Re: new survey on allocation of Universal Service subsidies

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> Rex Buddenberg said:

> A lot of ISPs are definitely shoestring outfits.  While there will
> certainly be a shakeout, they won't all be swallowed up by the
> telcos.  Indeed, the reverse may be happen in our increasingly
> horizontally integrated information structure -- the telcos
> do what they can do best (provide terrestrial connectivity) and
> the ISPs do what excell in (provide internet services).


> The disconnect that I see here is that the technology to reach
> rural areas is generally provided by companies that are outside
> of the regulatory framework.  Because they do not have natural
> monopoly characteristics that would cause the government to
> regulate them.  Given the cross-subsidization prohibitions
> in the legislation, we can't use the Universal Service subsidies
> for the technology that is appropriate to the requirement.
> Desire to reach rural areas is not a sufficient reason to bring
> these unregulated companies under regulation.  I haven't seen
> anyone on this list illustrate how we get from here to there...
> 
> Rex Buddenberg

I think my view of the Internet world and Rex's is pretty similar.  I'm not
convinced telcos will be the vendor of choice for Internet access by
libraries, school districts or pretty much anyone else in rural areas.   It
seems more likely that ISPs will purchase a connection to the Internet
backbone and then offer Internet bandwidth in the form of modem dial in,
ISDN dial in, frame relay connections, direct connections and RF
connections to the customers they serve.  The telcos will be providing some
of the physical circuits, but school districts and libraries are likely
buying their Internet bandwidth from a local ISP (an unregulated,
competitive, and unsubsidized business).  When the ISP is delivering
bandwidth via an RF connection, the telcos aren't even a direct part of the
service being offered to a school or library.

This scenario strikes me as probable unless the libraries and school
districts actually become ISPs and use subsidized manpower, bandwidth,
telco circuits etc. to capture the local market.  It's difficult for me to
conceptualize  a scenario where  even a well managed for profit ISP can
successfully  compete against a well managed subsidized non-profit ISP.

The assumption with nearly all the email I've been reading is that the
telcos will dominate delivery of Internet bandwidth and other Internet
services (consulting, training, server setup etc. etc.) to rural areas. 
This isn't the case today; why does everyone assume this will be the
scenario for the future?  And, if the telcos aren't the vendor of choice
for library and school district Inernet (and possibly other
telecommunication) needs, then what is the value of the "Universal Service"
rate subsidy for libraries and school districts?  I also sense a pretty
basic "disconnect" here.

Robert Mammel
Gaylord Michigan

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