Internet Update

November 2002
Telecommunications Policy Study and
Assessment for the State of Alaska

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Executive Summary:
Prepared By Bering Point (formerly KPMG Consulting)

The purpose of this report is to provide the State of Alaska with a set of recommendations, based on best practices nationwide, for a statewide framework that promotes a cost effective delivery of telecommunications services throughout Alaska.

The report’s recommendations addresses the following six policy goals for
telecommunications services for both urban and rural residents:

1. Universal service of both basic and advanced services.

2. Appropriate level of government involvement to ensure competitive neutrality and consistent service.

3. Appropriate levels of regulation to encourage industry.

4. Innovative and cost effective deployment of publicly available advanced telecommunications infrastructure.

5. Consistent actions across State government to promote universal service, infrastructure development, competitive neutrality, and appropriate regulation.

6. Implementation of the Telecommunications Act of 1996 in Alaska in a manner that addresses the State’s unique characteristics.

Nationally, the telecommunications industry is in a state of disarray. Recent events over the past two years have left the industry with a gloomy outlook, as forecasts continue to be scaled back. Alaska has been somewhat isolated from these events, as the impact of telecommunications company bankruptcies appear likely to have only a small impact on local providers.

Competition in the urban areas of the state – Anchorage, Fairbanks and Juneau – is brisk. In Anchorage, for example, there are several wireless telephone services, and the State’s largest CLEC has a 40% share of the local telephone service market.

In the rural areas of Alaska, telephone penetration increased substantially in the 1970s and 1980s. However, competition is less prevalent, and in order to address this, some communities are implementing innovative and cooperative solutions in order to establish infrastructure for advanced services.

Advanced services such as broadband and the Internet are of critical importance to Alaska, because of the extreme distances separating many communities in rural areas. These advanced technologies are the key to many social benefits, among them: education, healthcare, commerce, access to government services and active participation by citizens in the formation of public policy.

Over the years, the State has been active at the national level in attempting to shape policy and ensure continued universal service support. The Executive Branch has the ability to be an advocate at the federal level for Alaska’s communication issues. Views held by the White House, the Congress and the myriad federal agencies – particularly the FCC – play an important role in shaping the formation of telecommunications policy that will ultimately affect Alaskans. At the state level, the governor is responsible for nominating RCA commissioners for six-year terms, subject to confirmation by the Alaska Legislature. In addition, the Governor’s office manages state agencies and oversees procurement.

In addition to managing the administrative resources within the State, the Governor of Alaska also has an office in Washington, DC that works with federal officials in an ongoing capacity. The Governor’s Office in Washington, DC has been involved in telecommunications policy at the federal level for over two decades. Its primary role in this area is to represent the interests of the State in legislation before Congress
(including the Telecommunications Act of 1996) and in rulemaking and other proceedings before the FCC. In performing this task, the office works closely with other parts of the Administration, including the State of Alaska’s Telecommunications Information Council (TIC) and the Departments of Law, Administration and Education, and the Congressional delegation. It also regularly consults the RCA and relevant private interests, including telecommunications carriers serving Alaska.

State regulators have an important role in telecommunications policy, and maintain significant authority by the FCC and the 1996 Telecommunications Act. As the state regulatory commission for Alaska, the RCA has the power to make decisions regarding rates and tariffs for carriers operating within the State. The chair of the RCA is also a member of the Federal State Joint Board on Universal Service, which provides important input into FCC rulemaking.

Alaskan citizens benefit greatly from a range of federal support programs including the Low Income Program, the High Cost Program, the Schools and Libraries Program and the Rural Health Care Program. In addition, the State was granted an E-rate waiver, which enables residents to use public school facilities during off-hours for Internet access.

Satellite plays a key role in Alaskan telecommunications because of the rugged terrain, extreme weather and many sparsely populated rural areas. Satellite technologies have traditionally supported long distance service in the State, but they increasingly capable of providing services that compete with wireline broadband access and cable. This development bodes well for the State, as fiber or microwave deployments used
extensively in other rural states are not feasible in many parts of Alaska.

At the State level, there are initiatives that can be encouraged, or issues to be addressed. Key recommendations include:

Encourage the development of community and cooperative solutions.
Identify and implement policies that will ensure competitive neutrality and encourage sustainable infrastructure build-outs.
Foster Statewide access of advanced services in order to maximize benefit from eGovernment, distance education, telemedicine and commercial initiatives.

There are opportunities for continued active participation at the federal government level as well. Toward this end, Alaskan policymakers should:

Continue to engage the FCC on issues critical to Alaska, and intervene as appropriate.
Identify innovative telecommunication policy solutions utilizing multiple federal agencies.

Key policy issues are likely to come to a head in the next session of Congress, particularly if pressing national security issues dealing with terrorism and Iraq move from the forefront of the current legislative agenda. Definitions of universal service support, changing technological capability, infrastructure investment incentives and increasing
intermodal competition are causing existing statutes to be re-examined. As momentum builds to revise public policy, Alaska’s administrators, legislators and regulators should take the opportunity to be more active than ever at the federal level.

The following issues will be elaborated and analyzed, with implications for future public policy initiatives:

Role of Alaskan institutions on telecommunications policy that impacts the State is critical. Alaska has been very proactive at ensuring that the need for support is understood at the federal level, as well as the consequences of policy decisions. The State’s institutions have and should continue to speak with a unified voice
- Executive Branch – Governor’s Office
- Governor’s Office in Washington, DC
- Alaska Legislature
- State Regulators
- Denali Commission

Appropriate incentives to encourage competition should be continually reviewed in order to ensure a fair and neutral environment to all providers. Further, intermodal competition – across wireline, cable, satellite and wireless – is becoming more prevalent, and the definition of competitive boundaries in Alaska as elsewhere may benefit from re-examination.

Proactive local community initiatives have consistently been a necessary catalyst for advanced services to remote villages and regions. A function of both education and cooperative efforts at the local level, such programs should be nurtured and encouraged.

Measured, methodical approaches are key to successful sustained entry by competitive providers. While many carriers have been guilty of over-investment, overextension, and ultimately bankruptcy, others continue to operate by focusing on customer service and managing costs.

Community Technology Centers – in effect a logical extension of the waiver the State obtained regarding the Schools and Libraries program – could be an innovative approach to providing advanced telecommunication services to smaller villages. The tactic may be appropriate to include in the charter of the Denali Commission.

It is becoming increasingly clear that benefits to society from Internet access can be substantial. From education to healthcare to commerce, as well as active participation in government, the Internet and broadband technologies have the potential to touch the lives of all citizens. With that in mind, Alaskan representatives should strive to take that message forward in policy discussions at the state and national levels. If these issues are important to other states, they are essential to Alaska.