[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

BROADBAND: A CATALYST FOR SMALL BUSINESS GROWTH

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HEARING

before the

SUBCOMMITTEE ON HEALTHCARE AND TECHNOLOGY

OF THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

HEARING HELD
FEBRUARY 15, 2012

__________

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

Small Business Committee Document Number 112-054
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HOUSE COMMITTEE ON SMALL BUSINESS

SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
CHUCK FLEISCHMANN, Tennessee
JEFF LANDRY, Louisiana
JAIME HERRERA BEUTLER, Washington
ALLEN WEST, Florida
RENEE ELLMERS, North Carolina
JOE WALSH, Illinois
LOU BARLETTA, Pennsylvania
RICHARD HANNA, New York
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
MARK CRITZ, Pennsylvania
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
JUDY CHU, California
DAVID CICILLINE, Rhode Island
CEDRIC RICHMOND, Louisiana
GARY PETERS, Michigan
BILL OWENS, New York
BILL KEATING, Massachusetts

Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director

C O N T E N T S

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OPENING STATEMENTS

Page
Hon. Renee Ellmers............................................... 1
Hon. Cedric Richmond............................................. 2

WITNESSES

Mitzie S. Branon, General Manager, Yadkin Valley Telecom,
Yadkinville, North Carolina.................................... 3
Roger Bundridge, General Manager, NorthwestCell, Maryville, MO... 5
Darrell M. West, VP and Director of Governance Studies, Director
of the Center for Technology Innovation, Brookings Institute,
Washington, DC................................................. 7
Rebecca Sanders, Indiana Telehealth Network Director, Indiana
Rural Health Association, Plainfield, IN....................... 9

APPENDIX

Prepared Statements:
Mitzie S. Branon, General Manager, Yadkin Valley Telecom,
Yadkinville, North Carolina................................ 17
Roger Bundridge, General Manager, NorthwestCell, Maryville,
MO......................................................... 29
Darrell M. West, VP and Director of Governance Studies,
Director of the Center for Technology Innovation, Brookings
Institute, Washington, DC.................................. 39
Rebecca Sanders, Indiana Telehealth Network Director, Indiana
Rural Health Association, Plainfield, IN................... 47
Questions for the Record:
None.
Answers for the Record:
None.
Additional Materials for the Record:
Jerry James, CEO, COMPTEL Statement for the Record........... 63

BROADBAND: A CATALYST FOR SMALL BUSINESS GROWTH

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WEDNESDAY, FEBRUARY 15, 2012

House of Representatives,
Committee on Small Business,
Subcommittee on Healthcare and Technology,
Washington, DC.
The Committee met, pursuant to call, at 1 p.m., in room
2360, Rayburn House Office Building. Hon. Renee Ellmers
(chairwoman of the subcommittee) presiding.
Present: Representatives Ellmers and Richmond.
Chairwoman Ellmers. I call the hearing to order.
I want to thank the witnesses for your testimony and your
input today. We appreciate your participation at this very,
very important hearing today.
Access to broadband services has the potential to transform
the way small businesses and organizations fundamentally
operate. Small firms can communicate with potential buyers
around the world; family farmers can better monitor and manage
crop prices; and entrepreneurs can launch a website or
application from their living room. As a registered nurse and a
small business owner, I fully understand the benefits of a
modern health care facility with broadband access. More
importantly, broadband provides the gateway and opportunity for
economic growth and job creation, especially in the rural
areas.
While it is easy to understand the limitless benefits of
broadband Internet, those capabilities would not be available
if not for the contributions of our small business providers
like those represented here today. To keep up with the growing
demand, private sector enterprises have invested billions of
dollars to upgrade their network to provide faster and more
reliable services. It is because of these investments that we
can enjoy broadband at the workplace or on a wireless device.
However, there is still a severe shortage of network
infrastructure that limits many small businesses from utilizing
the broadband services. In particular, rural areas of states
are most likely to lack the necessary capabilities, as they can
be difficult and expensive to develop. This is the reason that
I introduced H.R. 2128, which is the Stripping the E-Prescribe
Arbitrary Mandate Act of 2011, which would prevent the federal
government from imposing penalties and fees on health care
providers who are not yet able to e-Prescribe.
Currently, there are a variety of federal initiatives aimed
at providing broadband to everyone in the United States. When
considering these policies, we must first ensure that the
regulatory changes do not diminish the incentive for private
sector investment in broadband infrastructure. Moreover, we
must strengthen our oversight on various programs to confirm
that federal dollars are being spent efficiently, and will
benefit small businesses in rural areas.
We have a distinguished panel of witnesses here today. I
look forward to hearing their thoughts on the importance of
broadband and how best to provide broadband to small businesses
across the United States. I now yield to Ranking Member
Richmond for his opening statement.
Mr. Richmond. Thank you, Chairwoman Ellmers, one for
recognizing me, and two for having this very appropriate
Committee hearing. And then thank you to Ms. Sanders, Mr. West,
Mr. Bundridge, and Ms. Branon for coming here today.
I think we can all agree that today's hearing will offer us
a great opportunity to examine the benefits and challenges of
broadband deployment. The technology and telecommunication
sectors are major contributors to the U.S. economy for engines
for economic growth with the potential to create at least one
million new jobs and keep over three million employees at work
in the broadband sector. Small firms stand ready and eager to
capture the economic gains produced by this technology.
Most small businesses are embracing broadband more than
ever before and it is rapidly changing the way business is
conducted. Innovative applications and services such as video
conferencing are helping small companies reduce costs, increase
productivity, and expand their businesses into new
marketplaces. We have seen the benefits broadband can bring to
our daily lives in a variety of ways. Those fortunate enough to
have access to broadband know how it improves efficiency while
reducing operator costs. Yet, in rural areas the percentage of
small businesses without broadband access is twice as high as
urban areas. Even though broadband subscriptions have steadily
increased, access in rural and low income communities is being
outpaced by the rest of the country due to a lack of network
deployment.
Beyond the access barrier there are cost issues. Small
firms pay two times more per employee for broadband than larger
firms. Unfortunately, the adoption gap may further widen
without adequate support for broadband deployment. Federal loan
and grant programs have helped economically disadvantaged
communities gain access to high speed Internet, resulting in
attracting business, lower unemployment rates, and skilled
workers. Eliminating the digital divide will not only assist
rural and low income communities, it will help our nation's job
creators.
By making the virtual marketplace more accessible, the bar
to entrepreneurship is lowered, which encourages job creation
throughout the economy. Broadband access has significantly
impacted tourism, agriculture, and rural health care. Improving
the ability of patients and practitioners to use electronic
medical records and telemedicine has been a top goal in
Louisiana. These investments have improved patient care and
resulted in a better integrated health system.
Today's hearing will focus on improving broadband access in
order to strengthen the small business economy. The insights
gathered today will enable us to make certain that policies
coming out of Congress and the FCC effectively support network
deployment. This Committee will ensure that the needs of small
firms are taken into account during the FCC's Universal Service
Fund reform process. Our country's continued leadership in
technological development depends on it.
In advance of the testimony, I want to thank all of the
witnesses who traveled here today for both their participation
and insights into this important topic. Thank you. And I yield
back.
Chairwoman Ellmers. Thank you to our ranking member.

STATEMENTS OF MITZIE S. BRANON, GENERAL MANAGER, YADKIN VALLEY
TELECOM, TESTIFYING ON BEHALF OF THE NATIONAL
TELECOMMUNICATIONS COOPERATIVE ASSOCIATION, ORGANIZATION FOR
THE PROMOTION AND ADVANCEMENT OF SMALL TELECOMMUNICATION
COMPANIES, AND WESTERN TELECOMMUNICATIONS ALLIANCE; ROGER
BUNDRIDGE, GENERAL MANAGER, NORTHWESTCELL, TESTIFYING ON BEHALF
OF THE RURAL CELLULAR ASSOCIATION; DARRELL M. WEST, DIRECTOR OF
THE CENTER FOR TECHNOLOGY INNOVATION, BROOKINGS INSTITUTION;
REBECCA SANDERS, INDIANA TELEHEALTH NETWORK DIRECTOR, INDIANA
RURAL HEALTH ASSOCIATION, TESTIFYING ON BEHALF OF THE NATIONAL
RURAL HEALTH ASSOCIATION

Chairwoman Ellmers. Our first witness is Mitzie Branon, who
is the general manager of Yadkin Valley Telecom in Yadkinville,
North Carolina. She has over 20 years of experience with the
Yadkin Valley and currently resides in Fall Creek, North
Carolina. She is testifying today on behalf of the National
Telecommunications Cooperative Association, Organization for
the Promotion and Advancement of Small Telecommunication
Companies, and the Western Telecommunications Alliance. Thank
you for being here, Ms. Branon, and we look forward to your
testimony.

STATEMENT OF MITZIE S. BRANON

Ms. Branon. Thank you for the invitation to participate in
today's discussion on the role of broadband access in the
start-up and growth of small business.
For the past two years I have served as general manager of
Yadkin Valley Telephone Membership Corporation, which is
headquartered in Yadkinville, and my remarks today are on
behalf of Yadkin Valley, as well as NTCA, OPASTCO, and WTA, and
their several hundred community-based members that provide a
variety of communication services throughout the rural far
reaches of the nation.
Our industry leads the way in deploying high speed
sustainable broadband to rural America, thereby providing an
incubator for small business ideas in rural America to be
implemented and flourish. America's 1,100 rural telecom
providers serve approximately 40 percent of the nation's
landmass, yet about 5 percent of the population, an average of
10 customers per square mile. Yadkin Valley serves over 26,000
customer lines and our 670 square mile rural service area in
the Piedmont portion of North Carolina. We employ 160 people,
and our 2011 operating revenue was about $34 million. We offer
1.5 megabit broadband to 96 percent of our service area with
much faster speeds offered to a majority of customers, and we
are working on a strategic network plan to deliver 25 megabit
broadband to the 55 percent of our customer base that does not
already receive it.
Rural providers are community focused. When Internet first
became widely available in the 1990s, Yadkin Valley donated
time and material to wire the local schools. Yadkin Valley
recently provided dedicated fiber circuits that connect a large
hospital in Winston-Salem to medical facilities in our service
area, empowering them to use state-of-the-art technology for
transmitting patient files and images. The efficiencies of our
broadband network mean more opportunity for small business to
start up and grow, and companies from around the world can
reach our customers through the Internet. Ever since Yadkin
Valley began operating in 1950, we have been proud to serve as
the only provider to the most rural areas of North Carolina
while other carriers chose to serve only the most profitable,
densely populated towns.
Broadband has become essential to doing business in the
United States. The Small Business Administration reported in
2010 that 90 percent of small businesses use broadband; 71
percent had a website; and over one-third are not satisfied
with their Internet speed. Small, rural, community-based
telecommunications providers alone contributed $14.5 billion to
the economy in 2009 supporting 70,700 jobs through employment
and purchasing goods and services. The Federal Universal
Service Fund was created to support quality, reliable telecom
service in high cost rural areas where low customer density,
vast distances, and rugged terrain deter even the most
optimistic business cases. Without universal service and
intercarrier compensation, which is a system by which carriers
compensate one another for the use of their networks, rural
carriers would be forced to drastically reduce service or
charge unaffordable prices, neither of which is consistent with
longstanding national statutory policy.
The FCC released its Universal Service Intercarrier
Compensation Reform Order on November 18, 2011, with the aim of
transitioning the program to explicitly support broadband
service in rural America. However, the FCC's order failed to
adopt provisions promoting broadband service in small rural
carrier service areas. It cuts existing cost recovery
mechanisms for rural carriers retroactively and it proposed
further notice of rulemaking with the potential for more cuts.
In sum, rural providers will be expected to do more with
less opportunity for cost recovery and do not even get the
regulatory certainty they sought as a further notice hinders
lending and investment. Reforming universal service and
intercarrier compensation properly is essential to achieving
our national goal of universal broadband access and to the
livelihood of thousands of job creating small businesses.
We can all be proud of our nation's broadband progress over
the past decade and the opportunities that broadband creates
for small businesses to compete and thrive. This success has
been made possible due to the unique cooperation between the
industry, the American people, and policymakers, a partnership
that will be essential to America's quest to secure and
maintain global broadband preeminence. Rural providers and the
rural associations are eager to continue working with you to
move forward aggressively to fulfill the national objective of
making broadband universally available.
Thank you for your attention to this matter.
Chairwoman Ellmers. Thank you so much, Ms. Branon. And I
failed to--you were well under our five minute time so I
appreciate that. And I did fail to mention to the rest of the
panel you will have five minutes to give your testimony. And if
you can see the lights in front of you, it will stay green. And
about the point where it is one minute left it will turn
yellow. And then you will get a red light after that. But we
are flexible here. We want to hear as much as we can, but if I
have to I will cut you off. So I appreciate that.
Our next witness is Mr. Roger Bundridge. See, I knew I was
going to get it wrong and I apologize. It is kind of a tongue
twister. Roger Bundridge.
Mr. Bundridge. Bundridge.
Chairwoman Ellmers. Bundridge.
Mr. Bundridge. Yes.
Chairwoman Ellmers. See, I kept putting another R in there.
That is my problem.
Mr. Bundridge. That is fine.
Chairwoman Ellmers. Roger Bundridge. He is the general
manager of NorthwestCell based in Maryville, Missouri. I did
say that correct. Yes?
Mr. Bundridge. Yes.
Chairwoman Ellmers. Is it Missouri to you or Missouri?
Mr. Bundridge. I use Missouri.
Chairwoman Ellmers. And the Maryville, okay.
Mr. Bundridge. Maryville. Yes.
Chairwoman Ellmers. It depends on where you are. I have
learned this.
Mr. Bundridge. That is right.
Chairwoman Ellmers. Okay. As he has held this position for
the past 10 years where he has helped to grow from 12 to 29
employees. He is testifying on behalf of the Rural Cellular
Association. Welcome, Mr. Bundridge.
Mr. Bundridge. Thank you, Chairwoman Ellmers.
Chairwoman Ellmers. I am going to get it right by the end
of this. So thank you for your testimony. And please proceed.

STATEMENT OF ROGER BUNDRIDGE

Mr. Bundridge. Chairwoman Ellmers, Ranking Member Richmond,
and members of the Subcommittee, thank you for the opportunity
to be here today. My name is Roger Bundridge and I am the
general manager for NorthwestCell.
NorthwestCell is headquartered in Maryville, Missouri, and
provides mobile voice and broadband services to customers in
five counties. NorthwestCell understands small business
operations because we are a small business with 29 employees,
one retail location, and 11 agent locations. We like to say
that we are big enough to serve you but small enough to know
you. I also serve on the Board of Directors for the Rural
Cellular Association, which represents over 100 competitive
wireless carriers just like NorthwestCell.
The areas that we serve are primarily rural and we take
pride in our commitment and support of these communities.
Smaller rural and regional wireless providers connect Americans
throughout their communities which allow them to innovate and
compete. For example, I recently met with a group of farmers
that will utilize our mobile broadband service along with iPads
to control and maximize planting and harvesting. NorthwestCell
also provides broadband data to the Nodaway County Sheriff's
Department so that officers can access critical databases in
real-time. NorthwestCell is the only company in our market that
is capable of providing wireless 3G broadband service in both
examples.
In order to be able to continue to serve rural America,
NorthwestCell and other competitive wireless carriers have four
critical needs. One, sufficient and predictable service through
the new universal service mechanisms; two, access to usable
spectrum; three, access to cutting edge devices; and four,
reasonable terms and conditions for roaming service.
First, like most of the RCA members, NorthwestCell
currently receives high cost support through universal service
funding to construct, maintain, and upgrade high quality
wireless networks at affordable prices in rural areas. Also,
like many RCA members, NorthwestCell stands to lose all or a
substantial portion of this funding as a result of the FCC's
recent USF reform efforts. As part of these efforts, the FCC is
working to establish the Mobility Fund to provide support for
mobile wireless services. Unfortunately, the $400 million in
annual non-Tribal support budgeted for the ongoing Mobility
Fund will not be sufficient to provide continued expansion. The
FCC must allocate additional funding. In addition, it is
critical that the funding be distributed based on a forward
looking cost model rather than a single winner reverse auction.
The use of reverse auction methodology will make it virtually
impossible for a small business to compete for funding for
mobile broadband.
Second, increased consumer adoption of mobile services and
the skyrocketing use of high speed data strains the carrier
spectrum holdings. As capacity is exhausted, a carrier must
acquire additional licenses either through the FCC auction or
on the secondary market. The FCC's authority to auction
spectrum expires this year, and it is important that Congress
extends this authority. In doing so, Congress must preserve the
FCC's flexibility to structure the auctions and license
services in a manner that promotes competition and allows small
businesses to participate.
Third, carriers have difficulties accessing the latest and
greatest devices. Exclusivity agreements between device
manufacturers and the largest carriers have limited the number
of devices available to small carriers where devices will only
work on a specific slice of spectrum. We need devices to
continue to expand our service.
Finally, roaming is critical to connectivity. Customers
expect their devices to work wherever they are. With the FCC's
Data Roaming Order last year, carriers are required to offer
roaming for both voice and data services at fair and reasonable
rates. The order is being challenged in court and the smaller
and regional carriers may be unable to provide their customers
with broadband roaming on the larger carriers' networks.
Despite these challenges, NorthwestCell and wireless
carriers like us play a critical role in the market. For us to
remain competitive in an increasingly consolidated industry and
to continue to expand service to difficult to serve areas, I
strongly urge you to support policies at the FCC and in
Congress that level the playing field and allow smaller
carriers to grow. One, with sufficient and predictable
universal service support for mobile broadband; two, for
competitive access to spectrum; three, roaming on commercially
reasonable rates; and four, to offer cutting edge devices.
Thank you again for the opportunity to participate today.
Chairwoman Ellmers. Thank you so much, Mr. Bundridge.
And now I am going to turn to Ranking Member Richmond to
introduce our next witness.
Mr. Richmond. Chairwoman Ellmers, it is my honor to
introduce to the panel and members in the audience Mr. Darrell
West. Mr. Darrell West is the director of the Center for
Technology Innovation at the Brookings Institution. He is the
author of 18 books and is the winner of the American Political
Science Association's Don K. Price award for best book on
technology. His current research focuses on technology policy,
the Internet, health care, education, and privacy and security.
Welcome, Mr. West.

STATEMENT OF DARRELL M. WEST

Mr. West. Thank you very much, Chairwoman Ellmers and
Ranking Member Richmond. I appreciate the possibility of
testifying before this Committee.
As each of you pointed out in your opening statements,
broadband is a crucial driver of job creation and economic
development. Researchers have found a strong link between
broadband innovation and overall economic prosperity. For
example, a World Bank study of 120 nations found that each 10
percentage point increase in broadband penetration adds 1.3
percentage points to a country's gross domestic product. So
there is a huge economic payoff in terms of investment in this
area. We are also seeing tremendous growth in terms of mobile
broadband in particular. Within four years it has been
estimated that mobile broadband will comprise about 80 percent
of the total broadband subscriptions. So it will become the
dominant means of Internet connectivity. The applications that
are enabled both by mobile, as well as fixed line broadband are
especially important for small businesses and rural communities
because these platforms have become the crucial areas for
innovation in entrepreneurship, health care, and in education.
But in order to gain the benefits of broadband innovation
there are three particular actions that we believe would
further economic development and help small businesses. The
first is in regard to the research and development tax credits.
We argue that Congress should extend and make permanent the
research and development tax credit. This is an example of our
national short sightedness. Oftentimes the R&D tax credit gets
extended on an annual basis. But rather than extend it over a
longer period of time it gets renewed episodically and never on
a very predictable schedule. This ends up creating uncertainty
and inefficiencies related to the vagaries of federal
policymaking. Many other countries basically have made this
permanent. They offer more favorable tax policies for
infrastructure, development, and investment. So we argue first
of all that we need to extend and make that tax credit
permanent.
Second, we support reasonable Universal Service Fund
reform. As each of you knows, our current fund dates back to
1997 when the Internet was in its infancy and there was little
social media or few mobile devices. We think it is time to
update our policies so that small businesses and consumers can
take advantage of 21st century digital tools. The world has
shifted from a communications model based on telephones and
mail to a digital economy that relies on the Internet, mobile
phones, e-commerce, and social media. But yet the billions
generated for the USF continue to focus almost exclusively on
phone services.
My Brookings colleague, Jeff Rosen, who is also a law
professor at George Washington University, has undertaken
research on the Universal Service Fund and he finds that the
programs are inefficient, they are expensive, and they are
redundant in what they provide. He finds examples where the
costs for terrestrial fixed line service is much more expensive
than mobile or satellite telephone services that are available
in those very same communities. He finds some communities have
multiple carriers each receiving high cost program subsidies.
So we think it is time to update the Universal Service Fund to
allow those living in underserved communities to use the funds
to cover both voice as well as broadband services.
We also support the idea of reverse auctions. David Wyld,
who is a professor in Louisiana, has undertaken research on
this. There are a number of federal agencies that already are
using reverse auctions--the State Department, the Defense
Department, and so on. He finds major cost savings of over 25
percent an increase in transparency. He also finds that more
than 80 percent of the winning bids out of these reverse
auctions have gone to small businesses. So they do not really
benefit large companies; it is actually small companies.
We support the use of incentive auctions in the spectrum
area to reallocate a scarce spectrum. We think this is a good
way for Congress not just to raise money for the federal budget
but also provides a mechanism for companies to sell their
unused spectrum. We think that the FCC should have the
authority to set up the eligibility requirements for these
auctions and also provide the licensing conditions that would
then allow them to attach some provisions in order to further a
particular goal. So with these actions we think small
businesses would have a fair opportunity to gain the benefits
in the new digital economy.
Chairwoman Ellmers. Thank you so much, Mr. West.
And our final witness is Ms. Becky Sanders. She is the
director of the Indiana Telehealth Network based in Terre
Haute, Indiana. She oversees the development and network
administration of their 60 remote health care facilities. She
is testifying on behalf of the National Rural Health
Association. Welcome. You have five minutes for your testimony.
Thank you.

STATEMENT OF REBECCA SANDERS

Ms. Sanders. Thank you. Good afternoon, Chairwoman Ellmers,
(coughed), Ranking Member Richmond, and members of the
Subcommittee. I am honored to stand before you today. Thank you
for the opportunity to testify today on behalf of the National
Rural Health Association and the Indiana Rural Health
Association.
As Representative Ellmers said, the Indiana Telehealth
Network has about 60 members right now. We are one of the 50
remaining projects under the FCC's Rural Health Care Pilot
Program. That program does allow for 85 percent subsidies for
construction and monthly recurring services for rural health
care providers.
We have 35 critical access hospitals in the state of
Indiana, about 20 of them are participating in our network. We
also have about 20 community mental health centers
participating in our network. We have found that with the
buildout of over 200 miles of fiber constructed through the
Federal Communications Commission's Rural Health Care Pilot
Program and the objective scoring process that is part of the
Pilot Program, that it is the rural telephone companies who
have been our most successful vendors. That is their market.
They are friends and neighbors of the rural folks that are
operating the hospitals, clinics, and the banks in the rural
communities we serve. We have six very strong examples of
public-private partnerships between local economic development
organizations and health care organizations. The average
standard fiber construction costs are about $44,000 per mile.
While I agree with my colleague Mr. West that it is more
expensive than a wireless setup, health care providers will not
rely on wireless to do their day-to-day business for
telepharmacy, for radiology, for transferring electronic
medical records. They do not believe that it has the five nines
of reliability that the PSTN was built upon.
Based upon our experiences with the Rural Health Care pilot
program, and the regular primary RHC program, we have found
that there are a lot of administrative burdens, a lot of
cumbersome forms that have to be filled out. When thinking
about USF reform I would argue that streamlining these
programs, and continuing to allow consortiums to work together
in a public-private partnership arena is the best way to move
forward.
Universal Service Reform needs to happen but there still is
a large need for subsidies. When telephone companies like
Yadkin Valley Telephone were built about 100 years ago, many of
them formed co-ops. Farmers and the rural communities that came
together with doctors in the rural communities that wanted to
have reliable phone service in areas that larger
telecommunications companies would not serve. If we look at
that kind of model again and we look back to those types of
cooperatives, I think we will find a very good model going
forward as we look at rolling out broadband to all Americans
across the nation.
Just a couple other things. We talk about America being the
land of the dreams and I thought it was very interesting last
night in Washington, DC, in my hotel when I was trying to do
some final research for my comments today, that I did not have
adequate wireless access in my hotel room to do what I needed
to do. There are huge opportunities across the nation for
wireline providers, and for wireless providers to work together
to bring broadband services to Americans. In those communities
that I mentioned where we have very good public-private
partnerships, it was the local economic development
organizations that came to me and said, ``Hey, I hear that you
have this program that can help us get fiber to our community.
Not only is it going to help the hospital; it is going to help
the community. I have businesses that want to relocate here
that will not do it unless we have reliable broadband in our
community. So what do we need to do to sign on?''
Thank you for your time today.
Chairwoman Ellmers. Thank you. Thank you so much, Ms.
Sanders. And we will go right into questions. Thank you all for
your opening statements. I will start with questions. This
question is for everyone on the panel. And Ms. Sanders, since
we ended with your testimony I will start with you first.
The National Broadband Plan sets the goal of providing
affordable broadband coverage to every American in the next
decade. How would you evaluate the government's performance so
far? That is a big question. And how are you working to help
reach these goals? And I know, Ms. Sanders, you have already
addressed some of those. So, please, if you will.
Ms. Sanders. When you look at the National Broadband Plan--
I believe it is in section 10--and in my written testimony I
have included some exhibits that talk about the needs for
health care providers; a minimum of five megabits for a single
physician office is the recommended broadband connection for
electronic medical records. For those in the health care
industry, the adoption of Meaningful Use and electronic medical
records is very important, in coming years healthcare providers
will be penalized for not adopting electronic medical records.
That is one of the reasons that adequate broadband access is so
important.
Programs like the USF Rural Health Care Program are a huge
step forward. It has taken a lot of time to put our program
together but I think we are at the tip of the iceberg. And as
the years progress and as we continue to build trust and
relationships with all of our health care participants and the
vendors that we are working with, we will begin to see the
benefits of what we have built.
Mr. West. I would say that we have made tremendous progress
in the national broadband area. Certainly, when you look at
some of the interesting new applications that have cone online
in terms of health care and education in particular, there are
lots of exciting new things. But I think there is still a lot
of work yet to be done. The general criticism that I would have
is I think we just need more flexibility in how we are using
the dollars. I mean, I think we are still tied to a telephone
landline model in an era where we are moving from telephones to
digital outreach. And even within the digital sphere we are
moving from fixed lines to mobile. Within five lines most
applications are going to be mobile. And I think even in the
health care area there are exciting new opportunities
developing in mobile health. We have done studies at Brookings
in terms of some of these new programs that are going online.
So I would just encourage Congress and certainly the various
federal agencies to try and build a little more flexibility
into some of these programs.
Mr. Bundridge. Speaking on behalf of NorthwestCell, my
company in the last 10 years has constructed from 12 cell sites
to 29-35 cell sites, I apologize. And we have even included 3G
wireless service. I mentioned a couple examples where we have
3G service and we have been able to support farmers and public
safety agencies. We have done this through the support of USF
and the system that we have been currently using has been
working. And for the past three years our company has been
under a cap and still we are not contributing to the growth of
the fund. So we are still continuing to offer broadband service
in our region. And we continue, in order to migrate to 4G
services and support the growth of mobile broadband service we
need to continue to receive funding to help do that in unserved
areas.
Ms. Branon. At Yadkin Valley Telephone we have made a lot
of progress towards our broadband deployment. Since 2005, we
have spent a little bit over $40 million on fiber to the home.
We have not gotten to all of our customers yet but we are
certainly working on that and we are constantly hearing from
small businesses how they need more speed, more speed. And we
are able to do that with the fiber but even now with the
download speeds that we are offering in those areas up to 25
meg, we are now hearing they would have demands for higher
speeds, the upload speeds.
So they want it both ways now and that is a requirement.
And we have also seen a lot of small businesses in our
territory taking advantage of the broadband. We recently had a
company, Southern Farm Supply, and we installed 12 computers
there. We actually are their IT provider as well. And obviously
they are--and they use our firewall service also, so they are
using the Internet for their business and they are in our area.
We have another trucking dispatching company that has been able
to put people in their homes to work out of to do the
dispatching because of the broadband that we provide to them.
So that has been a great efficiency builder for them and has
enabled those people to work out of home.
We have also had a couple of different companies who have
bought IP phone systems. They are in the rural areas and these
enable them to connect with other companies outside of our area
as if they are on the same phone system. The IP system is doing
great.
As far as the broadband plan, we were fortunate enough to
last year receive the loan grant dollars. So that is going to
enable us to get even to the more rural areas where you have
hardly, you know, very, very few customers per mile. But we can
only use that money in underserved areas. We cannot use that in
our home territory, but we are taking advantage of that. And
that is working along well.
We are striving to get 25 meg out to all of our customers
over the next several years but with the regulatory uncertainty
with the Universal Service Fund, you know, it really makes us
weary of really committing ourselves to a lot of investment
right now and not knowing what the future is going to be
because we really rely on the universal service and
intercarrier compensation to help us recover the cost of our
network.
And we have a lot of users on our network. You know, we
have long distance carriers and we work with the wireless
carriers to carry traffic. So lots of times for the heavy
traffic, when it hits a tower they then connect to our fiber,
which you have to have that to be a carrier for the heavy data
usage that is coming and is already here. Thank you.
Chairwoman Ellmers. Thank you. And I have one more question
for now and this question is for Ms. Sanders.
In your testimony, or excuse me, let me back up. I am
looking at the wrong one. Earlier today the Gallup Poll
actually put out some poll data that I think speaks volumes.
Forty-eight percent of small businesses are not hiring new
employees due to rising health care costs; and 46 percent are
focused on uncertainties in the new government regulations.
So my question for you is the effect of the broadband on
health care. Do you feel, or how do you characterize the access
of broadband in reducing the costs of health care for your
facilities? And do you believe it has helped small business
health care facilities become more independent and viable?
Ms. Sanders. That is a really good question. I wish I had a
crystal ball.
There is a lot of uncertainty in health care reform as well
as Universal Service Reform and intercarrier compensation. And
the answers to those questions will help us solve and answer
this question.
From the rural health practitioner standpoint, I have seen
a lot of use of telemedicine over our network and other
networks that we have been in touch with. With electronic
medical records, just like any new technology, or any new
procedure, there is a little bit of chaos at the beginning, but
once things calm down most practitioners are finding that they
are able to see more patients and be more productive with
electronic medical records.
Now, in a telehealth situation, a specialist could stay in
an urban area and see patients all over the world. That makes
for an even more productive workday. Without telehealth, many
physicians today from metropolitan areas in Indiana will spend
one day a week on the road, traveling to various rural sites
and see patients, maybe once a month in any given rural
community. The physicians have a lot of travel time on the
road. They are not nearly as productive as they could be over
telemedicine.
Chairwoman Ellmers. Thank you so much for that input.
And now I am going to yield to Ranking Member Richmond for
his questions.
Mr. Richmond. Thank you, Chairwoman.
I will start with just a small story. My mother is from the
poorest place in the country, which is Lake Providence,
Louisiana. When we talk about broadband and we talk about how
that affects small and poor communities, when I visit there,
the restaurants lose money and the hotels lose money because I
will not say there. I will drive 30 miles to Vicksburg so that
I can have broadband and cell service as opposed to staying in
my mother's hometown and renting a hotel and eating there at
night. And we typically do not think about the economic
development in those terms. But if you do not have it, you are
not staying there, especially people who are hooked to their
devices and people who have to use it for their business. I
guess I will start with Mr. West for my first question then.
We have heard a lot of compelling testimony that broadband
connectivity has become a critical economic driver of the U.S.
economy. Small firms in particular rely on broadband networks
to expand their markets and become more competitive. To that
extent, do you believe that broadband-related dollars could
translate quickly into jobs for American workers?
Mr. West. Absolutely. I mean, broadband is clearly a huge
driver of job creation. As I pointed out in my testimony, if we
just increase people's access to broadband we are going to
raise GDP on average 1.3 percentage points. So right now the
United States is roughly at about a 70 percentage Internet
usage level so there still are 30 percent of Americans who are
outside the digital revolution. So if we can just improve
access by getting costs down and by improving digital literacy
programs we can get broadband out to underserved communities,
both in rural as well as in urban areas, there is going to be
an economic payoff. Small business is going to be a big
beneficiary of that because a lot of the high tech jobs really
are being created at the small business level. So anything we
can do to ease the regulatory burden, improve access, and boost
Internet broadband usage is going to pay off economically.
Mr. Richmond. Thank you. And Mr. Bundridge, considering
what Mr. West just described, I guess looking at the reports by
the FCC and USDA with the impact of broadband on farming and
tourism, for small rural carriers how do you promote greater
adoption among small businesses in your local communities?
Mr. Bundridge. I think since I live within the areas that I
serve I have a personal relationship with those small
businesses and the people in those communities. Within my
market we have a county, Worth County, Missouri, and it is
actually one of the poorest counties in Missouri. There are
2,000 people in that county, and my company decided to go in
and build a cell site there five years ago. I received a
petition from somebody there within the community wanting
service and so we moved forward on that. We started off. We
worked with the city and we put something on a water tower. It
just let us come in here and at a low cost try to create some
service for you. And we went in and did that and we started
getting customers out of it. So the perception that it was a
poor county caused companies to stay out of it. Today we have--
over 50 percent of the customer base there has our service and
in turn, since they have our service, you know, we find
ourselves supporting the schools and the small businesses
within that community on a regular basis since it is, you know,
since we have such a large customer base there now as a
percentage of the customers.
So I think to go into some of these communities in these
rural areas that you mentioned, there is a lot of need there.
And there are a lot of people that need broadband, mobile
broadband, along with fixed broadband services. And companies
like ours are the ones that are going to go in there since we
have a personal relationship with those communities to build
that out.
Mr. Richmond. Ms. Branon, we know that many of the rural
service providers face high deployment costs associated with
serving low density areas. How is your business dealing with
those costs? And as an industry, where do we stand with respect
to deployment of broadband services in rural and high cost
areas?
Ms. Branon. We have, like I mentioned a minute ago, we have
taken advantage of the BIP Loan Grant. We received a $22
million half loan, half grant, and we look advantage of that.
We have slowly started, you know, we started building out our
fiber to the home network, which goes to homes and businesses
in 2005. And as far as the high cost with that, we were
fortunate that we did not have to borrow a lot to do that but
ongoing we are going to have to think about ways we are going
to have to do things differently. And that is where the whole
thing with the Universal Service Fund is very scary for us
because we are not sure how we are going to be able to move
forward with that uncertainty with what is going on with that.
Mr. Richmond. With the grant that you all received, what
was the process like to get it?
Ms. Branon. It was very cumbersome. A lot of paperwork. It
took us, you know, we had to hire outside engineers to help us
do the paperwork. There was so much involved with that. We had
to do in-depth analysis of who else was serving in those areas,
if we had competition, and were they truly underserved? Because
they had to be underserved to get that dollar. So we spent a
lot of money doing the application. And then we had to go
through the waiting process to see if we were going to get it.
You know, we put in a lot of dollars to get that loan grant.
Mr. Richmond. Do you have any idea how much you all spent?
Ms. Branon. Just the pre-loan work, I would say $100,000 to
$150,000 pre-loan.
Mr. Richmond. Madam Chairwoman, I yield back now and then
we can see if we can kind of get through.
Chairwoman Ellmers. Just so you are aware, I have another
question I would like to ask all of you. It is really kind of a
three part question but we have been called for a vote so we
are going to continue on but they will hold it open. So we have
got a few more minutes.
Basically, my last question for all of you is how do you
keep track of the variety of federal regulations that are
coming down in Washington, number one. And how does this
influence your business strategy? And lastly to that question I
would like to ask you, if you could eliminate one federal
regulation, what would it be?
And I will start with you, Ms. Sanders.
Ms. Sanders. Wow. Can I go last? Keeping track of things,
the Indiana Rural Health Association has 13 employees--or I am
sorry, 12 employees. We do our best to keep track of things. We
each have our own little areas that we keep an eye on as far as
federal grants, that type of thing. It is very difficult to
know.
For example, yesterday I was at a meeting. We were talking
about rural EMS services and somebody said, ``Oh, hey, did you
see this grant? This would be perfect for you guys.'' I had no
knowledge of it so she sent it over.
In an effort towards reducing paperwork, and administrative
work, we use grants.gov. But if there was a better way to
consolidate all of the different grants it would be very
helpful. For example, we have talked about BIP and BTOP a
little bit, as well as USDA funding. Keeping track of all of
the different grant opportunities is a very difficult process.
And to reduce legislation, not necessarily legislation but
just streamlining of government programs more work between
government agencies. As a FCC rural health care pilot program,
we looked at BIP and BTOP. We estimated maybe $100,000 on
paperwork to try and apply for that. We did not have it. WE did
not have the manpower. We did not have the money to hire
anybody to do it. So we could not even think about taking
advantage of that particular program.
The more that the federal government can do to streamline
the processes and reduce administrative burden, the better off
we all will be.
For example, the FCC Pilot Program does not include any
administrative assistance at all. So we had to go to outside
sources or resort to membership fees to cover our own costs.
Chairwoman Ellmers. Thank you. Mr. West.
Mr. West. I will try and keep my comments brief because I
know you have time constraints.
I agree with many of the comments that have been made and
certainly, you are right. There are a huge number of federal
regulatory requirements that stifle innovation, especially in
the technology area, so whatever we can do to ease the burden
there would be helpful. One particular thing that I would
highlight in terms of things the federal government could do is
to keep free and unlicensed spectrum because I think
particularly when you are thinking about the small business
community, it is the freedom and license spectrum that, you
know, mothers use for baby monitors, people with smartphones
use to access the Internet, and a wide variety of small
businesses use to communicate with their customers. And so, you
know, in the recent budget debates there has been a proposal to
kind of limit the free and unlicensed spectrum. I think that
would be devastating for small businesses and would have a very
negative impact on entrepreneurs.
Chairwoman Ellmers. Thank you.
Mr. Bundridge. I depend on my trade organization, Rural
Cellular Association, to keep up on issues. As far as your
question what burdens our companies, there are many things. I
would tend to think though the administration or administrative
burdens and streamlining policies that help foster small
businesses like mine to compete.
Chairwoman Ellmers. Thank you.
Ms. Branon. At Yadkin Valley, we rely heavily on NTCA,
which is the National Telephone Cooperative Association. They
do a great job of keeping us informed. We do also use some
consultants for that kind of thing, who help us do some
regulatory things that come across. New things that we have not
dealt with before, we rely on those outside consultants. And I
will have to agree with them; the administrative, you know, all
the paperwork, all the extra things we have to do, especially
like with the loan grant. We just went through an audit with
that and there is a lot of time involved. We had a RUS auditor
just left earlier this week and it is a lot.
Chairwoman Ellmers. Ranking Member Richmond will have
another question.
Mr. Richmond. Right. Hopefully we can keep it short. I am
not as confident as the Chairwoman, especially being in the
minority and being a new member that they are going to keep the
machine open for me. And the truth of the matter is as soon as
they get to the votes I think the Chairwoman is in trouble,
too, as soon as they get to the number they need.
Seriously, looking at, the recommendations that have come
from you all, I was trying to take notes. One was leveling the
playing field, predictable universal service support,
competitive access to spectrum, roaming, commercial reasonable
rates and availability of cutting edge, interoperable devices,
and making the R&D tax credit permanent so that people can
properly plan and know that it is going to be there and can
invest and calculate their business model accordingly. Is there
anything else that you can think of in like a minute or so that
we should look at that can be a legislative fix or something
through the administration that you think could help what we
are trying to accomplish?
Mr. West. I mean, one issue I would highlight is the need
for digital literacy programs because particularly with that 30
percent of Americans who are outside the Internet revolution, I
mean, some of it is costs, so reducing costs will help. But for
a fair number of these people it is like they do not know how
to use the Internet, they do not know how to set up their
computers, they do not know the virtue of the computers. I grew
up on a farm and I remember earlier the United States had the
Agricultural Extension Service to kind of go out and train
people on new techniques. For the digital world we need to
think about the same type of thing.
Mr. Bundridge. I think about education. Looking at e-
readers. A lot of people in these small communities do not have
access to Internet. If they could access Internet through an e-
reader, through a mobile product, or a fixed product, then I
think that would drastically help our education.
Chairwoman Ellmers. Ms. Branon.
Ms. Branon. I do not really have a comment about that right
now.
Mr. Richmond. Thank you very much.
Chairwoman Ellmers. Thank you. And thank you to all of our
distinguished panel today for your participation. Your input is
very important to us.
This Subcommittee will continue to closely follow the
actions of the federal government in expanding broadband to
small businesses. I look forward to working with my colleagues
to ensure that the federal policies do not obstruct the private
sector investment in broadband infrastructure, as this will
have an adverse impact on small businesses and their ability to
grow.
I ask unanimous consent that members have five legislative
days to submit statements and supporting materials for the
record. Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 1:50 p.m., the Subcommittee hearing was
adjourned.]

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