FCC 96J-3

Before the
Federal Communications Commission Washington, D.C. 20554

In the Matter of
Federal-State Joint Board on Universal Service
CC Docket No. 96-45

Public Notice on Recommended Decision (DA 96 1891)

Comments of the Benton Foundation and the Center for Strategic Communications

Kevin Taglang
Benton Foundation
950 18th Street, NW
Washington, DC 20006
benton@benton.org

Janel Radtke
Center for Strategic Communications
72 Spring Street, Suite 208
New York, NY 10012
jradtke@pipeline.com

Add your support to Benton comments
Benton appreciates your support of our comments to the FCC.
Click here to e-mail us your comments.

December 19, 1996

I. Introduction

In this Public Notice, the Commission and the Common Carrier Bureau seek further comment on recommendations of the Joint Board on Universal Service. Specifically, the Commission seeks comment on the additional principle of competitive neutrality, baseline federal support for low-income consumers, identifying support levels for schools and libraries, provisions for rural health care providers, and the administration of the universal service fund.

The Benton Foundation and the Center for Strategic Communications("Commenters") focus their remarks on two issues:

• the Commission should use the additional principle of competitive neutrality to begin defining the basic universal service package as the conduit that delivers services not as a set of narrowly defined services and
• the Commission should include the development of marketing strategies as part of the responsibilities of the new administrator of the universal service fund.

Benton believes that communications in the public interest, including the effort to connect all Americans to basic communications systems, is essential to a strong democracy. Benton's mission is to realize the social benefits made possible by the public interest use of communications. Benton bridges the worlds of philanthropy, community practice, and public policy. It develops and provides effective information and communication tools and strategies to equip and engage individuals and organizations in the emerging digital communications environment.

The Benton Foundation's Communications Policy Project is a nonpartisan initiative to strengthen public interest efforts in shaping the emerging National Information Infrastructure (NII). It is Benton's conviction that the vigorous participation of the nonprofit sector in policy debates, regulatory processes and demonstration projects will help realize the public interest potential of the NII. Current emphases of Benton's research include extending universal service in the digital age; the future of public service in the new media environment; the implications of new networking tools for civic participation and public dialogue; the roles of states as laboratories for policy development; and the ways in which noncommercial applications and services are being developed through new telecommunications and information tools.

Over the past two years, the Benton Foundation has commissioned a number of research papers on the subject of universal service and now hosts the World Wide Web's most comprehensive library of universal service and access documents.1

The Center for Strategic Communications is a nonprofit educational organization that informs and educates nonprofit managers about a wide range of communications tools and media techniques as well as how to develop effective communications plans. It also fosters increased investment by the grantmaking community for the use of communications and technology as a way to leverage program investments. Finally, it works to strengthen the not-for-profit technical assistance sector so that it may better meet the communications needs of the not-for-profit sector.

II. Principles

How should the additional principle of competitive neutrality be defined and applied within the context of universal service?

The Commission should recognize the rapid convergence of the technologies of access and service, the providers of these technologies, and the services themselves. This convergence is destroying the traditional conceptual and regulatory unity between company, facilities, and service. Take, for example, a convergence of two current Commission proceedings: universal service and advanced television. When broadcasters adopt digital broadcast technology, they will be able to deliver a number of non-broadcast services to consumers. Broadcasters could become multi-channel operators, wireless telephony providers, and/or Internet service providers. And, as an Internet service provider, the broadcaster could deliver telephony, video, audio, and data. Will we continue to regulate "television" Ü which could be hardware that serves the function of a TV, phone, fax, pages, and computer Ü through the Mass Media Bureau when it delivers functions regulated by the Common Carrier and Wireless Bureaus as well? How will regulators respond to the shrinking differences between the telephone carrier and the television carrier when the latter can provide the function of the former? What universal service obligations might a broadcaster adopt when it begins to become a conduit for telephony?

The Commission should move away from a universal service system that focuses on services and move towards a system defined by transport and termination requirements. Transport requirements concern the quality and capacity of telephony media2 (such as single-party service or being capable of providing fax/data service at specified speeds) and the distribution of those media (anti-redlining provisions, for example). Termination requirements mandate carriers to connect a user with a specified destination on demand (for example, equal access to interexchange carriers). In so doing, the Commission adopts policies without either specifying or implying specific facilities, architecture, or network topography and the carriers that are traditionally associated with those elements.

The Joint Board has recommended and the Commission may adopt a narrow set of services to be the basic "universal service package."3 This list, however, may never be inclusive enough to meet the legislative goal of serving all customers. The Commission would do better to define the basic package as a conduit that can deliver access to commercially available telecommunications services. In this way the market Ü the consumer Ü could decide what package of services works best.

If the Commission fails to adopt policies that take these issues into account it will result in rules that are:

• Anti-competitive Ü because they assume the traditional link between facilities and services, which is no longer necessary yet give obvious advantage to implied ways of delivering a service.
• Anti-consumer Ü because they undermine competitive pressures to serve the relevant market, the household, in the least costly, most innovative way possible, regardless of technologies.
• Antithetical to reaching stated policy goals Ü because they will not result in the broadest possible range of user needs being met.

The Commission should also consider competitive neutrality when addressing the need to market universal service programs to eligible individuals and institutions. The Commission should develop the marketing strategy that is the most efficient, effective, neutral and impartial. The Commenters address such a strategy below.

III. Administration

The Joint Board recommends "that the Commission not adopt, at this time, any national guidelines relating to the requirement that carriers advertise throughout the service area the availability of and rates for universal service using media of general distribution."4 The Joint Board states that [b]ecause relatively few commenters addressed [this and other issues related to carrier eligibility], there are few detailed proposals in the record on how to resolve them."5 This public notice, however, provides an opportunity to collect more detailed proposals.

The Joint Board recommendations and the resulting Commission order will produce radical changes for universal service eligibility and support. The worst of all possible universal service scenarios is the creation of explicit, competitively neutral support mechanisms that go unused because eligible recipients remain unaware of them. Low-income consumers will be allowed to choose from competing local service providers for the first time. Schools and libraries will be eligible for entirely new support and will need to choose from a number of providers.

The Joint Board recommends "that the Commission appoint a universal service advisory board to designate a neutral, third-party administrator."6 The administrator is to meet the following criteria:

• be neutral and impartial;
• not advocate specific positions to the Commission in non-administration-related proceedings;
• not be aligned or associated with any particular industry segment;
• not have a direct financial interest in the support mechanisms established by the Commission; and
• any candidate must also have the ability to process large amounts of data and to bill large numbers of carriers.7

The Commenters propose that the administrator also be charged with developing competitively neutral marketing strategies and to implement universal service marketing campaigns to make eligible individuals and institutions aware of the resulting support mechanisms.

The Commenters propose that organizations competing to become the administrator of the universal service fund should include plans to create a Universal Service Marketing Group (USMG).8 The USMG would work with the administrator to recruit a qualified advertising agency to develop print, billboard, radio, television, and Internet advertising for the universal service program. The USMG would also work with existing national organizations with the information infrastructures to alert eligible constituencies of universal service support mechanisms. The USMG should be comprised of representatives from consumer groups, public interest advocates, state consumer advocates, as well as experienced marketing executives from the telecommunications industry.

The USMG offers distinct advantages over relying on individual telecommunications providers for marketing universal service benefits:

• it makes no economical sense to have multiple marketing campaigns conducted by each carrier who is trying to sign up the same customers, especially when the marketing expense of each carrier is subsidized by the universal service fund;
• multiple marketing efforts tend to indirectly subsidize a carrier's overall marketing strategy by encouraging a potential customer to sign up regardless of their eligibility for universal service support;
• universal service-targeted advertising indirectly subsidizes the marketing of other services, such as toll and enhanced services, that the carrier can sell to consumers once they have become customers;
• carriers could potentially abuse a subsidized marketing system;
• certain carriers could be disadvantaged if funds for marketing are distributed based on a carrier's size or the number of customers it serves;
• the USMG could target consumer groups that have lower subscription rates by coordinating efforts with community-based organizations that work with these constituencies;
• the USMG could ensure that the additional principle of competitive neutrality is adhered to by allowing potential customers to see that they have a number of providers to choose from;
• coordination of efforts could be improved; for example, the USMG could help coordinate efforts to connect schools and libraries with the consultants and trainers these institutions may need to make best use of information technologies and services; and
• need for Commission oversight of carriers' efforts in this area would be substantially decreased.

The Commission should consider, as a parallel case, the Earned Income Tax Credit (EITC) program. EITC is a tax benefit for low-income workers; it reduces or eliminates the taxes owed by low-income households. In tax year 1995, over 19 million families and workers received a total of $25 billion in EITC benefits. In 1988, the year before the program outlined below9 began, only 8.8 million families with children received EITC benefits.

The Center on Budget and Policy Priorities ("Center") Ü a national, nonprofit organization based in Washington, DC Ü recognizes the importance of making sure that policies designed to assist low-income working families actually function as intended in the real world. The Center has conducted an EITC marketing campaign in each tax year since 1988. The Center's campaigns emphasize the role for nonprofit organizations in delivering services to targeted populations. Since 1989, the Center has distributed more than 150,000 outreach campaign kits with materials in 16 languages. The Center has 7,000 organizations and agencies in its nationwide campaign network.

Although it is hard to measure the direct impact of the Center's outreach campaign, EITC participation has risen every year since 1989 despite predicted drops and new filing criteria. The Internal Revenue Service has recognized the substantial contribution to increased use of the EITC benefit. The IRS has written that the Center's "aggressive outreach efforts" have been a major factor behind the increases and have had a "profound impact." The IRS has joined the Center in its efforts by participating in Center-sponsored training sessions. Governor Tommy Thompson of Wisconsin, Chairman of the National Governors' Association, has sent a copy of the Center's outreach kit to every governor, urging them to join in this endeavor.

IV. Conclusion

The Commenters strongly urge the Commission to whole-heartily adopt the additional principle of competitive neutrality. In this and future proceedings, the Commission should be identifying certain elements Ü such as transport and termination requirements Ü that make up the definition of the basic universal service package. The Commission should avoid identifying the basic package as a narrow set of services with their implications of certain carriers, networks and/or topography.

The Commenters also suggest that the Commission consider competitive neutrality when planning for the marketing of universal service support for both individuals and organizations. A neutral and impartial independent body affiliated with the universal service fund administrator and working with national and local organizations could best alert eligible constituencies of universal service support mechanisms.

Respectfully submitted,

Appendix I: The 1997 Earned Income Credit Campaign is located at www.cbpp.org

Endnotes

www.benton.org/Policy/96act/reccomments.html
Last updated: 20 December 1996 ha