EXECUTIVE DEPUTY COMMISSIONER OF EDUCATION
THE NEW YORK STATE EDUCATION DEPARTMENT
ALBANY, NEW YORK 12234

April 11, 1996

Office of the Secretary
Federal Communications Commission
1919 M Street, N.W.
Washington, DC 20554

Dear Secretary:

On behalf of the New York State Board of Regents and the State Education Department (SED), I thank you for the opportunity to comment on the notice of proposed rulemaking on universal service in the March 14, 1996 Federal Register.

The Board of Regents sets educational policy for New York State and governs the University of the State of New York, the nation's most comprehensive and unified educational system. It includes over 7,000 public and private elementary and secondary schools, 248 public and private colleges and universities, 251 proprietary (for-profit) schools, nearly 7,000 libraries, 750 museums, and 25 public broadcasting facilities. The SED is the Board's operating arm.

To facilitate affordable and equitable access to telecommunications-based resources and information services, a vital priority for the education and research community in New York State, the Regents have:

* Created an Office of Telecommunications Policy Analysis and Development to focus on state and Federal technology policy issues that could improve educational results for all learners, improve access to information for citizens, and enhance the state's economic development;

* Carried out substantial dialogue with the State's educational leadership, technology industries, and state and local government leaders on the use of information and telecommunications technologies for improving educational results and increasing access to information. In linking institutions through interoperable, broadband telecommunications networks, the Regents intend to create an "electronic leaming community" (portrayed graphically in Attachment A) to improve leaming in schools, colleges, universities, libraries and private industry and to enhance the equitable access of citizens to important information resources;

* Developed a major legislative proposal, the Ommbus Technology in Education act of 1996, to provide network access for every educational, research, and cultural institution in the State (Attachment B summarizes the major provisions);

* Established a strategy for working with the private sector, which advocates for the full deployment of network services and management of networks by private sector providers. To take advantage of the private sector deployment and management of networks and related services, it was decided that the education community must aggregate its purchasing power of about 10,000 geographically dispersed sites. This community represents the largest market beyond the residential market for all telecommunications providers and the largest market volume for future use of broadband services. We anticipate that this aggregate purchasing power, if properly articulated, will have substantial impact on market pricing for all telecommunications services. (Attachment C describes the entire educational market); and

* Articulated a regulatory strategy that unites all these factors and makes them consistent with Federal and state telecommunications policy (Attachment D contains five letters the Department sent to the New York State Public Service Commission outlining our positions.)

Underscoring these technical recommendations, however, has been our emphasis on three primary regulatory policy issues: lower prices, universal access for all educational institutions, and an evolving, scalable telecommunications infrastructure that supports "advanced" telecommunications applications. In this regard, the Department has embraced the principle that the most efficient way to lower rates, create more services, and improve access is through increased competition.

As a culmination of its work on state regulatory policy, in February, we hosted a two-day policy forum on Assuring Full and Equitable Access to Telecommunications Networks and Technology for Education and Research. The central purpose of the Forum was to determine how New York State could develop a universal access policy that is appropriate for education, research, and cultural institutions in an era of deregulation and increasing market competition. Participants were able to: 1) discuss the implications for education and research of ubiquitous, affordable access to broadband telecommunications capacities; 2) gain a perspective on the telecommunications industry's strategies for providing broadband access and supporting the needs of the education and research communities; and 3) discuss with state and Federal regulatory agencies the public interest issues related to ensuring affordable access to broadband telecommunications networks and services.

Then, on March 29, we hosted a one-day Universal Access forum with state education agencies from several northeast and central Atlantic states to: 1) identify and compare the commonalities and priorities of each state's regulatory policies vis a vis education; and 2) develop a preliminary joint statement to the Federal Communication Commission (FCC) on the implementation of the universal service provisions in the Telecommunications Act of 1996. AU attenders agreed that SED staff would draft the statement to reflect the position of all the states. Attachment E lists the organizations.

COMMENTS AND RECOMMENDATIONS

Note: we intend to provide more detailed comments during the Reply phase of this proceeding on the assessment of the technical and economic feasibility of providing access to "advanced" services, designation of service levels, the sufficiency and predictability of support mechanisms, and the circumstances under which carriers may be required to connect its services to public institutional networks. A comprehensive analysis of testimony by other respondents during the Comment phase of the proceeding and their comparison to pending State legislation will be required to fully develop positions in these and other areas outlined in the Notice.

I. Introduction - We have no comments on these sections.

II. Goals and Principles of Universal Service Support Mechanisms

DISCUSSION

The Telecommunications Act of 1996 makes an effort to differentiate between "special" services that could be provided to schools, libraries and health care providers within the general definition of universal service [Section 254 (c) (3)] and those that should be considered as "advanced" telecommunications services [Section 254 (b) (6)], access to which is considered to be a fundamental principle for furthering universal service (including "elementary and secondary schools and classrooms, health rare providers, and libraries...")

The language suggests that "special" services will not be defined within the universal service designation as "advanced" services. That is, the types of services designated as "special" services will be those capable of being supported by a standard telephony infrastructure (using standard voice-grade lines and telephony signaling and switching). Examples of services that might be considered are voice messaging, modem access to computer networks or other electronic media, and certain teleconferencing services. Access to, and use of these services would be subject to the development of specific support mechanisms that would result in discount pricing for educational organizations and health care providers. Further, the difference between the discount price of these services and the retail price of these services could be recovered from other classifications of rate payers by the companies providing these services.

"Advanced" services do not appear to be eligible for discount pricing for use. Instead, discounting may only be available for installation of networks to permit access to services. That is, the cost of providing access to an ISDN-based service for schools would be discounted but not the actual cost for using the service. 'Me current law also only calls for development of "competitively neutral rules to enhance access to "advanced" services. This seems to mean that there is no provision for ensuring access to "advanced" services or for ensuring interconnection of "advanced" services among companies.

Moreover, there appears to be some inconsistency in the discussion of these services as presented in the Notice (Paragraph 11) and the discussion in the Conference Report accompanying the new Act (pages 132-133). A literal interpretation of the language of Section 254 of the law (universal service) seems to be closer in intent to the discussion in the Conference Report than it is in the Notice. The language of the Notice seems to suggest that both "additional" and "advanced" services are categories for which Federal support mechanisms will need to be established to "obtain access" (Paragraph 11 of the Notice). The Conference Report, by contrast, appears to indicate that subsidies should be established for both "special" and "advanced" services for both access and use of these services. We support the Conference Report interpretation.

While we enthusiastically support the intent of the law to begin offering more telecommunications-based services to educational institutions, we are concerned that the current language - at least in terms of the universal support mechanisms - places too much emphasis on narrow-band services. This lack of specificity and legislative intent to promote assurance of affordable access to, and subsidy for use of, "advanced" services creates a significant challenge for the establishment of an interconnected, interoperable electronic leaming community. As stated above, the Regents have established, as a matter of policy and priority, the full use of technology and telecommunications for improving educational results and for promoting efficiencies in delivering quality learning and information services. The achievement of this goal is predicated on the use of high capacity telecommunications networks currently offered or under development by the State's telecommunications providers that will support applications requiring the transport of information at high speeds and at high volume.

RECOMMENDATIONS

* The Joint Board should clarify which services will be subject to discount pricing for both access and use and which will be subject for access only. This clarification will be critical for determining whether the establishment of a universal service funding mechanism will benefit educational organizations and libraries, especially since the magnitude of the resources that may need to be contributed by providers has a substantial impact on other classes of ratepayers. * It also may be important to strengthen requirements for ensuring access to "advanced" services for educational organizations, especially as it relates to subsidizing the provisioning of networks for this purpose. The actual cost of use of these networks may best be controlled, as implied in the current language of the Act, through fair market competition. The deliberations of the Joint Board should reflect this balance between the protection of the public's interest in gaining equitable access to "advanced"services and the recognition of the economic interests of the telecommunications industry to build these capacities. The long-term interests of educational organizations, including libraries, will not be served by the establishment of a universal service mechanism that impedes the economic incentive to build increasingly powerful networks or that passes the costs of network development along to other classes of users. In fact, we have built our regulatory strategy and legislative proposal on our ability to present an aggregate market to the telecommunications providers as a means for effecting long-term reductions in pricing for network access and use. However, the development of requirements in the Act's universal service provisions to ensure access to and the interconnection of "advanced" services will -- and should -- add leverage to the State's negotiations with telecommunications providers for affordable, high quality services. As such, any new language on support mechanisms should be clear in how it conforms to the underlying principle of the Act to provide for a pro- competitive, deregulated national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies to all Americans. * Any cross-subsidization policies at the Federal level should be constructed so that they provide maximum flexibility for states. That is, it is hoped that states Will have the regulatory freedom to set complementary price structures on "advanced" services, for example, that would be consistent with any Federal discounts on "core" or "special" services. * Under any scenario, it seems prudent to adopt a principle of moderation in terms of contributions to the universal service fund. The goal should be to minimize the impact on other classes of ratepayers because of the possible perception that the preferential treatment of educational organizations and other government agencies constitutes another form of taxation. Further, the moderation of fund contributions will give telecommunications providers more incentive to compete for the business of educational organizations and libraries, especially if the cost of use of "advanced" services will not be considered for subsidy. Educational institutions, in particular, should gain lower rates and more services if there is more market competition. Any cross-subsidization tends to obscure real price reductions and other benefits.

III. Support for Rural, Insular, and High-Cost Areas and Low-Income Consumers

DISCUSSION

The Notice's emphasis on equity for consumers in these areas is essential. The Board of Regents has a long history of concern with structural disparities of resources among educational institutions and their students. Networked resources with strict equitable access policies could redress inequities that have been developing since the Communication Act of 1934. We endorse the intent of the Act to ensure that telecommunications users in rural, insular, and high cost areas have access to services, including "interexchange services and advanced services that are reasonably comparable" to those services in urban areas.

RECOMMENDATIONS

* We have no specific recommendations. We plan, however, to review several of the technical proposals currently being developed by other organizations and will have specific comments on them for the May 7 submission.

IV. Schools, Libraries, and Health Care Providers

DISCUSSION

The New York State Education Department applauds congressional recognition of the importance of telecommunications and information services to educational institutions and rural health care providers. As discussed earlier, New York State's educational leadership has established as a matter of policy the assurance of universal access to "advanced" services as a modality for the creation of an electronic learning community that will provide educational and information services to all of the State's citizens on an equitable and cost effective basis. This State policy is consistent with, but broader in scope, than congressional intent because New York's vision includes colleges, universities, museums, and other cultural institutions in addition to schools and libraries. We therefore think extending the policy of universal access to all members of the educational delivery system will encourage a greater diversity and quality of learning resources and opportunities. Moreover, the inclusion of more eligible institutions will provide a greater incentive to telecommunications providers to provision networks for "advanced" services because a larger aggregate market using common operating standards and protocols can be served more efficiently.

While congressional intent is clear with respect to assisting schools and libraries in obtaining access to advanced telecommunications (Paragraph 72) we would like to make note once again of a seeming inconsistency in the language used to prescribe the Joint Commission's responsibility for defining "additional, special services" designated for universal support and those to be designated as "advanced' services for which access is to be "enhanced" (Paragraph 71). 'Me important issue that needs to be addressed through additional clarifying language is whether or not Congress intended to ensure access to "advanced" services and whether or not that access, and possibly use, were intended to be subsidized by some form of Federal support mechanism.

Further, the discussion presented at the beginning of paragraph 77 of the Notice sets the bar for what is considered to be the minimum set of services that should be considered for discount pricing pursuant to universal service provisions. These services, as indicated earlier, appear to be only those that are supported by standard voice grade lines and telephony signaling and switching. As such none of the "additional services" referenced here, or referenced elsewhere as 'special" services, can be considered to be "advanced" services.

In this context, comments and recommendations requested in paragraph 78 regarding the types of additional services that carriers must make available to schools and libraries under Section 254(h)(1)(B) will not adequately represent reasonable capacities for most educational organizations who wish to make effective use of technology and telecommunications for learning, teaching, and information access. Further, the discussions presented as footnotes to paragraphs 79 and 80 present a rather misleading context for specifying additional services.

In no way should the provision of World Wide Web Internet access via a single local loop voice grade line at 28.8 kbps be considered as adequate for use in an instructional setting. In all likelihood, the effective use of telecommunications and networking for achieving priority educational objectives will require the provisioning of networks to support "advanced" services.

We also want to note that while no part of the educational system is ready to use all of the "advanced" services that could be built, many institutions are already using these capacities and applications are growing rapidly. The implications of the widely varying levels of technology and telecommunications services being used is significant for two major reasons.

First, it means that the definitions and associated mechanisms for price support for all services should be made cautiously and judiciously. The nature of technology use in education and research institutions will require access to more bandwidth over time. This means that the establishment of discrete service levels gives the false impression that bandwidth needs are static. In reality, technologies, services, and functionalities are constantly evolving. We therefore argue that the focus of support mechanisms for service levels should be on the concepts of "bandwidth on demand' and a scalable telecommunications infrastructure. Defining "core," "special" and "advanced" services too rigidly could inhibit the evolutionary process of the network and its services.

Our second concern is that the labeling and financing of certain service levels could cause schools and libraries to plan and design educational programs around short- term, restrictive service levels. Educators, librarians, and other policymakers should always be in a position to assume that educational network capacities are scalable. In short, applications and use should drive the development of the network, not artificially imposed service levels and support mechanisms.

RECOMMENDATIONS

* The Joint Board should consider extending the provisions of universal service to colleges, universities, museums and other appropriate cultural institutions. Incidentally, it should be noted that the inclusion of CM additional institutions should have a minimal impact on the Universal Services Fund because they represent a small minority (6 - 7 percent in New York State) of the total number of education and research institutions.

* Given the increasing reliance of schools and libraries on broadband services (which would be defined as "advanced" services in any context), we strongly recommend that the Joint Commission recognize the assurance of access to "advanced" services as an essential component of universal service. Additional flexibility, however, must be introduced into discount pricing methodologies that will be needed to ensure access (and use) to "advanced" services at affordable rates. This issue will be addressed in section V.

* Other services that should be made available to schools and libraries using standard voice grade lines should include, but not be limited to:

- Internet access via local loop interconnection to an Internet service provider. This connection should not require schools or libraries to incur long distance or interexchange access charges for gaining access.
- Voice Messaging and electronic mail capability.
- Multiplexing capability to permit distribution of multiple local loop connections to a variety of sites (e.g. classrooms) within a single facility.

The facilities required to provide these functionalities would not appear to be different than those required to support regular telephony, except that central office switching facilities would have to be augmented with respect to the number of ports that would be required to handle the increased traffic associated with the use of these services. It would be highly desirable, however, to operate these types of services within a digital transport environment (as opposed to analog) to optimize the capability to interconnect with other users.

* Advances in telecommunications and information technologies need to be continually evaluated at least once every other year to determine which future services may have relevance to schools and libraries. For example, recent developments in compression technologies will have significant implications for the transport of visual images in digital formats via standard telephone lines. These technologies, while still in their infancy, already have substantial value for teaching and information access.

* With respect to seeking comments on whether "wireless technologies" may provide a more efficient way of delivering services designated for support, the principle of a "network of networks" should prevail. As competition and the maturation of technologies in local exchange, long distance, and cellular markets continue to grow, the number of comparable options made available to consumers will also continue to grow. In both respects wireless technologies are emerging as viable options and supplements to traditional ground-based telecommunications capacities. It may not be as important to consider whether wireless technologies are more or less efficient for the delivery of service as it is to consider how these technologies will complement the others currently in use.

* In formulating a discount methodology for universal service, support mechanisms will be heavily influenced by current industry cost and pricing regimes and by flexibility introduced through changes in the regulatory structure to encourage competition. There are several dimensions related to the use of networks by schools and libraries, however, that may need to be explored. First, schools and libraries generally operate under the same tariff provisions as businesses. These tariffs are generally higher than those for residential customers (at least for local exchange providers) and justified, in part, as an accommodation to the maintenance of lower prices for the latter. Consideration should be given to using the incremental portion of the business rates for services used to subsidize residential rates as an offset to rates charged to schools and libraries. Second, telecommunications providers should be required to monitor the usage of "additional" services by schools and libraries to determine if discount rate structures have resulted in increased use. A portion of the increased company revenues derived from the use of these services could be "shared" with other classifications of rate payers by returning a portion of these revenues to the universal services fund. This "revenue sharing" would help ease the perception that other classes of ratepayers are subsidizing lower rates for schools and libraries. Third, regardless of the strategies used to formulate a discount methodology, the principle of incremental pricing should prevail when establishing the cost basis for providing services via the universal service fund.

* Additional consideration should be given to achieving reduced rates for services using an aggregated market approach. If companies were required to work with schools and libraries en masse to determine which services could be provisioned for all organizations, or to define minimum capacity requirements for "advanced" services, the companies may possibly incur lower network design, development, and marketing costs. The savings that could accrue to the companies could, in turn, be passed on to these institutions in the form of reduced pricing. This approach, if considered useful, should be fully developed through a collaborative proceeding between the telecommunications providers and schools, libraries, and rural health care providers.

* With respect to reselling of services made available to schools and libraries via support from the universal service fund (Paragraphs 84 and 86), careful consideration must be given to the provisioning of certain services such as Internet access. Many schools and libraries obtain Internet access through "down streaming" from other educational organizations who partition out unused capacity. The cost of access is often apportioned to the agencies that share the service. In many cases, the lead organization allowed to share Internet services is a post-secondary institution, which is precluded from eligibility for universal service support under the current provisions of the Telecommunications Act. Clearly, accommodations must be made within the provisions established by the Joint Board to allow this type of cost sharing or "reselling" to occur. In addition, the implications of the prohibition against resale need to be addressed with respect to the provisioning of Internet services by non-profit organizations. In some instances, an Internet service provider (ISP), for example, is classified as a non- profit organization - which may or may not be operating as a bona fide educational organization.

* Paragraph 85 seeks comments and recommendations on ways to determine whether a service requested from a telecommunications provider by a school or library is "bona fide" request. We recommend that the Joint Board consider the establishment of a committee composed primarily of technology-using educators and librarians to review the types of requests for service that are received from schools and libraries. The objective here is to ensure that requests received can be assessed with respect to their purpose and value for supporting learning and information access. In many respects, the types of service requested may not be clearly understood if analyzed only with respect to their technical viability.

V. Enhancing Access to "Advanced' Services for Schools, Libraries, and Health Care Providers

DISCUSSION

Issues addressed above have particular significance to this section. While there are many technological developments that continue to enhance the capability of standard telephony, signaling and switching (e.g. compression technologies, digital switching), the full value of telecommunications and networking will not be realized unless schools and libraries can operate at relatively high line speeds and move large volumes of information. Effective interactive, multimedia teleconferencing and distance learning applications (especially video-based applications) require telecommunications capacities that, under any definition, would be considered as advanced in nature.

The following functional applications are provided to define the types of "advanced" services that should be considered for schools and libraries:

- High speed circuits for data transmission, e.g. Frame Relay, ATM, ADSL
- Videoconferencing/teleconferencing (satellite and terrestrial):

- One-way video, two-way audio
- Two-way video, two-way audio
- Point-to-point and multi-point
- Multimedia
- Collaborative

- Video on demand.
- Interactive multimedia (voice, data, and video combined)--e.g. distance learning,
case management service, and consultations.
- Internet-based activities (at the level of graphical interfaces such as the World Wide Web).
- Adaptive customer premises equipment interfaces for persons with disabilities (some interfaces are bandwidth and volume sensitive).

RECOMMENDATIONS

* Part of the basic or "core" service requirements to be established should include a requirement to provide access to broadband telecommunications capacities, if requested, by schools and libraries. All telecommunications providers should be required to provide local loop access or "bandwidth-on-demand" access to high speed, switched broadband telecommunications capabilities that enables users to send and/or receive voice, data (including high resolution graphics), and video. The key objectives with respect to ensuring access to broadband capacities are to allow for the interconnection and interoperation of educational organizations at a level that is sufficient to support applications for learning and information access (such as those described above) that will produce measurable improvements in educational performance and in efficiencies in the delivery of services.

* With respect to suggestions regarding competitively neutral rules to effect access to "advanced" services, all companies electing to provide "core" services to schools and libraries should be required to provide connectivity to "advanced" services and to ensure the capability to interconnect and interoperate with other carriers who are serving schools and libraries at the same level or similar level of service.

* The "advanced" services addressed in Section 254(h)(2) should be at least identical to, if not broader in scope, than those supported under Section 254(h)(1).

* With respect to measures other than discounts and financial support that should be considered to promote deployment of "advanced" services to schools, we ask consideration be given to the mechanisms suggested in our legislative proposal, Technology in Education Act of 1996 (attachment B). Our proposal attempts to introduce a market aggregation strategy for negotiating substantial discount rates with telecommunications providers serving the educational market. Volume purchase of standardized, consumer-specified telecommunications services that are supported through consistent, sustainable funding methodologies will provide great leverage with respect to negotiating with providers. This concept will be developed in more detail as more information is obtained with respect to the specific recommendations received by the Joint Board from other educational associations and user groups.

* Please refer to remarks provided in relation to Section IV of this submission in terms of the issues of resale of services. In summary, the same principles adopted for resale of services related for "core" and "special" services should pertain to VI advanced" services.

Sections VI - X - We have no comments on these sections.

Sincerely,

Thomas E. Sheldon Attachments