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PUBLISHED BY CONGRESSIONAL QUARTERLY INC.

T

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H QC Researcher

Jan. 28, 2000 • Volume 10, No. 3 • Pages 41-64

The Digital Divide Should Internet access for the poor be subsidized?

T he Internet is revolutionizing the world

economy, but some parts of the global village

are being left behind. The growing gap

between the information-rich and the

information-poor means many rural and low-income areas

— and much of the Third World — could lose out on jobs

and economic development. Many public-private

partnerships are trying to bridge the digital gap. In

addition, President Clinton plans to seek up to $50 million

in grants to help poor families get on-line, and pressure is

growing to make high-speed Internet access universally

available. But critics argue that lingering government

regulations are preventing the free market from solving

telecom access problems. And some in Congress want to

scale back the popular “e-rate” program, which subsidizes

Internet connections at schools and libraries.

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THE ISSUES .............................. 43

BACKGROUND ........................ 50

CHRONOLOGY ........................ 51

CURRENT SITUATION .............. 54

OUTLOOK ................................ 56

AT ISSUE ................................... 57

BIBLIOGRAPHY ....................... 61

THE NEXT STEP ....................... 62

THIS ISSUE

THE DIGITAL DIVIDE

42 CQ Researcher

MANAGING EDITOR Thomas J. Colin

STAFF WRITERS Mary H. Cooper

Kenneth Jost Kathy Koch David Masci

PRODUCTION EDITOR Angela S.D. Shoemaker

EDITORIAL ASSISTANT Alecia A. Marzullo

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Congressional Quarterly Inc.

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CONGRESSIONAL QUARTERLY INC.

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PRESIDENT AND PUBLISHER Robert W. Merry

Copyright 2000 Congressional Quarterly Inc. (CQ). CQ reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of CQ copyrighted material is a violation of federal law carrying civil fines of up to $100,000.

Bibliographic records and abstracts in The Next Step are the copyrighted material of UMI, and are used with permission.

The CQ Researcher (ISSN 1056-2036). Published weekly, except Jan. 7, June 30, July 7, July 21, Aug. 11, Aug. 18, Dec. 1 and Dec. 29, by Con- gressional Quarterly Inc. Annual subscription rate for libraries, businesses and government is $444. Single issues are available for $10 (sub- scribers) or $20 (non-subscribers). Quantity dis- counts apply to orders over 10. Additional rates furnished upon request. Periodicals postage paid at Washington, D.C., and additional mailing of- fices. POSTMASTER: Send address changes to The CQ Researcher, 1414 22nd St., N.W., Wash- ington, D.C. 20037.

CQ Researcher T

H E

Jan. 28, 2000 Volume 10, No. 3

THE ISSUES

43 • Should we worry aboutthe digital divide? • Are government regula- tions widening the broad- band divide? • Should the federal government subsidize high-speed Internet access?

BACKGROUND

50 ‘A New Illiteracy’In 1996, only 3 percent of the nation’s classrooms were connected to the Internet.

52 Universal ServiceThe government program seeks to eliminate dispari- ties in both phone and Internet access.

CURRENT SITUATION

54 ‘Open Access’Consumer groups are asking local officials to force cable operators to let Internet service providers use their cable lines.

55 Focus on Baby BellsA battle looms in Congress over how to give the regional Bell companies approval to send data over long-distance lines.

55 Scare Tactics?Rural-state House mem- bers have vowed to make an issue of the broadband digital divide.

56 Proposed SolutionsSenators from rural states have proposed administra- tive solutions instead of legislation to improve telephone and Internet service.

OUTLOOK

56 FCC InitiativesChairman Kennard has made beefing up phone service on Indian reserva- tions a top priority.

SIDEBARS AND GRAPHICS

44 Most Households LackInternet Access Fewer than 30 percent of the homes in 39 states had Internet access in 1998.

45 College Degree Means MostComputer Ownership The higher a household’s education level, the more likely it has a computer.

48 Internet Gap WidenedBetween Whites, Minorities Internet use increased faster among whites than minorities from 1997 to 1998.

51 ChronologyKey events since 1907.

53 The Broadband Advantage:It’s Not for Everyone Cable-installers often skirt low-income and rural areas.

57 At IssueAre government regulations widening the digital divide?

58 Popular E-Rate ProgramFaces Election-Season Attack An election-season attack may target the popular subsidy for schools.

FOR MORE INFORMATION

61 BibliographySelected sources used.

62 The Next StepAdditional articles from current periodicals.

Cover: Wireless telecommunications make high-speed Internet access possible. (Corbis Images)

Jan. 28, 2000 43CQ on the Web: www.cq.com

BY KATHY KOCH

THE ISSUES

The Digital Divide

E lementary schools on the Yurok Indian Reservation in Northern California do not have access to

the Internet. In fact, they don’t have computers — or telephones or even electricity.

“If our kids are ever going to get Internet access, we’ll have to start with the basics,” says tribal Chairperson Susan Masten. “Our big challenge is to get electricity. Then we’ll have to work on getting phones before we can even think about computers.”

In the long run, however, it is the lack of computers that may hurt Yurok children the most. Without computer experience, they will be handicapped when they attend a high school with computer-literate kids, or seek good jobs in mainstream America. But utility companies say it is not cost-effective to install power or phone lines to isolated places like the Indians’ Klamath River site.

To the Yuroks, the so-called digital divide — the gap between the techno- logical “haves” and “have-nots” — is a vast chasm. “We never think of Third World conditions existing in the U.S.,” Masten says, “but that’s what this is.”

The Internet may be transforming the world economy into a global village, but millions of villagers in the low-tech, unconnected hinterlands are being left behind. Technology experts say inner cities and large parts of rural America — plus many developing nations — are losing out on jobs, economic devel- opment and civic participation as the high-tech train roars by.

The wealthy are 20 times more likely to have Internet access than the poor, according to a recent Commerce Department study. And single parents, rural residents, Native Americans, His- panics and blacks also lag behind in computer ownership and Internet ac-

cess, the report said. 1

“If we don’t address this issue, it will have a serious impact on society in the next century,” Commerce Sec- retary William M. Daley said before the start of a national summit on the digital divide in Washington, D.C., in December. 2

Calling the divide “one of America’s leading economic and civil rights is- sues,” the report linked the gap to in- come, race, geography and education — and said it is likely to get worse.

“The digital divide has turned into a ‘racial ravine’ when one looks at access among households of differ- ent races and ethnic origins,” the report said. For instance, the Internet- access gap between blacks and whites grew 53 percent between 1997 and 1998, and 56 percent between Hispanics and whites. 3

The survey, the third in a series published by the Commerce Depart- ment since 1995, concluded that “minorities will continue to face a greater digital divide as we move into the next century,” because education and income appear to be among the leading factors driving the divide. 4

Not even mentioned in the Com- merce study is a new gap that some observers consider even more dis- turbing: the gap between those who

have access to high-speed — or broadband — Internet service and those who do not.

Unless the government intervenes, these experts warn, the broadband di- vide will isolate rural and inner-city America even more profoundly than the Interstate Highway System partitioned the nation in the 1950s and ’60s.

“If you think that the digital divide is only about getting computers into the hands of poor people, you ignore the rapidly developing infrastructure divide,” says Mark Lloyd, executive director of the Civil Rights Forum on Communications Policy.

Broadband allows interactive, real- time audio and video, plus extensive graphics to be delivered to desktop computers up to 100 times faster than existing dial-up modems. It can be delivered now through fiber-optic cable and upgraded copper telephone lines, or digital subscriber lines (DSL). Eventually, broadband is expected to be widely available through wireless services.

Broadband Internet access is al- ready crucial for big business, and some say it is becoming increasingly vital for small- and medium-sized businesses, whose suppliers and customers are beginning to expect them to conduct business over high- speed networks. And small towns see broadband access as a necessary tool for attracting new businesses and retaining old ones.

Because broadband is considered the future of the Internet, communi- cation companies are busily upgrad- ing existing phone lines and install- ing high-speed cables and satellite dishes in cities around the world. But they are targeting high-income and business-dominated areas that prom- ise a quick, lucrative return on their sizable investments. Not only are poor neighborhoods being bypassed — or redlined, as some assert — but so are many residential and rural areas.

THE DIGITAL DIVIDE

44 CQ Researcher

Already, city-dwellers are 18 times more likely to be offered broadband services than rural Americans, accord- ing to iAdvance, a coalition of public- interest groups and regional telecom- munications companies. “Rural areas are being ignored” by those installing the Internet’s broadband “backbone,” or infrastructure, said a recent coali- tion study. 5

Rural lawmakers have begun com- plaining bitterly about the growing broadband divide. “As this incred- ible, fast train of broadband services is leaving the station, some Ameri- cans are going to be left in its dust,” said Rep. W. J. “Billy” Tauzin, R-La., chairman of the House Commerce Telecommunications, Trade and Con- sumer Protection Subcommittee. Eat- ing digital dust will be people in “the most poverty-ridden sectors of our

country, the minority centers of our country,” and those living in the poor or rural parts of the South and West, he said in remarks to colleagues in early November. 6

Indeed, in three years three-quarters of the U.S. population will have broad- band Internet access from at least one source, but 25 percent will have no access, Tauzin said, citing a recent study by Legg-Mason, a brokerage firm.

Some telecommunications indus- try representatives say market forces will eventually close both the digital and broadband gaps. Others say the government must finish deregulating the telecom industry because only the magic of an unfettered market can bring about full communications equity.

President Clinton has asked Com- merce Secretary Daley to devise a

national strategy to make “comput- ers and Internet access available for every Ameri- can.” And in his State of the Union message on Jan. 27, the president was to announce that he would ask Congress to pro- vide grants to help poor families go on-line.

C l i n t o n a l s o vowed to use his upcoming “new markets” tour of low-income com- m u n i t i e s t h i s spring to highlight the digital divide. Meanwhile, the administration is promoting several p u b l i c - p r i v a t e partnerships, in which computer and technology

companies donate time, money or equipment to those without comput- ers, training or Internet access.

Some have criticized Clinton’s policy as too passive. “It’s a trickle-down ap- proach based on corporate welfare,” says Jeff Chester, executive director of the Center for Media Education. “We need a clear, conscious, national strat- egy to see that the gaps are closed. Otherwise, those already disenfran- chised will become even more marginalized.”

The administration also has pro- posed and championed the “e-rate” program — a digital safety net erected by Congress when it rewrote the Tele- communications Act in 1996. The program provides up to $2.25 billion a year for schools and libraries to receive Internet access at discounted, or “educational,” rates.

Most Households Lack Internet Access

Sources: National Telecommunications and Information Administration and U.S. Census Bureau, “Current Population Survey,” December 1998

In 39 states and Washington, D.C., fewer than 30 percent of the households had Internet access in 1998. Household access topped 30 percent in only 11 states.

Over 30 percent

From 20-30 percent

Under 20 percent

Percent of Households With Internet Access, 1998

Wash.

Oregon

Idaho

Montana

Wyoming

Nevada

Calif. Utah

Arizona

Colorado

New Mexico

Kansas Mo.

Ark.

Texas La.

Miss.

Ill.

North Dakota

South Dakota

Minn.

Wis.

IowaNebraska

Mich.

Ind. Ohio

W. Va.

Pa.

N.Y.

Va. Ky.

Vt.

N.H. Maine

R.I.

Mass.

Conn. N.J.

Delaware Maryland

N.C.

Ala. Ga.

S.C.

Fla.Hawaii

Alaska

Okla. Tenn.

Jan. 28, 2000 45CQ on the Web: www.cq.com

Since 1985 the government has also subsidized telephone service for low-income Ameri- cans through the Lifeline and Linkup programs, which last year provided $500 million in aid. It spent another $400 million to promote rural telemedicine via the Internet.

All three subsidies — for schools and libraries, low-in- come Americans and rural health centers — fall under the universal service program.

The fourth and largest part of the program subsidizes phone service for Americans living in rural and isolated areas. Known as the “high- cost program,” it allows phone companies to inflate urban, long-distance and business phone rates in order to raise enough money to subsidize rural rates to keep them af- fordable. Without the 66-year- old program, Americans in iso- lated areas would have to pay hundreds of dollars a month for basic phone service. 7 It is funded through about $20 billion in local, state and federal taxes and price supports that are part of monthly telephone bills, but not always clearly enumerated.

Members of Congress from rural areas and other advocates now say the universal service program should be expanded to subsidize broadband Internet access for poor and rural Americans, not just basic phone service.

As consumers, lawmakers and telecommunications experts confront the digital and broadband divides, these are some of the questions they are asking:

Should we worry about the digital divide?

Harris N. Miller, president of the Information Technology Association

of America (ITAA), says the digital divide won’t be around long enough to worry about.

“Rather than seeing the glass as three-quarters full, some folks insist on seeing it as one-quarter empty,” he says. “It’s not a digital divide. It’s really a digital opportunity.”

Information technology has spread faster than any new technology in history, he points out. It took 38 years for 50 million Americans to get access to radios and 13 years for 50 million Americans to buy a televi- sion, he says. “But it only took five years for 50 million to access the Internet,” he says. “Yet I never heard anyone talk about a radio or tele- phone ‘divide.’ ”

All new technologies have a time- lag in some locations, Harris argues. “Just as we didn’t build new superhigh- ways across America all at the same

time, you don’t install a new technol- ogy everywhere at the same time,” he says. And wealthier people always use new technology first, he admits.

Americans need to be patient, he advises, because Internet access costs are falling, and more libraries and community technology centers are offering free access. The Internet will soon be so ubiquitous that “in three or four years we’ll look back and wonder what all the fuss was about,” Harris says.

David Boaz, executive vice presi- dent of the libertarian Cato Institute, agrees. “It is sheer scare-mongering to write reports about information haves and have-nots,” Boaz wrote. “The reality is a little less exciting: the have-nows and have-laters.” 8

Companies have a powerful incen- tive to make sure the Internet is ac- cessible to as many customers as pos-

College Degree Means Most Computer Ownership In every region of the United States, the likelihood that a household had a computer in 1998 rose with the household’s education level. In both central cities and rural areas, the rate of computer ownership in house- holds with a college degree was twice that of households with only a high- school diploma.

Sources: National Telecommunications and Information Administration and U.S. Census Bureau, “Current Population Survey,” December 1998

Percentage of U.S. households with a computer, 1998

Elementary Some H.S.

H.S. Diploma or GED

Some College

B.A. or More

U.S. Rural Urban Central City

0

10%

20%

30%

40%

50%

60%

70%

80%

THE DIGITAL DIVIDE

46 CQ Researcher

sible, Miller adds. For example, most music, movies and videos will be dis- tributed via the Internet in the future, and young people in the inner cities are some of the largest consumers of those products. “Companies would be crazy to just forget about 30-40 per- cent of the market,” he says.

Moreover, Miller contends, com- panies installing high-speed Internet facilities are not avoiding non-white areas for racial reasons. “It’s not about race. It’s about timing.”

“I’ve talked with bankers, telecom- munications executives and utility com- panies,” says Allen S. Hammond, a pro- fessor of telecom law at Santa Clara University. “They all say they’d go into those areas if they can make a profit. That’s the only language they speak.”

But critics say technology compa- nies may be making erroneous, ra- cially based assumptions about low- income communities. They might find out later — as the cable-TV compa- nies once did — that the areas they are bypassing would be major con- sumers of their products, says Darien Dash, CEO of DME Interactive Hold- ings Inc., the first publicly traded black Internet company. In fact, cable-com- pany statistics show that low-income neighborhoods are the highest con- sumers of high-end cable services.

Dash told the December digital divide summit that African-Americans, who spend $25.2 billion a year on electronics, do not need “digital wel- fare.” “If you don’t think my aunt, who spends $400 on a sweatshirt, has enough money for a computer, you’ve got to be kidding,” he told the group.

In any event, Miller says, the racial digital divide is rapidly closing. “To- day the fastest-growing segment of the population signing onto the Internet for the first time is African- Americans,” he says. Boaz also notes that the Commerce Department study showed that computer ownership by blacks increased 125 percent from 1994-1998 but only increased 72

percent among whites. But Larry Irving, a former assistant

secretary of Commerce and an au- thor of the three digital divide stud- ies, notes that Internet access is only growing rapidly among upper- income African-Americans.

Irving strongly disagrees with Miller’s contention that policy-mak- ers shouldn’t be concerned about the digital divide just because they never worried about a telephone or televi- sion “divide.” In today’s Information Age, he argues; lacking computer ac- cess and skills can much more ad- versely affect one’s life than lacking a television did in the Industrial Era. “Today, millions of jobs are available only on-line,” Irving says. “College applications are increasingly being provided only on-line, and you can buy things more cheaply on-line.”

Free-market advocates say the na- tion does not need a new government strategy or new programs to bridge the digital divide, because competi- tion, innovation and corporate phi- lanthropy will lower costs and in- crease availability. “You’ll see very widespread deployment of Internet technology without any federal inter- vention,” says Solveig Singleton, di- rector of information studies at the Cato Institute.

“That is the same thing these people have said throughout our history,” says Mark Cooper, director of research at the Consumer Federa- tion of America. “They are not con- cerned with poor, isolated consum- ers. If you press them hard, it’s not that they think the divide will go away. It’s just that they view society as the have-nows and the have- laters.” But allowing the free market to provide service to the have-laters in their own time is tantamount to writing off the current generation of students, he says.

Taking such a laissez-faire attitude is especially dangerous, Hammond says, “When you are dealing with a

Congress that wants to cut back money on education, eliminate the e- rate and only address the digital di- vide if it affects their rural constitu- ents. They will forget about the folks in the cities.”

It didn’t hurt society, Hammond con- tinues, when cable companies delayed wiring whole areas of the Bronx or Brooklyn until the early 1990s, because people were only being denied enter- tainment. But with the Internet expected to serve as the basis for commerce, fi- nancial transactions, advanced educa- tional opportunity and political partici- pation, he says, “This isn’t about enter- tainment anymore.”

Indeed, by the end of 1999 the value of commercial Internet activity was estimated at $100 billion and was expected to double this year. Plus, the Internet created 1.2 million U.S. jobs in 1998, and $8 billion worth of consumer goods were sold on the World Wide Web last year. But more spectacularly, business-to-business commerce totaled $43 billion, and is expected to top $1.3 trillion by 2003. 9

As more political and government business is transacted on the Internet via high-speed connections, “It’s unfair and undemocratic to have half of America behind a digital iron curtain,” says Chester of the Center for Media Education.

Tauzin and Senate Minority Leader Tom Daschle, D-S.D., say small towns and small entrepreneurs bypassed by broadband technology cannot afford to take a wait-and-see approach. “We have no time to waste,” Daschle told telecom CEOs last September in Washington. “Markets are being tapped now. Companies are making decisions now about where to move. Rural communities need the tools to compete for these companies on a level playing field.”

Critics of the magic-of-the-market- place approach also note that market forces follow the money: They work very well at serving high-income dis-

Jan. 28, 2000 47CQ on the Web: www.cq.com

tricts, but less well at serving low- income, high-cost areas.

“There’s no avenue of upward mobility being created by this digital economy for low-income communi- ties,” says the consumer federation’s Cooper, citing the income-inequality gap that has been growing during the past two decades in the United States and worldwide. “That’s why the folks were protesting [at the recent World Trade Organization meeting] in Se- attle. Globalization and the digital economy are creating a dual society, in which you have the very wealthy at the top and the very poor at the bottom. And the middle ranks — made up of well- paid industrial labor and middle management — are shrinking.” 10

Critics also fear that if the country just waits for competition to take care of the problem, the di- vide could become per- manent, particularly for broadband service, which involves major infrastruc- ture installations. “The di- vide for telephones in low-income neighbor- hoods and on Indian res- ervations still exists, and it is persistent and consis- tent,” Irving says. “So it is likely that the digital divide, espe- cially for broadband access, will be persistent and consistent as well.”

“There’s a fundamental difference between us and the folks who say ignore the divide and it will go away,” Cooper says. “We believe that if you don’t change the institution, a vast pool of people will not benefit from the new economy, and that if private parties control the highways of com- merce, they will restrict access.”

Are government regulations widening the broadband divide?

Industry lobbyists, conservative

think tanks and free-market advo- cates say federal and state regula- tions are worsening the broadband digital divide.

Adam Thierer, an economist at the conservative Heritage Foundation, argues that the primary deterrent to increased broadband deployment is the “heavy-handed, intrusive, meticu- lously detailed and ridiculously com- plex” system of federal, state and local laws and regulations governing the telecommunications industry.

“Regulation is currently a major hindrance to greater economic equity” in how broadband is deployed across

the nation, says the iAdvance study. 11

“The current regulatory climate has encouraged companies to make ra- tional decisions that drive investment to bigger cities and large-business customers,” US West Chairman Solomon D. Trujillo told the Senate digital divide summit last September. “This is exactly the opposite of what Congress intended in the Telecom- munications Act of 1996.”

Citizens for a Sound Economy (CSE), a free-trade advocacy group, agrees. The divide was created by the very regula- tions meant to foster competition and benefit customers, the group says. To-

day those regulations prevent compa- nies from offering high-speed Internet access, and the threat of new regula- tions has “sidelined many companies from expanding broadband services,” it said in a July statement.

Heading the list of offending regu- lations, CSE says, is the congression- ally mandated ban against local tele- phone companies transmitting data over long distance. The 1996 act said the regional Bell operating compa- nies (RBOCs) could offer long- distance services only after they had proven that their local telephone mar- kets were competitive. The lawmak-

ers were trying to spur competition in local phone service, where the RBOCs have re- mained dominant since their parent company, AT&T, was broken up in 1984.

But since 1996, only one RBOC has been granted such permis- sion. On Dec. 22, the Federal Communica- tions Commission (FCC) allowed Bell Atlantic to offer long distance in New York state. 12

US West and other RBOCs want Congress to either reopen the

1996 act to eliminate the provision or grant them some kind of special ex- emption to the ban. “Without this restriction — which was never writ- ten with the Internet in mind — many more rural communities would be served,” the iAdvance study said. “Regulations have a powerful chilling effect on investment.”

The act’s requirement that RBOCs open, or “unbundle,” their voice networks so competitors can lease various elements at discounted rates is another impediment, Thierer ar- gues. Such regulations indirectly dis- courage broadband expansion be-

Affluent Americans are 20 times more likely to have Internet access than the poor, according to a recent Commerce Department report.

C o rb

is I

m a g e s

THE DIGITAL DIVIDE

48 CQ Researcher

cause they “adversely affect the po- tential return on investment and encourage industry ‘free-riding’ by rivals who would rather use existing local network elements under a rent- control scheme than risk capital building their own,” he wrote. 13

Thierer and others also argue that price controls and hidden subsidies embedded in the current universal service program discourage faster ru- ral broadband development. By keep- ing residential rates low and business and long-distance rates artificially high, the system encourages new RBOC competitors to “cherry pick” the high-margin sectors, such as urban businesses, he says. Meanwhile the RBOCs are losing the source of the subsidies designed to help them pro- vide service to underserved areas.

Further, he says, because rural phone rates are kept below cost by

the subsidy program, the new com- petitors are not interested in offering services in rural areas.

Robert T. Blau, vice president of external and regulatory affairs for Bell South, agrees that the way universal service is administered exacerbates the broadband digital divide. The FCC has made life “pretty sweet” for the RBOCs’ competitors, providing strong, government-induced incen- tives to “cream-skim” high-end busi- ness customers and “pretty much exclude everyone else,” he says.

But opponents of wholesale telecom deregulation argue that the RBOCs are misappropriating the term “digital divide” to solve their own short-term corporate interests. “There are some companies who are just shameless,” Irving says. “They will use any argument they can to get out from under regulations designed to pro-

mote competition. They just want as much monopoly power as possible with as little regulation as possible.”

“The Baby Bells are recovering monopolists suffering from a deep- seated pathology needing constant regulatory intervention,” Rep. Edward J. Markey, D-Mass., ranking member of the Commerce Telecommunica- tions, Trade and Consumer Protec- tion Subcommittee, said at a panel hearing last June.

“These guys are just digital crybabies,” Chester says. “They have enjoyed virtual government-approved monopolies for most of the past 60 years. They need to realize that there are social costs associated with that — such as offering efficient, afford- able services and democratic access.”

“Clearly, if we did not have a Life- line program we’d have millions of Americans without telephones,” he continues. “And without the e-rate, we’d have millions of students with- out computers. So rather than widen- ing the digital divide, government policy has kept the digital divide halfway decent.”

Irving agrees. “I just don’t see how loosening federal regulations will solve the digital divide,” he says. On the contrary, “I don’t believe they will deploy broadband fairly or ubiq- uitously unless the government is standing over them with a stick.”

Cooper also agrees. “Low-income and rural areas will not attract invest- ment, and thus will not receive rea- sonably priced, comparable services on their own,” he says. “The govern- ment has to establish policies to ei- ther force them to go there or make it economically attractive.”

“They’re saying, ‘Let us into long distance and we’ll take care of the problem. But there’s nothing in their history that indicates that they will do that,” he continues. He points out that since the 1996 act began deregulating the industry, consumers have seen a 21 percent increase in

Internet Gap Widened Between Whites and Minorities Internet use increased at a faster pace among whites than among minorities from 1997 to 1998, causing a bigger gap between whites’ and minorities’ Internet use.

Sources: National Telecommunications and Information Administration and U.S. Census Bureau, “Current Population Surveys,” October 1997 and December 1998

Percent of U.S. Households Using the Internet, 1997-1998

5%

10%

15%

20%

25%

30%

35%

5%

10%

15%

20%

25%

30%

35% 13.5 percentage point difference between whites and blacks

20.7 percentage point difference between whites and blacks

19.5 percentage point difference between whites and Hispanics

Wh ites

Blacks

Hispanics {{

12.5 percentage point difference between whites and Hispanics

19981997

}}

Jan. 28, 2000 49CQ on the Web: www.cq.com

cable rates and a 10 percent jump in intrastate long-distance rates.

ITAA’s Miller adds that since 1996, “Every local Bell has tried to eat an- other one, and true competition is still in very nascent stages.”

“Only one local geographic area in the entire country [New York] has enough local competition for a Bell company to credibly ask the FCC to allow it into the long-distance market,” he points out. Meanwhile, the long-dis- tance market is increasingly competi- tive, he says, “with 400 different long- distance companies out there.”

Contrary to what the RBOCs say, the Bells’ competitors have been forced to “cream-skim” high-end business and urban markets, Miller contends, because the RBOCs have intention- ally blocked them out of many local markets. Yet once there is com- petition in a local area, such as a cable com- pany offering broad- band services, “Sud- denly, ‘presto chango,’ the RBOCs begin offer- ing DSL,” Miller says. “So the sooner we can convince them to give up their monopolistic practices, the sooner we’ll have companies beating down the doors of small businesses, offering them broadband service at reasonable prices.”

Should the federal government subsidize high-speed Internet access?

When Congress rewrote the tele- communications law in 1996, it or- dered the FCC to redefine the univer- sal service subsidies to cover “ad- vanced telecommunications services.”

By definition, that covers broad- band, insists Sen. Byron L. Dorgan, D-N.D. But, Dorgan says, “We don’t

think the FCC has moved as aggres- sively as we’d have liked” to make sure that is enforced.

Farm-state lawmakers like Dorgan and Daschle say it is absolutely es- sential for rural residents and small businesses to have affordable high- speed Internet services. Otherwise, they say, small towns risk being left behind, just as many were bypassed when the nation’s Interstate highways were built. And small- and medium- sized businesses lacking broadband access also will be left out of the digital economy, they add.

“Access to advanced telecommu- nications services must be universal,”

Daschle told the telecom CEOs last September. “This is our shared re- sponsibility.”

Subsidizing high-speed Internet installation is like subsidizing Inter- state highways, argues Flo Raitano, director of the Colorado Rural Devel- opment Council. “Certainly the ‘in- formation superhighway’ is as impor- tant to us as the Interstate Highway System,” she said. “We should all share the burden” of constructing it. 14

“Absolutely, universal service should be expanded to include broad- band,” says Philip M. Burgess, presi-

dent of the Center for the New West, a free-market think tank in Denver.

“There are certain things — like postal delivery, Interstate highways, harbors and good airports — that are so important that they are endowed with the public interest. And high- speed Internet service is one of those things.”

“E-mail and the Internet are the 21st century’s equivalent of the postal service and the telephone system of the last century,” says market analyst Scott Cleland, managing director of Legg-Mason’s Precursor Group in Baltimore. “They are all forms of com- munications, and there has been a

longstanding national goal in this country that we need universal com- munications among all Americans. Both Republi- cans and Democrats in Congress reiterated their commitment to that goal when they passed, with overwhelming bipartisan support, the Telecommu- nications Act of 1996.”

O t h e r s a r g u e t h a t broadband access is rap- idly becoming an eco- nomic-equity issue as more students in wealthy neighborhoods have ac- cess to interactive, high- q u a l i t y , e d u c a t i o n a l

Internet material via broadband and as more commerce is conducted via high-speed lines.

“We have a growing gap between the rich and the middle class in this country,” says Lloyd of the Civil Rights Forum on Communications. “That gap has serious social and political rami- fications, especially for our democ- racy. A broadband digital divide will only exacerbate that problem.”

Telephone company executives say that before the country can even con- sider expanding universal service to include broadband, it needs to bring

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Communications companies target high-income and business- dominated areas — not poor neighborhoods, outlying suburbs and rural regions — for installation of high-speed Internet access cables.

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some order to the current system. “We need to walk before we can run,” says David Bolger, vice president of com- munications for the U.S. Telecommuni- cations Association (USTA), which rep- resents the RBOCs. “The FCC needs to fix the universal service mess before it tries to enlarge it.”

In essence, the problem with universal service is what some critics call “hidden” subsidies. They say that when Congress ordered the FCC to periodically redefine an evolving level of services to be subsidized under universal service, it also or- dered the commission to clearly iden- tify and spell out those subsidies, or make them “explicit,” by May 1997.

So far, the commission has not come up with a scheme for revealing all the hidden state and federally regulated subsidies, which some say reach $20 billion a year, all paid to local phone companies. (The federal share is about $5 billion.) “There’s been a huge debate going on over how much the program costs and how much people can afford to pay for local service,” Blau says.

Others say the FCC has not made the fees explicit because neither Congress nor the commission is re- ally anxious to tell city-dwelling tele- phone customers how much they are paying to subsidize phone service in rural areas.

Many fear a nasty rural-urban war could break out once city-dwellers see the explicit subsidies and realize that they pay higher phone rates so rural folks can have affordable phones.

“The customer in Washington, D.C., won’t want to underwrite the phone service for somebody down in south- western Virginia, even though he’s been doing it since 1934,” Blau says.

Lawmakers especially don’t want to then turn around and tell the public that they are now expanding the sub- sidy program manyfold to cover broad- band. “No one is anxious to be known as the guy responsible for a massive

expansion of the universal service en- titlements,” Thierer says. They are par- ticularly averse to tackling such an is- sue in an election year, he says.

Besides, lawmakers say, so far no one knows how much it would cost to expand the program to include broadband. “Sen. Dorgan’s reading of the act is a nice wish,’’ Blau says, “but it would cost billions of dollars a year, if not tens of billions, depend- ing on how fast you were going to try to push the stuff out there.”

Others say that instead of expand- ing universal service, the government should deregulate the industry and let the market take care of the prob- lem. “The answer is competition, competition, competition,” Miller says. “If there were true competition, there would be lots of companies — cable, wireless and telephone — vying to offer broadband in rural areas. Rural Republicans and inner- city Democrats are trying to set up a fight that doesn’t need to be fought.”

“Why should government policy say that just because you live in a rural area you should get below-cost telephone service?” asks Irving. “Per- haps those who can afford to pay the real cost for telephone service should pay their own way and keep the subsidies for those who are truly constrained economically.”

Thierer thinks deregulation would nearly negate the need for subsidies. But if subsidies were still needed, they could be distributed as “phone stamps,” like food stamps, paid di- rectly to the individual, he says.

Others warn that in considering whether to subsidize broadband, policy-makers must also consider the lost opportunity costs for not deploy- ing broadband as quickly as consum- ers are willing to pay for it. “If there’s a lot of demand out there not being met, that has huge social costs asso- ciated with it,” Blau says.

Any attempt to redefine universal service should be technologically

neutral, warn others. “If the govern- ment were to tell the phone compa- nies to provide fiber optics to every cow barn in America, they run the risk that within a few years wireless may be the cheapest way to provide that service,” Blau says.

Others argue that it’s simply too soon to include access to broadband in the universal service program. “It’s a stretch even for me,” Chester says. “Certainly we want to migrate to broadband over time, but right now we need to concentrate on plain, old, vanilla narrow-band access, because that’s the standard used by most people at this point in the evolution of the Internet.”

BACKGROUND ‘A New Illiteracy’

I n 1995, when the Commerce De-partment first studied disparities in computer and modem ownership, “digital divide” didn’t appear any- where in the report. 15

The term didn’t become a part of the national lexicon until early in 1996. At the time, only 3 percent of the nation’s classrooms were con- nected to the Internet, but the World Wide Web had burst onto the scene, and Americans were beginning to realize that a technology gap was developing. Today more than 90 percent of K-12 public schools are on the Internet. 16

“We’re facing a new illiteracy — computer illiteracy,” said Malcolm Cohen, author of Labor Shortages: As America Approaches the 21st Cen- tury. “Many, many children won’t be prepared for the work force, because they can’t use computers.” 17

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Chronology Early 1900s The federal government be- comes involved in regulating the telephone industry, with the goal of making phone service universally available to all Americans.

1907 Bell Chief Executive Theodore Vail coins the phrase “universal service,” meaning that all tele- phones should be interconnectable.

1934 Congress passes the Communica- tions Act of 1934, codifying the existing AT&T phone monopoly in exchange for the company’s promise to build a universally interconnected phone system nationwide. The act creates the Federal Communications Com- mission (FCC).

•

1950s-1970s The concept of universal ser- vice comes to mean that tele- phone service should be avail- able to all Americans at rea- sonable rates.

1970 Fiber-optic cable is developed.

1980-1995 Pressure to break up the AT&T monopoly leads to the opening of the long-distance market to competition and the creation of seven regional Baby Bells.

1982 Federal Judge Harold Green approves the Justice Department’s consent decree calling for the breakup of the AT&T monopoly.

1984 The breakup takes effect and AT&T begins to compete in the long-distance market with new- comers like MCI, while the seven Baby Bells retain a mo- nopoly on local phone service.

1985 Congress creates the Lifeline and Linkup services to help low- income families afford telephone service.

1995 In July the Commerce Depart- ment publishes its first report showing a gap between the Information Age “haves” and “have-nots.” The World Wide Web is in full swing.

•

1996-Present The Telecommunications Act is revised and leads to a flurry of telecom industry mergers. The Internet explodes in popularity and becomes a major source of commercial interaction in America. A growing digital divide between rich and poor Americans is identified, and programs are launched to address it.

1996 With broad bipartisan support Congress passes the Telecommu- nications Act, designed to spur greater competition in local and long-distance telephone markets. The act reaffirms the nation’s commitment to universal service but orders the FCC to spell out what subsidies are provided and to redefine universal service to include “advanced telecommuni- cations services.” The act also

requires the FCC to set up a system for subsidizing Internet access for schools and libraries — known as the e-rate — a pet project of Vice President Al Gore. In March President Clinton and Gore participate in the first Net Day, when volunteers help hook local schools up to the Internet.

May 8, 1997 The FCC misses its first deadline for making the universal service subsidies explicit.

1998 The Commerce Department issues its second study of the growing digital divide.

July 1999 The third Commerce Department study of the digital divide finds that, except for wealthy African- Americans, the divide is widening.

December 1999 The Commerce Department sponsors a national summit on the digital divide. President Clinton says closing the divide is one of his administration’s priorities and orders Commerce Secretary William M. Daley to draw up a national strategy to address the problem.

Jan. 28, 2000 President Clinton’s State of the Union address is expected to call for up to $50 million in grants to help low-income families get access to the Internet.

•

•

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Computers in schools turned into a hot election-year topic as it became evi- dent that the problem was not just about getting computers into classrooms but hooking them up to the Web.

Students with Internet access could interact with experts and participate in on-line debates. Unconnected classrooms, on the other hand, gener- ally used their computers like word processors, or used software limited to repetitive drills in reading and math.

“Richer kids use the Internet as a means of exploration and discovery,” said Stanford education Professor Michael Kirst. “Poorer kids without the Internet will just use a computer for drill and practice exercises.” 18

Both Clinton and Vice President Al Gore campaigned for the e-rate pro- gram to subsidize school and library Internet access. In February, when Congress adopted the Telecommuni- cations Act revisions, they also estab- lished the e-rate program for schools and libraries. A month later, 20,000 volunteers turned out to hook up a fifth of California’s schools to the Internet in a single day. In the ensu- ing months, similar “Net Days” were held at schools across the country.

In 1998, the Commerce De- partment’s second digital divide sur- vey showed that since the first report in 1995, computer ownership had increased 52 percent, modem owner- ship 139 percent and e-mail access by 397 percent. But the report found that disparities in computer owner- ship and Internet access based on income, demographic groups and geographic location had not only persisted but also had grown.

The department’s first two digital divide reports got little attention, however, probably because most of Middle America had not yet caught “dotcom fever,” Irving says.

The latest report, based on 48,000 face-to-face Census Bureau inter- views, still finds that the gap is appar-

ently related to income, race, geogra- phy and education. For instance:

• Black and Hispanic households are about one-third as likely to have home Internet access as Asian house- holds, and two-fifths as likely as white households.

• The college-educated are 16 times more likely to have home Internet access than the least edu- cated, but in rural areas they are 26 times more likely to have home Internet access than those with an elementary education.

• Regardless of income level, rural Americans are less likely to have home Internet access. The urban poor access the Internet more than twice as often as the rural poor.

• Two-parent households are twice as likely as female-headed households to have a computer, but two-parent black families are four times more likely than single-parent black house- holds to have one.

Universal Service

T he major government programaimed at eliminating such Internet disparities is the universal service program. For decades, its primary goal has been to ensure that all Ameri- cans have affordable access to the nation’s communications network, which until now has been the tele- phone system.

The term “universal service” was coined in 1907 by then AT&T Chief Executive Theodore Vail, who actu- ally used the phrase to mean that all phones should be interoperable. At that time, there were dozens of phone companies, and most used different electronic protocols, which did not interconnect. Thus a businessman would typically have five or six tele- phones on his desk, each providing service to a different area.

Vail proposed the use of a single protocol so all Americans could call each other on one phone system. But he knew that hooking up every home in America would be costly, because those located in sparsely populated rural areas are extremely expensive to serve.

So he told regulators if they would give him a monopoly, he could cross- subsidize, or “average out,” the more expensive services by inflating the rates in low-cost areas. Because it would all be done within one com- pany, the cross-subsidies could re- main hidden, or implicit. Congress formalized the system with passage of the Communications Act of 1934.

During the 1950s, the concept of universal service changed from mean- ing “interoperability” to a commit- ment to provide affordable service for all Americans, no matter their income or location.

Under the program, business cus- tomers have typically been charged two to three times the price of resi- dential service, even though their service often costs much less to pro- vide. Urban residents are also charged more than would otherwise be re- quired, as are long-distance custom- ers and those purchasing today’s advanced services, like call-waiting, call-forwarding and caller ID.

The system enabled AT&T, and later the regional Baby Bells, to build the nation’s telephone system, which today connects 94 percent of U.S. households. But in the process, the system of hidden fees and charges became “a messy and complex pro- cess — a mind-numbing system of cross-subsidies and government-man- dated support payments,” Burgess says.

“What you had all these years was a quiet conspiracy between regula- tors and the phone companies,” he says. “The regulators allowed the phone companies to overcharge for

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The Broadband Advantage: It’s Not for Everyone

I t may not seem like progress, but those narrow trenches being dug in city streets around the country are bringing “broadband,” or high-speed, Internet service. “But a lot of the commuters who have to suffer through

all that road work will not benefit any time soon from what’s being done,” says Larry DeFranco, president of InContext, a firm that tracks broadband-installation patterns.

That’s because the fiber-optic cables are consistently being laid in patterns favoring high-end downtown business districts and outer suburbs where corporate offices or government campuses are clustered. So far they are avoiding low-income and rural areas, he says.

In Atlanta, for instance, the fiber only heads north from the downtown areas, DeFranco says. “Nothing goes south, which is predominantly inhabited by African-Americans. It’s like a wall.”

In the areas where the cables are laid, however, economic growth follows, says William Lilley III, CEO of InContext. “Because having a high-speed Internet connection is so important to businesses these days, when a company’s lease runs out today, it must consider moving to where the cables are.”

Broadband is generally defined as having speeds at least 1.5 megabits per second, fast enough to have “full motion, real-time video” on the computer screen. Up to 100 times faster than current dial-up modems, it allows business users to instantly download graphics-heavy documents — such as product catalogs — which would take hours with a dial-up modem.

Consumers and businesses near cables can obtain ultra- fast Internet connections using cable modems. Or, if they are within three miles of a telephone company switching station, they can get the same service from the telephone company, using an upgraded “digital subscriber line” (DSL).

But those far from such services must either order a special, T-1 business line, which can cost more than $1,000 a month, or rely on slower dial-up telephone modems. And nowadays that can put a business at a distinct disadvantage, DeFranco says.

Even small businesses, like tire dealers, are needing higher-speed Internet service. “Goodyear no longer publishes its weekly catalog of tires that are available,” he says. “It’s posted on the Internet instead.” By the time a dealer using a dial-up modem downloads the catalog and orders, most of the popular tires are gone, he says.

The same thing happens with cars, DeFranco says. When General Motors began auctioning cars to dealers via the Internet, “They got such an outcry from the other end of the broadband divide that the company had to help finance satellite dishes for the dealers in isolated regions,” he says. But the dealer still had to pay for the satellite time he used, “and that’s very, very expensive.”

So businesses in bypassed neighborhoods either must

move or figure out how to remain competitive while waiting for broadband to come to their neighborhood. Some experts fear that thousands of small companies may flounder, as their business is siphoned off by Internet-advantaged competitors elsewhere. They also fear that as companies move out of unserved areas, they will leave behind economic stagnation. Likewise, small towns that have been ignored by broadband companies may lose business and young people to areas with broadband access.

Even entire states are being bypassed. For instance, Louisiana has only two high-speed Internet hubs, and most Western states have none, says Rep. W.J. “Billy” Tauzin, R-La., chairman of the House Commerce Telecommunications, Trade and Consumer Protection Subcommittee. “That’s the part of America that is going to get left behind in this incredible information revolution,” he told the House on Nov. 10, 1999. 1

Broadband companies say they plan to come back and fill in the bypassed areas later, but, “We find that they’re not coming back,” DeFranco says. “They just keep jumping to greener pastures as other technology-dependent companies move to the suburbs.”

Many have suggested that wireless eventually will provide reasonably priced service everywhere, because it does not require costly underground cables. But Lilley and DeFranco say they are seeing the same types of deployment patterns among fixed-wireless providers, which install satellite dishes on rooftops and then run data-transmission wires through the buildings to individual computers. “They, too, have to pick the high-end users first,” DeFranco says, “because it costs a lot to put the antenna on the roof and wire the buildings.”

As a result, DeFranco says, a digital divide is developing based on the type of business operated. Companies that need buildings to accommodate forklifts — and thus cannot locate in high-rise buildings downtown or in suburban commercial clusters — will find themselves on the wrong side of the broadband divide, he says. “Printers, for instance, will be out of luck, because they need a lot of space for their presses and are usually located in areas where the land is cheaper.”

Meanwhile, big corporations and suppliers with broadband “are saving tons of money by offering their inventories on the Internet,” DeFranco says. It allows them to save on printing costs, update their inventory daily, see what’s moving and adjust prices daily. “They are making their businesses better and faster and cheaper.”

“There’s nothing malevolent about all this. It’s economically, not racially, driven,” Lilley says. “And this has come along very fast. The 1996 telecom act didn’t even mention the word Internet.”

1 See Congressional Record, Nov. 10, 1999, p. H11945.

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certain services so they would have enough revenues to pay for service in the high-cost areas. In the process they’ve just larded this system up with a whole bunch of hidden taxes.”

When a court ordered the breakup of AT&T in 1984, the costs were spread among the seven regional Bells and the new long-distance companies. Low- cost phone services would continue to subsidize high-cost services, but long- distance companies like AT&T, MCI and others would contribute to the pot by paying significant “access fees” to the regional Bell companies for the right to route their calls through the Bell networks. This kept local phone bills lower but inflated long-distance prices.

Lifeline and Linkup Despite the longstanding commit-

ment to keep residential rates low, telephone service was still out of reach for many. So in 1985, after the breakup of AT&T, consumer advo- cates successfully sought two pro- grams to help the poor obtain phones. The Linkup program pro- vides up to $30 toward initial hookup costs, and the Lifeline program pro- vides up to $10 a month in state and federal subsidies to help defray monthly service charges.

But Lifeline and Linkup have some severe limitations, many of which are glaringly obvious on Native Ameri- can reservations. First, they are only available to those who qualify for Medicare or Medicaid. Indians receive their health care from the Bureau of Indian Affairs Health Service, making them ineligible.

In addition, Linkup can only be used if a phone line already exists in one’s home. It cannot be used to help pay for installing a phone line out to a house or a neighborhood, as is necessary on most Native Ameri- can reservations. In addition, recent studies show that some states fail to

provide their share of the monthly Lifeline subsidy.

Identifying Subsidies When Congress decided to pre-

serve universal service in 1996, it realized that the cross-subsidies of the past were incompatible with the new competitive marketplace they were trying to foster. Lawmakers fig- ured that if some services were being priced artificially high, competitors would try to lure away customers in those high-profit markets. Then the pool of money that local phone com- panies were using to keep residential rates low would soon dry up.

So Congress ordered the FCC to devise a system to make the previ- ously hidden subsidies explicit, set- ting a May 8, 1997, deadline. So far, the daunting task remains undone, complicated by the fact that no one really knows how much the high- cost portion of the universal service system costs.

Another problem is that policy- makers want to avoid an ugly rural/ urban battle, once ratepayers see how much the subsidies actually are. If telephone charges were allowed to reflect their actual, unsubsidized costs, “You’d have a political melt- down in certain areas of this coun- try,” Irving says.

Indeed, one FCC effort to identify true phone costs showed that totally unsubsidized residential rates would range from as little as $11.50 a month in Boston, Mass., to more than $2,800 in a small town in Nevada.

“When blue-collar folks in the cities find out they are paying higher phone bills so ranchers like [media mogul] Ted Turner or some guy with a ski chalet in Aspen can pay less for their telephones, they might get pretty angry,” he says.

To avoid such regional warfare over broadband, Blau says the gov- ernment must convince the public that deploying broadband nationwide

— and having everyone help pay for it — would represent “a good social benefit for society,” much like the Interstate Highway System. So far the administration hasn’t made that com- mitment, he says.

Meanwhile, confusion over uni- versal service reigns as the RBOCs wait for the new FCC rules while watching their competitors lure away the profitable portions of their busi- ness, which generated the money they used to keep basic phone ser- vice prices low for all. “We really are in a state of mass confusion over universal service,” Thierer says, “and the blame can be laid squarely at Congress’ feet for not making its intentions clear and for passing the buck to the FCC.”

But an RBOC spokesman blames the FCC. “We’re working in a policyless environment right now, because the FCC has been stalling for more than two and a half years on what constitutes universal service and who is going to pay for it,” Bolger says. “Such a decision takes some political courage, and that has not been at the forefront of what this FCC is all about.”

CURRENT SITUATION

‘Open Access’

A s the new year begins, two greatbroadband battles are being waged across the country. Huge amounts of money are at stake as corporate titans like AT&T, MCI Worldcom, the RBOCs and numer- ous Internet service providers (ISPs) and wireless and satellite companies

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scrap for their share of the giant tele- communications pie.

“This is the oil field of the next millennium,” says an FCC official. “This is the gold rush.” 19

Many say the outcome will either widen or shrink the digital divide, because it involves what the future Internet will look like. If competition thrives, the cost of accessing the Internet will go down, making it more widely available. The battles also will determine how, when and where the Internet infrastructure is built, and who will be bypassed in the process.

In the first fight, local officials are being asked by consumer groups to force cable operators — usually AT&T subsidiaries — to grant independent ISPs “open access” to their cable lines. But AT&T has already granted its business partner, At Home Corp., ex- clusive rights to provide Internet ser- vices over its high-speed cable lines through the year 2002. 20

Proponents of cable “open access” were encouraged, but not totally satisfied, when AT&T offered them an olive branch in early December. The company said it would voluntar- ily open its networks to Mindspring Enterprises Inc., one of the nation’s largest ISPs, after its current contract with At Home expires.

The proposal was not far-reaching enough to convince Rep. Robert W. Goodlatte, R-Va., to withdraw his measure to force cable companies to provide open access. “We need a national policy for consistency,” Goodlatte said after the AT&T deci- sion. “We need to go forward with legislation.” The House Judiciary Committee is expected to mark up Goodlatte’s bill soon. 21

Some consumer groups also think the voluntary measures don’t go far enough. They have been pushing city and county officials to insist that AT&T provide access to their facili- ties, much as the FCC did on Nov. 18, when it ordered the Baby Bells to

share their local telephone lines with competitors wishing to provide resi- dential DSL service.

The decision means most consum- ers won’t need a second phone line to obtain DSL service. Proponents say it will slash the cost and dramati- cally increase the availability of resi- dential DSL service. But Bruce Posey, senior vice president of US West, called the FCC action “corporate welfare” that gives one sector of the industry an unnecessary advantage.

Because AT&T has been more aggressive than the regional Bells at marketing its residential broadband service, only about 300,000 house- holds receive high-speed DSL service via their residential phone lines, com- pared with more than 1 million who receive broadband service from their cable companies.

Focus on Baby Bells

T he second battle looms in Congressover whether the Baby Bells should be excused from telecom act require- ments that they prove their local phone services are competitive be- fore they are allowed to send data over long-distance lines. Like the long-distance companies, the re- gional Bell operating companies want to be able to offer customers pack- age deals on “bundled” services, in- cluding broadband and local and long-distance telephone service.

On Dec. 22, the FCC granted Bell Atlantic permission to offer long-dis- tance service in New York state, the first such approval since the 1996 act. Bell Atlantic had to first prove to the FCC that its local market was open to competition.

Nonetheless, Reps. Tauzin and John D. Dingell, D-Mich., say they will forge ahead with their bill to exempt the regional Bells from such

FCC requirements. Along with 144 cosponsors, they claim the FCC has been too slow to open the long- distance market. 22

But supporters of both the Goodlatte bill and the Tauzin-Dingell measures will face stiff opposition from a coali- tion of lawmakers who believe it’s too soon to reopen the 1996 act.

Commerce Committee Chairman Rep. Thomas J. Bliley Jr., R-Va., has consistently said that the act is work- ing and that it is too soon to consider reopening the measure. “Chairman Bliley remains unconvinced that con- gressional action is necessary,” says Steve Schmidt, communications di- rector for the committee.

“Everyone knows that if the bill is reopened, then everything gets put on the table,” says a House staffer involved with the issue. “And it took us years to craft the ’96 measure, which passed with overwhelming bi- partisan support. So I don’t think many members of Congress are will- ing to get into it again, especially not in an election year.”

But as concern about the growing rural-urban broadband divide grows among Western and Southern law- makers, pressure could mount for a congressional solution to the problem.

Scare Tactics?

T auzin and a group of rural-staterepresentatives have vowed to talk about the digital divide “night after night,” in order to drum up support for a national broadband policy.

Some say the growing fear among rural senators and representatives about a widening broadband divide is largely being stoked by the RBOCs. “The Baby Bells are feeding off the digital divide fears just to get traction for their agenda,” Cooper says.

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In fact, trade associations in Wash- ington representing small businesses report no great clamor for more broadband — at least not yet. “It’s not a top agenda item,” says David Cullen, vice president for research and technology at the 600,000-mem- ber National Federation of Indepen- dent Businesses. “Our members are not at the point where a vast majority are concerned about broadband. A year from now that will probably be dramatically different.”

He suggested that perhaps small companies supplying larger compa- nies and high-tech entrepreneurs are feeling the broadband pinch more at the moment. But Rick Lane, director of congressional and public affairs for e-commerce at the U.S. Chamber of Commerce, says his group’s small- business members have not been complaining that either suppliers or customers are demanding that they get broadband. The chamber plans to “begin a dialogue” with its mem- bers this year “to educate them on broadband,” he says.

Nevertheless, the so-called Farm Team wants a pretty big grab-bag of high-tech goodies, says the Heritage Foundation’s Thierer. “But the urban and inner-city folks are saying per- haps we should focus on a more narrowly drawn solution,” he says

Cooper says that once the RBOCs see the trade-offs that rural lawmak- ers will require in exchange for the exemption, such as specific commit- ments to provide service in rural areas, “you watch how the Bells will start backing off.”

Moreover, Cooper says, opening the act could open the way for rural lawmakers to demand that universal service subsidies cover broadband, which the RBOCs generally oppose. “If the act is opened up,” he says, “there’s no doubt I could get a con- stituency together who would push hard to get a much broader definition of universal service.”

Proposed Solutions

I n the Senate, Farm Team senators areseeking administrative solutions rather than legislative ones. In a May 20 letter, they asked the FCC to more aggressively link universal service with the build-out of broadband. Among other things, they suggested that the FCC:

• Raise the minimum standard for basic voice telephone service eligible for universal service subsidies. Under the current standard, customers can- not even connect to the Internet at the 28.8 kilobits per second speed that many consumers already find too slow.

• Explore how universal service subsidies could be used to stimulate rural broadband investment.

• Encourage satellite and wireless companies to deploy more broad- band, and consider extending uni- versal service subsidies to wireless services in rural and tribal areas.

• Redefine universal service so rural customers can obtain subsidies for upgrading to broadband with speeds of at least 1.5 megabits per second, fast enough to allow full- range video.

On Dec. 23, FCC Chairman Will- iam E. Kennard responded, stating that making advanced telecom ser- vices available to all Americans, “es- pecially those in rural America,” tops his agenda. To that end, he wrote, the FCC has imposed “significant, en- forceable and unprecedented” condi- tions on regional phone company mergers, which should stimulate more competition and broadband de- ployment. Before a merger is ap- proved, at least 10 percent of DSL rollout would have to be in rural or low-income areas, he noted.

The commission has also acceler- ated its consideration of how univer- sal service needs to be redefined, he said. A joint federal-state advisory

board is expected to begin reviewing the issue this spring.

But several major obstacles to redefining universal service remain, not least that no one knows how much it would cost to cover broad- band, and no one wants to pay for it. “Unless and until the FCC figures out how it’s going to be paid for, it’s just not going to happen,” says Bell South’s Blau.

But Dorgan says how much it will cost is immaterial: “The act doesn’t say, ‘Do this if the cost is reasonable.’ It says to do this.”

OUTLOOK FCC Initiatives

A mid the uncertainty about nar-rowing the digital divide, there is cautious optimism among the Yurok that someday soon they will be con- nected to the rest of America via the telephone and Internet. After field hearings in January 1999 in Albuquer- que, N.M., FCC commissioners and Chairman Kennard came away de- termined to address the dearth of tele- phone services on Native American lands.

Only 16 percent of households on some reservations have telephones, the commission was told, and Native Americans can wait 10 years for a phone or may be told that they must pay $40,000 or even $150,000 to get the line.

Noting that phone companies have collected billions of dollars over the decades to provide low-cost service for all Americans, a frustrated Kennard said, “I don’t understand why the universal service subsidy isn’t work- ing in Indian communities. It is not a

Jan. 28, 2000 57CQ on the Web: www.cq.com

noyes At Issue:

Are government regulations widening the digital divide?

SOLOMON D. TRUJILLO President and CEO, US West

WRITTEN FOR THE CQ RESEARCHER

t he digital divide is popularly believed to be caused bythe inability of many people to afford to buy computers.But there is another underlying cause of the digital divide. Because of outdated regulations and lack of competi- tion, companies have little incentive to invest in providing advanced digital services to rural areas and economically disadvantaged inner cities. The fact is, more than three years after the passage of the Telecommunications Act of 1996, competition and investment in advanced telecommunications have largely been limited to prosperous downtown areas and office parks. The unintended result of these regulations is that millions of Americans are left without access to all the advantages that the Internet offers.

When it comes to deploying high-speed broadband, regulatory inefficiencies override market and technological incentives. That means investment is diverted to where it is most profitable — high-income, densely populated areas. The poor, rural areas and small businesses are left behind.

Voice regulations that creep into the world of data prolong the digital divide. Regulatory (interLATA) boundaries for data transmission hinder the ability of the incumbent local phone companies — whose networks already reach deep into small communities — to more broadly deploy broadband services. But given the costs and difficulties of deploying advanced services to less densely populated areas, the extra burden of rules like the interLata prohibitions only decrease the number of communities in which deployment is economically feasible.

The lack of certainty about universal service funding also contributes to the digital divide, allowing local competitors to choose to serve only the best customers without having to pay for the less profitable customers they leave behind. The subsidies that historically have gone to ensure afford- able phone service and continued investment for customers in rural and high-cost areas are eroding as access charges are reduced.

The economics of investing to bring broadband services to rural areas will change when the former regional Bell companies have the opportunity to earn additional revenue per customer by providing long-distance service. This will also give long-distance companies a competitive incentive to offer local service, boosting competition in the local mar- kets-to the customers’ benefit.

Until regulations like these are modified, much of our population will be barred from accessing the advantages of the Internet, and from full participation in American life.

ANTHONY WILHELM Program director, communications policy, Benton Foundation

WRITTEN FOR THE CQ RESEARCHER

f rom what we know about the digital divide, it isclear that the cost of a service is a critical factor in determining its universality. While basic telephone

service may be affordable to most households, it is priced beyond the ability of many single-parent, poor and rural households. Internet access is also too expensive for many, according to the 1999 Department of Commerce’s “Falling Through the Net” report. Moreover, Americans need to know how to use the Internet — and that means training.

Some have argued that government regulation contributes to inequality and scant investment in poor and rural commu- nities. In pushing for “regulatory forbearance,” conservative politicians and certain industry sectors argue that untying their hands surely must be better than the status quo. Local phone companies want access to long-distance markets, and competitors want them to open their networks. In short, unleashing the market will lead inexorably to more wide- spread delivery of service, they argue.

However, if we are to use our experience since the passage of the 1996 telecom act as our guide, local tele- phone and cable rates have actually gone up during a period of deregulation, as companies look to recoup the cost of mergers and an erosion of market share. The strategy has been to compete for high-end customers, offering them value-added services, rather than expending resources to serve those who have historically been underserved. In short, industry sectors have promoted those aspects of the act that provide an edge — or a relaxation of rules that constrain their own activities — and a tightening of regula- tions that hamper their competitors.

Government programs in the mid-to-late 1990s strove to bridge the digital divide by expanding universal service as well as providing access and training programs. It is clear that without government regulation of universal service, training, literacy, community access and other areas, the gap between the digital haves and have-nots would be even more pronounced.

A century after the invention of the telephone, we still have tremendous gaps in telephone access — in rural America, on tribal lands and in poor, urban neighborhoods — gaps that the market alone has not solved. Why, then, should we believe now that the market is the magic bullet? What is required is a collective will and determination to eliminate these gaps, not canards about deregulation and the primacy of market forces.

THE DIGITAL DIVIDE

58 CQ Researcher

Continued from p. 56

problem of technology. The problem is one of will,” said Kennard. “If we have the know-how to make a phone that can fit in your shirt pocket, we can figure out a way to put phones on Indian reservations.” 23

Telephone executives say the cost of running phone lines to such sparsely populated areas is prohibi- tively expensive and would bankrupt the universal service fund. Moreover, said Edward J. Lopez, vice president of US West New Mexico, decades-old regulations stifle their ability to de- liver service to reservations. “I can say with certainty that by removing these regulatory barriers, companies like US West can provide solutions

for Native American and rural com- munities on a far greater scale,” he said. 24

But New Mexico Assistant Attor- ney General Richard Weiner told commissioners that he knows of “dozens of cases” where US West has refused to reinforce existing tele- phone lines to expand service on Indian reservations. 25

Later, as he toured the nearby Jemez Indian Reservation, Kennard asked, “Is it any surprise, then, that these areas suffer so? If you don’t have the basic communications infra- structure, how can you run a busi- ness? How can you create high-pay- ing jobs?”

After the New Mexico trip,

Kennard ordered the FCC staff to make beefing-up phone service on reservations a top priority. By Au- gust, the commission had proposed two initiatives — one seeking recom- mendations on what incentives could be offered or changes made in the universal service program to encour- age more companies to offer tele- phone service on tribal lands. The other asked what regulatory barriers could be removed to clear the way for wireless technology to be used more widely on tribal lands.

“Telephone service on Indian lands is a disgrace,” Kennard said on Aug. 5, as he unveiled the two ini- tiatives. “I am committed that we do everything we can to make sure we

Popular E-Rate Program . . .

J ust in time for the presidential election season, some Republicans and anti-tax consumer groups plan an attack on the popular e-rate program — the federal program championed by Vice President Al Gore that gives

reduced-rate Internet access to schools and libraries. A Republican-controlled Congress created the program in

1996 with overwhelming bipartisan support, but some Republicans now say the Federal Communications Commission (FCC) unilaterally expanded the program, in the process creating a new and unconstitutional tax — the so-called Gore tax — to fund it.

“The Gore phone tax is fundamentally illegal and unfair,” House Commerce Committee Chairman Thomas J. Bliley Jr., R-Va., said on Sept. 30 during a subcommittee hearing considering a plan to eliminate the program.

The proposal by Commerce Telecommunications, Trade and Consumer Protection Subcommittee Chairman W. J. “Billy” Tauzin, R-La., would fund the program through block grants to the states instead of targeting the poorest schools and would phase the program out after five years. A companion Senate proposal sponsored by Conrad Burns, R-Mont., would only phase out funding for infrastructure improvements like rewiring. Subsidies for monthly Internet access would continue.

The Tauzin-Burns measures face an uncertain future. Largely because of the program’s popularity, earlier proposals to repeal it outright have been scaled back.

“Initially, they wanted to kill it,” says Colin Crowell, legislative assistant for Rep. Edward J. Markey, D-Mass., ranking member of the subcommittee. “But their constituents

like it, especially suburban Republican parents.” Harris N. Miller, president of the Information Technology

Association of America, suggests another reason why the attacks on the e-rate were moderated. “Maybe they were waiting to bring it up during the election,” he says.

He may have been right. Asked why the subcommittee was holding hearings last fall even though the bill would not make it to the House floor that session, Ken Johnson, a Tauzin spokesman, said the subcommittee was “setting the [e-rate] stage for . . . the election year.” 1

Tauzin’s proposal is likely to attract support from tax- reform groups like CapitolWatch. “Our mission is to reduce the size of government,” says Executive Director Andrew Quinlan. “The e-rate is an unnecessary expansion of government programs.” His grass-roots group has received “thousands of letters and petitions” from citizens angry about the e-rate, he says.

Citizens and consumer groups were angered when telephone companies passed their e-rate assessments on to their telephone customers, calling them either a “universal service” support fee or a “schools and libraries fund” fee.

Many members of Congress were especially annoyed when long-distance companies passed on the charge without also telling consumers that some of the major reductions in long-distance charges they now enjoy were due partly to $6 billion in FCC-ordered reductions in the “access fees” that long-distance companies pay local phone companies to use their lines. The 1996 act did not specify where e-rate funds should come from, but many lawmakers say they intended for long-distance companies to use

Jan. 28, 2000 59CQ on the Web: www.cq.com

don’t leave the Indian people in the digital dark ages.” 26

Among other things, the FCC is exploring:

• Clearing the way for wireless carriers or Indian-owned phone com- panies to become eligible for univer- sal service subsidies.

• Allowing residents on reserva- tions to have access to broadband services at federal Rural Utility Ser- vice and Bureau of Indian Affairs schools and other properties located on Indian lands.

• Raising height limits on wireless transmission towers so they can over- come the higher-terrain problems near Indian reservations.

Gerald Vaughan, deputy chief of

the FCC’s wireless telecommunica- tions bureau, says new wireless tech- nologies promise to soon solve the seemingly intractable problem of providing communication services to Indian reservations. And because the costs keep dropping, the Indians may eventually receive service at a frac- tion of the costs for conventional wired services, he says.

Some experts predict that within two years wireless subscribers will be able to use their phones to access the Internet, send e-mail and down- load documents and graphics. They will also be able to send faxes, hold teleconferences and even record video images via a small, built-in camera, according to Catherine Cox,

a vice president at Motorola Inc., one the largest manufacturers of mobile phones in the world. 27

Others are not so sure. “Wireless has been ‘Just around the corner’ for 20 years,” says the consumer federation’s Cooper.

Others say rooftop satellite dishes could solve many communication problems in isolated regions. Bill Gates and telephone entrepreneur Craig McCaw — through their com- pany Teledesic — are planning to build a $9 billion, 288-satellite net- work to provide two-way high-speed Internet access worldwide.

As wireless becomes cheaper and more ubiquitous, “It will call into question the level of subsidies pro-

. . . Faces Election-Season Attack some of their savings from reduced access fees to pay for their e-rate assessments.

If Tauzin’s bill does move forward, fans of e-rate are expected to rise up. “It’s a godsend in many disadvantaged areas,” says Edward Kealy, executive director of the Committee for Education Funding, a coalition of more than 95 organizations that seeks increased federal investment in education.

“Right now, there are millions of people, particularly in low-income areas, whose only affordable access to computers is at schools and libraries,” says Larry Irving, a former Commerce Department official who co-authored a recent Commerce study on the digital divide. “To just set an arbitrary phase-out date is criminal.”

In fact, Jeff Chester, executive director of the Center for Media Education, wants to expand e-rate to include youth centers, adult community centers and public housing projects. “The $2.5 billion they spend on the program is equivalent to the cost of one small B-1 bomber,” he says.

But groups like the Committee on State Taxation says that reducing telephone taxes, which can reach nearly 25 percent in some states, would help narrow the digital divide between poor and wealthy Americans. “In a world where we’re talking about the digital divide, it’s dumb to have so many taxes on telecommunications,” said Jeff Eisenbach, president of the Progress and Freedom Foundation. 2

Bliley last fall introduced “truth in billing” legislation requiring telephone companies to spell out taxes and fees on their bills. “The 1996 telecommunications act does not allow the FCC to increase such a tax without congressional

approval,” he said. “Folks should at least know when they’re being taxed, and for what purpose.”

The FCC maintains that the e-rate is a fee, not a tax, a position it says has been upheld in court. In any event, Tauzin says, Americans should know what they are being charged.

A debate on telephone taxes could turn into a bitter rural/urban battle over universal service, the program that allows Americans’ telephone bills to carry more than $20 billion in sometimes hidden federal, state and local taxes, subsidies and price supports. The funds are used to “average out” telephone charges between high-cost rural areas and low-cost urban areas.

Some Democratic lawmakers have vowed to publicize universal service subsidies, which go to rural residents regardless of income or need, if Republicans try to eliminate the e-rate, which is targeted at low-income school districts. “If we’re going to stop subsidizing children, we’re going to have to stop subsidizing wealthy farmers,” Markey said during a testy hearing last October. 3

Chester says the situation remains at a standoff, because, “There are a lot of rural Republicans who understand that if they get rid of the e-rate then they are on the way to killing the golden goose of universal service.”

1 Quoted in Robert MacMillan, “Rep. Tauzin Will Educate Public About Bad E-Rate,” Newsbytes, Sept. 28, 1999. 2 Quoted in William Glanz, “Panel Considers End to Telecommunications Tax, Undecided on Internet,” The Washington Times, Dec. 21, 1999. 3 Quoted in Mary Mosquera, “FCC Defends Market-Opening Policies,”

THE DIGITAL DIVIDE

60 CQ Researcher

Alliance for Public Technology, 919 18th St., N.W., 10th floor, Washing- ton, D.C. 20005; (202) 263-2970; www.apt.org. This nonprofit organization is made up of public groups and individuals concerned with developing affordable access to telecommunications technology.

Center for Media Education, 2120 L. St., N.W., Suite 200, Washington, D.C. 20037; (202) 331-7833; www.cme.org. This national nonprofit organi- zation fosters telecommunications policy in the public interest through research, advocacy, public education and outreach activities.

Center for the New West, 600 World Trade Center, 1625 Broadway, Denver, Colo. 80202; (303) 572-5400, (800) 795-WEST; www.newwest.org. The non-partisan think tank was founded in 1989 to develop policies dealing with rural economic development and lifestyle changes affecting the West.

Consumer Federation of America, 1424 16th St. N.W., Suite 604, Washington, D.C. 20036; (202) 387-6121; www.consumerfed.org. The federation is a coalition of national, state and local groups that promotes consumer interests in many industries, including telecommunications.

U.S. Telecommunications Association, 1401 H St. N.W., Suite 600, Washington, D.C. 20005; (202) 326-7300; www.usta.org. The association represents local telephone companies and their equipment suppliers.

vided for universal service and even- tually the need for subsidies in certain areas,” says Colin Crowell, legislative assistant to Rep. Markey. Some say the FCC may be delaying redefining universal service until wireless or sat- ellite technologies improve so dra- matically that they will be able to pro- vide reliable, high-speed service to rural areas for a fraction of the cost of installing in-ground wires or cables.

If the nation decides to include broadband in universal service, it should be “technology neutral” — it should not favor one broadband tech- nology over another, says nearly everyone familiar with the issue. The technology is changing so fast, and the costs for some services dropping so rapidly, the government should not lock in a technology that may quickly become outdated.

“It doesn’t matter to me whether it comes through a cable, through a DSL line or some other technology,” Dorgan says, “as long as we have the opportunities in the rural areas that the urban areas have.”

Notes

1 “Falling Through the Net: Defining the Digital Divide,” National Telecommunications and Information Administration, July 1999. 2 Quoted in Martin Crutsinger, “Gov’t Looks to Narrow Computer Gap,” AP Online, Dec. 9, 1999. 3 “Falling Through the Net, op. cit., p. 8. 4 Ibid., p. 9. 5 Matt Robinson, “A 21st Century Internet for All Americans,” iAdvance, Dec. 2, 1999. 6 Congressional Record, Nov. 10, 1999, pp. H11944-H11946. 7 For background, see David Masci, “In the Beginning There Was Universal Service,” The CQ Researcher, April 23, 1999, p. 341. 8 David Boaz, “A Snapshot View of a Com- plex World,” in “Today’s Commentary,” CATO Institute Web site, www.cato.org,

July 17, 1999. 9 For background, see Adriel Bettelheim, “Digital Commerce,” The CQ Researcher, Feb. 5, 1999, pp. 89-112. 10 For background, see Mary H. Cooper, “Income Inequality,” The CQ Researcher, April 17, 1998, pp. 337-360. 11 Robinson, op. cit. 12 For background, see Adriel Bettelheim, “High-Speed Internet Access Debate to Accelerate,” CQ Weekly, Jan. 1, 2000, p. 7. 13 Adam D. Thierer, “Broadband Telecom- munications in the 21st Century: Five Prin- ciples for Reform,” Heritage Foundation Backgrounder, Sept. 2, 1999, p. 8. 14 Quoted in “America’s Telecommunica- tions Revolution,” Points West, Center for the New West, February 1999, p. 6. 15 Falling Through the Net: A Survey of the ‘Have Nots’ in Rural and Urban America,” National Telecommunications and Informa- tion Administration, July 1995. 16 “Technology in Education 1999,” Market Data Retrieval Co. 17 Quoted in Gary Andrew Poole, “A New Gulf in American Education: The Digital Divide,” The New York Times, Jan. 29, 1996.

18 Quoted in Steve Lohr, “A Nation Ponders its Growing Digital Divide,” The New York Times, Oct. 21, 1996. 19 Quoted in John Schwartz, “Battler Over Broadband Being Waged Across U.S.,” The Washington Post, Sept. 19, 1999. 20 For background on open access, see Masci, op. cit., pp. 335-337. 21 See Alan K. Ota, “Critics Say AT&T’s ‘Open Access’ Would Still Shut Out Competitors,” CQ Weekly, Dec. 11, 1999. 22 See Adriel Bettelheim, “High-Speed Internet Access Debate To Accelerate,” CQ Weekly, Jan. 1, 2000. 23 Tom McGhee, “Tribes Feel Disconnected,” Albuquerque Journal, Jan. 30, 1999. 24 Chaka Ferguson, “FCC challenges phone companies to increase access on reserva- tions,” The Associated Press, Jan. 30, 1999. 25 McGhee, op. cit. 26 Quoted in Paul Davidson, “FCC Dials in on Phone Inequities,” USA Today, Aug. 5, 1999. 27 For background, see David Masci, “The Next Generation of Wireless,” The CQ Re- searcher, April 23, 1999, p. 344.

Jan. 28, 2000 61CQ on the Web: www.cq.com

Selected Sources Used

Bibliography

Articles

Lieberman, David, “On the Wrong Side of the Wires,” USA Today, Oct. 11, 1999. As the Internet revolutionizes the U.S. economy, many

small businesses are realizing they are located on the wrong side of the broadband wires being installed across the country, mainly in high-end business areas.

Lohr, Steve, “A Nation Ponders its Growing Digital Divide,” The New York Times, Oct. 21, 1996. Lohr describes what at the time was mainly the gap

between students with Internet access and those without. Children in unconnected classrooms generally used their computers for repetitive drills in reading and math.

McGhee, Tom, “Tribes Feel Disconnected,” Albuquer- que Journal, Jan. 30, 1999. McGhee reports on Federal Communications Commis-

sion field hearings held in New Mexico to determine what is preventing Native Americans from receiving telephone service.

Schwartz, John, “Battler Over Broadband Being Waged Across U.S.,” The Washington Post, Sept. 19, 1999. Schwartz discusses the battles over high-speed access

to the Internet, or broadband. Huge amounts of money are at stake, since the debates revolve around how much of the broadband pie will go to corporate titans like AT&T, MCI Worldcom and the Baby Bells.

Reports and Studies

Burgess, Philip M., “America’s Telecommunications Revolution,” Points West, Center for the New West, February 1999. The conservative Denver-based think tank traces the

history and justification for the 66-year-old universal service program. It explains how the FCC was ordered to revamp the program by the 1996 telecommunications act but is two years late in finishing the project, which will reveal previously hidden subsidies.

Burgess, Philip M., “The ‘Other’ Digital Divide: How Government Policy Redlines Small and Midsized Busi- nesses,” Points West, Center for the New West, Sep- tember 1999. This 32-page report argues that current FCC policies that

try to micromanage the information revolution actually discourage investment in high-speed telecommunications technologies in suburbs, small towns and rural areas.

“Deepening the Digital Divide: The War on Universal

Service,” Center for Media Education, Oct. 14, 1999. The nonprofit group argues that efforts to undercut the

nation’s long commitment to universal service could widen the gap between the information haves and have-nots.

“Falling Through the Net, I: A Survey of the ‘Have Nots’ in Rural and Urban America,” National Telecommuni- cations and Information Administration, July 1995. The first Commerce Department study of the gap be-

tween Information Age “haves” and “have-nots” focused on computer and modem ownership and didn’t use the term Digital Divide.

“Falling Through the Net, III: Defining the Digital Divide,” National Telecommunications and Informa- tion Administration, July 1999. The third and latest Commerce Department study shows

that even as a record one-third of all Americans are logging onto the Internet, a wide gap still exists between the information-rich and the information poor.

Gasman, Lawrence, “Universal Service: The New Tele- communications Entitlements and Taxes,” Cato Policy Analysis No. 310, The Cato Institute, June 25, 1998. The universal service program discourages innovation

and favors “status quo” technologies, says the Libertarian think tank. Unleashing market forces would solve the problem of providing cheap telecommunications ser- vices to all, the author argues.

Goslee, Susan, “Losing Ground, Bit by Bit: Low-In- come Communities in the Information Age,” Benton Foundation, June 1998. Digital technologies are actually aggravating the poverty

and isolation that plague some rural and inner-city areas by speeding the exodus of good jobs from rural and urban areas to suburban high-tech corridors, Goslee writes.

Robinson, Matt “A 21st Century Internet for All Ameri- cans,” iAdvance, Dec. 2, 1999. This report by a Harvard graduate student for a coalition

of public-interest groups and regional telecommunications companies found that city-dwellers are 18 times more likely to be offered broadband services than rural Americans.

Thierer, Adam D., “Broadband Telecommunications in the 21st Century: Five Principles for Reform,” Heritage Foundation Backgrounder, Sept. 2, 1999. Regulations discourage expansion of the broadband

industry because they adversely affect the potential return on investment and encourage industry “free- riding” by rivals, says the author, an economist at the conservative think tank.

THE DIGITAL DIVIDE

62 CQ Researcher

Additional information from UMI’s Newspaper & Periodical Abstracts™ database

The Next Step

Education

“Equal Access Technology,” Techniques, October 1998, p. 10. Two Georgia institutions, Clayton College and State

University in Morrow and Floyd College in Rome, are kicking off Information Technology Projects by distribut- ing Arsys Microquest notebook computers to all students and faculty.

Candiotti, Alan, and Neil Clarke, “Combining Univer- sal Access with Faculty Development and Academic Facilities,” Communications of the ACM, January 1998, pp. 36-41. Drew University’s strategy to integrate technology into

the curriculum has been a 15-year project, one that continues to evolve with the needs of the faculty and students.

Oldenburg, Don, “The Teacher-Technology Gap,” The Washington Post, Feb. 22, 1999, p. C4. As the nation’s schools continue to equip their

classrooms with computers and Internet connections, one of the difficult problems facing education is preparing teachers to integrate these advanced tech- nologies into their curriculum. The article discusses training programs that are targeting the teacher-tech- nology gap.

E-Rate

“E-Rate Update,” Technology & Learning, June 1999, pp. 14-15. In this discussion of the E-rate telecommunications

discount program, an educator says that it is crucial for teachers, curriculum leaders and other administra- tors to have hands-on involvement with technology planning.

Flagg, Gordon, “Federal Court Upholds E-Rate,” Ameri- can Libraries, September 1999, p. 12. A federal appeals court has upheld the e-rate program

of telecommunications discounts for libraries and schools. Despite challenges by telecommunications companies and states, the program, in which funds are collected from phone companies, does not amount to an unconsti- tutional tax.

Rogers, Michael, and Norman Oder, “E-Rate Proves Too Popular to Fight,” Library Journal, Sept. 15, 1999, p. 16. The e-rate telecommunications discount provided by

the Federal Communications Commission (FCC) has proved so popular with schools across the country that even its harshest critics say that further opposition is futile.

Zehr, Mary Ann, and Erik Fatemi, “FCC Approves Full Funding for E-Rate Program,” Education Week, June 2, 1999, pp. 17-18. Despite continued opposition from some members of

Congress, the FCC voted to fully fund the federal e-rate program in its second year. The education-rate program, which provides discounts on telecommunications to schools and libraries, will receive $2.25 billion this year.

The Gender Gap

Currid, Cheryl, “Technology Gender Gap Seems to be Disappearing,” Houston Chronicle, June 8, 1997, p. E7. The technology gender gap may be closing. Recent

surveys show that women have found the way to technol- ogy. Many have turned to technology as a tool to manage their lives.

Dorman, Steve M., “Technology and the Gender Gap,” Journal of School Health, April 1998, pp. 165-166. Girls and boys appear to use the computer and related

technology differently, but there are ways to promote greater gender equity in computer use. Teachers should expose students to successful women in technology.

Henry, Tamara, “Girls Face Technology Gap,” USA Today, Oct. 14, 1998, p. A1. Technology has become the new “boys club” in

public high schools even as the gap narrows between boys and girls in math and science. A report by the American Association of University Women is the first to document the enrollment of girls in high school computer sciences and the types of such courses they choose.

Van Slambrouck, Paul, “Narrowing Technology’s Gen- der Gap,” The Christian Science Monitor, Jan. 4, 1999, p. 1. Catherine Muther walked away from a top marketing

position at Cisco Systems and used $3 million from cashed stock options to establish the Three Guineas Fund, named after the book by Virginia Woolf and dedicated to increasing school and workplace opportu- nities for girls and women. The Women’s Technology Cluster is the foundation’s newest venture, founded to build the kinds of working relationships and networks that are already well established for men.

Jan. 28, 2000 63CQ on the Web: www.cq.com

Income and the Digital Divide

Lauria, Joe, “A Gulf Grows in Boom Economy: UN Report Finds Top 20 Percent of Nations Found to Control 86 Percent of Global GDP; Technology Gap Cited,” The Boston Globe, July 13, 1999, p. A2. The article discusses the United Nations Development

Program’s annual Human Development Report. The gap in technology between rich and poor countries is named as a factor in the increasing economic gap between such countries.

Moran, Charles, and Cynthia L. Selfe, “Teaching English Across the Technology/Wealth Gap,” English Journal, July 1999, pp. 48-54 The authors discuss technology use in English lan-

guage-arts classrooms and how emerging technologies are increasing the gap between the rich and poor and the related gap between races in this country.

Schofield, Jack, “A Week in View; Digital Divide,” The Guardian, May 27, 1999, p. 2. The British government’s attempts to provide on-line

capabilities to all income groups are discussed.

Minorities and the Digital Divide

Schwartz, John, “U.S. Cites Race Gap In Use of Internet; Clinton Bemoans ‘Digital Divide’,” The Washington Post, July 9, 1999, p. A1. The article discusses a U.S. Census Bureau report,

which found that while black and Hispanic Americans are tapping the Internet from home in increasing num- bers, more affluent Americans are far more likely to have Internet access than poorer people.

Shepard, Paul, “Digital Divide: Worrisome or Self-Cor- recting?” Los Angeles Sentinel, June 10, 1999, p. A12. The potential impact of the digital divide between minor-

ity groups and whites in Internet access is examined.

Singletary, Michelle, “‘Digital Divide’ Isn’t Just About Internet Access,” The Washington Post, Aug. 22, 1999, p. H1. Four corporate partners put up $35 million — report-

edly the largest investment ever for an on-line venture targeted to blacks. The Web site, called BET.com, would offer users free access to news, entertainment, chat rooms and shopping. “The failure of any community to avail itself of the resources of the Internet will limit its ability to succeed in the new millennium,” BET President John Johnson said.

Teicher, Stacy A., “Helping Minorities Bridge ‘Digital Divide’,” The Christian Science Monitor, July 29, 1999, p. 3. A statistical look by racial category at who is connected

to the Internet in the United States.

Urban and Rural Access

“FCC Splits Over Digital Divide,” Chicago Tribune, June 21, 1999, p. A10. A provision in the 1996 telecommunications act created

a subsidy so that schools and libraries, particularly in poorer urban and rural areas, could get wired for phone service. Every provider of interstate telecommunications services is required to contribute to a universal service fund to pay for this program. The providers pass along those fees to consumers as a “universal service charge.”

Brown, David A., “Alaska Information Technology Closes the Gap in a Vast Region,” Signal, June 1999, pp. VG3-4 The Alaskan government is working hard to use infor-

mation technology to overcome the vast distances that its citizens have to contend with and tourists encounter when they come to Alaska.

Darce, Keith, “Web Yet to Snare Rural Poor; Summit Focuses on Ways to Close Technology Gap,” New Orleans Times-Picayune, Oct. 12, 1999, p. C1. Telecommunications executives and industry regula-

tors who gathered in Baton Rouge for a daylong confer- ence on the future of high-tech telecommunications agreed that regulators and telecommunications compa- nies need to do more to give people in poor and rural communities access to the Internet and other high-tech communications networks.

THE DIGITAL DIVIDE

64 CQ Researcher

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JUNE 1999 Drug-Resistant Bacteria Saving the Rain Forests Boys’ Emotional Needs Patriotism in America

JULY 1999 Refugee Crisis Childhood Depression New Challenges in Space Defense Priorities

AUGUST 1999 Regulating Pesticides Hospitals’ Financial Woes Medical Marijuana Traffic Congestion

SEPTEMBER 1999 Drugmakers Under Siege Adoption Controversies Prison-Building Boom Airline Industry Problems

OCTOBER 1999 Endangered Species Act Democracy in Eastern Europe The New Millennium Rethinking Ritalin Public Broadcasting

NOVEMBER 1999 Saving Open Spaces Closing In on Tobacco The Consumer Culture Panama Canal

DECEMBER 1999 Reforming School Funding Embryo Research Asthma Epidemic

JANUARY 2000 Utility Deregulation Auto Industry’s Future