Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
October 5, 2000, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 1960 words
COMMITTEE:
HOUSE SCIENCE
SUBCOMMITTEE: TECHNOLOGY
HEADLINE: TESTIMONY RURAL ACESS TO TECHNOLOGY
TESTIMONY-BY: DAVID F. FREEMAN , CHIEF OPERATION
BODY:
October 5, 2000 TESTIMONY OF DAVID F. FREEMAN
CHIEF OPERATING OFFICER, ACE COMMUNICATIONS GROUP BEFORE THE COMMITTEE ON
SCIENCE, SUB COMMITTEE ON TECHNOLOGY Thank you for giving me the opportunity to
address you this morning. Your letter of invitation suggested that you would be
interested in hearing how Ace Communications Group and other small independent
telephone companies are deploying broadband services in rural Minnesota.
Deploying broadband services in rural areas is going to be costly and difficult.
Costs of providing DSL and other broadband services to rural
areas are much higher than providing the service to the more urban areas of the
country. But rural telephone companies like Ace are working to provide broadband
where it is economically feasible. Currently it is cost prohibitive to provide
broadband services in the most remote rural areas. Regulators must remember this
fact as they respond to the various pressures and rapid changes in technology.
The following are factors that contribute to rural LEC's (Local Exchange
Companies) higher costs: 1. Rural LEC's serve a more geographically dispersed
population. 2. Rural LEC's serve smaller exchanges. 3. Rural LEC's serve fewer
customers overall and lack economics of scale. Ace Communications Group is a
Cooperative serving over 25,000 access lines with 14 exchanges in Minnesota, 10
exchanges in Iowa and 5 exchanges in Michigan. Our average size exchange is 862
access lines and our smallest exchange serves 75 access lines in Granger,
Minnesota and our largest exchange serves 4,000 access lines in La Crescent,
Minnesota. Similarly, the average access lines per exchange for all LEC's across
rural America is 1275 compared to 11,000 access lines for the Bell Operating
Companies. Because small, rural LEC's serve fewer customers, we have less
opportunity to take advantage of economics of scale. This means higher per unit
cost for equipment. Ace Communications Group along with other LEC's in America
served fewer customers in larger geographic areas than our urban counterparts,
yet we provide the same or similar services. Ace Communications Group average
4.6 customers per route mile, all rural LEC's average 6.3 customers per route
mile, while the Bell operating companies on the other hand average 130 customers
per route mile of telephone line. Ace Communications Group average 10.9
customers per square mile served, all rural LEC's average 4.4 customers per
square mile, while the Bell operating companies on the other hand average more
than 330 customers per square mile served. It is important to remember that our
customers in rural Minnesota, Iowa and Michigan desire and need the same
services provided in the larger communities. Ace Communications Group has always
been at the forefront in embracing new technology and will continue to do so. In
1982 Ace installed its first digital switch; we connected our switches with a
fiber backbone in 1989, provided equal access by 1990, a local dialing Internet
connection was provided to our customers in December 1994 and SS7 (services such
as caller ID) were provided in 1995. We are currently in trial with
DSL service in two of our exchanges La Crescent and Caledonia.
Our budgets for years 2000 through 2002 to deploy DSL service
to customers in town or nearby are estimated at $644,000, $4,200,000 and
$4,000,000 respectively. By making the above expenditures Ace will have
DSL services available to 60 percent of our customers. In order
to economically reach the remaining 40 percent of our customers, current
technology will need to improve. Using available technology it would cost Ace
$29,718,000 to deploy DSL services to the remaining 40 percent.
According to a recent National Exchange Carrier Association (NECA) study, 65
percent of the lines belonging to its members in rural America will be broadband
capable by 2002. Today, in rural America DSL for the most part
has only been deployed by the small LEC's like Ace Communications Group, however
combined we represent less than 3% of the total access lines, its no wonder that
you have not heard of our accomplishments. At the end of 1999 16 percent of the
exchanges and 32. percent of the access lines served by the small LEC's had
DSL service available. In 1999 Minnesota had 80 small LEC's
serving 358,000 access lines which invested over $73,000,000 in technology. The
problem and expense of providing DSL service is that the
service is distance sensitive; customers currently must be within 12 to 18
thousand feet of the central office or a digital carrier system. In order to
provide quality voice service in loops over 18,000 feet the lines have to be
"loaded". Cable is "loaded" by placing inductors every mile or so along the
cable to maintain good frequency which blocks the higher frequencies needed for
DSL. Installing a distributed carrier system can eliminate
loading; customers are kept within 18,000 feet of a carrier system. In Section
706 of the Telecom Act, Congress directed the FCC to remove barriers to
infrastructure investment and promote competition if the Commission found that
"high-speed, switched broadband telecommunications capability" is not being
realized. Rural companies today are finding ourselves in the same predicament as
in the early part of the 20 th century when the general feeling was that
everyone should have telephone service, but that it was to expensive to provide.
Congress and the FCC are both directing telcos to rollout broadband services,
but aren't helping companies get the financial assistance needed to make the
necessary outside plant investments. In order for rural telcos to deploy
broadband services in the most rural areas Congress and the FCC need to provide
incentives and a predictable revenue source such as: 1. Universal Service
support for broadband on a per line bases. 2.Investment tax credits for
installing broadband equipment in the rural. 3.Assistance or tax credits for
employee technology education and training. 4. Support for RUS financing at low
interest rates. The definition of universal service must change from POTs
("Plain Old Telephone service") to PANs (Provisioning of Advanced Network
service"). Working together, we can make real progress in the deployment of
advanced services. Surveys conducted by various organizations indicate that many
small LEC's are either deploying advanced services, or have plans to do so in
the near future. Policymakers should reframe from requiring ubiquitous
deployment of advanced services and allow the dynamics of the marketplace and
technological development to continue the Thank you for the opportunity to
address you today.
LOAD-DATE: October 19, 2000,
Thursday 
