Before the

NATIONAL TELECOMMUNICATONS AND INFORMATION ADMINISTRATION

Washington, DC20230

In the Matter of)

)Docket No. 01109273-1273-01

Deployment of Broadband Networks)RIN 0660-XX13

and Advanced Telecommunications)

COMMENTS OF CORNING INCORPORATED

I.EXECUTIVE SUMMARY

1.The most rapid deployment of broadband capability at affordable cost to consumers should be the primary objective of our Nation’s broadband policy.This objective is currently being frustrated as the cost of capital and the cost of regulation are inhibiting investment in next generation broadband capability.The best evidence of this reality is the fact that next generation broadband technology is cost effective relative to current copper-based technology in new build and total rehab situations.Yet, copper remains the technology of choice for most ILEC investment.

2.The ILECs are not being irrational in this decision.The higher risk associated with investment in next generation broadband capability increases the relative cost of capital for such investment.And, senior ILEC representatives have been quite vocal about the fact that the cost of unbundling and resale regulations has discouraged investment in next generation broadband capability.The experience of SBC with its project BPON, which is currently restricted to two trials, is an excellent case in point.

3.These barriers to investment in next generation broadband capability can be overcome by implementation of a tax credit initiative for deployment of such capability and by the adoption of a new regulatory framework for next generation broadband capability deployed in new build and total rehab situations.

4.The tax credit initiative has already been developed in the Broadband Internet Access Act of 2001 (S.88/H.R.267).This initiative would directly reduce the cost of capital through a targeted tax reduction implemented by means of a tax credit equal to 20% of the capitalized cost of investment in next generation broadband capability deployed to serve residential customers.The incentive is both technology-neutral and carrier-neutral.

5.The new regulatory framework would reduce the cost of regulation associated with deploying next generation capability only in new build and total rehab situations.The regulatory relief is limited to these situations because all carriers are uniquely in the same position to compete in a new build or total rehab situation.New facilities must be deployed by all carriers to gain access to the customer.No carrier class has a competitive advantage by virtue of legacy facilities.

6.This new regulatory framework would involve the following elements:

·a 10 mbps definition for next generation capability;

·price deregulation for next generation broadband capability deployed in new build and total rehab situations;

·removal of unbundling requirements on next generation broadband capability in new build and total rehab situations;

·forbearance from imposing resale obligations on next generation broadband capability in new build and total rehab situations;

·waiver of the requirement to seek certificates of public necessity and convenience to build next generation broadband facilities; and

·use of price caps as a means for regulating services, such as traditional telephone service, which are already regulated and which ride on next generation broadband capability.

II. INTRODUCTION

7.These comments are being submitted by Corning Incorporated (herein referred to as “Corning”), a leading-edge technology company for the fastest growing markets in the world economy. Corning manufactures optical fiber, optical cable, and photonic components for the telecommunications industry.We produce high-performance displays and components for the television, information technology, and other communications-related industries.And, we manufacture advanced materials for the scientific, semi-conductor, and environmental markets.Corning’s total revenues for the year 2000 were $7.1 billion.

8.As the leading U.S. manufacturer of optical fiber, optical cable, and photonic components, Corning has a deep interest in the outcome of this proceeding.This interest arises from the fact that this proceeding could result in policy decisions that will affect the rate at which optical communications technology is deployed into the local portion of the Nation’s telecommunications network.

9.This proceeding is especially important to the fiber optics industry in today’s market.Along with the rest of the high-tech sector, the fiber optics industry has experienced a considerable contraction over the last year.A record number of employees have been laid off and most manufacturing facilities have been idled either permanently or temporarily. These negative trends could be reversed by policy decisions rising out of this proceeding that stimulate investment in fiber-based local access solutions.

10.Corning believes that government regulation is currently inhibiting the deployment of optical communications in the local access portion of the Nation’s telecommunications network.Hopefully, as a result of this proceeding, the Administration will strongly endorse policy measures to remove obstacles to investment in fiber optical technology.Such measures will benefit the industry and American consumers who are currently being denied the benefits of the technology in the form of information-rich applications that the technology enables.

III. BROADBAND POLICY OBJECTIVE

11.The primary objective of our Nation’s broadband policy should be to achieve the fastest possible deployment of broadband capability to consumers at affordable rates.Rapid deployment should be a national goal because broadband will prove to be a crucial infrastructure for economic development.Broadband infrastructure will provide the basis for productivity growth that, in turn, will enhance economic growth.

12.The experience of the 1990’s demonstrated the relationship between investment in information technology (including broadband), productivity growth, and economic expansion.The 1990’s experienced the longest expansion in the post-war period.A substantial increase in the rate of labor productivity growth drove this historic expansion.Labor productivity growth increased from an average rate of 1.4% per year in the 1973-95 period to 2.9 percent per year in the 1995-1999 period.

13.It is a well-established fact that investment in information technology accounted for a substantial portion of this increased growth in labor productivity.Numerous studies have made this linkage.Most significant among them is a study published by two Federal Reserve economists, Stephen Oliner and Daniel Sichel.[1]They observed that labor productivity growth increased from 1.5 percent per year in the first half of the decade (i.e., 1991-95) to 2.8 percent per year in the second half of the decade (i.e., 1996-00).They estimated that information technology accounted for about two-thirds of this increase in labor productivity growth.

14.The rapid deployment of broadband capability at affordable rates for consumers will result in the more rapid realization of the labor productivity growth, thereby accelerating economic growth.This economic impact has been examined in a recent study authored by Robert Crandall and Charles Jackson[2] . The study concluded that “[t]he total annual benefits to the U.S. economy of the widespread adaptation of broadband access … could be more than $400 billion annually.Faster roll-out of high-speed access services gives us these benefits earlier.”[3]

15.Thus, speed of broadband deployment at an affordable price to consumers should be primary consideration of policy makers as they fashion a national broadband policy.The sooner this technology is diffused, the sooner the Nation will capture the economic benefits associated with the widespread deployment of the technology.

16.The goal of rapid broadband deployment at affordable rates for consumers can be achieved by pursuing a multitude of policy solutions rather than using one simple solution.Some of the policy solutions include (at a high level of generalization):

·technology-neutral tax credits and other tax-based incentives;

·deregulation of existing unbundling, resale, and pricing rules;

·timely allocation of sufficient spectrum suitable for the provision of advanced wireless services; and

·removal of artificial barriers that new entrants encounter as they seek access to rights of way.

This is not intended to be an exhaustive list.Rather, it is intended to illustrate the fact that many policy measures must be employed to achieve the policy goal at hand.

17.The comments provided herein will be restricted to the use of tax credits and deregulatory initiatives.

IV. WHAT IS BROADBAND?

18.The definition of the term “broadband” is a critical issue for the purpose of this proceeding because the definition will dictate the nature of the problem and, hence, the policy prescription.

19.On one hand, if broadband includes a minimal service definition and a low data transfer rate (e.g., 200 kbps), a conclusion can be drawn that the capability is being widely deployed and, therefore, no policy action is necessary.On the other hand, if broadband includes a robust service definition, such as the bi-directional transport of audio, data, and full-motion video, and a high data transfer rate (e.g., 10 mbps), then a finding can be made that the deployment is occurring at extremely slow pace, thus justifying the need for policy action.Unfortunately, policy makers have erred to date on the side of defining broadband as a very minimal capability.The FCC, for example, in its Section 706 proceedings, has defined advanced telecommunications capability (which by statutory definition is “broadband”) as 200 kbps one-way transmission capability.

20.The Cross-Industry Working Team (“XIWT”) has developed a useful guide for defining the service platforms and data transfer speeds that can be used to define the term broadband.[4]The XIWT is an inter-industry-working group with scientific and technical representation from a broad corporate base covering the allied fields of communications, equipment manufacturing, and computing.[5]It has defined a series of “Class Profiles” for telecommunications capabilities and related applications.Table 1 below summarizes these class profiles.

Table 1

Application, Data Transfer Rates, Information Appliance, and Communications Service by Class Profile


 
Class 1
Application
Basic web browsing and e-mail
Data Transfer Rate
10Kb/s-100Kb/s
Information Appliance
Internet terminal using home TV as monitor, analog modem, integrated browser and e-mail application software, wireless remote control/pointer, wireless keyboard
Communications Service
Standard analog telephone line and dialup access to Internet Service Provider
Class 2
Application
Talking head video conferencing
Data Transfer Rate
100Kb/s-1Mb/s
Information Appliance
Basic personal computer and video monitor with H.261 video codec, basic rate ISDN interface card
Communications Service
Basic Rate ISDN dial-up connection
Class 3
Application
Geographic information acquisition, manipulation and analysis
Data Transfer Rate
1Mb/s-10Mb/s
Information Appliance
High end desktop personal computer with high resolution video display. 3D graphics display adapter, 64 MB of memory, 4GB hard drive. CDROM, cable modem/ADSL modem
Communications Service
Broadband network access through telco or cable company
Class 4
Application
On-campus networked multimedia distance education
Data Transfer Rate
10Mb/s-100Mb/s
Information Appliance
High performance computer workstation with high resolution video display. 3D graphics accelerator, real-time MPEGII codec,128MB memory, 10GB hard drive, DVD, ethernet interface
Communications Service
Switched ethernet over ATM campus network
Class 5
Application
Networked medical imaging including local and remote image acquisition, image interpretation/consultation and image archiving
Data Transfer Rate
100Mb/s-1Gb/s
Information Appliance
High performance multiprocessor server with 1GB memory, 100GB RAID file system, dual video displays including large screen high resolution video display, graphics accelerators, ATM interface
Communications Service
Switched 155 Mb/s ATM

Source: “Class Profiles for the Current and Emerging NII,” Cross Industry Working Team, Corporation for National Research Initiatives, http://www.xint.org/documents/classprofiles.html.

Note:Data transfer rates taken from Figure 1 of the “Class Profiles” document.

21.Figure 1 below depicts the Class Profiles in a fashion that links the application more clearly to the data transfer speed.


Figure 1

Applications and Related Data Transfer Rates by Class Profile

Source: “Class Profiles for the Current and Emerging NII,” Cross Industry Working Team, Corporation for National Research Initiatives, http://www.xint.org/documents/classprofiles.html.

22.It is clear from Table 1 and Figure 1, “broadband” as the term is used today encompasses anything from Class Profile 2 (100 Kbps to 1 mbps) to Class Profile 5 (100 mbps to 1 Gbps).However, this range is far too wide to provide useful guidance to policymakers.

23.Policymakers should be guided by two classes of broadband service: current generation broadband capability and next generation broadband capability.Current generation should be defined by XIWT Class Profiles 2 and 3.This covers data transfer rates of 100 Kbps to 10 mbps, speeds that can be achieved using current transmission technologies such as cable modems and ADSL.These technologies are being rapidly deployed today.

24.Next generation broadband capability should be defined by XIWT Class Profiles 4 and 5.It would involve data transfer rates ranging from 10 mbps to 1 Gbps.It requires technologies such as switched Ethernet over ATM, passive optical networks, and other fiber-based architectures.These technologies have not been deployed in any significant commercial volumes, although they are a cost-effective alternative to existing technology as will be demonstrated later.

25.For the purpose of these comments, Corning will address only issues affecting the deployment of next generation broadband capability.We proposed to define next generation capability, consistent with the XIWT definition, as a data transfer speed in excess of 10 mbps both upstream and downstream.This would encompass XIWT Class Profiles 4 and 5.Corning believes it is uniquely competent to comment on next generation broadband capability because fiber optics will play a pivotal role in delivery systems that can operate within the 10 mbps to 1 Gbps range (e.g., XIWT Class Profiles 4 and 5).

V.NEXT GENERATION BROADBAND CAPABILITY IS COST EFFECTIVE AND READY TO BE DEPLOYED

26.Technology diffusion models assume that new technology will be substituted for current technology when the cost of new technology is equal to or less than the current technology.To the extent the new technology offers a higher level of performance (as well as cost parity), the rate of substitution can be accelerated.

27.Next generation broadband capability is poised for rapid diffusion because it has reached the level of cost parity with current technology in new build and total rehab situations, and offers a substantially higher level of performance for no extra cost.The attached Exhibit attests to this fact.

28.Exhibit 1 provided by Paceon shows that copper and fiber-based technologies are at cost parity today in new build and total rehab situations.According to Paceon, a passive optical network (“PON”) can deliver 155 mbps to the home for $1,956.00 per home served versus $2,111.00 per home served for a copper-based DSL network delivering 1.5 mbps.

29.These are installed first cost estimates for deployment in a residential neighborhood of 10,000 homes.The estimates assume an 80% take rate for two 64 kbps voice channels and IP data service for each customer.The IP data service under the DSL scenario is at 1.5 mbps downstream and 750 Kbps upstream.The IP data service for the PON scenario delivers 155 mbps downstream shared among 32 homes and 4 mbps upstream for each home.

30.In short, these data show that a carrier can deliver 100 times more capacity over a fiber network for the same price as a copper network.Stated differently, the price per million bits on the copper network is $1,474.00 per million bits versus $12.62 per million bits on Paceon’s fiber network.

VI.DESPITE COST PARITY, CARRIERS ARE NOT DEPLOYING NEXT GENERATION BROADBAND DEPLOYMENT

31.Given the cost parity demonstrated above between current generation copper and next generation fiber technologies, one could reasonably expect ILECs to deploy next generation capability for new builds and total rehabs rather than copper.Unfortunately, this is not the case.As indicated in Table 2, ILECs deployed copper for nearly 80% of their new builds.

Table 2

Telco Deployment of Copper versus Fiber for New Builds and Total Rehabs

in the Subscriber Plant


 
Copper Sheath Miles Deployed
Fiber Sheath Miles Deployed
Total Sheath Miles Deployed
1997
919,192
28,918
948,110
1998
930,200
31,824
962,024
97-98 Change (i.e., new builds and total rehabs)
11,008
2,908
13,916
Proportion of Total for 1998
79.1%
19.9%
---

 
Source:Fiber Deployment Update, 1997 and 1998, Table 13.

Note:Data includes only GTE and Pacific Telesis.A more complete data set is unavailable.

This investment behavior would be understandable if fiber systems were more costly to deploy than copper, but this is not the case.[6]

VII.THE COST OF CAPITAL AND THE COST OF REGULATION ARE INHIBITING INVESTMENT IN NEXT GENERATION BROADBAND CAPABILITY.

32.The obvious policy question is why are the ILECs investing in copper-based solutions for new builds and total rehabs when next generation broadband capability can be deployed at the same cost?In making an investment decision, ILECs are faced with four sets of costs: equipment costs, operational costs, capital costs, and regulatory costs.There is no difference in equipment costs that would justify the decision not to invest in next generation broadband capability in new build or total rehab situations.And, it is well established that operating and maintaining a fiber-based network is less costly than operating and maintaining a copper-based network. Thus, the capital costs and the regulatory costs must be the factors that are inhibiting investment in next generation broadband capability.

A.Cost of Capital

33.The cost of capital is higher for investment in next generation broadband capability because of the technology and market risks associated with such new investment.There have not been any commercially significant deployments of next generation capability.Communications Industry Researchers estimates that only 16,000 U.S. homes currently have fiber to the home connectivity.[7]This low level of penetration makes the technology somewhat risky particularly as the robust applications made possible over such networks are also in an early stage of development.The fact that the transmission technology and the content are at an early stage in their development increases the risk associated with investment in next generation broadband capability and, hence, raises the relative cost of capital for making such investments.

B.Cost of Regulation

34.In addition to the cost of capital, the high regulatory costs associated with next generation broadband deployment are also a great inhibitor.Senior ILEC representatives said that their reluctance to invest in next generation broadband capability is the direct result of the unbundling regulations likely to be imposed on such facilities by the FCC and the state public utility commissions (“PUCs”).

35.The best example of this is the deployment by SBC of its broadband passive optical network (“BPON”).This network is very robust.It delivers 155 Mbps to each home via a shared fiber network with each fiber from the central office split by means of a passive optical splitter to serve up to 32 homes.

36.SBC has stated publicly that it does not intend to deploy BPON any further than their two ongoing trials until it is clear that the unbundling and pricing regulations do not apply to the BPON deployment.Ross Ireland, SBC’s Senior Executive Vice President for Services, stated that deployment of the optical network in SBC’s region would be affected by regulatory judgments.He cited SBC’s experience with the Illinois Commission noting that, “They required unbundling of technology where it just wasn’t economical.”[8]

37.In the case of the Illinois Commerce Commission, SBC was required to unbundle and lease at marginal cost its new broadband network known as Project Pronto.SBC simply stopped making those investments in Illinois.Its Chairman, Ed Whitacre, stated that “[The Commission’s] decision has made it economically impossible for SBC to recover the cost of deploying and operating the new DSL service in Illinois.”[9]

38.The most telling statement of the impact of the regulation came out of the third quarter earnings report from SBC.In it, Whitacre said:

“In these turbulent and economic waters, pervasive regulations and uncertainty concerning what regulatory rules will apply when SBC deploys and provides broadband and advanced services has become an anchor on the company.For example, rules regarding our new DSL Internet Service Network have added hundreds of millions of dollars in cost and have delayed deployment…In response to these challenges, the company will reduce its workforce by several thousand jobs in the coming months and will cut capital spending by 20% in 2002.”[10]

Clearly, regulation is inhibiting SBC’s investment in next generation broadband capability.

39.The impact of regulation is also seen in comments from Verizon.Verizon went so far as to actually estimate the amount of additional DSL customers that would be served if the regulations were modified.Specifically, Verizon stated:

“The establishment of a national policy that removes inappropriate regulation from broadband services will result in a dramatic increase in broadband availability and usage.In fact, we estimate that the adoption of better public policy would increase the number of additional households and businesses that could receive broadband services from Verizon during the next three years by 50-75% over the number that would receive service if current policies persist.”[11]

40.The ILECs object primarily to the unbundling rules which require them to break up their network into discrete elements (e.g., loop, operational support system, switching, etc.) and to sell these elements either individually or as a package to competitors at a regulated price known as TELRIC – total element long run incremental cost.TELRIC is the incremental, forward-looking cost for an entirely hypothetical, ideally efficient, state-of-the-art network.It is not historical or actual cost.It is a hypothetical cost that approximates the cost of the most efficient network that could be deployed at any point in time.In most cases, it is below actual or historical cost.

41.As an ILEC representative put it, “Requiring companies to offer competitors access to the broadband portion of these lines has a significant impact on the economics of that decision.Succeed, and your competitors obtain below-cost access and your never recover your investment.Fail, and you shoulder the entire cost of failure.Small wonder that SBC decided not to follow through on its plans to upgrade its network in Illinois after state regulators imposed unbundling requirements.”[12]

42.In light of the capital costs and regulatory costs associated with next generation broadband deployment, policy action that reduces these costs will likely have a substantially positive impact on deployment of this capability.

VIII.TAX CREDITS AND A NEW REGULATORY FRAMEWORK ARE NECESSARY TO OVERCOME BARRIERS TO INVESTMENT IN NEXT GENERATION BROADBAND CAPABILITY

43.As indicated above, equipment costs and operational costs are not inhibiting investment in next generation broadband capability, but capital costs and regulatory costs are.These barriers can be overcome by public policy initiatives.

A.Tax Credits

44.The first such initiative would be designed to overcome the problems associated with the cost of capital for investment in next generation broadband capability.Specifically, tax credits such as that incorporated in the Broadband Internet Access Act of 2001 (S.88/H.R.267), would be very effective in reducing capital costs through targeted tax reduction.The tax reduction would be achieved by means of a tax credit equal to 20% of the capitalized cost of investment in next generation broadband capability deployed to serve residential customers.Such an incentive must be designed to be both carrier neutral and technology neutral.It should also be temporary in nature because as the technology matures the risk premium associated with its deployment will decline, thereby making the credit no longer necessary.

45.The Broadband Internet Access Act includes the following specific elements:

·a 10% tax credit for investments to provide 1.5 mbps downstream/200 Kbps upstream service to rural and underserved areas; 

·a 20% tax credit for investments to provide 22mbps downstream/5 mbps upstream service to rural, underserved, and residential areas;

·availability of credits to any provider deploying the minimum transmission speeds described above, regardless of the technology used;

·a five-year duration to encourage providers to act quickly; and

·a cost of $2.2 billion over 10 years.

The bill is also extremely popular.It has 64 co-sponsors in the Senate and 193 co-sponsors in the House.

B.New Regulatory Framework

46.A new regulatory framework must be adopted by the FCC and the State PUCs to reduce the excessive regulatory costs associated with deployment of next generation broadband capability in new build and total rehab situations.This new framework is recommended only for new build and total rehab situations where next generation capability is deployed for two reasons.First, second generation broadband capability is a cost-effective alternative to current technology in such situations, but it is not being deployed because of excessive regulatory costs.

47.And second, unbundling regulations can be liberalized in new build and total rehab situations without disrupting the competitive relationships between ILECs and competitive local exchange carriers (“CLECs”) because they are in the same competitive position.Both have to build facilities to gain access to the customer.And, there are no legacy facilities for the ILECs to unbundle.This new regulatory framework would include the following elements:

a.10 mbps Definition for Next Generation Broadband

A minimum transmission speed of 10 mbps upstream and downstream should be utilized for the purpose of defining next generation broadband capability.This would encompass XIWT Class Profiles 4 and 5 as described in Section IV above.This speed is necessary to allow for the bi-directional transmission of audio, data at 10 base-T Ethernet speeds, and compressed full motion video.It is important to stress that 10 mbps is a minimal level of transmission.The range provided for in XIWT Class Profiles 4 and 5 range from 10 mbps to 1 Gbps.

b.Price Deregulation

Under this framework, the FCC would use its authority under Title I [13] and/or Section 201 of the Communications Act[14] to deregulate the price, terms, and conditions for the delivery of next generation broadband capability in new build and total rehab situations.The enhanced services and information services that ride over the network would similarly be deregulated.Next generation broadband capability, as well as the related enhanced and information services, can be deregulated because there is no demonstrated dominance in the provision of such capability and services.Services that are regulated today, such as traditional voice services, could continue to be regulated even though they are provided over next generation capability.

c.Unbundling Requirements

This new framework calls for the removal by the FCC of Section 251(c)(3)[15] unbundling requirements from next generation capability offered in new build and total rehab situations.This relief can be granted either in the context of the Commission’s Title I [16] authority or in the context of the unbundling requirements of Section 251(d)(2)(B)[17]-- the so-called “impair standard”.Under this standard, the Commission shall consider whether:

“[f}ailure to provide to [a] network element would impair the ability of the telecommunications carriers seeking access to provide the services that it seeks to offer.”

In a new build or total rehab situation, there is no impairment because both classes for carriers would need to deploy facilities in order to provide service.This renders the impair standard moot.

d.Forbear from the Resale Requirement

This new framework calls for the use by the FCC of its Title I [18] authority to forbear from requiring the discounted resale under Section 251(c)(3)[19] of next generation broadband capability in new build and total rehab situations.Section 10(d) of Title I [20] states that the Commission may forbear from applying the resale provisions in Section 251(c)(4)[21] once “it determines that those requirements have been fully implemented.”The Commission could make such a determination in a new build or total rehab situation because the facilities that would be subject to resale do not exist.Thus, the requirements to resell facilities under Section 251(c)(3)[22] , in essence, have been “fully implemented.”

e.Waive Construction Authorization under Section 214 

Under the new framework, the FCC should utilize its Title I Section 10[23] forbearance authority to waive the requirements under Section 214[24] to seek a certificate of public convenience and necessity to build facilities to provide next generation broadband capability in new build and total rehab situations. In the past, seeking such certificates have proved to be a major barrier to deployment.This was particularly the case with video dial tone in the early 1990’s.Because of this experience, Congress decided in passing the Telecommunications Act of 1996 not to require Section 214[25] certifications for carriers who deploy open video systems.The goal of Congress at the time was to stimulate deployment.Since the goal today is to stimulate deployment, a similar policy prescription with respect to Section 214[26] would be in order.

f.Price Cap Regulation

Under the new framework, the FCC and the PUCs should utilize price caps to regulate currently regulated services, such as traditional telephone service, that may ride on next generation broadband capability in new build and total rehab situations.Price caps have proven themselves to be the most effective means for regulating services over fiber optic systems.One study found that price cap regulation would have increased fiber investment by over 100%[27] when compared to the level of fiber investment under rate of return regulation.

It should be noted that this proposed new regulatory framework for next generation broadband capability deployed in new build and total rehab situations is both fair and reasonable.It does not put any carrier class at a disadvantage, while at the same time providing incentives for incumbents to invest.Since no facilities exist in the new build or total rehab situations, the ILECs and the CLECs are in exactly the same position to complete for new customers.They both have to build facilities to capture the customer.Moreover, there are no ILEC facilities to unbundle.

IX.CONCLUSION

48.Second generation broadband capability is not being deployed in new builds and total rehabs despite the fact that it is a cost-effective alternative to current copper-based technology.The cost of capital and the cost of regulation are inhibiting such investment.

49.These circumstances can be reversed by the adoption of a tax credit initiative and a new regulatory framework for next generation broadband capability.The tax credit initiative, currently encompassed in the Broadband Internet Access Act of 2001 (S.88/H.R.267), would give carriers a 20% tax credit for investment in next generation broadband capability to serve residential customers.

50.The new regulatory framework would apply only in new build and total rehab situations where all classes of carriers are in the same competitive position.It would include the following elements:

·a 10 mbps definition for next generation capability;

·price deregulation for next generation broadband capability deployed in new build and total rehab situations;

·removal of unbundling requirements on next generation broadband capability in new build and total rehab situations;

·forbearance from imposing discounted resale obligations on next generation broadband capability in new build and total rehab situations;

·waiver of the requirement to seek certificates of public necessity and convenience to build next generation broadband facilities; and

·use of price caps as a means for regulating services, such as traditional telephone service, which are already regulated and which ride on next generation broadband capability.

51.Next generation broadband capability is poised for rapid deployment.The government is in the position to adopt policy initiatives that will accelerate its deployment to the benefit of the industry and to the American consumer who will use the capability to access information-rich applications that heretofore have been unavailable.

Respectfully submitted,

CORNING INCORPORATED

___________________________________________

Timothy J. Regan

Senior Vice President, Government Affairs

Corning Incorporated

1350 I Street NW, Suite 500

Washington, DC20005

(tel)202-682-3200



[1]Steven D. Oliner and Daniel E. Sichel, “The Resurgence of Growth in the Late 1990’s:Is In Information Technology the Story”, Journal of Economic Perspectives, 14 (4), Fall 2000, at 21.
[2]SeeRobert W. Crandall and Charles L. Jackson, “The $500 Billion Opportunity: The Potential Benefit of Widespread Diffusion of Broadband Internet Access, Criterion Economics, L.L.C., July 2001
[3]Oliner and Sichel, at iv. 

[3]Id, at iv.

[4]Cross-Industry Working Team, “Class Profiles for the Current and Emerging NII,” Corporation for National Research Initiatives, http://xiwt.org/documents/classprofiles.html.
[5]The corporate members of the Cross-Industry Working Team of 3Com Corporation, Alcatel Telecom, American Management Systems, Apple Computer, AT&T, Bay Networks, BBN, Bell Atlantic, Bellcore, BellSouth, Cisco, Citicorp, Compaq, Corning, Cybercash, Digital Equipment, EarthLink Network, EPRI, Ericsson, Fujitsu, GTE Laboratories, Hewlett-Packard, Houston Associates, Hughes Network Systems, IBM< Intel, InterTrust, Lucent Technologies, MCI Communications, Motorola, NIST, NEC, New York Times, Nortel (Northern Telecom) Novell, Philips Research Briarcliff, Prodigy Services, QuantumLink, SAIC, Silicon Graphics, Southwestern Bell, Spring, Sun Microsystems, Texas Instruments, US West, and West Group.
[6]The relatively small volume of fiber deployed in the subscriber plant is acknowledged in the text of the FCC’s Fiber Deployment Update, 1998 which states

Aside from the fiber trials and fiber redundancy arrangements, there presently appears to be relatively little distribution fiber in place, and it is unclear how much of the existing loop fiber deployed to date is actually in current use.Local telephone companies generally continue to deploy fiber to modernize their plant with limited deployment in the subscriber loop.

[7]Rob Kirby, Fiber-Can’t Find Its Way Home?Network Magazine , September 5, 2001
[8]Liana H. LaBarba, Pronto, part deux, Telephony at p. 14-15 (May 14, 2001).
[9]See letter from Edward E. Whitacre, Jr., Chairman, SBC, to the Honorable J. Dennis Hastert, Speaker of the U.S. House of Representatives (March 14, 2001).
[10]SBC Communications Inc., Quarterly Report to Shareholders 2001, p. 1.
[11]See letter from Ivan Seidenberg, President and Co-Chief Executive Officer, Verizon, to Andy Grove, CEO and Chairman, Intel Corporation.
[12]John ThorneThe 1996 Telecom Act:What Went Wrong and Protecting the Broadband Buildout, at 35.
[13]47 U.S.C. 154
[14]47 U.S.C. 201
[15]47 U.S.C. 251
[16]47 U.S.C. 154
[17]47 U.S.C. 251
[18]47 U.S.C. 160
[19]47 U.S.C. 251
[20]47 U.S.C. 160
[21]47 U.S.C. 251
[22]Id.
[23]47 U.S.C. 160
[24]47 U.S.C. 214
[25]Id.
[26]Id.
[27]See Shane Greenstein, Susan McMaster, and Pablo T. Spiller, The Effect of Incentive Regulation on Local Exchange Companies’ Deployment of Digital Infrastructure, Conference Paper, AEI Telecommunications Summit: Competition and Strategic Alliances, American Enterprise Institute, July 7 1994, Table 6, p. 49.