[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

HEARING TO REVIEW RURAL BROADBAND PROGRAMS

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON RURAL DEVELOPMENT, BIOTECHNOLOGY, SPECIALTY CROPS,
AND FOREIGN AGRICULTURE

OF THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

__________

JULY 9, 2009

__________

Serial No. 111-22

Printed for the use of the Committee on Agriculture
agriculture.house.gov

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COMMITTEE ON AGRICULTURE

COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking
Vice Chairman Minority Member
MIKE McINTYRE, North Carolina BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas
JOE BACA, California TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California SAM GRAVES, Missouri
DAVID SCOTT, Georgia MIKE ROGERS, Alabama
JIM MARSHALL, Georgia STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas
Dakota K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska
JIM COSTA, California JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER, BILL CASSIDY, Louisiana
Pennsylvania CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

______

Professional Staff

Robert L. Larew, Chief of Staff

Andrew W. Baker, Chief Counsel

April Slayton, Communications Director

Nicole Scott, Minority Staff Director

______

Subcommittee on Rural Development, Biotechnology, Specialty Crops, and
Foreign Agriculture

MIKE McINTYRE, North Carolina, Chairman

BOBBY BRIGHT, Alabama K. MICHAEL CONAWAY, Texas, Ranking
JIM MARSHALL, Georgia Minority Member
HENRY CUELLAR, Texas DAVID P. ROE, Tennessee
LARRY KISSELL, North Carolina GLENN THOMPSON, Pennsylvania
WALT MINNICK, Idaho BILL CASSIDY, Louisiana

Aleta Botts, Subcommittee Staff Director

(ii)

C O N T E N T S

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Page
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 4
McIntyre, Hon. Mike, a Representative in Congress from North
Carolina, opening statement.................................... 1
Prepared statement........................................... 3
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, prepared statement.................................. 6

Witnesses

Cook, Cheryl, Deputy Under Secretary for Rural Development, U.S.
Department of Agriculture, Washington, D.C.; accompanied by
David J. Villano, Assistant Administrator, Rural Development
Telecommunications Program, Rural Utilities Service, U.S.
Department of Agriculture...................................... 7
Prepared statement........................................... 8
Seifert, Mark G., Senior Advisor to the Assistant Secretary,
National Telecommunications and Information Administration,
U.S. Department of Commerce, Washington, D.C................... 11
Prepared statement........................................... 12
Wilson, Delbert, General Manager, Hill Country Telephone
Cooperative, Ingram, TX; on behalf of National
Telecommunications Cooperative Association..................... 25
Prepared statement........................................... 28
McCormick, Jr., Walter B., President and CEO, USTelecom
Association, Washington, D.C................................... 30
Prepared statement........................................... 32
Stamp, J.D., Curtis W., President, Independent Telephone &
Telecommunications Alliance, Washington, D.C................... 37
Prepared statement........................................... 38
Simmons, W. Tom, Senior Vice President of Public Policy,
Midcontinent Communications, Sioux Falls, SD; on behalf of
National Cable and Telecommunications Association.............. 41
Prepared statement........................................... 43
Evans, G. Edward, Founder and CEO, Stelera Wireless, LLC; Member,
Board of Directors, CTIA--The Wireless Association',
Oklahoma City, OK.............................................. 49
Prepared statement........................................... 51

Submitted Material

American Farm Bureau Federation, submitted statement............. 61
Maxwell, Jay, President, Pixius, Inc., submitted statement....... 62
National Rural Telecommunications Cooperative, submitted
statement...................................................... 61
Submitted questions.............................................. 63

HEARING TO REVIEW RURAL BROADBAND PROGRAMS

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THURSDAY, JULY 9, 2009

House of Representatives,
Subcommittee on Rural Development, Biotechnology,
Specialty Crops, and Foreign Agriculture,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 1300, Longworth House Office Building, Hon. Mike McIntyre
[Chairman of the Subcommittee] presiding.
Members present: Representatives McIntyre, Bright, Minnick,
Conaway, Roe, Thompson, Cassidy, and Lummis.
Staff present: Aleta Botts, Claiborn Crain, Tyler Jameson,
John Konya, April Slayton, Rebekah Solem, Patricia Barr, Mike
Dunlap, and Jamie Mitchell.

OPENING STATEMENT OF HON. MIKE McINTYRE, A REPRESENTATIVE IN
CONGRESS FROM NORTH CAROLINA

The Chairman. This hearing of the Subcommittee on Rural
Development, Biotechnology, Specialty Crops, and Foreign
Agriculture to review rural broadband programs will come to
order. As you can see, we are starting very promptly on time
because we have word we may be interrupted by 13 votes. So we
are going to ask our witnesses to the extent they can to
homogenize, reduce and summarize their remarks so that we can
get your testimony. We have to use agricultural terms here.
We want to welcome everybody to today's hearing to review
rural broadband programs and funding for these programs that
was included in economic stimulus legislation, in particular,
that was passed earlier this year by Congress. Thank you all
for being here as we examine this important topic.
It was the very first week of this year, in fact the day
after our swearing in to the new Congress, that I hosted a
roundtable discussion in this room to talk about rural needs
and particularly rural broadband. We had rural organizations
from around the country come and talk about significant
infrastructure needs, and also how rural areas were faring
within the economic environment. We had some tough discussions.
As a result we were pleased in the following weeks to be able
to secure $7.2 billion within the stimulus package to address
rural broadband needs across the country.
We know that with the impact of the Internet upon our
everyday lives, that we have an economy that can be fueled by
millions of computers literally across the globe with the
ability to speak to each other just with the stroke of a key.
We want to make sure that, as we look at health care, as we
look at education, as we look at business relationships,
opportunities, and economic possibilities that we have that
opportunity for rural areas not to be left behind.
The biggest telecommunications issue right now, I know, in
our district of southeastern North Carolina is the deployment
of broadband to bring these vital Internet services into
consumers' homes. And even while many people in the urban and
suburban areas have high-speed Internet, there are huge swaths
of rural counties that remain dependent upon unreliable dial-up
connections. The poor quality and speed of dial up prevents
many individuals from being able to run a business, help their
children with school research projects, and be able to hook
into distant health care providers for medical assistance.
Broadband deployment can and will be a huge economic
success for rural America. We appreciate the companies that are
already working in this regard to hook up their customers to
broadband in areas previously unserved. The economic stimulus
bill included $2.5 billion for the Rural Utilities Service and
more than $4 billion for the NTIA Broadband Program. With this
legislation Congress charged both agencies with the difficult
task, but necessary task, of developing programs quickly that
could expand access to broadband and bridge the digital divide.
I was pleased to see the Notice of Funds Availability in
the Federal Register this past week and recognize the
tremendous work done by both agencies to bring us to this
point. However, I am concerned that some of the provisions in
the notice will arbitrarily disqualify large areas of unserved
rural areas from receiving grant dollars.
Also, other provisions appear to permit the Federal
Government to make broadband investments in areas that may
already have been adequately served by private providers. So
this is something we hope our witnesses can help us clear up
today, and also address if these are problems that are, indeed,
still germane to this issue of providing full rural broadband
service.
This Committee dealt with many of the same issues in the
writing of the 2008 Farm Bill, and through the amendments we
were able to make the Broadband Loan Program that is authorized
through that legislation. After hearing many concerns that the
program was simply not reaching the unserved rural areas that
Congress intended, changes were made in the farm bill to target
those areas without forcing existing incumbent service
providers out of business.
The funding provided in the stimulus holds enormous
potential to reduce the digital divide and provide our rural
areas with increased broadband access. However, let us all make
no mistake that funding will not be sufficient to reach every
single rural unserved area, particularly if a large proportion
of those funds end up going to increasing the areas that are
already served, or to provide service where providers are
already present. With limited funds we must prioritize.
If our goal is universal access to broadband, the programs
we construct must aim for that goal. I would ask our speakers
to particularly note that and address that. To be clear, I do
appreciate the effort taken with this funding notice to
accomplish that goal, and we are making progress. I would
encourage the agencies involved, however, to consider these
issues and the history of the Federal Broadband Deployment
Program as you approve applications to ensure that the same
mistakes are not made twice.
I look forward to hearing from both agencies on their plans
for these programs, and learning more from USDA on the plans
for the Broadband Loan Program regulations that are still
unpublished over a year after the 2008 Farm Bill was enacted.
Finally, I hope the witnesses on the second panel will
provide additional context for us to understand the funding
notice from the perspective of the entities providing the
broadband service on the ground. We want to make sure we are
not just meeting technical regulations, but that we are within
the spirit of what we want to provide with broadband service in
unserved areas. That is the ultimate goal.
I would encourage witnesses to use the 5 minutes provided
for their statements to highlight the most important points in
their testimony. Please do not read your testimony unless you
can read it within 5 minutes, or you can at least read the
highlights within 5 minutes. Pursuant to Committee rules,
testimony by witnesses along with questions and answers by
Members and witnesses will be stopped at 5 minutes. Our
preference today is to shorten that even more with the large
interruption of votes that we expect, unfortunately. Your
complete written testimony, please be assured, however, will be
submitted and be allowed to be printed in its entirety in the
record.
[The prepared statement of Mr. McIntyre follows:]

Prepared Statement of Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Good morning, and welcome to today's hearing to review rural
broadband programs and funding for these programs provided in the
economic stimulus legislation Congress passed earlier this year. I want
to thank all of you for being here as we examine this important topic,
and I want to especially thank our witnesses who will be testifying
before us today.
The very first week of the 111th Congress, before the Agriculture
Committee was even fully organized and operational, I held a roundtable
discussion on the importance of funding rural broadband throughout the
country. I invited rural organizations to discuss the significant
infrastructure needs faced by rural communities and how rural areas
were faring in the current difficult economic environment. As a result,
we were able to secure $7.2 billion within the stimulus package to
address rural broadband needs across the country.
The impact of the Internet is clear on our everyday lives. Our
economy is fueled by millions of computers across the globe with the
ability to speak to each other with the stroke of a key. Students in
Japan can directly communicate with students right in my home town of
Lumberton, North Carolina through chat rooms, educational fora, and
telephone Internet services like Skype. Patients and their doctors can
have personal consultations despite being hundreds of miles of apart.
Even visitors to our nation's Capitol must access the Internet to make
reservations!
The biggest telecommunications issue in my district right now is
deployment of broadband to bring these vital Internet services into
consumers' homes. While many citizens in our urban and suburban areas
of Wilmington and Fayetteville have high-speed Internet, huge swaths of
my rural counties remain dependent on unreliable dial-up connections.
The poor quality and speed of dial-up Internet prevents many
individuals from being able to run a business, help their children with
school research projects, and hook into distant health care providers
for medical assistance.
Broadband deployment can and will be a huge economic success for
rural America. And all of our witnesses testifying here today will be
integral parts of that success story. Already, companies serving my
district like Verizon, Embarq, and the rural telephone cooperatives are
hooking up customers to broadband in areas previously unserved, and I
look forward to that continuing.
The economic stimulus bill included $2.5 billion for the Rural
Utilities Service and more than $4 billion for the NTIA broadband
program. With this legislation, Congress charged both agencies with the
difficult task of developing programs quickly that could expand access
to broadband and bridge the digital divide. I was pleased to see the
Notice of Funds Availability in the Federal Register this past week and
recognize the tremendous work done at both agencies to bring us to this
point. However, I am concerned that some of the provisions in the
Notice will arbitrarily disqualify large swaths of unserved, rural
areas from receiving grant dollars. Furthermore, other provisions
appear to permit the Federal Government to make broadband investments
in areas that may already be adequately served by private providers.
This Committee dealt with many of these same issues in the writing
of the 2008 Farm Bill and through the amendments we made to the
broadband loan program that is authorized through that legislation. We
carefully evaluated the history of the loan program after hearing
concerns from many that it simply was not reaching the unserved, rural
areas that Congress intended, and made changes to the program to target
better those areas without forcing existing incumbent service providers
out of business.
The funding provided in the stimulus holds enormous potential to
reduce the digital divide and provide our rural areas with increased
broadband access. However, make no mistake: that funding will not be
sufficient to reach every rural, unserved area, particularly if a large
proportion of those funds go to increasing speeds in already served
areas or goes to provide service where providers are already present.
With limited funds, we must prioritize and if our goal is universal
access to broadband, the programs we construct must aim for that goal.
To be clear, I do appreciate the effort taken with this funding
notice to accomplish that goal, and I think we are making progress. I
would encourage the agencies involved, however, to consider these
issues and the history of Federal broadband deployment programs as they
approve applications to ensure we do not make the same mistakes twice.
I look forward to hearing from both agencies on their plans for these
programs and to learning more from USDA on the plans for the broadband
loan program regulations that are still unpublished over a year after
the 2008 Farm Bill was enacted. Finally, I hope the witnesses on the
second panel will provide additional context for us to understand the
funding notice from the perspective of the entities providing broadband
service on the ground.

The Chairman. We thank you for your cooperation in advance,
and I now call on Ranking Member, Mr. Conaway, for any comments
he would like to make.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS

Mr. Conaway. Thank you, Mr. Chairman. I thank you for
holding this hearing to review rural broadband programs. I am
pleased that we have a broad set of witnesses here today to
share their thoughts on the recent announcement of available
funds, and I thank them for taking their time to be with us
here today.
The current economic climate places new and acute burdens
on rural America. From the small businesses in each of our
communities, to the farmers and ranchers working every daylight
hour, the benefit of broadband access can help them gain access
and to compete in a global market. Bridging the broadband
divide can send American jobs to rural America, not overseas.
This in turn will create a sustainable and thriving future for
small communities across the country. To achieve that goal,
access must be affordable and accessible to people living in
rural America.
The 2008 Farm Bill provided additional guidance to help
focus efforts to deploy broadband access in the countryside.
Unfortunately, even though that bill came out over a year ago,
we have yet to see the rule for the Broadband Loan Program. I
hope that the Administration can provide an explanation for the
delay and can provide an assurance as to when the rule might be
forthcoming.
I also hope the witnesses will discuss the
nondiscrimination and interconnection obligations required of
the grant loan applicants. These new provisions seem to preempt
the FCC's rulemaking procedures and put applicants in a
precarious legal quandary when the FCC has yet to rule on
definitions for nondiscrimination and interconnection. I am
concerned that these new requirements will prevent competitive
applicants from applying because of the broad ramifications
that would be required of the overall network.
It seems obvious the nondiscrimination and interconnection
obligations would go against the goals of expanding broadband
across the country and providing an economic stimulus to
regions in the most need.
This Subcommittee has been carefully watching how the funds
are going to be disbursed since February of this year. Even
though it is an imperfect approach to economic policy with an
unprecedented increase in the size and cost of the government,
it is incumbent upon Congress to ensure over a trillion dollars
is directed to the areas of greatest need. Unfortunately, this
approach also forces the Broadband Program to move forward
without the benefit of a comprehensive plan or a map of the
existing service.
It is my belief that the Davis-Bacon requirements included
in this rule will increase the cost of grants and loans in
states like Texas and lessen the impact of the stimulus. In
previous testimony the USDA has projected that costs will be 10
to 20 percent higher than under existing programs and would
have an impact on how many projects will be funded.
The recent Notice of Funding Availability for broadband
programs contain several items which cause me to be concerned.
When this Committee contemplated how to best secure rural
access for rural America, the primary issues addressed were
what the optimum connection speeds should be, the
sustainability of the investment, and how the program targets
the most remote areas like many corners of Texas. It is not
clear whether the current NOFA adequately addresses these
concerns.
I hope that our first panel of witnesses can provide
additional insight as to how the broadband programs under the
stimulus program will be administered, and I look forward to
their testimony. I also look forward to the testimony from our
witnesses on the second panel as they represent the private
partnership side of a very important initiative.
Thank you, Mr. Chairman. I look forward to the testimony of
our witnesses.
The Chairman. Thank you so much.
The Chairman requests that other Members submit any
opening statements they may wish to have for the record so
witnesses may begin their testimony and we can move ahead to
questions after that.
[The prepared statement of Mr. Peterson follows:]

Prepared Statement of Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Thank you, Chairman McIntyre, for holding this hearing today to
look at how rural broadband programs are working.
USDA's Rural Development programs are responsible for financing
essential infrastructure that most urban and suburban residents take
for granted.
Reliable, affordable broadband Internet service is one of the most
important areas of infrastructure development needed in rural America
today. It is a vital tool that facilitates job creation and retention,
economic development, business innovation, education, and medical
technology.
While reliable data about broadband availability in rural areas is
limited, the National Telecommunications and Information Administration
estimates that only 38 percent of rural households subscribe to
broadband service, compared to 58 percent of urban households. At least
part of this digital divide results from a lack of access to broadband
service in rural areas.
In order to effectively expand broadband services in areas where
none is currently available, it is important to target funding for
these services to areas that are truly rural and unserved.
In the 2008 Farm Bill, we refined the criteria used by USDA to
prioritize applications for the broadband loan program. We redefined
rural areas so that communities near larger cities and towns would not
get preference over areas that are actually rural. We also required
that loans not be made in areas where more than three providers are
already providing broadband service. We should not be in the business
of subsidizing broadband buildup in metropolitan suburbs and resort
communities. The goal here is to bring service to areas where access is
limited or non-existent. Unfortunately, we are still waiting for the
regulations implementing these changes, and until those are published,
the program is making no loans.
With regard to the stimulus bill, when Congress was considering
this legislation, I made clear my concerns about the capacity of the
Federal Government--particularly the National Telecommunications and
Information Administration--to distribute this large amount of grant
funds for broadband deployment efficiently and effectively. I supported
broadband funding for USDA to allocate to rural, unserved areas because
I understand that only through grants will some of these areas ever
receive broadband access. Now that the first funding notice for these
dollars has been released, I am concerned that the money included in
the stimulus bill that was meant to support our efforts to expand
access to broadband service in rural areas may never reach those areas.
Under the application requirements associated with the stimulus money
for broadband programs, only ``remote'' areas will qualify for RUS
grants, despite the fact that there are many rural areas in need of
broadband service that will not meet the arbitrary 50 mile' limit from
an urban city or town. Additionally, before rural applicants can apply
for grant money from the better-funded National Telecommunications and
Information Administration, they must first apply for the Rural
Utilities Service program. If they are rejected by RUS, then they can
ask for NTIA money, which happens to force them to compete with
communities where there is already service.
We are talking about billions of dollars in stimulus money here,
and I want to be sure that the money is getting to the right places and
that we are getting the most bang for our buck with these investments.
I thank our witnesses for being here today. I am sure that there
will be a lot of questions for them, and I look forward to their
testimony.

The Chairman. We welcome our first panel: Ms. Cheryl Cook,
who is the Deputy Under Secretary For Rural Development; and
Mark Seifert, Senior Advisor to the Assistant Secretary at the
National Telecommunications and Information Administration.
And, Ms. Cook, as you begin your testimony, I will give you
the honor of introducing your Assistant Administrator, and then
you may begin.

STATEMENT OF CHERYL COOK, DEPUTY UNDER SECRETARY FOR RURAL
DEVELOPMENT, U.S. DEPARTMENT OF
AGRICULTURE, WASHINGTON, D.C.; ACCOMPANIED BY DAVID J. VILLANO,
ASSISTANT ADMINISTRATOR,
RURAL DEVELOPMENT TELECOMMUNICATIONS PROGRAM, RURAL UTILITIES
SERVICE, U.S. DEPARTMENT OF
AGRICULTURE

Ms. Cook. I appreciate the opportunity to appear here this
morning to discuss with you the role of Rural Development in
the new Broadband Initiative Program. Thank you for your
leadership in the development of the American Recovery and
Reinvestment Act, ensuring that rural America would be front
and center in this extra effort to increase access to broadband
technology. We literally wouldn't be here today without the
work of this Subcommittee.
As you know, the $2.5 billion initiative is the only brand
new program Rural Development received in the Recovery Act. In
all other cases the stimulus package provided a boost in
funding to programs already available to rural families,
businesses and communities. Of course, while the Broadband
Initiative Program put important new tools in our toolbox for
financing telecommunications infrastructure, the USDA has been
in the lending field in telecommunications for 60 some years.
Our regular Telecommunications Program has required, for some
time now, that the facilities we finance be broadband capable.
In addition, the Distance Learning and Telemedicine Program
and the Community Connect Program have added to our ability to
link end-users and to establish broadband capacity where it had
not previously existed. Both have served as models for how we
will use Recovery Act funds.
Most recently, as you have noted, last year's farm bill
authorized 5 more years of authority for loans and loan
guarantees for broadband infrastructure, and made other
adjustments to the program authorized in the 2002 bill.
Regulations to implement those statutory improvements and,
frankly, to reflect other lessons we have learned in the last 7
years are under development and will be released later this
summer.
In the meantime, though, the Recovery Act has given us an
important new approach, one that more resembles the Water and
Wastewater Disposal Program in its flexibility between loan and
grant funds, rather than the loan-only approach of the farm
bill program and predecessor telecommunications financing. It
is our belief that this flexibility, along with the significant
levels of funding provided in the Recovery Act, will allow for
a substantial down payment on the enormous task of providing
access to broadband in unserved and underserved rural areas.
Section 6112 of last year's farm bill charged the Federal
Communications Commission Chairman, in coordination with the
Secretary of Agriculture, with developing a comprehensive
broadband strategy for rural America. Before the 1 year window
for developing that plan had closed, the Recovery Act came
along and charged the Federal Communications Commission
Chairman, using funding provided by the Secretary of Commerce,
with developing a nationwide broadband strategy.
Clearly in both statutes it was Congress' intent that the
Executive Branch agencies work together on broadband. To the
best of our ability, and, frankly, at the insistence of the
White House, we have done so. The Notice of Funds Availability
that was posted on our website a week ago and published in the
Federal Register today is the result of significant interagency
work. This is the first of several NOFAs anticipated for
Recovery Act funding, and it provides, as seamlessly as
possible, access to the Broadband Initiative Program from USDA
and the Broadband Technology Opportunities Program from the
Department of Commerce.
We have used common definitions and standards to the extent
possible, given variations in statutory language. We have
agreed to a common application. And on Tuesday of this week, we
began with NTIA a series of joint public information and
outreach workshops. As important, USDA Rural Development is
also leveraging all of the resources of our mission area,
because as critical as broadband infrastructure is, it is
simply the means to the end of economic and community
development, and not an end in itself.
As we continue to finance rural libraries, schools,
hospitals, community colleges, senior centers and other
essential communities facilities through our Rural Housing
Programs, we will incorporate end-user access to broadband to
bring medical knowledge, educational opportunities and
emergency services management to rural communities. As we help
farmers form new cooperatives to add value to their farm
commodities or to market their products, we can facilitate
their e-commerce capacity. As we finance new entrepreneurs and
modernize rural businesses to keep jobs in rural America
through our Rural Business Programs, we can help our customers
use broadband tools to create and retain wealth in rural areas.
And finally, as we finance our other infrastructure programs,
we can help rural communities gain tools that they need to
manage water and sewer systems as effectively as possible.
Mr. Chairman, I am a dedicated user of broadband
technology, I am a passionate advocate for the role that
broadband can play in economic and community development, but,
frankly, it is all magic to me. And so I brought with me David
Villano, who is our Associate Administrator for the Rural
Utilities Service, just in case you had a more technical
question than how do you turn it on and use it. He and I will
be happy to answer any questions that you may have.
[The prepared statement of Ms. Cook follows:]

Prepared Statement of Cheryl Cook, Deputy Under Secretary for Rural
Development, U.S. Department of Agriculture, Washington, D.C.
Chairman McIntyre, Ranking Member Conaway, and Members of the
Subcommittee, thank you for your invitation to testify before you today
on USDA's Rural Development programs. This Subcommittee has been a
leader in working for the accelerated deployment of broadband in rural
America. I know that you recognize the strategic importance of
broadband in increasing economic opportunity and improving the quality
of life in rural communities, and I appreciate your understanding,
support, and at times criticism and counsel in this effort.
For over 7 decades, we have helped deploy electric,
telecommunications, water, and wastewater service to small towns and
rural communities across the country. Broadband is the newest addition
to our portfolio. It is a natural evolution of our traditional
infrastructure telecommunications program. USDA's Telecommunications
Program, working with private investors, was already involved in the
1970's in the development of the nation's first fiber optic system for
commercial use. As telecommunications technology moves from copper to
cable, fiber, and wireless, we must and will evolve to assist rural
communities in mastering new opportunities.
The current broadband loan program was established by the 2002 Farm
Bill and was subsequently amended by the 2008 Farm Bill. This program
to date has provided over $1.1 billion in funding for broadband
projects in rural communities in 42 states. In February of this year,
the American Recovery and Investment Act (ARRA) made an additional $7.2
billion available for a program to deploy broadband in unserved and
underserved areas nationwide. Of this total, $2.5 billion was provided
to USDA for loans, grants, and loan/grant combinations. The Notice of
Funds Availability--the NOFA--for Recovery Act broadband funding will
apply to both USDA and the Department of Commerce and was published in
the Federal Register today.
The prompt and efficient implementation of this initiative is a
high priority for Secretary Vilsack. The Secretary had the privilege on
July 1 of joining Vice President Biden, Commerce Secretary Gary Locke,
and FCC Chairman Julius Genachowski in Wattsburg, Pennsylvania, to
announce the first round of Recovery Act broadband funding. As the Vice
President stated, ``[This] announcement is a first step toward
realizing President Obama's vision of a nationwide 21st Century
communications infrastructure--one that encourages economic growth,
enhances America's global competitiveness, and helps address many of
America's most pressing challenges.'' We are committed to this effort.
Broadband Authorized in the Farm Bill
Under the Rural Electrification Act, we administer four broadband-
related programs. Our telecommunications program has for some years
required that all new capacity financed by USDA be broadband capable.
In addition, through the Community Connect and the Distance Learning
and Telemedicine Programs, we have achieved considerable success and
garnered invaluable experience in deploying broadband and related
services to rural and underserved communities.
Finally, the Farm Bill Broadband Loan Program has to date provided
over $1.1 billion in loans to 97 broadband infrastructure projects
across rural America. Implementation of this program involved a steep
learning curve, and we acknowledge the criticisms and suggestions we
have received. We have worked hard to incorporate these lessons in the
pending broadband regulation and the Recovery Act NOFA. New regulations
governing our traditional broadband program are expected to be
published later this year. These regulations will implement the changes
authorized by the 2008 Farm Bill and build on the experience we have
gained over the last 7 years. When these regulations are published,
outreach programs will be conducted to explain the new requirements and
to assist prospective applicants with applying. And as always,
Telecommunications Programs general field representatives can assist
service providers and rural community leaders with these new programs,
as well as current loan and grant programs. We expect that these new
regulations and procedures will continue to keep our portfolio healthy
and delinquencies low.
Broadband Under the Recovery Act
I will now turn to the Rural Development broadband program
authorized under the Recovery Act to fund broadband deployment in
rural, unserved, and underserved areas. The Recovery Act provided $7.2
billion for broadband deployment divided between USDA Rural Development
and the National Telecommunications Information Administration (NTIA).
We have named the USDA portion of this joint effort the Broadband
Initiatives Program or BIP.
Since enactment, both USDA and NTIA, with the active engagement of
the FCC, have worked very closely to develop a common strategy, common
definitions, and consistent standards. Our goal is to achieve the
President's vision of universal access, ensure that no community is
arbitrarily excluded, and that we do the best job possible of
leveraging the taxpayers' dollars for maximum benefit.
To this end, USDA and NTIA published a joint Request for
Information soliciting public comment on implementation of the ARRA
broadband program. We held six public meetings to provide an
opportunity for public comment and received over 1,000 comments from
institutions and individuals on key questions, including the
definitions of ``broadband,'' ``unserved,'' and ``underserved.'' We
then spent weeks drafting the Notice of Funds Availability (NOFA),
which was posted on-line on July 1st and published in the Federal
Register today.
We believe that this NOFA, the first of three anticipated NOFAs,
meets the tests I have just described. It was not an easy task, but the
result reflects diligent effort and a wealth of expertise and
experience. It also reflects President Obama's vision that rural
America, and our nation as a whole, have a world class, 21st century
broadband infrastructure.
In this effort, it is a top priority for USDA to ensure that our
share of Recovery Act broadband funds are deployed effectively to spur
economic development in the most rural and unserved areas that
currently lack adequate broadband service. In comparison to the
existing farm bill broadband program, the Recovery Act program provides
new tools and greater flexibility.
Under USDA's traditional loan program, for example, many potential
applicants who want to serve the most rural and unserved areas cannot
make a business case for a loan to serve these areas because costs
exceed revenues. The Recovery Act allows USDA to provide a flexible mix
of loans, grants and loan/grant combinations, which will make many more
projects in currently unserved areas feasible and eligible for funding.
The Recovery Act allows USDA to give preference to these types of
projects in unserved areas, and we will do so under the NOFA.
In addition, priority under the NOFA will be given to projects
that:

Spur economic development and create jobs in addition to
those created by the construction and operation of broadband
networks;

Give residents a choice of more than one service provider;

Provide service to the highest proportion of rural residents
who do not have access to broadband service;

Are current or former RUS borrowers; and

Are fully funded and can commence immediately.

The long-term objective is to promote rural economic development.
We are now at the beginning of the application process. Of the total
$7.2 billion in budget authority made available by the Recovery Act, $4
billion of available funding has been allocated to this NOFA. From July
14 through August 14, RUS and NTIA will accept applications for
projects that meet these NOFA requirements. Awards will be announced
starting in November.
We anticipate that remaining funds will be made available through
additional NOFAs. Subsequent NOFA requirements will vary as we learn
from our experience, respond to public and Congressional suggestions
and concerns, and work to better achieve the Administration's
priorities.
I would like to emphasize again that--while the USDA and NTIA
programs each have unique characteristics--we have worked hard to
ensure that implementation is a collaborative and coordinated effort
and that our activities are complementary, transparent, enhance
efficiency of the application process and prevent duplication of
funding.
Applicants requesting over $1 million in support will be required
to use the broadband portal--www.broadbandusa.gov--to submit
applications. USDA and the Department of Commerce will utilize a two-
step application process that will first establish viable applications,
and then will identify those applicants most qualified to receive
funding through additional information review. All applicants must also
agree to nondiscrimination and interconnection requirements that
connect to the public Internet backbone with reasonable rates and terms
and that do not favor applications or content. This is a policy choice,
and an important one; it will elicit much discussion from the industry,
but we believe it is an appropriate standard for the use of public
funds.
Because the purpose of the Recovery Act is to spur job creation and
stimulate long-term economic growth and opportunity, all $7.2 billion
in Recovery Act funding will be obligated by September 30, 2010.
In closing, I acknowledge that the Broadband Initiatives Program,
combined with our traditional broadband program, the Community Connect
program, and the Distance Learning and Telemedicine program, will not
connect every rural and remote place in the United States. The need is
large and we will not complete the task overnight.
These programs will, however, continue to help bridge what's been
termed ``the digital divide.'' Today, broadband has become as vital to
communities as basic telephone, electricity and running water. We are
committed to bringing broadband service to rural America and will
continue to work hard to connect rural residents to the rest of the
world.
Thank you for your generous support of the Rural Development
mission. Our ability to offer programs to create economic opportunity
and improve the quality of life in rural America is the result of your
work. It is an honor and privilege to work with you on behalf of the 60
million Americans in our rural communities.

The Chairman. Thank you. Thank you very much, and thank you
for your timely testimony.
Mr. Seifert.

STATEMENT OF MARK G. SEIFERT, SENIOR ADVISOR TO THE ASSISTANT
SECRETARY, NATIONAL TELECOMMUNICATIONS AND INFORMATION
ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE, WASHINGTON, D.C.

Mr. Seifert. Chairman McIntyre, Ranking Member Conaway and
Members of the Committee, thank you for this opportunity to
testify this morning on the implementation of the Broadband
Technology Opportunities Program, or, as we call it, BTOP, by
the National Telecommunications and Information Administration.
My name is Mark Seifert, and I oversee the BTOP Program. This
opportunity to testify this morning is the closing of a circle
for my family. My grandfather Ernie Seifert was a first-
generation German farmer in Pierce County, Wisconsin. He was
famous for his innovative techniques. He was the first member
in his county to have a radio, to have a telephone, to have a
television. He understood the value of technology. In fact, it
is family lore that he saved the farm during the Depression
nearly 8 decades ago. So it is a great honor for me to be here
and talk about our program, and about how we are going to do
our best to bring the benefits of broadband to all parts of
America, and especially rural America.
The BTOP Grant Program and the Rural Utilities Service Loan
and Grant Program form a critical component of the Obama
Administration's plan to expand the availability and quality of
broadband services in the United States. These two programs
funded at a total of $7.2 billion under the Recovery Act are
intended to preserve and create jobs and promote economic
recovery.
Last week at a rural high school in Wattsburg,
Pennsylvania, Vice President Biden, along with Secretary Locke
and Secretary Vilsack, announced the availability of these
funds to help bring broadband service to unserved and
underserved communities across America. NTIA and RUS released a
joint Notice of Funds Availability, or NOFA, to implement our
respective Recovery Act broadband programs. This NOFA reflects
months of collaborative efforts undertaken by NTIA and RUS,
with the technical assistance of the Federal Communications
Commission, to implement these programs and ensure that the
agency's activities and development of these programs are
complementary and integrated.
We have worked hard to ensure that taxpayer funds are
utilized as effectively and efficiently as possible, and that
the application process for both programs is as accessible as
possible for potential applicants. Working closely together,
our agencies have leveraged our collective experience, talents
and resources to develop and implement a coordinated Federal
Government approach to expand the access and quality of
broadband services.
This $7.2 billion will not completely answer this
challenge, but it can serve as an effective jump start for our
efforts. Ultimately all American consumers, and especially
those living in rural areas, will be the beneficiaries of these
efforts.
The BTOP Program seeks to serve the highest priority needs
for Federal investment, particularly projects that offer the
potential for economic growth and job creation and provide
benefits to education, health care and public safety. The
program also will favor viable, sustainable and scalable
projects that satisfy the public interest specified in our
portion of the statute and detailed in the NOFA. These projects
will bring immediate benefits to the communities that they
serve, but they will also serve as models for future broadband
investments as economic conditions improve.
In keeping with the statutory requirements for BTOP, NTIA
expects to distribute grants across geographic areas across the
United States addressing the public purpose as set forth in our
portion of the Recovery Act. We will issue grant awards on a
technologically neutral basis and expect to support projects
employing a wide range of technologies, including fixed and
mobile wireless, fiber and satellite. With up to $1.6 billion
in BTOP funds available, BTOP will make grant awards across the
three project categories as defined by our section of the
statute: broadband infrastructure, public computing centers and
innovative programs for sustainable broadband adoption.
To streamline the application process, NTIA and RUS have
created a single portal, www.broadbandusa.gov, for both the
BTOP and RUS programs. The deadlines for the applications under
this first NOFA is August 14, 2009, and the first grant awards
are tentatively planned to be announced in early November. NTIA
and RUS envision that two additional funding rounds will be
held with all funds obligated by September 30, 2010, as
required by the Recovery Act.
To assist potential applicants, we will be holding a series
of joint workshops, as the Under Secretary mentioned, in ten
locations throughout the country. Two were already held this
week, and a third is being held in Charleston on Friday.
Additional workshops will be held in Birmingham, Alabama;
Lonoke, Arkansas; Billings, Montana; and Albuquerque, New
Mexico, to mention a few. We are also making the training
materials available online for those unable to attend the
workshop.
The states have an important role in our overall effort.
One of the critical roles, and one which I believe Congressman
Conaway addressed, was finding out where broadband is and where
it isn't. So we have released a NOFA this week about mapping,
and we think it is critical to determine where broadband is and
where broadband isn't. With that information, policymakers such
as ourselves and, most importantly, Congress will know where
they need to invest funds. And so we look forward to robust
participation by the states in that effort.
I will conclude by saying thank you for this opportunity,
and I look forward to answering your questions.
[The prepared statement of Mr. Seifert follows:]

Prepared Statement of Mark G. Seifert, Senior Advisor to the Assistant
Secretary, National Telecommunications and Information Administration,
U.S. Department of Commerce, Washington, D.C.
Chairman McIntyre, Ranking Member Conaway, and Members of the
Subcommittee, thank you for the opportunity to testify this morning on
behalf of the National Telecommunications and Information
Administration (NTIA) at this hearing to review the Federal
Government's rural broadband programs. An agency of the U.S. Department
of Commerce, NTIA is the principal advisor to the President on domestic
and international telecommunications and information policy matters.
NTIA's portfolio grew upon the enactment of the American Recovery and
Reinvestment Act of 2009 \1\ (Recovery Act) on February 17, 2009, which
authorized and provided $4.7 billion in funding for the Broadband
Technology Opportunities Program (BTOP), a grant program to support the
deployment of broadband infrastructure and promote the adoption of
broadband service. The program will advance objectives articulated by
the President in his Inaugural address on January 20, 2009, in which he
stated:
---------------------------------------------------------------------------
\1\ Public L. No. 111-5, 123 Stat. 115.

``[W]e will act, not only to create new jobs, but to lay a new
foundation for growth. We will build the roads and bridges, the
electric grids and digital lines that feed our commerce and
---------------------------------------------------------------------------
bind us together.''

Eight days ago in Wattsburg, Pennsylvania, Vice President Biden,
joined by Secretary of Commerce Gary Locke and Secretary of Agriculture
Tom Vilsack, announced the ``first step toward realizing President
Obama's vision of a nationwide 21st century communications
infrastructure--one that encourages economic growth, enhances America's
global competitiveness, and helps address many of America's most
pressing challenges.'' Secretary Locke is working to ensure we make
this vision a reality--and the Department of Commerce has been charged
with administering a key part of the President's broadband expansion
initiative. The first step to which the Vice President referred was the
release of the first Notice of Funds Availability (NOFA) by NTIA and
the U.S. Department of Agriculture's Rural Utilities Service (RUS) for
the broadband initiatives included in the Recovery Act--NTIA's BTOP and
the RUS Broadband Initiatives Program (BIP).\2\ On July 1, 2009, NTIA
also released a NOFA announcing the availability of funds to implement
the State Broadband Data and Development Grant Program (State Broadband
Data Program) to fund state-level broadband data collection, mapping
and planning projects and the development and maintenance of a national
broadband map.
---------------------------------------------------------------------------
\2\ The NOFA provides general policy and applications procedures
for BTOP and the RUS Broadband Initiatives Program (BIP).
---------------------------------------------------------------------------
In my testimony, I will focus on NTIA's implementation of BTOP and
the State Broadband Data Program, and address our collaborative efforts
with RUS and the Federal Communications Commission (FCC) to achieve the
objectives of the Recovery Act and expand access to broadband services
in the United States.
Statutory Provisions and Interagency Coordination
The Recovery Act allocates $4.7 billion to BTOP for the general
purpose of accelerating the deployment and adoption of broadband
services. Of that amount, at least $250 million is to be made available
for programs that encourage sustainable adoption of broadband services,
and at least $200 million is to be made available for expanding public
computer center capacity, including at community colleges and public
libraries. The Recovery Act further provides for up to $350 million to
implement the State Broadband Data Program and to develop and maintain
a broadband inventory map.
As set forth in the Recovery Act, Congress designed BTOP to
accelerate broadband deployment in unserved and underserved areas and
to strategic community institutions that provide important public
benefits. The Act also focuses on stimulating demand for broadband
services. The Act specifies that the program be designed to stimulate
job creation, economic growth, and demand for broadband services. Other
purposes of BTOP include: improving access to and the use of broadband
services by public safety agencies and providing funds for broadband
education, awareness, training, access, and support to a number of
institutions including schools, libraries, job-creating strategic
facilities, and organizations that provide broadband outreach and
assistance to vulnerable populations.
The Recovery Act specifies the key elements NTIA must consider in
awarding BTOP grants. For example, in the case of broadband
infrastructure grants, the Act directs NTIA to consider whether:

an application will increase the affordability of, and
subscribership to, services to the greatest population of users
in an area;

the application will enhance service for health care
delivery, education, or children to the greatest population of
users in an area;

an application, if approved, will not result in unjust
enrichment as a result of support from another Federal program
in the area;

the applicant is a socially or economically disadvantaged
small business; and

the application will provide the greatest broadband speed to
the greatest population of users in an area.

Consistent with the statute, NTIA also aims to award grant funds to at
least one project in each state.

As we have worked to implement the Recovery Act's broadband
provisions, NTIA has coordinated closely with the other Federal
agencies directed to lead these efforts including the USDA's RUS, which
was appropriated $2.5 billion by the Recovery Act for broadband loans
and grants and the FCC which recently published its Rural Broadband
Strategy and is also required to develop a national broadband plan.
NTIA, RUS, and the FCC are working together closely to leverage our
authorities and resources to develop and implement a coordinated
Federal Government approach to addressing the challenge of expanding
the access and quality of broadband services across the country.
Our coordinated efforts began on March 10 of this year with a
public meeting that NTIA, RUS and the FCC cosponsored to initiate
public outreach about the current availability of broadband services in
the United States and ways in which the availability of broadband
services could be expanded. NTIA and RUS followed the March 10 meeting
with the release of an Request for Information (RFI) and six additional
public meetings and field hearings, all convened by NTIA and RUS in
March 2009. Nearly 120 panelists--including representatives from
consumer and public interest groups, state and local governments,
tribal governments, minority and vulnerable populations, industry,
academia, and other institutions--made presentations at the hearings
and commented on ways to make BTOP and BIP effective, equitable and
efficient.
In response to the RFI and public meetings, RUS and NTIA received
over 1,500 written comments from institutions and individuals. These
comments along with more than 5 months of constant meetings among the
agencies' staff and a concerted effort to leverage the combined
significant experience brought to the table by the two agencies all
played a crucial role in formulating the structure of the NTIA and RUS
broadband programs and the development of the NOFA. In establishing the
coordinated grant and loan programs that make up the broadband
initiatives, we believe, we have had an unprecedented level of
coordination between the two cabinet-level agencies and an independent
Federal agency. We also believe that ultimately consumers, especially
rural consumers, will be the beneficiaries of this work.
BTOP Implementation
The NOFA, which NTIA and RUS released jointly on July 1, 2009,
announces the availability of approximately $4 billion in program
funding and describes application requirements for the first round of
BTOP grants and BIP loans and grants. The collaborative approach that
NTIA and RUS have taken in this NOFA will help to ensure that the
agencies' activities are complementary and integrated, taxpayer funds
are best utilized, and the application process is easy to understand.
BTOP will seek to serve the highest priority needs for Federal
investment--particularly projects that offer the potential for economic
growth and job creation, and provide benefits to education, health
care, and public safety. The program will favor viable, sustainable,
and scalable projects. NTIA will also favor proposals that satisfy the
public-interest objectives specified in the statute and detailed in the
NOFA. These projects can serve as models for future private investments
once economic conditions improve.
In keeping with statutory requirements for NTIA, NTIA expects to
distribute grants across geographic areas of the United States,
addressing these various public purposes. We will issue grant awards on
a technologically neutral basis, and we expect to support projects
employing a range of technologies, including fixed and mobile wireless,
fiber, and satellite.
Up to $1.4 billion in BTOP funds will be available in this first
grant round.\3\ The application deadline for the first round of grants
is August 14, 2009. Consistent with its appropriation, BTOP is divided
into three categories of projects. Under the first NOFA, the Broadband
Infrastructure category will fund up to $1.2 billion in projects that
deliver broadband service to unserved and underserved areas.
Applications to fund broadband infrastructure projects in areas that
are at least 75 percent rural are required to be submitted to RUS for
consideration under BIP. If an applicant intending to serve such rural
areas also chooses to have an application considered for BTOP funding,
the applicant must complete the additional elements required of BTOP
infrastructure applicants. NTIA may determine such applications to be
meritorious and make grant awards if RUS reviews the application and
determines not to fund it. All other Broadband Infrastructure
applications--i.e., those projects with proposed service areas that are
less than 75 percent rural--must be submitted to NTIA for consideration
under BTOP. A single application portal--www.broadbandusa.gov--will
help streamline the process for grant applicants.
---------------------------------------------------------------------------
\3\ NTIA retains the discretion to divert funds from one project
category to another. Up to $200 million is reserved to augment any of
the individual BTOP funding categories in this round or remain unused
for subsequent NOFAs.
---------------------------------------------------------------------------
Within the Broadband Infrastructure category, NTIA and RUS
determined that a distinction should be made in funding infrastructure
projects, and we have created the broad categories of Last Mile and
Middle Mile projects. Applications for Last Mile projects under BTOP
must be for unserved or underserved areas and have the predominant
purpose of providing broadband service to end-users (and end-users
devices), including households, businesses, community anchor
institutions, public safety entities, and critical community
facilities. Applications for Middle Mile projects under BTOP also must
be for unserved or underserved areas, but these projects should have an
express purpose other than providing broadband service to end-users and
end-user devices and may include such things as interoffice transport,
backhaul, Internet connectivity, or special access services.
The second BTOP grant category, Public Computer Centers, will fund
projects that expand public access to broadband services and enhance
broadband capacity at entities that permit the public or specific
vulnerable populations, such as low-income, unemployed, aged, children,
minorities, and people with disabilities to use these computer centers.
In the first round, BTOP will fund up to $50 million for public
computer centers.
The third BTOP grant category, Sustainable Broadband Adoption, will
fund innovative projects that promote broadband demand and
affordability, such as projects focused on broadband education,
awareness, training, access, equipment and support, particular among
vulnerable populations where broadband technology has traditionally
been underutilized. In this first round, BTOP will fund up to $150
million in broadband demand projects.
BTOP Eligibility
The Recovery Act delineates those entities that are eligible to
apply for BTOP funding, including the U.S. states and their
subdivisions, U.S. territories and possessions, tribes, and nonprofit
entities. Consistent with the Recovery Act, the Assistant Secretary of
Commerce for Communications and Information found it to be in the
public interest to permit for-profit corporations and nonprofit
entities not otherwise encompassed in the Recovery Act that are willing
to promote the goals of the Act and comply with the statutory
requirements of BTOP to be eligible for a grant. By adopting this
approach, the Assistant Secretary enabled a large and diverse applicant
pool to participate in BTOP and to expand broadband capabilities in a
technologically neutral manner.
Other eligibility factors set forth in the NOFA require that all
BTOP applicants: submit a complete application and all supporting
documents; demonstrate the project can be substantially completed
within 2 years of the grant issuance date and fully completed within 3
years of the grant issuance date; advance one or more of BTOP's five
statutory purposes; provide matching funds of at least 20 percent
toward total eligible project costs (unless a waiver petition is
approved); document that the project would not be implemented during
the grant period but for a Federal grant; and demonstrate that the
budget is reasonable.
Applicants for Broadband Infrastructure grants are also required to
satisfy the following additional eligibility criteria:

The applicant must propose to offer ``broadband'' service as
defined in the NOFA--i.e., two-way data transmission with
advertised speeds of at least 768 kbps downstream and at least
200 kbps upstream to end-users; or sufficient capacity in a
middle-mile project to support ``broadband'' service to end-
users.

The applicant must provide information that enables NTIA to
determine that the proposed project is technically feasible,
including submitting a system design and project timeline
certified by a professional engineer for any project requesting
funds over $1 million.

The applicant must demonstrate the ability of the project to
be sustained beyond the funding period.

The applicant must commit to the program's Nondiscrimination
and Interconnection Obligations--(1) adherence to the FCC's
Internet Policy Statement; \4\ (2) not favor some lawful
Internet applications and content over others; (3) describe and
display any network management policies; (4) connect to the
public Internet and not be an entirely private closed network;
and (5) offer interconnection where technically feasible,
including the ability to connect to the public Internet and
physical interconnection for the exchange of traffic.\5\
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\4\ FCC 05-151, adopted August 5, 2005.
\5\ The NOFA also requires that applicants disclose proposed
interconnection, nondiscrimination, and network management practices in
the application. These requirements are subject to the needs of law
enforcement and reasonable network management.

Applicants for Last Mile infrastructure projects must
provide service to the entire territory of each Census block
included in the funded service area unless the applicant can
provide a reasoned explanation as to why providing coverage for
an entire Census block is infeasible.
BTOP Application Process
The NOFA sets forth a two-step application review process. The goal
in step one is to create a pool of viable and potentially fundable
applications. After an initial screening to determine whether
applications meet eligibility factors (such as application
completeness) step one will consist of evaluating and scoring each BTOP
application against objective criteria and not against other
applications. Applications will be evaluated by at least three expert
reviewers against objective criteria within four general categories:
(1) project purpose, (2) project benefits, (3) project viability, and
(4) project budget and sustainability. Scores will be averaged and the
applications that are considered to be the most highly qualified will
advance for further consideration.
The goal of step two, which we consider to be the ``due diligence''
phase, is to fully validate the applications that advance from step one
and identify the most highly qualified applications for funding. In
step two, NTIA will request that applicants submit additional
information as necessary to substantiate representations made in their
application. The nature and scope of additional information requested
will depend on the BTOP funding category in which the application was
made. NTIA will review and analyze supplemental information and assign
a rating, based on a five-point scale, reflecting the consistency of
the application with supporting documents. Not all applications that
are selected for step two will necessarily receive a grant. Grant
recipients will be notified if their application has been selected for
a BTOP grant. NTIA and RUS intend to announce awards beginning on or
about November 7, 2009.
To assist potential applicants with their applications for both
BTOP and BIP, NTIA and RUS are jointly conducting ten workshops this
month throughout the country. The workshops include an overview of both
BTOP and BIP and a review of the application process for funding.
The locations of the workshops are representative of rural and
urban needs, as well as a diversity of regions, populations,
topographies and city/metropolitan-area sizes. Two workshops were held
earlier this week here in Washington DC and in Boston. Tomorrow, a
workshop is scheduled in Charleston, West Virginia. In the coming
weeks, workshops will be held in: Birmingham, Alabama (July 14);
Memphis, Tennessee (July 15); Lonoke, Arkansas (July 16); Billings,
Montana (July 17); Minneapolis, Minnesota (July 21); Albuquerque, New
Mexico (July 23); and Los Angeles, California (July 24). For those
unable to attend any of the workshops, NTIA will also have a webinar
version of the workshops available on our website. We will also post
application guidance and frequently-asked-questions on issues of
general applicability to assist applicants complete a successful
application. For the second and third rounds of funding for BTOP and
BIP, NTIA and RUS anticipate that additional workshops will be held to
aid applicants.
Participation of the States in BTOP
States will play an important role in BTOP. First, the NOFA invited
each state to review and prioritize applications for projects in or
affecting the state. Second, through a separate NOFA released on July
1, 2009, creating the State Broadband Data Program, NTIA is encouraging
all states to collect broadband data for use in the national map
mandated by the Recovery Act.\6\ The State Broadband Data Program is a
competitive, merit-based matching grant program to fund projects that
collect comprehensive and accurate state broadband mapping data,
develop state broadband maps, and provide for broadband planning. With
data collected at the state level, NTIA will develop and maintain a
national broadband map, a key priority of this program. As such, NTIA
intends to fund high-quality projects that are designed to gather data
at the address level on broadband availability, technology, speed,
infrastructure, and average revenue per user across the project area.
---------------------------------------------------------------------------
\6\ See Recovery Act, Pub. L. No. 111-5, 123 Stat. 115 (2009);
Broadband Data Improvement Act, Title I of Pub. L. No. 110-385, 122
Stat. 4096 (2008).
---------------------------------------------------------------------------
The Recovery Act authorizes NTIA to expend up to $350 million to
support state mapping and planning efforts and for the development and
maintenance of a broadband inventory map. NTIA expects to make
approximately $240 million available for this activity, with grant
awards that range between $1.9 million and $3.8 million per state for
the mapping portion of each project, and up to $500,000 for the
planning portion of each project. The amount of grant awards will
depend on the specifics of each project and the quality of each project
as determined in NTIA's review, as well as demographic and geographic
features unique to each state.
As set forth in the NOFA for the State Broadband Data Program,
broadband mapping projects must propose:

the collection of comprehensive and verifiable broadband
data meeting the Program standards that will be accessible and
clearly presented to NTIA, the public, and state and local
governments without unduly compromising data or the protection
of confidential information;

a workable and sustainable framework for repeated updating
of data;

a plan for collaboration with state-level agencies, local
authorities, and other constituencies, as well as a proposal
for planning projects designed to identify and address
broadband challenges in the state;

feasibility as demonstrated by a reasonable and cost-
efficient budget, and a showing of applicant capacity,
knowledge, and experience; and

a timeline for expedient delivery of data with a preference
for initial delivery by November 1, 2009.

For broadband planning projects, the NOFA requires that applicants
propose projects or award uses that relate to broadband planning
activities, such as the identification of barriers to the adoption of
broadband service and information technology services, the creation and
facilitation of local technology planning teams, and the establishment
of computer ownership and Internet access programs.\7\
---------------------------------------------------------------------------
\7\ Only applications that meet NTIA's broadband mapping purposes
will be considered for planning funding. Mapping proposals do not need
to include a planning component in order to be eligible for funding.

Grant recipients may use the collected broadband data for any
lawful use consistent with the requirements of the program. In addition
to providing all data collected to NTIA, applicants are expected to use
the data to develop and maintain a statewide broadband map separate and
distinct from the national broadband map.
The collected data will be used to inform future NTIA grant-making
decisions under BTOP and for the development and maintenance of a
national broadband map. As described in the NOFA for this program, NTIA
expects that these and other data will publicly display the following
information about broadband service: geographic areas in which
broadband service is available; technologies used to provide broadband
service; spectrum used for the provision of wireless broadband service
in such areas; the speeds at which broadband service is available; and
broadband service availability at public schools, libraries, hospitals,
colleges and universities, and all public buildings. The national map
will also be searchable by address and, to the greatest extent
possible, at every address, provide the type and speed of broadband
service that will be provided. For providers of wireless broadband
service, the spectrum used for the provision of service will be
provided.
Conclusion
Congress has entrusted NTIA with a significant responsibility. We
believe the collaborative, open and transparent approach that we have
taken in developing these two NOFAs is not only responsive to the
statutory mandates for these programs, but also to the goals these
programs are intended to achieve--to expand the access and quality of
broadband services in the United States, preserve and create jobs, and
promote economic recovery. NTIA intends to continue our close
collaboration with RUS and the FCC as these programs progress and we
look forward to getting Recovery Act funds into the hands of those who
can use it to create jobs and to promote broadband deployment in
unserved and underserved areas.
All Americans, no matter where they live or what our individual
circumstances may be, deserve to enjoy all of the promises that
broadband service has to offer. The Administration is committed to
realizing the President's vision of bringing the benefits of broadband
technology to all Americans.
Thank you and I look forward to your questions.

The Chairman. Thank you, Mr. Seifert.
Do you have a copy of those maps with you?
Mr. Seifert. Of the maps we are trying to create? We are
sending out a grant program for states to actually map and get
that information and send back to us.
The Chairman. So when do you plan to have those done?
Mr. Seifert. With the state's participation, we anticipate
a rudimentary map probably in the January to February
timeframe. Again, a lot of this depends on how quickly the
states move. We are really pushing the states hard to get this
information out. We believe we will have enough information to
make the first round of grants in an appropriate fashion, but
having an overall map which will compare apples to apples will
allow policymakers to move forward in a reasonable and rational
fashion, will occur later.
The Chairman. Can you provide us copies of those maps to
the panel Members as soon as they are available?
Mr. Seifert. Certainly. Those will also be available
publicly. The statute requires us to put up a public map of
that information. But we would be happy to make sure you get
that information.
The Chairman. Please do.
Have you given the states a deadline?
Mr. Seifert. Yes.
The Chairman. Have you told them when to get it done by?
Mr. Seifert. They have 1 month to get their grant
application in to us. And I have to tell you, they are already
very concerned about meeting that deadline to get the
application in. And then the deadline--and I will make sure I
get the dates right to your staff, but I believe it is within 2
months of getting that information to us so that we can then
assemble it into a map.
The Chairman. All right. Thank you, sir.
I have spoken with Ranking Member Conaway, and we would
like to welcome the gentlewoman Mrs. Lummis. Although not a
Member of Subcommittee, she has joined us. I am pleased to have
her join us, and we welcome her in questioning the witnesses at
the appropriate time today.
Mrs. Lummis. Thank you, Mr. Chairman.
The Chairman. Yes, ma'am.
The chair would like to remind Members they will be
recognized for questioning in order of seniority, for Members
who were here at the start of the hearing. After that Members
will be recognized in the order of arrival pursuant to
Committee rules.
In the remaining time that I have, I wanted to ask the
panelists this question: I am concerned about the ability of
both of these programs to reach the rural unserved areas that
were not served via the loan program that desperately need
broadband access. Specifically, I am concerned about rural
unserved areas not meeting the extremely harsh definition of
remote. In fact, I have found zero out of 100 counties of all
100 counties in North Carolina eligible for grants under RUS.
If such areas meet the rural definition, they will be
required to apply for funds from RUS, be denied the grant, and
then turn around and have to compete for the funds at NTIA with
communities that have service already. How do you respond to
this concern, Ms. Cook?
Ms. Cook. Thank you, Mr. Chairman.
I would note that the remote requirement applies only to
100 percent grants; that a rural area may still end up in a
loan/grant combination. And by not being remote, you are not
being totally denied grant money, you are just not going to get
all-grant money.
With that said, we have had several conversations now with
staff, and some of the feedback we have gotten from the
workshops that we have been doing this week suggest that we do
need to consider ways that we might clarify the remote
definition. And we will, if need be, issue that within the next
2 weeks so that by the time the window for application opens,
that everybody has that revision or that clarification.
The Chairman. All right. I think we do have the need for
that to be done, so if you can do that within the next 2 weeks.
Ms. Cook. We will indeed do that. But part of the rationale
for doing this in three steps or several NOFAs, as opposed to
rolling the whole thing out in one, is that it gives us the
benefit of experience then as we move forward. I am sure, as
Mr. Seifert says, as we move from the first NOFA to later
rounds that we will be making those adjustments as we go.
It is difficult to know without the maps in place just what
is remote. I happen to be from Pennsylvania and served as the
Pennsylvania State Director for Rural Development in the
Clinton Administration. The most remote area in Pennsylvania is
probably Potter County. It is along the New York State border.
You cannot get there from here without going through the
Allegheny National Forest. By all accounts it is a remote area.
It also happens to house the home base of Adelphia, and it is
one of the best-served areas in the Commonwealth of
Pennsylvania in terms of broadband. So we just don't know,
until we get a little further down the road, the best way to
describe what a remote area is.
The Chairman. What is the highest percentage of grants for
nonremote areas?
Ms. Cook. The point is to get to an affordable user rate,
and it will be a combination of loan and grant that will vary
with the application.
The Chairman. So is that yet to be determined then?
Ms. Cook. Well, 50 percent is the max that we are looking
for in loan/grant combinations. It won't be 50 percent every
time; it may be a lesser amount depending on debt capacity of
the area.
The Chairman. I will let my Ranking Member pick up on that
line of questioning since my time is running out. I want to
give Mr. Seifert a chance to answer my broader question. You go
ahead.
Mr. Seifert. I want to make sure I answer the right broader
question, if you could.
The Chairman. Do you have any--when I mentioned earlier
about those applying to RUS, being denied the grant, and then
having to compete for funds at NTIA with communities that
already have service.
Mr. Seifert. We believe that there are communities--in
fact, Washington, D.C., is a perfect example--where there are
competitors providing service, but there are communities that
are not getting that service. And some people call this
functional redlining. And if you will look through the NOFA, we
have made sure that we are not going into places where there is
robust provision, where people are adopting it, where it is
affordable and putting more money into those places. We don't
think that is a wise investment of the taxpayers' dollars.
We do know, and received many comments, lots of comments,
about service in different parts of America that varies greatly
by quality, by speed, by availability. And so we are allowing
the applicants to come and make that demonstration. And they
may be able to make it, they may not be able to make it, but we
believe we set up a fairly stringent set of guidelines by which
we will adjudicate those grants. And again, we don't believe
$7.2 billion is going to solve our broadband issues all across
the country, but we believe that we can come up with a
playbook, almost, about how to bring broadband in the future to
areas such as those that you were talking about in North
Carolina. So, that is our approach at this point.
The Chairman. Thank you, sir.
Mr. Conaway.
Mr. Conaway. Thank you, Mr. Chairman. I appreciate it.
Ms. Cook, what is the normal volume for RUS loan processing
in a year?
Ms. Cook. Are you speaking specifically to the
Telecommunication Program or all----
Mr. Conaway. Yes, ma'am. Yes, ma'am.
Ms. Cook. Do you want to answer that?
Mr. Villano. One billion dollars.
Mr. Conaway. So a billion dollars in loan processing.
Mr. Villano. We did about $1.2 billion last----
Mr. Conaway. How does that compare to the money that was
going to be spent under this new program?
Mr. Villano. Under the Recovery Act we anticipate doing
about $7.9 billion in loans and grants.
Mr. Conaway. Do you have the capacity to do that?
Mr. Villano. Yes, we do.
Mr. Conaway. Seven times, eight times what your normal
volume is without a director?
Mr. Villano. The Recovery Act gave us the ability to use
some of the funds for salaries and expenses, so we are in the
process of hiring additional staff, and we will also have a
contractor onboard to work with us.
One of the advantages of being part of the Rural
Development mission area is that we also have 6,000 employees
throughout the country who work on business loans, community
facility loans. So if need be, we can also task some of those
employees to help us with the broadband loans and grants.
Mr. Conaway. But, obviously, you have a concern about being
able to do this wisely. I hope you have the resources to get
that done.
This is a bit random, but your applications for the BIP
Program, BTOP Program and the other things require that the
grantee tell you which Congressional district. Why is that of
remote interest to you?
Ms. Cook. Well, every Federal application, the Standard
Form 424 that the entire Federal Government uses includes that
information on it, but it is specifically important for the
Recovery Act funds because we want to be able to demonstrate
where those funds are going.
Mr. Conaway. Okay.
Ms. Cook. I am sure you have heard constituents ask, where
is my share of the recovery money? We currently have the
ability to map out where every dollar from the USDA share of
recovery funds have gone.
Mr. Conaway. Well, Ms. Cook, I have yours and Mr. Seifert's
personal assurances that that information won't be used in a
discriminatory way. There are news reports that the funds are
being focused on Obama-friendly Administrations, all of your
comments about Obama's vision for all of these things, and so
the fact that I voted against the stimulus package and this
funding, will that work against my Congressional district in
your processing?
Ms. Cook. Absolutely not. Absolutely not, Mr. Conaway.
Congressional district information is only for the sake of
transparency.
Mr. Conaway. All right. The nondiscrimination and
interconnection stuff is not required under the Act for the RUS
loans and grants. Why did you automatically extend it to the
RUS arena? What is your authority for doing that?
Mr. Villano. We felt that we should have one broadband
program, and to the extent possible that is where we went with
common definitions, and we felt that those were important, not
just for urban or commerce customers, but also for Rural
Development customers, so we adopted those provisions.
Mr. Conaway. So you acknowledge there is not statutory
authority to do that. Does that give you pause that there are
going to be lawsuits in this area?
Mr. Villano. No, I don't believe so.
Mr. Conaway. If the FCC handles the complaints on
nondiscrimination interconnection processes, the FCC rules
unfavorable to what the consumers wants. Then, as said in your
notice, they simply write you a letter and tell you that they
are dissatisfied. What is your intention, are you going to set
up a new bureaucracy that would affect, oversee what the FCC
has already ruled on?
Mr. Villano. No, we don't intend to set up another----
Mr. Conaway. What is the notice? Why the letter? If you are
just going to frustrate folks who don't think that the
providers are meeting the nondiscrimination and interconnection
requirements, what are you going to do with the letter?
Ms. Cook. Well, again, our hope is to better inform
ourselves for later rounds of NOFAs.
Mr. Conaway. You require signage? Are there going to be
limits on the amount of money spent on signs for the stimulus
package? Is there an equivalent to four Last Mile grants that
we will use in the signage, instead of those--what is your
intention on limiting the amount of money spent on nonprogram
processes like signs?
Ms. Cook. We have tried to be reasonable about that as we
have rolled out other programs, getting funding under the
Recovery Act. In water and waste, for example, there is a sign
around the project that would describe that this had been
funded by the Recovery Act.
Mr. Conaway. So, there are Middle Mile projects that may
run several miles, you have one every mile or every telephone
pole?
Ms. Cook. No. No, sir.
Mr. Conaway. Mr. Seifert, you mentioned limited dollars and
limited resources. And so to the extent we don't spend these
directly on the problem, then we are wasting taxpayer monies.
And, by the way, every nickel of the stimulus money is borrowed
from somebody else. We don't generate the revenues to fund this
deal, we borrowed the money. So we are particularly keen to
make sure it gets spent the right way.
I yield back. Thank you.
The Chairman. Thank you, Mr. Conaway.
We will have time for one more set of questions.
Mr. Bright.
Mr. Bright. Yes, sir. Thank you, Mr. Chairman, for having
this hearing today.
Ms. Cook, I have a couple of questions before we have to
leave here to vote. In the projects going that you offer five
points to, ``portability of service,'' what do you define as
affordable?
Ms. Cook. We have been using take rate as an indicator of
affordability, and in the definition of underserved area, 40
percent is the threshold that we are looking at.
Mr. Bright. Okay. Thank you very much. As you know, I am
from Alabama, and my area is very rural, so we are really
interested in this program and the resources from this program.
Second, some providers may be in 75 percent rural areas,
but not qualify for 100 percent grant funding. If applicants
only want to be considered for grants and not loan/grant
combos, will there be a way to signify that on the application
so that you will know to go ahead and send their application
over to the NTIA?
Ms. Cook. Rural applicants will come to us first. In the
event we are not able to serve them with a 100 percent grant,
then, yes, we will pass that on.
Mr. Bright. Will that information have somewhere on the
application an indication where that will be open and obvious
so that if you do refer it over there, it won't take up
additional time and waste additional time?
Ms. Cook. There may be additional things that they would
want to apply to NTIA to receive that are not part of the RUS
Program.
Mr. Seifert. Maybe I can clear this up. When an applicant
that wants to apply to both programs fills out the application
at the same time, RUS--we will be evaluating at the same time
RUS will be evaluating, so there will be no lag time. The only
processing is RUS says these are the applications that we are
funding, and if any of ours are on that list, we take them off,
and then we can move and fund more applications. So it is just
to adhere to the statutory requirement that is in the
agriculture section, which is don't fund two wires running down
the same side of the highway.
Mr. Bright. Thank you.
Mr. Seifert, one question for you, and this will be my
last, Mr. Chairman. The RUS grant funding is limited to remote
areas. NTIA grant funding has no such restriction. What happens
with rural unserved areas that do not qualify as remote, but do
not have the financial potential for a loan or loan/grant
combo?
Mr. Seifert. First off, I am also from Alabama. I know
Wiregrass very well.
Mr. Bright. I need to be in close contact with you.
Mr. Seifert. So the way it works, the grants are
competitive, and you come in with a blank slate to us and tell
us what your problem is, you tell us how you are going to solve
it, and you tell us how you are going to make a business out of
it. We want taxpayer dollars in going concerns. We want this to
continue after the capital expenses have been in. So even if
they don't qualify for the loan, we do our own independent
analysis under our statutory factors, and if they qualify and
they are competitive, then we will consider them.
Mr. Bright. Okay, good.
Mr. Chairman, I yield back the remainder of my time.
Thank you, panelists. I look forward to working with you
closely in the near future. Thank you.
The Chairman. Mr. Thompson, I am going to let you go very
quickly if you would like to ask your questions. I know you
have been here since the beginning.
Mr. Thompson. Sure. I appreciate that, Mr. Chairman.
Actually I do represent Potter County, so I appreciate you
noting Potter County; also Cameron County, which does not have
access, although they sit very close together.
I would like to start my question with Ms. Cook. Can you
explain the further definition intent of remote areas? And
since I am limited on time, if you could--I have a quick
follow-up question. If you could keep your answer under a
minute, that would be great.
Ms. Cook. Okay. The remote area is the key to accessing 100
percent grant funding under the Broadband Initiative Program
from the USDA. The public policy intent was to use those
dollars in the most rural locations as possible, recognizing
that in states like Pennsylvania that can get a little
difficult because it is sometimes hard to tell where the urban
area stops and the rural area starts.
As I indicated earlier, we have been receiving feedback
both from committee staff and from others as we have done these
outreach workshops. Perhaps we need to clarify further the
definition of remote. We will do that--if we do that, we will
do that within the next 2 weeks so that everybody has the same
definition in hand at the time that the application window
opens.
Mr. Thompson. Well, representing a Congressional district
that is larger than nine states, including New Jersey, what is
the definition of rural?
Ms. Cook. The definition of rural in this program is
communities of fewer than 20,000.
Mr. Thompson. Okay. Can you explain how the joint
application process will work? In other words, if an applicant
is rejected by the RUS because the applicant is not serving a
remote area, what happens to the application? Does it
automatically get sent to NTIA?
Ms. Cook. The applicant--if it is a rural application, if
they apply to both agencies, we will process first. The first--
first stop for a rural applicant is Rural Utilities Services in
USDA. As Mr. Seifert noted, if someone applies to both
agencies, they will be processed simultaneously rather than
serially. In the event Rural Utilities Service doesn't fund
that application, NTIA would be able to pick right up.
Mr. Thompson. Thank you. I will yield back.
The Chairman. I thank the gentleman. Thank you for your
cooperation.
I want to thank the panel. With the series of votes we
have, we want to be able to release the panel. If not before, I
will allow Mr. Conaway to make a quick statement, and then I
have some instructions for the panel before we release the
first panel.
Mr. Conaway. Thank you, Mr. Chairman.
On this map that is going to be critical to this deal, what
if states just decide they don't want to participate? It is
also a matching grant. We have states like California that are
broke and can't meet their half of the deal. What are your
plans for going into states where the state itself----
Mr. Seifert. To be clear, we are concerned about that. We
implemented the Broadband Data Improvement Act, which was a
statute that was passed before the Recovery Act. It passed out
of the House, 100 percent. And so we understand concerns of the
states. We are working with them on in-kind matching that is
appropriate under the law that should help the vast amount of
states to be able to cover that part of it. If a state doesn't
participate, we have other options. It is my fervent hope that
we will have the Subcommittee, in fact the full Committee on
Agriculture, encouraging their states to participate, because
it is tremendously important to you to have that data to make
your decisions going forward.
Mr. Conaway. I have a privacy issue as well. Some of the
details on the mapping that is required on the NOFA--you are
going to map it all the way to my house so you know what I am
buying, what my speeds are, those kinds of things?
Mr. Seifert. No, sir. We want it at the address level so
that if somebody wants to know what is available--not what you
are taking, but should you want to take--what are your options,
your name will never appear.
Mr. Conaway. But my address will.
Mr. Seifert. Your address is public information already.
Mr. Conaway. Not mine, but my constituent's are more
important.
Mr. Seifert. Your constituent's address is available in a
public database. The concept is not that we reveal what the
constituent is taking, but what the possibility is for that
constituent. And if the constituent has no possibilities, that
is something I believe this Subcommittee really wants to know.
We certainly want to know, because that helps us direct our
efforts.
Mr. Conaway. I do have some privacy concerns. Mr. Chairman,
I hope we may be able to have another hearing in September with
this panel to get a progress report of what we are doing.
The Chairman. Thank you. The panel--and I would like the
members of panel to know that--Members of the Subcommittee
panel to know you are welcome to submit questions. I know
because of the limitation of the votes that we did not get to
spend the time with this first testifying panel that we had
hoped, but please do submit your questions. We would ask those
that are giving the testimony today from this first panel of
witnesses to please respond within 10 days after you receive
the questions from these Members. We will take these questions
just as seriously as though you were physically present
answering them before the audience that is assembled today. So
in light of the fact that we have 13 votes or more, possibly,
pending right now, we will release this panel with the
understanding you will respond to our additional questions
within 10 days.
And we thank you for your time today. We allow the first
panel to be released and look forward to hearing from the
second panel. This Committee will suspend until such time as we
can reconvene after the series of votes on the floor of the
U.S. House.
[Recess.]
The Chairman. We will reconvene the meeting of this
Subcommittee.
We would like to welcome our second panel to the table: Mr.
Delbert Wilson, General Manager, Hill Country Telephone
Cooperative, on behalf of the National Telecommunications
Cooperative Association, Ingram, Texas; Mr. Walter B.
McCormick, Jr., President and CEO of USTelecom Association; Mr.
Curt Stamp, President of Independent Telephone &
Telecommunications Alliance; Mr. Tom Simmons, Senior Vice
President of Public Policy, Midcontinent Communications, on
behalf of the National Cable and Telecommunications
Association, Sioux Falls, South Dakota; and Mr. G. Edward
Evans, Chairman and CEO of Stelera Wireless, Oklahoma City,
Oklahoma.
I believe Mr. Conaway would like to provide a special
introduction to the witness from Texas.
Mr. Conaway. I would like to personally introduce Delbert
Wilson from Ingram, Texas, which is just off the edge of the
best district in all of America. Mr. Wilson is the General
Manager of the Hill Country Telephone Cooperative. His
testimony represents the providers that are servicing the most
rural and smallest communities in the country.
Over the last 5 years, Hill Country Telephone Cooperative
has been deploying a scalable infrastructure that will service
central Texas communities for years to come, and I'm pleased to
welcome his testimony and proud of his work in central Texas.
The Chairman. Mr. Wilson, you may begin.

STATEMENT OF DELBERT WILSON, GENERAL MANAGER, HILL COUNTRY
TELEPHONE COOPERATIVE, INGRAM, TX; ON
BEHALF OF THE NATIONAL TELECOMMUNICATIONS
COOPERATIVE ASSOCIATION

Mr. Wilson. Chairman McIntyre, Ranking Member Conaway, I
would like to thank you for the opportunity to be here today to
discuss rural broadband programs. I am here on behalf of Hill
Country Telephone Cooperative of Ingram, Texas, and the
National Telecommunications Cooperative Association, NTCA,
which represents more than 580 small, rural, community based
communication service providers throughout the nation.
Hill Country, where I serve as General Manager, provides
telecommunication services in 15 exchanges located in 14
counties spread over 2,900 square miles in rugged terrain
equivalent to the combined size of Rhode Island and Maryland.
Organized as a cooperative, Hill Country's top priority has
always been to provide every one of our consumers, who are also
our owners, with the very best communications and customer
service possible, an entrepreneurial spirit which is
representative of our 1,100+ rural counterparts that together
serve 50 percent of the nation's land mass but only ten percent
of the population.
Listening to the needs of rural consumers, and
understanding the ever-growing importance of broadband in
everyday life, Hill Country is actively engaged in a major
outside plant modernization project. This $57 million
initiative involves the deployment of 560 miles of fiber-optic
cable, 280 digital loop carriers, and state-of-the-art soft
switches throughout a substantial portion of our market area.
Why are we doing this? Quite simply, in an effort to
provide the broadband infrastructure that is necessary to
support the growing bandwidth needs of our members.
However, in spite of all of our efforts tied to this
modernization project, including the maximization of our debt
load, 543 households--approximately five percent of our market
area--will remain unserved from a broadband perspective because
the costs of providing service in these remote, economically
challenging areas are simply overwhelming. These 543 households
are in the outlying areas that are beyond the 18,000 kilofeet
standard where DSL will typically operate effectively.
According to a recent study conducted by Hill Country, 522
miles of fiber-optic cable would need to be installed to
provide broadband service to the five percent of the market
that remains unserved. This effort would cost approximately $20
million, at an average cost of $37,000 per subscriber, about
four times the average cost per subscriber of the other 95
percent of our market.
A typical business plan that would sustain itself simply
cannot be constructed for this segment of our market. It is in
these unserved areas that support from the RUS and National
Telecommunications and Information Administration broadband
funding incentives, which are associated with the American
Recovery and Reinvestment Act of 2009, will be critical in
enabling our system to overcome the economic challenges of
providing broadband to 100 percent of our customers. Clearly,
there is a real and true need for these dollars. Undoubtedly,
they will have an immediate stimulating effect during the
construction stage and thereafter during the consumer usage
stage.
Rural areas throughout our nation are low density and have
even higher costs. Some refer to these underserved areas as
market failures, where competition and existing Federal
programs have failed to help provide consumer choice. I like to
refer to these areas as economic realities. Serving our
nation's rural citizens with telephone service has always been
challenging, and bringing broadband to these partially
populated areas is even more challenging. It is these economic
realities that leads to our discussion today about the
potential impact of the broadband stimulus plan.
As you know, last week's Notice of Funding Availability
announced the policy and application procedures for the
stimulus bill's broadband initiatives. To ensure the funding
provided by the stimulus bill does not yield unintended
consequences and to achieve the bill's objectives of increasing
access to broadband and inciting economic development, we would
like to highlight a couple of areas of concern:
First, we believe it is important to ensure support is
directed towards areas with significant need; for example,
unserved areas first. Therefore, we are pleased that the
Broadband Initiative Program will make grants available for
remote, unserved, rural projects. However, given the extremely
high cost of building out the last mile to remote areas, the
$400 million provided by the BIP for the projects may not be
sufficient to meet the needs of the rural market. While $400
million sounds like a lot of money, remember, we have submitted
that it will cost about $20 million to reach just 543 homes in
Hill Country's outlying areas.
Second, rural providers must retain their right to
effectively manage their networks. The rural sector of the
communications industry has a long history of adopting new
technologies to meet evolving economic and security interests
of their consumers. Therefore, policymakers must ensure any net
neutrality or nondiscrimination actions do not unwittingly
stymie this entrepreneurial spirit. At first glance, the
regulations appear to mostly meet this objective. However, we
are concerned that the requirements are uniformly applied to
NTIA and RUS when in fact the law didn't impose applications of
interconnection and nondiscrimination to the RUS. In addition,
we are also concerned that these interconnection and
nondiscrimination requirements may supersede the exemptions set
forth by the Communications Act of 1934 that recognizes the
unique circumstances that is confronting rural
telecommunications providers.
As for the RUS Broadband Loan and Loan Guarantee Program,
it has been instrumental in helping accelerate broadband
deployment in rural communities throughout Texas and the rest
of the country. However, there remains room for improvement to
ensure its funding is utilized to the maximum extent possible.
We recommend the following changes to the RUS Broadband
Loan Program:
Require a 20 percent credit support of the requested loan
amount. The 2008 Food, Conservation, and Energy Act, the farm
bill, eliminated the 20 percent credit support requirement for
some entities. Broadband providers who cannot meet the 20
percent threshold will not likely have sufficient financial
stability to maintain service to their broadband customers.
Increase the deadline for completion of projects from 3
years to 5 years. The 3 year build-out time frame is too short
for many program applicants given telecommunication planning
horizons, changes in technology, and regulatory environments.
Lengthen the 30 working day notice period for incumbents to
60 to 90 days to give incumbents more time to see and respond
to new applications to ensure these scarce resources are not
wasted by funding duplicative systems in markets that cannot
even effectively sustain one provider.
Require all applicants to submit a market survey. The
painstaking process of a RUS loan is intended to protect the
American taxpayer. Therefore, the market survey requirement,
which was eliminated by the farm bill for those proposing to
have a subscriber projection of less than 20 percent, should be
reinstated.
Finally----
The Chairman. Mr. Wilson, I will have to ask you to make
your concluding sentence, please.
Mr. Wilson. All right, sir.
We emerged in these markets where no one else was willing
to go. We understand these markets and what their needs are. We
are committed to these markets because our systems are locally
owned and operated. We understand the programs, like these, and
how to utilize them to achieve our goal of ubiquitous broadband
deployment that will reclaim our international leadership in
the communications sphere.
Thank you.
[The prepared statement of Mr. Wilson follows:]

Prepared Statement of Delbert Wilson, General Manager, Hill Country
Telephone Cooperative, Ingram, TX; on Behalf of National
Telecommunications Cooperative Association
Chairman McIntyre, Ranking Member Conaway, Members of the
Subcommittee, I would like to thank you for the opportunity to be here
today to discuss rural broadband programs. I am here on behalf of Hill
Country Telephone Cooperative of Ingram, Texas and the National
Telecommunications Cooperative Association (NTCA), which represents
more than 580 small, rural, community-based communications service
providers throughout the nation.
Hill Country, where I serve as the General Manager, provides
telecommunication services in 15 exchanges located in 14 counties
spread over 2900 square miles in rugged terrain--equivalent to the
combined size of Rhode Island and Maryland. Organized as a cooperative,
Hill Country's top priority has always been to provide every one of our
consumers, who are also our owners, with the very best communications
and customer service possible--an entrepreneurial spirit that is
representative of our 1,100+ rural counterparts that together serve 50%
of the nation's land mass but only 10% of the population.
Hill Country came into being, like many other telecommunications
systems, soon after the 1949 passage of the Telephone Amendment to the
Rural Electrification Act (REA), which made Rural Utilities Service
(RUS) loan funds available to finance rural telecommunications systems.
At that time, the Bell companies and other large telecommunications
companies were already well established in the nation's cities and
growing suburban areas. However, they were not interested in providing
telephone service, much as they are not interested today in providing
broadband service, to sparsely populated rural areas without imposing
expensive line-extension charges. Therefore, in large part due to
support from the RUS, the unfulfilled need for telephone service was
met by the men and women of rural communities who joined together to
develop, finance, and build their own community based
telecommunications systems. If it were not for RUS, and other crucial
Federal cost recovery mechanisms like the universal service program and
the intercarrier compensation regime, many rural areas of our nation
would still be without adequate telecommunications service.
Now, the focus and the need have appropriately shifted to more
advanced communications services. Working in tandem with the
aforementioned cost recovery mechanisms, and private investment, the
RUS's broadband loan and grant programs are helping rural
communications service providers replicate the success of their
telephone service build-out by steadily deploying broadband
infrastructure and related services to an increasing percentage of
their subscribers.
Listening to the needs of rural consumers and understanding the
ever-growing importance of broadband in everyday life, Hill Country is
actively engaged in a major outside plant modernization project. This
$57 million initiative involves the deployment of 560 miles of fiber
optic cable, 280 digital loop carriers and state-of-the-art soft
switches throughout a substantial portion of our market area. Why are
we doing this? Quite simply, in an effort to provide the broadband
infrastructure that is necessary to support the growing bandwidth needs
of our members.
However, even in spite of all our efforts tied to this
modernization project, including the maximization of our debt load, 543
households--approximately five percent of our market area--will remain
unserved from a broadband perspective, because the costs of providing
service in these remote, economically challenging areas are simply
overwhelming. These 543 households are in outlying areas that are
beyond the 18,000 kilofeet standard where DSL will typically operate
effectively. According to a recent study conducted by Hill Country, 522
miles of fiber optic cable would need to be installed to provide
broadband service to the five percent of our market that remains
unserved. This effort would cost $20 million at an average cost of
$37,000 per subscriber--about four times the average cost per
subscriber of the other 95 percent of our market.
A typical business plan that would sustain itself simply cannot be
constructed for this segment of our market. It is in these unserved
areas that support from the RUS and National Telecommunications and
Information Administration (NTIA) broadband funding incentives, which
are associated with the American Recovery and Reinvestment Act of 2009
(stimulus bill), will be critical in enabling our system to overcome
the economic challenges of providing broadband to 100% of our
customers. Clearly, there is a real and true need for these dollars and
undoubtedly they will have an immediately stimulating effect during the
construction stage and thereafter during the consumer usage stage.
Rural areas throughout our nation are low density and even higher
cost. Some refer to these unserved areas as ``market failures,'' where
competition and existing Federal programs have failed to help provide
consumer choice. I like to refer to these areas as ``economic
realities.'' Serving our nation's rural citizens with telephone service
has always been challenging and bringing broadband to these sparsely
populated areas is even more challenging. It is these ``economic
realities'' that lead to our discussion today about the potential
impact of the broadband stimulus plan.
Broadband is not only the great equalizer between rural and
suburban/urban areas of our nation, but also with the United States in
relation to the rest of the world. Broadband infrastructure deployment
is critical to the economic development and national security of our
nation. As applications evolve over broadband, all Americans connected
will experience untold opportunities for employment, health care,
education, as well as entertainment. As the world is getting
increasingly competitive, it is essential that the United States have a
ubiquitous national broadband network where all Americans, whether
urban, suburban, or rural have access. Although our rural areas are
sparse in population, these people are critical in our nation's economy
and security--providing food, fiber, and energy for a growing nation.
As you know, last week's Notice of Funding Availability (NOFA)
announced the policy and application procedures for the stimulus bill's
broadband initiatives. To ensure the funding provided by the stimulus
bill does not yield unintended consequences and to achieve the bill's
objectives of increasing access to broadband and inciting economic
development, we would like to highlight a couple areas of concern:

First, we believe it is important to ensure support is
directed toward areas with significant need, i.e., unserved
areas first. Therefore, we are pleased that the Broadband
Initiatives Program (BIP) will make grants available for
remote, unserved, rural projects. However, given the extremely
high cost of building out the ``last mile'' to remote areas,
the $400 million in grants provided by the BIP for ``last
mile'' projects may not be sufficient to meet the needs of the
rural market. While $400 million sounds like a lot of money,
remember, we have estimated that it will cost about $20 million
to reach just the 543 homes in Hill Country's outlining areas.

Second, rural providers must retain their right to
effectively manage their networks. The rural sector of the
communications industry has a long history of adopting new
technologies to meet the evolving economic and security
interests of their consumers. Therefore, policymakers must
ensure any net neutrality or ``non-discrimination'' actions do
not unwittingly stymie this entrepreneurial spirit. At first
glance, the regulations appear to mostly meet this objective.
However, we are concerned that the requirements are uniformly
applied to NTIA and RUS when in fact the law didn't impose
application of the interconnection and nondiscrimination
provisions to the RUS. In addition, we are also concerned that
these interconnection and ``non-discrimination'' requirements
may supersede the exemptions set-forth by the Communications
Act of 1934 that recognize the unique circumstances confronting
rural telecommunications providers.

As our members prepare their applications and further review
the NOFA's regulations, we will provide the agencies and this
Subcommittee with further input regarding any additional
concerns or comments we may have. Like the agencies, we reserve
our right to provide further evaluation of these proposals as
the process moves forward.

Finally, while not directly related to the stimulus bill, we
believe it is important that the cap on the Universal Service
Program's High Cost Fund be removed if we truly want ubiquitous
broadband. The cap has reduced cost recovery support for Hill
Country by about $2 million annually--resources that remain
unavailable to help expand our broadband network.

As for the RUS Broadband Loan and Loan Guarantee Program (RUS
Broadband Loan Program), it has been instrumental in helping accelerate
broadband deployment in rural communities throughout Texas and the rest
of the country. However, there remains room for improvement to ensure
its funding is utilized to the maximum extent possible. We recommend
the following changes to the RUS Broadband Loan Program:

Require a 20 percent credit support of the requested loan
amount. The 2008 Food, Conservation, and Energy Act (farm bill)
eliminated the 20 percent credit support requirement for some
entities. Broadband providers who cannot meet the 20 percent
threshold will not likely have sufficient financial stability
to maintain service to their broadband customers.

Increase the deadline for completion of a project from 3
years to 5 years. The 3 year build-out time frame is too short
for many Program applicants given telecommunications planning
horizons, changes in technology, and regulatory environments.

Lengthen the 30 working day notice period for incumbents to
60 or 90 days to give incumbents more time to see and respond
to new applications to ensure these scarce resources are not
wasted by funding duplicative systems in markets that cannot
even effectively sustain one provider.

Require all applicants to submit a market survey. The
painstaking process of a RUS loan is intended to protect the
American taxpayer. Therefore, the market survey requirement,
which was eliminated by the farm bill for those proposing to
have a subscriber projection of less than 20 percent, should be
reinstated.

Finally, RUS perceived a need, and responded accordingly, when it
developed the Community Connect Grant program several years ago to
provide financial assistance in the form of grants to establish
community-oriented broadband points of presence in areas of great
need--those that are extremely rural, lower income in nature and
currently unserved. This approach has brought broadband within the
reach of thousands of rural citizens that otherwise would not have been
able to enjoy such access due to the economic circumstance of
themselves as well as the community as a whole. We encourage the
Committee to continue to support this important program.
Many have asked what role this program should play in light of the
emergence of the broadband stimulus funds. We believe the stimulus
funds change nothing with regard to the need for this critical program.
The Community Connect Grant Program brings broadband services and
equipment to community oriented locales such as community centers,
libraries and the like so that citizens that cannot afford to maintain
their own individual services at home still have the ability to come to
such centers and conduct business or entertainment on the community-
managed system. It is a wonderful program that has and will continue to
make a difference in numerous communities.
I believe that the funding provided by the stimulus bill, in
combination with other programs, such as the RUS Broadband Loan and
Loan Guarantee Program, the Community Connect Program, Universal
Service, and the intercarrier compensation regime will help enable
America's rural, community-based telecommunication system providers to
meet the broadband needs of our nation's rural citizens.
We emerged in these markets where no one else was willing to go. We
understand these markets and what their needs are. We are committed to
these markets because our systems are locally owned and operated. And
we understand the programs, like these, and how to utilize them to
achieve your goal of ubiquitous broadband deployment that will reclaim
our international leadership in the communications sphere.
Thank you again for inviting me to testify. I look forward to
answering any questions you may have.

The Chairman. Mr. McCormick.

STATEMENT OF WALTER B. McCORMICK, Jr., PRESIDENT AND CEO,
USTELECOM ASSOCIATION, WASHINGTON, D.C.

Mr. McCormick. Mr. Chairman, Ranking Member Conaway,
Members of the Committee, thank you very much for having me
appear before you today.
The USTelecom Association represents innovative companies
ranging from some of the smallest rural telecommunications
companies in the nation to some of the largest corporations in
our economy. The vast majority of our members are small
businesses serving small communities, and our diverse
membership is united by our shared determination to deliver the
broadband future to all Americans no matter where they may
live.
The nation's 1,400 broadband providers have invested more
than half a trillion dollars since the beginning of this decade
in building out broadband networks, and recent statistics bear
this out. Today, fewer than five percent of Americans cite the
lack of available broadband services as the reason they don't
have broadband at home. But that five percent live exclusively
in areas of rural America that have proven uneconomic for the
private sector to reach on its own.
So, with that in mind, last year we recommended
improvements to the RUS Broadband Loan Program. The thoughtful
amendments that you championed in the farm bill could make it
more feasible for companies to serve underserved areas, but,
like you, we are frustrated that more than a year after
enactment we still have no RUS implementing regulations. We do
believe that a timely confirmation for former FCC Commissioner
Adelstein would help resolve that matter.
With regard to the stimulus bill, we applaud Congress and
the Administration for their commitment to reviving our
nation's broadband infrastructure and for reviving our nation's
economy. But, we are concerned by what we see in the broadband
stimulus rules issued last week. They are exceedingly complex.
Some of them impose new and prescriptive requirements that go
well beyond current law and FCC rules. And the first round of
funding will not be awarded until early November, just as the
weather turns and the ground begins to freeze across large
spots of rural America.
While our analysis of the rules is not entirely complete,
there are four issues that stand out thus far as having the
potential to cause the kind of uncertainty and delay that are
antithetical to the stimulus' primary goal of job creation.
First, in addition to requiring recipients to abide by the
FCC's policy statement, which we support, the rules also impose
new and controversial obligations that may require companies to
operate in new and untested ways.
Second, the RUS scoring system seems to disadvantage very
rural populations by offering a maximum of only 5 out of 100
points for serving rural residents in unserved areas and then
apparently requiring applicants to serve at least 10,000 homes
in order to get even one point.
Third, technological neutrality has been cast aside. In the
scoring of broadband speeds, a wireline network must be ten
times faster than a wireless network to score the same number
of points.
Fourth, some restrictions and ambiguities may disadvantage
small telephone companies that serve rural areas. For example,
areas that are at least 75 percent rural must apply to RUS but
may only be eligible for a maximum of 50 percent grant funding;
whereas a provider in a less rural area can go to NTIA for up
to 80 percent grant funding, even if it's less expensive to
deploy there.
Mr. Chairman, I have provided the Committee with a couple
of maps. One is of your district, and one is of Ranking Member
Conaway's district. As you will see, Mr. Chairman, in your
district, there appears to be no point within your rural
district where an applicant would qualify for a hundred percent
loan that would be available to a remote rural area. The areas
within your district where an applicant could apply for a rural
loan would be up to 50 percent, but an applicant could go to
the higher population centers in Lumberton or Wilmington where
there is already service, where it is cheaper to serve and
offer expanded service and qualify for an 80 percent loan.
We think it's really turned this program on its head to
come up with definitions that were not part of the legislation-
making distinctions between rural areas and remote rural areas.
Having a differentiation in the funding scheme really
disadvantages projects to areas that are today totally
unserved, expensive to serve, and they are only qualified for a
50 percent loan.
Finally, Mr. Chairman, we think that while it made sense to
guard against speculative flipping of facilities with Federal
funds, the rules flatly prohibit the sale of any property for
10 years, and we think this could prevent even two very small
companies that serve adjacent rural areas from combining to
provide their customers with better service at lower costs, and
that, too, we think is antithetical to the goals of the Act.
Mr. Chairman, thank you.
[The prepared statement of Mr. McCormick follows:]

Prepared Statement of Walter B. McCormick, Jr., President and CEO,
USTelecom Association, Washington, D.C.
Chairman McIntyre, Ranking Member Conaway, Members of the
Subcommittee: Thank you for this opportunity to appear before you
today. I am Walter McCormick, President and CEO of the USTelecom
Association.
USTelecom represents innovative companies ranging from some of the
smallest rural telecoms in the nation to some of the largest
corporations in the U.S. economy. Our member companies offer a wide
range of services across the communications landscape, including voice,
video and data over local exchange, long distance, Internet and cable
networks. USTelecom is the nation's oldest--and largest--association
representing rural telecom providers. Almost all of our member
companies serve rural areas. The vast majority of them are small
businesses serving small communities and the surrounding sparsely
populated areas. They are proud members of these communities and deeply
committed to their future development. What unites our diverse
membership is our shared determination to deliver innovative voice,
video and data services to the consumer--a commitment we know this
Subcommittee shares.
Broadband in the United States has developed with a speed and scope
unparalleled by any prior technology. Moreover, unlike any other
infrastructure effort of its scope, it has done so largely with private
sector investment. By some estimates, cumulative capital expenditures
by broadband providers from 2000-2008 were over half a trillion
dollars, and private investment in broadband infrastructure has grown
consistently since 2003. As a result of this massive private investment
in infrastructure, an overwhelming majority of Americans today can
choose among multiple broadband platform providers.
While this has been an extraordinary decade of growth for both
broadband technology and access, more needs to be done. As you well
know, portions of rural America are unlikely to see robust broadband
without government support. This Committee, through its support of the
Rural Utilities Service (RUS) broadband program, has recognized that
when it comes to deploying broadband to areas that are uneconomic to
serve, using Federal resources to leverage the initiative and expertise
of established private sector broadband providers is clearly preferable
to direct operation and ownership by the government.
USTelecom has urged establishing a national goal of 100% broadband
access and adoption by 2014. While these are certainly stretch goals,
setting a lesser bar for this important effort would simply be aiming
too low. Still, approaching this goal will require the combined efforts
of network providers, applications providers, and community
organizations, together with Federal, state and local governments.
The RUS Broadband Loan Program
This Committee has been at the forefront of helping advance the
development of rural America, from bringing electricity and safe
running water to communities that never had it before, to connecting
the country via the telephone and now via high-speed broadband.
USTelecom and its member companies are proud of the role we play
connecting the country, and we fully support the critical role played
by the RUS in helping to bring broadband to rural areas.
When I appeared before you in 2007, I recommended several
improvements to the RUS broadband loan program. These included:

(1) Better targeting of areas currently not served;

(2) Enhancing incentives for investment in the areas not served;

(3) Expanding program eligibility;

(4) Improving loan processing at USDA; and

(5) Exploring public-private partnerships.

The Committee adopted these needed reforms to the RUS broadband
program as part of the farm bill enacted last year. Your thoughtful
modifications to this important program will significantly improve the
targeting of funds to areas unserved by broadband, streamline the
application process, take into account the greater degree of loan
security associated with financially strong borrowers, and expand the
availability of money to providers of all sizes. In addition, the
Committee improved program transparency by beefing up requirements for
publication of notices of each application. Furthermore, a 3 year build
out requirement was included to ensure that borrowers either promptly
construct broadband facilities or relinquish the claim and allow
another provider to apply for funding to serve that same area.
Unfortunately, although the farm bill was signed into law in June
of last year, we are now \3/4\ of the way into Fiscal Year 2009 without
the necessary implementing regulations. As a result, no loans have been
made from the over half a billion dollars Congress provided for
enhancing broadband access in rural areas. While it is certainly
understandable that RUS has been focused on developing rules for the
new broadband grant and loan program authorized under the American
Recovery and Reinvestment Act of 2009 (ARRA), RUS had 7 months after
the enactment of the farm bill and prior to the passage of the ARRA to
promulgate regulations.
The broadband loan program reauthorized in the farm bill remains an
important tool to bring high speed broadband to rural areas and the
regulations should be published promptly. RUS has indicated that such
regulations will be published in ``interim final'' form, allowing them
to be immediately implemented but permitting public comment. This less
than ideal procedure would not have been required had RUS promptly
published regulations within a reasonable period after adoption of the
farm bill. Given the current circumstances, we hope the Committee will
seek assurances that RUS will still give serious consideration to
public comments received on its broadband loan program regulations.
Finally, while we acknowledge and appreciate the efforts of the
current management of the agency during this busy time, we urge the
other body to promptly consider and approve the confirmation of
Jonathan Adelstein as Administrator of RUS. At this crucial time for
the RUS program, it would greatly benefit from the expertise and
leadership that Commissioner Adelstein will bring. Commissioner
Adelstein has been a tireless advocate for both broadband and rural
America, and as such is ideally suited to lead RUS at this moment in
its history.
Stimulus Presents RUS With a Tremendous Responsibility and a Momentous
Opportunity
The ARRA presents the RUS with both a tremendous responsibility and
a momentous opportunity. The opportunity, of course, is to make
significant progress toward the goal of ensuring that all Americans
have access to high-speed broadband services. The responsibility is to
do so in a manner that fulfills the fiduciary duty placed on it by
Congress, the President and the American public, that RUS must target
broadband stimulus funds toward projects that will immediately
stimulate economic activity, create jobs and provide high-speed
broadband service.
As the RUS worked to develop regulations for its program, USTelecom
offered a number of recommendations designed to meet those twin goals.
We pointed out that implementation of the Recovery Act should support,
not hinder, the ability of providers to continue to expand and enhance
services and speeds. In that regard, we are concerned that some view
these important programs in the ARRA less as engines for economic
recovery and job creation than as an opportunity to advance policies
that deserve far greater deliberation and thoughtful debate. This is
likely to inject an element of uncertainty and delay that is
antithetical to the ARRA's primary objective of promoting economic
recovery and creating jobs.
We also urged the RUS to rank applications by focusing on bringing
areas most lacking in broadband infrastructure up to levels available
to the majority of Americans with a particular emphasis on grants
rather than loans. Most of the areas that remain unserved and
underserved are not so because of the absence or the price of credit,
but due to the inability of broadband providers to demonstrate a
feasible business case to bring service to very high cost, low density
markets. By allocating new funds that could be used for grants,
Congress recognized that loans alone are not sufficient to address the
lack of broadband infrastructure in sizable portions of unserved rural
America.
Finally, in addition to proper loan and grant ratios, the program
requires clear, simple and streamlined procedures and definitions.
Department of Agriculture's Rural Utilities Service Broadband
Initiatives Program
On July 1, the Department of Commerce's National Telecommunications
and Information Administration and the Department of Agriculture's
Rural Utilities Service (RUS) released a 121 page Notice of Funding
Availability (NOFA) detailing the rules and process for the
distribution of the first phase of broadband loans and grants
established by the ARRA. Even though RUS had indicated that there would
be three tranches of funding, this NOFA will be used to distribute at
least half of the funding allocated to RUS's Broadband Initiatives
Program (BIP).
Applications for this first phase of both programs may be filed
beginning July 14 and must be in no later than August 14. There will be
a two-part review process, with those applicants making the first cut
likely to be required to provide additional information to the agencies
in mid-October. The agencies expect to announce awards around November
7.
The NOFA, in accord with USTelecom's recommendation, defines
broadband as 768 kbps downstream and 200 kbps upstream. It defines
unserved areas as those where at least 90% of households are without
broadband access. Underserved areas are defined broadly as:

--those areas where less than 50% of households have access to
broadband, or

--those areas where no broadband service provider advertises speeds
of at least 3 mbps downstream, or

--those areas where broadband subscribership is 40% of householdsor
less.

In addition to requiring applicants to abide by the FCC's Internet
Policy Statement, which USTelecom supports, the agencies have also
chosen to require adherence to a non-discrimination principle (``not
favor any lawful Internet applications and content over others'') and
an apparently broad interconnection obligation. The NOFA does allow
exceptions for law enforcement, managed services and for reasonable
network management. These obligations would apply to any facility
supported by the funding, but not any existing network arrangements,
and continue to apply for the life of that facility.
BIP funding is split between that for rural and remote areas.
Remote areas (those 50 miles outside of non-rural areas) are eligible
for grants up to 100% and rural areas that are non-remote can get
grants up to 50% of the cost of the project with the remainder being
loans. The loan portion will have ``attractive loan terms with
reasonable security requirements.'' No further information is provided
as to the details of the loan terms and reasonable security
requirements. However, as this Committee knows from its work reforming
the broadband loan program, those details will be a critical component
in the success or failure of this aspect of the program.
Finally, the BIP allocates $1.2 billion for last-mile projects,
both remote and non-remote. Approximately $400 million is for remote
area grants and $800 million for rural but non-remote loans and grants.
BIP will fund last-mile facilities to end-users and middle-mile
facilities connecting up the provider to the Internet backbone.
Applications for areas that are at least 75% rural must be made to BIP,
but can also be submitted to NTIA's broadband program. Applications for
all other areas go to NTIA's program.
The NOFA is quite complex, and USTelecom staff is continuing to
analyze its details. But let me offer some preliminary thoughts about
several aspects of the NOFA that USTelecom focused on in its commentary
to the Administration.
We believe the rules implementing the Recovery Act's requirement
that ``priority for awarding [RUS] funds shall be given to project
applications for broadband systems that will deliver end-users a choice
of more than one service provider'' should be interpreted as awarding a
priority to those applicants that agree to adhere to the FCC's
Broadband Policy Statement. More than 3 years of experience under that
Policy Statement has demonstrated its successful balancing of interests
among stakeholders--consumers, cable and wireline broadband service
providers, application and content providers and technology companies.
The NOFA, however, appears to exceed the principles laid out in the
Policy Statement. We are concerned that this could impact the number
and type of applications the RUS receives and therefore undermine the
goals of the ARRA to immediately stimulate economic activity and deploy
high speed broadband service.
Further, the scoring system for prioritizing applications for
funding has some troubling implications. For example, out of a possible
100 points awarded to an application, only a maximum of five points are
awarded for serving rural residents located in unserved areas. And each
of those five points requires serving 10,000 unserved households--the
vast majority of our members have substantially less than 10,000
customers in their entire service areas, so smaller companies or those
seeking funding for smaller scale projects serving pockets of customers
without broadband service may be ignored. These are the very places
that we believe Congress intended to support through the ARRA and this
proposal appears to unduly disadvantage these areas. Of similar concern
is the reduced availability of grant funding for ``non-remote'' rural
areas--those within 50 miles of towns larger than 20,000 people. It can
be prohibitively expensive to provide broadband in these areas, and we
are concerned that a maximum of 50 percent grant funding may not be
adequate to structure a financially feasible project.
Furthermore, technological neutrality is clearly cast aside. The
same number of points is awarded to a wireless provider that builds a
system that will deliver a total of 2 megabits per second upstream and
downstream, while a wireline provider must construct a system ten times
as fast to be awarded the same number of points.
Finally, there are unnecessarily restrictive provisions on the sale
or lease of award funded facilities which may discourage potential
applicants from providing needed broadband service to rural consumers.
The NOFA prohibits an awardee from selling or leasing stimulus financed
facilities for 10 years, and only then may the awardee request a
waiver. While restrictions on transferring such facilities is
reasonable to prevent speculation, the rule specifying a 10 year
timeframe is excessive. For example, the public interest would not be
well served by prohibiting two small rural companies wishing to better
serve their subscribers with broadband service from merging.
Conclusion
Mr. Chairman, in closing, let me reiterate that it is critically
important that rural areas be included in the nationwide drive for
greater bandwidth capacity. This modernization of the nation's
communications infrastructure will seed economic growth, attract new
businesses to rural America and expand opportunities ranging from
telecommuting to distance learning to telemedicine.
After 60 years of success, the RUS loan programs remain an
essential public-private partnership conceived with the best of
intentions--spreading opportunity throughout the country and helping
the private sector overcome the often significant economic barriers
associated with our nation's vast geography. The results have been
impressive: RUS loans generate more revenue than they cost. RUS loans,
loan guarantees and grants provide incentives where the market does
not, so that private companies can invest in infrastructure that
promotes rural economic development. And, it expands our citizens'
access to services that can vastly enhance their quality of life and
the economic opportunities available to them in their own communities.
We thank you for your invitation to appear today. USTelecom and its
member companies look forward to working with the Subcommittee and this
Congress to achieve our shared objective of making broadband as
ubiquitous today as electricity, water and telephone service. Broadband
is an essential building block of every modern American community. We
look forward to working with you to make its many opportunities
accessible to all Americans. Thank you.
Attachment

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Thank you.Mr. Stamp.

STATEMENT OF CURTIS W. STAMP, J.D., PRESIDENT,
INDEPENDENT TELEPHONE & TELECOMMUNICATIONS
ALLIANCE, WASHINGTON, D.C.

Mr. Stamp. Thank you.
Good afternoon, Chairman McIntyre and Ranking Member Conaway. I
appreciate the opportunity to testify before you on the development of
rural broadband.
I am Curt Stamp, President of the Independent Telephone &
Telecommunication Alliance, the national trade association of mid-size
telecommunication carriers who serve more than 30 million customers in
44 states, primarily in rural and small markets with very low
population densities. ITTA's members face the challenges inherent in
bringing service to wide-open spaces of the nation; and, despite these
challenges, they are at the forefront of providing advanced services to
rural America.
Today, on average, broadband is available to between 80 and 90
percent of the customers served by ITTA member companies; and our
members continue to push broadband further into rural America, at
faster speeds, while investing hundreds of millions of dollars in their
networks. But even with these efforts, portions of these areas are very
difficult to serve without some sort of external assistance such as
stimulus funding.
Through the leadership of Congress, monumental broadband incentives
have been enacted. The focus of these efforts should be on making
broadband available to those who have no access today. To do otherwise
would risk expanding the digital divide that currently exists.
The Recovery Act represents the concrete and commendable commitment
of Congress and the Administration to expanding broadband to Americans
who do not have access today. The success of its implementation will be
judged upon whether it expands broadband service to unserved area. ITTA
encourages the Subcommittee to exercise its oversight authority to
ensure this is the case. This is particularly crucial given that all of
RUS's Recovery Act funding may be distributed in the first round of
applications.
ITTA and its members commend RUS, NTIA, and the FCC for their
efforts in implementing the Recovery Act. We are pleased that RUS and
NTIA recognize that it is in the public's interest to allow private
companies like our members to participate in the program and to grant
reasonable waivers of the Buy America provisions when necessary so
projects can go forward.
ITTA and its members continue to review the rules released last
week but have identified a few issues to bring to your attention.
First, although grants, and not loans, are needed to spur
deployment in the remaining unserved areas, RUS's BIP rules cap grants
at 50 percent in all but the most remote areas and prioritizes
applications with greater loan amounts as compared to those seeing
seeking only grants. RUS and NTIA have determined that NTIA, which
offers higher grant percentages, will not forward funds to
predominantly rural areas unless RUS first declines to fund a project.
This causes more delay and more denial of service to unserved
customers.
Second, the BIP rules favor slower wireless projects over faster
wireline projects, are not technologically neutral, and could result in
inferior connection speeds in rural areas. For example, all things
being equal, BIP would prioritize a wireless project that offered
speeds of 2 megabits over a wired project offering speeds of 19
megabits. This preference for slower wireless connections seem contrary
to Congressional intent to use broadband to facilitate rural economic
development without regard to specific technologies employed.
Third, the BIP rules do not seem to place priority on deploying
broadband to unserved customers in the manner called for by the Act.
While the statute dictates that priority for awarding funds be given to
projects that provide service to the highest proportion of rural
residents who do not have access, applications to deploy broadband to
unserved areas appear to be afforded little, if any, priority over
applications that would merely insert another provider into an area
where service is already available.
This is further complicated by RUS's decision to limit grants to
unserved areas on the basis of whether the rural area qualifies as
remote or not. A survey of our members indicates that most projects in
unserved areas do not fall within the territory that RUS would deem
remote. Limiting funds based on this new standard effectively will
prevent many high-cost unserved areas from receiving broadband.
It was refreshing to hear RUS's commitment to continue to look at
this. However, the 2 week deadline that she offered up is well beyond
the start of the application process, which begins on July 14th.
Finally, we are concerned about the nondiscrimination and
interconnection provisions and how they may apply to our network,
especially if they end up applying to the entire network, since it is
not easy for our members to cordon off a portion of their network that
may or may not receive stimulus funding.
Also, I would like to thank you for the leadership on the
Subcommittee on the positive changes to the farm bill; and we, too, are
anxious for the implementation of those rules.
In closing, I would like to add this is a very exciting time in
broadband policy. We look forward to working with you and Jonathan
Adelstein, once he is confirmed, to ensure broadband continues to be
made available for all Americans.
Thank you. I look forward to your questions.
[The prepared statement of Mr. Stamp follows:]

Prepared Statement of Curtis W. Stamp, J.D., President, Independent
Telephone & Telecommunications Alliance, Washington, D.C.
Good morning Chairman McIntyre, Ranking Member Conaway, and Members
of the Subcommittee. Thank you for the opportunity to testify on the
development of rural broadband and, specifically, the implementation of
the 2008 Farm Bill and the Broadband Technology Opportunities Program
(``BTOP'') and the Broadband Initiatives Program (``BIP'') which are
administered, respectively through the National Telecommunications and
Information Administration (``NTIA'') and the Rural Utilities Service
(``RUS'').
I am Curt Stamp and I am the President of the Independent Telephone
& Telecommunications Alliance (``ITTA''). ITTA is an alliance of mid-
size telecommunication carriers \1\ that serve more than 30 million
customers in 44 states. ITTA members primarily serve rural and small
markets with low population densities, and face the challenges inherent
to bringing service to the wide open spaces of the nation. Despite the
challenges of these markets, ITTA members are at the forefront of
providing advanced services to rural America. Their respective efforts
have included not only serving rural America with robust and affordable
broadband service, but also programs such as partnering with computer
manufacturers to bring value-priced computers to consumers. These
initiatives increase not only availability, but subscribership as well.
---------------------------------------------------------------------------
\1\ ITTA member companies include CenturyLink, Comporium
Communications, Consolidated Communications, FairPoint Communications,
Frontier Communications, Iowa Telecom, Qwest Communications, TDS
Telecom, and Windstream Communications.
---------------------------------------------------------------------------
Today, on average, broadband is available to somewhere between 80
and 90 percent of the consumers serviced by ITTA member companies. ITTA
members continue to push broadband further and further into rural
America, at faster and faster speeds. In 2008, ITTA members invested
hundreds of millions of dollars in their networks and broadband
deployment.
Through the leadership of Congress, monumental broadband deployment
incentives--including broadband mapping legislation, RUS reforms in the
2008 Farm Bill, and most recently, broadband stimulus funding included
in the American Recovery and Reinvestment Act of 2009 (``ARRA'')--have
been enacted. As these programs are implemented the focus should be on
making broadband accessible to those who have no access today. Getting
some broadband to all must take priority over funding multiple
providers in areas that already enjoy the benefits of broadband.
As Congress has recognized, serving America with broadband can be
an economically challenging endeavor, particularly when compared to
serving urban or suburban areas. While rural networks must cover
substantially more area than more densely populated regions of the
country, rural areas contain fewer consumers to buy those services. On
average, rural consumers are older and have less money to buy such
services than their counterparts in other parts of the country.
Although ITTA members have done an excellent job deploying fast and
affordable broadband services to the vast majority to their customers,
these factors make some portion of these rural areas extremely
difficult to serve without government support.
For wireline companies serving rural America, the incidence of
fewer customers per square mile increases dramatically the amount of
per customer investment that is necessary to provide service. An
average ITTA member company has fewer than 24 access lines per square
mile. The result is that the remaining 10-15 percent of customers who
currently do not have access to broadband are the most expensive to
serve and cannot be reached without some sort of external assistance
like Universal Service support, RUS Rural Broadband Loan Program, or
stimulus funding.
While the Universal Service Fund and RUS programs have helped bring
broadband to additional rural consumers, much needed reform of the
programs to reflect today's changing telecommunication landscape has
been slow to come. Understandably, this is partly due to the fact that
technological innovation can often move forward more rapidly than
normal regulatory processes. Thanks to the leadership of this
Subcommittee, however, the RUS program was reformed in the 2008 Farm
Bill, which currently is at the Department of Agriculture awaiting
final rule implementation. In regard to the Universal Service Fund,
ITTA has worked closely with Congressmen Boucher and Terry on reforms
for mid-size, rural carriers that were included in H.R. 2054 in the
110th Congress. We remain optimistic that Congressmen Boucher and Terry
will reintroduce their USF reform bill and again mid-size rural carrier
reforms will be included. Once in place, these reforms will help more
consumers obtain the benefit of comparable broadband service to those
living in more densely populated areas.
ARRA Implementation:
The commitment made by Congress and the Administration in ARRA to
expanding broadband to Americans who do not have access today is
commendable. The primary purpose of ARRA was to bring robust and
affordable broadband service to consumers who currently do not have
broadband available to them. Its success, therefore, will be judged
upon whether its implementation expands broadband service to unserved
areas. ITTA encourages the Committee to exercise its oversight
authority to ensure this is the case, especially during the first round
of funding, and to seek changes if ARRA programs fail to fund
significant new deployment in unserved areas.
ITTA and its member companies commend RUS, NTIA, and the Federal
Communications Commission (``FCC'') for their efforts in implementing
ARRA. ITTA further commends RUS and NTIA for recognizing that it is in
the public interest to allow private companies, like ITTA's membership,
to participate in the program and that waiver of the Buy America
provision for certain telecommunications equipment was needed. Of
course ITTA and its members are still actively reviewing the complex
and substantial rules released only late last week, but ITTA has
identified a few issues that it would like to bring to the attention of
the Committee as it exercises its oversight of this critical
legislation. As we gain further insight from the BIP and BTOP
application, I hope that there will be additional opportunities to
speak on issues raised in the stimulus provisions adopted by RUS and
NTIA. My comments today are limited to potential issues that
immediately stood out to ITTA, but other regulatory provisions (such as
those prohibiting the sale and lease of broadband facilities and those
imposing onerous reporting and monitoring obligations) also may warrant
Congressional attention.
First, although grants, not loans, are needed to spur deployment in
most remaining unserved areas, BIP effectively limits grants at 50
percent for all but the most remote areas and prioritizes applications
with greater loan amounts as compared to grants. RUS and NTIA have
further determined that NTIA, which offers grants for up to 80 percent
of project costs, will not award funds to predominantly rural areas
unless RUS first has declined to offer a project funding. It is unclear
how this provision will be implemented, but it could have the effect of
delaying or blocking predominantly rural areas from receipt of NTIA
funding, which is significant due to the substantially higher available
grant amount cap available from NTIA's BTOP program as compared to RUS'
BIP program. To ensure adequate funding is available for unserved
consumers, the Subcommittee should recommend that a substantial share
of NTIA's BTOP funding be set aside for last mile deployment in
predominantly rural areas.
Second, BIP rules favoring slower wireless projects over faster
wired projects, are not on their face technologically neutral and
consequently could result in deployment of inferior connection speeds
in rural areas, which could expand the rural-urban digital divide.
Under BIP rules, wireless projects will receive prioritization at
speeds that are ten times slower than the threshold established for
wireline broadband service providers. For example, all things being
equal, BIP would prioritize a wireless broadband project that offers
consumers speeds of 2 Mbps over a wired project that offers 19 Mbps.
Although broadband providers using all different kinds of technologies
should be eligible to compete for funding, this preference for slower
wireless connections appears to be contrary to Congressional intent to
use broadband to ``facilitate rural economic development,'' without
regard to specific technologies employed.
Third, the BIP rules do not seem to place priority on deploying
broadband to unserved consumers in the manner called for by ARRA.
Although the statute dictates that ``priority for awarding funds . . .
be given to projects that provide service to the highest proportion of
rural residents that do not have access to broadband,'' \2\
applications to deploy broadband to unserved areas appear to be
afforded little, or no, priority over applications that would merely
insert another broadband provider into an area where service is already
available.
---------------------------------------------------------------------------
\2\ American Recovery and Reinvestment Act of 2009, Pub. L. 111-5,
123 Stat. 118-119 (2009).
---------------------------------------------------------------------------
Finally, ITTA is concerned that the nondiscrimination and
interconnection provisions of the NOFA create special obligations on
broadband providers that are ready and willing to deploy broadband in
areas that are the most difficult to reach. The uncertainty associated
with these new obligations unnecessarily complicates the calculus for
carriers considering seeking funding, and may reduce the number and
quality of providers stepping forward to compete. For years, ITTA
members have abided by the principles contained in the Internet Policy
Statement adopted by the FCC. Our members recognize that in today's
competitive marketplace customers will not tolerate an inability to
access the lawful content and applications they wish on the Internet.
The proposed requirements, however, go well beyond the FCC's Internet
Policy Statement and could implicate a broadband provider's entire
network, as network providers cannot easily cabin off one portion of
their network from the rest. To the extent new prophylactic rules
regarding nondiscrimination and interconnection are warranted (and
there is no record suggesting they are), any such obligation would be
most properly assessed and adopted in the context of a traditional
rulemaking conducted by the expert agency--which here is the FCC.
RUS
With passage of the 2008 Farm Bill positive reforms were made. ITTA
is hopeful that the new rules will be implemented soon. Any future
delays in rule implementation process will only further undermine the
value of the RUS broadband loan program and slow the expansion of
broadband to those who need it most.
In regard to the 2008 Farm Bill, ITTA strongly supported the
following reforms:

Priority to applicants that that can provide broadband
service to households that currently, are unserved by a
broadband provider.

Entities must complete build out of the broadband service
not later than 3 years after the initial date on which the loan
was made available.

Loans cannot be provided to areas where more than 75% of the
households are offered broadband by two or more incumbent
service providers. In areas with three or more incumbent
providers loans may not be granted.

Improved transparency on all applicants as well as
streamlining the application process.
Conclusion
Mr. Chairman and Members of the Committee, in closing, I would like
to add that this is a very exciting time in National broadband policy.
At no other time in our nation's history has more public policy
attention been directed towards broadband than today. The FCC has
opened a major proceeding on a National Broadband Plan and the
President is committed to ensuring that every child has ``the chance to
get online'' and broadband ``will strengthen America's competitiveness
in the world.'' \3\ Under the leadership and oversight of this
Committee and Congress strides have been made in ensuring broadband
availability across America. ITTA is hopeful that with your oversight
we can work with RUS to develop a program that will help realize the
goals of Congress and to bring the economic, health-care, and
educational benefits of broadband to rural and high-cost areas
throughout the nation.
---------------------------------------------------------------------------
\3\ ``Obama: Broadband Computers Part of Stimulus Package,''
Network World (Dec. 8, 2008).
---------------------------------------------------------------------------
Thank you for the opportunity to testify today. I would be happy to
answer any questions that you may have.

The Chairman. Thank you very much.
Mr. Simmons.

STATEMENT OF W. TOM SIMMONS, SENIOR VICE PRESIDENT OF PUBLIC
POLICY, MIDCONTINENT COMMUNICATIONS, SIOUX FALLS, SD; ON BEHALF
OF NATIONAL CABLE AND
TELECOMMUNICATIONS ASSOCIATION

Mr. Simmons. Chairman McIntyre, Members of the
Subcommittee, thank you for inviting me to testify today as
part of your review of rural broadband programs.
My name is Tom Simmons. I am the Senior Vice President of
Public Policy for Midcontinent Communications. Midcontinent is
the leading provider of cable television services as well as
local and long-distance telephone service, high-speed Internet
access, cable advertising services for communities in North
Dakota, South Dakota, and Minnesota.
I am also representing the National Cable and
Telecommunications Associations. NCTA is the principal trade
association of the cable industry, which has long been at the
forefront of the growth and deployment of broadband service.
Extending broadband to unserved areas should be the
government's highest priority. While broadband access has
grown, many Americans in rural areas still lack access to
broadband infrastructure and services. The $2.5 million that
Congress provided in the stimulus bill for their Broadband
Initiatives Program, or BIP, will help address this critical
need. BIP builds on Congress' determination in the 2008 Farm
Bill that government subsidies should be focused on unserved
rural areas.
While we are still reviewing last week's Notice of Funds
Availability, or NOFA, for BIP, we are pleased that the NOFA
places special emphasis on remote and rural areas without any
first-generation broadband. Specifically, under the NOFA, BIP
grants will be used exclusively to fund projects in these
areas.
The application scoring criteria also underscores the focus
on bringing broadband to unserved areas. The greater the number
of unserved households in the area, the more points a proposal
will receive. The more remote a proposed project, the more
points the application will receive.
We also applaud RUS's recognition in the NOFA that
investment in middle-mile facilities is critical for some rural
areas. This approach is consistent with the language and intent
of the Recovery Act's broadband provisions, which do not favor
any particular technology.
While BIP will also provide loans and loan/grant
combinations for underserved areas, we are hopeful that RUS
will administer this aspect of the program in a manner that
avoids subsidizing areas where Midcon and others have already
invested risk capital to provide broadband services. In this
regard, we urge RUS to rigorously enforce the NOFA's
presumption that an application meet at least two of the three
specified factors in order to qualify as an underserved area
project, and avoid subsidizing areas merely because broadband
penetration there is low. Using scarce government funds to
subsidize broadband where it is already available is not the
best use of taxpayer money.
We also welcome the NOFA's requirement that BIP applicants
provide a detailed description of the proposed funded service
area and a plan to post each such description on the
broadbandUSA.gov website for a 30 day public inspection period.
This transparent, open process will assist both the agencies
evaluating loans and grants and the public whose tax money
supports the programs.
We are concerned, however, that some provisions in the
Recovery Act and the NOFA could undermine the job creation and
other benefits of rapid broadband deployment intended by
Congress. In particular, the broad interconnection and
nondiscrimination requirements applicable to BIP and BTOP
projects go beyond the existing FCC broadband principles, and
include a first-time broadband interconnection mandate.
Requiring providers to implement new and largely undefined
requirements could chill investment and bog providers down in
litigation. We urge RUS and NTIA to apply these requirements in
a manner that gives them maximum flexibility.
Having adopted an interconnection requirement for BIP,
however, RUS should not prohibit the use of BIP interconnection
agreements to provide services that compete with projects
funded by existing REA telephone loans. This one-sided
restriction would effectively prevent new entrants from using
interconnection to provide voice service and competition with
existing borrowers, disserving consumers and violating the
statutory priority for BIP projects that give end-users a
choice of broadband providers.
I would like to take a moment to talk about the existing
RUS Broadband Loan Program. As you know, that program has had a
troubled past. We were, therefore, pleased when Congress
reformed the loan program as part of the 2008 Farm Bill. We
believe the changes made in that law will address many of the
problems identified by the Inspector General in two separate
reports.
In particular, the farm bill prioritizes funds for unserved
areas and, equally important, redefined the term rural to
encompass an area that has a population of 20,000 or less, but
not including any urbanized area adjacent to a city or town
that has a population of greater than 50,000. That definition
was also adopted in the NOFA for the BIP. The farm bill has
also established more stringent eligibility standards and
improves the transparency of the line process, which we
strongly support.
We also are confident that Jonathan Adelstein, should he be
confirmed by the U.S. Senate as Administrator of the RUS, will
fully implement the reforms of the 2008 Farm Bill. We also urge
RUS to release those revised regulations governing the program
in order the bring it in line with these reforms.
Mr. Chairman, thank you for inviting me to testify today. I
am happy to answer any questions you or any Member of the
Committee may have. Thank you.
[The prepared statement of Mr. Simmons follows:]

Prepared Statement of W. Tom Simmons, Senior Vice President of Public
Policy, Midcontinent Communications, Sioux Falls, SD; on Behalf of
National Cable and Telecommunications Association
Chairman McIntyre and Members of the Subcommittee, thank you for
inviting me to testify today as part of your review of rural broadband
programs. My name is Tom Simmons and I am the Senior Vice President of
Public Policy for Midcontinent Communications. Midcontinent is the
leading provider of cable television services, as well as local and
long distance telephone service, high-speed Internet access, and cable
advertising services for communities in North Dakota, South Dakota and
Minnesota. Midcontinent's service area includes over 200 communities
serving nearly 250,000 customers. The size of our communities ranges
from densities of 5 to 116 homes per mile of cable plant and
populations range from less than 125 in Dodge, North Dakota to our
largest community, Sioux Falls, South Dakota, which has a population of
more than 150,000.
I am also here today representing the National Cable and
Telecommunications Association (``NCTA''). NCTA is the principal trade
association of the cable industry in the United States. NCTA represents
cable operators serving more than 90 percent of the nation's cable
television households and more than 200 cable program networks, as well
as equipment suppliers and providers of other services to the cable
industry. The cable industry has long been at the forefront of the
growth and deployment of broadband service. Since 1996, the cable
industry has invested over $145 billion to upgrade and expand its
networks to provide broadband access. The result of this investment is
that cable operators today offer broadband to 92 percent of U.S.
households. The cable industry is expected to invest another $14
billion continuing such upgrades and expansion this year.
The cable industry believes strongly that quality broadband
services should be available to all regions of the country, including
the least densely populated areas of the country. Broadband is a
crucial driver of economic recovery and global competitiveness.
Broadband links rural America to the rest of the country and the world,
creates jobs, improves educational opportunities, and delivers health
care more efficiently. Midcontinent has invested over $100 million to
bring broadband to our service areas, but we recognize that there are
still some rural consumers who lack access to broadband. And even in
areas where one or more providers offer broadband service, there can be
other barriers to adoption--such as affordability, the lack of a
computer or other equipment needed to connect to the Internet, and low
levels of basic ``digital literacy.''
Bringing service to these unserved areas and facilitating broadband
adoption by underserved populations, e.g., low income consumers, are
the appropriate objectives for rural broadband programs. Thanks to the
hard work of this Subcommittee, Congress substantially reformed the
rural broadband program in the 2008 Farm Bill to focus on unserved
areas, and we look forward to seeing the Rural Utilities Service
(``RUS'') implement this program in accordance with the statutory
intent.
Likewise, we are pleased that the Broadband Initiatives Program
(``BIP'') funded by the stimulus bill places special emphasis on remote
and rural areas without any first generation broadband. Specifically,
under the Notice of Funds Availability (``NOFA'') released last week,
BIP grants will be used exclusively to fund projects in these areas.
While broadband projects in ``underserved'' rural areas are also
eligible for support, underserved has been carefully defined in a way
that we are hopeful will avoid wasting taxpayers' monies by subsidizing
additional competitive entrants in communities where an existing
provider has already invested private risk capital. We agree with RUS'
determination that only loans and loan/grant combinations should be
used to fund projects in these areas.
My testimony today will address each of these points in a little
more detail.
Rural Broadband Programs Should Focus on Unserved Areas and Underserved
Populations
Extending the physical availability of broadband where it currently
does not exist should be the government's highest priority in terms of
distributing broadband grants for infrastructure construction. While
the number of consumers with access to broadband at home has grown over
the past year,\1\ some geographic areas still lack the necessary
infrastructure to offer broadband services. As the Department of
Agriculture recently noted, ``broadband Internet access is becoming
essential for both businesses and households'' and ``many compare its
evolution to other technologies now considered common necessities . . .
.'' \2\ Broadband Internet access would benefit businesses as well as
provide ``rural residents access to goods and services that may not
otherwise be available locally or via dial-up Internet.'' \3\
---------------------------------------------------------------------------
\1\ Pew Internet & American Life Project, Home Broadband Adoption
2009, at 3 (June 2009) (``Pew''); http://www.pewinternet.org//media//
Files/Reports/2009/Home-Broadband-Adoption-2009.pdf (finding that 63%
of adult Americans had broadband at home as of April 2009, ``up from
55% in May, 2008'').
\2\ U.S. Dept. of Agriculture, Economic Research Service, Rural
Broadband at a Glance, at 1 (February 2009), available at http://
www.ers.usda.gov/Publications/EIB47/EIB47_SinglePages.pdf.
\3\ Id. at 4.
---------------------------------------------------------------------------
Even where broadband is available, two key obstacles--lack of
interest and lack of resources--greatly affect whether Americans
subscribe to broadband. Enabling underserved populations to acquire and
make effective use of broadband service is a critical component of our
national broadband strategy. Many rural and low-income households do
not subscribe to the broadband services that are available because they
do not have the necessary equipment, training, or educational
opportunities to take advantage of the benefits of Internet use.
Indeed, approximately 35 million households in the United States who
currently have access to broadband do not use it.\4\ Examples of
possible demand-side stimulus programs include making computers or
laptops available at a discount to qualifying households, subsidizing
monthly service fees for low-income households, providing for
reimbursement of telehealth expenditures, or other tailored means
designed to stimulate adoption by targeted groups.
---------------------------------------------------------------------------
\4\ Moving the Needle on Broadband: Stimulus Strategies to Spur
Adoption and Extend Access Across America, National Cable and
Telecommunications Assoc., at 2 (Mar. 17, 2009). Notably, of that
number, only 30 percent have more than a high school education. Id.
Broadband adoption continues to increase in households with a high
school education or greater. The Pew Internet & American Life Project's
most recent study indicates that home broadband adoption increased
between 2008 and 2009 at a rate of 30% for those with a high school
education, 8% for those with ``some college'' education, and 5% with at
least a college education. See Pew at 16.
---------------------------------------------------------------------------
The Broadband Initiative Program Is Properly Focused on Unserved and
Remote Areas
Today's hearing is extremely timely in light of last week's release
of the NOFA for the $2.5 billion in rural broadband stimulus funding,
now known as the Broadband Initiatives Program. The rural broadband
provisions of the Recovery Act \5\ and last week's NOFA build on
Congress's determination in the 2008 Farm Bill that government
subsidies should be focused on unserved rural areas.
---------------------------------------------------------------------------
\5\ American Recovery and Reinvestment Act of 2009, Pub. L. No.
111-5, 123 Stat. 115 (2009) (``Recovery Act'').
---------------------------------------------------------------------------
Consistent with the farm bill, the Recovery Act appropriately
targeted funding to areas ``without sufficient access to high speed
broadband service to facilitate rural economic development.'' Also like
the farm bill, the Recovery Act gives priority to projects that provide
service to the highest proportion of rural residents that do not have
access to broadband service; projects that will be fully funded if the
requested funds are provided; and projects that can start promptly
after the enactment of the Act.\6\
---------------------------------------------------------------------------
\6\ Id.
---------------------------------------------------------------------------
Midcontinent and NCTA welcome the Recovery Act's focus on unserved
areas and Secretary Vilsack's recent Senate testimony that his intent
is to direct ``at least 75% [of the stimulus funds] to unserved rural
areas.'' With about ten million households, most located in rural
areas, lacking access to broadband,\7\ this is surely the right
approach. While we are still reviewing the 121 page NOFA, we are
pleased that it appears to confirm the Secretary's intent and fulfill
Congress's objective to bring broadband to areas of the country that
lack this critical service today.
---------------------------------------------------------------------------
\7\ Jon M. Peha, Bringing Broadband to Unserved Communities, The
Hamilton Project, at 11 (The Brookings Institution) (July 2008); http:/
/www.brookings.edu//media/Files/rc/papers/2008/07_broadband_peha/
07_broadband_peha.pdf.
---------------------------------------------------------------------------
Specifically, the NOFA directs that broadband grants will be
available solely in unserved rural areas, defined as rural areas
without even first generation broadband with speeds of 768 kilobits per
second downstream. The scoring criteria announced in the NOFA
underscores the focus on bringing broadband to unserved areas: the
greater the number of unserved households in an area, the more points a
proposal will receive; the more remote a proposed project, the more
points the application will receive. Midcontinent is currently pulling
together the needed information to apply for BIP funding to expand its
broadband footprint to areas that are currently unserved.
Prioritizing unserved areas for government support is not only the
best use of stimulus funds, it also avoids creating disincentives for
providers to continue deploying broadband through private investment. A
robust broadband strategy inevitably depends on this continued private
investment--government subsidies cannot fund all the broadband
deployment needed for the country to become truly broadband-accessible.
Companies that have taken the financial risk of serving a rural market
without government assistance cannot realistically be expected to
continue to do so if they must face a government-subsidized competitor.
Moreover, devoting funds to already-served areas creates a greater risk
that loans may not be repaid because borrowers will face pre-existing
competition. We strongly support RUS' adoption of an application
process to ensure that loans will not subsidize competitive entrants.
We also applaud Secretary Vilsack's recognition that the best use
of stimulus funding may not be the same in all rural areas. As he
noted, ``[i]n some parts of the country, it may be more important that
we fund the `middle mile,' '' while in other areas ``it may be the last
mile that's most important.'' \8\ Accordingly, the NOFA confirms that
middle mile projects will be available for BIP funding. This approach
is consistent with the language and intent of the Recovery Act's
broadband provisions, which do not favor any particular technology but
rather contemplate that RUS will judge applicants based on which ``will
best meet the broadband access needs of the area to be served, whether
by a wireless provider, a wireline provider, or any provider offering
to construct last-mile, middle-mile, or long haul facilities.'' \9\
---------------------------------------------------------------------------
\8\ Vilsack: Broadband Program Will Target Unserved Areas, Offer
Simple Process, TR Daily (June 4, 2009).
\9\ H. Conf. Rep. No. 111-16, at 774 (2009).
---------------------------------------------------------------------------
While demand-side programs for underserved populations will not be
funded through BIP, RUS will provide loans and loan/grant combinations
for underserved areas. The NOFA appears to largely address our concern
that funding for underserved areas could result in the subsidization of
areas where Midcontinent and others have already invested risk capital
to provide broadband, by establishing a presumption that at least two
of three specified factors will need to be present in an area to
qualify as ``undeserved.'' \10\ To ensure that BIP loans and loan/grant
combinations are appropriately targeted at areas with the greatest
need, we urge RUS to rigorously enforce the NOFA's presumption that an
application meet at least two of these factors in order to qualify as
an underserved area project.
---------------------------------------------------------------------------
\10\ Those factors are: (1) no more than 50 percent of the
households in the proposed funded service area have access to
facilities-based, terrestrial broadband service at greater than 768
kilobits downstream; (2) no fixed or mobile broadband service provider
advertises broadband transmission speeds of at least 3 megabits per
second downstream in the proposed funded service area; or (3) the rate
of broadband subscribership for the proposed funded service area is 40
percent of households or less.
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The Broadband Stimulus Program Must be Administered With Transparency
Also like the 2008 Farm bill, the Recovery Act and its implementing
rules include important governance and accountability standards,
requiring the Secretary of Agriculture to report to the Appropriations
Committees on planned spending and actual obligations describing the
use of the funds. Ensuring accountability is essential, particularly
given the Inspector General's recent concerns about RUS' ability to
disburse Recovery Act funds:

We remain concerned with RUS' current direction of the
Broadband program, particularly as they receive greater funding
under the [Recovery Act], including its provisions for
transparency and accountability. As structured, RUS' Broadband
program may not meet the Recovery Act's objective of awarding
funds to projects that provide service to the most rural
residents that do not have access to broadband service.\11\
---------------------------------------------------------------------------
\11\ Report No. 09601-8-Te, U.S. Department of Agriculture, Office
of Inspector General, Rural Utilities Service Broadband Loan and Loan
Guarantee Program, Audit Report, at 2 (March 2009) (``OIG 2009
Report'').

We are confident that Jonathan Adelstein, should he be confirmed by the
U.S. Senate as Administrator of the RUS, recognizes the importance of
transparency and accountability and will move swiftly to address OIG's
---------------------------------------------------------------------------
concerns.

To ensure that funding is properly dedicated to unserved areas and
only those underserved areas meeting the requisite factors, it is
important that the entire award process be transparent to the public.
The provision of inaccurate information has hindered RUS' efforts in
its loan determination and allowed loans to be made on the basis of
faulty information.\12\ In this regard, we welcome the NOFA's
requirement that BIP applicants provide a detailed description of the
proposed funded service area \13\ and RUS' plan to post each such
description on the broadbandusa.gov website for a 30 day public
inspection period. The transparent, open process contemplated by the
Recovery Act will assist both the agencies evaluating loans and grants,
and the public, whose tax money supports the programs.
---------------------------------------------------------------------------
\12\ See, e.g., Iowa Cable and Telecomm. Assn. and Mediacom Comm.
Corp. v. United States Dep't of Agriculture, Case No. 06-C-256,
Complaint for Declaratory and Injunctive Relief (filed S.D. Iowa May
30, 2006).
\13\ The description must include a map; data describing the
geography and demographics of the proposed funded service area,
including information as to whether the proposed funded service area is
unserved or underserved; names of the Census designated communities and
identification of areas not within a Census designated community within
the proposed funded service area; information as to whether these
communities and areas are rural or non-rural, remote and unserved,
underserved or served; the methodology for making the above
classifications; and whether the applicant is seeking a waiver from
providing less than 100% coverage of any Census block.
---------------------------------------------------------------------------
Applicants should also be required to identify all sources of
funding for the project. For example, the Recovery Act requires
applicants for BTOP funds to ``disclose . . . the source and amount of
other Federal or state funding sources from which the applicant
receives, or has applied for, funding for activities or projects to
which the application relates.'' \14\ The NOFA confirms this
requirement for all BIP applications.
---------------------------------------------------------------------------
\14\ Recovery Act, 6001(e)(6).
---------------------------------------------------------------------------
RUS Should Minimize the Burdens of New Regulatory Requirements Adopted
in the NOFA and Ensure Competitive Parity
There remain a number of provisions in the Recovery Act and the
NOFA that could undermine the job creation and other benefits of rapid
broadband deployment intended by Congress. The precise impact of these
provisions will depend on how RUS implements them. First, the broad
interconnection and nondiscrimination requirements applicable to BIP
and BTOP projects go beyond the existing FCC broadband principles and
include a first-time broadband interconnection mandate. We are
concerned that requiring providers to implement new and largely
undefined requirements could chill investment and bog providers down in
litigation--at the very time when the focus should be on swiftly
building broadband and creating jobs. We urge RUS and NTIA to apply
these requirements in a manner that gives providers maximum flexibility
rather than tying their hands with complex technical and service rules.
Broad questions about policies like ``open access'' and ``net
neutrality'' are more appropriately addressed at the FCC.
Second, while we were disappointed that Congress established a
statutory priority under BIP for current or former borrowers under the
REA's rural telephone loan program, we believe the NOFA properly
limited this priority to a single five point preference. That said, we
believe that even this preference is appropriate only for borrowers in
good standing. To the extent a previous borrower has not completed past
projects in a timely manner or otherwise is behind in its loan
repayments, a deduction from the scoring of its application is
warranted.
Finally, we are concerned by the prohibition on the use of
interconnected facilities funded by BIP to provide services that
compete with projects funded by existing REA loans. This one-sided
restriction would effectively prevent new entrants from using BIP
interconnection agreements to provide voice service in competition with
existing borrowers. Having adopted an interconnection requirement for
BIP, RUS should not limit the requirement in this anti-consumer manner.
By inhibiting competitors from offering a ``triple play'' of services
(voice, video, and data), moreover, the restriction arguably violates
the statutory priority for BIP projects that give end-users a choice of
broadband providers (a priority, by the way, that is not explained in
the NOFA).
Notwithstanding these reservations, based on our review of the NOFA
to date we believe that it faithfully implements the Recovery Act. Of
course, the ultimate success of BIP will be determined by the hundreds
of decisions that RUS will have to make in response to specific
applications. We look forward to working with RUS and this Subcommittee
to ensure that the program fulfills its promise.
The 2008 Farm Bill Will Improve the Existing RUS Loan Program
While the Recovery Act and the NOFA help point the rural broadband
stimulus programs in the right direction, the existing rural broadband
loan program has had a troubled past. We were therefore heartened when
Congress reformed the RUS broadband loan program as part of the 2008
Farm Bill \15\ and we believe that the changes made in that law will
address many of the problems identified by OIG. We thank the Members of
this Subcommittee and the full Committee for your hard work in
achieving these reforms.
---------------------------------------------------------------------------
\15\ Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-
246, 6110 (``2008 Farm Bill'').
---------------------------------------------------------------------------
By now, we are all familiar with the 2005 USDA Inspector General's
audit of the rural broadband loan program, which was established in
2002. The Office of the Inspector General (OIG) found that the program
had ``not maintained its focus on rural communities without preexisting
service'' and was instead subsidizing competition in suburban areas and
in communities already served by one or more existing broadband
providers.\16\
---------------------------------------------------------------------------
\16\ Audit Report 09601-4-Te, Rural Utilities Service Broadband
Grant and Loan Programs, U.S. Department of Agriculture, Office of
Inspector General, Southwest Region, at ii (Sept. 2005).
---------------------------------------------------------------------------
The threat of a government subsidized competitor in rural markets
also creates a disincentive for a company that does not receive Federal
support to extend service to rural communities. As the OIG report made
clear, ``[the] RUS may be setting its own loans up to fail by
encouraging competitive service; it may also be creating an uneven
playing field for preexisting providers operating without Government
assistance'' \17\ Perhaps even more fundamentally from a taxpayer
standpoint, subsidizing competition is a waste of scarce RUS loan funds
that should instead be targeted to areas where a market-based solution
has not developed.
---------------------------------------------------------------------------
\17\ Id.
---------------------------------------------------------------------------
Regrettably, it appears that RUS has not yet addressed OIG's 2005
findings and recommendations. Just a few months ago, in March 2009, OIG
released a second report concluding that ``the key problems identified
in our 2005 report--loans being issued to suburban and exurban
communities and loans being issued where other providers already
provide access--have not been resolved.'' \18\ Despite OIG's 2005
initial findings, ``RUS continued to make loans to providers in areas
with preexisting service, sometimes in close proximity to urban areas''
while awaiting the enactment of the 2008 Farm Bill.\19\ The loan
application statistics contained in the OIG report bear out the
Inspector General's concerns about the program. OIG reported that of
``37 applications approved by RUS since September 2005, 34 were granted
to applicants in areas where one or more private broadband providers
already offered service.'' \20\ And although the 2008 Farm Bill does
not explicitly prohibit granting loans to preexisting service areas,
OIG expressed its concern that ``the overwhelming majority of
communities (77 percent) receiving service through the broadband
program already have access to the technology, without RUS' loan
program.'' \21\
---------------------------------------------------------------------------
\18\ OIG 2009 Report at 9.
\19\ Id. at 2.
\20\ Id. at 5 (emphasis added).
\21\ Id. at 6.
---------------------------------------------------------------------------
We are hopeful that the new RUS Administrator will quickly redress
these failings by implementing the reforms of the 2008 Farm Bill. In
particular, the farm bill prioritized funds for unserved areas and
directed the Secretary of Agriculture to ``give the highest priority to
applicants that offer to provide broadband service to the greatest
proportion of households that, prior to the provision of the broadband
service, had no incumbent service provider.'' \22\ Equally important,
the Act also redefined the term ``rural'' to encompass an area that has
a population of 20,000 or less, but not including any urbanized area
contiguous or adjacent to a city or town that has a population of
greater than 50,000.\23\ We are pleased that the NOFA adopted this
definition of ``rural area'' for the BIP.
---------------------------------------------------------------------------
\22\ 2008 Farm Bill, 601(c)(2); see also Conf. Rep. No. 110-627,
at 832 (2008). And the House Report indicated that eligibility
requirements were tightened for the broadband loan program in order
``to refocus on both rural and unserved areas of the country and
provides additional criteria to USDA to prevent entities from receiving
loans to serve only markets already sufficiently served with high-speed
and affordable broadband service.'' See House Rep. No. 110-256, at 232
(2008).
\23\ 2008 Farm Bill, 601(b)(3).
---------------------------------------------------------------------------
The farm bill also established more stringent project eligibility
standards, requiring, with certain exceptions, that not less than 25%
or more households in the proposed service territory be served by not
more than one broadband service provider and no portion of the proposed
service territory be served by three or more providers in order for a
project to be eligible for funding.\24\ The law also improved the
transparency of the loan process by directing the Secretary of
Agriculture to publish a notice for each loan or loan guarantee
application describing the content of the application, including the
identity of the applicant; each area proposed to be served by the
applicant; and the estimated number of households without terrestrial-
based broadband service in those areas.\25\
---------------------------------------------------------------------------
\24\ Farm Bill, 601(d)(2)(A)(i), (ii).
\25\ 2008 Farm Bill, 601(d)(5). Transparency would be further
served by requiring each applicant to include in its application a
project area map, whether and to what extent that project area is
believed to be served based on the data collected by the FCC on its
Form 477; information on the number of potential customers in the
proposed project area; a geographical representation and numerical
estimate of the unserved households within the proposed project area
that the applicant believes will be served upon completion of the
project; the number and identity of existing providers of broadband
service, if any, in the proposed project area; and details regarding
planned network construction, including types of equipment that will be
deployed, and a showing that network performance will meet or exceed
the speed eligibility requirements. As noted above, these are similar
to the showing required in a BIP application.
---------------------------------------------------------------------------
Although the 2008 Farm Bill took the appropriate steps towards
ensuring that unserved rural areas receive first loan priority and
implementing additional disclosure requirements, the revised
regulations governing that program have yet to be released. In order to
bring the rural loan program in line with the reforms Congress mandated
last year, we urge that RUS release these rules as soon as possible.
Conclusion
The cable industry strongly supports the goal of ensuring that all
Americans, including citizens in rural areas, have access to broadband
services. We have invested billions of dollars to help achieve this
goal. We also understand and accept that government assistance through
subsidies may be the only answer in some unserved rural areas, but any
government program designed to promote broadband deployment must be
carefully defined and targeted at those unserved areas that lack
broadband service. The new Broadband Initiatives Program and the
existing rural broadband loan program, as restructured by the 2008 Farm
Bill, appear to meet these objectives and both will be subject to
stringent government oversight to ensure that government funds are
allocated appropriately, taxpayers are protected, and private
entrepreneurs already serving the community are not harmed or penalized
in the process.
Mr. Chairman, thank you for inviting me to testify today. I am
happy to answer any questions you or the Members of the Committee may
have.

The Chairman. Thank you.
Mr. Evans.

STATEMENT OF G. EDWARD EVANS, FOUNDER AND CEO, STELERA
WIRELESS, LLC; MEMBER, BOARD OF DIRECTORS, CTIA--THE WIRELESS
ASSOCIATION', OKLAHOMA CITY, OK

Mr. Evans. Mr. Chairman and Members of the Subcommittee,
thank you for the opportunity to appear before you to discuss
rural broadband issues today, specifically the broadband
portion of the American Recovery and Reinvestment Act and the
U.S. Department of Agriculture's Broadband Loan Program.
My name is Ed Evans. I am the Founder and CEO of Stelera
Wireless, a start-up company now constructing broadband
wireless systems in 55 rural towns around the country using
spectrum we acquired in the Advanced Wireless Services auction
a couple of years back. I am also a Member of this Board of
Directors of CTIA--The Wireless Association'.
Since you may not be familiar with Stelera Wireless, allow
me to provide a little background. Stelera is a start-up
company formed in 2006 to participate in the FCC's Advanced
Wireless Services auction. That auction concluded in September
of 2006, with winning bidders paying almost $14 billion for the
rights to the AWS spectrum. I am pleased to say that Stelera
succeeded in winning 42 of those licenses, mostly in rural
markets. Having spent almost $8 million to acquire these
licenses, we are currently investing an additional $35 million
to build out the first phase of our network.
The towns in our markets range in size from Benton,
Washington, population of 2,624, to Lubbock, Texas, a
population of 199,000. Three-fourths of the towns in our
footprint have a population of less than 10,000 people. In some
of those towns, Stelera will be the first company to offer
broadband service because technology, terrain, lack of density
has made it infeasible to provide wireline broadband services
previously in those areas. In other towns, we will be the first
provider to offer speeds comparable to those that you receive
today in major metropolitan areas.
Stelera's business plan is to use this spectrum to provide
competitively priced broadband services in our markets both on
a month-to-month basis and under longer term contracts. We are
using third- and fourth-generation wireless technology called
High-Speed Packet Access, which provides transmission speeds of
up to 14.4 megabits per second today, and will evolve to even
faster speeds in the very near future.
We allow our customers to choose any Voice-over-IP provider
or to choose an offering that we will have ourselves in the
near future. We do not restrict customers from accessing any
website or running any applications on our network, although,
of course, we monitor total usage and reserve the right to take
action against any abusive subscriber. This is critical in a
wireless network, since one subscriber abusing the network can
adversely affect many other subscribers that are around them.
While there are still many unanswered questions with the
NOFA and how it will be implemented, I am excited that this
Administration recognizes the power that wireless broadband has
to transform rural America. In particular, I am pleased the
NOFA defines underserved areas to include communities that have
been typically ignored by some of the larger incumbent
providers, thus making funding available to support expansion
of broadband in these often overlooked communities.
The Administration is also to be commended for building a
flexible scoring system that will grade applications that are
based on a flexible set of criteria, rather than a rigid
checklist that sometimes prejudices one technology over
another.
In short, I believe the NTIA-RUS NOFA mostly got it right;
and now it is up to the providers like Stelera to take
advantage of this funding opportunity, going forward.
However, the NOFA raises several concerns for smaller
advanced wireless broadband providers. For example, there
appears to be a potential material tax liability to small
businesses that are awarded grant money. As an example, if
Stelera were to apply for a project costing $100 million, under
the current program, Stelera would be required to match 20
percent--or $20 million. However, in addition to this $20
million, Stelera would have a significant tax bill at the end
of the first year. That tax bill could be as high as $30 or $40
million in addition.
While the money is being used to acquire assets and Stelera
would depreciate these assets to receive the tax benefit over
the life of the asset, Stelera would still be forced to have a
significant cash tax problem at the end of the first year.
This tax penalty will greatly reduce the ability of any
small business to participate in the stimulus program. I would
encourage Congress to address this issue by eliminating the
potential tax burden associated with participating in the
stimulus program.
Now I would like to turn to the USDA's Broadband Loan and
Loan Guarantee Program as reauthorized by the 2008 Farm Bill.
Our impression overall has been very good. We have been a
participant in that program, for we have a $35 million loan in
order to facilitate the build-out of our 55 rural markets.
While the applications are time consuming and they are
cumbersome at times, the process did proceed at a very
reasonable pace. I found the staff at the Department of
Agriculture to be very helpful throughout the process.
I am concerned, though, that with the sudden availability
of a significant amount of additional funding, the Department
of Agriculture's staff will become overwhelmed with the new
applications. I fear the onslaught of applications will lead to
significant delays in processing those applications.
In conclusion, I would like to again thank the Committee
for inviting me to speak today. Stelera identified the need for
rural broadband services long before any Federal stimulus
program. We have demonstrated in these markets that they are
very viable and in need of our service. We are very pleased
with the opportunity to accelerate our growth programs and to
expand our coverage into rural communities across our licensed
footprint.
Thank you again for inviting me today, and I look forward
to your questions.
[The prepared statement of Mr. Evans follows:]

Prepared Statement of G. Edward Evans, Founder and CEO, Stelera
Wireless, LLC; Member, Board of Directors, CTIA--The Wireless
Association', Oklahoma City, OK
Mister Chairman and Members of the Subcommittee, thank you for the
opportunity to appear before you to discuss rural broadband issues--
specifically the broadband portion of American Recovery and
Reinvestment Act (``stimulus plan''), and the U.S. Department of
Agriculture's (USDA) broadband loan program.
My name is Ed Evans and I am the Founder and CEO of Stelera
Wireless, a start-up company now constructing broadband wireless
markets in 55 rural towns around the country, using spectrum we
purchased in the advanced wireless services auction. I am also a Member
of the Board of Directors of CTIA--The Wireless
Association'.
Since you may not be familiar with Stelera Wireless, allow me to
provide a little background. Stelera was formed in 2006 to participate
in the FCC's Advanced Wireless Services (AWS) auction. That auction
concluded in September 2006, with winning bidders paying almost $14
billion for the rights to the AWS spectrum. I am pleased to say that
Stelera succeeded in winning 42 licenses, mostly in rural markets.
Having spent almost $8 million to acquire these licenses, we are
currently investing an additional $35 million dollars to build out the
first phase of our network.
The towns in our markets range in size from Benton, Washington
(population 2,624) to Lubbock, Texas (population 199,000). Three-
fourths of the towns in our footprint have a population of less than
10,000. In some of those towns, Stelera will be the first company to
offer broadband service because technology, terrain, or lack of density
has made it infeasible to provide wireline broadband access. In other
towns, we will be the first provider to offer speeds comparable to
those in major metropolitan areas.
Stelera's business plan is to use this spectrum to provide
competitively priced broadband wireless services in our markets, both
on a month-to-month basis and under longer term contracts. We will be
using third and fourth generation (3G and 4G) wireless technology
called High-Speed Packet Access (HSPA), which provides transmission
speeds of up to 14.4 megabits per second today, and will evolve to even
faster speeds in the near future. We will allow the consumer to choose
any VoIP provider or to choose our offering once available. We will not
restrict customers from accessing any website or running any
applications, although of course we will monitor total usage and
reserve the right to take action against abusive subscribers. This is
critical in a wireless network, since one subscriber abusing the
network can adversely affect many other subscribers.
In announcing his candidacy in 2007, then candidate Obama said,
``Let us be the generation that reshapes our economy to compete in the
digital age . . . let's lay down broadband lines through the heart of
inner cities and rural towns all across America.'' I could not agree
with President Obama more. In fact, as CEO of Stelera we are deploying
``broadband lines'' to rural towns throughout the U.S. today--only
through the air using advanced wireless technology.
There is little need to explain to this Committee how broadband is
changing life in rural America. Today, because of wireless broadband
farmers are able to monitor their crops for soil and moisture content
without leaving their combine. Implement dealers are able to diagnosis
mechanical problems and order new parts while at a customer's farm.
Ranchers are able to check, in real-time, livestock futures with their
handheld smartphone. Doctors are able to provide health care to
patients hundreds of miles from their clinics. And, most important, our
schoolchildren are able to harness the power of the Internet giving
them opportunities they only dreamed about a short time ago. Because of
wireless broadband, rural Americans are experiencing the
transformational power of the Internet, while maintaining the unique
character of rural America.
When Congress passed and President Obama signed the Stimulus Act
earlier this year, policymakers cheered that the plan would save and
create jobs, increase investment and put us back on the path to
economic prosperity. And while time will tell whether the entire
stimulus plan succeeded in its purpose, I believe that with proper
focus and guidance, the broadband portion of the plan holds great
potential for consumers who lack robust broadband service today.
This past Wednesday, Vice President Biden along with Secretaries
Vilsack and Locke, FCC Chairman Genachowski and Congresswoman
Dahlkemper outlined the rules for the broadband portion of the stimulus
plan. In announcing the Notice of Funds Availability (NOFA), the Vice
President said, ``We believe we are in the process of transforming
rural America . . . so it's integrated with the country, without losing
its character. Getting broadband to every American is a priority for
this Administration.''
And while there are still many unanswered questions with the NOFA
and how it will be implemented, I am excited that this Administration
recognizes the power that wireless broadband has to transform rural
America.
In particular, I am pleased the NOFA defines ``underserved areas''
to include communities that have been typically ignored by some of the
larger incumbent providers, thus making funding available to support
expansion of broadband in these often overlooked communities. The
Administration should also be commended for building a flexible
`scoring' system that will grade applications based on a flexible set
of criteria rather than a rigid `checklist' that often prejudices one
technology over another.
Finally, the NOFA appears to allow Internet providers the ability
to portion off part of their network to offer `managed services' which
use private network connections that offer a better quality of service.
That's important because many Internet providers have been exploring
the idea of offering enhanced quality of service to entities like
hospitals and schools that often require secure and private
connections.
In short, I believe the NTIA-RUS NOFA `got it mostly right' and now
it's up to providers like Stelera to take advantage of this funding
opportunity.
However, the NOFA raises several concerns for smaller advanced
wireless broadband providers. For example, there appears to be a
potential material tax liability to small businesses that are awarded
grant money. If Stelera elected to apply for a broadband project
costing $100 million, under the current program Stelera would be
required to match 20% of the cost or $20 million. However, in addition
to this $20 million, Stelera would also have a significant tax bill at
the end of the year. The tax bill could be as high as an additional
$30M. While the money for the project is being used to acquire assets
and Stelera would depreciate the assets and receive the tax benefit of
the depreciation over the life of the asset, Stelera would still be
forced to pay a significant cash tax at the end of the year. This tax
penalty will greatly reduce the ability of any small business to
participate in the stimulus program. I would encourage Congress to
address this issue by eliminating the potential tax burden associated
with participating in the stimulus program.
I'd like to turn now to the USDA's broadband loan and loan
guarantee program as reauthorized by the 2008 Farm Bill and provide a
first-hand impression of the overall program. My experience with the
USDA program has been positive. Stelera applied for and was approved
for a $35M loan in 2008 in order to facilitate the build out of 55
rural cities. While the application was time consuming and cumbersome,
the process did proceed at a reasonable pace. I found the staff at the
Department of Agriculture to be helpful and thorough throughout the
application process. I am concerned that, with the sudden availability
of a significant amount of additional funding, the Department of
Agriculture's staff will become overwhelmed with new applications. I
fear the onslaught of applications will lead to significant delays in
the processing of applications. The process was time consuming prior to
the introduction of the stimulus package; I am concerned the time line
to approval will be significantly longer going forward. In my opinion,
it is critical that appropriate agencies have adequate staffing and
training to expedite the approval process in order for the program to
have the desired effect.
In conclusion, I would like to again thank the Committee for
inviting me to speak today. Stelera identified the need for rural
broadband services long before any discussion of Federal stimulus
programs. We have demonstrated that these markets are viable and in
need of our services. We are very pleased with the opportunity to
accelerate our growth plans and to expand our coverage into rural
communities across our licensed footprint. Thank you again for inviting
me today. I would be happy to answer any questions.

The Chairman. Your company received funds in 2008 through
the traditional broadband loan program for deployment of
broadband in 55 rural cities. How many households will you
reach through those funds?
And, also, could you explain why a loan made deploying
broadband to those areas is feasible and how those areas might
differ from those areas that are good targets for grants
instead?
Mr. Evans. Well, to start out with, the homes passed at the
conclusion of our 55 city build-out will be approximately a
half million homes that we pass throughout four states around
the country, including what was identified by Ranking Member
Conaway as the greatest district in the country. So we will
pass roughly a half million homes.
Our experience has been that cities that have 20,000
people, down to approximately 3,000 people, are viable for our
technology to go into. Once we get down below 3,000 people--
because of the lack of population and the expense required--
those types of cities are probably going to require grant money
to go in and feasibly serve, as opposed to us being able to
repay that over a period of time.
When you take out the capital component and just have to
rely on the operational expense, it looks like cities down to
750 to 1,000 people become viable at that point.
The Chairman. Mr. Stamp, RUS grant funding is limited to
remote unserved areas. Remote is defined, as you know, as 50
miles from a non-rural area. Could you provide some examples of
rural unserved areas that your member companies might be
interested in serving that would be out of the running for
these grant funds due to this definition?
Mr. Stamp. At this time, I can't provide you specific
communities, but I know from an anecdotal standpoint a lot of
the currently unserved areas that our members look at are
probably 5, 10, 15 miles outside of town. Most of our members
use DSL technology, which has a range of about 3 miles. So, as
you can tell, they kind of--the donut around town is primarily
an unserved area in some of these small communities. Obviously,
those would not be within that 50 mile range.
I can give you specific city examples if you allow me to
follow up with my members.
The Chairman. That would be great if you could provide it
within 10 days.
Mr. Conaway.
Mr. Conaway. Thanks for being here.
Any sense of how many applications are in the pipeline
headed directly to RUS and NTIA?
What I am trying to figure out is--Mr. Evans talked about
it. We have a bureaucracy that is used to working at a certain
pace. They now have 14 months, 15 months, I guess, to the end
of September of 2010 to get an awful lot of work done. Any
sense of how many applications cumulative that your members are
working on? Mr. Wilson?
Mr. Wilson. Congressman Conaway, not at the time. I don't
have an idea how many are going to be doing that. I know we are
working on one.
Mr. Conaway. That might be helpful to get that to us.
Because we want to make sure that RUS--you were here this
morning when I asked the question of Ms. Cook, did they have
the resources, and they seemed to say that they did.
I am new to some of the speed issues, and the speed
requirements that are in these applications are set based on
advertised speeds. Any concern among you that that is
unworkable or that the actual speeds delivered will in fact be
in excess of those advertised speeds, and may be a bit of an
unauditable kind of deal?
Mr. Evans. I think it is--if I may take a second. I think
it is--you are going to put down what the network is
technologically capable of doing. There are an infinite number
of variables that take place on any network, wireless or
wireline, at any time. In order to give you what the real
average throughput is going to be, as an example, I can tell
you from real-world experience right now my devices are capable
of 7.2 megabits download. We see peak speeds between 6 and 6.5
megabits. My average throughput today is somewhere between 2.5
and 3 megabits.
Mr. Conaway. What do you advertise at?
Mr. Evans. We say up to 7.2 megabits. But the average
throughput, like I said, is somewhere between 2.5 and 3
megabits.
Mr. Conaway. So the 768 kbps, everybody--all of your
systems--you will never get below that, would you?
Mr. Wilson. In our current project today we have speeds up
to 3 megabits with uplinks back up to 1 by 1 meg. But the
project we are currently working on, our modernization, we will
be able to deliver 17 to 20 meg down, file upload speeds up to
1 by 1.
Mr. Conaway. The relatively short application period: is
there enough time for the August 14th deadline to create or
look at service areas that you might not have previously had
business plans ready to go for, and create the application? In
other words, the more remote areas that you knew you couldn't
do without grants, are your members nimble enough to be able to
put together the right application to be able to apply in those
areas where they might not previously have been thinking about
serving?
Mr. Wilson. I think, in most cases, most rural telephone
companies know where their members are lacking. I know our
base. We are able to go in and select these customers and pull
them out. So I would say most small companies, particularly,
have some idea of the customers that are in need of applying
for a grant to serve them.
Mr. Conaway. So being able to put together the grant
request, what appears to be less than 6 weeks is not a hardship
for this state?
Mr. McCormick. The only thing I would say, as Mr. Stamp
pointed out, this definition of remote is a real problem, and
we were pleased that the RUS today said they were going to
clarify it, but it is not really clarification that is needed.
It is a very significant difference to go in and apply for--
whether the economics of the project are going to work or not
is going to depend on whether it is 100 percent grants, 80
percent grants, or 50 percent grants. If it is just a 50
percent grant, there are a lot of projects that will not be
applied for because they are not economic.
Mr. Conaway. I know what you are talking about. But to get
into the record, what does it mean to the monthly fee, as an
example, for the service? If you can give us some sense of what
a 50 percent loan/grant ratio versus a 100 percent loan/grant
would do. What impact would that have on the customer's monthly
bill for your service?
Mr. Evans. In my perspective, just to tell you what we
experience, is currently today we offer our services for $39 a
month and then they lease a modem for an additional $9.95 per
month.
So the difference in going into a 50 percent loan where I
have to buy that modem, and then I subsequently lease it to the
consumer, versus a grant environment where I can purchase that
modem and not lease it to the consumer, you are looking at a 25
percent reduction in what their monthly fee would be.
Mr. Conaway. Can anybody else give us a sense of what the
impact is?
Mr. Wilson. For us, there would be no impact. We concur in
the National Exchange Carrier Association's tariff for DSL, so
we charge the same rate regardless. Whether it be a grant or
loan, it wouldn't have any impact on what we ultimately charge
the customer.
Mr. Conaway. That is counterintuitive. If you are having to
pay money back on a loan versus a hundred percent grant, does
everybody else subsidize that loan repayment?
Mr. Wilson. No, sir. We concur in the National Exchange
Carrier again. We charge a standard rate for DSL. There are
about 1,100-1,200 of us in the NECA pool and we charge the same
DSL rate.
So just because I went after a grant or a loan for a
particular area would not allow me to come in and charge a
different rate for those customers versus the other----
Mr. Conaway. So you can't do it. But, I mean, there is an
economic impact to go after those customers if you are having
to do 50 percent loans.
Mr. Wilson. Yes, sir, there is one. But, like I say,
tariff-wise, being regulated, I have to charge the same rates.
Mr. Simmons. Congressman, you are exactly right. I mean,
there are going to be a number of non-remote rural areas where
the demographics are such that it is actually more expensive to
serve those areas than it would be to serve the remote areas.
The difference between a 50 percent grant and a 100 percent
grant can determine whether or not the project goes forward.
Moreover, the Administration has decided to provide 80
percent grants in areas that are underserved in the more urban
areas. So you are providing a higher grant to areas that by
definition are more densely populated and a lower level grant
to areas that are less densely populated. So it really is a
program that requires more than clarification. It requires a
rethinking.
Mr. Conaway. Thank you.
The Chairman. Thank you.
I will indulge the Ranking Member for another question in a
moment, if he would like. I would like to ask one or two more
questions to all of you. If you would just answer this to the
point, given that we are soon going to be called to votes
again.
Many of your members, of course, serve in rural areas. What
subscribership or take rate do they see in these areas?
Second, is it fair to consider an area with less than a 40
percent take rate underserved as the funding notice does?
Mr. Wilson.
Mr. Wilson. We are seeing a significant take rate. We are
currently at about 4,187 customers, adding about 135 a month. I
think we are currently at about a 45 percent take rate in our
cooperative. As our DSL footprint expands, we are seeing more
and more customers.
I think all areas need to be considered, sir. I would not
want to discriminate against an area that--say is at 40
percent. I think that DSL having broadband access these days is
just too important not to be connected, to have access to the
world these days. So I would say I would not want to
discriminate against any certain group but try to get access to
everyone.
The Chairman. Mr. McCormick.
Mr. McCormick. Yes. Well, obviously, we think if
subscribership is below 40 percent, then the area is in some
way underserved. And we think that the future of the
information-based economy is that you have to have broadband
that is ubiquitous and broadband that is robust. So we think
that take rates are going to be in the 80, 90, 100 percent
range; and they should be in those areas, because we are moving
forward with an economy that is going to be dependent upon
broadband communications.
The Chairman. Mr. Stamp.
Mr. Stamp. We will be happy to get the subscribership
information from our members.
I think it varies widely from company to company, but I
would agree that less than 40 percent is probably something you
would consider underserved. Congress and the Administration
should be commended because there are provisions within the
NTIA program for projects that actually do things to stimulate
adoption as well, and that is one of the challenges.
The Chairman. Mr. Simmons.
Mr. Simmons. I can only speak on behalf of my company. I
know what our take rate is. In most of the markets we serve,
we, frankly, have take rates beyond 40 percent. But there are a
goodly number of markets that show up, at least on my records,
as being under 40 percent, and that is because there are other
services in those particular markets.
One way of understanding, I guess, of measuring what might
be available in markets is not only what we might be doing,
what the take rates might be of our cable broadband service,
but if there are some other competitors in that particular
market as well. Of course, if you have a second competitor in
the market, one might assume that it is certainly not
underserved. So it is an important consideration.
I think, also, I would ask that the Committee also be
mindful of other conditions on why that particular market might
be underserved. It may not necessarily be just the availability
of broadband but other conditions about that unique community,
the individual demographics of those involved in that
particular market. Is it a very senior market and the job we'll
have to do in order to introduce broadband services to that
particular market. Those are considerations also that must be
made.
The Chairman. Mr. Evans.
Mr. Evans. I would agree with the 40 percent. I think below
40 percent there are clearly other factors there.
One piece that is missed is actually the consumer driving
that penetration. Is the quality of the network bad and,
therefore, they are not signing up for it? Is the pricing out
of line and they are not signing up for it?
So just going in, what we found in many markets is there
may be another provider that is in there, but the quality of
the network is bad and the pricing is out of line and,
therefore, the take rate is well below what you would expect.
So we are very comfortable with the 40 percent rule.
The Chairman. Just one other criterion is that no provider
in the area is offering 3 megabytes per second service. Such
areas would be eligible for grants from NTIA and loan/grant
combos from RUS. Do you believe these criteria well define an
underserved area?
Mr. Wilson.
Mr. Wilson. Yes, sir. I think they do.
Mr. McCormick. I think that they do.
Mr. Stamp. I believe so.
Mr. Simmons. I agree.
Mr. Evans. I am in concurrence. I think 3 megabits is
right.
The Chairman. Mr. Conaway, do you have further questions?
Mr. Conaway. Thank you.
Let me ask a couple of questions and pitch it around.
The national map that we are going to spend $350 million
on--I am not sure where they came up with that number--any
concerns you have of your data going into that national map?
Any privacy issues or proprietary information that you are
worried is going to get collected and made available to your
competitors?
And then any other comments that any of you want to make
with respect to the interconnection and nondiscrimination
clauses. Are your companies small enough that you can do it
everywhere without it being a problem? Are your companies too
big, that you don't want to have a different system? Any
further clarification you can give us on the nondiscrimination
charges.
Mr. McCormick. I would be delighted to comment on both of
those.
First, on the nondiscrimination and interconnection, the
FCC has a policy statement. It already says that you shall not
block, impair, or degrade access. It says you shall allow
attachment of any lawful device to the Internet that is running
a lawful application.
We all abide by and support the FCC policy statement. These
additional requirements that, ``you shall not favor any lawful
Internet applications and content over others,'' we're just
simply not sure what that means. Does that mean that if
somebody came forward with an application that would allow for
a heart monitor service and it would require prioritization of
our network on a non-managed basis, would we be prohibited from
allowing that? That would not seem to be consistent with public
policy.
With regard to interconnection, this is a new requirement
on interconnection to connect at any technically feasible
point. I mean, if you just use a railroad analogy, it is one
thing to require interconnection at railroad terminals. It is
another thing to require construction of interconnection with a
railroad anywhere on the railroad that is technically feasible
to construct an interconnection point.
So these are very expansive requirements, and they are
potentially very costly requirements, and they are potential
litigation risks. So they are of concern to us.
Mr. Conaway. Should the FCC work on that area or should
USDA and Commerce work on those?
Mr. Wilson. We think it is essential that the FCC work on
that area. There has got to be some consistency, and it is the
agency of jurisdiction.
Mr. Conaway. Privacy issues.
Mr. Wilson. Yes. We are deeply concerned about the privacy
issues. We support the idea of a broadband map. We think it
makes a lot of sense. But we support it in the context of the
Connected Nation approach that has worked so well in Kentucky,
is working now in Ohio. Whereby, you are able to provide this
information in a way that is not made available to your
competitors, but is made available through public-private
partnerships that lead to adoption and deployment.
So we would hope that this would not be a big government
approach but would instead be a public-private partnership
approach.
Mr. Stamp. I would say all of our members share those same
concerns in terms of confidentiality. I mean, we are willing to
participate in this process, but that is obviously a concern
for our members as well.
Mr. Wilson. We are concerned about some of the questions
that are being asked, the confidentiality of them. And also we
are concerned about the interconnection issues, too, because it
only applies to the areas that receive a grant. For us, those
543 customers are spread over 2,800 square miles. There is no
way I can pull them out and separate them. So the
interconnection issue is definitely an issue we are concerned
about.
Mr. Evans. No concerns on the privacy as such.
I am concerned, longer term, about the accuracy of the data
collection because of the speed at which technology is evolving
and how fast it is changing. I am just afraid for future
opportunities companies will be making decisions based on old
and outdated data in the marketplace.
I don't have a solution for it, by the way, but my biggest
concern is the amount of bad data that is going to be
circulated, and decisions are going to be made off of, as we go
forward.
The Chairman. We are about to conclude today's panel.
Mr. Minnick has stepped in. We welcome you to submit
questions or any other Members who may have stepped in or out.
We would ask this panel, as we did the first panel, to
please accept these questions that Members may submit just as
if you were asked in this public forum. We would expect your
answers within 10 days.
We thank you for your attendance at today's hearing and
thank you for waiting for over 2 hours for us to return from
that long series of votes we had. We do appreciate your
indulgence and patience.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material and supplementary written responses from
the witnesses, as well as any additional questions that Members
would like to pose.
May God bless each of you in your work to help those who
are disadvantaged in our society, especially those that we have
discussed living in areas of our country that we hope will be
benefited as all American taxpayers should be.
This hearing of the Subcommittee on Rural Development,
Biotechnology, Specialty Crops, and Foreign Agriculture is now
adjourned.
[Whereupon, at 1:40 p.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]

Submitted Statement of American Farm Bureau Federation
The American Farm Bureau Federation (Farm Bureau) believes that
high-speed broadband services have great potential to bring opportunity
to rural Americans. Farm Bureau represents more than six million
families who live and work in rural America, many of whom do not have
the same access to educational, medical, business and government
services as Americans living in more populated areas. Existing Federal
telecommunications programs like the Universal Service Fund (USF),
Rural Utilities Service's loan and grant programs and new initiatives
such as those mandated by the American Recovery and Reinvestment Act of
2009 (ARRA) have the potential to correct this disparity.
Many farmers and ranchers conduct their business operations from
their homes. As government agencies increasingly rely on information
technology to disseminate and collect information, affordable, high-
speed, home-based broadband connectivity is becoming a necessary tool
for producers. Farmers and ranchers without access to affordable high
speed Internet connections might eventually be unable to comply with
government regulations, take advantage of government services or gain
market information. Therefore, affordable home broadband access is
especially important to keep American agriculture competitive in a
world marketplace.
America's farmers and ranchers need viable rural communities to
supply the goods and services needed to support their families and that
are required for their agricultural operations. To thrive, rural areas
need access to health care, government services, educational and
business opportunities. For many rural communities access can only be
gained by using broadband services and sophisticated technologies that
require high speed connections. Rural business owners need access to
new markets and well educated employees for their businesses. Rural
health care providers need access to health information technology.
Rural students need access to educational resources and continuing
education opportunities. Current and future generations of rural
Americans will be left behind their fellow citizens if they are without
affordable high-speed broadband service to tap into health care and
educational services, government agencies and new business
opportunities.
Affordability is a critical component to broadband use in rural
America because rural household incomes are typically lower than those
in more populated regions of the nation. In rural areas where broadband
service is available, our members have reported that the service is
beyond the financial means of many residents of their communities.
Therefore, we urge policy makers to consider consumers cost as part of
the equation when defining access to broadband services.
Farm Bureau believes that broadband access in rural areas should be
increased through any technology, including wireless. We believe that
technologies funded by Federal programs should support state-of-the-art
telemedicine, education and business applications. Rural America should
enjoy access to telecommunications services equivalent to those found
in urban and suburban areas.
Broadband should be designated a ``supported service'' eligible to
receive support directly from the USF. The USF should be used to help
with long-term deployment of broadband in rural areas. While the funds
provided by the ARRA should help with the initial build out of rural
broadband, on-going support will be needed to continue the build out,
and maintain and improve the current infrastructure.
Farm Bureau is committed to revitalizing our rural communities and
ensuring the health and welfare of present and future generations of
rural Americans. We look forward to working with the Committee to
achieve this important goal.
______

Submitted Statement of National Rural Telecommunications Cooperative
July 9, 2009

The National Rural Telecommunications Cooperative (NRTC) and its
nearly 1500 electric and telephone cooperative members serve the
telecommunications interests of rural America. NRTC applauds the
efforts of the Administration and Congress to advance the deployment of
broadband to all Americans--particularly those in rural areas where the
need is the greatest. We also thank Chairman McIntyre and the
Subcommittee for holding today's hearing on this vital topic.
The recent Notice of Funds Availability (NOFA)--issued by the
Department of Agriculture Rural Utility Service (RUS) and the
Department of Commerce National Telecommunications and Information
Administration (NTIA) pursuant to the American Recovery and
Reinvestment Act of 2009 (the Act)--has prompted deep concerns about
the effectiveness of the broadband funding for rural America.
The NOFA appears to have placed rural America at a significant
funding disadvantage and seems to defeat the purpose of stimulus goals
of expanding broadband and creating jobs in rural areas.
Under the Act and NOFA, all ``rural'' areas must be submitted to
RUS for funding. However, under that program only areas that are
``remote and unserved'' are eligible for grants. To be ``remote'' an
area must be at least 50 miles from a ``non-rural'' area, and to be
``unserved'' at least 90% of the population must lack access to
broadband, which is defined at a relatively low speed of 786 Kbps down
and 200 Kbps up. If an area is rural yet not remote or unserved an
applicant is not eligible for a grant--only a loan or loan/grant
combination. Based on many years experience in the rural marketplace,
particularly as a provider of broadband services, it is our analysis
that very few populated rural areas will meet the requirements for
grants.
At the same time, broadband applicants for non-rural areas may
receive grants from NTIA, whether the market is unserved or
underserved--even if located in or near an urban or suburban market.
It goes without saying that rural areas are less densely populated
and more costly to serve when it comes to telecommunications. Even
though government supported loans have been historically available,
because of this high cost of service the deployment of broadband has
not been feasible in many rural markets, even those that are not
``remote''. NRTC members, anticipating the availability of grant money
from the Act may abandon plans to provide broadband service in their
rural markets.
While NRTC greatly appreciates the aims and goals of the
Administration and Congress as reflected in the Act, it is difficult to
understand why rural areas are placed in this disadvantageous position.
______

Submitted Statement of Jay Maxwell, President, Pixius, Inc.
Mr. Chairman, thank you very much for holding this hearing on
broadband technology and its importance to rural America. Recently, I
was pleased to participate in a hearing held by the Department of
Health and Human Services' National Advisory Committee on Rural Health
Care in Rapid City, South Dakota.
Broadband is critically important to the provision of health care
services in rural America as well as other vital services including
education.
I am pleased to submit for the record the statement presented to
HHS in South Dakota. Thank you very much for making this statement a
part of your hearing record.
Statement of Jay Maxwell, President, Pixius, Inc., Before the National
Advisory Committee on Rural Health and Human Services, Health
Resources and Services Administration, Department of Health and
Human Services, Meeting, Rapid City, South Dakota
June 9, 2009

Thank you for allowing me to appear today and to participate in
this meeting. I commend our former Governor, Kathleen Sebelius,
Secretary of HHS, for convening this forum.
President Obama and Secretary Sebelius have made healthcare reform
a major priority for the Administration. In rural America, the
distances involved and the lack of specialized services compound all of
the healthcare problems we face as a nation. There is a major disparity
in the quality of healthcare services provided in rural America as
compared to urban America. Those of us who live in rural America should
not have to leave our family and our home to receive adequate medical
attention. Our young people are leaving rural America because of the
lack of critical services, including healthcare.
We must maximize the use of modem technology to bridge the urban-
rural divide in America and bring health care to rural areas. Broadband
technology can go a long way to bringing healthcare services to rural
America.
Let me explain how the use of broadband can bring healthcare
services to the entire country.
Remote disease management is a new and effective way to measure and
monitor health status in the comfort of a patients living situation,
and to give physicians and nurses access to medical information right
away so they can quickly identify any changes that need to be
addressed. This method of measuring and monitoring health status is
interactive, easy to use, affordable, and can provide vital health
information to not only the clinical care team but the patient's family
as well.
The goal of remote disease management is to keep senior citizens in
their own homes as long as possible and out of nursing and long-term
care facilities, as well as to minimize hospitalizations, emergency
room visits, and scheduled physician visits. In short, technology is
being used to improve the quality of life and reduce the nation's
healthcare burden.
However, none of this is possible without access to a quality high-
speed broadband Internet connection. While this access is common in
urban and suburban areas, it is almost a luxury in rural America. Is it
a coincidence that rural America is also an area that is unserved or
underserved by medical facilities and practioners? Rural America is an
area with a population that is aging and placing increased demands on
scarce healthcare resources.
The economies of rural communities and the lifestyle associated
with rural communities are strong barriers to recruiting and retaining
physicians in rural America. Salary is often stated as a barrier to
recruitment. A study in 2007 by LocumTenens indicates that on average,
incomes for rural doctors do not differ significantly from those in
urban areas.
In Kansas, 29 percent of the population is classified as rural.
Physicians in Kansas are concentrated in urban areas with only 4% of
physicians being located in areas that are classified as rural. Since
the providers and services are not located where the need exists, we
need to take a different approach to healthcare delivery.
In South Dakota, the most remote areas of the state are the nine
Sioux Indian Reservations. The health statistics on the Reservations
resemble those of a third world country. The Reservations must be a
high priority for broadband.
Remote disease management is one effective solution, but it will
only be effective if patients in rural areas have access to a quality
high-speed broadband Internet connection. Funding for the improvement
of Internet access in rural areas is included in the American Recovery
and Reinvestment Act (ARRA).
ARRA funds that will be administered by the Department of
Agriculture's Rural Utility Services (USDA-RUS) are targeted toward
telemedicine programs and broadband programs in rural America. Funds
that will be administered by the National Telecommunications and
Information Administration (NTIA) address broadband programs for rural
America.
We urge HHS to coordinate to the maximum extent possible with both
USDA and NTIA to maximize the use of broadband funds with an eye to
improving rural health care. Pixius Communications is committed to
providing quality high-speed Internet service in unserved and
underserved areas. We understand the unique challenges of communicating
in rural America. Through partnerships with leaders in the delivery of
remote disease management, we use modern technology to bridge the
urban-rural divide in America and bring health care to rural areas. We
are available to assist HHS in any way possible as you seek practical
solutions to the challenge of extending health care in a uniform manner
throughout all of the United States.
Thank you.*
---------------------------------------------------------------------------
* Pixius is a Kansas based company that specializes in broadband
communication in rural area. www.pixius.com
---------------------------------------------------------------------------
______

Submitted Questions
Response from Cheryl Cook, Deputy Under Secretary for Rural
Development, U.S. Department of Agriculture
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question 1. What is the status of the broadband loan program
regulations required by last year's farm bill? How will that program be
integrated with the stimulus programs?
Answer. We anticipate that the regulations implementing the 2008
Farm Bill broadband program will be published as an interim final in
the Federal Register--with request for comment--this year. We are
working diligently to clear the rule in the Department and submit it to
OMB. The 2008 Farm Bill program and Recovery Act program have
significant differences with regard to the definitions of unserved and
underserved, and competition. There is currently demand for the 2008
Farm Bill program as well as the loan and grant programs provided in
the Recovery Act. We anticipate that both programs will complement each
other and bring broadband service to rural, unserved and underserved
communities.

Question 2. One of the criteria for determining if an area is
``underserved'' is that the rate of subscribership (or take rate) is
less than 40 percent. Another criterion is that no provider in the area
is offering 3 megabits per second service. Satisfying either of these
criteria means an area is eligible to be considered for funding. Given
that either of these criteria could be satisfied within an area that
has one or more providers, how are the programs going to avoid putting
in place government-funded competition, which, as you know, has been an
issue in the past with the loan program and which we tried very hard to
fix in the 2008 Farm Bill?
Answer. USDA assistance under the Recovery Act is limited to areas
that are at least 75% rural and meet the definition of unserved or
underserved. This is a threshold requirement to determine whether an
area is eligible for funding consideration. If the area is eligible,
the applicant will then need to prove that the project is feasible and
demand is adequate to repay a loan. The existence of competition will
be considered in both stages of the application process. The farm bill
and RUS' proposed regulations also include a requirement to inform the
public of a pending application and give incumbent service providers an
opportunity to describe their current service territory and offerings.
Questions Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question 1. The NOFA speaks of a working relationship with the FCC,
NTIA, and RUS. Why did NTIA and RUS not choose to defer to the FCC on
all matters regarding non-discrimination and interconnection in
definitions and enforcement?
Answer. NTIA and RUS used the FCC's non-discrimination and
interconnection rules as a model for the nondiscrimination and
interconnection requirements of the NOFA. NTIA, RUS, and the FCC have
worked in a coordinated fashion to leverage the authorities and
resources provided in the Recovery Act to develop a coordinated Federal
Government approach to addressing the challenge of rapidly expanding
the access and quality of broadband services across the country. Each
agency brings unique skills and resources to this effort. RUS has been
the Federal Government leader in bringing telecommunications to rural
America for decades. NTIA has experience in awarding technology-related
grants through the Technology Opportunities Program and serves as the
President's principal advisor on telecommunications and information
policies. Moreover, NTIA and the FCC together are responsible for the
development of Federal telecommunications policy. The statutory
deadline for the FCC's National Broadband Plan is February 2010,
therefore the FCC has not yet considered all the issues that NTIA and
RUS had to address in the NOFA; however, the consideration given these
issues in the NOFA does not supplant the role of the FCC as it
addresses the issues of interconnection and non-discrimination. The FCC
is responsible for enforcing the Communications Act of 1934, which
differs in many respects from the objectives of the Recovery Act.

Question 2. Non-program related spending (i.e., logos and signs)
will ultimately take dollars from program implementation. What action
is your agency taking to ensure that this spending is held to a
minimum, and what is the maximum amount of funding that will be spent
on these?
Answer. USDA, under its existing farm bill program and now the
Recovery Act program, must approve any and all proposed expenditures
proposed by the applicant. As you are aware, USDA's broadband program
has been heavily audited by both the Department's Inspector General and
the Government Accountability Office (GAO). Non-program related
spending (logos and signs) has not presented a negative audit finding.
Moreover, USDA will assess the reasonableness of the budget as one of
the evaluation criteria for all BIP applications. Through this, USDA
will continue to ensure that expenses in these areas are consistent
with the spirit and intent of the statute.

Question 3. What will be the increase in cost structure under the
Davis-Bacon provisions for broadband projects in Texas?
Answer. Pursuant to section 1606 of the Recovery Act, any project
using Recovery Act funds requires that ``all laborers and mechanics
employed by contractors and subcontractors on projects funded directly
by or assisted in whole or in part by and through the Federal
Government'' be paid wages at rates no less than those prevailing on
similar construction projects in the locality. The Davis-Bacon wage
rates can vary tremendously by type--fiber build, satellite, cable or
wireless systems--and by location. As one might expect, prevailing
wages in rural counties tend to be lower than in metropolitan areas.
While prevailing wage rates may run slightly higher than non-Davis-
Bacon wage rates, the targeting of the Broadband Initiative Program to
non-metropolitan rural areas should diminish cost disparities.

Question 4. How much of the stimulus funding will be used to pay
for the audits required under the BIP and BTOP, both by RUS and NTIA,
and by the awardee?
Answer. All recipients of Federal loans and grants, whether funded
through the Recovery Act or non-Recovery Act appropriated funds, are
required to have annual audits to ensure the taxpayers' resources are
spent appropriately. These are operating costs of the borrower. Since
USDA's Broadband Initiative Program (BIP) does not finance operating
expenses, no Recovery Act funds will be used for this purpose.
It is also important to note that the cost of these audits will
vary depending upon the Awardee type, structure and size of the
operation. We do not anticipate the auditing requirements under the
Recovery Act to be any more costly or onerous than that of those of the
farm bill program.

Question 5. What was the rationale for the Non-Discrimination and
Interconnection clause in the NOFA, and how did the agencies address
the legal consequences to awardees?
Answer. Section 6001 of the Recovery Act requires that ``non-
discrimination and network interconnection obligations shall be
contractual obligations . . .'' of an award and that these obligations,
at a minimum, adhere to the principles contained in the FCC's broadband
policy statement. The five non-discrimination and network
interconnection requirements in the NOFA ensure that public funds will
support the public goal of open networks. The standards chosen are
largely based on established FCC rules, avoid detailed regulation, and
allow for flexibility when network management requires differential
treatment (e.g., illegal or harmful activities) or exclusivity (e.g.,
managed services such as telemedicine or public safety communications).
The standards chosen are technologically neutral and appropriate for
the widest possible range of applications, because the definition of
reasonable network management may differ based on the network
technology used and other dimensions of the project. Applicants are
required to disclose interconnection, nondiscrimination, and network
management plans with their applications, and provide regular network
reporting, to facilitate compliance and better understanding of
appropriate network management techniques. The agencies do not believe
these disclosure requirements create any significant legal consequences
for awardees. The requirements in the NOFA give awardees the freedom to
meet applicable legal requirements, and to address illegal materials on
their networks, without violating the non-discrimination and network
interconnection conditions.

Question 6. If an application is submitted to RUS for a primarily
rural (75%) area and is approved for a combination of grants and loans
can the applicant reject the terms of the application and qualify to be
automatically considered by NTIA? Would the applicant be required to
file parallel applications at both agencies? If RUS rejects an
application or the applicant rejects the terms of the loan and grant,
can that project be considered in the current round of funding or would
it be delayed until a subsequent round?
Answer. In this round of funding, NTIA will consider funding only
those rural broadband infrastructure projects that RUS has determined
not to fund through a loan, grant or loan/grant combination. If an
applicant has been approved for funding by RUS, the applicant will not
be eligible for funding in this round by NTIA--regardless of whether
the applicant accepts or rejects the terms of funding for RUS. Such an
applicant would be welcome to submit another application in the later
rounds of funding. With respect to applications rejected by RUS, these
applications may be funded by NTIA in the first round of funding if the
applicant completed the additional elements required for the BTOP
program at the time of application. NTIA will not wait for RUS'
decision on a BIP application that has also been submitted to BTOP
before reviewing it against BTOP criteria. The application will be
reviewed in parallel by both RUS and NTIA. Once RUS has determined not
to fund a rural application it will become eligible for funding by NTIA
if the applicant completed the additional elements required for the
BTOP program at the time of application. The approach outlined by RUS
and NTIA in the NOFA permits the government to stretch taxpayer dollars
and provide funding for infrastructure projects that demonstrate
maximum benefits to the greatest number of rural, unserved, and
underserved areas of the United States. Thus, qualified applicants with
a demonstrated ability to repay their loans will be eligible to receive
the appropriate level of government support through RUS. If, despite
meeting the RUS requirements, the applicant is rejected by RUS in favor
of even stronger applications, the applicant will retain the
opportunity to compete for grant funding through NTIA in the same round
if the applicant completed the additional elements required for the
BTOP program at the time of application.

Question 7. You testified that USDA would modify the eligibility
criteria for remote areas within the next 2 weeks in order to allow
communities to qualify under those terms. Will USDA also be delaying or
extending the July 14-August 14 application period to allow review of
the new rule and provide adequate time for those small, remote
communities to apply?
Answer. Based upon our hearing, and questions regarding the
definition of ``remote'' at our joint USDA/Commerce Outreach and
Training Workshops, we are currently reviewing the concerns and looking
at potential solutions. The concept of having three NOFAs allows the
ability to modify criteria to target pockets of need that become more
obvious as the program moves forward. We will be soliciting comments
after this first NOFA that will help inform subsequent NOFAs.

Question 8. What will be the ratio of new hires and contractors to
existing staff as USDA works to ensure applications are processed
within a timely manner?
Answer. The Recovery Act allows USDA to utilize up to three percent
of its broadband appropriation for Salaries and Expenses. At the
current time, plans are to hire approximately 40 additional staff, on a
temporary basis, to assist with implementation of the Broadband
Initiatives Program (BIP). These temporary staff will be supplemented
by a contractor. Since the contract is still under negotiation, we are
unable to disclose the number of staff or staff hours each vendor is
proposing for the project. The 40 temporary FTEs represent an
approximate 13% temporary increase of full-time staff within the Rural
Utilities Service (RUS).

Question 9. As an agency that has limited resources how does USDA
plan to allocate resources between implementing the stimulus plan and
the 2008 Farm Bill?
Answer. The Salaries and Expenses provision of the Recovery Act
will allow USDA to supplement its staff through temporary staff and
contractors to effectively deliver the Recovery Act programs. Existing
staff will work with and supervise our temporary and contract staffs to
ensure that all appropriated funds are prudently used.

Question 10. Could you please clarify for the Committee, must all
applications seeking up to 100% grants meet all three definitions of
remote, rural, and unserved? Is USDA contemplating waivers for
applications seeking greater than 50% grants?
Answer. Based upon the NOFA published in the Federal Register on
July 9, 2009, to compete for ``remote rural'' funds, an area must meet
all three tests--it must be remote, rural and unserved. This ensures
limited grant resources reach the most unserved areas that are
typically served by our Community Connect grant program.
In response to your second question, the NOFA does not provide any
exception authority to consider higher than 50% grants under the non-
remote funding stream. Our goal is to make effective use of the budget
authority provided to USDA. Through a combination of grants, loans and
loan/grant combinations, USDA anticipates that our $2.5 billion in
budget authority will allow us to deliver an estimated $7 to $9 billion
in loans, grants and loan/grant combinations.
The demand and experiences learned under this first NOFA will
assist both USDA and Commerce in ensuring that future NOFAs most
effectively and efficiently deploy funds.

Question 11. Some of the organizations who might apply for funding
under the stimulus are already audited fully through their
participation in other grant and loan programs, and notably through the
Universal Service Fund. Will these entities be subject to an
additional, full audit, or will RUS be able to review those audits by
other agencies and only require supplemental information that is
proprietary to the stimulus funding?
Answer. Annual audited financial statements are a standard
performance measurement tool used throughout the lending community. To
ensure that taxpayers' resources are adequately protected, RUS
similarly requires an annual audited financial statement from its
customers. Most lenders and other Agencies will accept the same annual
audited financial statement reducing burden and costs to the customer.
Through its existing telecommunication programs, USDA has worked hard
to ensure that audit requirements are not onerous or duplicative for
our customers.

Question 12. The NOFA defines a middle mile project as a broadband
infrastructure project that does not predominantly provide broadband
service to end-users or to end-user devices, and may include
interoffice transport, backhaul, Internet connectivity, or special
access. Could you please clarify the furthest point this might include,
and whether it might fund projects from the central office to the curb,
or ``node,'' or only between the central office and the point of
presence (POP)?
Answer. The furthest point would be the interconnection point to
the Internet Service Provider (ISP) that is providing service to the
last mile area. A last mile project would include the backbone from the
central office (CO) to the premise of the end-user.
Questions Submitted By Hon. Glenn Thompson, a Representative in
Congress from Pennsylvania
Question 1. Can you explain further the definition and intent of
``remote'' areas?
Answer. : The intent of the ``remote'' rural bucket of funds under
the NOFA published in the Federal Register on July 9, 2009, was to
target grant resources to the most remote rural areas that
traditionally need a higher level of grant funding to make a business
case for broadband deployment.

Question 2. Can you explain how the joint application process will
work? In other words, if an applicant is rejected at RUS because the
applicant is not serving a ``remote'' area what happens to the
application? Does this application get sent to NTIA?
Answer. All applicants will be given the opportunity to self-select
whether they wish an application to be considered by USDA, Commerce or
both Departments. Applications for areas that are at least 75% rural
must first be considered by USDA. This policy was established for three
reasons. First, USDA assistance is targeted to rural areas. Second,
USDA has the authority to make loans, grants and loan/grant
combinations under the Recovery Act, and it is the intent of both
Departments to ensure that our limited resources are best leveraged to
meet the President's broadband vision. Last, the statute stipulates
that the funding by each agency cannot overlap, resulting in funding
the same types of projects in the same areas.
Any applicant seeking to finance a broadband project in a service
area that is at least 75% rural--remote or non-remote--may request that
the application be simultaneously reviewed by USDA and Commerce as long
as the applicant has completed the additional elements required of BTOP
infrastructure applicants. If USDA declines to make an award, the
proposal will automatically compete under Commerce's BTOP program. The
approach that RUS and NTIA have adopted specifying that BIP will make
award determinations for rural applications before BTOP does not
reflect a prioritization of loans over grants, but rather the fact that
Congress, in the Recovery Act, intended that RUS focus its activities
on rural areas and mandated that NTIA funding could not be applied in
the same area funded by RUS under the Recovery Act. RUS gives
preference in its evaluation criteria to applicants who request a
higher ratio of loans to grants as a means to stretch taxpayer dollars
and maximize the number of awards that may be distributed.
Questions Submitted By Hon. Walt Minnick, a Representative in Congress
from Idaho
Question 1. If it is a goal of the Administration to extend
broadband access to all Americans and close the urban-rural digital
divide, why are unserved areas not given priority over underserved
areas to receive limited broadband stimulus dollars set aside in the
recently released rules?
Answer. In USDA's program, three funding buckets are established to
ensure that remote, unserved and underserved areas are each considered
for funding opportunities. Remote rural areas have their own
competitive bucket of grant funds to ensure that these projects do not
compete against applicants that can afford a loan or loan component.
Similarly, funding buckets for middle mile and last mile projects are
provided to ensure that all rural communities without adequate
broadband service can effectively compete for funding.
We believe these funding buckets and the scoring criteria presented
in the NOFA provide adequate opportunities for unserved areas to
receive funding under the Recovery Act. This is our first NOFA to
deploy Recovery Act funds. We will consider changes or modifications to
future NOFAs based upon the experiences learned under this NOFA.

Question 2. Grants with specific provisions guaranteeing their use
in unserved areas would likely ensure that providers will apply to
build infrastructure in areas desperate for broadband. What is the
rationale for giving priority access of Recovery Act funds to providers
seeking loans, as opposed to grants, and what kind of guarantees will
there be that providers will actually build out this infrastructure in
unserved communities?
Answer. In this first NOFA, USDA chose to provide loans, grants and
loan/grant combinations to leverage the budget authority and serve as
many rural communities as possible. In this manner, USDA estimates that
the $2.5 billion in budget authority will allow the Department to
deliver $7 to $9 billion in funds. In response to your first question,
USDA is making ``grants only'' available to the most remote unserved
rural areas. Underserved rural areas may seek loan/grant combinations.
In all cases, if an applicant seeking to deliver broadband in rural
America is unable to secure funding from USDA, they can elect to be
simultaneously reviewed and considered by Commerce for their grant-only
program as long as the applicant has completed the additional elements
required of BTOP infrastructure applicants. In this manner, rural areas
get two opportunities to be considered for funding under this NOFA.
Questions Submitted By Hon. Bill Cassidy, a Representative in Congress
from Louisiana
Question 1. Do you currently know which specific areas do not have
broadband? The reason why I ask this question is because applicants for
rural grants must meet the definition of ``rural,'' ``remote,'' and
``unserved'' in order to qualify. Many areas in my district are truly
rural. However, a number of these rural communities are located less
than 50 miles from our state capital in Baton Rouge and do not qualify
because they do not meet the definition of ``remote.'' My concern is
that these qualifications were not designed with specific unserved
areas in mind. Can you please elaborate on how this NOFA will provide a
vehicle for rural areas to obtain sustainable broadband?
Answer. At the current time, there is no definitive nationwide map
which identifies communities--rural and urban--without broadband
service. With this in mind, USDA and Commerce have worked
collaboratively to best deploy the $7.2 billion in budget authority
provided under the Recovery Act. The Commerce program, by statute, is
grant only and may serve rural and non-rural communities. USDA's
program may offer loans, grants and loan/grant combos. By providing
loans, grants and loan/grant combos, USDA projects that it can leverage
its $2.5 billion in budget authority to an estimated $7 to $9 billion
in deliverable program level. In addition, the joint NOFA allows rural
communities ``two bites at the apple.'' An applicant may elect to be
considered for funding from USDA, Commerce or funding from both
programs. Applicants for areas that are at least 75% rural will first
be considered for USDA funding. If USDA is unable to make an award, the
request will automatically be considered for BTOP funds under Commerce
as long as the applicant has completed the additional elements required
of BTOP infrastructure applicants.
This NOFA provides for grant loan combinations of up to 50% grant.
The farm bill program does not allow for this. Having up to 50% grant
significantly increases the number of communities and areas that can
obtain sustainable broadband.

Question 2. Many of the factors in the application analysis provide
for preferences when considering an application. Is any preference
given to poorer communities in need of broadband to better serve
community needs such as education and healthcare?
Answer. The socioeconomic status of any one community is not
directly considered in providing preference under USDA's Broadband
Initiatives Program (BIP). To reach unserved and lower-income
communities, USDA has provided other priorities such as points for
leveraging with other Recovery Act or governmental programs which may
be aimed at serving lower-income rural residents. Also, points are
awarded for affordability, projects offering a choice of more than one
service provider (allowing more price competition), projects with
community support, projects that will offer a discounted rate to
critical community facilities and projects from disadvantaged and small
businesses. In addition, Commerce was appropriated grant funds
specifically for sustainable broadband adoption programs and computer
learning centers which are targeted through our joint NOFA to
vulnerable populations.

Question 3. For those areas currently unserved, do you anticipate
that large national providers, such as Comcast, Verizon, or Cox, will
move in to provide services to the unserved? If not, will the local
providers of last resort respond to this need?
Answer. The NOFA was crafted in a neutral manner and does not seek
to advantage any provider (except as statutorily required for Title II
borrowers). Our goal is to provide equal opportunities for any viable
applicant that has the capacity and ability to bring broadband service
to areas of the greatest need.
Response from Mark G. Seifert, Senior Advisor to the Assistant
Secretary, National Telecommunications and Information
Administration, U.S. Department of Commerce
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question 1. What portion of funds from NTIA will be going to
unserved versus underserved areas?
Answer. The Recovery Act instructs NTIA to address the broadband
needs of both unserved and underserved areas, as well as to enhance
broadband capabilities for strategic institutions that provide
significant public benefits, improve broadband for public safety, and
stimulate broadband demand. The Notice of Funds Availability (NOFA)
released by NTIA and the Department of Agriculture's Rural Utilities
Service (RUS) on July 1, 2009 does not establish minimum or maximum
funding levels among unserved or underserved areas. NTIA set aside up
to $1.6 billion in budget authority for funding opportunities under
this NOFA: $1.2 billion for Broadband Infrastructure grants, including
Last Mile and Middle Mile; $50 million for Public Computer Center
projects; $150 million for Sustainable Broadband Adoption projects; and
$200 million for a national reserve that may be used to augment these
Broadband Technology Opportunities Program (BTOP) funding categories.
Each of these amounts is a ceiling for this round of funding. NTIA may
distribute funding differently in future rounds if appropriate.
Applicants for Broadband Infrastructure projects, including Last Mile
and Middle Mile, are required to demonstrate that their proposed funded
service area meets the definition of unserved or underserved.
Applications for Public Computer Centers or Sustainable Adoption
Projects are not required to serve unserved or underserved areas, but
will be evaluated based in part on their ability to meet the greatest
broadband needs for vulnerable populations. Many factors--including the
type, quality, quantity, and characteristics of applications NTIA
receives--will impact the portion of funds awarded to unserved and
underserved areas. The NOFA describes in much further detail the
eligibility requirements, evaluation criteria, and selection factors
that will be used to award BTOP grants.

Question 2. How has NTIA developed the internal resources necessary
to ensure proper implementation and management of this very large
program?
Answer. NTIA is moving expeditiously to ensure that Recovery Act
funds are made available as quickly, transparently, and efficiently as
possible. NTIA has increased its staff and now has several dozen
qualified and experienced employees working primarily or exclusively on
BTOP. NTIA is collaborating with other relevant agencies, principally
the Department of Agriculture's Rural Utilities Service (RUS) and the
Federal Communications Commission (FCC), to benefit from their skills
and expertise as appropriate. We are currently reviewing proposals from
outside vendors for grant program support and intend to award a
contract by the end of July of this year. The implementation of such a
large and first-of-its-kind program under such tight deadlines is a
challenge, but one which NTIA and the entire Department of Commerce are
committed to meeting.

Question 3. To be considered ``underserved'', an area can have
multiple providers but lack a subscriber rate greater than 40 percent.
Given that national subscribership rates only broke the 50 percent
level in the past 2 years and rural rates are estimated at less than
50, why does it make sense to set the bar at 40 percent as one of the
criteria for ``underserved''? Could an area be considered
``underserved'' even when it has four providers each with 8-10 percent
subscriber rate?
Answer. As outlined in the NOFA, a proposed funded service area
(defined as one or more contiguous Census blocks) may qualify as
underserved for Last Mile projects if no more than 50 percent of the
households in the proposed funded service area have access to
facilities-based, terrestrial broadband service at greater than the
minimum broadband transmission speed of 768 kbps downstream and 200
kbps upstream; no fixed or mobile broadband service provider advertises
broadband transmission speeds of at least 3 megabits per second
(``mbps'') downstream in the proposed funded service area; or the rate
of broadband subscribership for the proposed funded service area is 40
percent of households or less. A proposed funded service area may
qualify as underserved for Middle Mile projects if one interconnection
point terminates in a proposed funded service area that qualifies as
unserved or underserved for Last Mile projects. NTIA defined
underserved to include a level of broadband subscribership below the
national average because low subscribership rates tend to reflect lower
income households and vulnerable or disadvantaged population groups.
NTIA believes this definition will help ensure that BTOP funding
benefits areas in which a minimum level of broadband service may be
available to a portion of users, but in which robust competition,
investment, or adoption has not taken shape. It is theoretically
possible that, for the purposes of awarding BTOP grants, an area could
have four providers each with a subscription rate below ten percent and
still qualify for underserved. But as a practical matter, areas with
low broadband subscribership are less likely to have attracted as many
as four providers.
Questions Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question 1. The NOFA speaks of a working relationship with the FCC,
NTIA, and RUS. Why did NTIA and RUS not choose to defer to the FCC on
all matters regarding nondiscrimination and interconnection in
definitions and enforcement?
Answer. The Recovery Act directed NTIA, in consultation with the
FCC, to establish nondiscrimination and interconnection requirements as
contractual terms of awards. Consistent with this directive, NTIA and
RUS engaged in extensive consultation with the FCC in developing the
nondiscrimination and interconnection requirements of the NOFA. NTIA,
RUS, and the FCC have worked closely to leverage the authorities and
resources provided in the Recovery Act to develop a coordinated Federal
Government approach to addressing the challenge of rapidly expanding
the access and quality of broadband services across the country. Each
agency brings unique skills and resources to this effort. RUS has been
the Federal Government leader in bringing telecommunications to rural
America for decades. NTIA has experience in awarding technology-related
grants through the Technology Opportunities Program and serves as the
President's principal advisor on telecommunications and information
policies. Moreover, NTIA and the FCC together are responsible for the
development of Federal telecommunications policy. The statutory
deadline for the FCC's National Broadband Plan is February 2010,
therefore the FCC has not yet considered all the issues that NTIA and
RUS had to address in the NOFA. Moreover, the FCC is responsible for
enforcing the Communications Act of 1934, which differs in many
respects from the objectives of the Recovery Act.

Question 2. Non-program related spending (i.e., logos and signs)
will ultimately take dollars from program implementation. What action
is your agency taking to ensure that this spending is held to a
minimum, and what is the maximum amount of funding that will be spent
on these?
Answer. BTOP program staff and grants office staff will review all
such spending to determine whether the proposed expenditures are
reasonable given the particular details of the application. Moreover,
NTIA will assess the reasonableness of the budget as one of the
evaluation criteria for all BTOP applications. This evaluation, through
a comparison of applications to BTOP's established standards in the
competitive grant review, will allow NTIA to identify the applicants
who will make the most efficient use of Federal funds.

Question 3. What will be the increase in cost structure under the
Davis-Bacon provisions for broadband projects in Texas?
Answer. Pursuant to section 1606 of the Recovery Act, any project
using Recovery Act funds requires that ``all laborers and mechanics
employed by contractors and subcontractors on projects funded directly
by or assisted in whole or in part by and through the Federal
Government'' be paid wages at rates no less than those prevailing on
similar construction projects in the locality. At this time, NTIA is
not able to estimate whether or to what extent cost structures for
broadband infrastructure projects may be impacted by this provision.
NTIA anticipates that it will receive a wide variety of proposals that
employ different technologies (e.g., wireline, wireless, satellite, or
other) designed to address the broadband infrastructure needs of
unserved or underserved areas of Texas and other states. The
technological design, build-out schedule, and characteristics of the
proposed funded service areas will likely determine the extent to which
cost structures may or may not be different because of the Davis-Bacon
Wage Requirements of the Recovery Act.

Question 4. How much of the stimulus funding will be used to pay
for the audits required under the BIP and BTOP, both by RUS and NTIA,
and by the awardee?
Answer. NTIA is committed to ensuring that BTOP funds are used in
the most transparent, efficient, and effective manner possible. One of
its first acts after the passage of the Recovery Act was the transfer
of $10 million to the Department of Commerce Office of Inspector
General for the purposes of audits and oversight of BTOP funds. In
order to achieve the accountability and transparency required of the
Recovery Act, BTOP grant recipients will be required to adhere to a
number of Recovery Act reporting and audit requirements, along with
BTOP-specific reporting and audit requirements. The costs to audit the
grants awarded to state and local governments, educational institutions
and nonprofit organizations are typically allowable as indirect costs
under the Single Audit Act, as implemented by OMB Circular A-133. The
awarding agency may also allow for-profit organizations to recover the
costs of audits as a direct cost to an award. The cost of such
obligations, and the amount of Recovery Act funding that will go
towards such activities, will depend to a significant measure on the
number, type, and characteristics of grants awarded under BTOP.

Question 5. What was the rational for the Non-Discrimination and
Interconnection clause in the NOFA, and how did the agencies address
the legal consequences to awardees?
Answer. Section 6001(j) of the Recovery Act requires that we
establish non-discrimination and interconnection obligations as
contractual terms of awards under this program that at a minimum,
adhere to the principles contained in the FCC's broadband policy
statement. The five non-discrimination and network interconnection
requirements in the NOFA ensure that public funds will support the
public goal of open networks. The standards chosen are largely based on
established FCC rules, avoid detailed regulation, and allow for
flexibility when network management requires differential treatment
(e.g., illegal or harmful activities) or exclusivity (e.g., managed
services such as telemedicine or public safety communications). The
standards chosen are technologically neutral and appropriate for the
widest possible range of applications, because the definition of
reasonable network management may differ based on the network
technology used and other dimensions of the project. Applicants are
required to disclose interconnection, nondiscrimination, and network
management plans with their applications, and provide regular network
reporting, to facilitate compliance and better understanding of
appropriate network management techniques. The agencies do not believe
these disclosure requirements create any significant legal consequences
for awardees. The requirements in the NOFA give awardees the freedom to
meet applicable legal requirements, and to address illegal materials on
their networks, without violating the non-discrimination and network
interconnection conditions.

Question 6. If an application is submitted to RUS for a primarily
rural (75%) area and is approved for a combination of grants and loans,
can the applicant reject the terms of the application and qualify to be
automatically considered by NTIA? Would the applicant be required to
file parallel applications at both agencies? If RUS rejects an
application or the applicant rejects the terms of the loan and grant,
can that project be considered in the current round of funding or would
it be delayed until a subsequent round?
Answer. In this round of funding, NTIA will consider funding only
those rural broadband infrastructure projects that RUS has determined
not to fund through a loan, grant or loan/grant combination. If an
applicant has been approved for funding by RUS, the applicant will not
be eligible for funding in this round by NTIA--regardless of whether
the applicant accepts or rejects the terms of funding for RUS. Such an
applicant would be welcome to submit another application in the later
rounds of funding. With respect to applications rejected by RUS, these
applications may be funded by NTIA in the first round of funding if the
applicant completed the additional elements required for the BTOP
program at the time of application. NTIA will not wait for RUS's
decision on a BIP application that has also been submitted to BTOP
before reviewing it against BTOP criteria. The application will be
reviewed in parallel by both RUS and NTIA. Once RUS has determined not
to fund a rural application it will become eligible for funding by NTIA
if the applicant has met the additional requirements of BTOP at the
time of the application. The approach outlined by RUS and NTIA in the
NOFA permits the government to stretch taxpayer dollars and provide
funding for infrastructure projects that demonstrate maximum benefits
to the greatest number of rural, unserved, and underserved areas of the
United States. Thus, qualified applicants with a demonstrated ability
to repay their loans will be eligible to receive the appropriate level
of government support through RUS. If, despite meeting the RUS
requirements, the applicant is rejected by RUS in favor of even
stronger applications, the applicant will retain the opportunity to
compete for grant funding through NTIA in the same round, if the
applicant has met the additional requirements of BTOP at the time of
the application.

Question 7. Will the State Broadband Data and Development Grant
Program produce a map before the first round of grants is awarded?
Answer. While a national broadband map will not be available prior
to the first round of grants, it is possible that individual states
will have maps available. The Recovery Act requires NTIA to make the
national broadband map available to the public by February 17, 2011.
NTIA is working as quickly as possible to implement the BTOP and
broadband mapping programs consistent with the Recovery Act's
objectives. In order to achieve Congress' intent that agencies
``commence[] expenditures and activities as quickly as possible
consistent with prudent management,'' BTOP will begin awarding grants
through its first round of funding in the Fall of 2009 before the
national broadband map is developed. On July 8, 2009, NTIA published in
the Federal Register its NOFA for the State Broadband Data and
Development Grant Program, which sets forth the guidelines for funding
projects that collect comprehensive and accurate state-level broadband
mapping data, develop state-level broadband maps, aid the development
and maintenance of a national broadband map, and fund statewide
initiatives directed at broadband planning. Grant applications for the
State Broadband Data and Development Grant Program will be accepted
from July 14 to August 14, 2009. This NOFA favors applicants that can
provide a substantially complete set of availability data by November
1, 2009, and to the extent possible NTIA will use available data to
drive decision making. We recognize, as you do, the importance of data-
driven decision-making and are pursuing the establishment of the
national map as quickly as possible.

Question 8. The stimulus makes available `up to' $350 million for
the State Broadband Data and Development Program mapping activities.
Within that authority, how much will NTIA be spending on mapping
efforts and what empirical data was used to determine the amount of
funding to be obligated for the State Broadband Data and Development
Program?
Answer. NTIA anticipates expending up to $240 million in State
Broadband Data and Development Program grants. NTIA consulted with
numerous states with experience in broadband mapping as well as private
companies that specialize in developing broadband maps. Through these
consultations, NTIA was able to determine a range of costs for state-
level broadband mapping and used such amounts to estimate the aggregate
grant cost for the entire program. Each state grant application will
include a detailed budget outlining proposed costs.

Question 9. On July 6, 2009, NTIA posted a solicitation for
volunteers to assist in reviewing $4.7 billion in grant applications.
While the solicitation requests applicants provide a description of
their knowledge of the program, it does not require specific grant
experience and indicates no formal training will be provided beyond a
webinar. What is NTIA's rationale for using such inexperienced, lightly
trained individuals to handle such a crucial component of this grant
process?
Answer. Expert review has long been used to evaluate grant
proposals using panels of well-qualified reviewers who have expertise
and experience in a variety of fields closely related to the proposals.
Numerous Federal agencies, among them the National Institutes of
Health, Department of Energy, National Oceanic and Atmospheric
Administration, National Institute of Standards and Technology, and
National Science Foundation, employ similar programs to review grant
applications. NTIA plans to assign applications to reviewers that are
knowledgeable and appropriate for the subject matter. They may include,
for example, professional engineers, MBAs, policy experts, and business
managers in networking and telecommunications, and/or in the operation
of public computer centers, according to the type of application. The
number of reviewers NTIA needs will depend on the volume of
applications received. For planning purposes, NTIA anticipates
receiving a large number of applications and is actively recruiting as
many qualified reviewers as possible. NTIA will provide the necessary
training for BTOP reviewers to ensure that they are adequately prepared
to review applications thoroughly and efficiently. The training for
BTOP reviewers will cover two areas: how to evaluate applications using
criteria prepared specifically for BTOP proposals, and how to use the
online system that will be used to organize the reviewing process. NTIA
will only select reviewers who have demonstrated significant expertise
in their fields. In addition, after the technical review process
conducted by expert reviewers, each eligible application will be
reviewed by NTIA program staff for policy determinations and conformity
with policy goals.

Question 10. You indicated during your testimony that NTIA had the
proper staff in place to review the applications. Why then is NTIA
asking for volunteers to review the applications? Is NTIA at all
concerned about the preparatory information that volunteers will be
reviewing? Should those submitting BTOP applications be comforted in
knowing that their future business decisions and their customer's
potential broadband availability may be decided by a volunteer who has
no previous experience?
Answer. Expert review has long been used to evaluate grant
proposals using panels of well-qualified reviewers who have expertise
and experience in a variety of fields closely related to the proposals.
Numerous Federal agencies, among them the National Institutes of
Health, Department of Energy, National Oceanic and Atmospheric
Administration, National Institute of Standards and Technology,
National Science Foundation, and the National Institutes of Health,
employ similar programs to review grant applications. In addition, the
Department of Commerce's Office of Inspector General has encouraged the
use of expert reviewers to ensure that projects are high-quality and
consistent with program objectives. NTIA plans to assign applications
to reviewers that are knowledgeable and appropriate for the subject
matter. They may include, for example, professional engineers, MBAs,
policy experts, and business managers in networking and
telecommunications, and/or in the operation of public computer centers,
according to the type of application. The training for BTOP reviewers
will cover two areas: how to evaluate applications using criteria
prepared specifically for BTOP proposals, and how to use the online
system that will be used to organize the reviewing process. NTIA will
only select reviewers who have demonstrated significant expertise in
their fields. In addition, after the technical review process conducted
by expert reviewers, each eligible application will be reviewed by NTIA
program staff for policy determinations and conformity with policy
goals.
Question Submitted By Hon. Glenn Thompson, a Representative in Congress
from Pennsylvania
Question. The NOFA indicates that an environmental questionnaire
may be required for funding, including those authorization and permits
under the National Environmental Policy Act. Given the short turn
around on the application process is it realistic to expect applicants
to comply with NEPA in such a short timeframe?
Answer. NTIA is committed to fully addressing National
Environmental Policy Act (NEPA) for BTOP projects. In order to comply
with NEPA requirements and meet the goals of the Recovery Act to move
funding into communities quickly to stimulate the U.S. economy, DOC and
NTIA have recently finalized a series of Categorical Exclusions (CEs)
that should facilitate the timely completion of NEPA requirements for
BTOP. The BTOP environmental questionnaire is designed to further
streamline the NEPA process by allowing the approving official to
determine quickly and efficiently if the action qualifies for one of
the exclusions. While it is envisioned that the majority of the BTOP
applications will be covered under the CEs, in the event that a project
is not covered under either the NTIA or DOC Departmental CEs,
additional environmental documentation will be required. This may
include the preparation of either an Environmental Assessment or an
Environmental Impact Statement. To minimize time delays associated with
the Agency approval process, the Department will assist NTIA with
sufficiency reviews and document preparation. Given the time
constraints of this program, projects requiring applicants to commence
an Environmental Assessment or Environmental Impact Study may be more
suitable for later rounds of funding.
Questions Submitted By Hon. Walt Minnick, a Representative in Congress
from Idaho
Question 1. If it is a goal of the Administration to extend
broadband access to all Americans and close the urban-rural digital
divide, why are unserved areas not given priority over underserved
areas to receive limited broadband stimulus dollars set aside in the
recently released rules?
Answer. The Recovery Act instructs NTIA to address the broadband
needs of both unserved and underserved areas, as well as to enhance
broadband capabilities for strategic institutions that provide
significant public benefits, enhance broadband for public safety, and
stimulate broadband demand. The Recovery Act directed the Department of
Agriculture's Rural Utilities Service (RUS) to enhance broadband
capabilities in rural areas of the United States. Consistent with its
directive, NTIA intends to fund highly-qualified applications that
address the Broadband Infrastructure needs of both unserved and
underserved areas. NTIA will also support exemplary proposals for
Public Computer Centers and Sustainable Broadband Adoption. In March,
NTIA and RUS issued a Request for Information (RFI) seeking public
input on the development of the Recovery Act broadband initiatives.
Many of the thoughtful public comments received--of which there were
more than 1,000--urged NTIA to consider the wide variety of broadband
needs in communities across the United States. In the first round of
BTOP grants, NTIA has established three categories of funding:
Broadband Infrastructure, Public Computer Centers, and Sustainable
Broadband Adoption, that will help fulfill the purposes of BTOP
outlined in the Recovery Act. RUS has established its program, the
Broadband Initiatives Program (BIP), to extend loans, grants, and loan/
grant combinations to facilitate broadband deployment in rural areas.
NTIA and RUS, as well as the FCC, are working together closely to
leverage our resources to implement a coordinated Federal Government
approach to addressing the challenge of expanding the access to and
quality of broadband services across the country.

Question 2. Grants with specific provisions guaranteeing their use
in unserved areas would likely ensure that providers will apply to
build infrastructure in areas desperate for broadband. What is the
rationale for giving priority access of Recovery Act funds to providers
seeking loans, as opposed to grants, and what kind of guarantees will
there be that providers will actually build out this infrastructure in
unserved communities?
Answer. The eligibility requirements for BIP and BTOP should ensure
that grants and loans are both used to deploy infrastructure in
unserved and underserved areas. Applications to fund broadband
infrastructure projects in areas that are at least 75 percent rural are
required to be submitted to RUS for consideration under BIP. If an
applicant intending to serve such rural areas also chooses to have an
application considered for BTOP funding, the applicant must complete
the additional elements required of BTOP infrastructure applicants.
NTIA may determine such applications to be meritorious and make grant
awards if RUS reviews the application and determines not to fund it.
The approach that RUS and NTIA have adopted specifying that BIP will
make award determinations for rural applications before BTOP does not
reflect a prioritization of loans over grants, but rather the fact that
Congress, in the Recovery Act, intended that RUS focus its activities
on rural areas and mandated that NTIA funding could not be applied in
the same area funded by RUS under the Recovery Act. RUS gives
preference in its evaluation criteria to applicants who request a
higher ratio of loans to grants as a means to stretch taxpayer dollars
and maximize the number of awards that may be distributed.
Questions Submitted By Hon. David P. Roe, a Representative in Congress
from Tennessee
Question 1. Why does NTIA's broadband mapping NOFA specify that the
mapping entities must collect average revenue per unit (``ARPU'') by
county?
Answer. Average revenue per user (ARPU) is calculated by dividing a
provider's total monthly residential broadband service revenue for a
county in the month for which data is being collected by its average
monthly residential subscribers for such county in that month. ARPU is
a very commonly-used metric in the telecommunications industry and, by
collecting it at the county level, NTIA will obtain a better
understanding of local market conditions. Particularly where broadband
services are sold as part of a bundle, ARPU can be a good proxy for
customer profitability. Additionally, where services are sold in
packages at different prices, ARPU is often used as a proxy for price.
The Broadband Data Improvement Act, one of the two pieces of
authorizing legislation for the State Broadband Data and Development
Grant Program, provides that funds under the Program may be used to
identify barriers to adoption of broadband, including an assessment of
whether the supply for such services is capable of meeting the existing
demand. One barrier to meeting existing demand is that the sunk cost of
deployment in certain areas may be so high relative to demand that no
one finds it profitable to deploy broadband infrastructure. Targeted
ARPU data can help NTIA and other policymakers make informed decisions
about actions to address such barriers. For example, ARPU data will
inform NTIA's consideration of the feasibility and sustainability of
broadband projects seeking funding under BTOP. NTIA recognizes that
ARPU data is sensitive information and it will take all appropriate
steps to ensure that it remains confidential.

Question 2. What research did NTIA conduct to determine the
existing availability of this data among rural broadband providers?
Answer. NTIA consulted extensively with the FCC, states, and
companies experienced with broadband mapping in determining the data
requested under the State Broadband Data and Development Grant Program.
Furthermore, numerous entities, including representatives from rural
areas, submitted public comments in response to NTIA's request for
information (RFI) and urged NTIA to collect pricing or cost data. ARPU
is a very commonly-used metric in the telecommunications industry,
having very broad applicability across technology types and
geographies. Calculation of ARPU for the Program requires the
collection of the total monthly residential broadband service revenue
for a particular county in the month for which data is being collected;
and the average monthly residential broadband subscribers for that
county in that month. NTIA believes that the requirement to do so is
reasonable and consistent with the objectives of the Broadband Data
Improvement Act and the Recovery Act.

Question 3. What it will cost rural broadband providers to create
and report this ARPU by county data?
Answer. The cost of generating and reporting ARPU by county will
vary depending on particular rural broadband providers' existing
accounting and data management practices. Many providers, rural and
otherwise, already track ARPU data and ARPU is a very commonly used
metric in the telecommunications industry. Furthermore, as previously
discussed, in the case that providers do not currently track ARPU, NTIA
believes that the requirement to do so is reasonable and consistent
with the objectives of the Broadband Data Improvement Act and the
Recovery Act.
Questions Submitted By Hon. Bill Cassidy, a Representative in Congress
from Louisiana
Question 1. My staff has spoken to service providers in my district
who tell us that there appears to be a preference for lower-bandwidth
wireless coverage over higher-bandwidth wireline. Could you provide
some clarity on which bandwidth speeds and technologies are preferred?
Answer. The definitions, eligibility requirements, evaluation
criteria and selection process outlined in the NOFA reflect the
technology-neutral approach NTIA intends to employ in the BTOP program.
Applications will be evaluated and selected based on their ability to
provide the greatest benefits--including the greatest broadband
speeds--to the greatest population of users, consistent with objectives
outlined by Congress in the Recovery Act. In order to be eligible for
Broadband Infrastructure grants, applicants must, among other
requirements, commit to providing broadband speeds of at least 786 kbps
downstream and 200 kbps upstream in an unserved or underserved proposed
funded service area. Applications will be evaluated and scored on a
number of factors, including the broadband speeds that will be provided
using BTOP funds. Applications offering higher broadband speeds will
receive more favorable consideration than those services with speeds
meeting the minimum broadband definition.

Question 2. For the Broadband Technologies Opportunities Grant, the
Notice of Funds Availability claims that state governments will be able
to submit recommendations on which projects would best suit local
needs. How do you plan to weight the states' recommendations?
Answer. The Recovery Act recognizes the valuable role that the
states and territories can play in implementing BTOP, and permits NTIA
to consult with them in identifying unserved and underserved areas
within their borders and in allocating grant funds for projects in or
affecting their jurisdictions. States will have more than one
opportunity to make recommendations concerning the allocation of funds
within their borders. In their application for the State Broadband Data
and Development Grant Program, participating states may identify
unserved and underserved areas in their state as well as make
recommendations for the allocation of broadband funding. Additionally,
states will be provided a list of the applications under consideration
during step two of the BTOP application process. States may provide a
list and prioritization of recommended projects, along with an
explanation of why the selected proposals meet the greatest needs of
the state. States will have 20 calendar days from the date of
notification to submit to NTIA their recommendations. Before NTIA makes
final award decisions, it will consider, among other factors, the
information and recommendations provided by states. NTIA believes this
process fulfills the Recovery Act's intent that states have a strong
consultative role in the BTOP process.
Response from G. Edward Evans, Founder and CEO, Stelera Wireless, LLC;
Member, Board of Directors, CTIA--The Wireless
Association'
Question Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. Wireless systems are often associated with lower speeds.
However, you mention a speed of 14.4 megabits per second and an
expectation that increases in the future are coming. Could you explain
why wireless broadband typically has lower speeds and how you are able
to overcome those constraints?
Answer. Wireless has often been associated with slower speeds as
you suggest however, wireless technology is evolving at a pace much
faster than that of wireline technology. Two technologies exist today
than can produce speeds comparable to wireline solutions. HSPA (High
Speed Packet Access) and WiMax technologies both offer the ability to
provide the speeds I mentioned in my testimony. A third technology, LTE
(Long Term Evolution), is close to being commercial and we will begin
to see commercial deployments this year.
We chose to deploy HSPA for several reasons. The first and most
important was the size of the ecosphere supporting the technology.
AT&T, T-Mobile, Vodafone, and over 300 additional wireless carriers
globally have committed to use the HSPA standard. As a small business
we believed we would not be able to drive the technology through our
own needs and we would need the support of a large number of carriers
to evolve the technology.
Once HSPA is deployed in a network, software loads and hardware
capabilities determine the last mile download speeds a carrier can
provide. Typical deployments begin at 1.8mps. The software loads can
then increase the last mile network download speeds in the following
increments; 3.6mps, 7.2mps, I4.4mps, 21.6mps. A hardware and antenna
upgrade will then take the speeds up to 28.8mps. The next step involves
increasing the spectrum usage from a single 10mhz carrier to two
carriers using 20mhz. By using 20mhz of spectrum at a cell site the
download speeds will increase to 48mps and on to 84mps. Upload speeds
evolve at a similar pace. Our current upload speed capability is 2mps;
it will increase to 5.6mps within the next 90 days and increase over
time in a similar manner described above. HSPA has a clear road map
that is supported by the GSM Association. Additionally, our network
vendor has specific dates for deployment of each upgrade for the
foreseeable future.
The second component that determines the speed a consumer
experiences on the wireless network is the middle mile or backhaul
capabilities of the network. Due to the lack of fiber in rural markets,
we chose to build our own wireless microwave backhaul network. Our cell
sites are connected by 150-300mps IP based microwave radios that are
daisy chained together to deliver our data back to the nearest metro
area. As an example, our South Texas towns are connected together and
then linked to a site in San Antonio, Texas. We lease a long haul
Ethernet connection (EPLS Circuit) from a third party provider in San
Antonio to deliver the traffic back to our core in Oklahoma City.
While each carrier's network is unique there are a few consistent
themes in answering your question as to why wireless is often
associated with slower speeds. Legacy network elements and legacy
consumer devices that are not upgradable may challenge a large
carrier's ability to upgrade rapidly. Upgrading to the latest
technology is expensive and time consuming. Large wireless networks
have become so complex that even minor software upgrades require
significant testing and planning prior to implementation in order to
make sure consumers are not negatively impacted by any change. AT&T
recently announced they would have their entire network upgraded to
7.2mps download by the end of 2011. I believe the time required for the
upgrade is not technology driven but more a factor of the complexities
involved in upgrading a network of their size.
Another driving factor is the middle mile or backhaul options
available at each cell site. Most carriers connect their cell sites to
the network via leased or owned wireline facilities. Limited wireline
facilities to a cell site and the cost associated with leasing
facilities at those cell sites drive the throughput available to the
consumer. Depending upon your business model, it is sometimes difficult
to justify the cost of leasing a fiber connection to a cell site. In
rural areas there simply isn't fiber available for the backhaul. The
cost of using traditional telephone, (TDM) connections like a DS-3 type
connection is simply cost prohibitive. This is the reason we chose to
build our own backhaul and bypass the traditional options.
An additional factor that drives the belief that wireless networks
provide slower speeds is the number of technology-limited deployments
that have already been completed. There are many wireless technologies
that have been deployed that have no clear road map to faster speeds. I
believe that in our attempt to remain technology neutral we have
unintentionally watered down the acceptable speeds to consumers to
protect some technologies that will not survive. Additionally, it
appears the slower speed requirements were created to protect incumbent
carriers that will require a significant amount of time to upgrade
their networks and would not be able to meet the time lines required by
the Stimulus Act.
While I was somewhat disappointed by the speed requirements
presented in the stimulus package, I must admit that I believe this
will actually be a competitive advantage for Stelera. Because we are a
new start-up company, a legacy network and old consumer devices do not
encumber us. Stelera is able to build the latest technology and deploy
the latest generation devices that are upgradable for many years into
the future.
In summary, I believe the perception that wireless technologies are
slower is sometimes driven by the fact that the deployment of the
technology is slower, not the technology itself. I believe that RUS and
NTIA must be diligent in awarding funding to technologies that have a
clear and defined roadmap to the future. This can be accomplished while
remaining technology neutral.
Question Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question. A limited waiver for `Buy American' provisions was
provided for broadband projects, but specifically excluded from the
waiver were fiber optic cable, cell towers, and other facilities. Do
you feel the waiver adequately mitigates the higher cost structure
imposed on projects through Davis-Bacon wage requirements and Buy
American provisions?
Answer. I believe this is a difficult question to answer at this
time. While the limited waiver is positive step; it will be difficult
to understand its true effect until we begin requesting quotes from the
respective vendors. As with any purchase process, the more vendors
eligible to bid, the more competition that is created.
In bundling the Davis-Bacon requirements into the ``Buy American''
provision you create an interesting dichotomy, pay prevailing wages and
limit the number of vendors who you can buy from which may increase our
costs.
The Davis-Bacon requirements alone may prove interesting. In the
current economic situation prevailing wages may be falling. I am
concerned the data we use to determine prevailing wages may not be real
time data and could overstate prevailing wages at the time construction
actually begins. Couple this with a limitation on the number of vendors
that we can buy from and we may be forced to over pay for labor and
over pay for our materials. This is a bad combination for a model that
needs capital assistance to be sustainable in the first place.
Response from Walter B. McCormick, Jr., President and CEO, USTelecom
Association
Question Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. You mention the problems with the scoring associated with
unserved populations along with the limitations associated with grants
going only to remote areas. How could the agencies do a better job of
incentivizing the deployment of broadband to rural, completely unserved
areas?
Answer. USTelecom represents innovative companies ranging from some
of the smallest rural telecoms in the nation to some of the largest
corporations in the U.S. economy. Almost all of our member companies
serve rural areas. The vast majority of them are small businesses
serving small communities and the surrounding sparsely populated areas.
They are proud members of these communities and deeply committed to
their future development.
Our member companies have identified areas passing a significant
number of rural households that can benefit from broadband stimulus
funds. However, as discussed at the hearing, the NOFA's ``remote/
rural'' definitions make it problematic to reach these areas. The
maximum of 50% grants for rural non-remote areas may discourage
potential applicants from applying for ARRA funds. We would also note
that for those companies that still choose to apply for ARRA funding,
it creates a disincentive to serving rural areas. A rural, non-remote,
application to RUS qualifies for a maximum of 50% in grant funds, while
an application serving a less rural area qualifies for up to 80% in
NTIA grant funding. A far simpler approach would be to synchronize the
RUS program with the Commerce Department effort by removing the
``remote'' definition and making all rural applications eligible for up
to 80% grants. This would accomplish two goals--creating sufficient
incentives for companies to apply to this voluntary program and
eliminate the current disincentive to serve rural areas.
However, addressing the NOFA's ``remote/rural'' delineation is only
part of a comprehensive approach to modifying the current RUS NOFA.
Nondiscrimination and interconnection requirements exceeding those
required by statute, unnecessarily restrictive provisions on the sale
or lease of award funded facilities, and onerous data requirements
linked to broadband mapping, can all impact the number and type of
applications the RUS receives and therefore undermine the goals of the
ARRA to immediately stimulate economic activity and deploy high speed
broadband service.
Question Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question. A limited waiver for `Buy American' provisions was
provided for broadband projects, but specifically excluded from the
waiver were fiber optic cable, cell towers, and other facilities. Do
you feel the waiver adequately mitigates the higher cost structure
imposed on projects through Davis-Bacon wage requirements and Buy
American provisions?
Answer. The ``Grant Guidelines for the Recovery Act BTOP'' issued
by NTIA and available at broadbandUSA.gov includes a list of items to
which the Buy American waivers recently promulgated by RUS and NTIA do
not apply. Such items include fiber optic cables, coaxial cable, cell
towers and other facilities or good that are produced in sufficient
quantifies in the United States. However, the same publication notes
that the Buy American provision applies only to public works and public
buildings. It goes on to state that private projects are exempt from
the provision. Unless the applicant forms a public-private partnership
and is thus treated as public and is subject to the Buy American
provision, the requirement does not apply. Thus it most likely will not
apply to the vast majority of applications for BIP and BTOP funding
submitted by USTelecom members.
Response from W. Tom Simmons, Senior Vice President of Public Policy,
Midcontinent Communications; on Behalf of National Cable and
Telecommunications Association
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question 1. You mention the need to address the demand side of
broadband subscription by making more computers available, subsidizing
the cost of service, and other means. Should limited Federal dollars be
directed toward deployment of broadband infrastructure or efforts to
increase consumer demand?
Answer. There is a need for funding both infrastructure and demand-
side projects, but funding needs to be properly targeted.
Infrastructure funding should be directed to unserved areas. Not only
are those the areas of greatest need, but directing government funds to
unserved areas will avoid wasting taxpayers' monies by subsidizing
additional competitive entrants in communities where an existing
provider has already invested private risk capital.
It is also appropriate to make stimulus funding available for
demand-side projects. As studies have shown, lack of interest and lack
of resources greatly affect whether Americans subscribe to broadband.
Funding demand-side projects can help educate vulnerable populations in
particular about the value of broadband and enable them to make
effective use of broadband services for improved education, health
care, and employment opportunities.

Question 2. You mention that your company is currently pulling
together information to determine whether you will be filing an
application to reach out to unserved areas. Can you reach those areas
via a subsidized loan or a loan/grant combo?
Answer. We could reach those areas using the grant option offered
by the program. We are carefully reviewing the specific requirements of
the loan side of the program and the potential impact those
requirements may have on our ability to finance the continued expansion
of services to customers in areas that do not qualify for these
programs. (It would be beneficial for our company if RUS guidelines
allowed the loan/grant combination to include loans obtained from
sources other than the RUS. In other words, if 100% grants are not
going to be allowed to deploy in unserved areas within the 50 mile
limit, we would like to have the option of obtaining a 50% grant from
the RUS and to finance the rest of the project on our own).

Question 2a. Do the areas you are considering qualify as ``remote''
under the definition of 50 miles from a non-rural area?
Answer. One area is clearly outside the 50 mile limit and should
qualify as rural remote. One area we had hoped would qualify is well
short of the 50 mile requirement, however. This location is in the
Black Hills outside of Rapid City, SD. Because of the terrain and the
twisting access roads into the area, it is a high cost area, but
because of the 50 mile limit it will likely not qualify as remote.
Question Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question. A limited waiver for `Buy American' provisions was
provided for broadband projects, but specifically excluded from the
waiver were fiber optic cable, cell towers, and other facilities. Do
you feel the waiver adequately mitigates the higher cost structure
imposed on projects through Davis-Bacon wage requirements and Buy
American provisions?
Answer. It is my understanding that at least some of the fiber
optic and coaxial cable facilities used to provide broadband are
manufactured in countries that would not be exempt from the Buy
American restriction in the Recovery Act. While this restriction is not
applicable to private sector applicants, it could impede the use of
BTOP and BIP fund for public-private partnerships to provide broadband
to schools, libraries, and other government buildings. We believe NTIA
should extend its Buy American waiver to cover these restrictions.
Doing so would promote the development of public-private partnerships
to further the goals of the Recovery Act.
Response from Curtis W. Stamp, President, Independent Telephone &
Telecommunications Alliance
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question 1. What have been the greatest constraints for your member
companies expanding broadband to rural areas without government
financing?
Answer. The greatest constraints for mid-size carriers serving
rural areas, like ITTA's members, in deploying broadband to the
remaining parts of the country without access to broadband are: (1) the
high costs of deploying facilities in sparsely populated areas; (2)
fewer customer from who to recover those costs; and (3) the absence of
substantial grants, not loans to change this dynamic. The fundamental
elements of this calculus are the same no matter which broadband
technology may be used.
Compared with suburban and urban areas, the costs of deploying in
rural America on a per subscriber basis are much greater and,
therefore, in many instances investments would not be made under any
private investment scenario.
As I stated in my written testimony, although ITTA members have
aggressively invested to make fast and affordable broadband available
to about 80-90 percent of the consumers in their service areas, the
remaining consumers who currently do not have access to broadband are
the most expensive to serve. In these high-cost, rural areas, loans are
an inadequate tool for addressing the sharp disparity between revenue
and costs. The costs to deploy constitute a far more significant
impediment than the absence (or cost) of credit. ITTA's members are
committed to continuing to work hard to reach more and more unserved
consumers--it is their core business after all to bring broadband to as
many consumers in their service areas as possible. But, for the
foreseeable future, it will not make business sense to serve many of
those remaining customers without substantial stimulus grants. In
addition to the strides in expanding broadband availability that will
be made as the result of ARRA funding, some of the most rural and high
cots parts of the nation may not realize access to broadband without
additional governmental support.

Question 2. Can you give the Committee what your broadband adoption
rates?
Answer. ITTA members generally have a 36% broadband adoption rate
among their customers.

Question 3. Are you aware of any communities that are unserved
today that will not be eligible for grants because the community falls
within 50 miles of a community of 20,000?
Answer. Windstream Communications a member company of ITTA has
identified a number of communities in the districts of: Ranking Member
Conaway, Congressman Kissell, Congressman Marshall, and Congressman
Bright that are unserved today that would not be eligible for BIP
grants under the definition of remote areas. I would also add that
there is not a single community in the entire 7th District of North
Carolina that would eligible for BIP grant funding.
For the record, I would like to submit a list of sampling of
communities that would not be eligible for BIP grants under the
definition of remote. A complete list would be much larger. In
addition, I would like to submit to the record maps of the 7th District
of North Carolina, the State of Georgia, and the 11th District of Texas
that really demonstrates that some very rural parts of our country will
be excluded from 100% broadband grants.
Question Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question. A limited waiver for `Buy American' provisions was
provided for broadband projects, but specifically excluded from the
waiver were fiber optic cable, cell towers, and other facilities. Do
you feel the waiver adequately mitigates the higher cost structure
imposed on projects through Davis-Bacon wage requirements and Buy
American provisions?
Answer. ITTA member companies will comply with the Buy American
provision although we were disappointed that fiber optic cable was not
included within the limited waiver of the Buy American provision
contained in the NOFA. Construction cost, including labor and material,
remain the most expensive item in building new or rebuilding existing
plant. The Buy American provision limits the ability of companies to
shop around for the best priced products--lowering costs and maximizing
the number of Americans that are able to have access to broadband
through BIP and BTOP funding.
A large number of ITTA member company employees are represented by
unions today. Because of this representation, ITTA member companies
already comply with Davis-Bacon wage requirements as a part of their
union contracts.
Attachment 1
House Subcommittee on Rural Development, Biotechnology, Specialty
Crops, and Foreign Agriculture
July 14, 2009

List of Windstream exchanges that are located within 50 miles of a
town of at least 20,000 population. In these areas, the definition of
``remote'' will undermine deployment goals.

------------------------------------------------------------------------------------------------------------------------------------------------
8Congressman Mike Conaway, TX-110 8Congressman Larry Kissell, NC-080
Andrews Ansonville
Frankel City Lilesville
Lamesa Morven-NC
Harper Peachland-Polkton
Loraine Wadesboro
Blackwell Laurel Hill
Wagram
8Congressman Jim Marshall, GA-080 Albemarle
Ashburn Badin
Berlin New London
Danville Norwood
Doerun Oakboro
Fitzgerald
Funston
Gordon 8Congressman Bobby Bright, AL-020
Haddock Eclectic
Irwinton Kowaliga
Irwinville
Jeffersonville
Lake Sinclair
Montrose
Moultrie
Norman Park
Ocilla
Perry
Pineview
Pitts
Rebecca
Rochelle
Toomsboro
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Attachment 2

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Question Submitted By Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. You mention the 3 year build-out requirement in the farm
bill loan program. Please explain why 3 years is not sufficient.
Answer. Chairman McIntyre, as stated in my testimony, I contend
that due to telecommunication planning horizons, changes in technology
and regulatory environments that the 3 year build out needs to be
expanded up to 5 years. Projects such as the one that we currently have
under construction, as well as the one we have proposed under the
Stimulus Broadband Plan, which is 560 miles of fiber will take us at
best efforts 4 to 5 years to complete. We have had environmental issues
dealing with the Golden Cheek Wobbler and the Toe Bush Fish Cactus that
have delayed our construction for up to 6 months alone. Issues with
easements and right-of-ways are enormous in these types of projects.
And for small companies such as ours having the available manpower
becomes an issue as well. My experience with outside plant construction
projects of any size is the 3 year time lines gets really tight for
completion.
Question Submitted By Hon. K. Michael Conaway, a Representative in
Congress from Texas
Question. A limited waiver for `Buy American' provisions was
provided for broadband projects, but specifically excluded from the
waiver were fiber optic cable, cell towers, and other facilities. Do
you feel the waiver adequately mitigates the higher cost structure
imposed on projects through Davis-Bacon wage requirements and Buy
American provisions?
Answer. Congressman Conaway, we have a history and to my knowledge
the contractors that have worked for us, of paying the prevailing
wages. So the Davis-Bacon wage requirement is not an issue for us. We
don't see any issues with the limited waiver for the ``Buy American''
provisions. We contend these provisions will not inhibit us from
obtaining all the necessary equipment we will need to construct a
broadband project.