies  on  unbundled  network  elements.  361  Our  re-evaluation 
 of  the  unbundling  rules  is  designed  to  bring  benefits  to  consumers  through  innovation  and  meaningful  competition,  and  consider  how  to  balance  incumbent  LECs  unbundling 
 obligations  with  incentives  for  carriers  to  invest  in  facilities.  Among  other  inquiries,  we  are  examining  whether  and  how  to  incorporate  our  mandate  under  section  706  of  the  Act  as  an 
 explicit  factor  in  our  unbundling  analysis. 
 2.  Promoting  Investment  Through  Competition 
 155.  Collocation  in  Remote  Facilities.  We  are  considering  modifications  to  our  collocation  rules  to  ensure  competitive  access  to  incumbent  LEC  remote  premises.  362  As  fiber  is 


 pushed  further  into  the  local  loop  and  customers  are  increasingly  served  through  remote  terminals,  we  recognize  the  need  to  ensure  that  investment  is  not  stifled  by  the  ability  of 
 incumbents  to  control  access  to  remote  devices  where  DSL  technology  may  be  installed. 
 156.  Carrier  Compliance.  Recognizing  that  the  unbundled  network  element  continues  to  be  an  important  model  for  competitors  to  provide  service,  we  note  that  the  underlying  carriers 


 service  quality  can  greatly  influence  a  competitors  ability  to  meet  customers  needs  and  the  carriers  ability  to  provide  quality  service.  As  a  result,  we  have  initiated  an  inquiry  about 
 whether  to  establish  national  performance  measurements  and  standards  that  would  assist  in  evaluating  a  carrier's  compliance  with  its  local  competition  obligations.  363  The  dozen  or  so 
 measures  we  will  consider  may  have  the  effect  of  streamlining  the  number  of  existing  performance  measurements,  making  clearer  a  carrier's  performance  in  critical  areas,  and 
 facilitating  federal  and  state  enforcement  of  that  carrier's  responsibilities. 
 157.  Cable  Inside  Wire  Second  Further  Notice  of  Proposed  Rulemaking.  We  continue  to  adopt  pro-  competitive  policies  governing  the  use  of  cable  wiring  inside  multiple  dwelling 


 units.  To  facilitate  competition  from  alternative  providers,  we  have  established  rules  that  govern  the  disposition  of  the  incumbent  cable  operators  wiring  once  it  no  longer  has  a  right  to  serve 
 multiple  dwelling  units.  364  We  are  currently  considering  whether  additional  measures  are 


 360  Incumbent  LEC  Broadband  Telecommunications  Services  NPRM. 
 361  See  Implementation  of  the  Telecommunications  Act  of  1996,  Third  Report  and  Order  and  Fourth  Further  Notice  of 
 Proposed  Rulemaking,  15  FCC  Rcd  3696,  3766  n.  269  (announcing  the  review  may  begin  after  approximately  only 
 two  years  of  experience  with  these  rules);  Triennial  Review. 


 362  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  No.  98-  147, 
 Order  on  Reconsideration  and  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd.  17044  (2000). 
 363  Performance  Measurements  and  Standards  for  Unbundled  Network  Elements  and  Interconnection,  et  al.,  CC 


 Docket  No.  01-  318,  Notice  of  Proposed  Rulemaking,  FCC  01-  331  (rel.  Nov.  19,  2001). 
 364  See  47  C.  F.  R.    76.804-  76.805;  see  also  47  C.  F.  R.    76.801-  76.802  (disposition  of  wiring  within  a  residence). 
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 necessary  to  enhance  the  ability  of  service  providers  to  use  existing  cable  wiring  to  offer  traditional  and  advanced  services  to  residents  of  multiple  dwelling  units.  365 
 3.  Universal  Service 
 158.  Definition  of  Core  Services.  In  December  2000,  the  Commission  asked  the  Joint  Board  on  Universal  Service  (Joint  Board)  to  consider  whether  changes  should  be  made  to  the 


 definition  of  core  services  that  are  eligible  for  universal  service  support  and  to  make  recommendations  to  the  Commission.  366  On  August  21,  2001,  the  Joint  Board  invited  comment 
 on,  among  other  things,  whether  any  advanced  or  high-  speed  services  should  be  included  within  the  list  of  core  services.  367 


 159.  Schools  and  Libraries  Program.  We  are  currently  seeking  comment  on  whether  the  Commission  should  modify  its  rules  in  order  to  improve  program  operation  and  ensure  that 
 support  is  distributed  in  a  fair  and  equitable  manner.  368  By  taking  steps  to  streamline  the  program,  we  hope  to  improve  schools  and  libraries  access  to  modern  telecommunications  and 
 information  services  for  educational  purposes.  369 
 160.  Rural  Health  Care.  Telemedicine  and  access  to  communications  infrastructure  for  rural  health  care  providers  is  a  critical  component  of  the  Nation's  emergency  preparedness. 


 We  will  consider  reviewing  our  rules  for  the  Rural  Health  Care  program  to  ensure  that  the  discounts  available  to  rural  health  care  providers  promote  a  national  network  for  health  care  and 
 emergency  medical  communications.  We  will  take  a  lead  role  in  fostering  awareness  of  the  program  and  the  role  it  can  play  in  the  advancement  of  telemedicine. 


 4.  Efficient  Use  of  Spectrum 
 161.  Secondary  Markets.  The  Commission  is  considering  the  removal  of  unnecessary  regulatory  barriers  to  the  development  of  a  more  robust  secondary  market  in  radio  spectrum 


 usage  rights.  370  The  proposed  action  would  enable  the  more  efficient  use  of  spectrum  through  leasing  and  other  commercial  arrangements.  One  objective  of  such  additional  flexibility  is  to 
 increase  the  availability  of  spectrum  for  innovative  service  offerings,  including  advanced  and  high-  speed  services. 


 162.  Auctions.  Spectrum  allocations  that  may  be  suitable  for  high-  speed  wireless  services  and  that  may  be  available  in  the  future  for  auction  include:  24  GHz,  3650-  3700  MHz, 
 698-  746  MHz  (Lower  700  MHz),  1710-  1755  MHz  and  2110-  2150  MHz. 
 365  See  Telecommunications  Services  Inside  Wiring,  CS  Docket  No.  95-  184  and  MM  Docket  No.  92-  260,  Report 
 and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  3659  (1997). 
 366  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Order,  15  FCC  Rcd  25257  (2000). 


 367  Federal-  State  Joint  Board  on  Universal  Service  Seeks  Comment  on  Review  of  the  Definition  of  Universal  Service, 
 CC  Docket  No.  96-  45,  Public  Notice,  FCC  01J-  1  (rel.  Aug.  21,  2001). 
 368  Schools  and  Libraries  Universal  Service  Support  Mechanism,  CC  Docket  No.  02-  6,  Notice  of  Proposed 


 Rulemaking  and  Order,  FCC  02-  8  (rel.  Jan.  25,  2002). 
 369  Id.  at  para.  2. 


 370  Promoting  Efficient  Use  of  Spectrum  Through  Elimination  of  Barriers  to  the  Development  of  Secondary  Markets, 
 WT  Docket  No.  00-  230,  Notice  of  Proposed  Rulemaking,  FCC  00-  402  (rel.  Nov.  27,  2000). 
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 163.  3G  Spectrum  Options.  On  January  5,  2000,  the  Commission  issued  a  Notice  of  Proposed  Rulemaking  that  examined  spectrum  options  for  3G  and  other  advanced  wireless 
 services.  371  In  a  subsequent  Order,  the  Commission  recognized  that  it  plans  to  explore  the  service  rules  that  would  apply  to  permit  mobile  operations,  including  3G  and  future  generations 
 of  wireless  systems,  in  the  2500-  2690  MHz  band.  372 
 164.  Service  Rules  for  MVDDS.  The  Commission  plans  to  adopt  service  rules  to  enable  the  introduction  of  a  new  terrestrial  wireless  service  --  Multichannel  Video  Distribution 


 and  Data  Service  (MVDDS)  --  in  the  12.2-  12.7  MHz  band  currently  used  for  domestic  satellite  service.  373  Service  rules  may  include  the  flexibility  to  introduce  high-  speed  data  services  to  the 
 residential  market. 
 165.  DBS  Ancillary  Services.  In  December  2000,  the  Commission  sought  comment  on  whether  it  should  eliminate,  relax  or  maintain  remaining  restrictions  on  ancillary  uses  of  DBS 


 spectrum.  374 
 5.  Efficient  Use  of  the  Rights-  of-  Way 
 166.  Rights-  of-  Way.  The  Commission  currently  has  some  proceedings  pending  that  consider  various  aspects  of  the  roles  and  practices  of  federal,  state,  and  local  governments  with 


 respect  to  rights-  of-  way  management.  375  We  share  commenters  concern  about  the  difficulty 


 371  See  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3GHz  for  Mobile  and  Fixed 
 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless  Systems, 
 ET  Docket  No.  00-  258,  Notice  of  Proposed  Rulemaking  and  Order,  16  FCC  Rcd  596  (2001). 


 372  See  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3GHz  for  Mobile  and  Fixed 


 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless  Systems, 
 ET  Docket  No.  00-  258,  First  Report  and  Order  and  Memorandum  Opinion  and  Order,  FCC  01-  256  (rel.  Sep.  24,  2001). 


 373  See  also  Amendment  of  Parts  2  and  25  of  the  Commission's  Rules  to  Permit  Operation  of  NGSO  FSS  Systems  Co-Frequency 
 with  GSO  and  Terrestrial  Systems  in  the  Ku-  Band  Frequency  Range,  ET  Docket  No.  98-  206,  Notice  of 
 Proposed  Rulemaking,  14  FCC  Rcd  1131  (1998);  First  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking, 
 16  FCC  Rcd  4096  (2001). 
 374  See  Commission  Requests  Further  Comment  in  Part  100  Rulemaking  Proceeding  on  Non-  Conforming  Uses  of 


 Direct  Broadcast  Satellite  Service  Spectrum,  IB  Docket  No.  98-  21,  Public  Notice,  FCC  00-  426  (rel.  Dec.  8,  2000). 
 The  FCC  currently  permits  Direct  Broadcast  Satellite  (DBS)  providers  to  utilize  up  to  50  percent  of  their  capacity  for  ancillary  services.  See  Revision  of  Rules  and  Policies  for  the  Direct  Broadcast  Satellite  Service,  Report  and 


 Order,  11  FCC  Rcd  9712,  para.  17  (1995).  See  also  Petition  of  U.  S.  Satellite  Broadcasting  Company,  Inc.  for 
 Declaratory  Ruling  Regarding  Permissible  Uses  of  the  Direct  Broadcast  Satellite  Service,  IB  Docket  No.  95-  168 
 and  PP  Docket  No.  93-  253,  Petition  for  Declaratory  Ruling,  1  FCC  Rcd  977,  977  (1986).  Such  ancillary  services  could  include  high-  speed  digital  services. 


 375  See  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996,  WT  Docket  No. 
 99-  217  and  CC  Docket  No.  96-  98,  Notice  of  Proposed  Rulemaking  and  Notice  of  Inquiry  in  WT  Docket  No.  99-  217  and  Third  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  96-  98,  FCC  99-  141  (rel.  Jul.  7,  1999)  at  paras. 


 70-  80;  Comments  Sought  on  City  Signal  Communications,  Inc.  Petition  for  Declaratory  Ruling  Concerning  Use  of  Public  Rights  of  Way  for  Access  to  Poles  in  Cleveland  Heights,  Ohio  Pursuant  to  Section  253,  Public  Notice,  2000 
 FCC  LEXIS  6802  (Dec.  22,  2000);  Comments  Sought  on  City  Signal  Communications,  Inc.  Petition  for  Declaratory 
 Ruling  Concerning  Use  of  Public  Rights  of  Way  for  Access  to  Poles  in  Wickliff,  Ohio  Pursuant  to  Section  253, 
 Public  Notice,  2000  FCC  LEXIS  6803  (Dec.  22,  2000);  Comments  Sought  on  City  Signal  Communications,  Inc.  Petition  for  Declaratory  Ruling  Concerning  Use  of  Public  Rights  of  Way  for  Access  to  Poles  in  Pepper  Pike,  Ohio 


 Pursuant  to  Section  253,  Public  Notice,  2000  FCC  LEXIS  6804  (Dec.  22,  2000).  City  Signal  withdrew  its  petition 
 (continued....) 
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 some  companies  have  faced  in  securing  access  to  the  rights-  of-  way  necessary  to  deploy  advanced  telecommunications  infrastructure  in  a  timely  manner.  376  Based  on  our  commitment  to 
 ensuring  the  right-  of-  way  issues  are  resolved  in  a  fair  and  expeditious  manner,  we  have  asked  the  Common  Carrier  Bureau  to  further  examine  this  matter  to  consider  the  legal  and  policy  issues  it 
 presents  including  the  question  of  federal  jurisdiction.  This  effort  may  best  be  served  through  a  forum  for  all  interests  to  meet  and  work  together  in  creating  a  guiding  set  of  best  practices  for 
 the  appropriate  management  of  the  publics  rights-  of-  way. 
 167.  In  particular,  some  service  providers  provided  the  Commission  with  specific  examples  of  rights-  of-  way  disputes  and  argued  that  costs  and  other  requirements  imposed  on 


 carriers  for  use  of  the  public  rights-  of-  way  are  burdensome  to  the  point  where  they  are  a  barrier  to  deployment.  For  example,  Global  Crossing  claims  that  during  recent  negotiations  for  a  right-of- 
 way  permit,  a  city  requested  that  Global  Crossing  provide  the  city  with  a  percent  of  revenue  fee  and  waive  its  right  to  challenge  the  legality  of  the  permits  provisions.  377  In  addition,  Global 
 Photon  notes  that  it  was  requested  to  voluntarily  contribute  $350,000  to  a  propertys  improvement  fund  in  order  to  obtain  a  permit.  378  Furthermore,  others  describe  prolonged  and 
 uncertain  application  procedures.  For  instance,  ABS  gives  examples  of  permit  requests  not  being  considered  until  fifteen  to  nineteen  months  after  the  municipality  was  originally 
 contacted.  379  Additionally,  some  commenters  note  that  the  need  to  seek  permits  from  multiple  jurisdictions  can  cause  significant  delay  in  deploying  new  facilities.  380  Local  government  parties 
 counter  that  there  is  no  evidence  to  suggest  their  current  practices  should  be  restricted.  381 
 168.  We  are  concerned  about  the  impact  that  some  of  these  practices  may  have  on  the  deployment  of  advanced  services.  As  a  result,  we  intend  to  examine  these  claims  and  explore 


 solutions  through  a  dialogue  with  industry  and  our  state  and  local  colleagues,  in  order  to  remove  barriers  that  may  hinder  investment  in  infrastructure  for  advanced  or  high-  speed  services.  382  We 


 (...  continued  from  previous  page)  with  regard  to  the  City  of  Wickliff  after  the  city  granted  City  Signal  access  to  the  public  rights-  of-  way.  See  City 
 Signal  Communications,  Inc.  v.  City  of  Wickliff,  DA  01-  1499,  2001  FCC  LEXIS  3401  (Jun.  26,  2001). 
 376  See,  e.  g.,  MFN  Comments  at  1  (  obtaining  access  to  public  rights  of  way  poses  a  significant  barrier  to  the 


 deployment  of  broadband  infrastructure.);  Qwest  Comments  at  12  (  Excessive  municipal  regulation  threatens  to  delay  or  prevent  distribution  of  advanced  telecommunications  services,  particularly  landline  services,  which 


 typically  require  new  facilities  to  be  placed  within  the  rights-  of-  way.);  Velocita  Comments  at  1  (  Velocita  hereby  adds  its  voice  to  the  chorus  urging  prompt  and  decisive  action  by  the  Commission  to  address  the  pervasive 
 and  crippling  barriers  to  competitive  market  entry  posed  by  unreasonable  and  unlawful  rights-  of-  way  management 
 practices  and  policies.);  Verizon  Comments  at  14  (  a  substantial  record  has  been  compiled  showing  how  existing  restrictions  are  interfering  with  provision  of  all  types  of  telecommunications  services,  including  broadband, 


 in  violation  of  section  253  of  the  Act.) 
 377  Global  Crossing  Comments  at  6. 


 378  Global  Photon  Comments  at  14. 
 379  ABS  Comments  at  19-  21. 
 380  See,  e.  g.,  Velocita  Comments  at  8;  Global  Crossing  Comments  at  6-  7. 
 381  We  note  that  several  commenters  expressed  concern  that  local  right-  of-  way  authority  should  not  be  preempted. 
 See,  e.  g.,  NATOA  and  NLC  Comments  at  2  (  There  is  no  evidence  to  suggest  that  local  governments  current  right-of- 
 way  management  or  compensation  policies  have  impeded  the  entry  of  competitive  providers  into  the  market.);  TCCFUI  Comments  at  8  (  there  is  no  evidence  that  restrictions  on  local  government  right-  of-  way  franchise 


 authority  facilitate  deployment  of  advanced  services  to  all  Americans.). 
 382  See  47  U.  S.  C.    253. 
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 65 
 are  hopeful  that  building  a  consensus  regarding  best  practices  will  help  create  reliable  and  reasonable  expectations  regarding  management  of  the  publics  right-  of-  way. 
 D.  Additional  Actions 
 169.  During  the  course  of  this  proceeding,  we  received  a  wide  range  of  suggestions  on  how  to  promote  the  deployment  of  advanced  services  to  all  Americans.  Some  of  these  ideas  may 


 be  relevant  to  groups  outside  of  the  Commission,  including  various  legislative,  regional,  local,  private  and  regulatory  entities.  The  appropriate  authorities  may  wish  to  take  these  suggestions 
 into  consideration. 
 170.  Coordination  Between  Federal,  State,  and  Local  Entities.  Federal,  State,  and  local  entities  would  likely  benefit  from  working  together  to  remove  barriers  and  create  incentives 


 for  the  development  of  infrastructure  to  support  advanced  services.  In  addition,  State  and  local  entities  may  find  it  useful  to  coordinate  enforcement  efforts  with  the  Commission,  in  order  to 
 ensure  compliance  and  limit  regulatory  uncertainty.  383 
 171.  Tax  Credits.  Investment  credits  may  provide  incentives  for  service  providers  to  deploy  additional  infrastructure  capable  of  supporting  advanced  services.  384  We  note  that 


 legislation  is  currently  pending  before  Congress  that  would  create  a  tax  credit  for  organizations  that  build-  out  advanced  services  in  rural  areas.  385 


 172.  Loan  Guarantees.  Loan  guarantees  may  be  used  to  provide  low-  or  no-  interest  financing  for  infrastructure  that  supports  advanced  services.  Loan  guarantees  could  also  be 
 designed  to  spur  development  for  certain  underserved  communities.  For  example,  the  Rural  Utilities  Service  (RUS)  of  the  Department  of  Agriculture  currently  administers  a  pilot  program 
 that  provides  loan  guarantees  for  rural  areas. 
 173.  Grants.  Grant  programs  may  be  an  additional  source  of  financing  for  advanced  services.  For  example,  the  National  Telecommunications  and  Information  Administrations 


 Technology  Opportunities  Program  (TOP)  gives  grants  to  public  and  non-  profit  private  sector  entities  for  model  projects  demonstrating  innovative  uses  of  network  technology. 


 174.  Support  Public/  Private  Partnerships.  Communities  may  benefit  from  working  with  private  entities  in  order  to  establish  community-  based  technology  centers  in  order  to 
 provide  computer  resources  and  training  for  residents.  Partnerships  may  be  tailored  to  address  particular  local  needs,  or  could  target  the  availability  of  services  for  certain  members  of  the 
 community,  such  as  the  disabled.  386 
 175.  Demand  Aggregation  and  Anchor  Tenancy.  Communities  may  wish  to  join  together  with  local  government,  schools,  and  private  businesses  in  order  to  warrant  private 


 383  See,  e.  g.,  CompTel  Comments  at  2. 
 384  See,  e.  g.,  Qwest  Comments  at  7. 
 385  See,  e.  g.,  S.  88,  107th  Congress,  1st  Session  (2001)  (Provides  tax  credits  for  five  years  to  companies  investing  in 
 advanced  telecommunications  equipment  to  serve  low-  income  and  rural  areas.) 
 386  See  TDI  Comments  at  6. 
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 investment  in  advanced  services.  Additionally,  fostering  an  understanding  of  advanced  services  among  community  leaders  may  help  promote  community-  driven  demand  aggregation.  387 
 176.  Compile  Additional  Data.  States,  municipalities,  and  other  entities  may  find  it  useful  to  collect  additional  information  regarding  providers  and  the  availability  of  services  in 
 their  region.  This  information  may  provide  insight  relating  to  deployment  and  allow  groups  to  assess  specific  concerns  relating  to  the  availability  of  advanced  services. 


 177.  Deployment  Timelines.  States  or  local  communities  may  find  it  useful  to  set  goals  with  respect  to  the  deployment  of  advanced  services  in  their  region.  388 
 VII.  ORDERING  CLAUSE 
 178.  Accordingly,  IT  IS  ORDERED  that,  pursuant  to  section  706  of  the  Telecommunications  Act  of  1996,  this  Report  is  ADOPTED. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 William  F.  Caton  Acting  Secretary 


 387  See  APT,  AAPD,  and  ACB  Comments  at  4. 
 388  See,  e.  g.,  APT  and  WID  Comments  at  10. 
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 APPENDIX  A 
 Section  706  of  the  Telecommunications  Act  of  1996  provides: 
 SEC.  706.  ADVANCED  TELECOMMUNICATIONS  INCENTIVES. 
 (a)  In  General.  --  The  Commission  and  each  State  commission  with  regulatory  jurisdiction  over  telecommunications  services  shall  encourage  the  deployment  on  a 
 reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans  (including,  in  particular,  elementary  and  secondary  schools  and  classrooms)  by  utilizing, 
 in  a  manner  consistent  with  the  public  interest,  convenience,  and  necessity,  price  cap  regulation,  regulatory  forbearance,  measures  that  promote  competition  in  the  local 
 telecommunications  market,  or  other  regulating  methods  that  remove  barriers  to  infrastructure  investment. 


 (b)  Inquiry.  --  The  Commission  shall,  within  30  months  after  the  date  of  enactment  of  this  Act,  and  regularly  thereafter,  initiate  a  notice  of  inquiry  concerning  the  availability  of 
 advanced  telecommunications  capability  to  all  Americans  (including,  in  particular,  elementary  and  secondary  schools  and  classrooms)  and  shall  complete  the  inquiry  within 
 180  days  after  its  initiation.  In  the  inquiry,  the  Commission  shall  determine  whether  advanced  telecommunications  capability  is  being  deployed  to  all  Americans  in  a 
 reasonable  and  timely  fashion.  If  the  Commissions  determination  is  negative,  it  shall  take  immediate  action  to  accelerate  deployment  of  such  capability  by  removing  barriers 
 to  infrastructure  investment  and  by  promoting  competition  in  the  telecommunications  market. 


 (c)  Definitions.  --  For  purposes  of  this  subsection:  (1)  Advanced  Telecommunications  Capability.  --  The  term  advanced 
 telecommunications  capability  is  defined,  without  regard  to  any  transmission  media  or  technology,  as  high-  speed,  switched,  broadband  telecommunications 
 capability  that  enable  users  to  originate  and  receive  high-  quality  voice,  data,  graphics,  and  video  telecommunications  using  any  technology. 
 (2)  Elementary  and  Secondary  Schools.  --  The  term  elementary  and  secondary  schools  means  elementary  and  secondary  schools,  as  defined  in  paragraphs  (14) 
 and  (25),  respectively,  of  section  14101  of  the  Elementary  and  Secondary  Education  Act  of  1965  (20  U.  S.  C.  8801). 


 Telecommunications  Act  of  1996,  Pub.  L.  104-  104,    706,  110  Stat.  153,  reproduced  in  the  notes  under  47  U.  S.  C.    157. 
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 Federal  Communications  Commission  FCC  02-  33 
 APPENDIX  B 
 NETWORK  OVERVIEW 


 1.  In  this  Appendix,  we  examine  each  of  the  components  of  the  network,  both  in  terms 
 of  the  technology  used  and  the  types  of  entities  providing  these  components.  389  We  indicated  in  our  inquiry  that  we  were  unaware  of  significant  changes  in  the  technology  and  networks  for 


 high-  speed  services  for  the  purposes  of  our  Report.  390  For  the  most  part,  we  conclude  that  our  prior  descriptions  continue  to  be  applicable,  and  we  have  revised  our  summary  where 
 appropriate.  We  focus  particularly  on  the  last  mile  because  it  is  a  critical  link  between  existing  long  haul  transport  and  middle  mile  infrastructure  and  the  last  l00  feet  to  the  end-  users  terminal, 
 and  it  appears  to  be  where  there  is  the  greatest  need  for  further  investment.  In  examining  each  component  of  the  network,  we  also  attempt  to  identify  any  major  technological  barriers  to 
 deployment  of  advanced  telecommunications  capability. 
 A.  Long  Haul  Communications  Transport  Facilities 
 2.  At  the  core  of  the  physical  infrastructure  supporting  advanced  telecommunications 
 capabilities  are  long  haul  communications  transport  facilities.  391  Much  of  the  terrestrial  fiber  optic  infrastructure  in  this  country  has  been  constructed  along  public  rights  of  way  created  for 


 railroad,  telephone,  and  electric-  utility  owned  companies.  Providers  have  created  additional  transport  capacity  in  the  form  of  undersea  cables  and  satellite  systems. 


 3.  Long  haul  communications  transport  providers  in  the  United  States  include  large  long 
 haul  providers  such  as  AT&  T,  WorldCom,  Sprint,  Qwest,  Level  3  and  a  number  of  smaller  facilities-  based  transport  providers.  There  are  additional  wireline,  terrestrial  wireless,  and 


 satellite-  based  long  haul  transport  providers,  with  varying  amounts  of  physical  facilities.  In  addition  to  traffic  over  the  Internet  backbone,  we  note  that  the  long  haul  transport  networks  carry 
 a  wide  range  of  applications,  such  as  voice,  data,  and  traffic  for  various  financial  networks.  The  major  transport  providers  support  speeds  ranging  from  approximately  2.5  Gbps  to  over  10  Gbps 
 (OC-  48  to  OC-  192  equivalent  speeds).  392 


 389  See  Second  Report,  15  FCC  Rcd  20922-  20939. 
 390  Third  Notice  of  Inquiry  at  para.  6. 
 391  In  our  prior  Report,  we  used  the  term  backbone  to  refer  to  long  haul  communications  transport  facilities.  This 
 led  to  some  confusion  as  to  whether  we  were  referring  to  high-  speed  physical  transport  specific  to  the  Internet  backbone.  The  Internet  backbone  uses  high-  speed  fiber  infrastructure,  but  so  do  other  applications,  including 


 conventional  voice.  See  Second  Report,  15  FCC  Rcd  at  20923-  20924.  In  this  Report,  we  use  the  term  long  haul 
 communications  transport  facilities  to  refer  to  high-  speed  physical  transport,  that  includes,  but  is  not  limited  to,  facilities  used  to  support  the  Internet  backbone. 


 392  See,  e.  g.,  Sprint  web-  site,  Internet  Backbone  Operations,  (visited  Feb.  5,  2002)  <http://  www.  sprintlink.  net> 
 (describing  its  backbone  as  operating  at  OC-  48  backbone  speed);  AT&  T  Technical  Brief,  Attributes  of  a  World  Class  IP  Provider  (visited  Feb.  5,  2002)  <http://  www.  ipservices.  att.  com/  techviews/  whitepapers/  IPProvider.  pdf> 


 (AT&  T  announced  that  it  would  be  at  OC-  192  at  the  end  of  2000). 
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 4.  Although  the  cost  of  building  and  maintaining  transport  facilities  is  high,  there  do  not 
 appear  to  be  significant  technological  or  regulatory  barriers  to  deployment  of  these  facilities.  393  To  date,  advances  in  fiber  optic  and  microwave  technologies  have  allowed  capacity  to  keep  pace 


 with  demand  for  national  communications  transport  facilities.  While  long  haul  transport  capacity  does  not  appear  to  present  a  barrier  to  deployment  of  advanced  telecommunications 
 capability  at  this  time,  the  ability  to  access  that  capacity  presents  other  questions. 
 B.  Middle  Mile  Facilities 
 5.  Middle  mile  facilities  provide  transport  or  routing  from  last  mile  aggregation  points  in 
 order  to  interconnect  and  exchange  traffic  with  long  haul  providers  or  directly  with  other  middle  mile  networks.  It  appears  that  most  fiber  optic,  middle-  mile  facilities,  like  long  haul 


 communications  transport  facilities,  exist  along  public  rights  of  way.  394  Other  middle  miles  include  fixed  wireless  and  satellite  links. 


 6.  Many  middle  mile  facilities  were  originally  built  by  incumbent  telephone  and  cable 
 companies  for  ordinary  telecommunications  or  cable  television  services.  For  example,  the  fiber  optic  connections  that  transport  telephone  traffic  between  telephone  company  central  offices  can 


 be  considered  middle  mile  facilities.  Additional  examples  of  middle  mile  networks  include  statewide  networks  and  regional  commercial  enterprises.  395 


 7.  Many  providers  of  middle  mile  transport  lease  capacity  on  their  networks  to  non-facilities 
 based  Internet  service  providers  (ISPs)  and  high-  speed  providers.  For  example,  many  local  exchange  carriers  (LECs)  currently  lease  the  fiber  or  high-  speed  lines  connecting  their 


 central  offices.  Most  cable  systems  also  have  fiber  or  satellite  transport  facilities  to  regional  and  national  backbone,  which  they  may  lease  to  other  providers.  In  addition,  there  are  entities  known 
 as  Global  Service  Providers  providing  interLATA  Internet  transport  service.  396  As  demand  for  middle  mile  facilities  has  increased,  existing  providers  and  new  providers  have  deployed 
 additional  facilities.  Interexchange  carriers,  incumbent  and  competitive  local  exchange  carriers,  cable  television  companies  and  others,  including  fixed  wireless  service  providers,  have  invested 
 enormous  amounts  of  money  into  construction  of  fiber  facilities. 


 393  One  analyst  notes  that  national  communications  transport  facility  fibers  are  currently  under-  utilized,  waiting  for 
 the  last  mile  access  bottleneck  to  be  relieved.  See  Michael  Ching,  Tal  Liani,  Merrill  Lynch,  Broadband  Access    Speed  is  of  the  Essence,  May  15,  2001,  at  13  (2001). 


 394  NECA  suggests  construction  of  additional  transport  facilities  across  private  property,  including  farm  land, 
 significantly  increases  the  cost  of  construction.  NECA  Rural  Broadband  Cost  Study,  2000  (visited  Feb.  5,  2002)  <http://  www.  neca.  org/  broadban.  asp>. 


 395  For  example,  South  Dakota  has  deployed  at  state-  wide  fiber  optic  network.  See  Second  Report,  15  FCC  Rcd  at 
 20926. 
 396  For  example  ,Verizon  sets  forth  its  policy  with  respect  to  Global  Service  Providers  on  its  web-  site.  See  Verizon 


 web-  site  (visited  Feb.  5,  2002)  <http://  www.  gte.  net/  hotlinks/  policies/  gspfaq.  asp>  (  In  certain  states,  Verizon  does  not  have  authorization  to  provide  interLATA  (long  distance)  services.  A  Global  Service  Provider  (GSP)  provides 


 the  interLATA  portion  of  the  Internet  service  and  the  connection  with  the  Internet.) 
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 8.  We  noted  previously  that  high  capacity  fiber  connects  to  almost  every  local  exchange 
 carrier  central  office.  397  Indeed,  significant  amounts  of  unused  high  capacity  fiber,  typically  referred  to  as  dark  fiber,  exist  within  the  fiber  conduit  connecting  local  exchange  carrier  central 


 offices.  398  In  part  because  of  the  lack  of  ubiquitous  alternative  middle  mile  transport,  we  determined  that  interoffice  dark  fiber  transport  qualified  as  an  unbundled  network  element.  399 
 This  determination  allows  competitive  carriers  access  to  interoffice  dark  fiber.  400 
 C.  Last  Mile  Facilities 
 9.  Last  mile  facilities  provide  the  connection  between  middle  mile  facilities  and  the  last 
 100  feet.  While  all  components  of  the  network  play  important  roles  in  the  delivery  of  advanced  services,  we  focus  particular  attention  on  the  deployment  of  last  mile  facilities  because  they  are 


 often  the  missing  link  in  communities  that  do  not  have  access  to  advanced  telecommunications  capability.  The  last  mile  connection  to  the  end-  user  can  take  the  form  of  cable  modem  service, 
 digital  subscriber  line  service  (DSL)  or  some  other  LEC-  provided  service,  terrestrial  wireless  service,  or  satellite  service.  Some  operators  of  last  mile  facilities,  like  cable  providers,  transport 
 data  entirely  over  facilities  that  they  own.  Others,  including  many  terrestrial  wireless  providers,  lease  transport  to  regional  and/  or  national  connection  points  from  local  exchange  carriers.  Last 
 mile  facilities  called  Very  Small  Aperture  Terminals  (VSATs)  may  also  use  satellite  links  to  transport  traffic  to  middle  mile  facilities  or  directly  to  the  national  backbone  networks.  401  In  the 
 sections  that  follow,  we  examine  each  of  the  four  major  technologies  used  to  provide  last  mile  facilities:  cable  modem  service,  DSL  and  other  LEC-  provided  services,  terrestrial  wireless,  and 
 satellite  service.  We  discuss  the  types  of  entities  that  provide  these  last  mile  facilities,  including  the  technology  used  to  deliver  advanced  services  and  the  significant  technological  barriers  to 
 deployment  of  each  technology. 
 1.  Overview  of  Cable  Modem  Architecture 
 10.  Over  the  last  several  years,  cable  operators  have  begun  to  offer  digital  video, 
 interactive  television  services,  high-  speed  cable  modem  services,  and,  in  some  cases,  facilities- 


 397  First  Report,  14  FCC  Rcd  at  2417  (  High-  capacity  fiber  goes  into  almost  every  telephone  central  office  in  this 
 country,  and  new  Dense  Wave  Division  Multiplexing  technology  will  increase  its  capacity  hugely.);  Second  Report 
 15  FCC  Rcd  at  20926. 
 398  The  local  exchange  carriers  that  serve  about  90  percent  of  local  customers  had,  at  the  end  of  2000,  a  total  of  12.4 


 million  fiber  miles  of  dark  fiber.  The  vast  majority  of  this  was  between  central  offices.  See  Statistics  of 
 Communications  Common  Carriers,  2000/  2001  Edition  (visited  Feb.  5,  2002)  <http:// 
 www.  fcc.  gov/  Bureaus/  Common_  Carrier/  Reports/  FCC-  State_  Link/  SOCC/  00socc.  pdf>. 


 399  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  Third  Report  & 
 Order  &  Fourth  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  3696,  3853  (1999)  (Dark  Fiber  Order)  (  a  competitive  wholesale  market  for  alternative  network  elements  has  not  developed  for  dedicated  transport,  in  part 


 because  of  the  lack  of  ubiquitous  transport  alternatives.). 
 400  Dark  Fiber  Order,  15  FCC  Rcd  at  3772,  3376,  3785-  86  (  interoffice  transport),  3843-  45  (  we  modify  the 


 definition  of  dedicated  interoffice  transport  to  include  dark  fiber),  3852-  55. 
 401  Very  small  aperture  terminals  or  "  VSATs"  are  small  earth  stations  or  antennas  usually  designed  to  operate  in  the 


 Ku  satellite  band  that  are  installed  at  a  user  location  to  allow  two  way  communications  via  satellite.  In  addition  to  providing  point  to  multipoint  data  network  services  to  merchants  to  transmit  credit  card,  inventory  management  and 


 other  business  related  data,  VSATs  are  used  for  distance  training  and  high  speed  intranet  and  Internet  access. 
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 based  telephone  services.  402  As  we  reported  last  year,  cable  modem  technologies  rely  on  the  same  basic  network  architecture  used  for  many  years  to  provide  multichannel  video  service,  but 
 with  upgrades  and  enhancements  to  support  a  variety  of  advanced  services.  403  As  of  June  2001,  many  major  cable  multiple  system  operators  (MSOs)  had  nearly  completed  these  upgrades  on 
 their  systems,  with  approximately  70  percent  of  cable  systems  nationwide  at  capacities  of  750  MHz  or  higher.  404  In  the  last  Report,  we  noted  that  many  cable  systems  were  providing 
 asymmetric  high-  speed  cable  modem  services  (broadband  downstream  with  telephone  return  path  connections).  405  This  year,  substantial  progress  in  network  upgrades  has  allowed  cable 
 operators  to  provide  two-  way  service  to  the  vast  majority  of  cable  modem  ready  homes.  406 
 11.  Cable  systems  were  originally  built  to  provide  video  programming  in  one  direction, 
 from  the  network  to  the  subscriber.  407  These  systems  were  designed  to  send  the  same  content,  a  package  of  video  channels,  in  an  analog  signal  format  to  all  subscribers  uniformly.  408  Before 


 offering  high-  speed  Internet  and  other  two-  way  high-  speed  services,  most  cable  providers  upgrade  their  networks.  This  process  often  includes  extending  optical  fiber  closer  to  the  end-user 
 and  improving  system  quality  to  reduce  signal  leakage.  409  Through  this  upgrade  process, 
 402  Over  the  past  year,  the  cable  operators  have  proven  that  they  can  successfully  deploy  such  multiple  services.  See 
 Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  CS  Docket 
 No.  01-  129,  Eighth  Annual  Report,  FCC  01-  389  (2001  MVPD  Competition  Report). 
 403  See  Second  Report,  15  FCC  Rcd  at  20928-  20930.  As  noted  in  the  First  Report,  our  inclusion  of  cable  modem 


 technology  in  our  assessment  of  advanced  telecommunications  capability  does  not  implicate  any  determination  by  this  Commission  as  to  the  appropriate  regulatory  classification  of  cable  modem  services  under  the  Communications 


 Act.  See  First  Report,  14  FCC  Rcd  at  2407.  The  Commission  is  currently  considering  the  appropriate 
 classification  of  cable  modem  service  and  the  applicable  regulatory  framework  in  its  Inquiry  Concerning  High-Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities  (High-  Speed  Access  Inquiry),  GN  Docket  No.  00-  185, 


 Notice  of  Inquiry,  15  FCC  Rcd  19287  (2000). 
 404  See  NCTA  Comments  in  the  2001  MVPD  Competition  Report  at  32-  33.  Comcast  expects  that  by  year-  end  2001, 


 85  percent  of  its  customers  will  be  served  by  systems  with  bandwidth  of  750  MHz  or  higher.  Comcast  Comments  in  the  2001  MVPD  Competition  Report  at  13.  Cox  expects  that  by  year-  end  2001,  80  percent  of  its  cable  plant  in  15 


 of  its  largest  markets  will  be  at  a  bandwidth  of  750  MHz,  and  expects  that  by  the  end  of  2002,  80  percent  of  its 
 plant  nationwide  will  be  at  a  bandwidth  of  750  MHz.  Cox  Comments  in  the  High-  Speed  Access  Inquiry  at  2-  3. 
 405  See  Second  Report,  15  FCC  Rcd  at  20929. 


 406  See  NCTA  Comments  in  the  2001  MVPD  Competition  Report  at  26;  see  also  Comcast  Comments  in  the  2001 
 MVPD  Competition  Report  at  7;  CableLabs,  DOCSIS  Primer  (visited  Feb.  5,  2002) 
 <http://  www.  cablemodem.  com/  docsisprimer.  html  >. 
 407  Many  cable  systems  had  some  upstream  capability,  i.  e.  ability  for  the  subscriber  to  transmit  information  back 


 to  the  cable  operator  through  the  cable  system,  even  before  systems  were  upgraded  to  provide  cable  modem  service,  but  this  tended  to  be  for  simple,  user-  to-  system  messages,  such  as  ordering  pay-  per-  view  programs.  CableLabs, 


 DOCSIS  Primer  (visited  Feb.  5,  2002)  <http://  www.  cablemodem.  com/  docsisprimer.  html>. 
 408  Newer  cable  systems,  such  as  those  constructed  by  overbuilders,  generally  are  designed  to  provide  an  array  of 


 services,  including  advanced  services  such  as  cable  modem  service.  These  systems  typically  are  constructed  to  modern  specifications  and  can  provide  advanced  services  without  additional  upgrades.  See  Letter  from  Charles  A. 


 Rohe  and  D.  Anthony  Mastando,  Counsel,  Carolina  BroadBand,  Inc.  to  Magalie  Roman  Salas,  Secretary,  Federal  Communications  Commission,  WT  Docket  No.  99-  217,  CC  Docket  Nos.  96-  98,  88-  57,  CS  Docket  No.  95-  184,  MM 
 Docket  No.  92-  260  (filed  May  3,  2001). 
 409  Signal  leakage  can  result  in  either  lost  data  or  the  transmission  of  unusable  data.  Digital  signals  are  composed  of 


 discrete  packets  of  information  and  carry  error-  correcting  codes  that  can  regenerate  any  lost  data.  If  these  error-correcting  codes  are  lost  due  to  system  leaks,  the  packets  may  not  be  transmitted  accurately  or  may  be  re-  assembled 


 incorrectly  at  the  receiving  end.  Also,  repairing  or  replacing  cable  plant  to  prevent  signal  leakage  has  the  added  (continued....) 
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 cable  operators  typically  increase  the  systems  transmission  capacity  to  550  MHz  or  750  MHz,  which  allows  the  operator  greater  flexibility  in  allocating  bandwidth  for  two-  way  high-  speed 
 services  without  reducing  the  capacity  available  for  existing  video  services. 
 12.  Upgrading  a  system  for  high-  speed  Internet  service  typically  requires  installation  of 
 equipment  that  enables  the  transmission  of  digital  data  packets:  routers,  switches,  and  a  cable  modem  termination  system  (CMTS)  to  allow  the  high-  speed  transmission  of  data  over  the  cable 


 infrastructure  in  both  the  upstream  and  downstream  directions.  Without  such  equipment,  providers  typically  can  provide  high-  speed  service  only  in  the  downstream  direction  and  must 
 rely  on  a  telephone  line  return  path. 
 13.  Cable  operators  have  invested  in  major  improvements  or  system  upgrades  to  provide 
 cable  modem  service.  The  typical  upgrade  employs  a  hybrid  fiber-  coaxial  (HFC)  architecture.  Most  HFC  systems  utilize  fiber  between  the  cable  operators  offices  (the  headend)  and  the 


 neighborhood  nodes.  410  Between  the  nodes  and  the  individual  end-  user  homes,  signals  travel  over  traditional  coaxial  cable  infrastructure.  Part  of  the  cable  system,  typically  a  6  MHz  channel, 
 is  dedicated  to  cable  modem  service.  411  At  each  subscribers  home  or  office,  a  splitter  and  a  high-  speed  cable  modem  are  installed.  The  splitter  separates  signals  and  sends  them  to  different 
 cables  going  to  the  subscribers  television  and  computer.  The  cable  that  goes  to  the  computer  connects  with  a  high-  speed  cable  modem  and  an  Ethernet  card  that  are  attached  to  the  computer. 
 This  modem  and  card  enable  the  cable  system  to  communicate  with  the  subscribers  computer,  and  vice  versa.  412 


 14.  The  HFC  architecture  generally  increases  the  reliability  and  the  overall  bandwidth 
 available  for  cable  modem  service,  video  programming,  and  other  services.  Once  a  portion  of  the  cable  plant  is  upgraded  to  an  HFC  network,  new  services  are  available  to  all  homes  passed  by 


 the  upgraded  infrastructure.  This  contrasts  with  DSL  technologies,  where  variations  in  legacy  outside  plant  conditions  can  limit  access  to  certain  end-  users  even  in  upgraded  areas,  and  with 
 wireless  technologies  where  line-  of-  sight  requirements  may  be  a  factor. 
 15.  As  noted  above,  cable  modem  service  requires  special  equipment  at  the  headend  and 
 in  other  parts  of  the  cable  system.  The  CMTS,  usually  located  primarily  at  the  cable  headend,  manages  the  flow  of  data  between  cable  subscribers  and  the  Internet  and  other  equipment.  The 


 (...  continued  from  previous  page) 
 benefit  of  reducing  signal  ingress  into  the  cable  system  which  translates  to  less  error  correction  required  in  the  system. 


 410  A  headend  is  the  origination  point  for  signals  in  the  cable  system.  Each  local  service  area  is  typically  served 
 by  one  or  more  headends.  The  headend  has  parabolic  or  other  appropriately  shaped  antennas  for  receiving  satellite-delivered  program  signals,  high-  gain  directional  antennas  for  receiving  distant  TV  broadcast  signals,  directional 


 antennas  for  receiving  local  signals,  machines  for  playback  of  taped  programming  and  commercial  insertion,  and 
 studios  for  local  origination  and  community  access  programming.  Walter  Ciciora  at  al.,  Modern  Cable  Television  Technology  12  (1999).  The  headend  may  also  house  equipment  to  connect  the  cable  system  to  the  Internet.  Id. 


 411  See  Kinetic  Strategies,  Inc.,  Overview  of  Cable  Modem  Technology  and  Services  (visited  Feb.  5,  2002) 
 <http://  www.  cabledatacomnews.  com/  cmic/  cmic1.  html  >;  Dan  Costa,  Cable:  This  Technology  is  the  Simplest  and  Most  Popular  Option,  ZDNet,  Dec.  14,  2001  (visited  Feb.  5,  2002) 


 <http://  msn.  zdnet.  com/  msn/  zdnet/  story/  0,12461,2671130-  hud00025inmn1,00.  html>. 
 412  See  Transport  Diagram  (visited  Feb.  5,  2002)  <http://  www.  cabledatacomnews.  com/  cmic/  home.  html>. 
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 CMTS  enables  the  enhanced  two-  way  capabilities  essential  for  cable  modem  service.  413  File  servers  for  data  storage  within  the  cable  system  and  other  types  of  Internet-  related  servers, 
 switches,  and  high-  speed  routers  that  manage  data  flow  on  the  Internet  are  often  located  at  regional  data  centers.  414 


 16.  The  current  cable  modem  specification  is  DOCSIS  1.0,  which  accounts  for  practically 
 all  cable  modem  services,  with  the  exception  of  cable  operator-  specific,  proprietary  modem  services.  415  The  near  term  upgrade  is  DOCSIS  1.1,  which  is  DOCSIS  1.0  compatible.  There  are 


 presently  nine  different  DOCSIS  1.1  cable  modem  models  that  are  certified  by  CableLabs.  416  This  new  specification  will  require  additional  investments  by  cable  operators  for  headend 
 equipment  and  software  enhancements.  DOCSIS  1.1  delivers  some  Quality  of  Service  (QoS)  capabilities  to  support  bandwidth  management,  tiered  service  offerings  (i.  e.  different 
 transmission  speeds),  multimedia,  and  telephony;  enhanced  security;  increased  upstream  performance;  and  additional  features  that  make  data-  over-  cable  platforms  easier  to  manage.  417 


 17.  Recently,  CableLabs  announced  the  next  version  of  the  specification,  to  be  called 
 DOCSIS  2.0,  which  will  provide  further  enhancements  for  cable  modem  services  and  significantly  increase  cable  bandwidth  for  data  transmissions  without  requiring  any  physical 


 rebuilding  of  cable  networks.  418  For  example,  DOCSIS  2.0  will  enable  greater  transmission  capacity,  increased  transmission  reliability,  reduced  noise  impairments,  and  compatibility  with 
 DOCSIS  1.0  and  1.1  specifications  to  allow  simultaneous  operation  within  the  same  cable  network.  419  When  completed,  the  DOCSIS  2.0  specifications  will  allow  cable  operators  to 
 provide  improved  IP  telephony  and  videoconferencing  offerings  for  homes  and  businesses.  DOCSIS  2.0  is  likely  to  become  the  future  standard,  with  full  specifications  to  be  announced 
 soon  by  CableLabs.  PacketCable,  another  CableLabs  project,  is  intended  to  develop  interoperable  interface  specifications  for  delivering  advanced,  real-  time  multimedia  services  over 
 two-  way  cable  plant.  PacketCable  will  use  IP  technology  to  enable  a  wide  range  of  services, 


 413  See,  e.  g.,  Letter  from  Betsy  J.  Brady,  Esq.,  Vice  President,  Federal  Government  Affairs,  to  Magalie  Roman  Salas, 
 Secretary,  Federal  Communications  Commission,  GEN  Docket  No.  00-  185  (filed  December  18,  2001)  (See  AT&  T 
 Dec.  18,  2001  Ex  Parte). 
 414  Regional  Data  Centers,  sometimes  referred  to  in  whole  or  in  part  as  master  headends,  are  facilities  that 


 process,  store,  and  manage  data  transmitted  through  cable  modem  service.  Regional  data  centers  are  located 
 upstream  of  headends,  in  general,  and  may  serve  many  headends.  See,  e.  g.,  AT&  T  Dec.  18,  2001  Ex  Parte. 
 415  See  generally  Kinetic  Strategies,  Inc.,  DOCSIS  Cable  Modem  Vendors,  Cable  Datacom  News  (last  updated  Jan. 


 25,  2002)  (visited  Feb.  5,  2002)  <http://  www.  cabledatacomnews.  com/  cmic/  docsiscm.  html>. 
 416  See  CableLabs,  CableLabs  Certifies  Seven  More  DOCSIS  1.1  Modems,  Continuing  Cable  Data  Advances,  Press 


 Release,  Dec.  20,  2001  (visited  Feb.  5,  2002)  <http://  www.  cablelabs.  com/  news_  room/  PR/  01_  pr_  cw20_  122001.  html  >. 


 417  See  generally  CableLabs,  DOCSIS  Project  Primer  (visited  Feb.  5,  2002) 
 <http://  www.  cablemodem.  com/  docsisprimer.  html  >;  CableLabs,  Project  CableModem  FAQs  (visited  Feb.  5,  2002)  <http://  www.  cablemodem.  com/  FAQs.  html#  FAQ17>. 


 418  CableLabs,  CableLabs  Certifies  Two  DOCSIS  1.1  Modems  and  Qualifies  Two  CMTS,  Achieving  Breakthrough 
 on  Advanced  Devices,  Press  Release,  Sep.  27,  2001. 
 419  See  CableLabs,  CableLabs  Creating  Advanced  Modem  Spec  to  Enable  30  Mbps  in  Upstream,  Press  Release, 


 Aug.  31,  2001  (visited  Feb.  5,  2002)  <www.  cablelabs.  com/  news_  room/  PR/  01_  pr_  adv_  phy_  083101.  html>. 
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 including  IP  telephony,  multimedia  conferencing,  interactive  gaming  and  general  multimedia  applications.  420 
 18.  Cable  networks  transport  data  signals  over  infrastructure  that  serves  numerous  users 
 simultaneously,  i.  e.,  a  shared  network,  rather  than  providing  a  dedicated  link  or  local  loop  between  the  provider  and  each  home,  as  does  DSL  technology.  As  discussed  below,  the  shared 


 architecture  of  cable  networks  poses  certain  challenges  for  providers  that  seek  to  offer  high-speed  Internet  access  or  other  advanced  services  over  cable  infrastructure. 


 19.  In  addition  to  the  network  improvements  just  described,  a  cable  operator  must 
 establish  a  connection  to  the  Internet  in  order  to  provide  cable  modem  service.  Depending  on  network  topologies  and  business  arrangements  between  the  cable  operator  and  other  entities, 


 Internet  connectivity  to  the  cable  plant  can  be  accomplished  by  various  methods,  as  discussed  below  in  relation  to  business  models.  In  one  scenario,  the  cable  operator  provides  the  Internet 
 connectivity,  either  by  itself  or  in  conjunction  with  a  single  affiliated  or  unaffiliated  ISP.  In  a  second  scenario,  the  cable  operator  may  offer  more  than  one  brand  of  cable  modem  service,  in 
 effect  giving  subscribers  a  choice  of  various  ISPs.  In  this  model,  an  unaffiliated  ISP  delivers  its  content  and  services  over  the  cable  system  to  subscribers  through  one  of  two  different  methods: 
 1)  via  the  cable  operator's  (or  affiliated  ISP's)  own  Internet  transport  arrangements;  or  2)  via  a  direct  interconnection  agreement  between  the  cable  operator  (or  affiliated  ISP)  and  the 
 unaffiliated  ISP.  421 
 20.  Currently,  many  cable  systems  providing  high-  speed  data  services  offer  asymmetric 
 service,  as  the  great  majority  of  available  bandwidth  is  allocated  for  downstream  transmissions.  The  limited  remaining  bandwidth  available  for  the  return  path  results  in  lower  upstream  speeds. 


 Most  systems  upstream  capacity  appears  to  be  sufficient  to  support  current  consumer  demand  for  established  services  such  as  web  surfing.  In  some  instances,  however,  this  asymmetric 
 service  may  not  offer  sufficient  upstream  speed  to  qualify  under  our  definition  of  advanced  telecommunications  capability.  As  consumers  use  applications  with  higher  upstream 
 requirements  such  as  video  conferencing,  cable  operators  may  need  to  allocate  greater  network  capacity  for  upstream  transmission.  Technological  advances  under  development,  such  as 
 DOCSIS  1.1  and  2.0  and  PacketCable,  should  address  many  of  these  constraints. 
 21.  Under  optimal  conditions,  an  upgraded  cable  system  can  provide  maximum 
 downstream  speeds  of  27  Mbps  and  maximum  upstream  speeds  of  10  Mbps,  more  than  sufficient  to  qualify  as  advanced  telecommunications  capability.  422  In  practice,  however,  cable 


 transmission  speeds  typically  range  from  500  kbps  to  1.5  Mbps.  The  lower  speed  is  attributable  to  several  factors.  First,  because  of  the  shared  architecture  of  cable  networks,  the  bandwidth  -- 


 420  See  CableLabs  (visited  Feb.  5,  2002)  <http://  www.  packetcable.  com>.  See  also  2001  Video  Competition  Report 
 at  para.  195. 
 421  See  generally  Letter  from  Betsy  J.  Brady,  Esq.,  Vice  President,  Federal  Government  Affairs,  to  Magalie  Roman 


 Salas,  Secretary,  Federal  Communications  Commission,  GEN  Docket  No.  00-  185  (filed  Dec.  15,  2000)  (AT&  T  Dec.  15,  2000  Ex  Parte). 


 422  See  Kinetic  Strategies,  Inc.,  Overview  of  Cable  Modem  Technology  and  Services  (visited  Feb.  5,  2002) 
 <http://  www.  cabledatacomnews.  com/  cmic/  cmic1.  html  >;  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  CS  Docket  No.  99-  230,  Sixth  Annual  Report,  15  FCC  Rcd  978, 


 1004,  para.  56  (2000)  (1999  Video  Competition  Report).  In  most  cases,  however,  cable  operators  offer  a  maximum 
 theoretical  downstream  capacity  of  10  Mbps. 
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 and  consequently  the  speed  --  available  to  any  single  user  drops  as  the  number  of  simultaneously  active  users  increases.  423  Second,  a  systems  transmission  speed  may  be  affected  by  the 
 proportion  of  capacity  devoted  to  advanced  services.  Third,  congestion  on  the  Internet  itself  often  limits  the  speed  of  access  to  well  below  10  to  27  Mbps.  Given  these  current  limitations  on 
 system  throughput,  cable  operators  have  typically  offered  a  maximum  speed  available  rather  than  a  guaranteed  stable  speed  of  service. 


 22.  Subscribers  to  cable  modem  service  typically  receive  the  same  functions  they  could 
 obtain  through  narrowband  Internet  service,  including  personal  web  pages,  e-  mail  accounts,  access  to  news  groups,  and  unrestricted  ability  to  retrieve  information  from  the  World  Wide 


 Web,  though  cable  modems  allow  users  to  access  the  Internet  at  speeds  that  range  from  fifty  to  several  hundred  times  faster  than  telephone  dial-  up.  424  Subscribers  can  send  and  view  content 
 with  little  or  no  transmission  delay,  utilize  sophisticated  real-  time  applications,  and  view  streamed  video  content  at  a  higher  resolution  and  on  a  larger  portion  of  their  screens  than  is 
 available  via  narrowband. 
 23.  As  we  noted  in  our  last  Report,  high-  speed  cable  modem  service  is  primarily 
 available  to  the  residential  market,  rather  than  the  business  market.  425  Cable  networks  were  originally  deployed  to  provide  video  programming  and  other  programming  services  to  residences 


 throughout  the  United  States.  While  some  residences  are  located  in  areas  where  there  are  large  and  small  businesses  alike,  most  businesses  were  originally,  and  still  are,  not  wired  for  cable 
 service.  This  leaves  cable  operators  less  capable  of  providing  cable  modem  services  to  many  business  districts  without  additional  system  build-  outs.  In  addition,  cables  shared  network 
 characteristics  make  it  difficult  for  providers  using  currently  deployed  cable  modem  technology  to  guarantee  the  consistently  high  speeds  and  other  advanced  features  that  some  business 
 customers  require.  Moreover,  the  relatively  narrow  bandwidth  typically  allocated  to  upstream  transmission  renders  cable  unable,  again  using  currently  deployed  cable  modem  technology,  to 
 provide  upstream  speeds  and  symmetric  transmission  capabilities  sufficient  to  support  the  requirements  of  some  business  customers.  These  technical  constraints  may  be  alleviated  or 
 eliminated  as  DOCSIS  1.1  and  2.0  cable  modems  are  deployed,  and  advances  made  through  the  PacketCable  process  are  placed  in  commercial  use. 


 2.  DSL  and  other  LEC-  Provided  Services 
 24.  Since  1996,  local  telephone  carriers  have  offered  consumers  high-  speed  data  service 
 through  their  digital  subscriber  line  (DSL)  service  offerings.  With  the  addition  of  certain  electronics  to  the  telephone  line,  carriers  can  transform  the  copper  loop  that  already  provides 


 voice  service  into  a  conduit  for  high-  speed  data  traffic.  While  there  are  multiple  variations  of  DSL,  some  of  which  we  discuss  below,  most  DSL  offerings  share  certain  characteristics.  With 
 most  DSL  technologies  today,  a  high-  speed  signal  is  sent  from  the  end-  user's  terminal  through  the  last  100  feet  and  the  last  mile  (sometimes  a  few  miles)  consisting  of  the  copper  loop  until  it 
 reaches  a  Digital  Subscriber  Line  Access  Multiplexer  (DSLAM),  usually  located  in  the  carriers 
 423  See  1999  Video  Competition  Report,  15  FCC  Rcd  at  1004,  para.  56. 
 424  See  Comcast  Reply  in  the  2001  MVPD  Competition  Report  at  7;  see  also  Cox  Comments  in  the  High-  Speed 
 Access  Inquiry  at  10;  Cablevision  Systems  Corp.,  Optimum  Online  (visited  Feb.  5,  2002) 
 <http://  www.  optimumonline.  com>. 


 425  See  Second  Report,  15  FCC  Rcd  at  20930. 
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 central  office.  At  the  DSLAM,  the  end-  user's  signal  is  combined  with  the  signals  of  many  other  customers  and  forwarded  though  a  switch  to  middle  mile  facilities. 
 25.  The  most  common  form  of  DSL  used  by  residential  customers  is  asymmetric  DSL,  or 
 ADSL.  426  As  its  name  suggests,  ADSL  provides  speeds  in  one  direction  (usually  downstream)  that  are  greater  than  the  speeds  in  the  other  direction.  427  ADSL  permits  the  customer  to  have 


 both  conventional  voice  and  high-  speed  data  carried  on  the  same  line  simultaneously  because  it  segregates  the  high  frequency  data  traffic  from  the  voice  traffic.  This  segregation  allows 
 customers  to  have  an  always  on  connection  for  the  data  traffic  and  an  open  path  for  telephone  calls  over  a  single  line.  Thus  a  single  line  can  be  used  for  both  a  telephone  conversation  and  for 
 Internet  access  at  the  same  time.  A  survey  of  various  web  sites  indicates  that  prices  for  low-  end  ADSL  service  typically  range  from  $45  to  $59  per  month.  428  Faster  ADSL  services  ranged  from 
 $49  to  $99  per  month.  429  Installation  fees  ranged  from  free,  typically  where  customers  are  offered  DSL  in  a  box,  430  to  $250,  where  a  technician  visit  is  necessary  to  install  premises 
 equipment. 
 26.  In  contrast  to  ADSL,  symmetric  DSL  (SDSL)  provides  users  with  equal  speeds  in  the 
 downstream  and  upstream  path,  usually  in  excess  of  200  kbps.  Because  of  the  symmetrical  nature  of  SDSL,  it  is  well-  suited  to  applications  that  require  high-  speed  capacity  in  the  upstream 


 path,  such  as  videoconferencing.  Because  of  its  higher  capacity  needs,  SDSL  service  typically  requires  a  dedicated  copper  pair  for  its  high-  speed  data  transmissions.  The  price  of  SDSL 
 service  currently  ranges  from  $79  to  $149  per  month,  with  installation  costs  ranging  from  free  to  $875,  depending  on  the  transmission  speed  desired.  431 


 27.  DSL  service  is  subject  to  certain  limitations  that  currently  prevent  it  from  being 
 deployed  as  a  last  mile  facility  to  all  potential  end-  users.  First,  it  is  distance  sensitive.  Currently,  an  ADSL  customer  must  be  within  approximately  15,000  feet  of  the  Digital  Subscriber  Line 


 Access  Multiplexer  (DSLAM),  usually  located  in  the  carriers  central  office;  SDSL  customers  must  be  between  10,000  and  12,000  feet  of  the  central  office  depending  on  the  speed  of  the 
 service  in  question.  432  Eighty  percent  of  the  subscriber  loop  plant  falls  within  these  distance  limitations,  and  thus  is  capable  of  supporting  DSL  service,  but  this  factor  remains  an  impediment 
 to  DSL  deployment  in  more  sparsely  populated  and  remote  locations.  New  technologies  may  allow  DSL  deployment  at  substantially  greater  distances.  433  For  example,  GoDigital  Networks 
 recently  introduced  the  Xcel-  4A  ADSL  extender,  which  may  provide  ADSL  up  to  25  miles  from 
 426  In  using  the  acronym  ADSL,  we  are  referring  generally  to  DSL  service  that  is  asymmetric,  not  the  specific 
 protocol  ADSL. 
 427  We  note  that  some  residential  ADSL  offerings  provide  speeds  in  excess  of  200  kbps  in  only  the  downstream  path 


 with  a  slower  upstream  path  and  thus  do  not  meet  the  standard  for  advanced  telecommunications  capability. 
 428  Based  on  a  survey  by  Commission  staff  of  ADSL  service  offerings  posted  on  the  Internet. 


 429  Id. 
 430  DSL  in  a  box  is  a  form  of  ADSL  in  which  the  provider  sends  the  customer  filters  and  a  modem  that  the 
 customer  installs.  By  having  the  customer  install  these  filters,  the  provider  avoids  sending  a  technician  to  the 
 customers  premises,  thus  reducing  the  time  and  cost  associated  with  establishing  ADSL  service. 
 431  Based  on  a  survey  by  Commission  staff  of  SDSL  service  offering  posted  on  the  Internet. 


 432  As  distance  from  the  telephone  companys  central  office  decreases,  the  potential  data  rate  increases. 
 433  See  Donny  Jackson,  Shifting  Gears,  Telephony,  Jul.  2,  2001  at  60. 
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 the  DSLAM.  434  As  a  result,  extender  technologies  may  permit  rural  carriers  to  provide  DSL  services  to  additional  customers  that  are  not  within  the  current  reach  of  the  central  office. 
 28.  The  second  factor  limiting  the  deployment  of  DSL  to  some  potential  customers  is  the 
 presence  on  their  loops  of  load  coils  and  bridged  taps,  devices  that  were  used  to  enhance  the  quality  of  voice  traffic  over  the  copper.  While  they  improve  the  quality  of  voice  transmission, 


 these  devices  prevent  the  deployment  of  DSL  service  over  a  line  on  which  they  are  installed.  Thus,  in  contrast  to  an  upgraded  cable  network,  which  can  offer  upgraded  service  to  all  homes  it 
 passes,  LECs  must  condition  each  end-  users  line  by  removing  the  load  coils  and  bridged  taps  while  increasing  the  strength  of  the  signal  to  maintain  the  quality  of  the  lines  voice  traffic. 
 Moreover,  older  loops  or  loops  in  need  of  maintenance,  which  may  occur  in  poor  or  inner-  city  areas,  pose  additional  problems  for  the  deployment  of  DSL  service.  Frayed  insulation  or  poorly 
 spliced  loops  can  cause  signal  leakage,  which  can  result  in  poor  quality  transmission. 
 29.  A  third  factor  that  impedes  DSL  deployment  is  the  choice  by  some  incumbent  local 
 exchange  carriers  to  abandon  copper  wire  and  instead  deploy  Digital  Loop  Carrier  (DLC)  in  their  networks.  DSL  service  is  incompatible  with  most  currently  deployed  DLC  systems.  However,  it 


 appears  that  new  DLC  products  will  allow  DSL  providers  to  circumvent  this  limitation.  For  example,  an  ADSL  Digital  Line  Unit  Card  (ADLU  Card)  integrates  ADSL  and  Asynchronous 
 Transfer  Mode  (ATM)  capabilities  into  the  DLC  system  and  can  be  plugged  into  a  DLC  system  to  provided  advanced  services.  435  The  ADLU  card  provides  functionality  similar  to  a  DSLAM, 
 although  it  also  contains  voice  capabilities  and  a  spectrum  splitter  functionality. 
 3.  Overview  of  Other  LEC-  Provided  Wireline  Services 
 30.  In  addition  to  DSL  offerings,  many  local  exchange  carriers  offer  more  traditional 
 high-  speed,  circuit  switched  services  like  T1  lines,  which  have  been  available  for  some  time.  The  monthly  charge  for  T1  service  can  range  from  $450  to  $2000,  with  installation  cost  ranging 


 from  $750  to  $5500,  depending  on  the  transmission  speed  desired  and  equipment  purchased.  436  Additionally,  local  exchange  carriers  have  used  fiber  technology  for  many  years  for  their 
 interoffice  plant.  It  is  also  used  to  deliver  signals  at  speeds  in  excess  of  45  Mbps  directly  to  certain  large  business  customers.  Most  residential  and  smaller  business  customers  currently  do 
 not  need  the  transmission  speed  of  fiber,  and  the  cost  of  fiber  service  generally  makes  it  prohibitive  for  all  but  the  largest  users.  Several  fiber-  based  residential  architectures  have  been 
 devised;  437  however,  at  this  time,  the  high  cost  associated  with  deploying  this  technology  makes  it  economically  viable  only  in  new  or  densely  populated  residential  settings.  438  In  addition,  some 
 T1  lines  are  currently  being  replaced  by  HDSL  and  HDSL2  services.  439 


 434  We  note  that  this  may  require  a  dedicated  line. 
 435  See  For  Consent  to  Transfer  Control  of  Corporations  Holding  Commission  Licenses  and  Lines  Pursuant  to 
 Sections  214  and  310(  d)  of  the  Communications  Act  and  Parts,  5,  22,  24,  25,  63,  90,  95,  and  101  of  the  Commissions  Rules, 
 CC  Docket  No.  98-  141,  Second  Memorandum  Opinion  and  Order,  15  FCC  Rcd  17521  (2000). 
 436  Based  on  a  survey  by  Commission  staff  of  T1  service  offerings  posted  on  the  Internet. 


 437  See,  e.  g.,  Vince  Vittore,  Fiber  Hits  Home,  Telephony,  Mar.  12,  2001,  at  66  (As  part  of  a  pilot  program,  Huxley 
 Cooperative  Telephone  Cooperative  installed  fiber  into  six  new  homes  in  Huxley,  Iowa). 
 438  See,  e.  g.,  Jeff  Hecht,  Fiber  Links  Speed  Data  on  Local  Telephone  Networks,  Laser  Focus  World,  Aug.  1,  2001 


 (  Fiber  to  the  home  also  requires  a  costly  rebuild  of  the  entire  local  transmission  network.);  Evan  Bass,  FTTH  (continued....) 
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 4.  Terrestrial  Fixed  Wireless 
 31.  Wireless  services  and  technologies  have  the  potential  to  deliver  high-  speed  services 
 to  residential,  rural,  and  otherwise  underserved  areas  and  to  increase  competition  in  the  last  mile.  As  discussed  below,  terrestrial  fixed  wireless  technologies  may  offer  unique  advantages  and 


 quick-  to-  market  solutions  for  the  delivery  of  high-  speed  services  in  a  number  of  circumstances.  440  At  present,  however,  technical  limitations  have  constrained  the  level  and 
 breadth  of  their  overall  deployment  and  their  effectiveness  in  certain  settings.  Moreover,  capital  market  conditions  over  the  past  year  have  slowed  deployment.  Many  of  the  larger  carriers  have 
 exited  the  market  or  significantly  scaled  back  their  operations.  At  this  point,  terrestrial  fixed  wireless  services  have  been  deployed  to  a  lesser  extent  than  the  traditional  wired  services, 
 cable-  modem  and  DSL. 
 32.  In  a  terrestrial  fixed  wireless  system  that  provides  high-  speed  services  to  consumers, 
 a  provider  generally  attaches  to  a  customers  premises  a  radio  transmitter/  receiver  (transceiver)  that  communicates  with  the  providers  central  antenna  site.  The  central  antenna  site  then  acts  as 


 the  gateway  into  the  public  switched  telephone  network  or  the  Internet  for  these  transceivers.  The  radio  signals  that  travel  over  this  network  architecture  serve  as  a  substitute  for  the  copper 
 wire  or  cable  strand  that  connects  customers  to  the  network  in  traditional,  wired  technologies. 
 33.  Providers  of  terrestrial  fixed  wireless  (wireless)  services  typically  have  the  ability  to 
 deploy  their  networks  much  more  quickly  and  with  substantially  less  expense  than  is  required  to  build  a  network  capable  of  supporting  either  cable-  modem  or  DSL  service.  First,  wireless 


 networks  are  free  of  the  substantial  costs  associated  with  installing  and  maintaining  wires  that  run  to  a  customers  premises  making  it  potentially  well  suited  as  an  economic  alternative  to 
 wireline  technologies.  441  Second,  the  relative  ease  of  installation  of  this  technology  allows  wireless  providers  to  deploy  their  networks  much  more  quickly  than  is  possible  for  providers  that 
 must  actually  install  wires  leading  to  each  customers  premises.  This  permits  wireless  providers 
 (...  continued  from  previous  page)  Not  Ready  for  Prime  Time    Yet,  Fiber  Optics  News,  Oct.  15,  2001  (  the  technology  and  the  products  really  have 
 not  existed  to  offer  competitive  services  at  a  cost-  effective  price.). 
 439  See,  e.  g.,  DSL  Knowledge  Center,  HDSL2:  Advanced  HDSL  for  Flexible  Deployment  (visited  Feb.  5,  2002) 


 http://  www.  orckit.  com/  hdsl2.  html;  HDSL  Basics  (visited  Feb.  5,  2002)  <http://  www.  arcelect.  com/  High-  bit-rate_  Digital_  Subscriber_  Line-  HDSL.  htm>  (  High-  bit-  rate  Digital  Subscriber  Line  (HDSL)  technology  is  a 


 transparent  replacement  for  a  T-  1  repeatered  line  in  the  distribution  plant.);  HDSL  Basics  (visited  Feb.  5,  2002)  <http://  www.  acterna.  com/  downloads/  white_  papers/  hdsl_  tn.  pdf>  (Providing  T1  service  is  a  competitive  race,  and  High-bit- 
 rate  Digital  Subscriber  Line  (HDSL)  is  quickly  emerging  as  the  ideal  solution  to  remain  a  step  ahead.  Currently  touted  as  repeaterless  T1,  HDSL  enables  T1  service  to  travel  up  to  12,000  ft.  on  copper  cable  with-  out  regeneration.). 


 440  While  the  future  of  wireless  high-  speed  services  likely  will  include  mobile  service,  it  does  not  appear  from  our 
 recent  data  collection  that  any  providers  currently  are  offering  mobile  data  service  at  a  speed  that  comports  with  our  definition  of  high-  speed.  No  provider  that  met  our  250  high-  speed  line  (or  wireless  channel)  threshold  reported 


 delivering  high-  speed  service  over  mobile  wireless  technology.  Nor  do  industry  analysts  report  that  any  provider  is 
 offering  such  service.  Accordingly,  we  discuss  only  terrestrial  fixed  wireless  offerings  in  this  report. 
 441  These  savings  have  the  potential  to  make  wireless  technology  especially  well  suited  to  deployment  in  many  rural 


 areas,  where  substantial  distances  between  customers  may  be  cost-  prohibitive  for  wireline  technologies.  Wireless 
 technologies  may  also  serve  as  an  economic  alternative  in  urban  areas  where  consumers  are  not  otherwise  served  by  certain  forms  of  wireline  technologies.  For  example,  only  a  small  percentage  of  multi-  tenant  office  buildings  are 


 currently  served  by  fiber  networks.  Thus,  terrestrial  fixed  wireless  services  may  make  high-  speed  access  more 
 affordable  for  those  small  and  medium-  sized  businesses  for  which  direct  fiber  connections  remain  too  expensive. 
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 to  respond  rapidly  and  dynamically  to  developing  demand  for  advanced  telecommunications  capability.  Third,  the  architecture  of  a  wireless  network  allows  providers  to  roll  out  their 
 facilities  in  an  incremental  manner  more  closely  related  to  the  product  demand  they  encounter  than  cable  or  DSL.  442  This  incremental  build-  out  process  has  the  potential  to  allow  wireless 
 providers  to  avoid  much  of  the  up-  front  investment  that  traditional  wired  advanced  telecommunications  capability  providers  must  make. 


 34.  Although  wireless  services  can  generally  be  deployed  more  rapidly  and  at  lower  cost 
 than  comparable  wireline  services,  they  remain  subject  to  certain  technical  limitations  that  may  reduce  their  effectiveness  in  certain  areas  and  for  certain  purposes.  For  example,  in  addition  to 


 requiring  access  to  telecommunications  equipment  closets  and  any  necessary  in-  building  wiring,  wireless  providers  often  must  obtain  access  to  rooftops  for  the  placement  of  antennas.  This  can 
 become  particularly  problematic  in  the  case  of  multi-  tenant  buildings,  in  which  a  building  owner  may  resist  permitting  access.  Also,  many,  though  not  all,  terrestrial  fixed  wireless  technologies 
 are  subject  to  line-  of-  sight  restrictions.  Thus,  there  must  be  an  unobstructed  path  from  a  wireless  providers  antenna  to  the  customers  antenna  on  the  rooftop  of  a  building.  While  certain 
 advances  in  wireless  technology  may  help  to  overcome  this  limitation  in  the  future,  buildings,  topographical  features,  certain  adverse  weather  conditions,  and  even  vegetation  can  interfere 
 with  the  provision  of  service. 
 35.  While  physical  infrastructure  costs  of  wireless  networks  may  be  significantly  less 
 than  wireline  networks,  wireless  networks  require  access  to  spectrum.  Of  the  terrestrial  fixed  wireless  operators  providing  high-  speed  services  today,  some  use  unlicensed  spectrum,  some 


 obtained  free  spectrum  licenses,  and  others  obtained  spectrum  through  auctions.  443  New  wireless  and  satellite  services  are  increasingly  constrained  by  spectrum  scarcity  and  encumbrances,  444 
 which  may  result  in  substantial  additional  acquisition  costs  in  the  future. 
 36.  There  are  several  different  bands  of  spectrum  over  which  wireless  providers  have 
 offered  their  services.  The  characteristics  of  the  services,  their  means  of  deployment,  and  their  potential  technical  limitations  all  vary  somewhat  over  the  different  spectrum  bands. 


 Accordingly,  we  briefly  discuss  each  separately  below. 
 37.  The  Upperbands  (above  24  GHz).  The  technologies  that  have  been  deployed  in  the 
 upperband  spectrum  generally  have  the  ability  to  provide  data  rates  of  up  to  155  Mbps,  a  speed 


 442  A  traditional  wired  provider  often  will  install  the  network  infrastructure  in  an  entire  area  before  it  begins  to 
 market  its  service  in  that  area.  Thus,  a  cable  provider  will  upgrade  its  cable  plant  throughout  a  neighborhood  when  it  begins  to  offer  advanced  telecommunications  service  to  the  neighborhoods  residents  even  if  initial  subscription 


 rates  are  low.  Similarly,  a  DSL  provider  likely  will  make  certain  network  investments  in  an  area  where  it  intends  to  offer  service  before  it  signs  up  its  first  customer.  By  contrast,  once  a  wireless  provider  has  installed  its  antenna  in  an 
 area,  it  completes  the  last-  mile  connection  by  installing  an  on-  premises  transceiver  only  for  those  customers  who 
 have  actually  subscribed  to  its  service. 
 443  Spectrum  licenses  have  garnered  nearly  $34  billion  in  winning  bids  since  the  Commission  received  authority  to 


 auction  spectrum,  with  spectrum  capable  of  providing  high-  speed  terrestrial  services  receiving  bids  over  $1.2  billion. 
 FCC  Wireless  Telecommunications  Bureau  Auction  Summary,  Completed  Auctions  Summary  Table  (visited  Feb.  5,  2002)  <http://  wireless.  fcc.  gov/  auctions/  summary.  html#  completed>. 


 444  See  Principles  for  Reallocation  of  Spectrum  to  Encourage  the  Development  of  Telecommunications  Technologies 
 for  the  New  Millenium,  Policy  Statement,  14  FCC  Rcd  19868  (1999)  (Spectrum  Reallocation  Policy  Statement). 
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 adequate  to  support  a  host  of  multimedia  applications.  445  As  a  general  matter,  wireless  services  in  the  upperbands  may  suffer  signal  loss  in  adverse  weather  conditions.  However,  by  adjusting 
 factors  such  as  cell  size  and  transmission  power,  these  systems  can  be  engineered  to  the  standard  reliability  level  for  telecommunications  networks.  Fixed  wireless  technologies  operating  in  these 
 bands  have  relatively  small  cell  sizes,  with  an  average  cell  radius  of  between  three  and  five  miles.  Also,  since  upperband  signals  behave  more  like  visible  light  than  cellular  or  PCS  signals, 
 wireless  networks  deployed  in  these  spectrum  bands  require  a  clear  line  of  sight  between  transmitters  and  receivers.  Terrain,  buildings,  and  even  vegetation  may  interfere  with  the 
 provision  of  service. 
 38.  The  Lowerbands  (below  3  GHz).  MDS.  Multipoint  Distribution  Service  (MDS) 
 operators  provide  commercial  terrestrial  fixed  wireless  services  in  the  2  GHz  range.  446  The  MDS  spectrum  was  originally  used  for  one-  way  video  programming  services,  requiring  a  telephone 


 return  path  for  data  services,  until  the  Commission  modified  its  technical  rules  to  afford  licensees  flexibility  in  designing  systems  to  offer  two-  way  communication  services,  including  high-  speed 
 Internet  access.  447  MDS  spectrum  is  heavily  licensed  throughout  the  country,  with  several  licensees  already  providing  high-  speed  Internet  services  to  customers;  other  MDS  licensees  are 
 projecting  two-  way  operations  in  the  near  term.  448  In  a  rule  making  proceeding  to  examine  and  propose  frequency  bands  to  be  used  for  advanced  wireless  services,  including  third  generation 
 wireless,  the  Commission  recently  removed  the  2.5-  2.7  GHz  from  consideration  for  relocation,  and  added  a  mobile  allocation  to  provide  additional  flexibility  for  use  of  that  spectrum.  449 


 445  The  upperbands  of  spectrum  that  have  been  used  for  the  commercial  deployment  of  wireless  high-  speed  systems 
 generally  consist  of  three  different  spectrum  bands:  24  GHz  (formerly  known  as  Digital  Electronic  Messaging  Service  or  DEMS),  28  GHz  (Local  Multipoint  Distribution  Services  or  LMDS),  and  39  GHz  bands. 


 446  This  spectrum,  made  up  of  33  different  6  MHz  channels  in  the  2.1-  2.2  GHz  and  2.5-  2.7  GHz  spectrum  bands, 
 includes  MDS,  Multichannel  MDS  (MMDS)  and  Instructional  Television  Fixed  Service  (ITFS)  channels.  See  47  C.  F.  R.    21.900  et  seq.;  47  C.  F.  R.    74.901  et  seq.  In  a  two-  way  communication  system,  an  MDS  operator 


 generally  uses  the  MMDS  channels  and  leased  excess  capacity  on  the  ITFS  channels  in  the  2.5-  2.7  GHz  range  for 
 downstream  communications  and  it  uses  the  2.1-  2.2  GHz  band  for  upstream  communications  to  hub  receiving  facilities.  The  band  is  also  used  for  educational,  instructional  and  cultural  video  programming  and  other  services. 


 447  See  Amendment  of  Parts  21  and  74  to  Enable  Multipoint  Distribution  Service  and  Instructional  Television  Fixed 
 Service  Licensees  to  Engage  in  Fixed  Two-  Way  Transmissions,  Report  and  Order,  13  FCC  Rcd  19112  (1998),  recon., 
 14  FCC  Rcd  12764  (1999),  further  recon.,  15  FCC  Rcd  14566  (2000).  These  modified  rules  afford  licensees  flexibility  to  superchannelize  or  subchannelize  6  MHz-  wide  channels  to  form  wider  or  narrower  bandwidth 


 channels. 
 448  The  Commission  recently  undertook  a  study  of  the  2500-  2690  MHz  band,  issuing  reports  which  provide  detailed 


 information  regarding  the  roll-  out  of  two-  way  services  by  MDS  providers.  FCC  Staff  Report  issued  by  the  Office  of 
 Engineering  and  Technology,  Mass  Media  Bureau,  Wireless  Telecommunications  Bureau,  and  International  Bureau:  Spectrum  Study  of  the  2500-  2690  MHz  Band:  The  Potential  for  Accommodating  Third  Generation  Mobile 


 Systems,  Interim  Report,  ET  Docket  No.  00-  232,  DA  00-  2583,  rel.  Nov.  15,  2000;  Final  Report,  DA  01-  786,  rel. 
 March  30,  2001.  See  also  Annual  Report  and  Analysis  of  Competitive  Market  Conditions  with  Respect  to  Commercial  Mobile  Services,  Sixth  Report,  16  FCC  Rcd  13350,  App.  A-  20  (2001)  (Sixth  Competition  Report), 


 listing  29  MDS  operators  offering  Internet  access  at  speeds  ranging  from  256  kbps  to  11  Mbps. 
 449  Amendment  of  Part  2  of  the  Commissions  Rules  to  Allocate  Spectrum  Below  3  GHz  for  Mobile  and  Fixed 


 Services  to  Support  the  Introduction  of  New  Advanced  Wireless  Services,  including  Third  Generation  Wireless  Systems, 
 ET  Docket  No.  00-  258,  FCC  01-  256  (rel.  Sep.  24,  2001)  (New  Advanced  Wireless  Services  Report  and 
 Order). 
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 39.  MDS  transmissions  have  a  substantially  greater  radius  than  upperband  fixed  wireless 
 services,  generally  25  to  35  miles  versus  three  to  five  miles  for  upperband  services.  This  is  partly  because  MDS  signals  do  not  degrade  in  adverse  weather  conditions.  MDSs  larger  radius 


 makes  the  service  well  suited  for  not  only  urban  and  suburban  residential  customers,  but  also  customers  in  rural,  underserved,  and  unserved  areas,  where  the  larger  cell-  size  substantially 
 reduces  the  cost  of  providing  service.  450  MDS  typically  has  functioned  best  with  a  direct  line  of  sight  between  the  transmitter  and  the  receiver.  However,  recent  technological  developments  may 
 help  to  overcome  this  restriction.  451 
 40.  Wireless  Communications  Service  (2.3  GHz).  WorldCom  offers  MDS-  based  fixed 
 wireless  broadband  services  to  businesses  in  nine  markets,  452  however,  in  four  of  those  markets  it  is  reportedly  using  a  combination  of  MDS  and  WCS  453  spectrum  to  offer  these  services.  454 


 AT&  T  Wireless  had  also  been  using  WCS  licenses  for  its  Digital  Broadband  (formerly  called  Project  Angel)  terrestrial  fixed  wireless  service.  455  However,  in  October  2001,  AT&  T 


 450  Generally,  customers  of  Sprint  can  subscribe  to  its  high-  speed  MDS  service  for  $49.95  per  month,  or  $39.95  if 
 bundled  with  a  home  long-  distance  plan.  Sprint  to  Expand  Fixed  Wireless  Service  Area  in  Houston,  Jun.  26,  2001, 
 (visited  Feb.  5,  2002)  <http://  www3.  sprint.  com/  PR/  CDA/  PR_  CDA_  Press_  Releases_  Detail/  1,1579,2909,00.  html>.  Sprint  recently  announced  the  suspension  of  its  deployment  of  first  generation  two-  way  fixed  wireless  services,  but 


 stated  it  would  continue  to  provide  service  to  existing  first  generation  customers  and  video  service  customers. 
 Sprint  to  Terminate  ION  Efforts;  Announces  Additional  Actions  to  Improve  Competitive  Positioning  and  Reduce  Operating  Costs  in  FON  Group, 
 Oct.  17,  2001  (visited  Feb.  5,  2002)  <http://  www3.  sprint.  com/  PR/  CDA/  PR_  CDA_  Press_  Releases_  Detail/  1,1579,3921,00.  html>. 


 451  Several  equipment  manufacturers  are  continuing  to  advance  wireless  technology  in  this  area.  On  September  26, 
 2001,  the  Mass  Media  Bureau  granted  a  request  filed  by  Cisco  Systems,  Inc.  for  a  declaratory  ruling  on  the  use  of  Orthogonal  Frequency  Division  Multiplexing  (OFDM)  Modulation,  a  technology  which  allows  the  capture  of 


 signals  as  they  bounce  off  buildings  and  other  objects  and  redirects  the  signals  to  end-  user  transceivers.  NextNet  Wireless,  Inc.  has  developed  an  end-  to-  end  MDS  system  with  a  desktop  customer-  premises  unit  that  requires  no 
 rooftop  antenna  and  no  inside  wiring  connections.  See  NextNet  Wireless,  Inc.,  Products  &  Technology  (visited  Feb.  5,  2002)  <http://  www.  nextnetworks.  com/  products.  html  >.  IPWireless,  Inc.  has  developed  a  technology  that  will 
 allow  its  customers  to  utilize  modems  inside  buildings  under  non-  line-  of-  sight  conditions.  See  New  Advanced  Wireless  Services  Report  and  Order,  supra  at    16.  See  also  IPWireless,  Inc.,  Technology  (visited  Feb.  5,  2002) 
 <www.  ipwireless.  com/  tech_  over.  html  >.  Sprint  is  continuing  to  test  second  generation  fixed  wireless  technology 
 which  promises  to  reduce  or  eliminate  line-  of-  sight  restrictions,  provide  lower  installation  costs,  and  provide  voice  capability.  See  As  it  Cuts  back  on  fixed-  wireless  service,  Sprint  considers  using  spectrum  for  mobile  offerings,  TR 


 Daily,  Oct.  8,  2001. 
 452  Suzanne  King,  WorldCom  Brings  to  KC  its  Fixed  Wireless  Service,  The  Kansas  City  Star,  Nov.  13,  2001,  at  D15. 


 453  WCS  service  operates  on  the  2305-  2320  MHz  and  2345-  2360  MHz  bands. 
 454  See  Sixth  Competition  Report,  at  A-  12. 
 455  AT&  T  Wireless  had  also  used  its  broadband  PCS  licensees  to  offer  this  service  initially.  However,  prior  to 
 halting  the  service,  AT&  T  Wireless  had  converted  nearly  all  of  its  Digital  Broadband  customers  to  WCS  spectrum  in  order  to  free  up  its  broadband  PCS  spectrum  for  mobile  service.  AT&  T  Wireless  Exits  Fixed  Wireless,  Takes  $1.3 


 Billion  Charge,  Communications  Daily,  Oct.  24,  2001.  AT&  T  Wireless  reportedly  offered  Digital  Broadband  in 
 five  markets.  Blackwell  Project  Angel  Article;  Marcia  Martinek,  Angel  in  the  Outfield,  Wireless  Review,  Sep.  30,  2000,  available  in  2000  WL  7119396;  Elizabeth  Douglas,  Putting  Broadband  on  the  Air  Wireless  Technology  is 


 Speeding  the  Spread  of  Residential  Service,  Los  Angeles,  Oct.  19,  2000,  available  in  2000  WL  25909045.  The 
 service  gave  users  up  to  four  voice  lines,  unlimited  local  calling,  long  distance  calling  at  five  cents  per  minute  for  in-state  calls  and  seven  cents  per  minute  for  out-  of-  state  calls,  three  advanced  calling  features,  and  unlimited,  always-on 


 Internet  access  for  up  to  five  computers  with  downstream  speeds  of  up  to  512  kbps  and  upstream  speeds  of  128  kbps.  Blackwell  Project  Angel  Article;  AT&  T,  Digital  Broadband  Services  California  (visited  Apr.  4,  2001) 
 <http://  www.  iatt.  com/  local/  ca/  local/  local_  services.  html>.  Digital  Broadband  cost  AT&  T  Wireless  $700-$  750  per 
 customer  to  deploy,  and  about  two-  thirds  of  that  expense  is  for  end-  user  equipment.  Jeff  May,  Out  of  Thin  Air    (continued....) 
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 Wireless  announced  it  was  exiting  the  terrestrial  fixed  wireless  business  and  phasing  out  service  to  its  47,000  existing  customers.  456 
 41.  Unlicensed  Spectrum.  The  unlicensed  spectrum  that  is  currently  used  for  commercial 
 terrestrial  fixed  wireless  services  consists  of  26  megahertz  in  the  900  MHz  band,  83.5  megahertz  in  the  2.4  GHz  band,  and  300  megahertz  in  the  5  GHz  band.  457  Operators  can  use  these  bands 


 without  an  FCC  license  for  a  variety  of  radio  transmissions,  but  are  not  protected  from  interference  and  may  not  cause  interference  to  licensed  users  in  the  spectrum.  Unlicensed  fixed 
 applications  primarily  use  spread  spectrum  technology  for  long  range  transmissions  in  order  to  minimize  the  risk  of  interference  with  other  operators. 


 42.  Most  of  the  companies  that  use  unlicensed  spectrum  to  offer  Internet  access  are  local 
 and  regional  ISPs  that  offer  the  service  in  a  small  number  of  markets  each,  and  many  of  these  companies  offer  traditional  wireline  dial-  up  Internet  access  as  well.  Estimates  of  the  number  of 


 companies  using  unlicensed  spectrum  to  provide  Internet  access  vary.  Based  on  obtainable,  publicly-  available  information,  the  Commission  estimates  there  are  at  least  241  different 
 companies  using  unlicensed  spectrum  to  provide  high-  speed  terrestrial  fixed  wireless  Internet  access  in  approximately  503  different  counties.  458 


 43.  Most  unlicensed  operators  offer  Internet  access  speeds  ranging  from  384  kbps  to  15 
 Mbps,  with  some  advertising  speeds  as  high  as  100  Mbps.  Many  of  the  carriers  are  targeting  business  customers,  while  others  serve  both  businesses  and  residences.  Furthermore,  many 


 operators  offer  unlicensed  Internet  access  in  rural  and  underserved  areas.  459 


 (...  continued  from  previous  page)  AT&  Ts  Home-  Grown  Fixed  Wireless  Technology  Has  Yet  to  Bear  Fruit,  The  Star  Ledger,  Sep.  10,  2000, 
 available  in  2000  WL  26254641. 
 456  AT&  T  Wireless  Exits  Fixed  Wireless,  Takes  $1.3  Billion  Charge,  Communications  Daily,  Oct.  24,  2001.  AT&  T 


 has  stated  that  it  will  retain  the  WCS  licenses,  and  that  it  may  re-  purpose  tower  capacity  originally  designated  to  support  fixed  wireless  services  to  expansion  of  the  companys  mobile  capacity.  Id.  (citing  CFO  Joseph  McCabe.) 


 457  See  generally  47  C.  F.  R.  Part  15. 
 458  Approximately  143  million  people  (or  50  percent  of  the  U.  S.  population)  live  in  counties  with  at  least  unlicensed 
 fixed  wireless  Internet  provider.  This  analysis  is  based  on  publicly-  available  information,  such  as  news  articles  and 
 operators  press  releases,  SEC  filings,  and  web  sites.  Several  caveats  apply  to  this  data.  First,  in  order  to  be  considered  as  covering  a  county,  an  operator  need  only  be  offering  service  in  a  portion  of  that  county.  Second, 


 because  some  carriers  serve  small  and  remote  locations  and  because  unlicensed  operators  provide  service  without  a 
 license  from  the  Commission,  it  is  difficult  to  assess  precisely  who  is  operating  where.  Therefore,  the  analysis  may  not  include  certain  companies  that  do  not  make  the  information  on  their  fixed  wireless  offerings  easily  obtainable  or 


 publicly  available.  See  Sixth  Competition  Report  at  A-  12. 
 459  For  example,  Canyon  Country  Communications  offers  Internet  access  in  Page,  Arizona;  Planet  Connect  offers 


 fixed  wireless  service  in  Bristol,  Seymour,  Newport,  and  Greeneville,  Tennessee;  and  DATACentric  sells  the  service  in  Lufkin,  Conroe,  and  Bryan-  College  Station,  Texas.  Canyon  Country  Communications,  Page 


 Arizona's...  First  High-  Speed  Internet  Access  (visited  Feb.  5,  2002)  <http://  www.  canyoncountry.  net/>;  Planet 
 Connect,  Planet  Connect  Internet  (visited  Feb.  5,  2002)  <http://  www.  planetc.  com/  Wireless/  Locations/  Locations.  html  >;  DATACentric  Broadband  to  Provide  Wireless 


 Broadband  Connectivity  to  the  City  of  Lufkin,  News  Release,  DATACentric,  Oct.  17,  2001. 
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 44.  Unlicensed  spectrum  is  also  used  for  short-  range  data  transmissions  and  wireless 
 LAN/  WAN  connections.  460  Bluetooth  and  802.11b  are  two  short-  range  data  transmission  technology  standards  that  operate  using  unlicensed  spectrum.  Bluetooth  is  currently  being 


 integrated  into  numerous  electronic  devices,  such  as  mobile  phones,  handheld  devices,  and  personal  computers,  in  order  to  allow  users  to  transfer  data  among  the  devices  without  using 
 wires  or  cables.  802.11b  is  being  used  to  connect  multiple  computers  to  servers  in  wireless  LANs.  461 


 5.  Satellite  Service 
 45.  Satellite  service  provides  another  option  for  last  mile  facilities  with  its  own  set  of 
 unique  characteristics.  Two  companies,  StarBand  and  Hughes  Network  Systems,  which  provides  a  high-  speed  service  with  the  brand  name  DIRECTWAY,  now  provides  residential  satellite-based 


 last  mile  facilities  in  the  United  States.  Both  can  provide  a  service  in  which  both  the  downstream  and  upstream  signal  is  provided  by  satellite.  DIRECWAY  also  offers  a  service  in 
 which  the  downstream  path  is  provided  by  satellite  and  the  upstream  path  is  provided  by  a  standard  dial-  up  telephone  connection.  Even  when  both  downstream  and  upstream  signals  are 
 provided  by  satellite,  the  downstream  signals  for  current  residential  satellite  offerings  are  capable  of  providing  speeds  in  excess  of  200  kbps,  but  the  upstream  signals  are  generally  much  slower 
 and  therefore  do  not  meet  the  definition  of  advanced  telecommunications  capability.  462  Nonetheless,  satellite-  based  last  mile  facilities  can  provide  consumers  and  small  businesses  in 
 geographically  remote  and  sparsely  populated  areas  with  access  to  high-  speed  services  that  would  not  otherwise  be  available. 


 46.  High-  speed  satellite  service  is  currently  provided  to  both  residential  and  business 
 customers.  Much  of  the  current  business  use  is  for  high-  speed  service  and  data  communications  such  as  credit  card  verification  or  inventory  control.  Most  of  this  traffic  is  handled  under  private 


 contractual  arrangements  similar  to  private  line  service.  A  growing  number  of  business  customers  are  also  using  satellite  service  for  Internet  connections.  463 


 460  For  example,  MobileStar  Networking  Corp.  (MobileStar)  uses  unlicensed  spectrum  to  provide  WLAN  service  in 
 over  370  locations  across  the  United  States,  including  airports,  hotels,  restaurants,  and  multi-  tenant  office  buildings.  MobileStar,  Locations  (visited  Feb.  5,  2002)  <http://  www.  mobilestar.  net/  locations/  page5.  asp>.  Mobile 


 professionals  who  subscribe  to  MobileStars  service  can  bring  their  handheld  devices  and  laptop  computers  to  these  locations  and  obtain  high-  speed  Internet  access  without  attaching  a  cord  or  cable.  The  buildings  may  then  connect 
 to  the  Internet  using  wireline  technology. 
 461  See  Sixth  Competition  Report  at  77. 


 462  In  many  large  business  satellite-  based  offerings,  the  end-  users  terminal  (i.  e.,  satellite  dish)  is  capable  of  both 
 receiving  and  sending  data.  This  allows  for  downstream  and  upstream  speeds  that  exceed  200  kbps. 
 463  For  example,  Hughes  Network  Systems  announced  that  it  had  entered  into  an  agreement  to  provide  DIRECWAY 


 broadband  services  to  1,200  Wendy's  restaurants.  Its  press  release  also  states  that  Hughes  Network  Systems,  a  unit  of  Hughes  Electronics  Corporation,  is  the  world's  largest  provider  of  broadband  satellite  network  solutions  for 


 businesses  and  consumers,  with  approximately  500,000  systems  installed  in  more  than  85  countries."  See  Wendy's  International  Signs  With  Hughes  Network  Systems  for  Nationwide  Broadband  Connectivity  Via  DIRECWAY,  Press 
 Release,  Dec.  17,  2001,  (visited  Feb.  5,  2002)  <http://  www.  hns.  com/  corporate/  news/  pr/  pr9999487460000.  htm>. 
 Hughes  Network  Systems  also  announced  that  it  had  entered  into  agreement  with  AgriStar  to  provide  two-  way  high-speed  satellite  communications  services  for  the  agricultural  industry.  See  Hughes  and  AgriStar  Join  Forces  to 


 Provide  High-  Speed  Connectivity  for  Agriculture  Industry,  Press  Release,  Dec.  18,  2001  (visited  Feb.  5,  2002) 
 <http://  www.  hns.  com/  corporate/  news/  pr/  pr9999487460001.  htm>.  (continued....) 
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 Federal  Communications  Commission  FCC  02-  33 
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 47.  Hughes  originally  developed  a  service  called  DirecPC,  which  provided  high-  speed 
 service  in  the  downstream  direction  but  the  upstream  transmissions  used  a  conventional  telephone  dial-  up  connection.  464  Hughes  now  provides  a  broadband  service  named 


 DIRECWAY.  DIRECWAY  offers  two  types  of  options:  satellite  downstream  provision  of  data  and  the  return  upstream  path  by  telephone  line,  or  a  two  way  system  in  which  both  the 
 downstream  and  upstream  data  are  carried  over  satellite.  465  DIRECWAY  two-  way  satellite  systems  are  offered  through  Earthlink,  Pegasus,  and  local  rural  electric  or  telephone  cooperatives 
 and  independent  telephone  companies.  The  one-  way  satellite  service  with  the  telephone  line  return  path  is  offered  through  AOL  and  a  variety  of  other  companies  such  as  American  Satellite, 
 InfoDish,  Value  Electronics  and  Best  Buy.  466 
 48.  StarBand  Communications  Inc.,  which  began  operation  in  April  2000,  has  strategic 
 partnerships  with  Gilat  Satellite  Networks,  Microsoft  Corporation  and  EchoStar  Communications.  467  StarBand  provides  a  two-  way  always  on  high-  speed  satellite  Internet 


 connection.  According  to  StarBand,  downlink  speeds  may  be  up  to  500  Kbps  per  second  with  a  targeted  minimum  speed  in  excess  of  150  kbps.  468  Currently,  StarBands  web  site  does  not 
 specify  upload  speeds,  but  previously  it  indicated  that  upload  speeds  range  from  40  to  60  Kbps.  469  Service  is  available  virtually  everywhere  in  the  continental  United  States,  as  well  as 
 Alaska  and  Hawaii,  as  long  as  the  satellite  antenna  or  dish  has  a  clear  unobstructed  view  of  the  southern  sky.  470  StarBand  is  testing  plans  and  options  for  expanding  its  service  to  the  U.  S. 
 Virgin  islands,  Puerto  Rico,  and  Canada.  471  StarBand  is  offered  through  an  authorized  distribution  partner  and  professional  installation  by  a  certified  StarBand  installer  is  required.  The 
 suggested  retail  price  for  the  equipment  package  is  $499  plus  a  suggested  basic  standard  installation  charge  starting  at  $199.  Monthly  unlimited  service  fees  start  at  a  suggested  price  of 
 $69.99  per  month.  472 
 49.  Satellite-  based  last  mile  facilities  have  some  limitations.  Consumers  must  have  a 
 clear  line  of  sight  to  the  south  in  order  to  access  satellite-  based  services.  Areas  subject  to  extreme  rain  or  snow  may  have  difficulty  receiving  satellite  signals  in  those  conditions. 


 (...  continued  from  previous  page) 
 464  DirecPC  service  is  apparently  still  available.  Prices  range  from  $19.99/  month  without  using  their  ISP  and  25 
 hours  per  month  of  usage  (with  extra  hours  costing  $0.99/  hour)  to  $49.99/  month  for  unlimited  service  and  using  their  ISP.  See  the  DirecPC  System  for  your  home  (visited  Feb.  5,  2002) 


 <http://  www.  direcpc.  com/  athome/  serviceplanstxt.  html>. 
 465  See  DIRECWAY,  Frequently  Asked  Questions  (visited  Feb.  5,  2002) 


 <http://  www.  hns.  com/  direcway/  for_  home/  learn_  more/  faq.  htm.>. 
 466  See  DIRECWAY,  Getting  DIRECWAY  (visited  Feb.  5,  2002) 


 <http://  www.  hns.  com/  direcway/  for_  home/  how_  to_  get_  it/  getting_  direcway.  htm>. 
 467  See  Q&  A  StarBand  Facts  (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  faq/  starbandfacts.  htm>. 


 468  See  What  is  StarBand?  (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  whatis/  index.  htm>. 
 469  Id. 
 470  See  Q&  A  StarBand  Facts  (visited  Feb.  5,  2002)  <http://  www.  starband.  com/  faq/  starbandfacts.  htm>. 
 471  Id. 
 472  Id. 
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 Federal  Communications  Commission  FCC  02-  33 
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 D.  Last  100  Feet  Facilities 
 50.  The  last  100  feet  typically  refers  to  the  final  infrastructure  segment  from  the 
 demarcation  point  to  the  end-  users  terminal.  This  includes  in-  building  wiring,  local  area  networks  and  wireless  local  area  networks  and  there  appears  to  be  a  variety  of  wireline  and 


 wireless  options  for  constructing  these  facilities.  The  cost  of  some  of  these  facilities,  however,  may  be  a  significant  factor  in  the  deployment  of  advanced  telecommunication  capability, 
 especially  in  the  small  business  or  school  and  library  context.  Unlike  a  residential  setting  with  a  handful  of  users,  small  businesses  or  schools  and  libraries  may  have  multiple  users  accessing 
 advanced  services  simultaneously.  This  need  for  simultaneous  access  may  require  upgrades  to  the  existing  in-  building  wiring  and  other  last  100  feet  facilities,  which  may  have  been  originally 
 installed  only  with  enough  capacity  for  standard  voice  telephony  services.  In  addition,  access  to  last  100  feet  facilities  may  be  controlled  by  someone  other  than  the  end-  user,  such  as  the 
 landlord  of  a  multiple  tenant  dwelling.  473  This  also  may  create  access  barriers  for  these  facilities,  especially  for  competitors  of  the  incumbent  service  provider. 


 E.  Connection  Points 
 51.  In  the  preceding  discussion,  we  have  examined  the  various  components  of  the 
 network.  In  order  for  advanced  services  to  be  delivered  to  end-  users,  however,  these  components  must  interconnect  with  each  other  at  the  places  we  loosely  describe  as  connection 


 points  --  those  places  at  which  traffic  passes  between  the  various  components  of  networks.  High-  speed  networks  exchange  traffic  at  a  variety  of  different  places  and  in  a  variety  of  different 
 mechanisms.  For  example,  public  telephone  networks,  including  local,  long  distance  and  international  networks,  interconnect  at  Points  of  Presence  (POPs)  or  through  other 
 interconnection  arrangements.  Satellite  networks  exchange  traffic  with  terrestrial  networks.  National  Internet  service  providers  exchange  traffic  at  network  access  points  (NAPs), 
 Metropolitan  Area  Exchanges  (MAEs),  474  and  through  other  public  and  private  peering  and 
 473  The  Commission  is  currently  considering  whether  additional  measures  are  necessary  to  enhance  the  ability  of 
 service  providers  to  use  existing  cable  wiring  to  offer  traditional  and  advanced  services  to  residents  of  multiple  dwelling  units.  See  Telecommunications  Services  Inside  Wiring,  CS  Docket  No.  95-  184  and  MM  Docket  No.  92- 


 260,  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  3659  (1997). 
 474  See,  e.  g.,  Exchange  Point  Information  (visited  Feb.  5,  2002)  <www.  ep.  net>  (listing  55  Internet  exchange  points 


 in  North  America). 
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 Federal  Communications  Commission  FCC  02-  33 
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 transit  arrangements.  475  National  Internet  transport  providers  report  operating  commercial  exchange  points  in  over  200  cities  in  the  United  States  and  having  over  900  POPs  where  they 
 interconnect  with  regional  networks,  private  networks  and  other  providers.  As  usage  and  demand  increase,  network  operators  establish  additional  arrangements  for  the  exchange  of 
 traffic.  476 


 475  See,  e.  g.,  Architecture:  The  Internet:  What  is  it?  (visited  Feb.  5,  2002) 
 <http://  www.  ispworld.  com/  isp/  Architecture.  htm>. 
 476  In  response  to  Internet  congestion  and  delay,  content  creators,  service  providers  and  users  employ  different 


 strategies,  including  caching  and  web  hosting  server  site  selection.  Caching  is  the  practice  of  placing  copies  of  the  popular  content  nearer  to  the  users  on  web  servers  off  of  the  major  Internet  exchanges  or  in  major  cities.  Web 


 hosting  site  selection  permits  a  content  creator  to  locate  its  content  off  of  a  major  access  point  in  order  to  maximize  accessibility  to  their  content  while  minimizing  latency  and  intermediary  network  routing.  Both  these  strategies 
 minimize  the  impact  of  the  location  of  content  creator  on  the  accessibility  of  the  content  created. 
86
 Federal  Communications  Commission  FCC  02-  33 
 APPENDIX  C 
 COMMISSIONS  SUBSCRIBERSHIP  DATA  AS  OF  JUNE  30,  2001 
87
 High-  Speed  Services  for  Internet  Access:  Subscribership  as  of  June  30,  2001 
 Industry  Analysis  Division  Common  Carrier  Bureau 
 February  2002 


 This  report  is  available  for  reference  in  the  FCCs  Information  Center  at  445  12th  Street,  S.  W.,  Courtyard  Level.  Copies  may  be  purchased  by  calling  Qualex  International,  Portals  II,  445  12th  Street  S.  W.,  Room 
 CY-  B402,  Washington,  D.  C.  20554,  telephone  202-  863-  2893,  facsimile  202-  863-  2898,  or  via  e-  mail 
 qualexint@  aol.  com.  The  report  can  also  be  downloaded  from  the  FCC-  State  Link  Internet  site  at  www.  fcc.  gov/  ccb/  stats. 
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 1 
 High-  Speed  Services  for  Internet  Access:  Subscribership  as  of  June  30,  2001 
 Congress  directed  the  Commission  and  the  states,  in  section  706  of  the  Telecommunications  Act  of  1996,  to  encourage  deployment  of  advanced  telecommunications  capability  in  the  United  States  on  a 
 reasonable  and  timely  basis.  1  To  assist  in  its  evaluation  of  such  deployment,  the  Commission  instituted  a  formal  data  collection  program  to  gather  standardized  information  about  subscribership  to  high-  speed 
 services,  including  advanced  services,  from  wireline  telephone  companies,  cable  providers,  terrestrial  wireless  providers,  satellite  providers,  and  any  other  facilities-  based  providers  of  advanced 
 telecommunications  capability.  2 
 We  summarize  here  information  from  the  fourth  data  collection,  thereby  presenting  a  snapshot  of  subscribership  as  of  June  30,  2001.  3  Subscribership  to  high-  speed  services  for  Internet  access 
 increased  by  36%  during  the  first  half  of  the  year  2001,  to  a  total  of  9.6  million  lines  in  service.  The  presence  of  high-  speed  service  subscribers  was  reported  in  fifty  states,  the  District  of  Columbia,  Puerto 
 Rico,  and  the  Virgin  Islands,  and  in  78%  of  the  zip  codes  in  the  United  States. 
 Before  presenting  the  most  recent  information  in  some  detail,  a  brief  description  of  the  Commissions  data  collection  program  is  in  order  to  enable  the  reader  to  better  understand  how  the  nationwide 
 information  presented  here  may  compare  to  similar  information  derived  from  other  sources.  First,  a  facilities-  based  provider  of  high-  speed  service  lines  (or  wireless  channels)  in  a  given  state  reports  to  the 
 Commission  basic  information  about  its  service  offerings  and  customers  if  the  provider  has  at  least  250 


 1  See  706,  Pub.  L.  104-  104,  Title  VII,  Feb.  8,  1996,  110  Stat.  153,  reproduced  in  the  notes  under  47 
 U.  S.  C.  157.  We  define  services  as  high-  speed  that  provide  the  subscriber  with  transmissions  at  a  speed  in  excess  of  200  kilobits  per  second  (kbps)  in  at  least  one  direction.  Advanced  services,  which 


 provide  the  subscriber  with  transmission  speeds  in  excess  of  200  kbps  in  each  direction,  are  a  subset  of  high-  speed  services. 


 2  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Report  and  Order,  15  FCC 
 Rcd  7717  (2000)  (Data  Gathering  Order).  During  this  data  gathering  program,  qualifying  providers  file  FCC  Form  477  each  year  on  March  1  (reporting  data  for  the  preceding  December  31)  and  September  1 


 (reporting  data  for  June  30  of  the  same  year).  An  updated  FCC  Form  477,  and  Instructions  for  that  particular  form,  for  each  specific  round  of  the  data  collection  may  be  downloaded  from  the  FCC  Forms 
 website  at  <www.  fcc.  gov/  formpage.  html>.  The  formal  program  followed  several  attempts  by  the  Common  Carrier  Bureau  to  collect  information  on  a  voluntary  basis.  See  Local  Competition  and 
 Broadband  Reporting,  CC  Docket  No.  99-  301,  Notice  of  Proposed  Rulemaking,  14  FCC  Rcd  18106  (1999). 


 3  Results  from  the  first  data  collection,  in  which  providers  reported  numbers  of  subscribers  to  high-speed 
 services  at  the  end  of  1999,  were  presented  in  the  Commissions  second  report  to  Congress  on  advanced  telecommunications  capability.  See  Deployment  of  Advanced  Telecommunications 


 Capability  to  All  Americans  in  a  Reasonable  and  Timely  Fashion,  CC  Docket  No.  98-  146,  Second  Report  (rel.  Aug.  21,  2000),  available  at  <www.  fcc.  gov/  broadband>.  (In  the  report,  the  Commissions 
 data  collection  program  is  referred  to  as  the  Broadband  Survey.)  Results  from  the  second  and  third  data  collections  appear  in  reports  titled  High-  Speed  Services  for  Internet  Access,  available  at 
 <www.  fcc.  gov/  ccb/  stats>. 
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 2 
 such  lines  in  service  in  that  state.  While  providers  not  meeting  the  reporting  threshold  may  provide  information  on  a  voluntary  basis,  as  some  have  done,  it  is  likely  that  not  all  such  providers  have  reported 
 data.  4  In  particular,  we  do  not  know  how  comprehensively  small  providers,  many  of  which  serve  rural  areas  with  relatively  small  populations,  are  represented  in  the  data  summarized  here.  Second,  lines  (or 
 wireless  channels)  that  do  not  meet  the  Commissions  definition  of  high-  speed  (i.  e.,  delivering  transmissions  to  the  subscriber  at  a  speed  in  excess  of  200  kbps  in  at  least  one  direction)  are  not 
 reported.  Some  asymmetric  digital  subscriber  line  (ADSL)  services  and  Integrated  Services  Digital  Network  (ISDN)  services  provided  by  telephone  companies  and  some  services  that  connect 
 subscribers  to  the  Internet  over  cable  systems  do  not  meet  this  criterion,  but  may  nevertheless  meet  the  needs  of  the  subscribers  who  select  them. 


 We  expect  providers  to  report  data  more  accurately  as  they  gain  experience  with  the  program.  We  also  expect  that  there  may  be  some  need  for  further  clarification  and  adjustment  of  the  reporting 
 system.  5  Nevertheless,  based  on  the  information  now  available,  the  following  broad  conclusions  emerge: 


   Subscribership  to  high-  speed  services  increased  by  36%  during  the  first  half  of  the  year  2001,  to  a  total  of  9.6  million  lines  (or  wireless  channels)  in  service.  The  rate  of  growth  during  the  last  half  of 
 the  year  2000  was  62%.  6  See  Table  1. 
   Considering  services  according  to  the  technology  deployed  in  the  last  few  feet  to  the  subscribers  premises,  high-  speed  lines  in  service  over  coaxial  cable  systems  (cable  modem  service)  remained 
 the  most  numerous,  increasing  45%  during  the  first  half  of  the  year  2001,  to  5.2  million  lines.  High-speed  ADSL  lines  in  service  increased  36%,  to  2.7  million  lines.  7 


 4  We  received  76  state-  specific  voluntary  submissions  (made  by  38  holding  companies)  in  the  first  FCC 
 Form  477  filing,  81  voluntary  submissions  (made  by  35  holding  companies)  in  the  second  filing,  64  voluntary  submissions  (made  by  41  holding  companies)  in  the  third  filing,  and  64  voluntary  submissions 


 (made  by  41  holding  companies)  in  the  fourth  filing.  High-  speed  lines  reported  in  voluntary  submissions  in  the  fourth  filing  represent  less  than  0.1%  of  total  high-  speed  lines  reported. 


 5  The  Commission  has  requested  comments  on  whether  various  modifications  should  be  made  to  this 
 data  collection.  See  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Second  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  2072  (rel.  Jan.  19,  2001). 


 6  The  National  Bureau  of  Economic  Research  dates  the  current  U.  S.  recession  from  March,  2001. 
 Starting  about  a  year  earlier,  facilities-  based  providers  of  high-  speed  services  --  particularly  non-  incumbent  providers  --  found  it  increasingly  difficult  to  raise  capital. 


 7  Providers  are  instructed  to  report  a  high-  speed  subscriber  in  the  (mutually  exclusive)  technology 
 category  that  characterizes  the  last  few  feet  of  distribution  plant  to  the  subscribers  premises,  e.  g.,  coaxial  cable  in  the  case  of  the  hybrid  fiber-  coax  (HFC)  architecture  of  upgraded  cable  systems.  As  noted  above, 


 ADSL  services  that  do  not  deliver  over  200  kbps  in  at  least  one  direction  are  not  included  in  the  data  reported  here.  Symmetric  DSL  services  at  speeds  exceeding  200  kbps  are  included  in  the  other 
 wireline  category  because  they  are  typically  used  to  provide  data  services  that  are  functionally  equivalent  to  a  T1  and  other  data  services  that  wireline  telephone  companies  have  offered  to  business  customers  for 
 some  time. 
90
 3 
   Reported  high-  speed  connections  to  end-  user  customers  by  means  of  satellite  or  fixed  wireless  technologies  increased  at  the  fastest  rate,  73%,  during  the  first  half  of  the  year  2001,  to  0.2  million. 
 Reported  fiber  optic  connections  to  end-  user  customer  premises  increased  by  21%,  to  0.5  million.  8 
   Subscribership  to  the  subset  of  high-  speed  services  that  the  Commission  defines  as  advanced  services  (i.  e.,  delivering  to  subscribers  transmission  speeds  in  excess  of  200  kbps  in  each  direction) 
 increased  by  38%  during  the  first  half  of  the  year  2001,  to  a  total  of  5.9  million  lines  (or  wireless  channels)  in  service.  Advanced  services  lines  provided  by  means  of  ADSL  technology  increased  by 
 48%,  and  advanced  services  lines  provided  over  coaxial  cable  systems  increased  by  52%.  See  Table  2. 


   As  of  June  30,  2001,  there  were  7.8  million  residential  and  small  business  subscribers  to  high-  speed  services.  By  contrast,  there  were  approximately  5.2  million  such  subscribers  six  months  earlier,  and 
 about  3.2  million  a  year  earlier.  See  Table  3. 
   Of  the  7.8  million  high-  speed  lines  in  service  to  residential  and  small  business  subscribers  at  the  end  of  June  2001,  we  estimate  that  4.3  million  lines  also  met  the  Commissions  definition  of  advanced 
 services.  See  Table  4. 
   Among  entities  that  reported  facilities-  based  ADSL  high-  speed  lines  in  service  as  of  June  30,  2001,  about  93%  of  such  lines  were  reported  by  incumbent  local  exchange  carriers  (ILECs).  See  Table 
 5. 
   Providers  of  high-  speed  services  over  coaxial  cable  systems  report  serving  subscribers  in  49  states  and  the  District  of  Columbia.  Providers  of  high-  speed  ADSL  services  report  serving  subscribers  in 
 50  states,  the  District  of  Columbia,  Puerto  Rico,  and  the  Virgin  Islands,  as  do  providers  who  use  wireline  technologies  other  than  ADSL,  or  who  use  optical  carrier  (i.  e.,  fiber),  satellite,  or  fixed 
 wireless  technologies  in  the  last  few  feet  to  the  subscribers  premises.  9  See  Table  6. 
   The  Commissions  data  collection  program  uniquely  gathers  from  providers  information  about  the  number  of  high-  speed  lines  in  service  in  individual  states,  in  total  and  by  technology  deployed  in  the 
 last  few  feet  to  the  subscribers  premises.  Relatively  large  numbers  of  total  high-  speed  lines  in  service  are  associated  with  the  more  populous  states.  The  most  populous  state,  California,  has  the 
 largest  reported  number  of  high-  speed  lines.  The  second,  third,  and  fourth  largest  numbers  of  high-speed  lines  are  reported  for  New  York,  Florida,  and  Texas,  which  are  the  third,  fourth,  and  second 
 most  populous  states,  respectively.  See  Table  7. 


 8  Inconsistencies  in  reporting  data  in  these  technology  categories  over  the  course  of  the  first  three  data 
 collections  make  comparison  of  growth  rates  problematic. 
 9  Information  about  providers  of  high-  speed  services  other  than  ADSL  and  cable  modem  is  reported  in 


 a  single  category,  for  the  individual  states,  to  honor  requests  for  nondisclosure  of  information  that  reporting  entities  assert  is  competitively  sensitive.  In  the  Data  Gathering  Order,  the  Commission  stated  it  would 


 publish  high-  speed  data  only  once  it  has  been  aggregated  in  a  manner  that  does  not  reveal  individual  company  data.  See  Data  Gathering  Order,  15  FCC  Rcd  7760. 
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 4 
   Reporting  entities  estimate  the  percentage  of  their  high-  speed  lines  in  service  that  connect  to  residential  and  small  business  end-  user  customers  (as  opposed  to  connecting  to  medium  and  large 
 business,  institutional,  or  government  end-  user  customers).  10  These  percentages  allow  us  to  derive  approximate  numbers  of  residential  and  small-  business  high-  speed  lines  in  service  by  state.  See 
 Table  8. 
   The  Commissions  data  collection  program  also  requires  service  providers  to  identify  each  zip  code  in  which  the  provider  has  at  least  one  high-  speed  subscriber.  As  of  June  30,  2001,  subscribers  to 
 high-  speed  services  were  reported  in  78%  of  the  nations  zip  codes.  Multiple  providers  reported  having  subscribers  in  58%  of  the  nations  zip  codes.  11  See  Table  9. 


   Our  analysis  indicates  that  97%  of  the  countrys  population  lives  in  the  78%  of  zip  codes  where  a  provider  reports  having  at  least  one  high-  speed  service  subscriber.  12  Moreover,  numerous 
 competing  providers  report  serving  high-  speed  subscribers  in  the  major  population  centers  of  the  country.  See  the  map  that  follows  Table  9. 


   States  vary  widely  with  respect  to  the  percentage  of  zip  codes  in  the  state  in  which  no  high-  speed  lines  are  reported  to  be  in  service.  See  Table  10. 
   High  population  density  has  a  positive  correlation  with  reports  that  high-  speed  subscribers  are  present,  and  low  population  density  has  a  negative  correlation.  For  example,  as  of  June  30,  2001, 
 high-  speed  subscribers  are  reported  to  be  present  in  97%  of  the  most  densely  populated  zip  codes  and  in  49%  of  zip  codes  with  the  lowest  population  densities.  13  However,  the  comparable  figure  for 
 the  least  dense  zip  codes  was  39%  six  months  earlier.  See  Table  11. 


 10  End-  user  customers  use  the  high-  speed  services  for  their  own  purposes  and  do  not  resell  them  to  other 
 entities.  For  purposes  of  the  FCC  Form  477  data  collection,  Internet  Service  Providers  (ISPs)  are  not  end-  user  customers.  Reporting  entities  are  directed  to  consider  a  line  as  being  provided  to  an  end-  user 


 customer  in  the  residential  and  small  business  category  if  that  customer  orders  high-  speed  service  of  a  type  (e.  g.,  speeds  in  the  downstream  (from  the  Internet  to  the  end  user)  and  upstream  (from  the  end  user 
 to  the  Internet)  directions)  that  is  normally  associated  with  residential  customers. 
 11  Lists  of  zip  codes  with  number  of  service  providers  as  reported  in  the  FCC  Form  477  filings  are  made 


 available  at  <www.  fcc.  gov/  ccb/  stats>  in  a  format  that  honors  requests  for  nondisclosure  of  information  the  reporting  entities  assert  is  competitively  sensitive. 


 12  Historical  zip  code  data  have  been  revised  following  staff  review  of  reporting  methodologies  with  a 
 number  of  reporting  entities.  Some  inconsistencies  of  reporting  methodology  among  reporting  periods  and  among  reporting  entities  remain. 


 13  For  this  comparison,  we  consider  the  most  densely  populated  zip  codes  to  be  those  with  more  than  268 
 persons  per  square  mile  (the  top  three  deciles),  and  the  least  densely  populated  zip  codes  to  be  those  with  fewer  than  25  persons  per  square  mile  (the  bottom  three  deciles). 
92
 5 
   High  median  family  income  also  has  a  positive  correlation  with  reports  that  high-  speed  subscribers  are  present.  In  the  top  one-  tenth  of  zip  codes  ranked  by  median  family  income,  high-  speed 
 subscribers  are  reported  in  96%  of  zip  codes.  By  contrast,  high-  speed  subscribers  are  reported  in  59%  of  zip  codes  with  the  lowest  median  family  income,  compared  to  55%  six  months  earlier.  See 
 Table  12. 
 As  other  information  from  the  Commissions  data  collection  program  (FCC  Form  477)  becomes  available,  it  will  be  included  in  future  reports  on  the  deployment  of  advanced  telecommunications 
 capability  and  in  publications  such  as  this  one. 
 We  invite  users  of  this  information  to  provide  suggestions  for  improved  data  collection  and  analysis  by: 
   Using  the  attached  customer  response  form,    E-  mailing  comments  to  eburton@  fcc.  gov, 
   Calling  the  Industry  Analysis  Division  at  (202)  418-  0940,  or    Participating  in  any  formal  proceedings  undertaken  by  the  Commission  to  solicit  comments  for 
 improvement  of  FCC  Form  477. 
93
 Types  of  Technology  2/  December  June  December  June 
 1999  2000  2000  2001 


 ADSL  369,792  951,583  1,977,101  2,693,834  108  %  36  % 
 Other  Wireline  609,909  758,594  1,021,291  1,088,066  35  7 
 Coaxial  Cable  1,411,977  2,284,491  3,582,874  5,184,141  57  45 
 Fiber  312,204  307,151  376,203  455,593  22  21 
 Satellite  or  Fixed  Wireless  50,404  65,615  112,405  194,707  71  73 


 Total  Lines  2,754,286  4,367,434  7,069,874  9,616,341  62  %  36  % 


 Types  of  Technology  2/  December  June  December  June 
 1999  2000  2000  2001 


 ADSL  185,950  326,816  675,366  998,883  107  %  48  % 
 Other  Wireline  609,909  758,594  1,021,291  1,088,066  35  7 
 Coaxial  Cable  877,465  1,469,130  2,193,609  3,329,976  49  52 
 Fiber  307,315  301,143  376,197  455,549  25  21 
 Satellite  or  Fixed  Wireless  7,816  3,649  26,906  73,476  NM  173 


 Total  Lines  1,988,455  2,859,332  4,293,369  5,945,950  50  %  38  % 


 Jun  2000  -  Dec  2000  -Jun 
 2000  -  Dec  2000  - 
 Dec  2000  Jun  2001 
 High-  Speed  Lines  1/ 
 Table  1 


 Dec  2000  Jun  2001 
 Percent  Change 
 (Over  200  kbps  in  Both  Directions) 
 Advanced  Services  Lines  1/ 
 Table  2 


 (Over  200  kbps  in  at  Least  One  Direction) 
 Percent  Change 


 NM  -  Not  meaningful  due  to  inconsistencies  in  reported  data. 
 2/  The  mutually  exclusive  types  of  technology  are,  respectively:  Asymmetric  digital  subscriber  line  (ADSL)  technologies, 
 which  provide  speeds  in  one  direction  greater  than  speeds  in  the  other  direction;  wireline  technologies  "other"  than  ADSL, 
 including  traditional  telephone  company  high-  speed  services  and  symmetric  DSL  services  that  provide  equivalent  functionality; 
 coaxial  cable,  including  the  typical  hybrid  fiber-  coax  (HFC)  architecture  of  upgraded  cable  TV  systems;  optical  fiber  to  the 
 subscriber's  premises  (e.  g.,  Fiber-  to-  the-  Home,  or  FTTH);  and  satellite  and  (terrestrial)  fixed  wireless  systems,  which  use  radio 
 spectrum  to  communicate  with  a  radio  transmitter  at  the  subscriber's  premises. 


 1/  Some  previously  published  data  have  been  revised. 
94
 Types  of  Technology  2/  December  June  December  June 
 1999  2000  2000  2001 


 ADSL  291,757  772,272  1,594,879  2,490,740  107  %  56  % 
 Other  Wireline  46,856  111,490  176,520  138,307  NM  NM 
 Coaxial  Cable  1,402,394  2,215,259  3,294,546  4,998,540  49  52 
 Fiber  1,023  325  1,994  2,623  NM  NM 
 Satellite  or  Fixed  Wireless  50,189  64,320  102,432  182,165  59  78 


 Total  Lines  1,792,219  3,163,666  5,170,371  7,812,375  63  %  51  % 


 Types  of  Technology  2/  December  June  December  June 
 1999  2000  2000  2001 


 ADSL  116,994  195,324  393,246  916,364  101  %  133  % 
 Other  Wireline  46,856  111,490  176,520  138,307  NM  NM 
 Coaxial  Cable  872,024  1,401,434  2,177,328  3,146,953  55  45 
 Fiber  138  325  1,992  2,617  NM  NM 
 Satellite  or  Fixed  Wireless  7,682  2,916  17,043  60,988  NM  NM 


 Total  Lines  1,043,694  1,711,488  2,766,130  4,265,229  62  %  54  % 
 Note:  Residential  and  small  business  advanced  services  lines  are  estimated  based  on  data  from  FCC  Form  477. 


 Jun  2000  -Dec 
 2000 
 Dec  2000  -Jun 
 2001 


 Residential  and  Small  Business  High-  Speed  Lines  1/ 
 Table  3 


 Percent  Change 
 (Over  200  kbps  in  at  Least  One  Direction) 


 Table  4 
 Residential  and  Small  Business  Advanced  Services  Lines  (Over  200  kbps  in  Both  Directions) 


 Percent  Change 


 NM  -  Not  meaningful  due  to  inconsistencies  in  reported  data. 
 2/  The  mutually  exclusive  types  of  technology  are,  respectively:  Asymmetric  digital  subscriber  line  (ADSL)  technologies, 
 which  provide  speeds  in  one  direction  greater  than  speeds  in  the  other  direction;  wireline  technologies  "other"  than  ADSL, 
 including  traditional  telephone  company  high-  speed  services  and  symmetric  DSL  services  that  provide  equivalent 
 functionality;  coaxial  cable,  including  the  typical  hybrid  fiber-  coax  (HFC)  architecture  of  upgraded  cable  TV  systems;  optical 
 fiber  to  the  subscriber's  premises  (e.  g.,  Fiber-  to-  the-  Home,  or  FTTH);  and  satellite  and  (terrestrial)  fixed  wireless  systems, 
 which  use  radio  spectrum  to  communicate  with  a  radio  transmitter  at  the  subscriber's  premises. 


 1/  Some  previously  published  have  been  revised. 


 Jun  2000  -  Dec  2000  -Dec 
 2000  Jun  2001 
95
 RBOC  Other  Non-  Total 
 2/  ILEC  ILEC  3/ 


 ADSL  2,328,147  175,876  189,811  2,693,834  86.4  %  6.5  %  7.0  % 
 Other  Wireline  706,944  108,738  272,384  1,088,066  65.0  10.0  25.0 
 Coaxial  Cable  *  *  5,105,547  5,184,141  *  *  98.5 
 Other  *  *  597,983  650,300  *  *  92.0 


 Total  Lines  3,095,699  354,917  6,165,725  9,616,341  32.2  %  3.7  %  64.1  % 


 3/  Non-  ILEC  lines  include  lines  provided  by  carriers  affiliated  with  non-  RBOC  ILECs. 
 1/  The  mutually  exclusive  types  of  technology  are,  respectively:  Asymmetric  digital  subscriber  line  (ADSL) 
 technologies,  which  provide  speeds  in  one  direction  greater  than  speeds  in  the  other  direction;  wireline  technologies 
 "other"  than  ADSL,  including  traditional  telephone  company  high-  speed  services  and  symmetric  DSL  services  that 
 provide  equivalent  functionality;  coaxial  cable,  including  the  typical  hybrid  fiber-  coax  (HFC)  architecture  of  upgraded 
 cable  TV  systems;  optical  fiber  to  the  subscriber's  premises  (e.  g.,  Fiber-  to-  the-  Home,  or  FTTH);  and  satellite  and 
 (terrestrial)  fixed  wireless  systems,  which  use  radio  spectrum  to  communicate  with  a  radio  transmitter  at  the 
 subscriber's  premises. 


 ILEC 


 2/  RBOC  lines  include  all  high-  speed  lines  reported  by  BellSouth,  Qwest,  SBC,  and  Verizon. 


 Types  of 
 Lines 


 *  Data  withheld  to  maintain  firm  confidentiality. 
 Other  Non-  RBOC 
 Percent  of  Lines 


 Technology  1/  ILEC 


 as  of  June  30,  2001  High-  Speed  Lines  by  Type  of  Provider 
 Table  5 


 (Over  200  kbps  in  at  Least  One  Direction) 
96
 ADSL  Coaxial  Cable  Other  2/  Total 
 (Unduplicated) 


 Alabama  *  8  10  16 
 Alaska  *  0  6  7  Arizona  5  *  9  11 


 Arkansas  *  *  4  7  California  12  8  22  28 
 Colorado  8  *  11  14  Connecticut  5  5  10  13 
 Delaware  *  *  *  5  District  of  Columbia  5  *  11  11 
 Florida  9  10  19  27  Georgia  11  7  18  24 
 Hawaii  *  *  *  * 
 Idaho  *  *  4  7  Illinois  10  5  17  23 


 Indiana  6  6  10  17  Iowa  6  6  9  15 
 Kansas  *  6  10  14 
 Kentucky  7  *  7  14  Louisiana  4  4  8  12 


 Maine  4  *  6  8  Maryland  4  5  13  17 
 Massachusetts  5  5  13  16 
 Michigan  8  5  13  20  Minnesota  8  8  15  22 


 Mississippi  *  *  4  8  Missouri  6  5  12  17 
 Montana  5  *  *  7 
 Nebraska  4  5  7  11  Nevada  *  *  10  11 


 New  Hampshire  4  *  8  9  New  Jersey  6  *  14  16 
 New  Mexico  4  *  8  10 
 New  York  12  5  20  26  North  Carolina  9  7  13  21 


 North  Dakota  *  *  *  5  Ohio  11  8  15  23 
 Oklahoma  4  *  10  14 
 Oregon  6  *  9  11  Pennsylvania  11  5  22  25 


 Puerto  Rico  *  0  *  *  Rhode  Island  *  *  4  4 
 South  Carolina  6  7  10  15 
 South  Dakota  4  *  *  7  Tennessee  7  5  9  16 


 Texas  19  7  22  33  Utah  5  *  10  11 
 Vermont  *  *  *  6 
 Virgin  Islands  *  0  *  *  Virginia  8  5  19  23 


 Washington  9  *  12  17  West  Virginia  *  *  5  6 
 Wisconsin  9  *  11  16  Wyoming  *  *  *  * 


 Nationwide  (Unduplicated)  Jun  2001  86  47  98  160 
 Nationwide  (Unduplicated)  Dec  2000  68  39  87  136 


 Nationwide  (Unduplicated)  Jun  2000  47  36  75  116 
 Nationwide  (Unduplicated)  Dec  1999  28  43  65  105 


 *  Data  withheld  to  maintain  firm  confidentiality.  In  this  table,  an  asterisk  also  indicates  1-  3  providers  reporting. 


 Table  6  Providers  of  High-  Speed  Lines  by  Technology 
 as  of  June  30,  2001  1/  (Over  200  kbps  in  at  Least  One  Direction) 


 1/  Some  previously  published  data  have  been  revised. 
 2/  Other  includes  wireline  technologies  other  than  asymmetric  digital  subscriber  line  (ADSL),  optical  fiber  to  the 
 subscriber's  premises,  satellite,  and  (terrestrial)  fixed  wireless  systems. 
97
 Dec  1999  Jun  2000  Dec  2000 
 Total  Total  Total  ADSL  Coaxial  Other  2/  Total 
 Cable 


 Alabama  19,796  32,756  63,334  *  47,325  *  86,234  93  %  36  % 
 Alaska  *  *  934  *  0  *  20,906  NA  2138 
 Arizona  58,825  111,678  153,500  39,828  *  *  158,122  37  3 
 Arkansas  8,155  15,539  28,968  *  *  5,154  40,803  86  41 
 California  547,179  910,006  1,386,625  735,677  609,174  360,963  1,705,814  52  23 
 Colorado  36,726  64,033  104,534  52,617  *  *  147,220  63  41 
 Connecticut  36,488  63,772  111,792  30,142  106,019  12,896  149,057  75  33 
 Delaware  1,558  3,660  7,492  *  *  *  12,771  105  70 
 District  of  Columbia  13,288  16,926  27,757  16,313  *  *  39,101  64  41 
 Florida  190,700  244,678  460,795  170,702  372,190  108,275  651,167  88  41 
 Georgia  75,870  130,292  203,855  106,649  109,922  86,027  302,598  56  48 
 Hawaii  *  *  *  *  *  *  *  NA  NA 
 Idaho  *  8,070  15,908  *  *  2,441  20,233  97  27 
 Illinois  77,672  166,933  242,239  89,080  144,872  116,289  350,241  45  45 
 Indiana  20,059  49,702  60,494  2,375  56,441  21,548  80,364  22  33 
 Iowa  19,258  49,159  58,199  9,532  59,253  3,798  72,583  18  25 
 Kansas  26,179  42,679  68,743  *  74,337  *  101,734  61  48 
 Kentucky  23,570  24,237  32,731  20,256  *  *  39,297  35  20 
 Louisiana  28,133  43,294  74,950  37,444  64,219  20,022  121,685  73  62 
 Maine  19,878  17,864  26,266  6,877  *  *  38,149  47  45 
 Maryland  52,749  71,005  124,465  51,051  97,466  32,504  181,021  75  45 
 Massachusetts  114,116  185,365  289,447  82,699  243,670  30,887  357,256  56  23 
 Michigan  81,223  135,318  198,230  41,428  301,842  52,313  395,583  46  100 
 Minnesota  38,268  65,272  117,283  51,640  80,259  16,113  148,012  80  26 
 Mississippi  *  6,514  12,305  *  *  7,551  21,517  89  75 
 Missouri  23,347  46,903  100,403  53,250  51,733  18,932  123,915  114  23 
 Montana  *  *  7,378  2,842  *  *  10,446  NA  42 
 Nebraska  36,748  44,188  54,085  9,293  37,168  8,727  55,188  22  2 
 Nevada  23,514  40,582  59,879  *  *  16,691  78,535  48  31 
 New  Hampshire  22,807  33,045  42,364  5,651  *  *  55,658  28  31 
 New  Jersey  101,832  144,203  285,311  102,430  *  *  428,514  98  50 
 New  Mexico  *  2,929  28,497  7,578  *  *  20,482  873  -28 
 New  York  186,504  342,743  603,487  197,135  564,423  131,474  893,032  76  48 
 North  Carolina  57,881  81,998  136,703  41,332  115,949  48,335  205,616  67  50 
 North  Dakota  *  2,437  4,227  *  *  *  6,277  73  48 
 Ohio  160,792  156,980  230,525  87,567  213,606  57,792  358,965  47  56 
 Oklahoma  96,730  163,703  95,138  31,321  *  *  92,947  NM  NM 
 Oregon  27,062  44,186  76,839  25,877  *  *  93,242  74  21 
 Pennsylvania  71,926  79,892  176,670  89,595  131,119  42,522  263,236  121  49 
 Puerto  Rico  *  *  *  *  0  *  *  NA  NA 
 Rhode  Island  *  20,628  30,919  *  *  1,908  49,215  50  59 
 South  Carolina  25,229  32,824  63,914  9,704  68,487  18,648  96,839  95  52 
 South  Dakota  *  3,516  2,839  1,652  *  *  5,448  -19  92 
 Tennessee  66,307  87,317  122,391  22,902  96,119  33,489  152,510  40  25 
 Texas  152,518  276,087  522,538  197,668  328,900  120,271  646,839  89  24 
 Utah  11,635  19,612  35,970  23,476  *  *  55,103  83  53 
 Vermont  *  1,551  7,773  *  *  *  16,230  401  109 
 Virgin  Islands  0  *  *  *  0  *  *  NA  NA 
 Virginia  51,305  72,436  139,915  39,114  131,553  42,141  212,808  93  52 
 Washington  71,930  118,723  195,628  64,812  *  *  227,066  65  16 
 West  Virginia  *  1,835  6,498  *  *  2,062  16,697  254  157 
 Wisconsin  18,599  34,262  76,257  17,800  *  *  127,755  123  68 
 Wyoming  *  *  *  *  *  *  *  NA  NA 


 Nationwide  Reported  Total  2,754,286  4,367,434  7,069,874  2,693,834  5,184,141  1,738,366  9,616,341  62  %  36  % 
 NA  -  Not  Available. 
 NM  -  Not  meaningful  due  to  inconsistencies  in  reported  data. 


 (Over  200  kbps  in  at  Least  One  Direction) 
 Table  7 
 High-  Speed  Lines  by  Technology  1/ 


 1/  Some  previously  published  data  have  been  revised. 
 2/  Other  includes  wireline  technologies  other  than  asymmetric  digital  subscriber  line  (ADSL),  optical  fiber  to  the  subscriber's  premises,  satellite,  and  (terrestrial) 
 fixed  wireless  systems. 


 *  Data  withheld  to  maintain  firm  confidentiality. 


 Jun  2001 
 Jun  2000  -Dec 
 2000 
 Dec  2000  -Jun 
 2001 


 Percentage  Change 
98
 as  of  June  30,  2001 
 Residential  and  Other  1/  Total 
 Small  Business 


 Alabama  70,308  15,926  86,234 
 Alaska  15,288  5,618  20,906 
 Arizona  141,450  16,672  158,122 
 Arkansas  37,616  3,187  40,803 
 California  1,332,462  373,352  1,705,814 
 Colorado  128,198  19,022  147,220 
 Connecticut  138,552  10,505  149,057 
 Delaware  10,736  2,035  12,771 
 District  of  Columbia  22,243  16,858  39,101 
 Florida  547,207  103,960  651,167 
 Georgia  221,220  81,378  302,598 
 Hawaii  *  *  * 
 Idaho  17,616  2,617  20,233 
 Illinois  256,197  94,044  350,241 
 Indiana  62,335  18,029  80,364 
 Iowa  69,232  3,351  72,583 
 Kansas  96,393  5,341  101,734 
 Kentucky  23,557  15,740  39,297 
 Louisiana  102,516  19,169  121,685 
 Maine  32,898  5,251  38,149 
 Maryland  149,593  31,429  181,021 
 Massachusetts  312,711  44,545  357,256 
 Michigan  350,073  45,510  395,583 
 Minnesota  132,244  15,768  148,012 
 Mississippi  15,008  6,509  21,517 
 Missouri  108,458  15,457  123,915 
 Montana  9,528  918  10,446 
 Nebraska  49,912  5,276  55,188 
 Nevada  62,451  16,084  78,535 
 New  Hampshire  49,992  5,666  55,658 
 New  Jersey  369,508  59,006  428,514 
 New  Mexico  17,513  2,969  20,482 
 New  York  738,924  154,108  893,032 
 North  Carolina  163,507  42,109  205,616 
 North  Dakota  5,645  632  6,277 
 Ohio  299,240  59,725  358,965 
 Oklahoma  81,584  11,363  92,947 
 Oregon  82,919  10,323  93,242 
 Pennsylvania  216,551  46,685  263,236 
 Puerto  Rico  *  *  * 
 Rhode  Island  46,622  2,593  49,215 
 South  Carolina  78,183  18,656  96,839 
 South  Dakota  4,479  969  5,448 
 Tennessee  119,464  33,046  152,510 
 Texas  387,910  258,929  646,839 
 Utah  47,256  7,847  55,103 
 Vermont  15,021  1,209  16,230 
 Virgin  Islands  *  *  * 
 Virginia  178,648  34,160  212,808 
 Washington  204,137  22,929  227,066 
 West  Virginia  15,223  1,474  16,697 
 Wisconsin  105,574  22,181  127,755 
 Wyoming  *  *  * 


 Nationwide  Reported  Total  7,812,375  1,803,966  9,616,341  1,616,420 
 *  Data  witheld  to  maintain  firm  confidentiality. 


 High-  Speed  Lines  by  Type  of  User 
 Table  8 


 (Over  200  kbps  in  at  Least  One  Direction) 


 1/  Other  includes  medium  and  large  business,  institutional,  and  government  customers. 
99
 Number  of 
 Providers 


 Zero  40.3  %  33.0  %  26.8  %  22.2  % 
 One  26.0  25.9  22.7  20.3 
 Two  15.5  17.8  18.4  16.7 
 Three  8.2  9.2  10.9  13.2 
 Four  4.3  4.9  6.1  8.2 
 Five  2.7  3.4  4.0  4.9 
 Six  1.7  2.5  3.0  3.6 
 Seven  0.8  1.7  2.3  2.8 
 Eight  0.3  0.8  2.0  2.2 
 Nine  0.2  0.4  1.6  1.9 
 Ten  or  More  0.0  0.4  2.4  3.9 


 1/  Some  previously  published  data  have  been  revised. 


 Table  9 
 Percentage  of  Zip  Codes  with  High-  Speed  Lines  in  Service  1/ 


 December 
 1999 
 June 
 2000 
 December 
 2000 
 June 
 2001 
100
 High-  Speed  Providers  by  Zip  Code 
 Number  of  Reporting  Providers 
 7  or  more 
 4  to  6 
 1  to  3 


 (As  of  June  30,  2001) 
101
 Alabama  20  %  66  %  11  %  3  %  1  %  0  % 
 Alaska  79  18  3  0  0  0 
 Arizona  8  37  14  10  12  20 
 Arkansas  39  54  7  0  0  0 
 California  7  29  9  7  7  41 
 Colorado  15  48  10  6  3  18 
 Connecticut  3  48  11  10  12  16 
 Delaware  0  72  28  0  0  0 
 District  of  Columbia  7  15  4  7  4  63 
 Florida  2  35  17  13  9  24 
 Georgia  16  51  10  5  4  13 
 Hawaii  20  80  0  0  0  0 
 Idaho  34  56  5  5  0  0 
 Illinois  18  56  5  3  2  16 
 Indiana  19  61  8  5  1  6 
 Iowa  49  45  4  1  0  0 
 Kansas  35  52  8  4  1  0 
 Kentucky  40  57  3  0  0  0 
 Louisiana  21  75  4  0  0  0 
 Maine  35  61  3  1  0  0 
 Maryland  12  37  10  4  8  28 
 Massachusetts  1  31  18  10  11  29 
 Michigan  10  57  8  5  4  16 
 Minnesota  35  46  7  4  5  3 
 Mississippi  28  66  6  1  0  0 
 Missouri  35  50  4  4  3  4 
 Montana  48  48  3  0  0  0 
 Nebraska  44  49  5  2  0  0 
 Nevada  22  47  17  11  2  2 
 New  Hampshire  8  64  14  8  4  2 
 New  Jersey  1  25  13  10  10  40 
 New  Mexico  34  56  5  3  2  1 
 New  York  8  45  11  8  6  20 
 North  Carolina  11  64  14  5  3  2 
 North  Dakota  72  28  0  0  0  0 
 Ohio  8  59  15  7  4  6 
 Oklahoma  29  53  5  5  5  3 
 Oregon  9  64  11  7  6  3 
 Pennsylvania  22  50  7  6  3  12 
 Puerto  Rico  0  100  0  0  0  0 
 Rhode  Island  6  43  26  25  0  0 
 South  Carolina  16  67  13  3  1  0 
 South  Dakota  63  37  1  0  0  0 
 Tennessee  18  62  12  5  2  2 
 Texas  17  48  8  5  3  19 
 Utah  25  42  8  6  6  13 
 Vermont  25  74  1  0  0  0 
 Virginia  18  51  6  7  3  15 
 Washington  11  50  11  11  8  9 
 West  Virginia  58  41  0  0  0  0 
 Wisconsin  16  62  8  5  5  4 
 Wyoming  47  53  0  0  0  0 


 Nationwide  22  %  50  %  8  %  5  %  4  %  11  %  ` 


 More 
 Number  of  Providers 
 Zero  One  -Three  Four  Five  Six  Seven  or 


 as  of  June  30,  2001  Percentage  of  Zip  Codes  with  High-  Speed  Lines  in  Service  (Over  200  kbps  in  at  Least  One  Direction) 
 Table  10 
102
 Deciles 
 (Blocks  of  Zip  Codes 
 Grouped  by  Density) 


 Persons  per  Square  Mile 
 (In  Each  Decile  of  Zip 
 Codes) 


 Dec  1999  Dec  2000 
 90-  100  More  Than  3,147  96.1  %  98.2  %  98.1  %  98.9  %  99.9  %  99.9  % 
 80-  90  947-  3,147  93.2  97.1  97.1  98.5  99.8  99.8 
 70-  80  268-  947  87.5  95.7  95.6  96.2  99.3  99.5 
 60-  70  118-  268  77.7  91.5  92.3  91.4  98.1  98.8 
 50-  60  67-  118  66.9  85.9  87.5  83.3  95.0  96.8 
 40-  50  41-  67  53.7  76.1  80.9  72.3  87.9  93.0 
 30-  40  25-  41  40.9  65.0  72.8  60.0  80.0  87.3 
 20-  30  15-  25  29.8  50.1  58.9  50.9  69.4  78.4 
 10-  20  6-  15  26.7  38.5  51.1  50.2  61.9  74.6 
 0-  10  Fewer  Than  6  19.9  27.5  36.8  38.5  49.9  60.7 


 1/  Some  previously  published  data  have  been  revised. 


 Deciles  (Blocks  of  Zip 
 Codes  Grouped  by 
 Median  Household 
 Income) 


 Median  Household 
 Income  (In  Each  Decile 
 of  Zip  Codes) 


 Dec  1999  Dec  2000  Dec  1999 
 90-  100  $53,494  to  $291,938  90.8  %  96.1  %  96.4  %  98.4  %  99.8  %  99.8  % 
 80-  90  $43,617  to  $53,478  77.1  88.9  90.7  95.8  99.0  99.3 
 70-  80  $38,396  to  $43,614  67.0  79.5  83.8  94.3  97.8  98.5 
 60-  70  $34,744  to  $38,395  59.9  74.5  80.0  91.5  96.6  97.9 
 50-  60  $32,122  to  $34,743  55.3  71.2  77.3  90.0  95.9  97.4 
 40-  50  $29,893  to  $32,121  53.7  67.4  73.4  88.9  94.5  96.3 
 30-  40  $27,542  to  $29,892  50.4  66.9  73.5  86.1  93.8  95.9 
 20-  30  $24,855  to  $27,541  50.1  65.1  69.6  85.7  93.1  95.2 
 10-  20  $21,645  to  $24,855  46.3  61.2  67.4  83.0  91.1  93.9 
 0-  10  $0  to  $21,644  41.7  54.9  59.1  83.8  91.5  94.1 


 1/  Some  previously  published  data  have  been  revised. 


 Percent  of  Population  in  Decile  that  Resides  in 
 Zip  Codes  with  High-  Speed  Service 


 Jun  2001 


 Table  12 


 Percent  of  Zip  Codes  in  Decile  with  at  Least 
 One  High-  Speed  Subscriber 


 Dec  2000  Jun  2001  Dec  1999 


 Table  11 
 High-  Speed  Subscribership 
 Ranked  by  Population  Density  1/ 
 (Over  200  kbps  in  at  Least  One  Direction) 


 Jun  2001 
 High-  Speed  Subscribership 
 Ranked  by  Household  Income  1/ 
 (Over  200  kbps  in  at  Least  One  Direction) 


 Dec  2000 
 Percent  of  Population  in  Decile  that  Resides  in 
 Zip  Codes  with  High-  Speed  Service 


 Jun  2001 


 Percent  of  Zip  Codes  in  Decile  with  at  Least 
 One  High-  Speed  Subscriber 
103
 Federal  Communications  Commission  FCC  02-  33 
 APPENDIX  D 
 COMMENTERS:  ABBREVIATION: 
 Adelphia  Business  Solutions,  Inc.  ABS  Alcatel  USA,  Inc.  Alcatel 
 Alliance  for  Public  Technology  &  World  Institute  on  Disability  APT  &  WID 
 Association  of  Americas  Public  Television  Stations  APTS 
 AT&  T  Corp.  AT&  T  BellSouth  Corporation  BellSouth 
 Burnstein,  Dave  Commonwealth  of  the  Northern  Mariana  Islands 
 Global  Crossing  Ltd.  Global  Crossing  Global  Photon  Systems,  Inc.  Global  Photon 
 Hughes  Network  Systems,  Hughes  Communications  Galaxy,  Inc., 
 Hughes  Communications,  Inc.  Hughes  Intel  Corporation 
 Intertainer,  Inc  Metromedia  Fiber  Network  Services,  Inc.  MFN 
 National  Association  of  the  Deaf  NAD  National  Cable  &  Telecommunications  Association,  The  NCTA 
 National  Exchange  Carrier  Association  NECA  National  Grange  of  the  Order  of  Patrons  Husbandry  Grange 
 National  Rural  Telecommunications  Cooperative  NRTC  New  Networks  Institute  NNI 
 Organization  for  the  Promotion  and  Advancement  of  Small  Telecommunications  Companies  OPASTCO 
 City  of  Plano,  Texas  Progress  &  Freedom  Foundation  PFF 
 Qwest  Communications  International,  Inc.  Qwest  Ruby  Ranch  Internet  Cooperative  Association  Ruby  Ranch 
 SBC  Communications,  Inc.  SBC  Sprint  Corporation  Sprint 
 StarBand  Communications  Corporation  State  of  Alaska 
 Telecommunications  for  the  Death,  Inc.  TDI  Texas  Coalition  of  Cities  for  Utility  Issues  TCCFUI 
 Texas  Public  Utility  Commission  Texas  PUC  United  States  Telecom  Association  USTA 
 Verizon  Telephone  Companies  Verizon  WorldCom,  Inc.  WorldCom 
104
 Federal  Communications  Commission  FCC  02-  33 
 2 
 COMMENTERS:  ABBREVIATION: 
 Alcatel  USA,  Inc.  Alcatel  Alliance  for  Public  Technology  APT 
 American  Foundation  for  the  Blind  AFB  American  ISP  Association  AISPA 
 AT&  T  Corp.  AT&  T  BellSouth  Corporation  BellSouth 
 City  of  Boulder,  Colorado  City  of  Carrollton,  Texas 
 City  of  Colorado  Springs,  Colorado  Competitive  Telecommunications  Association  CompTel 
 Corning  Incorporated  Corning  Covad  Communications  Company  Covad 
 EarthLink,  Inc.  EarthLink  Hughes  Network  Systems, 
 Hughes  Communications  Galaxy,  Inc.,  Hughes  Communications,  Inc.  Hughes 
 National  Association  of  Community  Action  Agencies  NACAA  National  Association  of  Telecommunications  Officers 
 and  Advisors  and  the  National  League  of  Cities  NATOA  and  NLC  National  Rural  Telecommunications  Cooperative  NRTC 
 National  Telephone  Cooperative  Association  NTCA  Progress  &  Freedom  Foundation  PFF 
 Qwest  Communications  International,  Inc.  Qwest  SBC  Communications,  Inc.  SBC 
 Telecommunications  for  the  Deaf,  Inc.  TDI  Telecommunications  Industry  Association  TIA 
 Telecommunications  Right-  of-  Way  Coalition  TelROW  Texas  Coalition  of  Cities  for  Utility  Issues  TCCFUI 
 United  States  Telecom  Association  USTA  Velocita  Corporation  Velocita 
 Verizon  Telephone  Companies  Verizon  WorldCom,  Inc.  WorldCom 
105
 Federal  Communications  Commission  FCC  02-  33 
 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 


 Re:  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  And  Timely  Fashion,  and  Possible  Steps  To  Accelerate  Such 
 Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996 


 This  Report  culminates  the  latest  in  a  growing  list  of  broadband  proceedings  that  the  Commission  has  conducted  recently  to  help  fulfill  section  706s  mandate  that  we  encourage  the 
 deployment  of  high-  speed  communications  services  to  all  Americans. 
 Over  the  last  several  months,  the  Commission  has  begun  an  examination  of  regulatory  requirements  for  incumbent  LEC  broadband  telecommunications  services  and  expanded  our 
 consideration  of  broadband  deployment  as  a  goal  in  the  context  of  triennial  review  of  section  251  unbundling  requirements.  In  the  coming  weeks,  we  will  consider  the  statutory  classification  of 
 high-  speed  Internet  access  provided  via  cable  modems,  as  well  as  initiate  an  inquiry  regarding  the  appropriate  regulatory  treatment  of  broadband  Internet  access  provided  by  telephone 
 companies.  As  the  Report  details,  there  are  several  additional  proceedings  that  directly  address  broadband  deployment,  including  those  that  seek  to  promote  intramodal  competition  among 
 incumbent  LECs  and  their  competitors  and  those  that  seek  to  facilitate  spectrum-  based  broadband  offerings.  And  these  examples  do  not  include  the  myriad  other  formal  and  informal 
 activities  undertaken  by  me,  my  colleagues,  our  fellow  federal  and  state  policymakers  and  our  able  staffs  that  will  address  some  aspect  of  broadband  deployment. 


 In  sum,  our  demonstrated  commitment  to  spurring  broadband  deployment  is  as  varied  as  it  is  pervasive.  It  is  one  of  our  highest  priorities  and  is  never  far  from  our  thoughts  as  we  decide 
 communications  policy. 
 It  is  in  the  context  of  these  many  efforts  that  I  write  separately  to  underscore  my  support  for  this  Report.  I  agree  with  the  Reports  finding  that  broadband  is  being  deployed  in  a 
 reasonable  and  timely  manner,  notwithstanding  my  firm  belief  that  the  Commissions  central  policymaking  focus  is  and  should  remain  the  promotion  of  efficient  broadband  deployment. 
 Although  one  can  easily  point  to  specific  communities  or  categories  of  customers  in  which  broadband  is  not  yet  fully  available,  the  record  amply  illustrates  that  the  broadband  market 
 continues  to  grow,  and  that  overall  availability  and  subscribership  have  increased  significantly,  despite  some  slowing  investment  trends.  Likewise,  the  Report  shows  that  availability  and 
 subscribership  have  enjoyed  strong  growth  even  in  the  categories  of  residential  and  small  business  customers,  low-  income  consumers  and  people  within  sparsely  populated  regions.  The 
 Report  bases  these  conclusions  not  only  on  the  extensive  data  the  Commission  collects  as  part  of  its  ongoing  data  gathering  efforts,  but  also  based  on  various  governmental,  industry  and  analyst 
 assessments.  In  this  regard,  I  would  note  that  the  conclusions  in  this  Report  are  consistent  with  the  Commerce  Departments  recent  finding  that  one  of  the  key  drivers  of  broadband  deployment, 
106
 Federal  Communications  Commission  FCC  02-  33 
 2 
 computer  usage,  is  increasing  for  Americans  regardless  of  income,  education,  age,  race,  ethnicity  or  gender.  477 
 Certainly,  we  should  strive  for  more  granular  or  direct  data  upon  which  to  make  the  findings  required  under  section  706,  though  obtaining  it  is  easier  said  than  done,  as  many 
 analysts  have  learned.  But  it  is  misleading  to  suggest  that  the  zip  code  data  used  in  our  evaluation  provide  little  useful  guidance  on  broadband  deployment.  Because  the  leading  forms 
 of  broadband  technology  (DSL  and  cable  modem)  involve  upgrading  significant  portions  of  existing  networks,  we  know  that  the  presence  of  at  least  one  subscriber  in  a  zip  code  means  that 
 there  are  probably  many  other  subscribers  who  also  have  broadband  available  in  that  zip  code,  particularly  where  a  service  provider  is  mass  marketing  the  service.  And  although  the  Report 
 does  correctly  indicate  that  97%  of  the  countrys  population  lives  in  zip  codes  that  have  some  broadband  deployment,  it  is  careful  not  to  conclude  that  all  of  those  people  currently  have 
 broadband  available.  We  also  must  recognize  that  collecting  additional  broadband  data  at  the  Commission  may  burden  service  providers  or  subject  them  to  competitive  injury,  thereby 
 inhibiting  their  ability  to  contribute  to  the  very  deployment  we  seek  to  promote.  In  any  event,  the  judgments  we  make  here  are  reasonable  and  more  than  adequately  supported  by  the  many 
 internal  and  independent  sources  cited  or  discussed  here,  and  so  I  support  these  judgments  fully. 
 In  closing,  I  would  reiterate  that  our  finding  that  broadband  deployment  is  reasonable  and  timely  in  no  way  suggests  that  we  should  flag  in  our  efforts  to  foster  deployment.  Section  706 
 mandates  that  we  promote  the  availability  of  broadband  whether  or  not  we  conclude  that  deployment  is  reasonable  and  timely.  And  promoting  such  deployment  is  clearly  imperative  if 
 we  are  to  enjoy  the  full  promise  of  our  economy  and  our  democratic  society.  Thus,  the  Commission  will  continue  to  carry  out  and  expand  upon  the  prodigious  array  of  proceedings  and 
 other  activities  that  I  reference  above.  I  eagerly  anticipate,  in  particular,  continued  partnership  with  our  state  utility  commission  colleagues.  It  is  through  their  individual  efforts,  and  those  of 
 the  Federal-  State  Joint  Conference  on  Advanced  Services  that  we  have  made  enormous  progress  in  highlighting  the  urgency  of  promoting  broadband,  in  sharing  potential  solutions,  and  in 
 continuing  a  dialogue  that  will  yield  further  benefits  to  our  regulatory  efforts  and  to  the  public  generally.  I  look  forward  to  working  with  the  states,  and  with  my  federal  counterparts,  on  this 
 worthy  and  critical  endeavor. 


 477  U.  S.  Department  of  Commerce,  National  Telecommunications  and  Information  Administration  and  Economics 
 and  Statistics  Administration,  A  Nation  Online:  How  Americans  Are  Expanding  Their  Use  of  the  Internet  3  (Feb.  5,  2002). 
107
 Federal  Communications  Commission  FCC  02-  33 
 SEPARATE  STATEMENT  OF  COMMISSIONER  KATHLEEN  Q.  ABERNATHY 


 Re:  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  And  Timely  Fashion,  and  Possible  Steps  To  Accelerate  Such 
 Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996 


 I  support  the  Commissions  determination  that  advanced  telecommunications  capability  is  being  deployed  on  a  reasonable  and  timely  basis.  478  I  write  separately  to  emphasize  that, 
 while  broadband  deployment  is  occurring  reasonably,  that  is  no  reason  to  rest  on  our  laurels.  To  the  contrary,  I  am  committed  to  remaining  vigilant  in  our  monitoring  efforts  and  I  am 
 encouraged  that,  notwithstanding  our  generally  positive  assessment  of  broadband  deployment,  the  Commission  has  recently  launched  a  number  of  rulemaking  proceedings  to  explore  how  to 
 eliminate  barriers  to  infrastructure  investment  and  to  accelerate  broadband  deployment. 
 The  Commission  has  appropriately  been  concerned  about  the  deployment  of  broadband  facilities  in  rural  areas  and  other  underserved  areas.  But  our  most  recent  data  suggest  that  the 
 digital  divide  is  narrowing.  The  deployment  gaps  between  urban  and  rural  areas  and  between  high-  income  and  low-  income  households  have  narrowed  significantly  since  the  issuance  of  our 
 last  Report.  479  To  be  sure,  deployment  still  needs  to  improve  in  rural  areas  and  among  low-income  households.  But  given  our  conclusion  in  the  Second  Report  that  the  deployment  of 
 advanced  telecommunications  capability  was  occurring  on  a  reasonable  and  timely  basis,  the  significant  improvement  since  that  Report  demonstrates  that  such  deployment    while  not 
 perfect    remains  reasonable  and  timely. 
 As  the  foregoing  Report  recognizes,  our  information  concerning  broadband  deployment  is  imperfect.  To  avoid  imposing  undue  burdens  on  providers,  the  Commission  permitted 
 providers  to  report  subscribership  (which  in  turn  reflects  their  deployment  of  facilities)  at  a  highly  aggregated  level.  While  the  Commissions  data-  collection  requirements  prevent  us  from 
 assessing  the  full  extent  of  subscribership  or  facilities  deployment  within  particular  zip  codes,  third-  party  data  confirm  the  conclusion  that  providers  are  continuing  to  deploy  facilities 
 throughout  the  country.  480  Moreover,  the  Commission  already  has  launched  a  proceeding  seeking  comment  on  the  efficacy  of  our  data-  collection  requirements,  so  if  there  improvements 
 we  can  make  without  imposing  undue  burdens  on  providers,  we  are  well-  positioned  to  do  so.  481 
 In  addition,  there  are  strong  indications  that  the  gap  between  broadband  haves  and  have-  nots  will  continue  to  shrink  as  a  result  of  technological  developments.  Perhaps  most 


 478  See  Telecommunications  Act  of  1996,    706,  Pub.  L.  104-  104,  Title  VII,  110  Stat.  153  (Feb.  8,  1996) 
 (reproduced  in  the  notes  under  47  U.  S.  C.    157). 
 479  See  Report,  supra.  at    35-  39. 


 480  See  generally  id.  at    89-  124. 
 481  See  Local  Competition  and  Broadband  Reporting,  CC  Docket  No.  99-  301,  Second  Notice  of  Proposed 
 Rulemaking,  16  FCC  Rcd  2072  (2000). 
108
 Federal  Communications  Commission  FCC  02-  33 
 2 
 promisingly,  high-  speed  satellite  services  are  now  available  in  all  50  states.  482  Local  exchange  carriers  also  appear  to  be  making  progress  in  extending  the  reach  of  their  DSL  services  through 
 new  technologies.  483  And  other  service  providers,  such  as  electric  utilities,  are  developing  innovative  means  of  reaching  rural  consumers.  484 


 Despite  this  evidence  of  reasonable  and  timely  deployment    particularly  in  comparison  to  the  rollout  of  other  new  technologies  and  services  485    the  Commission  is  considering  an 
 impressive  array  of  actions  to  encourage  further  broadband  deployment.  Indeed,  having  made  broadband  deployment  a  top  priority,  the  Commission  is  leaving  no  stone  unturned  in  its 
 consideration  of  measures  that  will  encourage  the  deployment  of  advanced  telecommunications  capability  to  all  Americans  as  soon  as  possible.  Thus,  the  Commission  is  proceeding  as  if  the 
 existing  pace  of  deployment  werent  reasonable,  making  the  Reports  assessment  of  reasonableness  academic.  As  the  Report  details,  the  Commission  has  launched  or  soon  will 
 launch  rulemakings  that  explore  (a)  the  impact  of  our  section  251(  c)  unbundling  obligations  on  telephone  companies  incentives  to  deploy  new  facilities;  (b)  the  appropriate  regulatory 
 treatment  of  incumbent  LECs  broadband  transmission  services  and  Internet  access  services;  and  (c)  the  appropriate  regulatory  treatment  of  cable  operators  broadband  Internet  access  services.  486 
 I  enthusiastically  support  the  Commissions  further  decision  to  consider,  in  consultation  with  industry  and  our  state  and  local  colleagues,  possible  means  of  removing  barriers  to  deployment 
 associated  with  local  right-  of-  way  regulation.  487  And  the  Commission  has  identified  a  range  of  other  actions  that  have  the  potential  to  promote  broadband  deployment.  488 


 Finally,  I  recognize  that  subscription  rates  lag  far  behind  our  estimates  of  infrastructure  investment  and  facilities  deployment.  Many  commenters  are  discouraged  that  the  take  rate  for 
 broadband  remains  less  than  10  percent,  even  as  estimates  of  availability  approach  80  percent.  But  we  must  keep  in  mind  the  Commissions  role  under  the  1996  Act.  Section  706  directs  us  to 
 encourage  the  deployment  of  advanced  telecommunications  capability    not  to  ensure  that 
 482  See  Report,  supra  at    115. 
 483  Id. 
 484  Id. 
 485  See  id.  at    124  (comparing  rollout  of  the  telephone  and  television). 
 486  Id.  at    151-  54. 
 487  Id.  at    166-  68. 
 488  Id.  at    169-  77. 
109
 Federal  Communications  Commission  FCC  02-  33 
 3 
 consumers  purchase  particular  services.  As  one  competitor  put  it,  convincing  large  numbers  of  consumers  to  purchase  broadband  services  is  an  issue  for  sales  and  marketing  arms  of 
 broadband  providers,  not  for  regulators.  489  I  am  confident  that,  as  providers  continue  to  introduce  new  applications  and  better  educate  consumers  about  the  many  benefits  of  broadband, 
 subscribership  figures  will  increase.  But  my  job  as  a  regulator  is  to  ensure  only  that  the  necessary  facilities  are  being  deployed.  As  the  Report  demonstrates,  such  deployment  is 
 occurring  on  a  reasonable  and  timely  basis. 


 489  Covad  Comments  at  3. 
110
 Federal  Communications  Commission  FCC  02-  33 
 DISSENTING  STATEMENT  OF  COMMISSIONER  MICHAEL  COPPS 


 Re:  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  And  Timely  Fashion,  and  Possible  Steps  To  Accelerate  Such 
 Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996 


 On  the  basis  of  the  record  before  us,  I  am  unable  to  determine  whether  the  deployment  of  advanced  telecommunications  capability  to  all  Americans  is  or  is  not  reasonable  and  timely. 
 This  is  because  we  have  not  gathered  data  of  adequate  quality  or  granularity  to  fulfill  our  statutory  responsibility  under  Section  706.  I  cannot  therefore  endorse  the  conclusions  of  the 
 majority  and  must  respectfully  dissent  from  this  Report.  I  impugn  no  colleagues  commitment  to  broadband  deployment  and  no  bureaus  enthusiasm  and  hard  work  for  bringing  the  wonders  of 
 broadband  technologies  to  the  American  people.  I  just  happen  to  have  a  different  perspective. 
 The  Importance  of  Broadband 
 Congress  recognized  the  importance  of  broadband  access  in  the  Telecommunications  Act  of  1996.  It  gave  us  the  statutory  mandate  to  advance  the  cause  of  bringing  access  to  advanced 


 telecommunications  to  each  and  every  citizen  of  this  great  country    whether  they  live  in  rural  areas,  on  tribal  lands  or  in  the  inner  city;  whether  they  are  affluent  or  of  limited  income;  with  or 
 without  disabilities.  Congressional  interest  in  broadband  has  only  increased  in  the  intervening  years,  with  broadband  occupying  an  increasingly  prominent  position  on  the  Congressional 
 agenda.  Indeed,  the  nation  generally  seems  to  have  embarked  on  a  significantly  more  intensive  dialogue  about  broadband,  putting  issues  on  the  table  that  were  simply  not  there  just  a  few 
 months  ago.  This  is  a  welcome  and  salutary  development. 
 Broadband  is  rapidly  becoming  a  key  component  of  our  nations  systems  of  education,  commerce,  employment,  health,  government  and  entertainment.  The  transformative  potential  of 
 broadband  technologies  is,  I  believe,  akin  to  the  major  infrastructure  developments  that  built  America  to  greatness.  I  believe  that  when  the  history  of  our  times  is  written,  the  broadband 
 transformation  will  be  discussed  in  the  same  vein  as  the  building  of  the  roads  and  ports  and  harbors  that  made  commerce  possible  in  pre-  Civil  War  America;  as  the  Transcontinental 
 railroads  that  made  us  a  continental  power  in  the  late  Nineteenth  century;  as  the  national  highway  system  that  opened  the  way  for  rapid  transportation  and  demographic  migration  in  the 
 last  century;  and  as  the  first  great  telecommunications  revolution  that  brought  telephone  service  to  the  far  corners  of  America,  a  job  mostly,  but  not  yet  totally,  completed. 


 Some  may  argue  that  broadband  infrastructure  does  not  rise  to  the  level  of  developmental  importance  I  ascribe  to  it.  But  the  issue  does  seem  to  be  coming  front-  and-  center  in  our  national 
 dialogue,  and  I  believe  there  is  sufficient  plausibility  attached  to  it  to  merit,  indeed  to  compel,  a  significantly  broader  and  deeper  analysis  of  broadband  deployment  than  we  have  thus  far 
 undertaken.  We  can  argue  whether  the  parameters  of  previous  Section  706  reports  were  sufficiently  broad.  I  think  they  were  not.  But  circumstances  have  changed;  new  questions  now 
 need  to  be  asked;  and  old  questions  may  merit  new  and  very  different  answers.  This  is  precisely  why  Congress  instructed  the  Commission  to  reexamine  this  issue  regularly.  New  data,  new 
 analysis  and  new  perspectives  can  only  nourish  the  national  dialogue  we  are  beginning  to  have. 
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 Congress  gave  the  Commission  the  charge  to  determine  whether  advanced  telecommunications  capability  --  broadband  --  is  being  deployed  to  all  Americans  in  a 
 reasonable  and  timely  fashion  for  two  reasons.  First,  Congress  required  us,  as  the  governments  expert  agency,  to  engage  in  fact  finding  that  would  inform  the  national  debate.  Second,  as  the 
 agency  that  implements  Congressional  policy,  we  have  been  instructed  by  Congress  that,  if  we  find  deployment  not  to  be  reasonable  and  timely,  we  must  take  immediate  action  to  accelerate  it. 


 Thus,  in  adopting  this  section,  Congress  envisioned  that  the  FCC  would  actively  pursue  information  each  year  on  broadband  deployment.  Here,  we  have  not  delved  as  deeply  as 
 Congress  expects.  The  data  we  have  and  the  analysis  derived  from  it  are,  for  me,  insufficient  for  making  the  critical  determination  mandated  by  Congress. 


 I  am  further  troubled  that  todays  Report  neither  lays  out  a  plan  to  obtain  these  data  nor  initiates  an  action  for  the  Commission  that  would  foster  a  national  dialogue  and  promote 
 broadband  deployment.  The  Commission  needs  to  be  more  proactive  in  this  pursuit.  We  need  to  investigate  the  availability  of  broadband  to  all  Americans,  including  those  communities  that  are 
 at  risk  of  being  left  behind.  We  must  be  willing  to  ask  the  hard  questions  and  act  according  to  full  and  accurate  data,  rather  than  conjecture  about  the  state  of  deployment.  This  is  too  important 
 an  issue  for  our  nation  merely  to  conduct  an  incomplete  analysis  and  conclude  that  everything  is  proceeding  apace. 


 Inadequacy  of  the  Data 
 I  do  not  believe  the  Commission  has  gathered  data  of  adequate  quality  or  granularity  to  fulfill  its  statutory  responsibility  to  determine  if  deployment  of  advanced  telecommunications 


 capability  is  reasonable  and  timely  to  all  Americans.  We  simply  did  not  have  access  to  the  information  necessary  to  carry  out  our  section  706  mandate.  It  is  our  statutory  duty  to  obtain 
 this  data. 
 The  competition-  enhancing  portions  of  the  1996  Act  have  led  to  undoubted  progress  in  deploying  broadband.  We  are  now  seeing  competition  not  only  within  delivery  platforms,  but 
 also  among  delivery  platforms.  Indeed,  we  are  seeing  convergence  of  industries,  convergence  of  services,  and  convergence  of  markets.  It  is  clear  that  companies  are  actively  deploying  advanced 
 technologies  in  response  to  competition  from  other  broadband  providers.  The  competition  resulting  from  the  1996  Act  unleashed  an  unprecedented  investment  in  communications 
 infrastructure  in  many  areas  of  the  country. 
 A  detailed  analysis  of  broadband  deployment  might  well  have  shown  that  broadband  deployment  is  proceeding  as  Congress  expected.  Certainly  the  number  of  broadband  subscribers 
 and  users  of  the  Internet  in  many  communities  continues  to  increase  substantially,  as  every  report  seems  to  confirm.  And  certainly  we  should  not  expect  broadband  to  be  available  to  everyone  at 
 the  exact  same  instant.  But  the  Commission  is  obligated  to  seek  specific  and  concrete  data  to  undergird  its  conclusions  and  to  ensure  that  all  Americans  are  obtaining  broadband  access  in  a 
 reasonable  and  timely  manner. 
 To  carry  out  this  706  inquiry,  the  Commission  asks  providers  to  report  zip  codes  in  which  there  is  at  least  one  subscriber.  Our  data  leaves  the  impression  that  everyone  in  a  zip  code  has 
 access  to  broadband  merely  because  one  person  has  it.  The  Report  concedes  that  we  cannot 
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 determine  from  our  data  the  full  extent  to  which  the  presence  of  high-  speed  service  in  a  given  zip  code  indicates  that  high-  speed  services  are  widely  available,  or  whether  they  are  restricted  to  a 
 few  customers.  In  fact,  with  our  data,  that  zip  code  might  include  only  large  business  customers  buying  facilities  that  would  not  be  available  or  affordable  to  small  business  or  residential 
 customers.  It  might  also  include  zip  codes  where  only  a  limited  number  of  customers  have  access.  The  majority  recognizes  these  shortcomings,  but  nevertheless  concludes  on  the  basis  of 
 the  data  that  deployment  is  reasonable  and  timely.  By  the  logic  of  our  current  use  of  these  data,  rather  than  counting  each  zip  code  with  one  subscriber  as  fully  connected,  perhaps  we  ought  to 
 count  each  zip  code  that  has  one  customer  without  access  as  not  connected.  I  suspect  accurate  numbers  would  demonstrate  a  much  smaller  percentage  of  the  population  with  access  than  the  97 
 percent  contained  in  our  data. 
 Moreover,  the  Commission  must  ensure  that  communities  are  not  being  left  behind.  Importantly,  the  Report  states  that  certain  citizens    those  living  in  rural  or  insular  areas  or  on 
 tribal  lands,  those  with  low  incomes,  and  those  with  disabilities    are  at  significantly  greater  risk  of  not  having  access  to  broadband.  Is  deployment  reasonable  and  timely  to  these  Americans?  I 
 do  not  believe  that  the  Commission  has  adequately  explored  this  question.  Without  doing  so,  we  have  not  fulfilled  our  statutorily  mandated  responsibilities. 


 A  Broadband  Action  Plan 
 Given  the  importance  of  broadband  deployment  for  our  nation,  and  without  an  adequate  record  to  make  a  determination  under  section  706,  I  believe  that  the  Commission  should  initiate  a 
 broadband  action  plan  to  obtain  concrete,  nationwide  data,  to  elicit  wider  stakeholder  input  and  analysis,  and  to  promote  the  deployment  of  broadband  to  all  Americans. 


 First,  the  Commission  should  adopt  a  specific  plan  to  gather  information  that  would  allow  a  rigorous  analysis  of  broadband  deployment.  The  majority  recognizes  the  limited  usefulness  of 
 our  data,  but  does  not  undertake  steps  to  rectify  the  problem.  The  Commission  issued  a  Notice  of  Proposed  Rulemaking  on  this  issue  over  a  year  ago  but  has  yet  to  issue  an  order.  The  data  we 
 collect  should  focus  on  the  availability  of  broadband  and  should  not  assume  that  everyone  in  a  zip  code  has  access  to  broadband  merely  because  one  entity  does.  Although  certainly  not  an 
 exhaustive  list,  more  granular  information,  separation  of  data  based  on  services  to  residential  and  small  business  customers,  and  statistical  sampling  can  provide  a  fuller  and  more  accurate  picture 
 of  deployment  patterns.  This  data  is  admittedly  neither  easy  nor  cheap  to  come  by.  It  is,  however,  necessary  for  the  fulfillment  of  our  charge  from  Congress,  and  it  must  have  a  resource 
 priority  here  at  the  Commission  commensurate  with  the  developmental  priority  that  broadband  has  for  the  nation.  The  Commission  should  devote  the  additional  resources  necessary  to  carry  out 
 our  section  706  mandate  as  Congress  expected. 
 The  states  can  play  a  critical  role  in  supplying  information,  expertise  and  new  perspectives.  Indeed,  the  states  are  charged  with  an  active  role  by  Section  706.  Their  more 
 active  participation  during  the  Commissions  annual  Section  706  work  would  significantly  enhance  the  quantity  of  our  data  and  the  quality  of  our  analysis.  Soliciting  their  more  active 
 input  should  be  one  of  the  Commissions  first  action  plan  steps. 
 Second,  the  Commission  has  a  responsibility  to  help  foster  a  national  dialogue  on  broadband.  The  nations  sense  of  urgency  about  this  issue  is  heightening  as  people  are  asking 
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 hard  questions  about  how  the  infrastructure  is  to  be  built.  We  need  to  develop  answers  to  these  questions.  A  serious  national  dialogue  about  this  issue  will  help  frame  the  policy  options.  For 
 openers,  we  should  conduct  hearings  and  roundtables  around  the  country    meetings  that  include  other  government  entities  and  significant  input  from  both  traditional  and  non-  traditional 
 stakeholders.  We  are  of  course  an  independent  agency  and  we  implement,  rather  than  make,  policy.  Nevertheless,  it  is  clear  that  Congress  envisioned  a  major  role  for  the  FCC  when  it 
 charged  us  with  encouraging  reasonable  and  timely  deployment  of  advanced  telecommunications  capability  to  all  Americans.  Congress  did  not  urge  a  hands-  off  policy  upon  the  Commission 
 when  it  comes  to  broadband  deployment. 
 As  part  of  the  effort,  we  should  devote  more  adequate  resources  to  looking  at  what  other  countries  are  doing.  We  dont  pay  nearly  enough  attention  to  this.  Interesting  broadband 
 initiatives  are  taking  place  in  numerous  countries.  They  need  to  be  looked  at,  studied,  evaluated.  As  far  as  I  can  tell,  all  of  the  industrialized  countries,  except  the  United  States  and  Italy,  have 
 national  plans  for  broadband  deployment.  And  Italy  is  in  the  process  of  developing  one.  Its  not  that  we  need  to  emulate  what  others  with  different  traditions  and  cultures  and  economies  may  be 
 doing,  but  lets  be  serious  enough  to  at  least  look  at  what  theyre  doing  and  see  if  there  may  not  be  a  lesson  or  two  there  for  us. 


 Lets  look  in  more  detail  at  what  some  communities  right  here  at  home  are  doing.  We  need  to  realize  that  communities  across  America  are  already  taking  steps  to  supply  broadband 
 themselves  when  industry  fails  to  get  it  to  them.  Certainly  we  need  to  examine  the  demand  for  broadband  services;  I  would  be  among  the  last  to  suggest  that  we  ignore  the  realities  of  the 
 marketplace.  Indeed,  we  must  examine  consumer  demand,  and  whether  and  when  it  is  appropriate  to  define  advanced  telecommunications  as  a  higher  transmission  speed  to  take 
 account  of  evolving  technologies  and  consumer  expectations.  But  I  have  been  to  too  many  conferences  where  the  definition  of  broadband  and  demand  are  the  only  questions  that  are 
 discussed.  Shouldnt  we  also  discuss  why  it  is  that  some  communities  in  America  are  already  floating  bond  issues  and  taxing  themselves  to  get  broadband  deployed  to  satisfy  unmet  demand? 


 Lets  look  at  the  many  communities  that  do  not  have  access  to  broadband.  We  should  undertake  a  specific  accounting  of  where  these  places  are  and  what  they  have  in  common.  We 
 should  examine  how  population  density,  income  level,  race,  and  other  factors  come  into  play,  and  determine  if  there  are  market  failures  that  are  limiting  broadband  deployment  in  these 
 communities.  We  should  focus  in  particular  on  rural  areas,  tribal  lands,  inner  city  communities,  and  on  those  of  our  fellow  citizens  who  have  disabilities. 


 Lets  look  more  closely  at  potential  impediments  to  broadband  deployment.  As  the  Report  demonstrates,  we  have  initiated  a  number  of  proceedings  to  promote  broadband 
 deployment.  But  we  have  not  committed  the  resources  to  evaluate  more  broadly  the  impediments  to  deployment  and  to  consider  steps  to  eliminate  those  barriers. 


 And,  finally,  lets  examine  the  role  of  government  in  the  deployment  effort.  The  private  sector  can,  should,  and  will  be  the  lead  locomotive  in  rolling  out  broadband.  But  Ive  asked  just 
 about  every  businessperson  Ive  had  the  chance  to  meet  if  he  or  she  was  convinced  the  market  could  get  the  job  of  deployment  done.  The  vast  majority  of  these  business  leaders  tell  me  that 
 for  that  last  10,  15,  20  percent  or  more  of  Americans,  probably  not.  One  of  Americas  foremost  CEOs  told  us  a  few  months  ago  that  30  percent  could  be  beyond  deployment.  Leaving  10 
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 percent  behind  amounts  to  about  29  million  people,  and  leaving  20  percent  behind  abandons  58  million  fellow  citizens.  So  the  issue  has  a  human  face.  If  we  get  to  2020  and  we  have  29  or  58 
 or  87  million  people  without  broadband,  we  will  have  a  Broadband  Chasm  that  not  only  denies  many  citizens  of  a  precious  right  but  also  denies  our  country  of  critically  needed  economic 
 growth. 
 Historically,  business  and  government  worked  closely  together  in  all  of  the  great  economic  infrastructure  transformations  that  I  described  earlier  in  these  comments.  All  of  these 
 were  built  with  the  public  and  private  sectors  working  together  to  provide  America  with  the  infrastructure  we  needed  to  prosper.  History  doesnt  necessarily  repeat  itself,  but  there  are 
 enough  resemblances  to  merit  our  close  attention.  Some  may  say  that  broaching  such  questions  stretches  the  FCC  mandate.  I  answer  that  examining  what  works  --  in  our  communities  and 
 municipalities,  in  other  countries,  in  our  own  historical  experience  --  is  integral  to  setting  out  the  options  for  our  nations  policy-  makers  in  Congress  and  the  Administration.  Our  policy  makers 
 expect  no  less  of  us. 
 I  dont  pretend  to  have  all  of  the  answers.  I  dont  even  have  all  of  the  questions  that  need  to  be  asked.  Nor  am  I  saying  these  are  the  only  steps  we  should  take.  I  merely  say  that  we  need  to 
 take  action  to  get  a  fuller  and  more  accurate  picture  of  broadband  deployment  and  try  to  get  a  handle  on  meeting  one  of  the  most  important  challenges    and  opportunities    confronting  our 
 country  today.  Americas  broadband  business  is  not,  I  think,  business  as  usual. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN 


 Re:  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  And  Timely  Fashion,  and  Possible  Steps  To  Accelerate  Such 
 Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996 


 Encouraging  the  deployment  of  broadband  services  to  all  Americans  should  be  a  national  priority.  Such  services  are  essential  to  the  economy  of  the  21st  century,  dramatically  reducing 
 the  costs  of  exchanging  information  and  allowing  previously  local  businesses  to  serve  the  world.  Broadband  services  are  especially  important  to  rural  America,  providing  business,  educational, 
 and  healthcare  opportunities  to  remote  parts  of  the  country.  I  am  hopeful  that,  just  as  rapid  developments  in  telecommunications  and  technology  have  driven  much  of  this  nations 
 economic  growth  in  recent  years,  broadband  deployment  will  lead  to  a  new  period  of  growth.  I  thus  believe  that  all  levels  of  government  should  work  to  eliminate  barriers  to  infrastructure 
 investment  and  to  accelerate  broadband  deployment. 
 Under  the  Chairmans  direction,  the  Commission  has  sought  to  promote  broadband  deployment  through  a  variety  of  efforts,  including  (i)  proceedings  on  performance  measures  for 
 unbundled  network  elements  and  special  access,  (ii)  examination  of  the  impact  of  unbundling  obligations  on  telephone  carriers  incentives  to  invest  in  new  facilities,  and  (iii  and  iv) 
 consideration  of  the  appropriate  regulatory  treatment  of  broadband  transmission  services  and  Internet  access  services  provided  over  cable  and  telephone  infrastructure.  These  proceedings  are 
 positive  steps,  and  I  am  pleased  to  support  them. 
 I  write  separately  to  emphasize  my  belief  that  there  is  some  urgency  to  the  need  for  continued  efforts.  I  agree  with  the  Commissions  conclusion  that  advanced  telecommunications 
 capability  is  currently  being  deployed  on  a  reasonable  and  timely  basis.  The  availability  of  that  capability  is  increasing,  and  I  am  pleased  that  subscribers  to  services  the  Commission 
 characterizes  as  high-  speed  were  reported  in  78  percent  of  all  zip  codes  in  the  United  States. 
 I  am  concerned,  however,  that  deployment  of  such  services  still  lags  in  rural  and  other  underserved  areas.  Our  data  show  that  fewer  than  40  percent  of  the  most  sparsely  populated  zip 
 codes  have  at  least  one  subscriber  to  high-  speed  services  while  more  than  90  percent  of  the  most  densely  populated  zip  codes  have  at  least  one  such  subscriber.  While  that  gap  is  narrowing, 
 there  is  no  question  that  the  continued  lag  is  far  from  ideal.  Moreover,  the  fact  that  a  particular  zip  code  contains  one  subscriber  to  a  service  does  not  necessarily  indicate  that  the  service  is 
 widely  available. 
 More  fundamentally,  however,  I  am  concerned  about  the  transmission  speed  of  the  services  that  are  available  to  most  subscribers.  In  making  our  determinations  of  the  availability 
 of  advanced  telecommunications  capability,  we  measure  the  deployment  of  services  that  offer  transmission  speeds  of  at  least  200  kbps.  Many  argue  that  Internet  access  services  at  such  speeds 
 are  merely  transitional  and  that  true  broadband  services  should  be  defined  at  a  much  higher  speed.  As  we  acknowledge,  many  of  the  most  exciting  applications,  such  as  video-  on-  demand, 
 require  transmission  speeds  significantly  in  excess  of  200  kbps.  There  are  strong  arguments  that  such  applications,  or  others  that  require  higher  speeds,  offer  the  kind  of  content  that  consumers 
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 truly  demand,  and  will  ultimately  drive  much  higher  adoption  rates.  I  thus  am  pleased  with  this  reports  recognition  that  the  speed  at  which  we  define  advanced  telecommunications  capability 
 is  an  evolving  measure  and  particularly  support  the  reports  commitment  to  reevaluate  the  appropriate  transmission  speed  in  the  future.  I  expect  that  in  the  next  706  inquiry,  we  will  ask 
 more  in  depth  questions  on  the  appropriate  transmission  speed  that  should  mark  advanced  telecommunications  capability  and  will  seek  specific  information  on  the  deployment  of  and 
 subscription  to  higher  speed  services. 
 In  the  mean  time,  I  believe  that  government,  at  all  levels,  should  continue  to  play  an  important  role  in  promoting  broadband.  While  I  am  cautious  of  avoiding  industrial  policy,  I 
 think  the  government  can,  and  should,  focus  on  removing  barriers  to  infrastructure  investment  and  eliminating  disincentives  to  deployment,  both  financial  and  regulatory. 


 For  example,  I  believe  the  government  should  commit  to  exercising  self-  restraint  in  placing  financial  burdens  on  broadband.  Currently,  at  every  level,  government  too  often  sees 
 broadband  deployment  as  a  potential  revenue  stream.  Telecommunications  services  are  subject  to  federal  and  state  excise  taxes    the  kind  of  taxes  traditionally  reserved  for  decreasing  demand 
 for  products  such  as  alcohol  and  tobacco.  New  entrants  to  the  broadband  market  face  federal,  state,  and  local  rights-  of-  way  management  fees  and  franchise  fees,  which  are  sometimes  intended 
 to  generate  revenue  rather  than  recover  legitimate  costs.  All  of  these  financial  burdens  discourage  deployment  and  should  be  minimized. 


 Government  should  also  endeavor  to  remove  regulatory  underbrush    burdensome  regulations  that  may  no  longer  serve  compelling  purposes.  Some  state  and  local  governments   
 and  the  federal  government  with  respect  to  federal  lands    maintain  onerous  permitting  processes  for  rights  of  way,  zoning,  and  tower  siting,  which  may  be  significant  impediments  to  new 
 entrants  ability  to  provide  broadband.  I  am  pleased  to  say  that  some  states  have  begun  to  address  these  problems.  For  example,  the  Michigan  Public  Service  Commission  evaluates  how 
 open  Michigan  local  communities  are  to  broadband  deployment,  including  the  time  it  takes  them  to  provide  rights-  of-  way  permits  and  the  amounts  they  charge  in  franchise  fees.  I  hope  that  this 
 kind  of  effort  to  spotlight  local  communities  that  may  be  impeding  deployment  and  those  that  are  facilitating  it  will  spur  all  officials  to  take  a  more  critical  look  at  their  existing  regulations. 


 Moreover,  we  need  to  focus  not  only  on  changing  our  regulations,  but  also  on  changing  the  regulatory  environment.  Regulatory  uncertainty  and  delay  function  as  entry  barriers,  limiting 
 investment  and  impeding  deployment  of  new  services.  We  should  work  to  be  faster  and  more  reliable  in  our  decisionmaking  and  in  our  enforcement  efforts.  Prolonged  proceedings,  with 
 shifting  rules,  ultimately  serve  no  ones  interest,  regardless  of  the  substantive  outcome. 
 Finally,  at  the  Commission,  we  need  to  place  a  high  priority  on  facilities-  based  competition.  In  the  past,  the  Commission  adopted  a  framework  that  may  have  discouraged 
 facilities-  based  competition,  allowing  competitors  to  use  every  piece  of  the  incumbents  network  at  super-  efficient  prices.  This  regime  creates  significant  disincentives  for  the  deployment  of  new 
 facilities  that  could  be  used  to  provide  broadband.  Under  such  a  regime,  new  entrants  have  little  incentive  to  build  their  own  facilities,  since  they  can  use  the  incumbents  cheaper  and  more 
 quickly.  And  incumbents  have  little  incentive  to  build  new  facilities,  since  they  must  share  them  with  all  their  competitors.  Under  the  current  Chairman,  we  have  begun  several  important 
 proceedings  that  may  change  this  regime.  In  particular,  we  will  examine  how  our  unbundling 
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 and/  or  pricing  rules  should  apply  to  incumbent  deployment  of  new  facilities.  Nevertheless,  there  is  still  significant  work  to  be  done.  I  look  forward  to  working  on  these  issues  and  hope  to  ensure 
 that  advanced  telecommunications  capability  continues  to  be  deployed  on  a  reasonable  and  timely  basis. 
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