<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:73403.wais]
BROADBAND ACCESS IN RURAL AREAS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY REFORM
AND OVERSIGHT
and
SUBCOMMITTEE ON RURAL ENTERPRISES,
AGRICULTURE AND TECHNOLOGY
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC, MAY 17 & 24, 2001
__________
Serial No. 107-9
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
73-403 WASHINGTON : 2001
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE G. BARTLETT, Maryland California
FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois
SUE W. KELLY, New York WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio DONNA M. CHRISTIAN-CHRISTENSEN,
PATRICK J. TOOMEY, Pennsylvania Virgin Islands
JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania
JOHN THUNE, South Dakota TOM UDALL, New Mexico
MIKE PENCE, Indiana STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado
TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island
SHELLY MORRE CAPITO, West Virginia MIKE ROSS, Arizona
BRAD CARSON, Oklahoma
ANIBAL ACEVEDO-VILA, Puerto Rico
Phil Eskeland, Deputy Staff Director
Michael Day, Minority Staff Director
------
Subcommittee on Regulatory Reform and Oversight
MIKE PENCE, Indiana, Chairman
LARRY COMBEST, Texas ROBERT BRADY, Pennsylvania
SUE KELLY, New York BILL PASCRELL, Jr., New Jersey
SAM GRAVES, Missouri CHARLES GONZALEZ, Texas
ROSCOE BARTLETT, Maryland DAVID D. PHELPS, Illinois
TODD AKIN, Missouri JAMES R. LANGEVIN, Rhode Island
PAT TOOMEY, Pennsylvania ANIBAL ACEVEDO-VILA, Puerto Rico
Barry Pineles, Professional Staff Member
------
Subcommittee on Rural Enterprises, Agriculture, and Technology
JOHN THUNE, South Dakota, Chairman
ROSCOE BARTLETT, Maryland TOM UDALL, New Mexico
FELIX GRUCCI, New York DONNA M. CHRISTIAN-CHRISTENSEN,
MIKE PENCE, Indiana Virgin Islands
VACANT DAVID D. PHELPS, Illinois
BRAD CARSON, Oklahoma
Brad Close, Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on May 17, 2001..................................... 1
Witnesses
Nolley, Robert, Founder & President, Tubesock.Net................ 5
Reich, Gene, Telehealth Coordinator, Avera St. Luke's Hospital... 8
Imus, Marvin, Owner, Paw Paw Shopping Center..................... 9
Linkous, John, Executive Director, The American Telemedicine
Association.................................................... 12
Stark, Nancy, Director, National Center for Small Communities.... 14
Appendix
Opening statements:
Pence, Hon. Mike............................................. 65
Thune, Hon. John............................................. 68
Udall, Hon. Tom.............................................. 71
Prepared statements:
Nolley, Robert............................................... 74
Reich, Gene.................................................. 82
Imus, Marvin................................................. 84
Linkous, John................................................ 92
Stark, Nancy................................................. 98
Additional Information: Letter to Congressman Pence from
Congressman McInnis............................................ 106
Hearing held on May 24, 2001..................................... 31
Witnesses
Cook, Michael, Vice President & General Manager, Spaceway &
Hughes Network Systems......................................... 36
Kelly, Thorpe, Sr. V.P., Western Wireless Corp................... 38
McAdams, Susan, V.P., New Edge Networks.......................... 41
Houdek, Randy, Sulley Buttes Telephone Cooperative............... 43
Campbell, Kirby, CEO, Armstrong Group of Companies............... 46
Appendix
Opening statements:
Pence, Hon. Mike............................................. 114
Thune, Hon. John............................................. 117
Prepared statements:
Cook, Michael................................................ 121
Kelly, Thorpe................................................ 127
McAdams, Susan............................................... 138
Houdek, Randy................................................ 142
Campbell, Kirby.............................................. 150
Additional Information:
Prepared testimony of Thomas Cohen, Coordinator, Americans
for the Digital Bridge..................................... 169
Prepared testimony of Bob Phillips, President & CEO, National
Rural Telecommunications Cooperative....................... 174
Press Release of OPASTCO..................................... 179
Letter to Chairmen from David Stephens, Chairman & Co-
Founder, OnSat Network..................................... 182
ECONOMIC DEVELOPMENT IN RURAL AMERICA, SMALL BUSINESS ACCESS TO
BROADBAND
----------
Thursday, May 17, 2001
House of Representatives, Subcommittee on
Regulatory Reform and Oversight, Subcommittee
on Rural Enterprises, Agriculture and
Technology, Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:07 p.m., in
Room 2360, Rayburn House Office Building, Hon. Mike Pence
[chairman of the subcommittees] presiding.
Chairman Pence. I would like to call to order this joint
hearing of the Subcommittee on Regulatory Reform and Oversight
and the Subcommittee on Rural Enterprises, Agriculture and
Technology of the Committee on Small Business. This joint
hearing is entitled Economic Development in Rural America--
Small Business Access to the Broadband. And I will be welcoming
our guests individually, but as Chairman of the Subcommittee on
Regulatory Reform and Oversight, I have a few brief remarks, as
does my colleague and friend, Chairman of the other
Subcommittee that serves as a host today, and then we will hear
also from the Ranking Member of that Subcommittee before we
receive testimony.
Our hearing held jointly today with my good friend from
South Dakota's Subcommittee on Rural Enterprises, Agriculture,
and Technology addresses the new economy and the technology
needed to ensure that rural areas can share in the global
business opportunities that arise from continuing penetration
of the Internet. This is the second in a series of hearings
that the Subcommittee on Regulatory Reform and Oversight has
held on the Internet-based economy. Today's hearing focuses on
the so-called digital divide, the lack of high-speed or
broadband access to the Internet currently plaguing rural small
businesses and the importance that broadband access will play
in the continued economic prosperity of rural small businesses.
Next week, the Subcommittees will examine the technologies and
providers who will help bridge the urban and rural digital
divide. I would like to thank the gentleman from South Dakota,
Chairman Thune, for agreeing to cochair these very timely and
important hearings.
Since the advent of the Industrial Revolution in England in
the late 1700s, infrastructure development has been a key
component of economic development. Location always has been a
critical component for building infrastructure. Villages in the
late 1700s that were not located near a stream that could be
used for steam generation often missed the prosperity of the
early Industrial Revolution. Towns in the late 1800s that were
not served by railroads faced economic stagnation. Counties
bypassed by interstate highways lost substantial growth
opportunities as the economy moved from rail transportation to
cars and trucks. Cities without adequate air transportation
links cannot attract companies in a national and even global
economy.
Today communities that do not have broadband access to the
Internet face the same barriers to economic development that
communities, mostly rural, faced in previous generations when
the mills, railroads, highways and airports passed them by.
Without broadband access, rural communities will be unable to
entice businesses that rely on the Internet to relocate and
take advantage of the many qualities that rural communities
offer. The other benefits, low crime, inexpensive housing, lack
of traffic, clean air and a connection with one's neighbors are
things that are missing in the booming metropolises of this
country. All these things taken together are the competitive
advantage of our small towns and of rural America at large.
Broadband access also provides small businesses with new,
more efficient ways to conduct their operations. There are some
great examples of how technology is changing business in
unexpected ways. Who would have predicted that ranchers would
be transmitting bids in cattle auctions over the Internet?
Finally, broadband access will provide rural communities with
access to information and resources that at one time would have
necessitated visiting or locating in metropolitan areas.
Ultimately broadband access will invigorate rural economic
development and not force young people in rural areas to leave
home in search of the American dream.
Rural areas and businesses should not be deprived of their
opportunity to prosper because they do not have access to high-
speed Internet connections. The witnesses at this hearing will
explain the vital role that broadband access plays or can play
in their businesses. Furthermore, they will discuss the
importance of broadband access to economic development in rural
areas.
I look forward to hearing from all of the witnesses today,
particularly my own constituent Robert Nolley, the founder of
the ISP Tubesock.net, who provides a valuable service to the
residents and businesses of Shelbyville, Indiana, by bringing
them access to the Internet.
I will now recognize my cochair for this hearing, the
gentleman from South Dakota, Mr. Thune, for his opening
statement. After his opening statement, I will then recognize
the Ranking Member of Mr. Thune's Subcommittee Mr. Udall. I
would also take note that the Ranking Member of my Subcommittee
Mr. Brady had a death in the family and could not be with us
today.
So with that I recognize my co-Chairman Mr. Thune for his
opening remarks.
[Mr. Pence's statement may be found in appendix.]
Chairman Thune. I thank the gentleman from Indiana for his
openings remarks and want to say good afternoon. It is a
pleasure to welcome our panelists to this joint hearing between
the Subcommittee on Rural Enterprises, Agriculture and
Technology, which I chair, and the Subcommittee on Regulatory
Reform and Oversight, which is chaired by my colleague from
Indiana Mr. Pence. I also want to acknowledge Mr. Udall,
Ranking Member of our Subcommittee, and appreciate his
participation here today and am looking forward very much to
the testimony we have before us.
We want to thank those of you who have traveled long
distances to be here to participate in this hearing.
Today's hearing is the first of two hearings that will
focus on the issue of broadband telecommunications access to
rural America. This afternoon we plan to examine a critical
role that small business access to broadband services will play
in maintaining the economic health of our rural communities.
Throughout our Nation's history there have been significant
events that help connect all of America. In the 18th century it
was the creation of the river and canal systems. In the 19th
century the railroad system was built, and in the 20th century
we spent significant energybuilding a national highway system.
All of these transportation systems served to connect rural America and
small business owners with the rest of the population and were crucial
in bringing economic prosperity to our communities.
Advanced telecommunication services are just as important
to our future. As our economy becomes more and more dependent
on the Internet for growth, we must ensure that rural America
is not left behind. Without high-speed Internet and
communications access, more sparsely populated areas will find
it difficult to improve economically. Farmer and ranchers to
health care workers and retail store owners, people are
realizing that if they want to maintain a viable business and
serve their community, they must have access to advanced
telecommunications service. In addition, for States with
predominantly rural populations, being able to offer the latest
technology is crucial to luring new business and providing
jobs. It is no longer enough to offer a probusiness
environment. Advanced technology has to be available.
Broadband access may also help to stem population loss to
rural areas. Citizens will no longer be compelled to leave
their towns and communities in higher paying jobs and
challenging careers, and telecommuting may well become a
reality for many workers in rural areas.
I look forward to hearing from our witnesses and thank you
all for participating in today's hearing.
I also have a gentleman from my home State who I would like
to introduce at the appropriate time. But I look forward to the
testimony and the opportunity to address this issue and
hopefully shed some light on what I think is a very important
issue to rural America, and certainly to all of America. Thank
you, Mr. Chairman.
[Mr. Thune's statement may be found in appendix.]
Mr. Udall. Mr. Chairman. Thank you very much, and welcome
to the panel, Chairman Thune and Chairman Pence. I am pleased
to be here today for our first joint Subcommittee hearing to
examine the impact that broadband telecommunications services
have on small business in rural areas.
Over the last decade we have witnessed how the Internet has
revolutionized our economy, the way we teach our children,
provide medical services and even conduct our everyday business
from shopping to communicating. However, about 86 percent of
Internet delivery in the United States is concentrated in only
the 20 largest cities. Rural America and its communities are
not a part of the information highway and instead are in danger
of losing ground to urban areas that can attract jobs and have
access to affordable high-speed service and a strong
telecommunications infrastructure.
On August 3, 2000, the Federal Communications Commission
released a report on the availability of high-speed and
advanced telecommunications services. The report concluded that
advanced telecommunications capability is being deployed in a
reasonable and timely fashion overall, although certain groups
were identified as being vulnerable to not receiving service in
a timely fashion. Those groups included rural Americans,
particularly those outside of population centers, low-income
consumers, minority consumers and tribal areas to name a few.
It is clear that rural America is in danger of becoming the
other digital divide. Many small business men and women in our
rural community recognize the need to engage in e-commerce to
compete and survive in our growing technological economy. Rural
communities recognize without a strong telecommunications
infrastructure, recruiting businesses and building economies
will be hard to achieve. However, even if technologies like
broadband are deployed, communities like our Native American
reservations that are without even the most basic
telecommunications infrastructure will be beyond the far
reaches of this technological leash.
One of the questions we need to ask ourselves is will small
business in rural areas with high-speed Internet access be more
likely to find new market opportunities? That question will be
hard to answer because we would have to assume that small
businesses in rural areas know how to use e-commerce, have the
training and skills to make it work, and that is a whole other
ballgame.
There are several legislative proposals that have been
offered in Congress that address the concerns of broadband
access and deployment. One bill would allow the Baby Bells to
offer long distance data and voice services in their home
areas. However, there are no guarantees that if this were to
occur that the Baby Bells would deploy this service to the most
rural of rural areas.
A second piece of legislation, which I am cosponsor of,
H.R. 267, the Broadband Internet Access Act of 2001, would
offer incentives for deployment of broadband service to rural
and low-income areas. This legislation would offer a two-tier
tax credit for investments that provide next-generation
broadband service to all other areas of the country except
urban business areas, and to encourage providers to act
quickly, the credit would be limited to broadband service
deployment in the next 5 years.
The Internet holds an endless amount of potential for small
business as well as for parents, teachers, doctors and farmers.
Through the use of the Internet, doctors are using telemedicine
to help cure and save lives. For those who live in rural
communities, telemedicine would allow rural hospitals to
effectively treat patients and receive expert medical advice
with no degradation of patient care.
Beside the deployment of broadband to rural areas, we
should make sure we address other areas of concerns that small
businesses have with the Internet, such as security, privacy,
construction and maintenance, intimidation, and how to fully
participate and utilize e-commerce applications in its business
practices.
Thank you both, Chairmen Thune and Pence, and I look
forward today to hear from our panel.
[Mr. Udall's statement may be found in appendix.]
Chairman Pence. I thank the gentleman from New Mexico Mr.
Udall for his very thoughtful opening statement and his
participation in our hearing today, and to Chairman Thune, the
gentleman from South Dakota, we thank you for your comments as
well.
Before the Chair recognizes the first witness, allow me to
explain as a courtesy the technology that is in front of you.
It is fairly evident. We will ask you to keep your opening
statement to approximately 5 minutes to allow for this panel to
ask questions and complete our hearing in an orderly way. You
will see the lights in front of you green from the moment that
you start. At 1 minute that light will turn yellow, and at the
5-minute marker the red light will appear. You need not fear
the gavel unless you go dramatically past the 5-minute time
frame. So when you see the red light, just try to wrap up your
remarks, and we will move on to the next witness.
With that, it is my privilege to introduce your first
witness today, Mr. Robert Nolley, who is the president and
founder of Tubesock.net, which happily is a successful Internet
business serving individuals and businesses in the heart of
east central Indiana's Second Congressional District that I
serve here in Washington, D.C.
Mr. Nolley is one of those youthful prodigies that makes
those of us with gray hair frustrated. Rob became interested in
computers in 1986 at the age of 16 when his father purchased a
Commodore 64 computer for him, and since graduating from high
school and tour of duty in theUnited States Navy, he went on to
pursue a bachelor's degree in business administration at Indiana
University.
He proceeded to become professionally involved in site
construction, Internet site construction, working with NFL
Hall-of-Famer Joe Theismann. He developed an online chat
program with basketball analyst Billy Packer, but in 1996 he
left that employer to form his own Web development company,
starting RN Media in February of 1996, and began marketing his
services to local businesses. And in 1999 and thereafter, he
began the company Tubesock, Incorporated, and it is currently
the ISP of choice for small businesses in Shelbyville, Indiana,
and across much of east central Indiana.
Rob is married to the former Jill Drake of Shelbyville and
comes to us under duress, having become a new father just 60
days ago.
The Chair recognizes for 5 minutes Robert Nolley of
Shelbyville.
STATEMENT OF ROBERT NOLLEY, FOUNDER AND PRESIDENT,
TUBESOCK.NET, SHELBYVILLE, IN
Mr. Nolley. Thank you. I would like to state that I do not
have any contract with the Federal Government.
Good afternoon, ladies and gentlemen of the Committee. I
would like to thank you for inviting me here today. My name is
Rob Nolley, and I am the president of Tubesock Inc., an
Internet service provider based in Shelbyville, Indiana.
Although Tubesock has only been offering Internet access to
citizens of Shelby County since the fall of 1999, we already
serve more than 900 subscribers, employ five people and deliver
a full range of e-commerce services to our customers for both
residential and business. From helping local businesses to
design Web pages to providing the high-speed Internet
connections that help citizens of Shelby County reach the world
quickly and efficiently, we do it all.
Like many other small Internet providers nationwide, I
recognize that rural markets provide great opportunities, and I
hope to be there to provide Internet access and Web development
services for many years to come.
Early on when we added Internet access to our Web
development business, we realized that in order to survive and
compete with other ISPs, we would need to offer broadband
service. The dial-up business is a good one, but more and more
business customers are demanding faster Internet service in
order to more efficiently serve their own clients. In
Shelbyville we are presently bringing high-speed access to our
customers in two way, through DSL or digital subscriber line
access service, and high-speed Internet over cable. In order
for us to deliver DSL to our customers, we must interconnect
with special DSL equipment installed at our local phone
company's central office. We cannot install the equipment
ourselves because we are not registered as a phone company, nor
do we desire to become one.
In Shelbyville, Ameritech does not employ any of this
equipment, but a competitor of theirs, Rhythms, does. We
approached Rhythms in order to interconnect and sell their
product. Because of our small size, we were referred to a
resaler of the Rhythms product, a company called Netisun.
Offering the DSL product this way has been tough. The lead
times are about 2 months. It is a two-part installation. The
length of time is primarily because of the amount of time it
takes SBC-Ameritech to configure our customers' phone lines so
they can get their data through the Rhythms equipment. Once
this is done, Rhythms generally gets our customers switched on
1 day later.
SBC-Ameritech does not offer DSL itself in Shelbyville and
claims this is because it is under scrutiny of the State
utility regulatory commission for the poor service it provides
to residential consumers, and it wants to fix those problems
first. Yet we have noticed that SBC-Ameritech offers DSL
service everywhere in Indiana except Kokomo and Shelbyville.
The other way for us to deliver high-speed Internet access
for our customers is over local cable network, and I must say
for us this is the way we prefer to do it. Dealing with the
phone company is usually such a nightmare. In Shelbyville the
local cable operator is Susquehanna Communications, and
Susquehanna recognized early on that partnerships with multiple
ISPs could be a profitable business. It ran four strands of
fiber-optic cable to our facility at no cost in order to
provide this service to our customers. And in contrast to the
2-month lead times for DSL, a customer can have their high-
speed Internet over cable delivered in about a week, and we are
informed almost immediately when Susquehanna's router is down.
This allows us to tell our business customers quickly about
service difficulties. Susquehanna in also local, and this makes
them easier to deal with as well.
We have a number of business customers who use high-speed
connections for their business, customers in Shelbyville, like
Prime Time Grill and Bar, that is able to upload its sales
information to its corporate office in Indianapolis over its
cable connection; or Martin Potts and Associates, a local CPA
firm that is able to use its DSL connections to download IRS
forms and accounting software updates much faster than they
could over a dial-up operation; or Sandman Brothers, the local
GMC-Chrysler dealership that does all of its customer financing
through its DSL connection. We have seen the differences that
broadband services make to these business and believe that
broadband is an important product that we must continue to be
able to deliver to our customers in a cost-effective way in
order to survive as an Internet service provider.
We have specific thoughts and real concerns regarding this,
part of which are included in my written testimony, that I
would like to address in the question-and-answer portion of
this hearing. Thank you.
Chairman Pence. Thank you, Mr. Nolley.
[Mr. Nolley's statement may be found in appendix.]
Chairman Pence. And before I yield to Chairman Thune to
introduce a witness from South Dakota, I wanted to acknowledge
the presence of the gentlelady from New York. Congresswoman
Kelly has joined us. She is the former Chairman of the
Subcommittee on Regulatory Reform and Oversight and has set the
pace for our Subcommittee. So it is great to have you here.
Thank you for being with us.
With that I will recognize Chairman Thune to introduce our
next witness.
Chairman Thune. Thank you, Mr. Chairman, and it is a great
honor for me to have someone from my State here today, Gene
Reich, who is the coordinator for telehealth services at Avera
St. Luke's Hospital in Aberdeen, South Dakota, and has been
very instrumental in exploring the utilization of new
technologies to serve the health care needs of people not only
in Aberdeen, but also in many rural areas of my State.
Everything in my State is kind of rural, but there are
degrees of rural, and, frankly, Gene really spearheaded the
telemedicine legislation that was adopted and signed into law
last year by the President as part of the Medicare refinement
bill. It originated in a hearing I had up there where he laid
out some of the issues and barriers to using technology and
being able to get reimbursedunder Medicare. As a result of that
process, we were able to have legislation adopted last year which is
currently in, as Gene informs me, the rulemaking stage, and we are
hopeful that we can get the rules drafted in such a way that it will
provide the assistance that is necessary to really make this a
transformational technology in terms of serving the health care needs
of people in my State of South Dakota and all across this country.
Gene has often indicated to me that this is about
telehealth, not just telemedicine. They are doing some
wonderful things in patient consultation and innovative
pioneering-type ideas when it comes to health care, but also
when it comes to the area of education, wellness programs,
training, those sorts of things, all of which I think he will
talk about in his testimony.
But it is great to have him here and very exciting to see
the things that are happening as a result of his efforts there
in Aberdeen, South Dakota. So with that I will yield the floor
to Mr. Reich.
STATEMENT OF GENE REICH, TELEHEALTH COORDINATOR, AVERA ST.
LUKE'S HOSPITAL, ABERDEEN, SD
Mr. Reich. Thank you, Congressman. My name is Gene Reich,
from Aberdeen, South Dakota, and I am the coordinator for
telehealth services at Avera St. Luke's in Aberdeen, South
Dakota. And on behalf the Presentation Sisters and the
Benedictine Sisters, the sponsoring groups of our network
family called Avera Health, I would like to thank you for the
opportunity to present our input on this critical subject
certainly to rural America and to rural health care.
I would also like to publicly thank Congressman Thune and
this body for its support of telehealth legislation passed last
year that will benefit the future growth of telehealth services
nationwide. I commend this Committee for taking up the matter
of access to broadband technology in rural America. This is an
important issue for the economic development in our State as
well as the delivery of quality health care services in our
region of northeastern/north central South Dakota.
Avera St. Luke's is celebrating its centennial year in
meeting the healthcare mission of the Presentation Sisters in
the city of Aberdeen and the surrounding region. We are proud
that we have used the latest technology to meet the sisters'
cherished health care mission and would be interested to know
what some of the early members of the order might think about
some of the methods we have used to meet that mission. There
are not many members of the order left with us, only about just
a handful less than the age of 50, so all of us at Avera St.
Luke's feel a strong commitment to continue the mission, and
pledge to do so in any way possible.
We feel that advanced technologies will be a key to our
survival as a rural health care provider. At Avera St. Luke's
we use interactive video conferencing to provide valuable
health care services to 15 rural hospitals and clinics. We
built and equipped these facilities with videoconferencing
technology with the help of two Federal grants and a
significant investment by Avera St. Luke's.
We use the technology to deliver quality health care
services in a variety of ways. We provide regular continuing
medical education programs to rural providers and staff. We
provide frequent training sessions for rural health care staff
in a variety of disciplines. For example, in the month of June,
we have already scheduled a workshop for hospice volunteers, a
workshop on mentoring and a session on caring for the urology
patient in a rural health care setting. We also use
videoconferencing for corporate meetings, partner meetings,
association meetings.
In this time of cutting programs in health care to meet
budget concerns, Avera St. Luke's and Avera Health are using
innovative technologies such as videoconferencing to cut travel
costs by thousands of dollars a year in order to keep our
current level of services intact. Like most similar projects
around the country, we also use the technology for telemedicine
services. It allows our medical specialists to be available to
rural providers and patients in a videoconference setting,
saving patients and families travel expenses and time away from
work. Risk of travel is also a consideration, especially in our
part of country during the winter months.
While CME programs, trainings, meetings and telemedicine
are all part of the offerings of Avera St. Luke's telehealth
services, the area we are most proud of and the area of service
that I think separates our project from many others around the
Nation is our education and wellness programs. We offer classes
in lowering your cholesterol, quitting smoking, eating right,
and even a support group for diabetics. We also offer regular
health forums featuring physicians and other health care
professionals presenting valuable health care information on a
variety of subjects. And last December we also made Santa Claus
available over our videoconferencing network. As it turns out
Santa Claus was high-tech. We are proud of the wide diversity
of our programming which makes our project one of the true
telehealth projects in the country.
One thing we have learned about access to technology, when
people are exposed to new and innovative technology, they learn
to use it to benefit their way of life. We have certainly been
a witness to that premise in the health industry. We currently
use ISDN service to deliver our programming at Avera St.
Luke's. Many experts feel that ISDN is an outdated technology,
that it has served its purpose, and we are certainly very aware
of that and are exploring new and more efficient ways to
communicate, and we are constantly looking for new equipment
designs that will serve us better. Staying on top of the
developing technology is nearly impossible, but in our field of
telehealth, it is essential to our survival to cut costs in
order to keep our now coveted telehealth services in place.
We feel the availability of advanced and affordable
networks and infrastructure are critical to the survival of our
project and projects like ours across the country and also to
the survival of rural America. Thank you.
[Mr. Reich's statement may be found in appendix.]
Chairman Pence. The Chair now recognizes Mr. Marvin Imus,
who is an owner/manager for over 20 years of a family-owned
single store that was founded 47 years ago.
Mr. Imus. 1947.
Chairman Pence. A degree in economics from Western Michigan
University, currently you are the Chair of the Wholesaler
Technology Advisory Board, a member of the Wholesaler
Independent Retailer Task Force and the NAWGA's Category
Management Certification Committee, and you have been involved
in developing and implementing a card-based marketing program
for the last 5 years, and your own customer card base is 6
years old. He is owner of the Paw Paw Shopping Center in Paw
Paw, Michigan.
Mr. Imus.
STATEMENT OF MARVIN IMUS, OWNER, PAW PAW SHOPPING CENTER, PAW
PAW, MI
Mr. Imus. Thank you.
Good afternoon, Chairman Thune, Chairman Pence and members
of the Subcommittee. I would like to thank you for this
opportunity to speak to you on behalf of my business and also
for all retailer single-store operators that are supported by
FMI, the Food Market Institute.
Let me take a moment to tell you have about my business and
my community. Paw Paw, Michigan, is a small town in Michigan
just outside of Kalamazoo, about 10 miles west. We started the
business in 1947 with 1,000 square foot of retail space.
Currently we have 41,000 square feet. We have 30,000 products
on our shelves, but we have a database of 75,000 items and a
historical data base of every item sold to every customer for
the last 6 years. This is probably our most important asset as
we go to our marketplace and as we try to use the data from our
sales to market back to the consumer, information and the
products that they desire. We rely on this information, and it
is all based on broadband technology to give us the
profitability aspect of it.
We have a Website which currently offers weekly specials,
wine ordering, gift baskets, weekly recipes, and meal
solutions, as well as household tips and consumer alerts. We
have a weekly newsletter that we e-mail to our customers that
request it. Approximately 10 percent of our customers visit the
Website. We see the Internet as being the facilitator of
communications for our commerce in the future and potentially
providing for competitive advantage for a small business like
ours.
Broadband access is important for small businesses and
consumers in rural America. Broadband access is not currently
available in Paw Paw. If it were available, we would use it to
enhance our business. Currently we utilize a frame relay
connection for our Internet usage. This is provided to us
through our wholesaler out of Grand Rapids, Michigan, and
basically provides us an ability of communicating back and
forth. We exchange information, orders, products back and forth
between our store and the headquarters of our supplier.
There is an analogy I would like to use that seems to work
very well. If you are on an escalator at the bottom level of a
building, and you want to get to the third floor, with a 56k
modem you have a one-person escalator going up to the second
floor. As you go up to the second floor, you have to get off
because the escalator has to reverse to go back down, and you
have to get back on the escalator to go up to the third floor.
This is a 56k modem.
A broadband technology has the ability of putting three or
four persons or more on a step of the escalator. That escalator
can go up or down, so you have access both ways. It has a TV-
like quality that the consumers are demanding before we can get
to a point where the information that we are delivering to the
consumer is impactful enough for us. With dial-up technology
today, it is too slow. They don't have the time nor the desire
to want to wait for a page to be drawn on our site. Textual
information that is available quickly is basically boring. They
are looking for TV-quality access.
As you can see in my statement here, which included a chart
that highlights the number of years it has taken from major
technologies that we depend on each day to reach mass market
over the years, electricity took 40 years, telephones 30, and
Internet access has reached over 25 percent of the population
in 10 years, yet in rural America we are not seeing that type
of access yet.
One other analogy I would like to use is my mother-in-law.
She goes south for the wintertime, and we use telephones to
keep in contact. But we bought her a small Web TV system just
so we can e-mail back and forth with her. It cut my phone bills
down dramatically. In fact, it really overkilled it because she
is online so much now that we cannot call her anyhow, which is
great. But that aspect that the elderly are getting access
outside of their own community and gives them the broad world
aspect is tremendous, but we need to have quicker access with
more TV-like quality to get to that.
Certainly the work of the Committee in conjunction with the
Commerce Committee is important to ensuring that broadband
access is available in the near future to businesses and
customers in rural areas at a reasonable cost. I understand
that this is no easy charge, but I for one feel the
competitiveness of our business depends on it.
Thank you for the opportunity to testify, and I will be
pleased to answer questions later.
Chairman Pence. Thank you, Mr. Imus.
[Mr. Imus' statement may be found in appendix.]
Chairman Pence. And you mention questions, and for those of
you new to being witnesses on Capitol Hill, we will have time
for questions by this panel of members for this panel of
witnesses at the conclusion of Mrs. Stark's presentation.
I would also remind Mr. Imus and others that in view of
your mother-in-law analogy that all your testimony here is a
public record.
Mr. Imus. Can I see that before you publish it?
Chairman Pence. If it gets back to your mother-in-law, it
is your fault.
I would like to recognize Jonathan Linkous, who is the
executive director of American Telemedicine Association, the
largest membership-based organization in the world focusing
exclusively on providing health and medical care through
telecommunications technologies, and Mr. Linkous has over 20
years experience in the Nation's capital working in corporate
and public sectors. For 5 years he was a leader in the aging
services community as the executive director of the National
Association of Area Agencies on Aging. His principal interest
in this position was in using telecommunications and adaptive
technology to assist older Americans and their caregivers.
Mr. Linkous was also involved for many years in the
regional planning and economic development field, serving as
the deputy executive director of the National Association of
Regional Councils and at the Appalachian Regional Commission as
director of the district.
Mr. Linkous holds a master's in public administration from
American University in Washington, D.C., and also degrees from
Franklin University in Columbus, Ohio, with postgraduate work
at the LBJ School of Public Affairs in Austin.
The Chair recognizes Jonathan Linkous for 5 minutes.
STATEMENT OF JONATHAN LINKOUS, EXECUTIVE DIRECTOR, AMERICAN
TELEMEDICINE ASSOCIATION, WASHINGTON, DC
Mr. Linkous. Thank you, Mr. Chairman. I appreciate the
opportunity for testimony today, and I am testifying on behalf
of the American Telemedicine Association. ATA is a nonprofit
membership-based organization promoting telemedicine and
working on ways to resolve barriers to employment. Members of
ATA include representatives of an important small business in
rural America, and that is health care clinics, physicians'
offices and small hospitals.
Telemedicine represents a marriage of advanced
telecommunications technology and new approaches to providing
medical and health care. Be it through online consultations
between rural clinics and specialists at major medical centers,
telehomecare for homebound frail patients or homebound mothers-
in-law, access to comprehensive databases of health and
medicalinformation for consumers over the Internet, telemedicine holds
the promise of using telecommunications to improve the lives of all
Americans.
The deployment of telemedical links to rural medical,
centers requires communications networks that are affordable
reliable and capable of handling large amounts of data in a
very small time.
When I was at the Appalachian Regional Commission, we
recognized the importance of opening up the isolated areas of
Appalachia through a construction of a network of highway
systems throughout the Appalachian Mountains. The highways of
today are located on the telecommunications infrastructure. The
telecommunications infrastructure opens up the isolation of
rural America to the opportunities for education, commerce, and
health care.
For rural hospitals, medical clinics and other health-
related small business, access to broadband networks means
being able to treat patients through a local health facility
rather than losing those patients and the revenues to distant
communities. It means improved health care for rural residents.
It means being able to keep a local clinic open. It means
reducing public and private employer costs for health care, and
finally, it means hope for small and rural towns and villages
struggling to survive and grow.
I would like to share one example as to how access to
broadband technologies can make a substantial difference to
improving patient care. That is in the area of teleradiology.
Teleradiology allows medical clinics in rural areas to gain
access to services of a qualified radiologist you may not get
otherwise. An X-ray or other image is transmitted to a
radiologist for an assessment or service they provide. For
almost all radiology services there are several images to be
viewed in the area in question from two or more angles. If
anybody has had a broken arm, you know you go in, you get two
or three X-rays. If you digitize those X-rays and send them
over a communications line as is needed for teleradiology, the
amount of information provided in that can be enormous, up to 5
megabits of data, for example.
If you are transmitting that over a plain old telephone
line, you are talking about several hours of waiting. If there
is a glitch in the line, you have to resend the data because it
is a medical image. So, therefore, you are talking about double
the amount of time. In emergency situations this can happen,
and many medical clinics in rural, isolated areas, that amount
of waiting time is just totally unacceptable. For other
situations it is at best inefficient.
Despite the recent growth of alternative bandwidth choices
such as wireless or terrestrial communications lines, rural
communities are still limited to the availability of high-speed
telecommunications where available and have problems with the
reliability and costs. Other countries, notably Canada and
Finland and Sweden, have established specific national goals
towards universal deployment of high-speed telecommunications
to every home throughout that country. The United States has
not done that. Congress should consider establishing a national
public-private commission to look at establishing similar goals
incorporating similar incentives and programs that will
accelerate the availability of broadband telecommunications to
every business and every home throughout the United States. The
provision of such policies in Canada and Scandinavia, I
believe, is accelerating those countries in the battle for the
telecommunications market in the future.
There is a small but very important program authorized
through which the Federal Communications Commission assists
rural health providers in obtaining access to broadband
services. Congress established this program under the
Telecommunications Act of 1996 to provide improved broadband
access by rural health care providers. Recent improvements by
the FCC in the program create hope that the program can provide
major benefits to rural America, and I urge Congress's support
for that program.
Finally, I want to join the other members of the Committee
in thanking this panel and particularly thanking Representative
Thune for your support for telemedicine and your support this
last year of the telehealth bill that provides very important
incentives for telemedicine, particularly rural America. So I
publicly want to thank you, sir, on behalf of the association
for your leadership and support.
Thank you, and I will be glad to answer any questions.
Chairman Pence. Thank you, Mr. Linkous.
[Mr. Linkous' statement may be found in appendix.]
Chairman Pence. Lastly, the Chair is pleased to recognize
Nancy Stark, the director of community and economic development
at the National Center For Small Communities here in
Washington, D.C. With 24 years of experience in community and
economic development in telecommunications, Ms. Stark has
directed research, designed and conducted training programs,
written guidebooks and provided technical assistance to small-
town leaders across America.
Currently Ms. Stark directs a U.S. Department of Commerce-
funded research project to identify, describe and evaluate the
most effective technology-led economic development strategies
for distressed rural communities.
Recently Ms. Stark authored Getting Online, a Guide to the
Internet for Small-Town Leaders, and Harvesting Hometown Jobs,
a Rural Economic Development Primer.
Ms. Stark created and led the AOL Rural Telecommunications
Leaderships Awards, a digital divide initiative and partnership
with the AOL Foundation. The awards recognized and promoted
outstanding achievement in rural community development
resulting from the deployment and use of advanced technologies.
Ms. Stark hold an M.S. in financial management from
American University and a B.S. from Cornell, and the Chair
recognizes Nancy Stark for 5 minutes. Thank you for being here.
STATEMENT OF NANCY STARK, DIRECTOR OF COMMUNITY AND ECONOMIC
DEVELOPMENT, NATIONAL CENTER FOR SMALL COMMUNITIES, WASHINGTON,
DC
Ms. Stark. Thank you, Chairman Pence and Chairman Thune,
members of the Subcommittee. Thank you for the opportunity to
testify before you today. I am Nancy Stark, director of
community and economic development with the National Center for
Small Communities here in Washington. The National Center for
Small Communities is the only national, nonprofit research,
training and technical assistance organization devoted
exclusively to serving the public servants of America's small
and rural communities.
On the topic of telecommunications, rural
telecommunications we have directed several initiatives that
were mentioned recently. One is a guidebook called Getting
Online, a Guide to the Internet for Small-Town Leaders--
actually several Members of Congress have distributed this to
their constituents; the AOL Rural Telecommunications Awards;
and most recently now a research project on technology-led
economic development strategy.
As I am sure you know, our Nation is a Nation of very small
communities. The latest Census of Governments reports that of
the 36,001 subcounty and local governments, meaning
towns,cities, villages, all the rest, approximately 90 percent have
fewer than 10,000 residents; 82 percent have less than 5,000 residents;
51 percent have fewer than 1,000 residents.
Much has been reported recently about the apparent
narrowing of the urban-rural digital divide. For instance, a
recent U.S. Department of Commerce report said that the gap
between rural households and the others that access the
Internet had narrowed from 4 percentage points in 1998 to 2.6
percentage points in 2000.
However, these statistics mask the real urban-rural digital
divide. More and more rural households and businesses have
Internet access, but few have high-speed broadband
telecommunications services. While nearly all users can now
ramp on to the information highway via a local dial-up
connection, although there are certainly places in this country
where you have to make a long distance call to connect to the
Internet, but saying that most of them can get dial-up, the
deployment of high-speed services has been slow and limited.
For example, the April 2000 joint report of the U.S. Department
of Commerce and the U.S. Department of Agriculture showed that
less than 1 percent of residents in communities with fewer than
10,000 residents have access to DSL, in contrast with 86
percent for cities with populations above 100,000. Similarly,
approximately 1 percent of residents in communities of 10,000
population or less have access to cable modem compared to 72
percent of residents in cities above 250,000 population.
Without state-of-the-art communications, rural businesses
are at a severe disadvantage. Nearly all businesses need
connection to the Internet. Small and midsized enterprises are
being forced to migrate their business to the Internet by
bigger companies they are affiliated with. In this symbiotic
relationship, most small businesses are either suppliers to or
distributors of bigger businesses. Businesses need high-speed
broadband to download files, submit and receive orders, view
graphics, access databases, participate in videoconferencing,
basically to participate in the modern economy.
Without state-of-the-art telecommunications, businesses are
far less productive. Consider the time it takes to download a
10-megabyte file using dial-up versus high-speed Internet
access. This is kind of my version of the escalator motif.
Those are some statistics from the FCC. If you took this
guidebook, for example, which is principally text and a few
graphics, and you had 12\1/2\ of these, that would be a 10-
megabyte file. If you downloaded that using a 14.4 modem, which
is not uncommon in rural areas, it would take 1\1/2\ hours. If
you downloaded it with DSL, a 4-megabit cable, it would take 20
seconds; or with an 8-megabyte DSL, it would take 10 seconds.
So we are looking the difference between 1\1/2\ hours and 10
seconds.
There are signs the deployment of broadband
telecommunications services to rural America is increasing, but
it is increasing very slowly. Our observation is that despite
the demand, and there is lots of demand kicking and screaming
from local and residential and business markets, it is chiefly
the small local telephone companies or cooperatives that are
providing DSL, and sometimes cable, to small communities, not
the larger companies. It is also our observation that the
market forces in many small, especially very remote rural
communities may not be sufficient to inspire the development of
high-speed services, and that Congress may need to consider
market-based incentives to spur deployment.
Because of the critical influence of broadband
telecommunications services on rural economic development, the
National Center For Small Communities hopes that Congress will
explore strategies for helping communities to remain on the
right side of the digital divide.
Thanks for this opportunity, and I welcome your questions.
[Ms. Stark's statement may be found in appendix.]
Chairman Pence. Thank you, Ms. Stark, and, witnesses, we
are going to move to the question-and-answer portion. The Chair
has a few questions for each of the witnesses, and we will then
recognize Chairman Thune and Ranking Member Udall and Ms. Kelly
and those who can remain to participate.
We encourage you to keep your answers fairly brief so we
can get as much participation as possible, but we will refrain
from any blinking lights.
The Chair would like to congratulate each of the witnesses
on very good and informative and particularly plain English
presentations which those of us that do not have Chairman
Thune's background in this area are particularly grateful that
you spoke in plain English.
With that said, the question for Mr. Nolley, on a very
practical level SBC is the employer in Shelby County, Indiana.
What is the time frame right now when you ask SBC to provide
Tubesock.net with a T-1, ISDN or other telecommunications
service? Is that rapid deployment; is it acceptable? In
practical terms how does it work?
Mr. Nolley. It is real slow. The current lead times are
about 2 months, so we have to kind of time--keep on top of time
to make sure we ordered ahead of time before we actually need
it. We have to order it ahead of time. And sometimes we may be
off on our timing, and we get it a little bit too soon, so we
are paying for something we do not really need. Their lead
times are off, and they keep getting further and further out.
Chairman Pence. The effect on your ability to interact with
your clientele, encouraging them to go to more advanced
communications technology when they have to wait for that, the
period of time would be what?
Mr. Nolley. We often make ourselves look pretty bad because
we will get the lead times from Ameritech, relay those lead
times to our clients, and then our clients end up asking us
where is the product, where is the product. We look bad, and,
of course, trying to get through to Ameritech to get answers
you never get anywhere. That is why we have been pushing cable
Internet service because it doesn't touch Ameritech at all. It
is local cable company, local people who are working in the
community. We already have good rapport with them, good
conversation. It is quicker. You don't have to worry about
getting a suspect voice mail system and trying to leave a
message for somebody. So we are moving towards cable.
Chairman Pence. A question for Mr. Imus. The Paw Paw
Shopping Center. You describe the Internet as a facilitator for
your business. Could you elaborate for these Committees in this
joint hearing how it would facilitate your business? Do you
expect to use the Internet principally for marketing, or do you
expect online shopping to become a large part of your revenue
stream?
Mr. Imus. Well, yes. All of the above. Actually what we
have with our wholesaler right now is an intranet, which is a
closed Internet loop where it is just communication between us
and the wholesaler, and all the other retailers are part of it.
But the Internet gives us the ability of having effective
marketing abilities that we can use very cost-effectively.
As consumers get more and more online, we achieve a
critical mass. We have not achieved that point yet. We have
online shopping. Again, because of the speeds of the access
that the consumers have in our area, it has not been overly
well-received. I foresee it to be a key component of our future
plans for survival.
Chairman Pence. Mr. Linkous, a couple questions. First, I
wonder if you might elaborate on the significance of technical
clarity that comes with broadband access in terms of
diagnosing. Inplain English is there a health benefit, a
diagnostic benefit to expanded broadband access in telemedicine?
Mr. Linkous. Well, if I were a patient, I would like to
have a physician who may need an eyeglass prescription to wear
his glasses; and with broadband, you do have a guarantee of
certain clarity of images. There are a few medical specialty
groups, radiology being one of them, that actually have come up
with some specific clinical guidelines regarding clarity of
image. The American College of Radiology has a requirement now
that you have an image, radiology image, that is 2k by 2k,
2,000 dots by 2,000 dots. That is a fairly high-definition
image that is required, because, again, if you are looking at
an X-ray, it is a very minor change in the bone that can make a
completely different diagnosis, and the soft tissues would be
the same.
So, yes, I think it would--broadband is absolutely critical
for certain types of applications. Now, there are applications
in telemedicine that probably can get by with lower, but
absolutely. But for a lot of what you see, certainly for
emergency situations, certainly for specialty referrals, the
higher the speed, the better. It is not only going to be an
image that you have that is going to be arriving at the
destination quicker, but also the quality of the image is going
to be significantly improved.
Chairman Pence. Mr. Linkous, you also propounded today
before these Subcommittees the idea of a national commission of
sorts. I wonders if you might elaborate on the jurisdiction of
that commission, the goals of that commission, and so we might
consider that.
Mr. Linkous. Certainly, and certainly I would be available
to talk to staff about it in more detail. But if you look at
the experience in a couple of other countries, I think,
frankly, they are putting the United States in the dust in some
of the things that they are doing. Using an urban example, if
you look at Helsinki in Finland, they have made a commitment
that every single home in Helsinki is broadband-wired. When you
talk to a neighbor, when you talk to your mother-in-law or
children, you are seeing your children over the phone lines.
Canada has made a similar commitment in the process of
deploying it.
Now, in the United States we have a little bit of a
different system where we have a private sector that is
involved more so than other countries, but it seems to me that
in the United States, it is high time particularly for rural
America to have a commission of public and private companies to
talk about ways that we can deploy broadband throughout--not
only to every business, but as I mentioned, to every home,
using things like tax incentives, regulatory relief, building
on programs that are available in many, many States that are
deploying broadband networks throughout the State, and as well
as volunteerism that is going on throughout the country.
So it seems to me there is a lot of solutions available,
and it is probably an appropriate time for this country to have
some kind of a national body that is starting to set forward
some goals and a specific timetable to get things deployed.
Chairman Pence. Mr. Reich, thanks again for your wonderful
presentation. You are breaking new background for me and my
understanding this area.
You used some pretty strong language today about the
Internet, and you said that it was the key to the survival of
the rural health care provider. As someone who represents an
area that is largely rural and has seen a real shift in the
delivery of health care services--one county that I serve, Rush
County, Indiana, announced, sadly, 2 years ago--said that they
would no longer be delivering babies at Rush County hospitals.
Is the power of the Internet and broadband technology powerful
enough to reverse the trend towards regionalism, or we are
talking about the survival of regional health care providers?
Mr. Reich. I think there is an evolution certainly. That is
not going to change. But I think we can do a lot with broadband
capabilities to keep that rural physician and rural provider in
place. We have several examples of communities and health care
facilities on our network that aren't very big. A community in
extreme--north central South Dakota, maybe a community of 3- or
400 people has one rural physician, but he has access--he has
access to broadband videoconferencing technology, so he has
been able to resolve a lot of the isolationism which he has
faced. He is all out there by himself, but he is not anymore.
He has access to consultations. He can talk to the surgeons
about a patient he might want to send in. He can present that
patient. And he takes advantage of continuing medical education
programs that he needs to stay certified and to keep his
license intact by staying at home during during lunch hour, not
missing any time away from his clinic, not being gone for 2 or
3 weeks wherever to get the credits that he needs. He can get
all of those credits by staying in his own clinic, and he has
access to so many different things.
I think in his current situation he will probably end up
retiring there. Not too long ago he had considered leaving this
community in north central South Dakota, and the community
encouraged him and came to him and got he and his wife to stay.
And it is really a cool story because part of that, I think,
really is the reason he was staying is because he has access.
And there are others. There are other stories on the
network, too, not necessarily physicians, but PAs. I think we
solved a lot of isolationism. I think we feel like there is
some connection even though we are not a huge medical center
hub site. We are a relatively small medical center in
northeastern South Dakota, but still just having that
connection and that relationship I think is going to help. I
really do.
Chairman Pence. Last question before I yield to my
colleague Mr. Thune.
Ms. Stark, you are a recognized national expert in the area
of economic development in small communities. Do you have any
data or do you have any comparison of communities that have
broadband access, relatively small, versus ones that haven't
and the impact that can--that may have on the economic
development over the last 5, 10 years?
Ms. Stark. No, I don't have any absolute data to share with
you. I think most of what is going on is anecdotal. Even what
we are doing for the Department of Commerce, this project on
technology is primarily collecting data, in the process of
collecting data. However, we are looking at 14 very rural
distressed communities that were recognized as having a
leadership role in technology-led economic development. We are
not finished yet. We administered a survey to them, and we are
looking at what have been the impacts in terms of economic
development and also things that are a little bit less tangible
perhaps, citizen participation, youth engagement, lots of
things that make a rural community survive or not survive.
So I would love to share that with you once we have
finished that, which will be in a few months, but there are
some wonderful case studies. I have mentioned a few communities
in here, Abingdon, Virginia, which is not that far from here,
which has had high-speed broadband access in many public access
places as well as residential use since 1996, which is really
remarkable. So there are examples out there. They are just few
and far between.
Chairman Pence. The Chair recognizes Chairman Thune for any
questions.
Chairman Thune. I thank the Chairman, and I thank the panel
for all the good testimony. This all helps us build a record
and establish a foundation which points to not only the
successeshappening out there today, but certainly highlights
where we need to go in the future in order to make this an online
society that doesn't know a digital divide, where you have rural areas
that are benefiting from the same technology that the urban, more
populated areas are.
Mr. Imus, by the way, your mother-in-law called, and she
heard what you said, and she wants you to stay with your
escalator story. She is very well-connected down there. I
commend you not only for your entrepreneurship in taking on the
challenges that you have in your business, but also your
bravery in using illustrations that pertain to your mother-in-
law. Most of us probably would not dare to go there.
Just a couple of questions, and I will direct these around
a little bit to a couple of different areas.
Mr. Reich--and I know in conversations with you, and having
seen firsthand the things that you are doing, the various
innovations that were out there, and really what that is doing
to change the way that we do business, to change the way we
meet health care needs in rural areas, to enhance and improve
the quality of life for people that live not only in Aberdeen,
which, by South Dakota standards, is a population center, but
those who live in more remote outlying areas, those towns of
5,000 people that are served by your facility there, but I
guess I would be just curious to know how broadband technology
could further enhance your ability to provide telehealth
services and telemedicine services to South Dakota residents.
How does that improve what you were already doing?
Mr. Reich. I have lots of ideas. Everybody that has been
involved in technology for a while comes up with ideas and new
ideas. And I think for access to broadband technology, high-
speed Internet access for us, I think, would be really
something that would open up a lot of doors for us in education
and wellness.
We do a lot of education wellness programs on our network.
The folks in those communities have access to those programs in
rural health facilities, whether it is a clinic or hospital. I
believe in the future with access to broadband technology in
small farm homes, in communities all across our State and all
across the country, we feel like that we can eventually archive
the program eventually on the Internet, maybe place them on the
Internet, put them on our Website, and people can have access
to a variety of health care issues. They can have access to a
class on cholesterol. They can access a diabetes-type
information if they had access.
And right now I don't think a majority--I don't think there
is a whole lot of high-speed Internet access to the rural farms
and communities in much of North and South Dakota and the
western parts of the State, but I see that as a real
interesting step for ourselves in telehealth and telemedicine
in the future, kind of what these guys are talking about with
the use of the Internet.
Right now we have same broadband access to rural areas. We
have to bring it to more rural people, and we think we can do a
lot more in delivering health care services.
Chairman Thune. I would like to tie into a point that, Mr.
Linkous, you made earlier on, and either of you can respond to
this question, in dealing with reliability. One was quality of
transmission, which I think you referenced, and you got an
interactive patient consultation, and I am thinking--looking
at, say, for example, some sort of a skin condition, and being
able to make a diagnosis in an interactive setting like that.
And the question is about liability and whether or not you
diagnose it accurately, and if you don't have the good quality
of transmission, is that an issue?
And then secondly, the reliability question having to
pertain more to if you were doing emergency-type care of the
equipment itself--I am talking about the infrastructure
itself--do you have enough confidence--at that point is there a
confidence level in treating, say, a trauma situation if you
had to rely on that technology? I mean, do we have the sort of
confidence in the reliability of the technology now that it
would enable us to use it in that kind of a context where you
are talking about an emergency situation, a trauma-related-type
situation?
Mr. Reich. I think we are close. We have had--and, in fact,
I have talked to a gentleman. Who happens to be a rural
telecommunications worker who also works on the community
ambulance. And he told me, he said, boy, we would like to have
access to ERs. And, boy, I think the technology is close. I
don't know if Jon would agree or not, but I think it is really
close. I think we can do a lot of things that would be
acceptable for an ER doc.
Mr. Linkous. Yeah. A couple of examples of things that are
under way in Texas. At the Houston Medical Center they are
working on an ambulance that has the ability to forward, send
live images from the ambulance directly to the emergency room.
I don't think we are quite there yet on reliability, but we are
getting close, I agree.
The second example is there is a new company that has
formed that provides intensive care services; that they have a
contract right now with several hospitals in the Norfolk area
where there is actually intensive care docs, intensivists as
they call them, that were wired into the intensive rooms for
the small hospitals that cannot afford an intensive specialist
before this. But because it is a very dangerous situation where
you have immediate emergency care that is needed, they use
multiple T-1 lines going into the facility, to their clinic,
using different providers, because it is very important for
them to have redundancy built into the system.
So that is one way they are using it now. They are getting
there. We are not quite, but we are getting there.
Chairman Thune. Any comment on the quality? It seems to me
at least broadband, where you have the interactive, the ability
to interactively telelink, are there any questions with quality
of transmission, when a doctor, for example, might be seeing--
and I will just use my State as an example again--a specialist
at St. Luke's Hospital might be looking at a situation, say, in
Miller or Highmore or Gettysburg, and somebody has a skin
lesion or a lesion of some sort and is trying to make a
diagnosis.
Mr. Reich. How comfortable is the physician in that
respect?
Chairman Thune. Yes.
Mr. Reich. I hate to say, but it depends on the physician.
Some physicians are more cautious than others. I like to call
them open-minded physicians. As far as liability is concerned,
I don't know if we have had any real test cases as of yet, and
I would assume they are coming somewhere along the line, but we
have not seen any yet.
I think it depends on the physician. I think some
physicians are really accepting. Others see it as a follow-up
tool rather than maybe a primary diagnosis-type tool. But it
depends. I think that there are physicians that are very
comfortable. There is equipment out there for--in dermatology
that I think we can do it. I think we can project the image
that is acceptable if the dermatologist is open enough to--and
it takes some time. They just don't--I think you just don't
come into a medical consult and do it for the first time. When
we start out a physician in telemedicine, we try to train them
a little bit, and these guys are busy people, and we need a
little bit more open-mindedness and cooperation from these
people, and I think we are going to get it as we educate them
better.
And I think that is maybe the brunt of all we are talking
about here. We have a need to educate people on what broadband
technology means to them. Some people don't really understand
whatwe are talking about today. This is an issue that is
incredibly important for us in rural South Dakota.
Chairman Thune. In a follow-up to that, are you having any
problems getting new communities to accept and utilize
telehealth, the types of technology that are there? You have
addressed sort of the physician side of it, but how about that
community out there? Are there any barriers?
Mr. Reich. I think we did at first. I really do. I think it
has gotten better. Part of what we have to do is get out there
and to talk to them and explain to them about what this
technology could mean to their communities. I have spoken to
many small community groups, doing lunches, explaining to them
what we are trying to do with videoconferencing as it turns out
in this particular application.
But an example, Mobridge is a community on the Missouri
River in north central South Dakota, and we are going to put a
couple new sites there online in the next month or so. Just the
opposite there. While some of the early communities we worked
with, we had to go out there and sell it, Mobridge is saying,
hey, we see what is going on; we want to be a part of it. So I
don't think there is going to be a big sell needed out there.
They want to be a part of it. We have had docs out there ask
when are we going to get this technology? We need this; we see
what it is doing for John Ottenbacher out in Selby. We want the
same kind of access.
Mr. Linkous. If I can mention, in the last 10 years there
are lots and lots of clinical trial studies done on medical
imaging that send telecommunications versus the doctor seeing
it as well as patient satisfaction surveys. Every single one of
them without an exception, as far as I know, have shown that
the images transmitted using telemedicine have been acceptable,
assuming you have the high-speed telecommunications line that
transmits that image. And patient satisfaction people love it
because people do not get access to those doctors if they do
not have telemedicine.
Chairman Thune. It is a very real issue in many areas, the
distances, the weather. I direct this maybe to Mr. Nolley. I
would be curious to know what your thoughts are about the
percentage of people out there on the main streets of this
country who are conversant or knowledgable about DSL or
broadband or regular dial-up modem connections. Do most people
really understand the differences about those options and what
kind of benefits they offer? Do people who have a standard
dial-up connection today--and Ms. Stark utilized some of the
statistics and percentages of people, and there are a lot of
people who have at least some form of access, but do they
really understand the potential of having access to a broadband
or high-speed Internet type?
Mr. Nolley. When we refer to businesses, they do understand
what it is that it can bring. When you refer to residential
consumers, they know--they don't understand the words or the
terms ``broadband'' or any of that kind of stuff, but they do
know what DSL is. They do know it is faster and what it can
offer. They know what cable Internet is and what it can offer.
But in talking with the businesses in our community and doing
my job going around trying to sell this, they do understand
what it can bring and the benefits, especially the
communications aspect of bringing e-mail to the corporate
network, Internet availability on every desktop, things of that
nature. They understand.
Chairman Thune. And I think Mr. Imus testified to that
fact, too. He understands what this is about. And you said that
in Paw Paw today you don't have access to broadband. Some of
your competitors, the bigger ones who have the benefit of
economies of scale, use satellite or something else. They are
going to have that opportunity available to them.
How ultimately are we going to get broadband access to a
community like Paw Paw? And I mean, do you have any suggestions
for us in terms of things that we might be able to do to
provide incentives to get your area served? I am--certainly
from a small business--we talked about the health care side of
it, but certainly from a small business standpoint, I would
think, doing business with your suppliers who are all
connected.
Mr. Imus. It is becoming a competitive issue, very much so.
We are competing with chains that are doing billions of dollars
of business instead of the millions that we do. While it is not
the only component of our success, it is becoming a larger
percentage. Consumers want products on the shelves quicker and
faster. As soon as they see it on TV, they want it in the
store. Information about products, about the health aspects of
the product, we do not have access to that information in a
timely enough manner. We had a conversation the other day, and
there are areas just outside of Paw Paw that are still on
third-party lines. You pick up a phone and you have to listen
to somebody else's conversation.
Chairman Thune. You want to hear your mother-in-law.
Mr. Imus. Exactly. I am not sure how to address that issue,
I don't know, because it is a very big issue. A lot of our
penetration with our Website, I think, is the lack of the
ability of the consumers to access the Internet. You can get a
56k modem off the shelf for 20 bucks, but even the quality of
the telecommunications in our area is so bad that these modems
automatically adjust down speedwise for quality. So I have a
56k modem, but I am only going to access the Internet at 14.4,
and that is the best I can do, and that is just completely
unacceptable.
Chairman Thune. Hopefully next week we will get some
suggestions, too. We will bring in some broadband providers to
talk to about what we can do to drop those barriers. I
appreciate very much your testimony this afternoon and your
responses to the questions, and we hope this will help us build
a record upon which to hopefully formulate some decisions.
Thank you, and, Mr. Chairman, I yield back.
Chairman Pence. Thank you, Chairman Thune, and the Chair
with now recognize the gentleman from New Mexico, the Ranking
Member of Mr. Thune's Subcommittee Mr. Udall.
Mr. Udall. Thank you, Chairman Pence. I want to, first of
all, thank the panel and tell them how much we appreciate their
presence and for the excellent questions of both of the
Chairmen here exploring this very important area.
It seems to me we are at a point where--and I guess, Mr.
Linkous, you talked about it a little bit--other places like
Helsinki, Finland say every home should be broadband-wired.
Canada has made a commitment. Other places in the world are
making these kind of commitments and doing these things, and
the challenge for us rural areas is how we figure out to do
that as quickly as possible. And when we faced that challenge
in terms of moving goods and moving materials a generation ago,
we invested heavily in an interstate highway system. And
Congress right now is considering when it comes to broadband
looking at legislation to increase broadband access to rural
areas. Much of this legislation would cost 2-, $3 billion over
5 years, major commitment of resources.
This question is really addressed to all of you on the
panel. As taxpayers, do you believe it is a good idea for
Congress to focus on this investment at this type of level?
Mr. Linkous. I will take a little stab at that. In looking
at what is needed in the suggestions I have from the national
commission, I don't think I had envisioned or the association
envisionsthe Federal Government paying for every last mile of
wire that goes out there. However, there is a lot of incentives that
Congress and the United States can use to make sure that that
technology is out there as well as looking at the use of alternative
technologies, because you have to look at what the advancements have
been for wireless applications right now. We are not always talking
about wireline applications going to every home, but it certainly seems
to me that if we are looking at what is increasingly--what I see as a
competitive issue, an issue of the U.S.'s position in the world, in a
competitive marketplace, then it probably does justify some investment
of taxpayer dollars.
Mr. Udall. When you have say incentives, we are talking
about using the Tax Code. We are using taxpayer dollars in a
little different way.
Any other panelists' thoughts on it?
Ms. Stark. It seems that there are two kinds of communities
out there right now. There are those communities served by
high-speed broadband, or will be soon, and those are
communities, primarily urban, suburban or rural areas right
outside of metropolitan areas, where the market forces exist,
where the demand for such services exist. And either the large
RBOC's (Regional Bell Operating Companies) will provide that
service, or it will be large cable, or it will be small
telephone companies, co-ops, small cable companies.
But there are a whole other group of communities out there
where the market forces may not exist, and I think those are
the communities that we should be concerned about. And they are
in your States, absolutely, as well as in many other States. I
think those are the communities where we need to think about
market incentives or also just some provisions.
You know the very controversial issue now as to whether
local government, utilities can provide telecommunications
services, and that is being litigated back and forth right now.
What other things can we do, because I think the truth is--and
we have seen this over and over again in all the research we
have ever done--in very small, rural communities people make do
with what they have. So if there is a community college, there
is a whole lot of economic development coming out of that
community college. It may only be two or three stakeholders,
movers and shakers, whatever you want to call them, that make
things happen in that rural community. People make do with what
they have.
So I think we need to think about those communities that--
sitting in situations where the conditions are such that there
is not a profit-making motive for companies to come in and
provide telecom, and those are the communities I am concerned
with.
Mr. Nolley. I would like to comment also that using
Chairman Pence's Rushville district, we have tried to penetrate
that area with broadband. It is in a different LATA. We are in
the Ameritech territory. Rushville happens to be in the Verizon
territory. A lot of businesses in Rushville, they can not even
get ISDN service, and I think someone mentioned earlier that is
kind of an outdated service. We have had a lot of trouble with
the tariffs involved when you cross LATAs in getting broadband
over there. Verizon's explanation is they don't feel like
investing in Rushville because they do not know if it will be
profitable. But for a small business--say the ISP had the
incentive to do something like that, as a small business it
would be profitable for them. So I feel that investment would
work.
Mr. Reich. I have a feeling that the Federal Government
still is--granted the public sector is going to have something
to do with this, but somewhere along the line if we are going
to get out there and build an interstate highway system with
broadband technology, which to me is totally realistic, it
needs to happen in our country in the next 10 to 15 years for
sure.
I still think the Federal Government has to play a role in
putting together the networks. If we want to build an ultimate
network someday where we can all talk to each other and
everything works out, I think if we get everybody going in
different directions, too, all these providers going in
different directions, we might have affordability problems, and
we will not communicate well with the other side. So I think
there will have to be some leadership that will come from
Congress or somewhere to keep everything intertwined, very
comparable to what the interstate highway system is. That is a
very good analogy.
Mr. Udall. Mr. Imus.
Mr. Imus. I am just very concerned about the competitive
nature of our industry. We are a dying breed, small single-
store retailer, market, hardware. We are impacted by the
megachains, and any kind of regulatory issues that come to us
are very impactful on our whole business. So I don't really
have that much more to add to that.
Mr. Udall. Great. Thank you. Thank you for your answers.
Two of you talked about the use of technology and how you
can use this technology in the area of medicine, for example--a
radiologist looking at tests over a long distance for medical
purposes. Can you think of other examples, either, I guess, Mr.
Reich or Mr. Linkous, of other specialties that are also
utilized? Are we really opening it up to rural areas which will
have a real difficulty getting specialists in many cases, that
all the specialists out there will be able to be plugged in
this way?
Mr. Linkous. I would say there is probably not a medical
specialty around that is not involved in some way in
telemedicine. Our membership has, I would say off the top of my
head, 40 or so specialties and subspecialties represented by
the memberships. And I am sure that Avera has many different
types of applications.
Mr. Reich. I agree, there is an application, if it is
follow-ups, whatever, there is a value to them. And we are
working on right now a diabetes education project. We have a
tremendous need for diabetes education. We feel like we can
save people a lot of travel by conducting diabetes education
consults, using videoconferencing technology, critical for an
aging population like we have in South Dakota. There is no
physician involved. This is talking to diabetics and their
families. There are a lot of other things going on for
services, other services provided other than just the medical
specialists.
Mr. Udall. Now, when you talk about being able to take a
medical record like an X-ray or any other record that we have
just talked about and utilizing that in another place and
transferring it across these lines, it raises a whole other
issue that we hear a lot about from our constituents, which is
this whole issue of privacy and how do you deal with the
privacy issue. How do you protect a patient's privacy moving
that kind of information around? Have you run into any
problems? Is there another problem there? What would you tell a
patient that is going to have to have this kind of thing happen
to them? And, of course, the advantages you have outlined, are
there any disadvantages in terms of privacy?
Mr. Reich. I would say there is some education involved,
but, boy, we really haven't had any. It would be just like if a
patient came to our facility, we conduct a consult the same
way. It is the same thing except it is a face-to-face video
conversation. Everything is conducted the same way, the same
confidentiality. I think there is no difference. We would like
to mimic as much as we can what a patient would go through
seeing a specialist if they traveled 2 hours to our facility
and traveled 2 hours home.
But to answer your question, for sure it is an issue.
Absolutely. And in health care it is a big-time issue right
now. But I am very conscious of that, and that is maybe one of
our number one concerns when we work on the telemedicine
application is that we need to make sure we protect the
patient's privacy.
Mr. Linkous. I will add to that every telemedicine
application, every program has in place guidelines and use of
encryptions, as well as specialty clinical requirements
regarding privacy of patients' records, as well as the
protection of the images themselves that are transmitted. I
agree it is a very important issue, and it is a very important
issue throughout the country on patient privacy and electronic
medical records.
I think it is important to point out that probably anybody
in this room can put on a white lab coat and go into many
medical centers right now and collect a number of patient
records and walk out with it. So it is not limited to the fact
that there is electronic records right now available, it is
throughout the country in terms of patient records.
Mr. Imus. Mr. Udall, if I might comment on that. As I
mentioned before, we have a database of all our customers'
transactions for the last 6 years, and privacy has become a
very big issue for us, and we try to protect that. As you know,
medical histories are very important as is personal shopping,
grocery shopping is very personal to the consumer herself.
I had a call from an attorney who wanted to subpoena my
record for this consumer in a divorce case, and I have told
them, no, that I would not let the record go. And he said, I am
going to subpoena you. And I said, that is fine, you may
subpoena me, and still won't provide the record. And he said,
well, you will be in contempt of court, and you can serve jail
time and have a severe fine. And I said, you do not seem to
understand. First of all, this is Paw Paw, Michigan. The judge
and everybody in the jury are going to be shopping in my store.
The second is that the protection of the consumer is so private
that it takes each of us as individuals that are guarding that
data, we have taken on that onus of having to do that to the
best of our extent in protecting that.
That happens all the time. Hackers get in there. Kids are
smarter than we are when it comes to this type of technology.
Yet it still is very important for us to take that upon
ourselves to protect that data so it will not become public
record.
Mr. Udall. Do any of you have any idea how much medical
centers or hospitals have to spend annually to upgrade systems
to protect privacy?
Mr. Reich. I wouldn't have any firm numbers, Congressman,
but it is astronomical. It is a huge issue. We have that all
the time. We are trying to meet these new regs that are coming,
and I deal with this in education as well as telehealth, and I
have people clamoring for information about what we need to do,
and it is costing us. It is going to cost the health care
industry millions of dollars to adhere to some of these
regulations, and, you know, we are trying to--there are a lot
of reimbursement questions, and now you have to deal with these
kind of issues. No firm number, but it is a big one.
Mr. Udall. When you say regs, you are referring to the
HIPAA regulations that Secretary Thompson has under review?
Mr. Reich. Yes.
Mr. Udall. Okay.
Mr. Linkous. Certainly we hear from our members fear of
HIPAA, particularly rural hospitals and rural clinics, those
institutions that are operating on the margin already, as to
what HIPAA is going to do to them in terms of costs. There is a
lot of rumors and scared talk right now. There is hope when it
finally comes down and we see the black and white of what is
going to be required to be implemented, it will not be as bad
as what we feared, but there is a lot of concern that
implementations of HIPAA regulations will, frankly, put some
medical centers out of business.
Mr. Udall. And you all know that Secretary Thompson has
said that he has opened this up for comment, and clearly
anybody that is interested here ought to give him specific
examples of what needs to be changed, because just like you
were saying, I was very encouraged with his guidelines and
principles that he was going to try to follow. He is going to
try to protect privacy, yet at the same time try not to hinder
the operation and--the operation with a patient and her quality
of care. So we really need to find that right balance.
Once again, let me thank the panelists and thank the two
Chairmen, Chairman Pence and Chairman Thune, for your very
strong interest on this issue and your commitment to get to the
bottom of this and really do something about it. Thank you very
much.
Chairman Pence. The Chair thanks the gentleman from New
Mexico, the Ranking Member, for his very thoughtful questions
and kind remarks.
The Chair would also recognize for any questions she might
have the gentlelady from Ohio Ms. Tubbs Jones.
Mrs. Jones. Thank you. I don't serve on this Subcommittee,
and I was sitting here trying to figure out how I got here, and
I told my staff member I was trying to be up on broadband. So
she put this on my schedule, and I am glad I got here.
I come from the rural community of Cleveland, Ohio. Very
interesting, my hair stylist, a small businessman, and I have
lots of conversations, and he said to me, you know, I am having
a problem getting the type of phone lines I want in the city of
East Cleveland to do the high-speed, the whole business. And I
said, Mr. Black--that's his name--not in East Cleveland. He
said, apparently it is not lucrative for them to come and wire
this little suburb of East Cleveland.
And I say this seriously and jokingly, but also I want to
add that my colleague Eva Clayton from the great State of North
Carolina said to me--I said, I am going by this, are you
interested, and she said, yes, and go read this letter. I won't
read the whole letter, but in essence what she says, when we
talk about rural communities, we have tend to talk about
farming, but more importantly rural communities need a lot of
different things, and I will read one paragraph. She says,
however, in spite of the many challenges facing rural America,
the response of the United States Government has been a
piecemeal combination of policies. While we devote resources to
individual problems facing our rural communities, such as
housing, there is a lack of an integrated policy that seeks to
address the entire rich fabric of rural America. Included in
that she is talking about infrastructure, broadband and the
like.
So on behalf of my friends that come from rural
communities, I am glad I had an opportunity to hear what you
had to say. I am enlightened more than I was previously. I have
absolutely have no questions, but I thank you for coming here,
and I thank the Chair and Ranking Member.
One more thing I will say, I did have a chance to visit Mr.
Udall's community with President Clinton 2 years ago, and we
were discussing this very issue, the digital divide, and had a
chance to travel up to the Navajo Nation, and it took us an
Army helicopter and another helicopter to get there. So I
recognize the distance and the divide that comes as a result of
being in rural America. And thank you, Mr. Chairman, for the
community, to be here.
Chairman Pence. Well, the Chair thanks the gentlelady from
Ohio and welcomes her as an ex officio member of these joint
hearings at any time in the future. I appreciate your energy,
your enthusiasm and encouragement to these outstanding
witnesses.
I will ask as a courtesy of Chairman Thune for Mr. Udall
are there any additional questions of the panel?
Chairman Thune. I think we have probably covered all the
bases, Mr. Chairman, and would invite Ms. Tubbs Jones to South
Dakota, too. There are places you can't get to with a
helicopter. I am just kidding. But I appreciate the fact that
we have Members from the more populated area of the country who
feel our pain, so to speak, because these rural areas are very,
very difficult, challenging when it comes to getting some of
the same basic service that a lot of our brethren in the bigger
cities expect.
I appreciate your participation, and I appreciate the
panel's testimony today, and we will look forward to developing
this issue further. Thank you, Mr. Chairman.
Chairman Pence. Mr. Udall, any additional questions or
comments?
Mr. Udall. No. I would just like to say that on that trip
she talked about out to Shiprock, New Mexico, I know that
Congressman Thune has many areas like that in South Dakota,
many of these tribal areas and reservations. They have a hard
time getting phone service, sometimes getting electricity
service. So we have a real challenge there, and I think
sometimes we may need to look at those in a little different
way than we look at some of the other rural problems that are
out there, but clearly everybody is in the same boat on this.
We need that kind of broadband access, and thank you once
again.
Chairman Pence. With that, the Chair would like to thank
our witnesses, Mr. Reich and Mr. Imus, Mr. Linkous, Ms. Stark
and Mr. Nolley of Indiana. We thank you for all traveling, in
some cases far distances, and in other cases bringing
tremendous acumen and background to what will be the first in a
series of joint hearings of the Subcommittee on Rural
Enterprises, Agriculture and Technology and the Subcommittee on
Regulatory Reform and Oversight of Small Business. And I think
I speak for Chairman Thune when I say that it is my sincere
hope that the remainder of our hearings will be as illuminating
and as interesting and as well presented as this panel has
provided in this hearing.
With that, this joint hearing is adjourned. I thank you.
[Whereupon, at 3:47 p.m., the subcommittees were
adjourned.]
ELIMINATING THE DIGITAL DIVIDE: WHO WILL WIRE RURAL AMERICA?
----------
Thursday, May 24, 2001
House of Representatives, Subcommittee on
Regulatory Reform and Oversight, and
Subcommittee on Rural Enterprises, Agriculture
and Technology Committee on Small Business,
Washington, DC.
The subcommittee met, pursuant to call, 10:06 a.m. in Room
2360 Rayburn House Office Building, Hon. Mike Pence and Hon.
John Thune [chairmen of the subcommittees] presiding.
Mr. Thune. This joint hearing will come to order.
Good morning. It is my pleasure to welcome you this morning
to the joint hearing between the Subcommittee on Rural
Enterprises, Agriculture, and Technology, and the Subcommittee
on Regulatory Reform and Oversight chaired by my colleague from
Indiana, Mike Pence.
I would especially like to thank those of you who have
traveled over a long distance to participate in this hearing
today.
Today's hearing is the second of two which are focusing on
the issue of broadband telecommunications access in rural
America. This morning we plan to examine how we can connect
rural America to ensure it is not left out of the Internet
revolution.
Here to discuss this challenge with us today are five
witnesses representing a broad array of telecommunications
companies. The committee will hear from Sulley Buttes Telephone
Cooperative from my home state of South Dakota; from New Edge
Networks; Armstrong Cable Company; Western Wireless
Corporation; and Hughes Network Systems. These companies range
in size from large corporations to small local businesses and
utilize very different technologies but they all have one goal
in mind, and that is to provide broadband access to rural
America.
We heard at last weeks' hearing that one of the biggest
obstacles to rural broadband access is affordability. Because
of the sheer cost of new technology and the associated access
costs, the vast majority of small business owners find
themselves unable to obtain services that other parts of the
country take for granted. So when faced with the question of
how to provide high speed connections to all Americans, those
of us who represent rural areas understand how important the
information highway is to the future prosperity of our
constituents.
Just as the national highway system has been crucial to the
economic prosperity of rural America during the last century,
broadband Internet technology will be equally important this
century.
Small business owners in rural America are becoming
increasingly aware of the importance of broadband access to the
future viability of their businesses. To continue to serve
theircommunities and remain competitive with large companies,
small business owners must have reliable and affordable high speed
Internet access.
Congress is looking at different solutions to the problems
of access and affordability. One promising bill, H.R. 267, the
Broadband Internet Access Act of 2001, has been introduced by
Representative Phil English from Pennsylvania. The bill uses
tax credits as incentives for companies who are interested in
providing broadband access in rural and low income areas. As a
cosponsor of this legislation, I believe H.R. 267 uses a
balanced approach to federal tax dollars and free market
solutions to reach our goal of broadband access for all
Americans.
I again want to thank all of our witnesses for
participating in today's hearing, and I look forward to hearing
your testimony. At this point I would like to yield to the
chairman of the other subcommittee, my colleague from Indiana,
Mike Pence for an opening statement.
Mr. Pence. Thank you, Mr. Chairman.
I thank you for agreeing to co-chair these very important
and timely hearings.
Our hearing held jointly today with my good friend from
South Dakota's Subcommittee on Rural Enterprises, Agriculture
and Technology addresses the rise of the new economy and the
technology needed to ensure that rural areas can share in the
global business opportunities that arise from the continuing
penetration of the Internet.
This is the third in a series of hearings that the
Subcommittee on Regulatory Reform and Oversight has held on the
Internet-based economy. Last weeks' hearing, as the Chairman
indicated, focused on the so-called digital divide--the lack of
high speed or broadband access to the Internet currently
plaguing rural small communities. Today's hearing examines the
various technologies for eliminating the digital divide, be it
cable, satellite, DSL, fiber-optic, or wireless. The businesses
testifying today have decided that it makes good business sense
to provide broadband to rural areas, and I look forward to a
very informative session from all of our witnesses.
Again, I would like to thank the gentleman from South
Dakota, Chairman Thune, for agreeing to co-chair these hearings
and also would like to acknowledge the ranking member of our
subcommittee the gentleman from Pennsylvania, Mr. Robert Brady,
who joins us and who while from a very large city,
Philadelphia, still is demonstrating a genuine commitment to
seeing to it that the opportunities that are available over the
Internet are available to all Americans. I thank you for your
interest and participation.
The evidence of the digital divide is pretty clear. While
urban areas get broadband access, rural areas are left behind.
A relevant illustration is that today's hearing is being
carried live by Hearings.Com on the worldwide web. That is
accessible in most major metropolitan areas, as our discussion
will be today, but is not accessible to adults or to students
in rural America that might be even more interested in our
discussion today.
As the Federal Communications Commission noted in August of
2000 in their report on deployment of broadband services,
``Consumers in Los Angeles County have a rich variety of
choices of advanced services while there are no providers of
advanced services for residents of rural West Virginia.''
Given the benefits of broadband service and the importance
it can play in maintaining the vitality of America's rural
communities, that disparity must change. Inroads are being made
to reduce this disparity as the witnesses at today's hearing
will demonstrate. More investment will be required as the
National Exchange Carrier Association estimates that it may
cost as much as $11 billion to make telephone lines in rural
America broadband capable.
My primary concern is that the investment will not occur
quickly enough to stimulate the economies of rural America, and
of Indiana particularly. The only favorite I seek to play in
the debate over broadband is to ensure that businesses in rural
America have the same access to advanced telecommunication
services that are available in Los Angeles, New York, and
Washington, D.C. and Philadelphia. I have no preference
concerning technology or providers. All I am interested in is
making sure the government gets out of the way or otherwise
adopts policies that ensure that all businesses interested in
serving rural America have that opportunity.
I look forward to the testimony from the witnesses and the
problems that they see in delivering broadband to rural
America. The businesses at today's hearing represent the entire
spectrum of technologies for delivering broadband access. We
will hear from a company that provides satellite service, a
cable operator focusing on serving rural America, two
competitive local exchange carriers that started to serve rural
America after the enactment of the Telecommunications Act of
1996, and a very small telephone cooperative that serves rural
South Dakota.
Conspicuously absent today are the largest incumbent
telephone companies serving rural Indiana, South Dakota and
rural New Mexico. Let the record show that invitations were
extended so the joint subcommittee members could inquire about
these companies' plans for broadband deployment in rural areas.
The invitations were turned down due to the press of business.
I might note that a number of the small businesses represented
here today were able to attend even though they clearly do not
have the resources or the flexibility of the companies that did
not wish to participate. I know that I am disappointed in not
being able to create a full and complete record on the
potential providers of broadband service for rural America and
the problems they face in eliminating the digital divide as I
am sure all of my colleagues on this panel are as well.
Again, let me thank the gentleman from South Dakota for
agreeing to co-chair this hearing. I look forward to working
with him and other members interested in addressing the
critical need for telecommunications infrastructure in rural
America.
I thank you, Mr. Chairman.
Mr. Thune. I thank the gentleman from Indiana for his
statement, for his leadership on this issue.
We are joined by the ranking members of the two
subcommittees, and I would first like to yield to the gentleman
from the great state of New Mexico, the ranking member on the
Subcommittee on Rural Enterprises, Agriculture and Technology,
Mr. Tom Udall.
Mr. Udall. Thank you very much, Chairman Thune.
Chairman Thune, Chairman Pence, and ranking member Brady, I
also find it particularly discouraging that Qwest would not
attend today and come and tell us about their plans to expand
into rural areas of New Mexico, and I think all of us feel the
same way on that.
I am pleased to be here today for the second joint
subcommittee hearing to examine the impact of broadband
telecommunication services on small business in rural areas.
All of us recognize that the Internet has revolutionized the
way people communicate, students learn, and the way in which
business is conducted in America and throughout the world.
However the fact of the matter is that while just about every
apartment and city school and suburban home are wired and
connected with high speed Internet access, there are many
people in America who have not benefitted from this
technological revolution either because service is too costly
or non-existent.
This is especially the case in rural areas where the
Internet along with high speed access remains just a concept,
not a real tool as it is in more urban areas.
The Internet possesses limitless potential to bring
technology, information and jobs to our rural communities. In
my state our small business communities accounted for nearly 90
percent of all net new jobs last year. High speed Internet
access must be an essential and basic service that all
Americans are entitled to. I believe that Internet access must
become a basic service everywhere for every American.
Yesterday Qwest announced that broadband Internet access
will be coming to parts of rural New Mexico. Two of the four
cities where digital subscriber line equipment, otherwise known
as DSL, will be installed are located in my district. In
addition to New Mexico, Qwest will expand its DSL service in 10
other western states. Even though communities I represent are
not like Los Angeles or Phoenix, they are significantly
populated and personally it is astonishing to me that this
service was not offered earlier.
Many areas of my district remain technologically isolated
and some of my constituents face the threat of never acquiring
the computer skills that we have come to consider basic and
essential in today's technological economy.
One piece of legislation which I believe will assist in the
deployment of broadband to rural areas such as in my district
is H.R. 267, the Broadband Internet Access Act of 2001 which is
designed to offer incentives for deployment of broadband
service to rural and low income areas. I have joined Chairman
Thune, Congressman Bartlett, Congresswoman Christensen, and 149
other members from both sides of the aisle in co-sponsoring
this legislation. The broad support for this legislation is an
indication that Congress is committed to seeing the deployment
of high speed and affordable Internet access that will reach
all Americans.
I hope that you share our concern and that we can work
today towards greater understanding and a common goal.
Thank you, Mr. Chairman. I look forward to hearing from our
panel today.
Mr. Thune. I thank the gentleman, and I would at this point
yield to the distinguished ranking member of the Subcommittee
on Regulatory Reform and Oversight, Mr. Brady, from the state
of Pennsylvania.
Mr. Brady. Thank you, Mr. Chairman.
I represent urban districts. I do not always get the chance
to hear the concerns of rural areas in obtaining Internet
access. I am very happy to have this opportunity to hear these
concerns and offer my support for the rural communities in
their endeavors to gain broadband access. Because broadband
technology has the potential to transform the Internet, there
has been a great deal of debate in Congress on how to ensure
timely deployment, fair competition and service to all sectors
and geographical locations of America.
I look forward to learning more about these issues. And
just to let you know, South Dakota, Indiana, New Mexico,
Philadelphia. [Laughter.]
It sounds strange, but I thank the two chairmen and my
ranking member also, my dear friend from New Mexico for
allowing this city slicker here to learn a little bit more
about the rural areas and to pledge my support to you.
Thank you.
Mr. Thune. And I want to thank the gentleman for his
hospitality last summer. We were in your fine city of
Philadelphia for a national convention. I did not see you at a
lot of those events, but we enjoyed the greatest hospitality of
your district.
Mr. Brady. I was in so much seclusion.
Mr. Thune. Okay.
We have been joined also by a gentleman from Illinois. Mr.
Phelps, welcome to the committee.
Mr. Baird from the state of Washington has joined us, and I
believe he is here to introduce the witness from New Edge
Networks.
Do you want to make an opening statement?
Mr. Baird. I can do that now, Mr. Chairman, or when----
Mr. Thune. Do you want to get a minute to catch your
breath? We can catch up with you.
Mr. Baird. Sure.
Mr. Thune. Terrific. Good.
Before we begin receiving testimony from the witnesses I do
want to remind everyone that we would like to keep each of the
witnesses, to keep their oral testimony to five minutes. Your
written statement will be included in the record.
In front of you on the table you will see an array of
lights. Green, red, and yellow, which I guess is fairly self
explanatory. But when the red light is on, the committee would
like to have you, if you could, wrap up your testimony. But
there are no trap doors there. If you are not finished by then
we will not----
[Laughter.]
But without further delay--And I might add, too, that we
are scheduled to have a vote on the journal here at some point
in the very near future. So we will get underway but we may
have to break just to make you aware of that.
So without further delay I am going to introduce our first
witness. That is Mr. Michael Cook of Hughes Network Systems. He
is the Vice President and General Manager of the Spaceway
Business Group of Hughes Network Systems. In this role he is
responsible for the establishment and operation of the new
Hughes Spaceway Broadband Satellite System. Mr. Cook has more
than 20 years experience in telecommunications, having worked
previously for cable and wireless and Alcatel Business Systems.
Mr. Cook holds a first class or honors Bachelor of Science
degree in Mathematics from Exeter University.
Mr. Cook, if you would please proceed.
STATEMENT OF MICHAEL L. COOK, VICE PRESIDENT AND GENERAL
MANAGER, SPACEWAY AND HUGHES NETWORK SYSTEMS, BETHESDA, MD
Mr. Cook. Thank you very much. Good morning.
I am Vice President of Hughes Network Systems and General
Manager of Spaceway. Spaceway is Hughes' next generation
broadband satellite system, and that is going to provide
broadband service coverage to the whole of the United States
including Alaska, Hawaii, South Dakota, Indiana, New Mexico,
Illinois, Washington State, and of course Pennsylvania.
I would like to thank the committee for the opportunity to
speak to you today and to commend the members of both
committees for reviewing the issue.
In the satellite industry we are inspired by the prospects
and promises of broadband service, but at the same time we are
deeply frustrated with the apparent lack of awareness of the
critical role that satellites will play in the provision of
advanced broadband services--particularly to small businesses
and consumers in rural areas.
We hope the Congress in drafting legislation to support the
deployment of broadband and in reviewing the FCC allocation of
spectrum will take into account and support this essential
rolethat satellites will play both in the provision of broadband
service and indeed in the competitive landscape across the whole of the
country. I am going to come back to those two issues in a few moments.
Firstly, I would like to review the role that Hughes
Network Systems, or HNS as I will probably refer to it, is
playing in providing high speed communications. HNS was a
pioneer in the very small aperture terminal VSAT industry which
is the provision of satellite delivered data communications
services using small dishes.
H.N.S. was also the first to offer true broadband service
over satellites when it introduced its direct PC service in
1996.
Today HNS provides broadband satellite services to
approximately 300,000 consumers and businesses in the United
States through its DirecPC and DirecWay services using today's
operational Ku-band satellites.
What is more important than that is that we continue to
invest heavily to significantly advance the technology and
service quality. HNS' efforts have led to significant price
reductions in both equipment and services while simultaneously
increasing the power and the effectiveness of these systems.
Historically small business has been underserved by
terrestrial broadband service providers. HNS considers that
small businesses are one of the most important components of
our future broadband services. In fact we already provide
satellite broadband services nationwide to thousands of small
businesses through DirecPC and DirecWay.
Using current satellite technology we are involved today in
a number of initiatives that are aimed specifically at serving
the small business community. These initiatives are things like
on-line livestock auctions, streaming video and Internet
content to family-owned businesses, data multicasting, remote
worker training, and briefing such as for the health care,
financial, agricultural and insurance industries.
In the not too distant future small businesses, no matter
where they are located geographically, will require broadband
access. Not merely to be more competitive, but in order to
survive.
As part of our dedication to the continuing development of
advanced broadband services, we have committed $1.5 billion for
the U.S. portion of a new, advanced, broadband satellite system
called Spaceway.
When it is fully deployed Spaceway will consist of a global
network of geostationary satellites offering broadband service
in the new Ka-band frequency spectrum. Three satellites will be
dedicated to serving North America with launches beginning at
the end of next year.
Spaceway satellites are quite unlike any that exist today.
The satellites have roughly five to ten times more capacity and
will be capable of much higher data, voice and video
communication speeds than today's Ku-band systems.
Spaceway satellites will be capable of transmitting data at
over 400 megabits per second, and with custom software and
equipment individual Spaceway users will receive services
individual services at downlink speeds of 30 megabits per
second or 30,000 kilobits per second to each terminal.
This downlink speed is about 1,000 times faster than the
speeds available today on a typical telephone modem, and
depending on the particular terminal chosen, users will be able
to send data up to the satellite at speeds from 512 kilobits
per second to 16 megabits per second.
Spaceway is perfectly designed to meet the burgeoning
demands of small businesses everywhere, and using standard
Internet protocols from low cost satellite terminals, its data
rates will support high speed Internet access, high quality
full motion videoconferences for businesses and residential
applications, and point to point applications of streaming and
large amounts of data.
In the Spaceway world there will be no have's and no have
not's. There will be no differences between rural and urban
communities' access to broadband. And with broadband satellite
solutions there is no digital divide.
One key issue has been spectrum allocation. In order to
provide a high quality service, Spaceway needs clear spectrum
that is not simultaneously used by terrestrial services. In our
view, the FCC, which has the primary responsibility for
allocating spectrum, has sometimes placed a higher priority on
short term terrestrial deployment rather than on long term
provision of competitive satellite services. As a result,
broadband satellite systems operating in the Ka-band such as
Spaceway, have not been allocated sufficient spectrum to
operate as efficiently and effectively as possible.
We would like to encourage the committee to examine the
crucial role of spectrum allocation and the most effective way
it can be used to serve small businesses and underserved
communities, particularly in rural areas.
Secondly, there are a number of bills before Congress, and
we have talked about some of them already, that would offer tax
and other incentives to companies to build out their broadband
infrastructure to rural areas. We believe it is essential that
any legislation enacted by Congress be truly technology neutral
and recognize the needs of users throughout the country.
Unfortunately, we sometimes find that proposals do not take
into account the unique characteristics of broadband satellite
technology, but instead tend to favor terrestrial technologies.
We believe that that will be counterproductive since it will
diminish the potential availability of broadband services in
rural areas by discouraging the most promising solution for
these areas.
In conclusion, I would like to say very clearly that
through the development of interactive broadband satellite
technology, Hughes is eliminating the digital divide. With the
services we are deploying today--DirecPC and DirecWay--and with
the significantly enhanced capabilities we will have when we
deploy Spaceway at the end of next year, small businesses,
wherever they are, will be within easy reach of the broadband
universe without service discrimination, and very particularly,
without financial disadvantage.
I would like to thank the subcommittee members for your
time this morning, and I will be delighted to answer any
questions that you have on the subject.
[Mr. Cook's statement may be found in appendix.]
Mr. Thune. Thank you, Mr. Cook.
Next we will move to Thorpe ``Chip'' Kelly with Western
Wireless Corporation. He is the Senior Vice President for Sales
and Marketing for Western Wireless in Bellevue, Washington. Mr.
Kelly started as General Manager in 1989, working for
predecessor entities of Western Wireless including Stanton
Communications and Pacific Northwest Cellular. Over the years
he has held a variety of positions in sales and marketing for
the company.
Mr. Kelly, please proceed.
STATEMENT OF MR. THORPE ``CHIP'' KELLY, SR. V.P. FOR SALES AND
MARKETING WESTERN WIRELESS CORP., SEATTLE, WA
Mr. Kelly. Thank you very much.
Good morning Congressman Thune, Congressman Pence, and
members of the subcommittees. I commend you and your colleagues
for highlighting the advanced telecommunication needs of rural
America.
My company, Western Wireless, successfully provides
wireless telephone services in areas of the country long
neglected by others.
The company serves customers in 19 western states with a
state of the art network infrastructure capable of providing
both basic and advanced telecommunications services for rural
businesses and residential customers. Our system covers 800,000
square miles which is 30 percent of the continental United
States, and our average population density in our markets is 11
people per square mile.
For Congressman Brady, that would be probably the area of
Philadelphia with about 500 people in it. So it is rural.
Our mission statement is that we endeavor to be the premier
communications provider to rural America.
About seven years ago we began providing wireless local
loop service to small businesses and residential customers in a
remote area of Nevada that had never been served by local
telephone companies before. In the last year we have launched
competitive wireless local loop service in more than 70 rural
communities in Minnesota, Kansas, Texas, and South Dakota.
In South Dakota, for example, we are providing wireless
service on the Pine Ridge Indian Reservation, which as
Congressman Thune knows all too well, is a remote and depressed
area. For almost half of our tribal customers we provided their
first ever telephone service.
Many have questioned the viability of cellular telephone
service in rural America, and now it is widely recognized that
wireless service holds the key to the availability of advanced
telecommunications services in rural America.
The centerpiece of Western's three year old effort to bring
the benefits of competition to the local telephone market in
rural America is our petitions, pursuant with federal law, for
designation as eligible telecommunications carrier status or
ETC. Western Wireless has been designated as an ETC in 12
states.
Despite national policy to the contrary, rural areas have
in many cases been effectively excluded from the benefits of
the competitive telecommunications market because of incumbent
local telephone companies which have historically monopolized
the access to universal service support necessary to provide
affordable telecommunications in these rural and high cost
areas.
For example, the cost of providing telephone service in
many rural areas exceeds $100 per line per month, and yet
consumers pay as little as $10 or less per month with the
Universal Service Fund making up the bulk of the difference.
Clearly, a competitive carrier that does not have access to
Universal Service Funds would not choose to enter that local
market and compete with incumbent carriers who do have
universal service support.
The Telecommunications Act of 1996 was supposed to
eliminate the historical barriers to local competition in rural
areas by requiring the FCC and state commissions to open the
universal service market to competitive entry. Five years have
now passed since the passage of this Act and rural consumers
are still waiting for the promised benefits.
The problem is that the FCC and state commissions have not
completed the transition to a competitive universal service
system, which I believe is critical to competitive entry in
rural markets and to the closing of the digital divide in rural
America.
Western's entry into the universal service market allows us
to serve the basic and the advanced communications needs of our
rural customers.
In December, Western successfully demonstrated the
capabilities of next generation wireless digital technology in
a trial in Windom, Minnesota where speeds of 153 kilobits per
second were received over wireless local loops. And Western is
now in the process of deploying this technology into its
network and will commercially launch high speed data services
later this year.
Further, as third generation wireless technology becomes
widely available in 2002, data rates of more than 600 kilobits
per second will be supportive.
In order to resolve the digital divide the government must
take steps to reform current universal service support
mechanisms so that competitive carriers and incumbent carriers
alike have access to the same levels of support.
This means that implicit support mechanisms such as access
charges must be replaced with explicit portable universal
service funding mechanisms, and that explicit portable
universal service funds are established to provide support to
carriers that serve rural, high cost areas.
Second, the government must expeditiously grant competitive
carriers ETC status and prevent incumbent carriers from
delaying and preventing competitive entry into the global
market.
For the past three years, incumbent local exchange carriers
have engaged in anti-competitive tactics aimed at delaying or
preventing Western from entering the local market. One
incumbent local exchange carrier in North Dakota went as far as
to cut off Western Wireless' interconnection to the public
telephone network. A court order ultimately ordered the
incumbent telephone company to restore service and pay damages.
In conclusion, competition holds the key to the deployment
of advanced telecommunications services in rural America.
The federal government should foster competition by
establishing a competitive universal service system and by
taking enforcement actions against anti-competitive behavior by
incumbent carriers.
The government should also end the limitations on spectrum
aggregation by crafting a comprehensive spectrum allocation
policy, and these two points are elaborated upon in my written
statement.
Thank you, Mr. Chairman, and I am happy to answer questions
later.
[Mr. Kelly's statement may be found in appendix.]
Mr. Thune. Thank you, Mr. Kelly.
At this point I am going to yield to the gentleman from
Washington, Mr. Baird, who would like to introduce his witness
and I believe any statement you would like to make, Mr. Baird.
Mr. Baird. Let me thank the Chairman for assembling this
panel. I think it is a critical topic particularly for areas
such as yours and mine where a number of rural areas do not
have access to high speed Internet.
Fortunately, however, companies such as those we are
hearing from today are making real progress in this area. One
company that has made particularly progress is a company
located in Vancouver, Washington, New Edge Network.
With us today is Susan McAdams, the Vice President for
Regulatory and Public Affairs. Ms. McAdams has more than 23
years of experience in the telecom field. Before coming to
NewEdge she worked for the Washington State Utilities and
Transportation Commission, the National League of Cities, the National
Telecommunications and Information Administration of the Department of
Commerce, and the North Carolina Task Force on Public
Telecommunications.
I want to thank Ms. McAdams for making the trip here to
testify. I believe we could not have a better person to talk
about this issue.
Mr. Thune. Thank you, Mr. Baird.
Ms. McAdams, please proceed.
STATEMENT OF SUSAN MCADAMS, V.P. FOR EXTERNAL AND LEGAL
AFFAIRS, NEW EDGE NETWORKS, VANCOUVER, WA
Ms. McAdams. Thank you very much, Mr. Chairman, members of
the committee, and Congressman Baird for that most gracious
introduction. Thank you very much.
I am especially pleased to have the opportunity to testify
here today because New Edge Networks is proud to in fact be
bridging the digital divide by bringing broadband communication
services to hometown USA. New Edge Networks is the largest
national broadband services provider focusing on small and mid-
sized cities and towns. We generally serve communities with
population ranges between 5,000 and 250,000. These include
towns like Rapid City and Sioux City, South Dakota; Bedford,
Michigan City, Indiana; Decatur, Illinois; Farmington, Santa Fe
and Albuquerque, New Mexico; and of course Battleground, Camas,
Longview and Vancouver, Washington.
We were founded less than two years ago and believe that we
are in fact a success story of the 1996 Act. To date, New Edge
Networks offers services, broadband Internet access services to
customers in 400 smaller cities and towns in 29 states.
Today, gentlemen, there is a new economic revival in small
town USA and information is the driving force behind that
revival. Chairman Pence, Chairman Thune, and other members of
this committee have spoken eloquently about the vital role of
broadband in supporting small business development, and our
marketplace experience bears this out.
Let me tell you about the comments of one small
businessman, Marcus Wilcox, whose company, Cascade Energy
Engineering, is located in the small town of Walla Walla,
Washington. He had this to say. ``Our engineering firm makes
heavy use of the Internet from e-mail to transferring large,
computer-aided design files and spreadsheets. With our choice
to set up shop in a small, eastern Washington town, slow
Internet access was assumed to be a way of life. When New Edge
Networks and our Internet service provider, Blue Mountain
Internet, offered us DSL, it seemed to be too good to be true.
Going to DSL actually saved us money.''
A moment ago I referred to an information-powered economic
revival in small town USA. Unfortunately, the revival tent in
which this miracle is taking place is currently listing in the
wind and is in danger of toppling over. Some proposals before
this Congress, if enacted, threaten continued competitive
deployment of advanced telecommunications services, especially
in smaller markets.
The 1996 Telecommunications Act did something conceptually
very simple. It set in motion a framework for competition in
the telecommunications marketplace. The promise of the Act was
to bring further deployment, competitive prices, increased
innovation, and improved customer service to telecommunications
markets across the nation. To achieve these objectives Congress
carefully crafted the transition from monopoly to a competitive
market structure. And central to this design is the requirement
that new entrants be allowed to interconnect with traditional
networks that were financed over the last 100 years by monopoly
rate payers.
In fact in only the few short years since the Act,
competitive providers have produced astonishing results. Fifty-
six billion dollars invested since 1997 in new network
infrastructure; 16 million access lines served by CLECs; 8200
central offices DSL-equipped; 500,000 DSL lines provided; and
in fact today about half of Americans can access CLEC provided
DSL.
What the committee is probably most interested in is what
we feel the Congress can do today to continue to address the
issue of broadband development in rural America. I suggest the
following in conclusion. Stay the course that Congress charged
with the Telecommunications Act. Make monies available for
targeted subsidies, for further deployment in rural areas. Give
the FCC stronger enforcement tools such as Chairman Michael
Powell has requested. Urge timely FCC action on pending
petitions that would set clear performance intervals and
standards for loop provisioning by the incumbent telephone
company. Consider requiring full structural separation of the
major incumbent telephone companies into retail and wholesale
companies. And finally, send a clear message to Wall Street
that Congress continues to support the important pro-
competitive policies of the '96 Act.
Unlike some in the industry, we believe that the House
Small Business community has a critical stake in this debate,
and that is why I am here today. We applaud you for holding
these hearings. We urge you to continue to monitor
telecommunications developments. You are in a unique position
to assure that any legislation before Congress empowers small
businesses as full participants in today's information economy.
Thank you very much.
[Ms. McAdams' statement may be found in appendix.]
Mr. Thune. Thank you, Ms. McAdams.
At this point we have a vote on, so members have gone. We
are going to keep rolling here, and they will come back and we
will turn it over.
But I would like to introduce, and I will take these out of
order if it is okay with the witnesses.
It is my pleasure to introduce Randy Houdek of Sulley
Buttes Telephone Cooperative in Highmore, South Dakota from my
home state. Mr. Houdek is a graduate of Northern State
University of Aberdeen, South Dakota and has been employed by
Sulley Buttes for 15 years, spending the last four years as
General Manager. He and his wife Deb are the proud parents of
three boys--Derrick, Carsten, and Hayden.
Sulley Buttes' telephone is a small rural incumbent local
exchange carrier that is owned by the members of the
cooperative and run by a board of directors elected by the
membership and has been serving customers for over 40 years in
central and northeast South Dakota. And I might add, has very
much been on what I would call the cutting edge of extending
broadband service, DSL, to a lot of small, rural communities
across South Dakota.
So we are very delighted and pleased to have Randy with us
today. Thank you for coming to Washington. Please proceed.
STATEMENT OF RANDY HOUDEK, SULLEY BUTTES TELEPHONE COOPERATIVE
HIGHMORE, SD
Mr. Houdek. Thank you very much for allowing me this
opportunity. I am honored.
Again, my name is Randy Houdek. I am the General Manager of
Sulley Buttes Telephone, SBCT, of Highmore, South Dakota. Our
system serves a substantial portion of central and northeast
South Dakota. We are a small local exchange carrier, an ILEC,
that is owned by the members of our rural communities.
Sulley Buttes currently is serving more than 13,600
customer in rural areas of central and northeastern South
Dakota. According to the 2000 census, South Dakota has
approximately 754,000 people or roughly the same number of
people as the city of San Francisco. However, our population is
disbursed over more than 77,000 square miles with fewer than
ten people per square mile. In areas served by Sulley Buttes,
we have fewer than two customers per mile of line.
In contrast, the average customer density in the urban
areas is closer to 100 per mile of line. Several other
incumbent carriers in South Dakota have less than one customer
per mile.
The U.S. Department of Health and Human Services classifies
more than 60 percent of South Dakota as not rural, but
frontier. Yet even in the face of these obstacles we have
managed to grow and thrive as a company thanks in part to the
federal government's policy of universal service. This policy
has brought basic telephone service to rural locations like
Highmore in the early parts of the 20th Century, and now the
policy of universal service is helping bring advanced services
to communities in rural South Dakota.
At Sulley Buttes we are proud of the fact that we offer our
customers many of the latest and most advanced technologies
available in the market today. Currently we have deployed
digital subscriber line, DSL technology, in seven of our
exchanges, and we plan to deploy DSL in the remaining 19 before
the end of the year. We offer the latest call-in features
including voicemail, caller ID, call waiting, and most of the
other services offered in urbanized areas. Moreover, we provide
advanced services including high speed, always on Internet,
cable television, centralized equal access to long distance
carriers. This progress has largely been made possible by the
various financing programs and support mechanisms made
available to companies like mine over the past several decades.
More recently we have acquired wireless licenses including PCS
and LMDS licenses to use as tools in providing advanced
services to our subscribers.
Programs like the Rural Utility Service or RUS and the
Rural Telephone Bank have helped finance major portions for
rural companies like ours that are just not feasible for many
commercial lenders. Thanks to these entities and the universal
service concept, Sulley Buttes and other ILECs in South Dakota
have deployed broadband services in more than 40 small
communities with plans to increase to more than 100 by the end
of the year.
The subject of your hearing today is eliminating the
digital divide--Who will wire rural America? I am here to tell
you this morning for the record, that the job is already being
done to a large degree by Sulley Buttes and its colleagues from
around the nation. We approach our work from an integrated
perspective using wire as well as fiber, radio, and all other
available technologies.
Sulley Buttes is a member of National Telephone Cooperative
Association or NTCA, an association representing more than 540
small rural ILECs. Much of what I talk about today is
representative of what other rural ILECs are doing as well.
Sulley Buttes and our rural ILEC colleague surveyors that
are viewed as economically unattractive to the industry's
largest carriers. We have relied on loans from the Rural
Utility Service telephone program as well as cost recovery
through federal universal service program. Both programs have
been critical to our ability to provide service of a price and
scope that are comparable to those anywhere else in the nation.
Because of our commitment to serving these communities,
rural telephone companies accept an area-wide coverage
commitment. In other words, we take on the responsibility of
serving every customer in our market regardless of their
economic desirability.
The push for Internet access came primarily from our
business customers which includes farming and ranching
operations that have interest in commodity pricing and other
market information, and retail operations that wish to interact
with their customers. On the residential side we have helped to
ensure that the school-age children are able to access many
educational offerings available via the Internet. In South
Dakota we have what is known as the Digital Dakota Network, a
state-initiated project that provides broadband access to most
of the educational classrooms within the state.
I am proud to say that Sulley Buttes already provides
broadband service to the native American community in the
Sisseton exchange. We have fiber in place on the Coal Creek
Reservation and soon will be providing broadband service in
this area as well.
Finally, for the past five years we have provided the
technology that has enabled telemedicine applications and are
taking steps to move these services to higher speeds in the
near future.
Regardless of the technology used to provide advanced
services, cost will always be a major factor. It is critical
that policymakers here in Washington understand this fact and
remain willing to support programs such as the rural utility
service or universal service system.
There will always be upgrades and new technologies that are
necessary to ensure consumers are receiving the most advanced
services of the era.
Recently NTCA conducted surveys on the provision of
advanced service deployment nationwide in rural America by the
ILEC community. The results should be of interest to this
subcommittee and are summarized at the end of my written
presentation. Contrary to popular perception, dial-up Internet
access is widely available to the areas served by the rural
telcos and actual usage is growing significantly. Almost 90
percent of the schools and libraries and other public
institutions have access to broadband service. Meanwhile, rural
companies who are seeking to provide broadband service face
economic and technical challenges including extremely high
costs.
The bottom line is continued support will be necessary.
We are cognizant that certain wireless carriers are seeking
to gain access to the universal service funds in the name of
bringing competition to rural communities. Congress and the FCC
must recognize the sensitivity of the rural ILECs and changes
to the revenue streams, particularly in USF funding. Rural
ILECs like Sulley Buttes have taken on the responsibility of
being the carrier of last resort and we have a decades-long
track record of being committed to serving the rural
communities. Competition in this arena must coexist with the
concept of universal service. This requires regulators to
engage in a balancing process. Rural America does not benefit
from competition for the mere sake of competition. California
has learned this lesson the hard way with regard to its
electric utilities.
The '96 Act is pro-competitive but recognizes that one size
does not fit all. Competition must be tempered with universal
service considerations in high cost, hard to serve rural areas.
As discussed above, Sulley Buttes and our fellow rural ILECs
are already eliminating the digital divide in a lasting way by
providing broadband service to the communities we have served
for decades and will continue to serve for decades to come.
The current universal service funding mechanism is not
broken. It may require updating. The FCC is going in the
correct direction with its USF reform effort.
In this regard we hope the FCC adopts the complete MEG
plan. The FCC must focus more on the USF impact when it
considers policy matter related to the ETC status such as those
represented by Western Wireless.
Thank you again for this opportunity.
[Mr. Houdek's statement may be found in appendix.]
Mr. Thune. Thank you, Mr. Houdek.
We have, Mr. Pence has returned. I am going to turn the
chair over to him so I can get over to vote. He will introduce
our last witness.
Mr. Pence. [presiding]. Thank you, Mr. Chairman. I thank
our witnesses for accommodating the vagaries of a congressional
voting schedule. It is my understanding that that will be our
last recorded vote for some time so we should be able to
complete our business this morning without any additional
interruption.
Our next witness this morning is Kirby Campbell with the
Armstrong Group of Companies. Mr. Campbell is the CEO of the
Armstrong Group of Companies based in Butler, Pennsylvania. As
CEO he provides advice on all financial decisions, and assists
in Armstrong's continued growth and diversification efforts.
Prior to joining the Armstrong Group in 1972 he worked for
PriceWaterhouse for three years. Mr. Campbell graduated from
Geneva College in 1969.
The chair recognizes Mr. Campbell for five minutes.
STATEMENT OF KIRBY CAMPBELL, CEO, ARMSTRONG GROUP OF COMPANIES
BUTLER, PA
Mr. Campbell. Thank you.
Why am I here? I am here to help in any way I can. I have
been in the industry for 30 years. We serve rural America in
the states of Pennsylvania, New York, Ohio, Maryland, West
Virginia and Kentucky. Not only in cable, but small, rural
telephone companies. What I wanted to do was identify what I
felt were critical areas that you and your group could focus on
and maybe make a difference going forward so that the small
operator in rural America can continue to exist.
There are over 1,000 cable operators in this nation right
now, and the bulk of that 1,000 are serving rural America. They
are, I think, being put at some disadvantage based on some of
the unintended results of legislation and rules being
misinterpreted.
One of the areas that I think you could focus on if I were
sitting in your chair that would help. Rural, small cable
companies do not enjoy the same costs for acquiring programming
as the large MSOs do.
When you go out and build these facilities and plants in
rural America you sign personally for this model and you have
to put models together that justify the borrowing. It makes it
hard when you have to pay more yet charge the same because of
competitive pressures of the MSOs around you or the satellite
providers, that if your bottom line is eroded. So I ask the
question and I ask you to look into why are rural cable
companies, smaller cable companies, having to pay more for
programming?
When those programmers realize that they force through
these processes the small operators out of business, sometimes
the acquirors of these small areas leave the management team
and everything intact and do not change a thing, yet the
acquiring large MSO immediately gets more money into the bottom
line because they get reduced rates.
Another area that I think is being abused and needs focus
is retransmission. I do not think that retransmission is
getting the results that it intended. Rural companies who have
to provide network service to the constituents are being forced
to carry multiple channels on their broadband. That is all
operators have to sell is broadband width. We would like to see
the marketplace determine who--what is carried by the
marketplace. The subscriber will pay for what they want.
We are being forced to carry multiple channels by the
networks that the subscriber may or may not want. When these
retransmissions rules were instituted, I think there was not a
vision that these networks would be in three businesses. I
could give you specific examples later if you want, but
networks are in sports programming, they are in network and
they are in satellite programming. They force the operators to
carry multiple channels as a result of just trying to get the
local network to the local subscriber. They do not care whether
it is in the state that you operate or not, they make you carry
these things all over the place. So retransmission consent,
again, I think could be talked about for hours. I would urge
you to look into that and see is it really doing or is it
hindering the development? Our conclusion after 30 years of
watching it, it is hindering it because it is thwarting the
money available through higher costs.
Another area that is concerning us is again with the
networks, digital must carry. The same thing. We have
broadband. We would like the market to determine what can be
carried. Broadcasters are seeking legislation that will force
us to carry not only their analog and their digital, and who
knows what programming they will provide on those services
going down the road.
Open access is a big issue. Many of us in rural America
have stepped forward, risked our capital. We put models
together which we control our own destiny and it does not seem
fair that after private money is put into the marketplace that
after the fact the rules can be changed and jeopardize the very
loan covenants that I agreed to when I signed on the dotted
line.
Another thing that just came across my desk this week that
concerns me, in rural America we use rights of way. We feel
that we have a need to pay for that right of way. Our average
cost for pole attachment is $6 to $9. We just received an
invoice this week which the utility is asking for $42 a pole.
If that were to result in the way that we have to pay for these
poles, that would mean in some of the areas that we serve that
each subscriber each month would have to pay $10 a month just
to cover pole rental. A huge deterrent. I would think that you
would be concerned that if pole attachments are permitted to go
that high, that is a huge deterrent to the construction and
deployment of broadband going forward.
My perspectives, like I say, are after 30 years of
experience. To the extent that our group, I am associated with
the ACA representing 1,000 operators, we will give you whatever
information you need to make prudent decisions going forward.
Thank you.
[Mr. Campbell's statement may be found in appendix.]
Mr. Pence. The Chair thanks Mr. Campbell for his testimony,
and for the testimony of all of our witnesses.
With apologies to the gentleman from New Mexico, I am going
to exercise the authority of the Chair and recess our hearing
for approximately 40 minutes. We on the Republican side of the
aisle have a mandatory conference relative to the tax bill, and
we do expect that to run about 30 minutes.
So we will order this hearing, which you all have
stimulated some very important questions that I know members of
this panel are anxious to ask you. We will recess this hearing
forapproximately 40 minutes or until such time that either
Chairman Thune or I return to the chair. I encourage you to take
advantage of the delicatessens and other lunch fare as we may be going
into the lunch hour.
[Recess.]
Mr. Thune [presiding]. The hearing will resume.
Let me sort of pick up where we left off. Again, we
appreciate all the testimony of our witnesses on the panel this
morning. Very insightful. It is exciting to see some of the
things that are happening out there, and figure out how we can
go about replicating some of those success stories, and then
talk, as some of you did in your testimony as well, about
things that the Congress ought to be looking at in terms of
making broadband access more accessible in rural areas.
Just a first question that I would like to pose of all the
witnesses if you can respond to it to the degree that you have
perhaps studied this issue, but the House Commerce Committee
recently passed H.R. 1542 which is the Internet Freedom and
Broadband Deployment Act, probably more commonly known as
Tauzin-Dingell. The bill seeks to ease restrictions and
requirements on providing broadband services that were placed,
restrictions, that is, that were placed on the Bell operating
companies by the Telecom Act of 1996.
I would just as a general question ask do any of you
believe that opening up the long distance market to the Baby
Bells would increase competition and help meet the growing
demand for Internet access and long distance data capacity?
Ms. McAdams. Quite the opposite, Mr. Chairman. I am
convinced that the provisions of the Tauzin-Dingel bill both in
terms of opening up the Interlata data market and the
provisions which would eliminate the provision of unbundled
network elements are the obligation of the RBOCs to provide
unbundled network elements for broadband services, would have
the eventual effect of condemning especially more rural
constituents to monopoly supply of telecommunications.
What we know today, in New Edge's case, in many of the
central offices and small towns where we are, we are the only
DSL provider. The incumbent has not yet even stepped up to that
plate. They tend to roll out DSL service shortly after
competition comes, and that is a great dynamic of competition,
and that has been the pattern with broadband development.
So no, I believe that is a counterproductive approach.
Mr. Thune. Anyone else care to comment on that subject?
Mr. Cook.
Mr. Cook. I think, just to pick up on the issue of the
monopoly supply. Of course from a satellite point of view we
bypass all of the terrestrial networks and therefore because we
are going to be providing services literally everywhere, we
will be a competitor to whatever terrestrial networks are put
in place. So we think that we have confidence, if you like,
that Congress is going to make the right decisions on this
bill. From our point of view we are relatively neutral. We
think that competition will exist regardless of the outcome of
that particular bill.
Mr. Thune. Would anyone else care to comment?
Mr. Houdek. From an independent's perspective, particularly
in South Dakota, we are a single-Lata state. It does not have a
lot of impact for our company. However, we are a little bit
reluctant to open up the Act this early. There are provisions
to accomplish what they want. So we are, I guess, in favor of
not tearing the Act apart yet.
Mr. Thune. Ms. McAdams, you indicated that the monopoly
status would not be helpful. What they have argued in support
of that legislation is that it will give them powers they do
not currently have that will enable them to get to places that
nobody else can--that because of their economies of scale they
can serve and there are not providers out there. That would be
their argument to counter yours, that it is better to have one
than to have none.
For those of us who come from rural areas, that is a fairly
persuasive argument if we do not have anything going right now.
But we are also attuned to the fact that we want to make sure
there is a competitive playing field out there.
I guess I am wondering, in particularly remote areas of the
country like South Dakota I think fits that category, Randy
described it as the frontier. It is not rural, it is frontier.
We want to make sure that our smaller towns have that
opportunity.
I know that the RBOCs in coming in and making that case,
that was the argument they made. But you disagree, obviously,
with that position.
Ms. McAdams. Yes, Mr. Chairman. I do agree that wireless is
a great and appropriate technology for the very much more rural
areas, the farms, the ranches, et cetera. But for the small
cities and towns where DSL wire line service makes sense, and
where the constituents have paid for that distribution plant
through their rates, their monopoly rates for the last 100
years, it makes equal sense in those areas to provide the
opportunity for both the RBOC and the competitor to compete,
and we do not mind competing with the incumbent. And in the
case of the small companies, in fact New Edge Networks
currently brings DSL services on a wholesale basis to some of
the small telephone companies who then resell our service
branded with their own name, and that is a great cooperative
effort.
But today the argument mounted by the large incumbents that
the inter-Lata restriction is keeping them from deploying
broadband, I frankly believe has very little merit. There
certainly are a few areas in the country which we can point to
where perhaps the Lata boundary is in a somewhat inconvenient
place. The FCC has in place today an expedited process by which
companies or individuals in those communities can apply for
Lata-boundary modifications. As far as I know, none of the
incumbents have in fact availed themselves of that process to
correct Lata boundaries if they are in fact making this problem
for them in some specified areas.
Mr. Thune. There are several bills that have been
introduced in this Congress that are designed to promote
development of broadband technology to rural and underserved
areas in addition to the Tauzin-Dingell legislation, and again,
I think it is questionable as to whether that is the
appropriate vehicle for some of the reasons that you noted.
But some of the other legislation--tax incentives, tax
credit, the English bill, loan guarantees. I think Mr. Houdek
you referenced RUS in our part of the world.
Do those make sense? Are those approaches that in your
judgment would make a difference in terms of the incentive it
provides for companies to come in and provide those types of
services?
Anybody feel free to comment on that.
Mr. Campbell. A concern I have is that there are
deployments of monies already out there, and to bring in
subsidized monies that could compete with those already
invested dollars, or how do you recognize those who did step
forward already?
I think it is a good idea, it helped develop telephone
service in rural America, but it is a complex environment in
today's world. So if you can figure a fair way to do it, that
would be--What I have read so far, there are some inequities.
So a fair way, yes, but subsidized monies is not always
necessarily the solution either.
A lot of people did the tax credits in a lot of the smaller
coop areas do not even pay taxes so it is really not a true
incentive to some of the rural areas that are doing this stuff
through coops.
Mr. Cook. I would just again like to echo some of those
things. In building out a broadband satellite network, we have
already made the decision to invest $1.5 billion without the
need or the incentive of tax credits.
While we think that tax credits are not wholly bad, there
has got to be some benefit and incentive and it will no doubt
encourage some additional build-out, it is not going to solve
the whole problem because some of the areas that we are talking
about will remain too expensive to bill out with traditional
terrestrial technologies. So from our point of view, we think
that if indeed there are to be tax credits or similar
incentives, the most important thing is to ensure that they are
truly technology neutral, that they do not have requirements
for particular types of service or speed which would favor one
technology against another. Under those circumstances we would
obviously, anything which is an incentive, which will encourage
you to take up broadband services is obviously in principle a
good thing.
We also wonder whether maybe the credits should be oriented
towards the end user rather than the infrastructure builder,
and thus allow the market to decide what is the appropriate
technology to use in each different area, so some way of
encouraging or motivating the end user, subsidizing the end
user's takeup of broadband services. That in itself will create
a level playing field for all of the technologies to build out.
Mr. Thune. In that approach the customer basically, it
would incent them through some sort of a tax credit to
subscribe to whatever services might be out there?
Mr. Cook. That is right.
Mr. Thune. Without differentiating between types of
technologies.
Mr. Cook. That is exactly right. You put the power in the
hand of the end user to decide what is most appropriate for
him.
Mr. Thune. A followup question with respect to your
technology, Mr. Cook. One of the accusations that has been
leveled I think against the satellite industry or systems is
their lack of reliability relative to other types of
technology. What has been your experience with respect to the
reliability issue?
Mr. Cook. In the end there is absolutely no difference in
terms of reliability between satellite systems and terrestrial
systems. With broadband satellite today and indeed tomorrow
when we have Spaceway available, we will be offering levels of
availability and levels of service quality that will be
equivalent to anything that is offered by terrestrial
technologies. We spent a huge amount of money and effort, time
and effort, in really pushing the limits of technology and we
believe that we have a fantastic service offering which will
compete everywhere very favorably with anything that is offered
terrestrially.
Mr. Thune. I have some other questions I would like to ask
but I will take a break here and yield to the distinguished co-
chair here, Mr. Pence, for some questions.
Mr. Pence. Thank you, Mr. Chairman. I want to thank all the
witnesses for their patience on what has become a fairly
unusual day in Washington.
First a question across the board. As someone who believes
very strongly in state and local control, I would like to ask
the panel generally what they would view as the proper role of
local governments in the regulation of broadband services,
specifically should local governments be limited to simply
regulating the use of the right of ways, or should there be a
greater role, and if there is a greater role does that act as a
hindrance? Whoever wants to step up to the microphone on that
one.
Mr. Houdek. I think the '96 Act was written, gave specific
powers to the state commissions to determine ETC status.
One of the things they base it on is the public interest. I
am afraid that without the actual states making those decisions
they might not, some of the areas that are currently served
only by the traditional ILEC might go unserved.
Our industry has made a commitment to serve the entire area
with high speed, high quality. I think that it would be very
difficult for us if we were to lose some of the support we get
to provide that service for less, or for a substandard product.
Ms. McAdams. Mr. Chairman, I have been dealing with
telecommunications public policy long enough that I remember a
time, frankly a couple of decades ago I hate to admit, when the
cities at their conferences of the National League of Cities,
the Conference of Mayors, et cetera, would get together and ask
themselves the question what can we do to attract
infrastructure development in terms of telecommunications? It
is important for us in terms of our economic development, in
terms of our competitiveness in the nation and the world, and
that, it seemed to me, was a very positive approach saying how
can we attract this infrastructure investment.
Unfortunately what many of the CLECs and the competitors
today are finding is that the city's interest has changed
somewhat and is unfortunately more along the lines of how much
revenue can we derive from the individuals who bring in the
infrastructure and use the public rights of way.
Clearly the municipalities have an important role in
managing their rights of way and reducing traffic congestion,
in issuing permits and making sure that work in the streets is
done safely and so forth. But that is a circumscribed role. I
agree the Act and the history of telecommunications law cedes
to the public utility commissions in the states the overall
regulatory oversight of entry and pricing for local services.
So I would agree with those who argue that the role of the
municipality should be limited to that which is reasonably
related to the direct use of the right of way, and that fees
for the use of the right of way should relate to the actual
administrative costs of making that right of way available.
In fact the local economy stands to gain immeasurably from
the increased transactional mass, the support for small, medium
and large businesses as a result of that infrastructure
development.
Mr. Kelly. We too share the desire to keep most of the
oversight on a state and local basis. Instead of right of way,
we talk about tower ordinances and that certainly is something
that is a bit frustrating on a region by region basis, but
something that we are easily able to work with local
constituencies.
What has been a little discouraging though is I think the
different speed with which different states, state PSCs, have
taken up compliance with the Telecom Act of '96 and in
particular, there are a lot of states that just do not seem to
be very close at all to having their state funds or state
universal service funds funded in any way. That is a
frustration for us.
Mr. Cook. From our point of view I think we think it is a
very good thing, a healthy thing that state and local
government takes an active interest in telecommunications. From
the perspective of a satellite provider, for every satellite
that we put up we are able to offer coverage across the whole
of the United States. That means it would be very difficult for
us to operate ifthere were differences in the regulatory or
other environment, significant differences anyway, on a state by state
or a local basis.
So the most important thing, again, is to ensure that there
is consistency of environment for us to be able to provide the
same high quality services to everybody.
Mr. Houdek. An experience we have is, at the local level,
an unfair competitive advantage of different technologies,
i.e., not having to pay local franchise fees.
A certain percent of every dollar we collect, be it for
broadband Internet, video, whatever services we provide is
taxed where competitors are not. And we have equal to or
greater investments in providing those. So I would like to see
that leveled out somehow by the locals.
Mr. Pence. Specifically to Mr. Campbell, in your testimony,
your written testimony, you spoke about the irony of attempts
being made to create incentives to RBOCs and to incumbents to
service smaller market areas and rural areas, to close the
digital divide saying rather obliquely that we are already
here.
Is it your feeling that we should not create incentives or
mandates in the Congress that would even invite the incumbents
in in a competitive environment under the '96 Act? I wanted you
to amplify those remarks.
Mr. Campbell. In a fair way, competition is good. I have
watched with interest being in telephone and cable over the
last 30 years the results of the larger incumbents not stepping
forth in rural America, and I find it ironic that they do when
the incentives are put before them. Right now those large
incumbents are even thinking about abandoning by selling off
some of their rural investments and concentrating in highly
populated areas.
So I take it from just a competitive view that if it is a
level playing field--But why did they not step up before this?
It is not that they did not have the resources or the money,
they opted to go where the more dense population was and where
they could make bigger returns. That is what I find ironic at
this time to encourage those who have ignored, to now
participate.
Mr. Pence. Somewhat along those lines, Ms. McAdams, you
made a comment during Chairman Thune's question and answer
period about if we were to provide incentives to the RBOCs or
the incumbents to move into the rural area that we would be, I
think your phrase was condemning you to monopoly supply. Could
you elaborate on that for someone very new to this area?
Ms. McAdams. Yes, thank you, Mr. Chair. I need to perhaps
clarify the point I was trying to make and perhaps I did not
make myself as clear as I should have. In particular,
incentives for development, I agree with my fellow panelists
that direct incentives, especially if they go to rural
businesses, rural institutions and agencies, who then can
choose through a competitive bidding process a provider, make a
great deal of sense, and in some of those instances the
incumbent would win those bids and we think that is a fine
thing.
The point I was trying to make was that some of the current
proposals before Congress, and Mr. Thune referenced the Tauzin
and Dingell bill, would in fact make it impossible for
companies like my own to have access to the existing copper
infrastructure which by its nature is today a natural monopoly
in terms of wire line access, and therefore if that bill were
to pass in its current form, competitors such as myself would
simply no longer be able to provide these broadband services to
the rural communities in which we serve today.
So in that sense, removing the obligation of the
incumbents, the RBOCs, to allow access to the existing copper
plant would result in in most instances the RBOC being the only
wire line carrier available to rural consumers.
Mr. Pence. One other question for Ms. McAdams, in your
written testimony you call for, that Congress ought to or the
FCC ought to consider full structural separation of large
incumbent telephone companies into distinct wholesale and
retail telecommunications providers to avoid there being a
built-in institutional incentive for preferring their own
provider.
We certainly have been down this road in the courts with
courtesy of the Justice Department and another high tech area.
Speak to that proposal and how, whether you would see Congress
acting or the FCC acting or legal action as appropriate.
Ms. McAdams. Yes, thank you, Mr. Chairman, for the
opportunity to expand those thoughts.
The basic problem and the reason why we have to have so
much regulatory oversight of this transition between the
monopoly market structure and a competitive one is because of
the need for wire line competitors to interconnect with and use
the essential facilities of the incumbent phone company.
Because it is the incumbent who controls those bottlenecks,
clearly there can be an opportunity and we believe an incentive
for the incumbents to favor their own retail operations,
perhaps in very subtle ways in some cases. The ultimate
solution to that problem, and in fact a fairly deregulatory
proposal, would be to duplicate what the courts ended up doing,
and of course Congress was also considering at the time, which
was done in 1984 in divesting the AT&T Bell system into local
and long distance companies.
A divestiture of the existing RBOCs into retail and
wholesale arms would then break that affiliation such that
there would no longer be any incentive for the incumbent who
owns the bottleneck facilities and provides them on a wholesale
basis to all comers, to favor their own retail efforts. Now how
that might come about, I think there are a number of forums. It
has been suggested in Congress. Senators DeWine and Kohl
presented such a proposal in the past. Today such proposals are
pending before a number of state legislatures. Some PUCs such
as Pennsylvania have considered and implemented some version of
structural separation. And certainly if the antitrust
opportunities and remedies in telecommunications are restored,
right now there is some what I would consider to be bad law out
there which says violations of the Telecommunications Act
basically can't be used as evidence in an antitrust case and
there is pending legislation before the House Judiciary
Committee to correct that. So if the antitrust remedy were
restored, then conceivably such a structural separation might
end up being ordered by a court as a result of an antitrust
case.
Mr. Pence. Thank you.
One other question, and I will yield to the Chairman and to
my colleagues.
Mr. Cook, in my former life I was in syndicated radio, and
know just enough to be dangerous about Ku-band technology. I'm
fascinated by your presentation about the Ka-band as a possible
way of end-running all the challenges of terrestrial access to
broadband and wanted just very briefly to ask you about your
Spaceway system and I believe you said within three years you
expect to have three geosynchronous satellites that can address
North America and how realistic is that as an alternative to
more traditional means of broadband access?
Mr. Cook. The simple answer is it is a very, very real
alternative. It builds actually on the Ku-band technologies
that we have today, so we have existing Ku-band, broadband
services, which are widely distributed and widely taken up.
But we certainly intend to launch Spaceway--actually,
again, the first satellite will be up round about the end of
next year; the second Spaceway satellite is programmed to be
about six months later; and then the third will come on stream
based on the uptake of the first two.
And the services that we will be able to provide will be
extremely competitive. I think I mentioned in my statement the
sort of speeds we are talking about. The speeds we are talking
about are typically greater than you will be able to get with
today's SDL and cable modem types of technology.
There are some unique benefits that you can generate from a
satellite system. It is very, very good for rural casting and
multi-casting services, when it is saying the same information
to lots of people.
We have devised Spaceway with some very, very advanced
technology to optimize now the satellite broadband capability
for point to point traffic.
Today's systems tend to be broadcast orientated technology
systems. Spaceway is being pushed far more towards the point to
point end of the spectrum. It means that we will be able to
offer direct small dish to small dish high speed connectivity,
so there is no need anymore for users to go into a terrestrial
gateway or into a central hot station. Any small business will
be able to communicate directly with any other at these high
broadband speeds.
We think from a pricing point of view we are also going to
be extremely competitive. We are expecting that small
businesses will be able to acquire Spaceway technology, capital
costs for up to two years out, so there is no final cost yet.
But we are expecting the capital costs can be significantly
less than $1,000 for the equipment and the dish and everything
necessary to receive the service, subscription rates will be
very comparable with DSL subscription rates.
So we expect the service to be very, very competitive from
a technology and from a commercial point of view.
Again, from the main subject of the hearing, from a rural
point of view, the cost differential to us in providing service
to a rural user compared to a metropolitan user. And therefore,
the service will be available fundamentally at the same price
with the same capabilities wherever the user is.
Mr. Pence. Thank you, Mr. Chairman. I have no more
questions.
Mr. Thune. Thank you, Mr. Pence, and I notice when you made
the comment about this not being a usual day in Congress that
there really are not any what I would call very many usual days
in Congress. This is an unusual place and I think having the
word Congress and extraterrestrial in the same context probably
makes a lot of sense.
But I would like to yield to the ranking member, the
gentleman from New Mexico, Mr. Udall for questions.
Mr. Udall. Thank you, Chairman Thune.
I have a couple of questions for Randy Houdek.
I have a district that is, in my state, heavily native
American. We have 22 tribes, we have a large Navajo
reservation, so I am very interested in your ability to serve
native American populations.
To start, what specifically has your business done to
provide broadband access to the rural areas in South Dakota?
Mr. Houdek. Thank you.
What we have--We have taken a system-wide approach to
deploying as quickly as we can fiber into the local, the rural
areas, and then to the house we will use copper.
The part of the reservation we serve is the Coal Creek
Reservation. We have just done that. We have got fiber-optic
loop in and within a month we will be able to provide DSL-type
services 30 miles out in the country on the reservation.
We recently acquired the system exchange from Qwest which
has a large native American population up there, the Sisseton
Wahpeton Tribe. We are, as we speak, we have staked and are
planning to bury fiber to that community right now. We are
offering via sole services in Sisseton and plan to expand that.
Within the city of agency they have a couple of hospitals and
clinics and schools. We are going to bury fiber to all of
those.
There has been a very good reception from our communities.
Mr. Udall. Can you address some of the challenges than to
putting it into Indian country.
Mr. Houdek. Actually the challenges that we face in
particular are not much greater than they are in any other part
of our service area. We are very sparsely populated. The
technology is expensive. And in order to get the customers to
actually subscribe to the service you have to price it
aggressively, and that just makes for kind of a long-term
payback.
We are a coop. We are member owned. Maybe our incentive is
not to much generating huge profits as opposed to providing
service to our owners.
Mr. Udall. What percentage of the market does SBC control
in South Dakota?
Mr. Houdek. Sulley Buttes Telephone?
Mr. Udall. Yes.
Mr. Houdek. We have about 7,000 square miles. What
percentage, again, we are 13,600, there are 770,000 in the
state. Geographically we are about 10 percent; actual access
lines, I cannot do the math that quick.
Mr. Udall. That gives me what I need, thank you.
Mr. Kelly, can you elaborate on some of the problems your
company has encountered in its ETC application process and in
its general efforts to provide service?
Mr. Kelly. Certainly. As I mentioned earlier, we have had
problems with incumbent carriers, and what we have found, there
has been quite a bit of frivolous activity that has been
brought to bear by the incumbent, lots of motions, in some
cases court challenges along the way. Probably the ultimate
frustration was when we initiated service up in Regent, North
Dakota, and after getting ETC status up there, and had the
local telephone company shut our network office. Just
completely cut the wires, took us out of the system.
We were restored within a couple of days and were fortunate
through court action to get that resolved in our favor. But it
is tough going up against the incumbents. We would really
appreciate a real smooth and orderly process, particularly at
the state level at the PFCs.
Mr. Udall. Am I right in inquiring and getting ETC means
you cannot pick and choose your customers?
Mr. Kelly. Absolutely not. When we receive ETC status it is
for a designated study area and we are required with our ETC to
provide service to everyone within that study area.
Mr. Udall. And the universal service funding covers basic
services only, is that correct?
Mr. Kelly. Absolutely. We see----
Mr. Udall. What is the difference between your basic
offering and your advanced services offering?
Mr. Kelly. If you take a look at our native American
initiative in South Dakota on the Pine Ridge Indian
reservation, for instance, we are providing today basic
telephone service. I would not construe it as being broadband.
But half the customers who we have signed up there in the five
months that we have been in service never had a telephone line
before. So before you can go broadband you need to get basic
service.
So we see universal service as the mechanism by which we
can get good competition for basic telecom service. Then from
there we can, on a level playing field, go out and start making
the enhancements to both our network and to our other
competitors' networks to get the high speed bandwidth and the
broadband type technology that we are here talking about today.
Mr. Udall. Thank you.
Chairman Thune mentioned the surrealities of Washington,
and one of the things that happens back here is we sometimes
see television commercials that the rest of the country do not
see that I think are designed to influence members of Congress.
I just recently saw a commercial on Tauzin-Dingell that
talked about, and maybe those of you here have seen it, it
talked about how it was going to be guaranteed that rural areas
under that bill would be provided with broadband access. I know
that Chairman Thune asked about this but I was just wondering
if any of you had any thoughts, or if you had seen that
commercial or any additional thoughts in terms of the
discussion on the bill providing that.
Ms. McAdams. Mr. Udall, the bill as originally submitted,
as I read it at least, did not have any assurance or guarantee
of any additional deployment on the part of the incumbents in
return for the end run around Section 271 of the Act that is
also incorporated in the proposal. However, it is my
understanding that an amendment was added during committee
markup which purports to be a rural, a buildout provision but
in fact is very limited. It requires within five years, which
of course is an eternity in the telecommunications industry,
the incumbents to outfit their existing central offices for DSL
and make DSL available within three miles of the central
office.
Three miles from the central office probably does not take
care of a lot of your constituents, Mr. Udall. I know that
Congressman Largent argued during the markup that in his rural
area in Oklahoma a buildout requirement more on the order of 30
miles such as you are hearing, some of the coops, have stepped
up on their own to do, would make more sense if there is to be
a bill of that nature and there is to be a buildout
requirement.
Frankly, I think what you are hearing among the panelists
today, the witnesses today, is that the market is working to in
fact bring these services perhaps not as fast as any others
would have liked, but the capital realities are such that it is
a both expensive and time consuming process. But I think you
are seeing services in fact brought through appropriate mixes
of technology increasingly to rural areas as a direct result of
the opportunities crafted in the '96 Act.
Mr. Udall. Any other panelist--Go ahead.
Mr. Kelly. I am not familiar with the particular
legislation, it is not my general domain. But Randy and I were
both talking, that it is interesting that neither of us have
seen the ad. It is Beltway surrealism. And there is a certain
amount of irony that the companies sponsoring it are the very
ones in our markets who are selling off the exchanges to
companies like Randy's.
Mr. Udall. Okay. Thank you very much. We will keep an eye
on those commercials and monitor that. [Laughter.]
Mr. Thune. Three miles in South Dakota is just a short
walk. [Laughter.]
The distances are very real. I do not think anything in
that bill probably contemplates what we are talking about as
far as the dimensions.
The Chair recognizes the gentleman from Washington, Mr.
Baird, for questions.
Mr. Baird. Thank you, Mr. Chairman.
I want to in all sincerity compliment both Chairs for
hosting this meeting. We have an awful lot of hearings around
this place and very few, I can sincerely say, are as
informative as this one has been, and I compliment you for
hosting it and the panelist for their thoughtful and diverse
presentation.
I do want to ask my friend from New Mexico where he is
finding time to watch TV. [Laughter.]
Mr. Baird. Maybe your staff tapes them.
Mr. Udall. Five seconds when I am shoving down some
breakfast before heading to this hearing. [Laughter.]
Mr. Baird. Oh, I remember that.
I think part of the importance of this is many of us
represent rural communities and we know on the Small Business
Committee how important broadband and remote access is to our
development of these communities. Many have been hit hard in
our state by timber cutbacks or fishing changes, and if we are
going to help them diversify their economy, we have got to
provide the access to the technology to make it so.
Years ago our country faced rural electrification
challenges, and very analogous in the sense that the sort of
major companies did not have the financial incentive to go out
and provide this access. In that case the government stepped up
to the plate and found ways to promote rural electrification.
Let me ask each one of you to address this question, and it
is a two-parter.
What is the single most important and effective thing the
federal government could do to promote broadband access to our
rural communities? And what is the single stupidest thing we
could do, even possibly through unintended consequences, that
would impede the expansion of broadband?
I will start with Mr. Cook.
Mr. Cook. From our point of view the single most important
thing is spectrum allocated for satellite. Spectrum is the one
component which directly affects the amount of capacity that we
can put up, and therefore the number of subscribers that we can
serve. Having access to an appropriate amount of spectrum is
essential if satellite services are to be readily available to
rural areas.
Our concern is that the amount of spectrum required is not
being made available to us, and I am talking about the entire
satellite industry. Each orbital slot that we have could
support more satellites and therefore more subscribers if we
were given the full amount of spectrum that we had requested
when the licenses were being issued.
Additionally, there has been a tendency to continue to
nibble away at the clear spectrum that is available--in other
words, interference-free spectrum that is allocated for
satellite services. That is a trend that must be reversed.
The stupidest? I guess from our point of view it would be
to create legislation that unduly favors one technology versus
another, one place versus another.
As we have heard there are a lot of things going on in the
market which are positive and which are generating improved
broadband access to rural areas. The wrong sort of intervention
will create distortions which could have an absolutely
counterproductive impact.
Tax legislation and other incentives should be absolutely
technologically neutral.
Mr. Kelly. I think that as the microphone gets passed down
you are going to start hearing the answers get more and more
similar.
The most important thing is going to be having a technology
neutral, competitive enhancing set of incentives out there.
That is the most important thing that can happen.
I think the more that we look at fostering monopolies, the
less competition obviously you are going to get and the fewer
the advances in broadband.
Probably the stupidest thing right now, once again this
kind of sounds familiar, is going to be ignoring the need for
some comprehensive spectrum policy planning right now.
The U.S. is behind particularly the European but also
Japanese carriers in terms of their spectrum allocations. More
spectrum out there in the hands of wireless providers will mean
more broadband, plain and simple. We are under a spectrum
crunch right now so ignoring that is probably the stupidest
thing that I could see out of Washington.
Mr. Houdek. Thank you.
From the rural ILEC perspective, I guess one of the most
important things I would like to see happen is when enforcing
the Act, as FCC enforces the Act, we recognize the balance
between competition and universal service. Competition is
wonderful, but let us not sacrifice the service in the very
rural areas just for the sake of competition. The Act was
written fairly well so that the two prongs are competition and
universal service and to do one without the other is I think
going to do a disservice to the very rural people.
Mr. Campbell. Repeating what I said earlier, I think the
most important thing for a small rural company like ours and
the members of the ACA is to be afforded a level playing field.
It takes money to develop these facilities and you have to sell
at bottom line profit to pay that money back. And there is an
unjust, or undue disadvantage by the larger MSOs getting
programming costs cheaper. Therefore being forced to build into
less dense areas that we would like. We could build into more
less dense areas if we could get more bottom line, we could got
a little deeper.
That falls into the retransmission rules as well. Let the
marketplace determine how that broadband--We don't have
spectrum, we have bandwidth. And with the rules and regs as
they are being utilized now by the networks, they are demanding
the use of that in a way that maybe is not behooving the best
interest of the constituents and subscribers out there.
I guess the thing that I would like you not to do is ignore
history. This is a Small Business Committee, and just look what
has made rural America what it is. It is the small businessman.
It is not the big guys. They do not go there, and we have.
Ms. McAdams. Thank you, Mr. Baird.
It is absolutely clear to me that the biggest barrier today
to further broadband deployment is the drought in the capital
markets throughout the telecommunications industry and in the
competitive sector in particular.
What Congress could do that would be the smartest thing
today in my perspective, would be to make it clear to Wall
Street that Congress intends to stick with the very good policy
framework and direction and pro-competitive policies that were
set forth in the '96 Act and stay that course.
The market is working. Everyone sitting at this table is in
fact demonstrating that fact today.
The stupidest thing is, you know, it is a symmetrical
answer, Mr. Baird. The stupidest thing would be to reward the
bad behavior of the large and incumbent telephone companies who
frankly have done everything they can get away with to impede
the development of competition under the Act by both legal and
regulatory challenges, by strategic incompetence, by confusion
of the station and egregious pricing, and reward them for that
behavior by restoring their monopoly.
Mr. Baird. Thank you very much for those I thought very
thoughtful answers.
If you could give me a list of those critiques I might use
them later on in the floor speeches.
But I think the points are very well taken and I certainly
have seen first hand the challenges many of your industries
face in the capital market, and we have seen I think elsewhere
in the economy when regulatory uncertainty creeps in, it can
create huge disincentives to investments and capital starvation
can be possibly the greatest single threat to innovative folks
like you who are really pioneers and going--Where other folks
have not seen the great return, you have seen the need and I
commend you for that, and I think your points are very well
taken.
Thank you, Mr. Chair.
Mr. Thune. I thank the gentleman from Washington.
I would also add that I like small words and big print so I
am not sure all of the adjectives that you used I could stay
with either, but I think it does make the point and I
appreciate the very direct and candid way in which you have all
answered the questions.
I just have a couple of wrapup questions, and I asked most
of the members if they had other questions and I do not think
anybody does. You can get a chance at a closing statement here
in a minute.
But I am curious as to understanding, help me better
understand the technology. How do you differentiate, Mr. Kelly
and Mr. Cook, between what your two technologies do? Satellite
and wireless. Mechanically speaking so I better understand it.
I think I understand the wired side of it. But how do those
work?
Mr. Cook. In one sense they are very similar because we are
using wireless techniques. There is a slight frequency
difference in the allocated spectrum we are using, but that is
not significant.
The most important difference is that a satellite can see a
lot of geography from one place. That means we can offer the
same high quality service wherever people are in the footprint.
So ubiquity of coverage is an inherant feature of satelite
service. That then enables, as I think I said earlier, services
such as like broadcasting and multicasting.
One of the particular benefits of the sort of system we
have, the new Ka-band technology, are spot beams. These are
geographically oriented high power beams. There are lots of
them together which provides the total coverage.
But in each of those spot beams a services, such as local
broadcasting which is very important for local communities, is
a viable activity. Local multicasting and local connectivity--
again, very important.
So really the issue is the source of the data transmission
is coming from, and what is the link point? That link point is
our capacity point.
It does not matter where the demand for service is on the
ground. Our capacity is available fundamentally to everybody,
and therefore the capacity can be used to save the demand from
wherever it originates.
Mr. Kelly. I am trying to keep big type and small words in
mind here.
In essence, our technology is wire telephony without the
wires. We also have switches and we are terrestrially based. We
maintain towers, towers that provide coverage to the signal
that we use to communicate to the device.
The beauty of wireless as a technology is that you do not
ever have to replace the waves out there. As we go through and
add new technology, as technology advances, it is something
that is added once at the switch. It is added to each
individual tower as you go. The devices are upgraded, but you
are not faced with the degradation of copper, the wires, in
between.
So we, in particular Western Wireless operates in the 800
megahertz cellular frequency range. It is a technology that is
very good for coverage, very good for capacity, particularly in
rural America. And we believe that as we go through and make
extra investments into 3G technology and new digital technology
that we are going to be able to get very good data rates, up to
20, 30 miles away from the tower. So it is something that lends
itself very well to rural America.
Mr. Thune. And just one followup question, because you had
indicated earlier, and I know some of your frustrations in
dealing with some of the reservations in South Dakota, but the
question about the universal service fund, being eligible for
voice transmission type services. That decision is a function,
is it not, of the state public utility commissions? I mean in
order to become eligible for some of that funding, is that
where you would wage your argument, or wage your debate?
Mr. Kelly. In general all those decisions are made on a
state level. We have an application pending right now with the
FCC, however, because jurisdiction over Indian reservations is
a little less clear for Pine Ridge.
Mr. Thune. I am aware of that. And any of the panel who
care to comment on that subject, but I think it was referenced
in at least a couple of the testimonies this morning about the
universal service fund, in terms of how that might be applied
across other areas as opposed to just its traditional use under
the Act.
As I understand the way that works, at least right now in
most cases it is just limited, is that correct?
Ms. McAdams. Yes, Mr. Chairman. It is under the purview of
the state regulatory commissions who periodically undertake to
evaluate what level of services constitute basic services, and
most of the state commissions believe that that well may be a
moving threshold over time. However, in making that evaluation
the state commissions I believe also are taking very seriously
the need to balance what should be subsidized with what
essentially is a telecommunications taxation program on basic
telecommunications bills to collect the funding to go into
universal service.
So while they look at whether new services should be
subsidized, they also are balancing that benefit against the
cost on the normal consumer's bill.
Mr. Thune. Randy.
Mr. Houdek. Thank you.
If I could add, the federal universal service fund, the FCC
makes the determination on what services are supported. If it
is a statewide USF then the state commission makes that
determination.
But back to the issue of should support be given to a
competitor in that case. In a perfect world, the fund would not
be limited. But the way it works now is if the USF support is
given to someone else it takes away from the incumbent who
obviously still has that investment.
The risk of losing a revenue stream that it takes to
support or make those investments, you know, if that is at risk
I feel that you might stifle investment.
In a perfect world--the fund is capped right now. In a
perfect world it would not be, but that is the way it is now.
Mr. Thune. All right. Does the gentleman from Washington
have any closing remarks? Mr. Chairman, Mr. Pence, any
summation?
Mr. Pence. Thank you, Mr. Chairman.
I want to thank again Chairman Thune for lending his
support and his subcommittee's interest in this issue. I think
these have been, as has been said by some of our colleagues,
very informative. As Mr. Baird said, very informative and very
enlightening hearings over the past two weeks.
I look forward to working together on many future occasions
as we bring regulatory reform and rural enterprise together to
truly promote small business development.
In addition to commending the Chairman and the members, I
want to commend these witnesses who have achieved a couple of
goals in this area that this fairly high tech, illiterate
member of Congress is grateful for. Number one, I appreciate
that you spoke in English, and you did not use a lot of very
big words. More importantly, I think that you very clearly
advocated your hard earned position and credibility as pioneers
on the frontier of the digital divide.
You are truly representative of enterprises across America
who have been willing to go where no RBOC has been willing to
go. In many cases where no incumbent with far more resources
has been willing to go.
Having an entrepreneurial background, I admire you, and I
respect you, and I pledge to you not only our subcommittee's
continued interest in your challenges, but also I pledge to you
simply as a member of Congress to be an advocate for the work
that you are doing.
In that vein, I feel very strongly that we should stay the
course that Congress charted in 1996 with the
Telecommunications Act. I also believe and will look for
opportunities to make monies available for targeted subsidies
and grants dealing with that capital drought that so many of
you spoke to.
Also, I am going to pursue the availability of stronger
enforcement tools, giving the FCC a stronger hand simply to
enforce the law as it is written, and ultimately as we move
into what will likely be a lively debate over modifications of
the '96 Act and other very worthwhile measures before Congress.
Allow me to say that this member of Congress is committed
to leveling the playing field, avoiding mandates to
organizations small or large, but ultimately doing those things
inside the context of a free market model that will achieve the
objective of those 150 West Virginia children who flanked
Chairman Thune and I this morning at our press conference who
attend a small, rural middle school that does not have
broadband access. To recognize that unless we deal aggressively
in a public policy model, in an enforcement model, and in the
way of subsidies and grants for capital formation, that as I
said this morning at the press conference, I believe that 25
years from now you will be able to tell where there is
broadband access in America from a satellite photograph, given
the nature of the economic activity and the population centers.
I come from a largely rural area with medium sized cities
that are filled with the brightest adults and the brightest
young people in America, and I would like to keep them all
right there and make sure that the opportunities to move into
the new economy are there.
I thank you for the sacrifices that you all have made, the
capital that you have risked in bridging that divide, and I
pledge to work with you to achieve that goal.
I thank the Chairman, again, for cooperation in this
hearing, and I thank all the witnesses for their outstanding
presentations.
Mr. Thune. I thank the gentleman from Indiana, and I would
just say that all those young people that he talked about in
his state, we would like to move to South Dakota, which is why
we want to make sure that we have all these opportunities
available there.
But I have to admit, I am very excited to hear the things
that are going on. I really am. I think some of the things that
are happening are remarkable and as Mr. Pence noted, they are
happening out there in the small business sector,
entrepreneurial sector, as opposed to the more traditional
deliverers of these types of services, and I want to credit all
of you for the work that is going on and echo what Mr. Pence
said. That is we want to work with you as partners, in making
sure that we are tearing down barriers and providing
incentives.
Whatever this Congress can do to enhance the opportunity
for better availability of high speed access, whether it is
band-width or spectrum, depending on what your technology is,
we want to make sure that the competitive issues, the economic
development issues, distance learning, health care, all those
quality of life things are available not just in our population
centers but to people that live in rural areas. I think this is
going to be critical in terms of seeing that accomplished in
the same way that building the interstate highway system and
the railroad system of the past, or rural electrification as
Mr. Baird indicated, those are all things, models that have led
to great progress in this country and it ought to be progress
that extends beyond the borders of Washington, D.C. and some of
our metropolitan areas to places more remote.
So anyway, I appreciate very much your testimony. I hope
that you will feel free in the future to call upon us and visit
with us about things that we ought to be doing, insights that
you have.
I certainly am someone who admittedly is a novice in this
area but want to come up to speed on the issue so that we can
be conversant in talking away. And we can come to a formation
of public policy that would enable us to get to the finish
line.
So thank you very much for your testimony and for your
patience today. I appreciate everything that you have
contributed.
This hearing is adjourned.
[Whereupon, at 12:51 p.m., the subcommittees were
adjourned.]
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