[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
SMALL BUSINESS ACCESS TO TECHNOLOGY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON RURAL ENTERPRISES,
AGRICULTURE, AND TECHNOLOGY
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, FEBRUARY 7, 2002
__________
Serial No. 107-42
__________
Printed for the use of the Committee on Small Business
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78-339 WASHINGTON : 2002
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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 BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin
PATRICK J. TOOMEY, Pennsylvania Islands
JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota TOM UDALL, New Mexico
MICHAEL 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
SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma
ANIBAL ACEVEDO-VILA, Puerto Rico
Doug Thomas, Staff Director
Phil Eskeland, Deputy Staff Director
Michael Day, Minority Staff Director
------
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. CHRISTENSEN, Virgin
MIKE PENCE, Indiana Islands
BILL SHUSTER, Pennsylvania DAVID D. PHELPS, Illinois
BRAD CARSON, Oklahoma
Brad Close, Professional Staff
C O N T E N T S
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Page
Hearing held on February 7, 2002................................. 1
Witnesses
Cooper, Kathleen, Undersecretary for Economic Affairs, Department
of Commerce, Economic and Statistics Administration............ 5
Aughenbaugh, Tim, President and CEO, IdentityPreserved.com....... 7
Richmond, Ralph, President, USA Cartage, Inc..................... 9
Hugh-Jensen, Per, Owner, Bowhe & Peare........................... 11
Pequigney, Steve, President, I-CUBE.............................. 13
Appendix
Opening Statement: Thune, Hon. John.............................. 25
Prepared statements:
Cooper, Katheleen............................................ 27
Aughenbaugh, Tim............................................. 31
Richmond, Ralph.............................................. 38
Hugh-Jensen, Per............................................. 42
Pequigney, Steve............................................. 49
HEARING ON SMALL BUSINESS ACCESS TO TECHNOLOGY
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THURSDAY, FEBRUARY 7, 2002
House of Representatives,
Committee on Small Business,
Subcommittee on Rural Enterprises,
Agriculture and Technology,
Washington, DC.
The subcommittee met, pursuant to call, at 10:15 a.m. in
room 2360, Rayburn House Office Building, Hon. John Thune
(chairman of the subcommittee) presiding.
Chairman Thune. This hearing will come to order. Good
morning, and welcome to this hearing of the Subcommittee on
Rural Enterprises, Agriculture and Technology. I would
especially like to thank those of you who have traveled a long
distance to participate this morning.
Today we are going to be examining the issue of small
business access to technology. Small business owners are aware
of all the benefits technology has to offer, but are not always
in the best position to utilize technology to its fullest
extent. As much as they might like, small business owners often
times do not have the resources to devote to investing in new
technologies.
On Tuesday, the Commerce Department released data
indicating that more than half of all American households are
now connected to the Internet and that 90 percent of children
between the ages of 5 and 17 now use the Internet at home.
While these figures are promising indicators of the
technological skill level of future employees, small businesses
still lag their larger counterparts in the use of technology.
We have with us today the Undersecretary for Economic
Affairs at the Commerce Department, Ms. Kathleen Cooper.
Undersecretary Cooper will be providing us with an in-depth
look at a recent study by the Commerce Department entitled Main
Street in the Digital Age: How Small and Medium-sized
Businesses Are Using the Tools of the New Economy.
It is the Subcommittee's hope the results of this study
will help small business owners and Congress gain a better
understanding of how technology is used by the small business
community and provide some direction as we look at ways to
improve access to necessary technology.
In rural areas such as South Dakota, small business owners
realize that to continue to serve their communities and remain
competitive in an increasingly consolidated marketplace they
need reliable and affordable access to technology. That
technology might be used to help a business manage its
inventory or help it purchase and sell on line or help
consolidate the massive amounts of paperwork small business
workers are faced with daily.
Last year, the Subcommittee held two hearings on the issue
of access to broadband Internet in rural areas. While we heard
about some promising new technologies, it is clear that most
people in rural areas do not yet have broadband capacity. This
lack of access to broadband is indicative of the larger problem
of access to technology in general for small business owners in
rural areas.
Job creation is vital to the small communities and rural
areas of our country, and access to technology will help stem
population loss in rural areas. Residents will no longer feel
compelled to leave their towns and communities in search of
higher paying jobs and challenging careers. Farmers and
ranchers, healthcare workers and retail store owners realize
that if they want to keep and attract quality employees they
need to have access to technology.
I look forward to hearing from our witnesses this morning,
and I want to thank them for participating in today's hearing.
I would at this moment yield to the gentleman from New
Mexico, Mr. Udall.
[Chairman Thune's statement may be found in the appendix.]
Mr. Udall. Thank you, Chairman Thune. Thank you for doing
this hearing. I know this is an important subject that you care
a lot about and have focused a lot in on this Subcommittee. We
know the benefits of high-technology properly applied. It
boosts productivity, reduces cost, increases profits and wages
and prepares workers for a lifetime of technological change.
One primary hurdle behind high-tech investment for small
business is cost. Small companies see high startup prices and
ongoing costs for support and personnel with unknown or
uncertain benefits. But the use of information technology as a
tool of commerce also relies on making another leap forward in
communications infrastructure.
High-speed Internet connections are the next wave to propel
the awesome potential of e-commerce and telecommunications. If
one thing rings clearly from this report, it is that e-commerce
is not even out of its infancy. The potential for growth is
enormous. Twelve percent of manufacturing sales are now on
line. The sales rate of wholesale merchants is up to 5.3
percent. Retail sales are lagging at only .5 percent of sales,
but, if anything, the manufacturing and the B(2)(b) sales rates
show where this rate could go. Clearly, the potential is there.
So what is the holdup? That seems to be clear, too. The
growth of the Internet is restricted by bandwidth and the
number of people with access to it. We need to do everything we
can to make the Internet what it can be, an information conduit
as wide and flush as the Rio Grande.
We also need to make sure that river reaches more people
all across this country and that they have the tools to harness
its power. Currently, high-speed Internet connections are
really only available in urban areas. There companies and some
homes can pay a reasonable sum for DSL, which uses existing
telephone lines, but DSL requires the end user to be located
only a few miles from a major telecommunications switch
available for now in densely populated communities.
As a consequence, DSL is not available in rural, isolated
areas like my district, including Native American reservations
that need this kind of service to make the Internet work for
them. Fewer people living in this country's open, in between
places have high-speed Internet access than people anywhere
else, and they often have less money to pay for it. In areas
like these, small businesses are critical to the communities
they serve for employment opportunities and economic growth.
Unfortunately, the big river of information runs a lot thinner
and drier out there.
The Internet and its technology and tools for communication
are here to say. The Internet still has a great potential to
transform business by boosting productivity, employment,
innovation and sales, but we will only reach that full
potential if technology can expand its reach and capacity. We
can widen and deepen this river of information and technology
and make it available for more and more Americans.
Thank you, Mr. Chairman. I look forward to hearing the
testimony of the panels.
Chairman Thune. Thank you.
The Chair would now recognize the gentleman from Maryland,
Mr. Bartlett, who would like to acknowledge one of our
witnesses who comes from his district and to make his opening
statement.
Mr. Bartlett. Thank you. It is a real pleasure to be able
to welcome a friend andconstituent. We are a little late this
morning, and it is ironic that I am late because I was at the National
Prayer Breakfast with another trucker. Mr. Richmond is a trucker, and I
was there with Don and Joanie Bowman. Don Bowman is the very recent
past president of the American Trucking Association.
Mr. Richmond began his company, USA Cartage, in 1986 with
one driver, himself, which is just the way Don Bowman started
his company a bit before that. Mr. Richmond's company may have
been one of those small business companies. I do not know how
big his company was in the early 1990s when we were coming out
of the last recession, but I was shocked by the statistics of
where the new jobs appeared as we came out of the last
recession.
If you divide businesses up into groups depending, you
know, by their size, the largest, 5,000 or more, down to the
very small businesses, zero to four employees, and that is a
small business. When Mr. Richmond started he had zero
employees, unless he paid himself with a paycheck. That was a
zero employee company; just one person.
More than 90 percent, well more than 90 percent, of all the
new jobs that brought us out of the last recession were created
in businesses of zero to four employees, so small business is
the engine which runs our economy. We are in a recession now.
It will not surprise me that the same thing happens in this
recession that most of the new jobs will come from small
businesses. So it is very appropriate for this hearing this
morning that we recognize some of the problems that small
business has in accessing the technologies that can help them
grow and very rapidly become large businesses.
I note that Bill Gates started not very many years ago as a
small business, did he not. So it is still possible--
increasingly more difficult with all of our regulations and
high taxes--but it is still possible in this country to achieve
the American dream. Mr. Ralph Richmond is one of those who has
done this, so it is really a pleasure to welcome him here as a
witness today.
I must again apologize because I need to leave. One of the
problems we have here is that you cannot be in two places at
once, and I need to go chair the Science Committee. The Chair
of that must go to the Floor to manage a bill, his bill on the
Floor, so he asked me if I would come and chair the Science
Committee for him.
Thank you very much. I have read some of your testimony. I
will read it all. I am one of maybe 35 people who came to the
Congress as a member of NFIB, so I was a small business person
in another life and understand your concerns and your problems
and your challenges.
Thank you very much for coming today to contribute your
knowledge in our desire to make technology more readily
available so that small businesses can graduate from being
small businesses and become big businesses and make room for
others to come in as small businesses, which truly is the
engine which drives our economy in this country.
Thank you very much, and thank you, Mr. Chairman, for
yielding.
Chairman Thune. Thank you. I would note as well and
apologize for the late start. There were a number of us who
were at the National Prayer Breakfast this morning and just got
back up on the Hill.
I now yield to the gentleman from Illinois, Mr. Phelps, if
you have an opening statement.
Mr. Phelps. I have no opening statement.
Chairman Thune. No statement. Okay.
We will turn to our witnesses. Before we begin receiving
testimony from the witnesses, I do want to remind everyone and
ask that each witness keep their oral testimony to five
minutes. In front of you on the table you will see a little box
that will let you know when the time is up. When it lights up
yellow you have one minute remaining, and when five minutes has
expired you will have a red light that will appear.
Once that red light is on, we would appreciate it if you
could begin to wrap up or hopefully wrap up your testimony as
soon as you are comfortable. We will obviously grant some
discretion on that. There is no trapdoor there when the light
goes off if you are not through.
What I first want to do, too, is recognize Kathleen Cooper,
who is the Undersecretary for Economic Affairs at the
Department of Commerce. She has to leave early, and so after we
hear her testimony Members will have an opportunity to question
her. After we are finished questioning, we will proceed with
the rest of our witnesses.
Having said that, the bells are going off. Ms. Cooper, if
you would like to go ahead? I do not know if we have time for
questions. Your deadline is 11:00?
Ms. Cooper. Yes, but I can stay. I can stay if need be.
Chairman Thune. If you could make your statement at least,
and then maybe we can get a few questions asked before we head
over to vote. It is a 15 minute vote. If you would like to go
ahead and proceed, we would welcome your testimony.
STATEMENT OF KATHLEEN B. COOPER, UNDERSECRETARY FOR ECONOMIC
AFFAIRS, DEPARTMENT OF COMMERCE, ECONOMICS AND STATISTICS
ADMINISTRATION
Ms. Cooper. Thank you very much, Mr. Congressman.
Chairman Thune, Congressman Udall and Members of the
Committee, Member of the Committee, good morning. I am pleased
to be here. My name, as mentioned, is Kathy Cooper, and I serve
as the Commerce Department's Undersecretary for Economic
Affairs.
My complete testimony has been submitted for the record,
but I am pleased to be able to be here to provide a short
summary of the highlights of the Commerce Department's report,
Main Street in the Digital Age.
This report does provide some good news. First, small
businesses are investing in and using the tools of today's
economy. In fact, they invest about a quarter of their total
capital expenditures on computers and communications equipment,
approximately the same as large businesses.
Second, 70 percent of small businesses use computers. The
data indicate that the majority of small and medium-sized
businesses are also subscribing to the Internet.
Third, around 16 percent of employees of small and medium-
sized firms who do not use a computer at work use it at home.
This, combined with the share of small business employees who
already use a computer on the job, suggests that there is a
basic level of computer literacy in the current small business
workforce.
However, our research also shows that the smaller firm, the
less it invests in absolute terms in IT equipment on a per
employee basis. Companies with more than 500 employees, as was
referred to earlier, invested more, invested in fact twice as
much per employee in computers and communications equipment as
enterprises with 500 or fewer employees.
Employees at smaller firms are less likely to use a
computer at work than their counterparts at larger companies,
and the best available evidence suggests that small and medium-
sized businesses are less likely than larger firms to undertake
certain e-commerce activities like buying and selling on line.
Our report thus paints a picture of the diffusion, although
the uneven diffusion, of information technologies to small and
medium-sized firms. Our research presents a look first at
entrepreneurs' information technology investment patterns and
suggests a variety of questionsabout the role of small business
in the digital economy.
Why, for instance, do large firms invest more than small
and medium-sized firms in information technology equipment, and
what role does the Internet and e-commerce play in helping
businesses to succeed? Two factors help to account for lower
levels of IT investment per employee.
First, although small and medium-sized firms devote roughly
the same percentage of their capital spending to IT as do
larger businesses, the total amount they invest in capital
equipment is simply less than that expended by large firms.
Second, smaller firms are more prevalent in industries that
tend to be less capital-intensive such as retail, services and
construction.
Our data are revealing, but they do raise new questions
that will require new data to answer. All of these are areas
for further research. Improvements in the data collection
programs at Commerce should aid in addressing these important
research questions, and I would be happy to discuss these
initiatives at a later point in more detail. They include the
Census Bureau's American Community Survey, the Economic Census,
which is the statistical benchmark of business economic
activity and also the new economic indicators that are being
considered reflecting the services in high-tech sectors of the
U.S. economy.
The emergence of the Internet and the combination of
increasing quality and falling prices of computer equipment
during the last decade should not be overlooked in this
context. Less expensive computers and easy to use computer
networks have given small and medium-sized firms entree into
the information economy. Small business may not be engaging in
some of the more sophisticated online activities like buying
and selling on line to the same extent as large firms, but most
firms are at relatively early stages of incorporating the
Internet into their business processes.
Furthermore, as you know, small businesses are an
incredibly diverse collection of firms. Some of the most
technologically advanced firms are small web-design firms, for
example, independent software designers and so on. We cannot
expect a single technological approach to be appropriate for
every firm. Business owners must evaluate each technology and
each online business activity in light of their business goals.
This research is just one part of the Commerce Department's
efforts to improve our understanding of small businesses in the
new economy and to make sure that these firms are able to grasp
the potential of new technology.
Secretary Evans' e-business facilitation initiative
encouraged the OECD, the Organization for Economic Cooperation
and Development, to examine the obstacles facing small
businesses in conducting cross border transactions over the
Internet. The Secretary wants to look for positive ways to help
businesses use information technology and electronic commerce
to expand internationally.
In my own agency, the Economics and Statistics
Administration, we are making it easier for smaller exporters
to complete their trade paperwork and submit it to us on line.
This will reduce the administrative burden on small business
and enable the Census Bureau to produce trade statistics more
quickly.
The Administration's proposals are detailed. As I mentioned
in my written testimony, the President's tax bill enacted last
year has already helped small business, and his commitment to
enhance trade policy and improve education will reap benefits
down the road.
Mr. Chairman, Members of the Subcommittee, I appreciate
your leadership. This is a critical time for the economy as a
whole. As the Members of the Subcommittee well know, small
business has been hit hard. I hope and expect that we will see
a rebound in the near term. A solid recovery depends on a
variety of factors, of course, including the strength of small
business and the high-tech industry, both individually and
together.
I thank you, and I would be happy to take questions at the
appropriate time.
[Ms. Cooper's statement may be found in the appendix]
Chairman Thune. Thanks, Ms. Cooper. Since we have some
folks that are over voting and who will be returning here, I
would rather, if we can, hold up on questions until they get
back.
What I would like to do is move to our second witness, who
is a gentleman from the great State of South Dakota, Tim
Aughenbaugh. Tim grew up on a family farm near Iroquois, South
Dakota. After graduating from South Dakota State University
with a degree in Agricultural Engineering, he started his own
business in 1991.
Tim's business, IdentityPreserved.com, produces Internet
software that enables food companies and their supply chains to
monitor production protocols and product safety and quality
issues and does business in several countries throughout the
world. Tim, his wife and three children live in De Smet, South
Dakota, where he currently serves on the board of the De Smet
Development Corporation.
It is a great privilege for me to be able to welcome
someone from my own state, someone who has been a leader in
this field and has some great insights and ideas about how to
apply technology in the rural sector of our economy.
Tim, it is good to have you here today. Welcome. Please
proceed.
STATEMENT OF TIM AUGHENBAUGH, PRESIDENT AND CEO,
IDENTITYPRESERVED.COM
Mr. Aughenbaugh. Mr. Chairman and Members of the
Subcommittee, it is an honor and a pleasure to come before you
today and testify on the opportunities and challenges that
technology represents to small businesses. The subject of
technology, particularly as it relates to agricultural and
other rural enterprises, has been at the center of my 11-year
career as an entrepreneur.
The company I founded has strived to help production
agriculture in the better use of technology. As you likely
know, technology use has not grown as fast in this sector as it
has in others. An ongoing difficulty in obtaining a strong
penetration here is the challenge of making the technology easy
to use. This is difficult because of the harsh work
environment, the speed and long hours in which people work and
the wide range of technical expertise that is found in the
workforce.
Advances in the capabilities of technology, as well as the
increase in technology infrastructure in rural areas, such as
the addition of wireless and higher speed access, certainly
make the job of providing these appropriate technologies an
easier task. The need for technology in agriculture is on the
rise. In order to meet the increasing need for food safety and
security, as well as those of a more demanding domestic and
international customer, today's farmer needs to communicate,
coordinate, document and verify his efforts to the supply
chain.
It is my opinion that in the near term most of the
requirements for this type of production can be met with the
addition of technology applied to our existing infrastructure.
The farmer who is better able to meet the needs of this
production environment will find himself in a much more secure
and valuable position. Therefore, if agriculture is to continue
to deliver, I believe that investment in the development,
access and training of new technologies will be crucial.
I would like to address technology as it relates to small
rural businesses in a slightly broader manner. I concur with
the Commerce Department's study that small businesses need to
embracetechnology in order that they can compete with their
larger counterparts in several basic areas. I further believe that
technology investment in technology industries themselves in rural
areas can offer assistance on a very important subject, the stemming of
outflow of young, talented people from these areas.
The reality of this outflow strikes pretty close to home. I
currently sit on the board of directors of the Development
Corporation of De Smet, South Dakota, a town of 1,100 people
and the childhood home of Laura Ingalls Wilder, the childhood
author whose books were made popular by the TV series Little
House on the Prairie.
De Smet has been the beneficiary of a strong economic
development effort and currently boasts 143 small businesses,
including a strong industrial park. But the looming problem for
De Smet, as it is for many other rural communities, is coming
to terms with declining rural population. The concern is
magnified by the fact that our young people and the potential
babies that they take with them represent the majority of this
population outflow.
In my home county, for instance, only 11 percent of the
population is now made up of 20- to 34-year-olds. In
recognition of the importance of this age group, one must look
seriously at ways to retain them. In order to do that, one must
look seriously at the reasons that they leave. From my own
perspective, I believe that the driving force is not so much a
desire to leave, but rather a desire to seek opportunity. In
today's world, opportunity is pronounced `technology,' and that
opportunity is currently elsewhere.
A study recently conducted in South Dakota maintains that
if any stability is to be attained, it will demand a holding
power, which will allow young adults to stay and even return to
a community. I believe that technology is one such holding
power.
Challenges certainly abound in running a technology
business from a rural location. In my own case, we utilize ten
of the 11 copper phone lines coming from the town in my area.
Our corporate office operates with an Internet connection speed
that is often only a fraction of that of our offsite employees,
the connection speed that they enjoy in their home offices. We
were forced to open a satellite development office in
Minneapolis in order to just hire some of our own homegrown
talent that has chosen to live there.
All of these difficulties aside, it should be noted that
technology itself allows us to run a technology business from a
rural location. When people do go to the trouble of physically
visiting our remote offices, they unfailingly mention that they
cannot believe it is possible to do what we are doing from out
in the boonies. Those comments are not only a testament to the
fact that the technology is in place, but also a statement on
its ability to deliver positive results.
The point may be that the technology pipe is technically
built to flow both ways. Just as it allowed rural businesses to
access services of the broader world, so, too, should that
vast, broad world outside our rural boundaries be afforded the
opportunity to access the talent, work ethic and solid values
that personify the people of our rural neighborhoods.
I thank you for the opportunity to share my experience and
perspective on these topics. I am hopeful that the
Subcommittee's efforts can positively impact the opportunities
and challenges we face in adopting technology in rural areas.
[Mr. Aughenbaugh's statement may be found in the appendix.]
Chairman Thune. Thanks, Tim.
Since Mr. Udall has not returned, I am going to have to
run. We have about two minutes left on the vote, so I am going
to temporarily recess. As soon as he returns, we will continue
with the testimony.
The hearing is temporarily recessed.
[Recess.]
Mr. Udall [presiding]. The hearing will come back to order.
We are doing a little shuffle here to try to keep it rolling
for all of you.
I ran into John in the hallway. He wants to continue with
the witnesses, so we will hear now from Ralph Richmond, who was
previously introduced by Roscoe Bartlett. Mr. Richmond, please
go ahead.
STATEMENT OF RALPH RICHMOND, PRESIDENT, USA CARTAGE, INC.
Mr. Richmond. Good morning, Mr. Chairman and Members of the
Subcommittee. I would also like to thank Mr. Bartlett for that
very kind introduction.
My name is Ralph Richmond. I am the president of USA
Cartage, Inc., a trucking company based out of Williamsport,
Maryland, and I am here representing the American Trucking
Association. First, I want to thank you for the opportunity to
share my thoughts and ideas on technology use in trucking and
small business.
The trucking industry as a whole is large, moving 350
billion tons of goods every year. In fact, 82 percent of all
freight in the U.S. is moved by truck. The industry employs
more than ten million hardworking men and women. Seventy-four
percent of all trucking companies have six or fewer trucks, so
today I am speaking on behalf of more than 400,000 small to
medium-sized trucking companies across the U.S. Challenges
facing our industry today include shortage of skilled drivers,
skyrocketing insurance rates, unstable fuel cost, increasing
regulatory burden.
There are three factors that influence our company to look
at and invest in technology. Number one is productivity. We
look at how can we increase our miles per gallon? How can we
extend oil changes? How can we handle data more efficiently?
How can we make our trucks safer? How can we make our trucks
last longer? How can we file our taxes faster?
Second, we are influenced by the marketplace. Changing
customer requirements include many customers now and, because
of technology by larger and larger companies that over the
years have become more and more commonplace, customers now
require that you have electronic billing, that you have GPS
tracking, and that you have Internet tracking for their
shipments.
Third, we are influenced by government regulations and
mandates. We need to invest in systems to keep up with and meet
compliance issues with federal regulations and technologies
mandated on our industry and equipment.
There are four thoughts I would like to advance to this
Committee to help small businesses in dealing with technology
issues. Number one, faster depreciation. Currently, systems are
required to be depreciated over five years. With the speed of
technology today, we are sometimes still depreciating systems
after they are functionally obsolete.
Number two, tax credits. I encourage you to look at tax
credits to small business for technology investments.
Number three, proprietary policies. Now, I am a firm
believer in the American free market system, so this idea is
just a little bit hard for me to articulate, so I would like to
express it with an example and then give some other examples
that I am involved with.
I want you to think for a moment that the technology is
cable TV. You had that technology, and for some reason you were
required to move to another city. In that city you had a
different vendor for that cable service, and that service was
not compatible or did not read the systems that you had. In
order to hook up to that service, you would have to buy all new
TVs in your house. The same thing if you for some reason had to
move into another or get another service.
Fortunately, that is not the case in cable TV or in the
cable industry, but our industry is faced with some emerging
technologies such as satellite communications and GPS tracking
that requires huge investments for the hardware and software,
but are only proprietary to the specific vendors. These systems
do not speak to each other, even though the technologies are
fundamentally the same. These huge investments make it very
difficult, if not impossible, for a small business to change to
another vendor or better service.
Another example is that our industry is headed for
requiring data transponders on our trucks to transmit data for
several different government agencies. Once again, the
technology is fundamentally the same, yet different states or
agencies may have different systems or vendors, and we will be
required to buy and maintain multiple transponders on each
truck just to operate. I can only ask you where warranted for
you to encourage standardization and freer access for companies
to build on some of these emerging technologies.
Fourth, data privacy protection. One thing for sure is that
today's technology can gather and store and make available data
at unprecedented efficiency. I see that trend only getting more
and more efficient as we move along. Data and information are
valuable to every company, large or small. I urge you to bear
that in mind as you set policies. Data privacy is very
important to us.
I want to thank you for the opportunity to share my
opinions with you, and I would be happy to answer any questions
you may have. Thank you.
[Mr. Richmond's statement may be found in the appendix.]
Mr. Udall. Thank you very much, Mr. Richmond.
Next, the Subcommittee will hear from Mr. Per Hugh-Jensen,
owner of Bowhe & Peare Retail headquartered in Old Town
Alexandria. Please proceed.
STATEMENT OF PER HUGH-JENSEN, OWNER, BOWHE & PEARE
Mr. Hugh-Jensen. Thank you, Mr. Chairman and Members of the
Subcommittee. First and foremost, I would like to thank you all
for inviting me to testify here today on behalf of the National
Retail Federation.
The National Retail Federation is the world's largest
retail trade association with membership that comprises all
retail formats and channels of distribution, including
department, specialty, discount, catalog, Internet and
independent stores. NRF members represent an industry that
encompasses more than 1.4 million U.S. retail establishments,
employs more than 20 million people, about one in five American
workers, and registered 2001 sales of $3.5 trillion.
N.R.F.'s international members operate stores in more than
50 nations. In its role as the retail industry's umbrella
group, NRF also represents 32 national and 50 state
associations in the U.S., as well as 36 international
associations representing retailers abroad.
As an owner of a small retail chain, Bowhe & Peare, here in
Old Town Alexandria, we are presently facing many of the
challenges which I will briefly outline today. As we look to
grow and expand our business over the next 12 to 18 months, it
is imperative that we integrate a system into our business
which allows us to track sales, inventory, inventory turnover,
customer purchases, et cetera, along with a customer database.
While most business owners would agree that this is
imperative, there are many obstacles that small and medium-
sized business owners, in particular retail, face in making
these decisions. They are as follows:
Cost. This is probably the area most evident in making
these decisions. Because of today's economic climate, making
the decision to invest thousands of dollars into the business
is somewhat risky, thereby creating a fear factor. On the other
hand, if you are going to become a leader in your state, you
must have the ability to evaluate your business to make
strategic decisions to grow the business intelligently.
There are great products on the market that allow you to do
this today. Recently, both Microsoft and Oracle have announced
initiatives to launch products and services for small and
medium-sized businesses, but I suspect that we are not at the
top of their priority list based on what I just stated.
Education. When a company has made a decision to
incorporate certain technologies into their organization, they
must also be able to train their staff on the use of these
technologies. Since in the gift industry in our geographic area
we have a lot of part-time help making $9 to $15 an hour, this
presents a great challenge in incorporating these new systems
into our business model.
There is an up-to-speed issue that business owners must
understand. In retail, almost all employees are in touch with
the systems we decide to incorporate into our business. I would
venture to say that the retail industry, in particular in the
small to medium size range, is not technologically savvy. This
is why we are not perceived as a great market by many of the
large supplier companies that are out there in the market
today.
It is hard for the retailer to understand why to
incorporate something into their business when ``everything is
working fine for me today.'' It is equally hard for the
technology suppliers to SMEs to find business owners who
understand and appreciate the value of what some of these
products can do to enhance their business. Because many of
these small retailers over the past six to nine months have had
to streamline their resources, they have had less time to focus
on the ``what is next'' portion of their business.
I believe there should be local community initiatives that
allow the owners of small and medium-sized businesses to
discuss these issues and become more educated on what is
available to them. Some of us here in this room might argue
that the local chamber of commerce units throughout the United
States and other nonprofits provide this service, but I feel
that there is a great disparity between the SMEs and the larger
businesses out there today.
Change. There is a saying that people are afraid of change.
This fear escalates in times of economic uncertainty. I believe
this is true in what we are discussing here today. Unless
people can truly see a direct benefit to their business, as
opposed to someone trying to ``sell'' them something, they are
reluctant to make these changes to their organization. It takes
a lot of time, money and patience; thus, the reluctance to make
the change.
Obsolescence. This is also an important area to discuss. In
my company, we are looking to spend in excess of $150,000 on
new technologies for a four-store operation over the next ten
to 12 months. Because of the size of our organization, we
cannot afford to make a decision on some technology that
becomes obsolete in two years, nor do we want to be forced to
upgrade to some new version of software in order to stay
compatible and receive the proper maintenance and support. This
is a very, very common issue that we see out there today.
A great example of where this has happened before and where
this is prevalent is in the healthcare industry where in the
early 1990s a lot of the healthcare companies or I should say
the hospital groups made major expenditures where they only
found two to three years later a lot of these systems were
proprietary and could not integrate or speak to other systems
within the organization.
If the technology that we decide to purchase cannot scale
with our business moving forward, we risk not being able to
grow or even the potential of going out of business. Both my
brother and I have experience in IT so I would say that we are
the fortunate ones, but this is by no meansthe norm.
In closing, I believe most retail SME business owners will
likely never have enough technical knowledge to be able to stay
abreast of technological change. This is probably just as well
because that knowledge is not a core competency of retailers. I
believe that there will one day need to be a model where retail
SMEs can pay a monthly fee for a shared service and ASP model
that provides all necessary retail applications at a lower
cost. This should allow them to incorporate technology, be
cost-effective and have an online help service that is user
friendly. Most importantly, it will allow them to focus better
on their core business.
I also think we should look at having some form of a stamp
of approval provided by a third party, a nonprofit, that would
give the retail SMEs some level of assurance that these
products conform to industry best practice.
Thank you very much for giving me the opportunity to speak
with you here today. I welcome any questions you may have.
[Hugh-Jensen's statement may be found in the appendix.]
Chairman Thune [presiding]. Thank you, Mr. Jensen.
We are going to move to our last witness this morning, who
is a small business owner from Crofton, Maryland, Steve
Pequigney. Steve is president of Integrated Imaging, Inc.,
better known as I-Cube. Please proceed.
STATEMENT OF STEVE PEQUIGNEY, PRESIDENT, I-CUBE
Mr. Pequigney. Good morning, Chairman Thune and Members of
the Committee. I thank you for the invitation and the
opportunity to present testimony on behalf of the National
Federation of Independent Business, NFIB, regarding small
business and technology investment. NFIB is the nation's
largest small business advocacy organization, representing more
than 600,000 small business owners in all 50 states and the
District of Columbia.
My name is Steve Pequigney, and I am a small business owner
from Millersville, Maryland. I sit before you today with a
unique perspective; not only am I a small business owner, but I
am also a technology professional.
In the late 1980s, I was in charge of a sales office for a
high-tech corporation when all outside sales offices were
closed. I found myself facing two choices: securing another
corporate job or striking out on my own as an entrepreneur. I
chose the latter, and my company, Integrated Imaging, Inc.,
known as I-Cube, was born.
I-Cube is a four-person digital imaging company that sells
equipment and services such as high-tech digital cameras,
computer interface boards and scientific imaging software to
government labs, universities and corporate research and
development clients.
In my opinion, the personal computer is one tool that can
make an immediate improvement in efficiency for small business
owners. For example, an accounting program such as Quickbooks
can be utilized on a PC in order to eliminate heaps of
paperwork associated with entering orders, generating invoices
and financial statements, paying bills and processing payroll.
Utilizing accounting software has allowed me to save time
and money, for example, by simply maintaining records
electronically which can be copied to a removable disk and sent
to my accountant for tax preparation. Other software, such as
customer contact database programs, can be used to eliminate
manual tasks of organizing and maintaining customer addresses,
phone numbers and e-mail addresses.
A second area of technology investment that has become
increasingly important to small business owners is the
Internet. E-commerce is here to stay, and small business owners
must compete in this marketplace. Additionally, the Internet
offers small business owners a unique opportunity to overcome
the economies of scale that often bar them from competing
effectively against larger firms.
I-Cube has maintained a web presence since the mid 1990s,
and the presence of product and technical information and lead
generation stemming from our website, i-cubeinc.com, is
invaluable. In years past, I purchased print advertising in
trade publications in order to market I-Cube. Today, that is
unnecessary. In fact, my only advertising is accomplished via
the web. In addition to simply advertising, I-Cube utilizes the
website to showcase products, to expedite customer service and
to actually sell products on line.
As you can see, I believe technology investment, even a
minimal amount, is a great thing for small business. However,
as the recent Commerce Department study highlights, not all
small business owners have jumped on the technology bandwagon.
So what are the barriers? One major barrier is the
unfamiliarity with or even fear of technology itself. For many
small business owners, especially those who have spent years
running their businesses the old-fashioned way, technology can
be daunting. Large corporations have entire IS or IT
departments to analyze e-commerce and technology needs,
purchase and maintain equipment and to train users. For those
with no technology background, consultants, often with high
price tags, must be hired to handle technology needs.
A second barrier that I have personally experienced is the
difficulty in finding and hiring qualified workers. Even if a
new employee has technological aptitude, he or she must still
often be trained on specific programs and software.
In November 2000, NFIB asked its members if small business
owners should be allowed a tax credit for technology credit.
Seventy-six percent of members responding answered yes. This
poll provides strong indication that technology training for
small business owners and their employees is a need for many on
Main Street.
So there are opportunities and challenges to technology
investment for small business owners. What are the solutions? I
think the overwhelming objective must be to provide education
and resources that allow small business owners to see the value
of technology to their bottom line and to assist them in
analyzing, purchasing, training and utilizing technology.
A second objective, in my opinion, would be to make
technology accessible and affordable for Main Street. Small
business is the engine that drives this nation's economy, and
it is important that small business be in a position to take
advantage of opportunities in a fast-moving, technology-based
marketplace.
In conclusion, I commend the Chairman and the Committee for
examining the topic of small business and technology
investment, and I thank you for the opportunity to speak here
today. I would be happy to answer any questions related to my
testimony.
[Mr. Pequigney's statement may be found in the appendix.]
Chairman Thune. Thank you, Mr. Pequigney, and I apologize
for butchering your name.
Mr. Pequigney. No problem.
Chairman Thune. I do have a few questions, and then I will
yield to my colleagues here for some questions.
I should introduce Mr. Carson from Oklahoma, who has joined
us. Any statement that you would like to make?
Mr. Carson. If we could go straight to the questions, Mr.
Thune, I think that would be most appropriate.
Chairman Thune. Very good. Thank you.
I would like to address a couple questions to
Undersecretary Cooper. To what degree has the recession and the
sharp downturn in technology and the technology sector, how
that has affected small businesses? I mean, do you see evidence
of that fact? Can you elaborate on that?
Ms. Cooper. I think there is no question that that is the
case. Certainly there has been a very sharp downturn in the
last year and a half in IT spending overall, and it has
affected small businesses, just as it has the larger ones.
Small businesses do not tend to have as much of a backstop
as do large businesses for some of the same reasons that have
been mentioned by my fellow panelists, so it has made it
tougher. But I would say it is encouraging at this moment
because we are seeing a leveling off in the declines in IT
spending nationwide.
I would expect that before too many more months we will see
some upward movement, not just a leveling off. That would be in
spending by small businesses and larger businesses as well. All
of that is a plus for the U.S. economy and a plus for small
businesses.
Chairman Thune. The data that you compiled in the report
primarily uses 1998. I would be curious to know, are there
things that you are doing to improve your data collection and
make it more current, particularly in rural areas? That is one
thing I guess I would like to see more of an emphasis on. Any
thoughts about how you might accomplish that?
Ms. Cooper. Well, I mentioned a couple things where we are
trying to improve the data collection.
Chairman Thune. Right.
Ms. Cooper. This is an unusual and special project that we
did. Some of the data that we used for this particular project
will not be available and will not be collected again until
next year. But because of the amount of interest that we think
there is out there in following the trends that we have seen or
this baseline that we have seen from this report, I am sure
that we will do that again. We will update this report and get
the new data next year.
As far as the question of rural versus urban, I guess we do
not really have that in this particular report. I did want to
mention in response to what Congressman Udall mentioned earlier
that we are encouraged by the fact that we are seeing essential
parity in urban and rural populations in terms of their use of
the Internet.
That is not broadband, no question, but it is a first step
and I think good movement in that direction, so we ought to see
this evolutionary process of people and then small businesses
starting to use more and more of the technology and being able,
therefore, to prosper and contribute even more to their
development and development of their companies, sell overseas
and so on.
Chairman Thune. Thank you.
Mr. Aughenbaugh, one of the things in the Commerce study
findings indicated that there were a low number of agricultural
workers that would use a computer at home or at work. I am just
curious to know, in your experience, is this a real problem? Is
that something that you see?
Mr. Aughenbaugh. Well, from my experience, and working with
people in that industry really across the country, I would say
that there is a general lack of training for many of the people
who are in the business-making decisions.
Many of the younger people who are coming back into that
industry and are afforded the opportunity to do that have gone
and gotten some training and are much more familiar with it,
but in many cases in people 40 years old and up that are often
managing these businesses or have the assets underneath them to
be able to participate today in the agricultural community,
there are some barriers related to just almost a fear factor
related to using technology.
I have seen some people be fairly comfortable with it even,
but just their inability to type has stopped them from
participating at the level that they could.
To some extent as technology is increasing as we get more
higher speed access and more different technologies out into
the countryside, I think we will be able to develop
technologies that more easily interface with these people so
some of the hurdles will not be there, but those days are yet
to come.
Chairman Thune. What types of technology do you see most
benefiting the agricultural economy?
Mr. Aughenbaugh. I think the dominant one has to be access
to the Internet. It brings an awareness that goes beyond the
local community that has not been there in the past and instant
access to information that can be used for marketing reasons of
crops, that can be used for better access and better and more
efficiently producing crops, those types of things.
Secondarily to that are better methods that farmers can use
to collect data on their farms, which then can be used by
consultants to advise them if they do not have the knowledge to
use that information, or that information can be better shared
with the supply chain that they are involved in, which should
strengthen their role in that supply chain.
Chairman Thune. How do we make farmers more aware of the
benefits of technology?
Mr. Aughenbaugh. I think awareness is out there in general.
It is more the ability to then act on that awareness that is
the issue, and that certainly involves training and investment
in technologies that can speed that process up for them, such
as higher access to the Internet.
Chairman Thune. I have some questions for some of the other
witnesses, but I yield to Mr. Udall.
Mr. Udall. Thank you, Mr. Chairman.
Dr. Cooper, some information I received in preparation for
this hearing states, ``The Administration would like to see
widespread availability of broadband communications.''
My question for you is what proposal does the
Administration recommend to ensure that all small businesses
throughout the country have affordable, high-speed Internet
access?
Ms. Cooper. Well, I can say that we have not yet formulated
any specific proposal on broadband policy. We, as you might
well imagine, are very interested, as you are, in having
widespread access for small businesses and for the population
at large, but what we know is that it is much better--everyone
will be able to afford it much better, small business will be
able to afford it much better--if we are in an environment
where the economy that is a stronger economy.
That is one of the reasons we have pushed as hard as we
have over the course of this last year with regard to getting
tax rates changed and allowing small businesses to be able to
have somewhat improved incomes in order to make the investments
that we know are needed over the course of the next year and
pushed as well in terms of trade and education to allow small
businesses to do that when the time comes.
Mr. Udall. I assume the Administration sees this as a high
priority from your perspective in your Department in terms of
broadband into all areas, including rural areas?
Ms. Cooper. We do see it as a high priority, but, as you
can well appreciate, it is a very difficult issue and one that
we want to be very careful in terms of coming up with the right
set of proposals so we have not been specific yet in that
regard, but we are working on it. We take it very seriously.
Mr. Udall. If you look at your statistics in this report
and you are comparing urban andrural, is it fair to say that
there is a huge disparity there between urban and rural on broadband?
Ms. Cooper. I think there is a large disparity. It has to
do with costs in rural areas. It is a lot more cost effective
in urban areas, concentrated areas, for installing the
technology and providing it to a wide range of people. When we
get to the rural areas, those that would have to make the
investment would have to make a lot more significant investment
for a smaller number of people, who then would pay the bill.
I think we understand why that is the case. We just have to
figure out the most effective way to move in the direction of
getting closer to parity over a period of time. We do not know
exactly what the right amount of time is. Here I am as an
economist. I think of everything in terms of a tradeoff. People
have to look at prices and cost-effectiveness.
We have heard from the people on the panel--I think they
said it much better than I could say it--that there is still
some fear of technology. All of that takes time to work its way
out, and it has to work its way out in terms of price as well,
but I think we are very much moving in the right direction.
Mr. Udall. The whole idea of moving this into rural areas,
I think part of it is that the employment base there and the
growth that we want to see, and I know the Chairman has a
district very much like mine where I think there is a skilled
workforce out there in rural areas.
If you just have the ability to have broadband and have
everybody hooked up, I think there would be a workforce that
business could plug into. You, I am sure, agree with that. It
is just how we get that done. We may have to think outside of
the box, it seems to me, in terms of the economics and
everything else.
Have you looked at the different ways? I know you say the
policy is not set yet, but have you looked at the combinations
that might be there? I mean, is this something government
should do, or should it be in the private sector, or should it
be a combination of both?
Ms. Cooper. Congressman Udall, I understand your interest
in this. I would simply say that this is not an area that I am
spending a great deal of my time on.
We are providing the information, and I know the Commerce
Department itself, with the rest of the Administration, is
developing such a policy. What we are trying to do with this
report and with this information is to help people understand
what indeed the changes that are out there might be and what
the goals should be when we do develop that policy.
I would remind you again that all of this would be more
affordable with a strong economy. We certainly want to do that.
I think the news from this report is quite good in the sense
that small businesses, whether urban or rural, are devoting a
quarter of their investment into high-tech expenditures.
That in and of itself says that they are ready and willing
and their employees are a lot of them using computers already
either at home or at work, so I think it is a good story. It is
just a question of exactly what the right way to go is. We are
moving towards a policy, but it has not been finalized yet.
Mr. Udall. Thank you very much for your testimony.
Ms. Cooper. Yes.
Chairman Thune. Mr. Carson.
Mr. Carson. Thank you very much, Mr. Chairman. I apologize
for missing the opening testimony of Dr. Cooper and Mr.
Aughenbaugh, if I am pronouncing that correctly. I read your
testimony with interest, and I want to thank you and the rest
of the panel for your testimony today.
I also read the report from the Department of Commerce with
great interest as well. I wonder if I could just ask a couple
of questions about that and then a couple of questions perhaps
to Mr. Aughenbaugh as well about some of the problems that he
outlines in his testimony about the difficulty getting his
business on line and hooked up with the kind of connection that
he needs as well.
I know that in the report, Dr. Cooper, you discuss some
estimates from various trade groups and private organizations
about the percentage of businesses that have access to
broadband. Is there any sense of the percent of the population
in this country that has access to broadband services?
Ms. Cooper. The number that I hear for the U.S. is right
around 10 percent, 10 or 11 percent.
Mr. Carson. That is the number I usually see reported as
taking up broadband services. My question is the percent of
people who have access to it if they so desire to have it.
Ms. Cooper. I am not familiar with how to come up with a
different way to look at it than that. The only one I am
familiar with is the 10 percent.
Mr. Carson. Do you have any sense of that 10-percent number
and how it breaks down between urban and rural or for the
business community alone perhaps, if not the entire household--
--
Ms. Cooper. I do not. Earlier Chairman Thune mentioned a
report that we released earlier, A Unique Nation On Line. I do
not have the numbers in my head. I do not have them with me,
but we certainly can get them to you.
Mr. Carson. Very good.
Ms. Cooper. There is some breakdown in that.
Mr. Carson. Do you know if there is a breakdown as well of
that 10 percent of businesses that have access to broadband,
some form of broadband--DSL, cable, wireless, satellite?
Ms. Cooper. I have heard estimates along those lines. We
will get you what we can find. Certainly we would be happy to
do that.
Mr. Carson. Very good.
Mr. Aughenbaugh, let me ask you a couple of questions. You
discussed the fact, as I recall, your business went to a
satellite hookup. Is that correct?
Mr. Aughenbaugh. Yes.
Mr. Carson. Tell me why you went to a satellite hookup.
Does your community have DSL? Does it not have wireless? Tell
me what led you to go to a satellite.
Mr. Aughenbaugh. Because our business is directed to the
agricultural market, we decided to build our offices. Once the
business became successful seven or eight years ago, we decided
to build our offices in a rural location just outside of town
to have closer access to the customers we serve.
Mr. Carson. And how big is the community that you are close
to?
Mr. Aughenbaugh. The one that I live in is ten miles away.
It is 1,100. The one that our office is closest to is a town by
the name of Iroquois, which is around 350 people.
Mr. Carson. Okay. So very small.
Mr. Aughenbaugh. Yes.
Mr. Carson. Okay.
Mr. Aughenbaugh. During the growth of our business, we grew
to expand to need ten of the 11 phone lines that came out of
that area, as I testified to. Our need was actually much
greater than that, and it kind of caused the need for a bunch
of switches and combination boxes and the like.
In fact, at one point one of my partners there, I overheard
him talking to our business development office in Minneapolis
and referred to our office as Planet Iroquois due to the
inadequacies of the communication there. DSL is not an option
in our company just because of length from the central office.
Mr. Carson. Who is your local exchange carrier there in
your area?
Mr. Aughenbaugh. Bell.
Mr. Carson. Is it one of the regional Bell companies?
Mr. Aughenbaugh. One of the regional Bells. U.S. West or
whatever name they call themselves today.
Mr. Carson. I understand.
Mr. Aughenbaugh. We made a decision after talking to the
phone company in which they were going to require a several
thousand dollar investment for us to pay them to bury more
fiber into our area off the main trunkline to go instead with
an investment in digital satellite capabilities.
Our first step into that was paying several thousand
dollars for our own computer server station that would really
receive downlink from a satellite, but at that point in time
all we were able to have was uplink through a local dial-up
connector. Any problems we had at that point was dealt with
between two suppliers.
Mr. Carson. Right.
Mr. Aughenbaugh. Later on we were able to go to a satellite
connection, which we now use, that goes up and down.
Mr. Carson. Very good. One of the major debates in this
whole controversy over broadband is how we stimulate demand for
it. The application is out there. Now that Napster has gone,
the font which attributed so much of the demand for broadband
in the consumer market at least, that there is not a demand out
there because the application does not exist.
Tell me how your business is using it. Why broadband? Why
do you need it in a way that a 56K dial-up connection is not
sufficient for your work?
Mr. Aughenbaugh. Increasingly, our business has grown to do
commerce with several countries around the world as it relates
to food production and food tracking and food safety.
Increasingly, as we demonstrate these new capabilities to other
people we try to do that via demonstrations over the web.
That is where our technology is based, and that is also a
very efficient tool, as opposed to traveling and scheduling
other activities for us to do so. Currently, it is very
limited, the type of technology we can use to do that.
To expand on that just a touch, Congressman Udall mentioned
access to the capabilities of rural people. I think that the
work ethic and the raw capability of people in rural areas is
in demand by companies. They express a desire to move certain
types of activities there.
Increasing capabilities and infrastructure of broadband
technology is a pipe that can work the other way to these
companies so that a community can serve a broader industry and
enterprise that is out there.
Mr. Carson. Can you tell us how much you pay for that two-
way satellite hookup?
Mr. Aughenbaugh. My wife can. I believe it is several
hundred dollars a month, $300 a month or so that we pay for
access charges beyond the equipment.
Mr. Carson. Just in your own experience, are other
businesses in South Dakota in rural areas like the one in which
you live and work, are they taking advantage of the satellite
technology for Internet access, or are consumers in households?
Mr. Aughenbaugh. Most have not made that leap. It takes
quite a bit of internal technical support at our company just
to keep it up and running, and so most of them may do with a
dial-up connection, which is what they have today.
Mr. Carson. Very good. One last question to Dr. Cooper, and
this may not be data you have at your immediate disposal or
perhaps you haven't even collected.
In some of the surveys that have been done on small
businesses do we know, and I know you have some hypotheses
about why small businesses are not investing as much in IT as
our large businesses that all sound quite plausible. Any survey
data or similar ideas about businesses that are offered various
broadband technologies, various advanced services, their
decision to take them up or not?
That is, we have broadband offered a lot of places across
the country. People do not want it. It is expensive, more
expensive here than in most countries around the globe
attributed to the lower take-up rate of it.
Any reason why small businesses--maybe they do not think
they need it, for example, for their day-to-day work. Maybe
there is not that application out there. Any sense of numbers
why people are not taking more advantage of the high-speed
advanced services?
Ms. Cooper. I have not seen specifically any research on
that, but I would say to you that I think everybody, and I
think we have heard vivid examples of this in the testimony
that we have heard this morning. Every small business person is
looking at the tradeoff between benefit versus cost.
If they think that it will help them make money, the speed
and so forth that they get from it will help them add to their
business, then I think they will go ahead and be willing to pay
the cost. I think it is that tradeoff between price and
benefit. Clearly what I think small businesses will
increasingly do is more and more begin to use it.
We heard good examples I think as well of what large
businesses' role is in all of this. They tend to spend money,
learn some of the mistakes, get some of the providers of these
services to change to make them more user friendly, and then
ultimately small businesses will get a better product. I think
that is what they are waiting for. They are waiting for to some
degree a better product.
But all of this, of course, this Administration is very,
very interested in, in fostering small businesses' access to
capital and to people who know how to use the Internet and are
learning how to use the Internet. We know that small businesses
have to take on risk, and we want to make sure that they are
rewarded for those risks.
I think this is just one more set of policies that we are
allowing them. We certainly know they have to make these
choices themselves, and they will.
Mr. Carson. Thank you, Dr. Cooper, and thank you, all
members of the panel, for being here today. Thank you, Mr.
Chairman.
Chairman Thune. Thank you. I understand, Dr. Cooper, if you
need to excuse yourself. We appreciate your testimony and
response to questions this morning.
A couple of questions for the entire panel if I might.
Again, this has sort of been hit upon or touched upon in some
of your testimony already, but I am just curious to know how
much of a barrier lack of broadband access is to the effective
use of e-commerce for small businesses.
Mr. Aughenbaugh has testified that in his particular set of
circumstances broadband was a necessity in order to be able to
demonstrate his services on a website, but how many of the
others of you have experienced, in terms of is that something
that really prevents businesses from using e- commerce as a
tool, not having broadband access?
Mr. Pequigney. Somewhat from a communications perspective.
I mean, for information traveling from one point to another
broadband is a great benefit. If you think of files and things
that need to be transferred from one location to another or if
you are accessing and searching for information on the
Internet, broadband saves you time. It allows you to be more
efficient.
Chairman Thune. Does anybody else care to tell me?
Mr. Hugh-Jensen. I was just going to say that I think also
in developing some of your applications that you are using on
line, I think there are some applications that can be developed
using a lower bandwidth so really, I mean, you are sort of
limited depending upon your location.
I think, once again not living in a rural area, I would
have to say that in my opinion I think that bandwidth today is
adequate. I think there are many, many other issues that sort
of complement the broadband argument that need to be thought of
as well.
Chairman Thune. Could you elaborate on that a little bit?
Mr. Hugh-Jensen. Well, I mean, in part of my testimony I
just think that if you are talking from a small retail
perspective I think you have seen a lot of people streamline
their internal resources. You know, we hear all the time that
everything in our lives today is based on we are too busy.
There are all these services out there. Anything that we can do
quickly is something we are interested in.
There is a time issue to be able to train part-time
employees on how to use these technologies that you are going
to incorporate into your business. You know, obviously the
cost, which we brought up today, is also prevalent.
When I was referring to cost, I was referring more to the
hardware and software aspects, as opposed to the actual
connectivity costs from my perspective. I was really referring
more to hardware, software----
Chairman Thune. Right.
Mr. Hugh-Jensen [continuing]. Understanding of the costs to
be able to--there are a lot of software companies out there now
that you can purchase and you are forced almost to continuously
make these upgrades on a periodic basis. If you do not make
these upgrades, you basically will not receive the same service
level as someone who does; once again, also an issue when you
think about making these huge capital expenditures.
Chairman Thune. Can any of you sort of quantify the benefit
of technology to your bottom line? Can you measure? Is there a
way of saying, you know, that we are this much more profitable
because we use technology?
Mr. Hugh-Jensen. Speaking from a retailer perspective, we
just had a meeting up in New York with a bunch of larger
retailers as well. We actually have a database. We have a small
store, but what we do is we ask people to provide us with their
e-mail address once they are in the store.
In two years, we have an e-mail database of about 8,000
people, so from a perspective of doing regular print
advertising, print advertising, newspaper advertising, whatever
your normal marketing avenues are, we are able to really see a
tremendous bottom-line cost savings from a standpoint of really
being able to market new promotions, new products, items that
are basically going to be discontinued, et cetera.
We do offer an opt-out to all of the people. They have
actually given us their name, address, e-mail address.
Sometimes they forget that they did that, so in doing that we
offer them an opt-out to say please do not send me. We do not
really overburden. We send out probably about six to eight a
year spaced out based on promotions, new lines, et cetera.
I cannot tell you a dollar amount other than we have
lowered our marketing costs probably from 2000 to 2001. We have
probably cut our costs in half from what we expected for
marketing from 2000 to 2001. We have probably cut that in half,
which is nice because now we can go and invest the monies that
we need to upgrade to the latest version for our POS system
that we are using.
Chairman Thune. Does anybody else care to----
Mr. Pequigney. Yes. I would say that without the available
technology our company has taken advantage of, we would be
hard-pressed to have done--we would probably be about 40
percent down from a revenue perspective.
Chairman Thune. Let me ask you one other question just for
the panel, too. Have any of you lost customers because your
access to technology is not at the level of a larger
competitor? Does it put you at a disadvantage if the technology
is deficient relative to those larger businesses in the market
that might have access to that sort of technology?
Mr. Richmond. I cannot say that we ourselves have lost, but
I do know smaller companies that have. In our industry, it is
starting to come more and more where customers are going to
maybe a third-party logistics.
One of the things that is required when they take over and
they might be writing a bid package is do you have GPS
tracking? In a DOT contract, do you have GPS tracking? If you
have not been keeping up with that or been handling that
freight when that data comes out, you are off the contract.
I know people that have lost for that very reason, or a
customer will go to an EDI-type billing system or an Internet-
based shipment status billing. If you do not have that
capability, you cannot get that business.
Chairman Thune. Anybody else?
Mr. Pequigney. I would say in our company, since we are a
technology company, our size actually benefits us in many cases
because we are able to take advantage of things that larger
companies do not tap into as quickly.
Chairman Thune. Do you have any other questions?
Mr. Udall. I do not have any additional questions, but I
would like to thank each member of the panel for the insight
and energy you bring to this issue. Thank you very much for
your testimony today.
Chairman Thune. Let me just close again also by echoing
what the distinguished gentleman from New Mexico said. Thank
you for your testimony. This is very insightful and helpful.
Like Tom, I have a keen interest in how we bridge this
digital divide that exists in this country. We are always
seeking suggestions on policy that we can implement here,
things that we might be able to do to provide incentives.
There are some things out there that have been proposed.
So, to the degree that those solutions will help to sort of
close that, I mean, I think increasingly what we see in my part
of the world, which is very rural and sparsely populated, is
that we just do not have some of the same access to those
technologies that those in more populated areas have. It makes
it difficult.
I think that Mr. Aughenbaugh touched on it exactly. It is a
way of keeping people in rural areas if we can figure out a way
to not only provide access to technology, but how to apply it.
Part of that comes back to making sure you have people that
understand and are trained in using it.
But there are a whole range of issues here which I think
strike very profoundly at our ability to survive and prosper in
rural areas of this country, and so it is an issue of great
importance to me, as I know it is to Mr. Udall and others who
represent rural areas.
We appreciate the insights that you have provided on this,
and we welcome your input in the future as we consider things
that we might do here in terms of public policy changes that
would make Internet access, broadband access technology more
readily available in rural areas.
I thank you again for your testimony. With that, we will
conclude the hearing.
[Whereupon, at 11:30 a.m. the Subcommittee was adjourned.]
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