George Lucas Educational Foundation

Crossing the Digital Divide: Bridges and Barriers to Digital Inclusion

Now that we’ve reached the second decade of the new millennium, how is digital access changing, and what are the implications for schools?
Sara Bernard
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Credit: iStockphoto

The term digital divide was coined in the mid-1990s as a way to describe the gap in equity between those who have access to computers and the Internet and those who do not. Today, the conversation has shifted to this question: How do we define access when the price of personal computers and related technologies has dropped dramatically over the years and, according to the Pew Internet & American Life Project, 95 percent of Americans between the ages of 18 and 29 use the Internet? And all of this is happening while we are in the midst of an explosive rise in mobile technology.

"Wireless is being sold as the bridge across the digital divide," says Amalia Deloney, grassroots policy director at the Center for Media Justice. "But what we know is that wireless is not a substitute for a wired connection." It's very difficult to apply for a job or college, for instance, on a mobile phone. According to Pew research, in 2010, just 45 percent of households that earned less than $30,000 a year had broadband in their homes. It would be unfair to say that a community has Internet access because a cash-strapped local library has a DSL connection. As the authors of a recent Federal Communications Commission-sponsored study said, "Access to the Internet is not a choice: It is a necessity."

How the Landscape Has Changed

Things look a bit different now than they did in 1995, and today's divide is more nuanced than it was in the mid-90s. Technology is more widespread and prevalent and there have been massive jumps in technological innovation, all of which has created higher expectations for technology at home, at school, and at the workplace.

Mobiles: The rise of mobile technology in the past few years is mind-blowing. According to CTIA - The Wireless Association, some 91 percent of Americans now use a cell phone, and 90 percent of cell phone subscribers in the United States and Western Europe have phones that are Internet-ready, according to comScore's 2010 Mobile Year in Review. Whether cell owners are using the Internet-access feature or not, it's there, and if the trends say anything, they'll be adopting its use by leaps and bounds.

These days, mobile devices are sophisticated. "Kids are bringing more technology to school in their pockets than we have been able to buy them over the last thirty years," says Shelly Blake-Plock, blogger in chief at TeachPaperless and a faculty associate at the Johns Hopkins University School of Education. This fact has prompted some to say that the digital divide is shrinking: African Americans and English-speaking Latinos are among the most active users of the mobile Web, and cell phone ownership is higher among these groups than it is for whites, according to several recent studies. But for many of these cell phone users, mobile technology is the only way they can get online. Access to richer graphics and data, as well as superior tools, is still limited on many affordable mobiles. At the same time, many schools continue to demonize cell phone use during school, which may be an outdated policy. Not only are there an increasing number of educational applications for mobiles but, as Blake-Plock suggests, prohibiting phones now means "disconnecting the kid from what's actually happening in most of our lives."

Broadband: In 2009, the FCC began developing the National Broadband Plan, a work-in-progress that aims to increase broadband access across the country by providing additional infrastructure, incentives for companies to create low-cost access, educational programs, and much more. The plan includes thousands of suggestions from the American public made via online comments and Twitter posts. In some cases, corporations are doing great work by pushing for greater broadband access and creating public-private partnerships that benefit those on the underserved side of the divide. But the power of the provider in this case can also be problematic. What creates more customers may differ from what creates more digitally literate members of a Web 2.0 community.

Digital Inclusion: In some circles, the term digital divide is itself defunct. Instead, using digital inclusion is not only a way to reframe the discourse in a more positive light but also reflective of what access, adoption, and literacy in the digital world really mean today. Students who are excluded from the digital universe know exactly what they're missing, according to Deloney. "They know they're not getting the homework help that everyone else is; they know they're not getting that discount textbook or taking classes to further their degrees." Now, even the United Nations is stepping up to the plate. In May 2011, U.N. Special Rapporteur Frank La Rue released a report declaring that access to the Internet is a basic human right. He based this on a year of meetings with human rights organizations across the globe.

Perhaps the authors of the "NMC Horizon Report: 2011 K-12 Edition" -- part of a series of research-based analyses of trends in ed tech by the New Media Consortium -- said it best: "The digital divide, once seen as a factor of wealth, is now seen as a factor of education: Those who have the opportunity to learn technology skills are in a better position to obtain and make use of technology than those who do not."

How to Level the Digital Playing Field

Today, physical access to computers and the Internet is only the first of three significant layers to digital equality, according to both Deloney and Blake-Plock. Here's how they break it down (and how we can change the game):

Availability of the Devices Themselves: Is there broadband installed at home or at a library close by? If there's a computer in the classroom, does it do more than collect dust? Has it been updated in the last five years? Blake-Plock calls this basic infrastructural inequality the digital divide. National initiatives like the National Broadband Plan, as well as grants for hardware and software in schools and libraries, can help address the essential-tools gap that persists in some rural and low-income areas.

Accessibility of the Technology At Hand: Once there is a Web-enabled computer at a community center or school, can you access the websites you need to in order to learn, contribute, and create? Is there help nearby if a computer breaks down or if a piece of software fizzles? If it's a broadband connection at home, is the monthly cost sustainable for the family? Blake-Plock calls this the access divide. This is a more complex issue to address because it encompasses a variety of obstacles. Among the remedies is to end the practice at many schools of blocking creativity-enabling websites, to make sure there's a computer maintenance staff on hand (or to allow tech-savvy students to do the troubleshooting), and to regulate telecommunications companies so they adopt open-Internet rules when it comes to low-income consumers. (That's a tough one perhaps, but it is what organizations like the Center for Media Justice are working on.)

Literacy: Blake-Plock refers to a final and crucial barrier to digital equality -- the connected divide. This refers to literacy, not only with hardware and software but also with the vast global conversation that the Internet enables. He notes that there is a gap between those who are "getting connected into broader networks, building their capacity and their social capital, creating the new wave of learning" and those who are, for a slew of complex reasons, not doing so. Addressing this means beefing up effective technology-integration programs at schools of education, encouraging and enabling students to create media and to participate in collaborations with others around the world, and making sure that every computer lab -- whether at a school or elsewhere -- has a way for users to tap into an educational component.

Only when there's equal opportunity for everyone to become literate in these technologies so that they're creating and not just consuming content can we begin to imagine closing the digital divide.

Says Blake-Plock, "The question is not whether we can get an iPod into every kid's hand. It's whether communities can leverage the capacity of networks to make learning more authentic and powerful for students." It's not just word processing, but blogging and tweeting; not just a class project, but an international student collaboration; not reinventing the wheel every time, but tapping into a professional-learning community that shares ideas and resources.

There's no question that the road to digital inclusion is lined with obstacles. Efforts from every sector of society will be required to clear a path to a more equitable future. And schools, in particular, have a decision to make. As Blake-Plock says, they can continue to "treat technology as their auxiliary" as they have for years, or they can start to see it for the force it has become today, a place "where culture itself is developing in the 21st century."

For more information on the digital divide, visit our Digital Divide Resource Roundup.

Sara Bernard is a former staff writer and multimedia producer for

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Bonnie Bracey Sutton's picture
Bonnie Bracey Sutton
Teacher Agent of Change, Power of US Foundation

Thank you for including a subject I have been writing about and talking about since the inception of the use of technology. The resources are great. If you could get Paul Resta to share his powerpoint that is a visual representation of the problems that would be great. Also this is a great problem. As digital divide widens, many can't afford access to information
New study reports that 38 % of lower-income parents don't know what an app is

Bonnie Bracey Sutton's picture
Bonnie Bracey Sutton
Teacher Agent of Change, Power of US Foundation

Affordability: 36 percent of non-adopters, or 28 million adults, said
they do not have home broadband because the monthly fee is too
expensive (15 percent), they cannot afford a computer, the installation
fee is too high (10 percent), or they do not want to enter into a
long-term service contract (9 percent). According to survey
respondents, their average monthly broadband bill is $41.
We also know that Broadband is not available to many Americans.

Digital Literacy: 22 percent of non-adopters, or 17 million adults,
indicated that they do not have home broadband because they lack the
digital skills (12 percent) or they are concerned about potential
hazards of online life, such as exposure to inappropriate content or
security of personal information (10 percent) So in some places that I go
even when schools have the access the filtering even weeds out the National Geographic. At the Wireless Conference last week, most of the Superintendents
admitted that filtering was used because of the fear of cyberbullying and innappropriate access to pornographic sites
Relevance: 19 percent of non-adopters, or 15 million adults, said they
do not have broadband because they say that the Internet is a waste of
time, there is no online content of interest to them or, for dial-up
users, they are content with their current service.

Digital Hopefuls, who make up 22 percent of non-adopters, like the idea
of being online but lack the resources for access.
Few have a computer and, among those who use one, few feel comfortable
with the technology. Some 44 percent cite affordability as a barrier to
adoption and they are also more likely than average to say digital
literacy are a barrier. This group is heavily Hispanic and has a high
share of African-Americans.

There are also people in the workforce who have
been marginalized in their job because the job has become more technical,
blackberry, Internet, use of special kinds of technology, for which they are not comfortable, or for which they have no real sustained professional development or support.

Rural has a whole different set of problems. Technically there is broadband but there are ways to share and show broadband deficients in the community and to be proactive for them.

Bonnie Bracey Sutton's picture
Bonnie Bracey Sutton
Teacher Agent of Change, Power of US Foundation

We have a different problem for the teachers. I was always the pioneer and so I got is a lot of trouble, was having to move schools as I won prizes for the use of technology. I had my resources thrown into a back room and my Internet connection ripped out, parents complained and I got it back, but again, I had to move schools. That principal did not believe that technology was going to be an item in the future. So then I moved schools again and began to work with Chris Dede and other professors. That was the most wonderful school. We used the resources from the National Geographic, NASA and the Discovery Channel. We were able to create projects for other students. But the problem in the digital divide is educational leadership and often the person at the top just creates another level of administration using technology people. Content in the way of TPACK is not always known to technology specialists. Sustained professional development and support is often too thin. As the tech people rejoin in all the new widgets , gadgets, 2.O tools, there is often a lack of knowledge about content that is needed for teachers in the classroom. Sites like this and Thinkfinity help but content is a problem. Jack Dale, the supervisor of Fairfax County Schools was thankful for the possibility of not using NCLB, new or old because to be set aside.

John Norton's picture
John Norton
Education writer, Founder & co-editor of

In this interview I did recently about digital division in the rural South, Renee Moore, a national teacher leader who lives and works in the Mississippi Delta, warns that many poor and minority students in under-developed regions of the US are a long way from gaining "21st century skills".

Thanks for keeping this issue alive, Edutopia.

Tim Hutchinson's picture
Tim Hutchinson
6th Grade RSP Teacher, Vista CA

The technology of today in both open source software as well as devices are well ahead of most classrooms. Having been an IT manager prior to being a teacher, I understand the need to limit software and devices to what can be supported. However, the decision on what is supported should be driven by best classroom practices. If IT polices are not revisited often the result stifles innovation.

Bonnie Bracey Sutton's picture
Bonnie Bracey Sutton
Teacher Agent of Change, Power of US Foundation

FCC Creates 'Connect America Fund' to Help Extend High-Speed Internet to 18 Million Unserved Americans
Newsletter: October 28, 2011 (FCC Meeting Recap)
Submitted: October 27, 2011 - 9:16pm
Originally published: October 27, 2011
Last updated: October 28, 2011 - 11:56am
Source: Federal Communications Commission
Author: press release
Federal Communications Commission (FCC), 445 12th Street SW, Washington, DC, 20554, United States
The Federal Communications Commission voted unanimously to comprehensively reform its Universal Service Fund and intercarrier compensation systems.

Those systems have been widely viewed as broken, and long overdue for reform. Efforts to expand high-speed Internet to rural America over the next six years will increase economic growth by $50 billion over that period, the FCC estimates. These reforms create a new Connect America Fund with an annual budget of no more than $4.5 billion, which will extend broadband infrastructure to the millions of Americans who currently have no access to broadband. As a result, today's action has the potential to be one of the biggest job creators in rural America in decades. The FCC estimates that approximately 500,000 jobs will be created over the next six years by expanding high-speed Internet access to over 7 million Americans living in rural areas. And by increasing the overall size of the U.S. marketplace, small Main Street businesses across the country will benefit from the opportunity to sell to new customers. The Connect America Fund will put America on the path to universal broadband and advanced mobile coverage without increasing costs to consumers. By eliminating waste and targeting support where it is most needed, these reforms put universal service funding on a firm budget, and they will impose strict new accountability on fund recipients.

As part of this reform, the FCC recognizes the growing importance of mobile broadband and makes it an independent universal service objective for the first time in history. Dedicated support to expand mobile broadband nationwide will be provided through a new Mobility Fund.

The FCC provided few details about its plan to phase down ICC charges, although one staff member said the reforms initially will cap interstate and intrastate access charges with the ultimate goal of moving toward a "bill and keep" approach via a "transition path." She also referenced an access charge replacement mechanism, although details of that mechanism were not provided. Based on what was said, ICC reforms appear to be in line with what was proposed in a proposal brokered by telephone companies. As expected the FCC also said it would require service providers to pay access charges on calls that originate or terminate on the PSTN. In addition officials said the order takes steps to prohibit access charge arbitrage, including access stimulation and phantom traffic. Although the order apparently does not address how IP-to-IP interconnection should be treated, FCC officials said the order does require all carriers to negotiate such agreements in good faith. In addition, the commission said it will seek comment on how calls connected directly via IP should be treated. One of the more surprising comments made at today's meeting was that all carriers would be on an "equal footing" in their ability to obtain ICC compensation -- a comment that appears directed at meeting the requests of cable operators, who have asked for greater ability to collect access charges.

Connect America Fund & Intercarrier Compensation Reform Order and FNPRM
Executive Summary

Universal Service Reform

1. Principles and Goals. We begin by adopting support for broadband-capable networks as an express universal service principle under section 254(b) of the Communications Act, and, for the first time, we set specific performance goals for the high-cost component of the Universal Service Fund (USF) that we are reforming today, to ensure these reforms are achieving their intended purposes. The goals are: (1) preserve and advance universal availability of voice service; (2) ensure universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions; (3) ensure universal availability of modern networks capable of providing advanced mobile voice and broadband service; (4) ensure that rates for broadband services and rates for voice services are reasonably comparable in all regions of the nation; and (5) minimize the universal service contribution burden on consumers and businesses.

2. Budget. We establish, also for the first time, a firm and comprehensive budget for the high-cost programs within USF. The annual funding target is set at no more than $4.5 billion over the next six years, the same level as the high-cost program for Fiscal Year 2011, with an automatic review trigger if the budget is threatened to be exceeded. This will provide for more predictable funding for carriers and will protect consumers and businesses that ultimately pay for the fund through fees on their communications bills. We are today taking important steps to control costs and improve accountability in USF, and our estimates of the funding necessary for components of the Connect America Fund (CAF) and legacy high-cost mechanisms represent our predictive judgment as to how best to allocate limited resources at this time. We anticipate that we may revisit and adjust accordingly the appropriate size of each of these programs by the end of the six-year period, based on market developments, efficiencies realized, and further evaluation of the effect of these programs in achieving our goals.

3. Public Interest Obligations. While continuing to require that all eligible telecommunications carriers (ETCs) offer voice services, we now require that they also offer broadband services. We update the definition of voice services for universal service purposes, and decline to disrupt any state carrier of last resort (COLR) obligations that may exist. We also establish specific and robust broadband performance requirements for funding recipients.

4. Connect America Fund. We create the Connect America Fund, which will ultimately replace all existing high-cost support mechanisms. The CAF will help make broadband available to homes, businesses, and community anchor institutions in areas that do not, or would not otherwise, have broadband, including mobile voice and broadband networks in areas that do not, or would not otherwise, have mobile service, and broadband in the most remote areas of the nation. The CAF will also help facilitate our intercarrier compensation (ICC) reforms. The CAF will rely on incentive-based, market-driven policies, including competitive bidding, to distribute universal service funds as efficiently and effectively as possible.

5. Price Cap Territories. More than 83 percent of the approximately 18 million Americans that lack access to residential fixed broadband at or above the Commission's broadband speed benchmark live in areas served by price cap carriers--Bell Operating Companies and other large and mid-sized carriers. In these areas, the CAF will introduce targeted, efficient support for broadband in two phases.

6. Phase I. To spur immediate broadband buildout, we will provide additional funding for price cap carriers to extend robust, scalable broadband to hundreds of thousands of unserved Americans beginning in early 2012. To enable this deployment, all existing legacy high-cost support to price cap carriers will be frozen, and an additional $300 million in CAF funding will be made available. Frozen support will be immediately subject to the goal of achieving universal availability of voice and broadband, and subject to obligations to build and operate broadbandcapable networks in areas unserved by an unsubsidized competitor over time. Any carrier electing to receive the additional support will be required to deploy broadband and offer service that satisfies our new public interest obligations to an unserved location for every $775 in incremental support. Specifically, carriers that elect to receive this additional support must provide broadband with actual speeds of at least 4 Mbps downstream and 1 Mbps upstream, with latency suitable for real-time applications and services such as VoIP, and with monthly usage capacity reasonably comparable to that of residential terrestrial fixed broadband offerings in urban areas. In addition, to ensure fairness for consumers across the country who pay into USF, we reduce existing support levels in any areas where a price cap company charges artificially low end-user voice rates.

7. Phase II. The next phase of the CAF will use a combination of a forward-looking broadband cost model and competitive bidding to efficiently support deployment of networks providing both voice and broadband service for five years. We expect that the CAF will expand broadband availability to millions more unserved Americans.

8. We direct the Wireline Competition Bureau to undertake a public process to determine the specific design and operation of the cost model to be used for this purpose, with stakeholders encouraged to participate in that process. The model will be used to establish the efficient amount of support required to extend and sustain robust, scalable broadband in high-cost areas. In each state, each incumbent price cap carrier will be asked to undertake a "state-level commitment" to provide affordable broadband to all high-cost locations in its service territory in that state, excluding extremely high cost areas as determined by the model. Importantly, the CAF will only provide support in those areas where a federal subsidy is necessary to ensure the buildout and operation of broadband networks. The CAF will not provide support in areas where unsubsidized competitors are providing broadband that meets our definition. Carriers accepting the state-level commitment will be obligated to meet rigorous broadband service requirements--with interim buildout requirements in three years and final requirements in five years--and will receive CAF funding, in an amount calculated by the model, over a five-year period, with significant financial consequences in the event of non- or under-performance. We anticipate that CAF obligations will keep pace as services in urban areas evolve, and we will ensure that CAF-funded services remain reasonably comparable to urban broadband services over time. After the five-year period, the Commission will use competitive bidding to distribute any universal service support needed in those areas.

9. In areas where the incumbent declines the state-level commitment, we will use competitive bidding to distribute support in a way that maximizes the extent of robust, scalable broadband service subject to an overall budget. In the Further Notice of Proposed Rulemaking (FNPRM) that accompanies today's Order, we propose a structure and operational details for the competitive bidding mechanism, in which any broadband provider that has been designated as an ETC for the relevant area may participate. The second phase of the CAF will distribute a total of up to $1.8 billion annually in support for areas with no unsubsidized broadband competitor. We expect that the model and competitive bidding mechanism will be adopted by December 2012, and disbursements will ramp up in 2013 and continue through 2017.

10. Rate-of-Return Reforms. Although they serve less than five percent of access lines in the U.S., smaller rate-of-return carriers operate in many of the country's most difficult and expensive areas to serve. Rate-of-return carriers' total support from the high-cost fund is approaching $2 billion annually. We reform our rules for rate-of-return companies in order to support continued broadband investment while increasing accountability and incentives for efficient use of public resources. Rate-of-return carriers receiving legacy universal service support, or CAF support to offset lost ICC revenues, must offer broadband service meeting initial CAF requirements, with actual speeds of at least 4 Mbps downstream and 1 Mbps upstream, upon their customers' reasonable request. Recognizing the economic challenges of extending service in the high-cost areas of the country served by rate-of-return carriers, this flexible approach does not require rate-of-return companies to extend service to customers absent such a request.

11. Alongside these broadband service rules, we adopt reforms to:

establish a framework to limit reimbursements for excessive capital and operating expenses, which will be implemented no later than July 1, 2012, after an additional opportunity for public comment;
encourage efficiencies by extending existing corporate operations expense limits to the existing high-cost loop support and interstate common line support mechanisms, effective January 1, 2012;
ensure fairness by reducing high-cost loop support for carriers that maintain artificially low end-user voice rates, with a three-step phase-in beginning July 1, 2012;
phase out the Safety Net Additive component of high-cost loop support over time;
address Local Switching Support as part of comprehensive ICC reform;
phase out over three years support in study areas that overlap completely with an unsubsidized facilities-based terrestrial competitor that provides voice and fixed broadband service, beginning July 1, 2012; and
cap per-line support at $250 per month, with a gradual phasedown to that cap over a three-year period commencing July 1, 2012.
In the FNPRM, we seek comment on establishing a long-term broadband-focused CAF mechanism for rate-of-return carriers, and relatedly seek comment on reducing the interstate rate-of-return from its current level of 11.25 percent. We expect rate-of-return carriers will receive approximately $2 billion per year in total high-cost universal service support under our budget through 2017.

12. CAF Mobility Fund. Concluding that mobile voice and broadband services provide unique consumer benefits, and that promoting the universal availability of such services is a vital component of the Commission's universal service mission, we create the Mobility Fund, the first universal service mechanism dedicated to ensuring availability of mobile broadband networks in areas where a private-sector business case is lacking. Mobile broadband carriers will receive significant legacy support during the transition to the Mobility Fund, and will have opportunities for new Mobility Fund dollars. The providers receiving support through the CAF Phase II competitive bidding process will also be eligible for the Mobility Fund, but carriers will not be allowed to receive redundant support for the same service in the same areas. Mobility Fund recipients will be subject to public interest obligations, including data roaming and collocation requirements.

Phase I. We provide up to $300 million in one-time support to immediately accelerate deployment of networks for mobile voice and broadband services in unserved areas. Mobility Fund Phase I support will be awarded through a nationwide reverse auction, which we expect to occur in third quarter 2012. Eligible areas will include census blocks unserved today by mobile broadband services, and carriers may not receive support for areas they have previously stated they plan to cover. The auction will maximize coverage of unserved road miles within the budget, and winners will be required to deploy 4G service within three years, or 3G service within two years, accelerating the migration to 4G. We also establish a separate and complementary one-time Tribal Mobility Fund Phase I to award up to $50 million in additional universal service funding to Tribal lands to accelerate mobile voice and broadband availability in these remote and underserved areas.
Phase II. To ensure universal availability of mobile broadband services, the Mobility Fund will provide up to $500 million per year in ongoing support. The Fund will expand and sustain mobile voice and broadband services in communities in which service would be unavailable absent federal support. The Mobility Fund will include ongoing support for Tribal areas of up to $100 million per year as part of the $500 million total budget. In the FNPRM we propose a structure and operational details for the ongoing Mobility Fund, including the proper distribution methodology, eligible geographic areas and providers, and public interest obligations. We expect to adopt the distribution mechanism for Phase II in 2012 with implementation in 2013.
13. Identical Support Rule. In light of the new support mechanisms we adopt for mobile broadband service and our commitment to fiscal responsibility, we eliminate the identical support rule that determines the amount of support for mobile, as well as wireline, competitive ETCs today. We freeze identical support per study area as of year end 2011, and phase down existing support over a five-year period beginning on July 1, 2012. The gradual phase down we adopt, in conjunction with the new funding provided by Mobility Fund Phase I and II, will ensure that an average of over $900 million is provided to mobile carriers for each of the first four years of reform (through 2015). The phase down of CETC support will stop if Mobility Fund Phase II is not operational by June 30, 2014, ensuring approximately $600 million per year in legacy support will continue to flow until the new mechanism is operational.

14. Remote Areas Fund. We allocate at least $100 million per year to ensure that Americans living in the most remote areas in the nation, where the cost of deploying traditional terrestrial broadband networks is extremely high, can obtain affordable access through alternative technology platforms, including satellite and unlicensed wireless services. We propose in the FNPRM a structure and operational details for that mechanism, including the form of support, eligible geographic areas and providers, and public interest obligations. We expect to finalize the Remote Areas Fund in 2012 with implementation in 2013.

15. Reporting and Enforcement. We establish a national framework for certification and reporting requirements for all universal service recipients to ensure that their public interest obligations are satisfied, that state and federal regulators have the tools needed to conduct meaningful oversight, and that public funds are expended in an efficient and effective manner. We do not disturb the existing role of states in designating ETCs and in monitoring that ETCs within their jurisdiction are using universal service support for its intended purpose. We seek comment on whether and how we should adjust federal obligations on ETCs in areas where legacy funding is phased down. We also adopt rules to reduce or eliminate support if public interest obligations or other requirements are not satisfied, and seek comment on the appropriateness of additional enforcement mechanisms.

16. Waiver. As a safeguard to protect consumers, we provide for an explicit waiver mechanism under which a carrier can seek relief from some or all of our reforms if the carrier can demonstrate that the reduction in existing high-cost support would put consumers at risk of losing voice service, with no alternative terrestrial providers available to provide voice telephony.

Intercarrier Compensation Reform
17. Immediate ICC Reforms. We take immediate action to curtail wasteful arbitrage practices, which cost carriers and ultimately consumers hundreds of millions of dollars annually:

Access Stimulation. We adopt rules to address the practice of access stimulation, in which carriers artificially inflate their traffic volumes to increase ICC payments. Our revised interstate access rules generally require competitive carriers and rate-of-return incumbent local exchange carriers (LECs) to refile their interstate switched access tariffs at lower rates if the following two conditions are met: (1) a LEC has a revenue sharing agreement and (2) the LEC either has (a) a three-to-one ratio of terminating-to-originating traffic in any month or (b) experiences more than a 100 percent increase in traffic volume in any month measured against the same month during the previous year. These new rules are narrowly tailored to address harmful practices while avoiding burdens on entities not engaging in access stimulation.
Phantom Traffic. We adopt rules to address "phantom traffic," i.e., calls for which identifying information is missing or masked in ways that frustrate intercarrier billing. Specifically, we require telecommunications carriers and providers of interconnected VoIP service to include the calling party's telephone number in all call signaling, and we require intermediate carriers to pass this signaling information, unaltered, to the next provider in a call path.
18. Comprehensive ICC Reform. We adopt a uniform national bill-and-keep framework as the ultimate end state for all telecommunications traffic exchanged with a LEC. Under billand- keep, carriers look first to their subscribers to cover the costs of the network, then to explicit universal service support where necessary. Bill-and-keep has worked well as a model for the wireless industry; is consistent with and promotes deployment of IP networks; will eliminate competitive distortions between wireline and wireless services; and best promotes our overall goals of modernizing our rules and facilitating the transition to IP. Moreover, we reject the notion that only the calling party benefits from a call and therefore should bear the entire cost of originating, transporting, and terminating a call. As a result, we now abandon the calling-partynetwork-pays model that dominated ICC regimes of the last century. Although we adopt bill-and-keep as a national framework, governing both inter- and intrastate traffic, states will have a key role in determining the scope of each carrier's financial responsibility for purposes of bill-and-keep, and in evaluating interconnection agreements negotiated or arbitrated under the framework in sections 251 and 252 of the Communications Act. We also address concerns expressed by some commenters about potential fears of traffic "dumping" and seek comment in the FNPRM on whether any additional measures are necessary in this regard.

19. Multi-Year Transition. We focus initial reforms on reducing terminating switched
access rates, which are the principal source of arbitrage problems today. This approach will
promote migration to all-IP networks while minimizing the burden on consumers and staying
within our universal service budget. For these rates, as well as certain transport rates, we adopt a
gradual, measured transition that will facilitate predictability and stability. First, we require
carriers to cap most ICC rates as of the effective date of this Order. To reduce the disparity
between intrastate and interstate terminating end office rates, we next require carriers to bring
these rates to parity within two steps, by July 2013. Thereafter, we require carriers to reduce their
termination (and for some carriers also transport) rates to bill-and-keep, within six years for price
cap carriers and nine for rate-of-return carriers. The framework and transition are default rules
and carriers are free to negotiate alternatives that better address their individual needs. Although
the Order begins the process of reforming all ICC charges by capping all interstate rate elements
and most intrastate rate elements, the FNPRM seeks comment on the appropriate transition and
recovery for the remaining originating and transport rate elements. States will play a key role in
overseeing modifications to rates in intrastate tariffs to ensure carriers are complying with the
framework adopted in this Order and not shifting costs or otherwise seeking to gain excess
recovery. The FNPRM also seeks comment on interconnection issues likely to arise in the
process of implementing a bill-and-keep methodology for ICC.

20. New Recovery Mechanism. We adopt a transitional recovery mechanism to mitigate
the effect of reduced intercarrier revenues on carriers and facilitate continued investment in
broadband infrastructure, while providing greater certainty and predictability going forward than
the status quo. Although carriers will first look to limited increases from their end users for
recovery, we reject notions that all recovery should be borne by consumers. Rather, we believe,
consistent with past reforms, that carriers should have the opportunity to seek partial recovery
from all of their end user customers. We permit incumbent telephone companies to charge a
limited monthly Access Recovery Charge (ARC) on wireline telephone service, with a maximum
annual increase of $0.50 for consumers and small businesses, and $1.00 per line for multi-line
businesses, to partially offset ICC revenue declines. To protect consumers, we adopt a strict
ceiling that prevents carriers from assessing any ARC for any consumer whose total monthly rate
for local telephone service, inclusive of various rate-related fees, is at or above $30. Although the
maximum ARC is $0.50 per month, we expect the actual average increase across all wireline
consumers to be no more than $0.10-$0.15 a month, which translates into an expected maximum
of $1.20-$1.80 per year that the average consumer will pay.4 We anticipate that consumers will
receive more than three times that amount in benefits in the form of lower calling prices, more
value for their wireless or wireline bill, or both, as well as greater broadband availability.
Furthermore, the ARC will phase down over time as carriers' eligible revenue decreases, and we
prevent carriers from charging any ARC on Lifeline customers or further drawing on the Lifeline
program, so that ICC reform will not raise rates at all for these low-income consumers. We also
seek comment in the FNPRM about reassessing existing subscriber line charges (SLCs), which
are not otherwise implicated by this Order, to determine whether those charges are set at
appropriate levels.

21. Likewise, although we do not adopt a rate ceiling for multi-line businesses
customers, we do adopt a cap on the combination of the ARC and the existing SLC to ensure that
multi-line businesses do not bear a disproportionate share of recovery and that their rates remain
just and reasonable. Specifically, carriers cannot charge a multi-line business customer an ARC
when doing so would result in the ARC plus the existing SLC exceeding $12.20 per line.
Moreover, to further protect consumers, we adopt measures to ensure that carriers must apportion
lost revenues eligible for ICC recovery between residential and business lines, appropriately
weighting the business lines (i.e., according to the higher maximum annual increase in the
business ARC) to prevent carriers that elect not to receive ICC CAF from recovering their entire
ICC revenue loss from consumers. Carriers may receive CAF support for any otherwise-eligible
revenue not recovered by the ARC. In addition, carriers receiving CAF support to offset lost ICC
revenues will be required to use the money to advance our goals for universal voice and

22. In defining how much of their lost revenues carriers will have the opportunity to
recover, we reject the notion that ICC reform should be revenue neutral. We limit carriers' total
eligible recovery to reflect the existing downward trends on ICC revenues with declining
switching costs and minutes of use. For price cap carriers, baseline recovery amounts available to
each price cap carrier will decline at 10 percent annually. Price cap carriers whose interstate rates
have largely been unchanged for a decade because they participated in the Commission's 2000
CALLS plan will be eligible to receive 90 percent of this baseline every year from ARCs and the
CAF. In those study areas that have recently converted from rate-of-return to price cap
regulation, carriers will initially be permitted to recover the full baseline amount to permit a more
gradual transition, but we will decline to 90 percent recovery for these areas as well after 5 years.
All price cap CAF support for ICC recovery will phase out over a three-year period beginning in
the sixth year of the reform.

23. For rate-of-return carriers, recovery will be calculated initially based on rate-of-return
carriers' fiscal year 2011 interstate switched access revenue requirement, intrastate access
revenues that are being reformed as part of this Order, and net reciprocal compensation revenues.
This baseline will decline at five percent annually to reflect combined historical trends of an
annual three percent interstate cost and associated revenue decline, and ten percent intrastate
revenue decline, while providing for true ups to ensure CAF recovery in the event of faster-thanexpected
declines in demand. Both recovery mechanisms provide carriers with significantly
more revenue certainty than the status quo, enabling carriers to reap the benefits of efficiencies
and reduced switching costs, while giving providers stable support for investment as they adjust
to an IP world.

24. Treatment of VoIP Traffic. We make clear the prospective payment obligations for
VoIP traffic exchanged in TDM between a LEC and another carrier, and adopt a transitional
framework for VoIP intercarrier compensation. We establish that default charges for "toll" VoIPPSTN
traffic will be equal to interstate rates applicable to non-VoIP traffic, and default charges
for other VoIP-PSTN traffic will be the applicable reciprocal compensation rates. Under this
framework, all carriers originating and terminating VoIP calls will be on equal footing in their
ability to obtain compensation for this traffic.

25. CMRS-Local Exchange Carrier (LEC) Compensation. We clarify certain aspects of
CMRS-LEC compensation to reduce disputes and address existing ambiguity. We adopt bill-andkeep
as the default methodology for all non-access CMRS-LEC traffic. To provide rate-of-return
LECs time to adjust to bill-and-keep, we adopt an interim transport rule for rate-of-return carriers
to specify LEC transport obligations under the default bill-and-keep framework for non-access
traffic exchanged between these carriers. We also clarify the relationship between the
compensation obligations in section 20.11 of the Commission's rules and the reciprocal
compensation framework, thus addressing growing concerns about arbitrage related to rates set
without federal guidance. Further, in response to disputes, we make clear that a call is considered
to be originated by a CMRS provider for purposes of the intraMTA rule only if the calling party
initiating the call has done so through a CMRS provider. Finally, we affirm that all traffic routed
to or from a CMRS provider that, at the beginning of a call, originates and terminates within the
same MTA, is subject to reciprocal compensation, without exception.

26. IP-to-IP Interconnection. We recognize the importance of interconnection to
competition and the associated consumer benefits. We anticipate that the reforms we adopt will
further promote the deployment and use of IP networks, and seek comment in the accompanying
FNPRM regarding the policy framework for IP-to-IP interconnection. We also make clear that
even while our FNPRM is pending, we expect all carriers to negotiate in good faith in response to
requests for IP-to-IP interconnection for the exchange of voice traffic.

Links to Sources

FCC Creates 'Connect America Fund' to Help Extend High-Speed Internet to 18 Million Unserved Americans
FCC (Executive summary of Report and Order)
FCC approves $4.5 billion broadband fund (Washington Post)
FCC unveils rules for rural broadband fund (Associated Press)
FCC Approves USF Reform Proposal (B&C)
FCC adopts Universal Service and inter-carrier compensation reform order (Connected Planet)

Bonnie Bracey Sutton's picture
Bonnie Bracey Sutton
Teacher Agent of Change, Power of US Foundation

By Michael Nunez | October 28, 2011 12:00 PM EDT

The Federal Communications Commission accepted Chairman Julius Genachowski's proposal to overhaul a program dedicated to building telephone connections in remote places. The $8 billion subsidy program that Genachowski dismantled was written in the dial-up era of internet and was structured to subsidize basic phone service-not broadband. The commission voted 4-to-0 to restructure the subsidy program.
Regulators approved a $4.5 billion subsidy to extend high-speed internet to 18 million Americans unable to reach broadband internet. The alteration of the FCC's subsidy program will ensure that they're building long-lasting technology in rural places rather than dated dial-up technology.

"We are taking a system designed for the Alexander Graham Bell era of rotary telephones and modernizing it for the era of Steve Jobs and the Internet future he imagined," said Genachowski at the meeting in Washington. He believes that broadband may spur hundreds of thousands of jobs in the affected areas.

The effort makes huge strides in closing the digital divide, one that's apparent in remote communities, where they often don't have access to high- speed internet. The FCC will also lower rates it charges companies to connect calls in remote areas, which will help more people get connected in these areas and promote business.

The FCC's order relies heavily on competitive bidding in awarding subsidies to phone companies, sends more funds to hardest-to-serve areas and places stricter limits on new fees carriers may levy to make up for reduced connection charges an FCC spokesman said in a Bloomberg Businessweek report.

Still, some are critical of the decision-mainly wireless carriers and companies that will not be allowed to bid on servicing these remote places. Other telecom providers believe that the FCC is giving incubmant phone companies an unwarranted advantage to provide broadband to the area. Mobile broadband providers feel like the FCC is discouraging mobile broadband carriers-the ones pushing innovation in the broadband industry-from investing dollars into these areas.

The new plan will not not cost taxpayers anymore money, according to FCC Commissioner Robert McDoweell, whose quoted in the Businesweek report. The announcement comes after years of lobbying from rural phone companies, large telecommunication companies, cable companies, wireless carriers and consumer groups - who each had reasons for trying to impact the bill.

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