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


 
               HEARING TO REVIEW RURAL BROADBAND PROGRAMS 

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

                                HEARING

                               BEFORE THE

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

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 9, 2009

                               __________

                           Serial No. 111-22


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

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52-651 PDF                       WASHINGTON : 2009 

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                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

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

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

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

                MIKE McINTYRE, North Carolina, Chairman

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

                Aleta Botts, Subcommittee Staff Director

                                  (ii)






















                             C O N T E N T S

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

                               Witnesses

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

                           Submitted Material

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


               HEARING TO REVIEW RURAL BROADBAND PROGRAMS

                              ----------                              


                         THURSDAY, JULY 9, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

   Give residents a choice of more than one service provider;

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

   Are current or former RUS borrowers; and

   Are fully funded and can commence immediately.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

   a workable and sustainable framework for repeated updating 
        of data;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The Chairman. Mr. McCormick.

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

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

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

    (1) Better targeting of areas currently not served;

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

    (3) Expanding program eligibility;

    (4) Improving loan processing at USDA; and

    (5) Exploring public-private partnerships.

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

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

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

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

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

     Thank you.Mr. Stamp.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The Chairman. Thank you.
    Mr. Evans.

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

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

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

    The Chairman. Your company received funds in 2008 through 
the traditional broadband loan program for deployment of 
broadband in 55 rural cities. How many households will you 
reach through those funds?
    And, also, could you explain why a loan made deploying 
broadband to those areas is feasible and how those areas might 
differ from those areas that are good targets for grants 
instead?
    Mr. Evans. Well, to start out with, the homes passed at the 
conclusion of our 55 city build-out will be approximately a 
half million homes that we pass throughout four states around 
the country, including what was identified by Ranking Member 
Conaway as the greatest district in the country. So we will 
pass roughly a half million homes.
    Our experience has been that cities that have 20,000 
people, down to approximately 3,000 people, are viable for our 
technology to go into. Once we get down below 3,000 people--
because of the lack of population and the expense required--
those types of cities are probably going to require grant money 
to go in and feasibly serve, as opposed to us being able to 
repay that over a period of time.
    When you take out the capital component and just have to 
rely on the operational expense, it looks like cities down to 
750 to 1,000 people become viable at that point.
    The Chairman. Mr. Stamp, RUS grant funding is limited to 
remote unserved areas. Remote is defined, as you know, as 50 
miles from a non-rural area. Could you provide some examples of 
rural unserved areas that your member companies might be 
interested in serving that would be out of the running for 
these grant funds due to this definition?
    Mr. Stamp. At this time, I can't provide you specific 
communities, but I know from an anecdotal standpoint a lot of 
the currently unserved areas that our members look at are 
probably 5, 10, 15 miles outside of town. Most of our members 
use DSL technology, which has a range of about 3 miles. So, as 
you can tell, they kind of--the donut around town is primarily 
an unserved area in some of these small communities. Obviously, 
those would not be within that 50 mile range.
    I can give you specific city examples if you allow me to 
follow up with my members.
    The Chairman. That would be great if you could provide it 
within 10 days.
    Mr. Conaway.
    Mr. Conaway. Thanks for being here.
    Any sense of how many applications are in the pipeline 
headed directly to RUS and NTIA?
    What I am trying to figure out is--Mr. Evans talked about 
it. We have a bureaucracy that is used to working at a certain 
pace. They now have 14 months, 15 months, I guess, to the end 
of September of 2010 to get an awful lot of work done. Any 
sense of how many applications cumulative that your members are 
working on? Mr. Wilson?
    Mr. Wilson. Congressman Conaway, not at the time. I don't 
have an idea how many are going to be doing that. I know we are 
working on one.
    Mr. Conaway. That might be helpful to get that to us. 
Because we want to make sure that RUS--you were here this 
morning when I asked the question of Ms. Cook, did they have 
the resources, and they seemed to say that they did.
    I am new to some of the speed issues, and the speed 
requirements that are in these applications are set based on 
advertised speeds. Any concern among you that that is 
unworkable or that the actual speeds delivered will in fact be 
in excess of those advertised speeds, and may be a bit of an 
unauditable kind of deal?
    Mr. Evans. I think it is--if I may take a second. I think 
it is--you are going to put down what the network is 
technologically capable of doing. There are an infinite number 
of variables that take place on any network, wireless or 
wireline, at any time. In order to give you what the real 
average throughput is going to be, as an example, I can tell 
you from real-world experience right now my devices are capable 
of 7.2 megabits download. We see peak speeds between 6 and 6.5 
megabits. My average throughput today is somewhere between 2.5 
and 3 megabits.
    Mr. Conaway. What do you advertise at?
    Mr. Evans. We say up to 7.2 megabits. But the average 
throughput, like I said, is somewhere between 2.5 and 3 
megabits.
    Mr. Conaway. So the 768 kbps, everybody--all of your 
systems--you will never get below that, would you?
    Mr. Wilson. In our current project today we have speeds up 
to 3 megabits with uplinks back up to 1 by 1 meg. But the 
project we are currently working on, our modernization, we will 
be able to deliver 17 to 20 meg down, file upload speeds up to 
1 by 1.
    Mr. Conaway. The relatively short application period: is 
there enough time for the August 14th deadline to create or 
look at service areas that you might not have previously had 
business plans ready to go for, and create the application? In 
other words, the more remote areas that you knew you couldn't 
do without grants, are your members nimble enough to be able to 
put together the right application to be able to apply in those 
areas where they might not previously have been thinking about 
serving?
    Mr. Wilson. I think, in most cases, most rural telephone 
companies know where their members are lacking. I know our 
base. We are able to go in and select these customers and pull 
them out. So I would say most small companies, particularly, 
have some idea of the customers that are in need of applying 
for a grant to serve them.
    Mr. Conaway. So being able to put together the grant 
request, what appears to be less than 6 weeks is not a hardship 
for this state?
    Mr. McCormick. The only thing I would say, as Mr. Stamp 
pointed out, this definition of remote is a real problem, and 
we were pleased that the RUS today said they were going to 
clarify it, but it is not really clarification that is needed. 
It is a very significant difference to go in and apply for--
whether the economics of the project are going to work or not 
is going to depend on whether it is 100 percent grants, 80 
percent grants, or 50 percent grants. If it is just a 50 
percent grant, there are a lot of projects that will not be 
applied for because they are not economic.
    Mr. Conaway. I know what you are talking about. But to get 
into the record, what does it mean to the monthly fee, as an 
example, for the service? If you can give us some sense of what 
a 50 percent loan/grant ratio versus a 100 percent loan/grant 
would do. What impact would that have on the customer's monthly 
bill for your service?
    Mr. Evans. In my perspective, just to tell you what we 
experience, is currently today we offer our services for $39 a 
month and then they lease a modem for an additional $9.95 per 
month.
    So the difference in going into a 50 percent loan where I 
have to buy that modem, and then I subsequently lease it to the 
consumer, versus a grant environment where I can purchase that 
modem and not lease it to the consumer, you are looking at a 25 
percent reduction in what their monthly fee would be.
    Mr. Conaway. Can anybody else give us a sense of what the 
impact is?
    Mr. Wilson. For us, there would be no impact. We concur in 
the National Exchange Carrier Association's tariff for DSL, so 
we charge the same rate regardless. Whether it be a grant or 
loan, it wouldn't have any impact on what we ultimately charge 
the customer.
    Mr. Conaway. That is counterintuitive. If you are having to 
pay money back on a loan versus a hundred percent grant, does 
everybody else subsidize that loan repayment?
    Mr. Wilson. No, sir. We concur in the National Exchange 
Carrier again. We charge a standard rate for DSL. There are 
about 1,100-1,200 of us in the NECA pool and we charge the same 
DSL rate.
    So just because I went after a grant or a loan for a 
particular area would not allow me to come in and charge a 
different rate for those customers versus the other----
    Mr. Conaway. So you can't do it. But, I mean, there is an 
economic impact to go after those customers if you are having 
to do 50 percent loans.
    Mr. Wilson. Yes, sir, there is one. But, like I say, 
tariff-wise, being regulated, I have to charge the same rates.
    Mr. Simmons. Congressman, you are exactly right. I mean, 
there are going to be a number of non-remote rural areas where 
the demographics are such that it is actually more expensive to 
serve those areas than it would be to serve the remote areas. 
The difference between a 50 percent grant and a 100 percent 
grant can determine whether or not the project goes forward.
    Moreover, the Administration has decided to provide 80 
percent grants in areas that are underserved in the more urban 
areas. So you are providing a higher grant to areas that by 
definition are more densely populated and a lower level grant 
to areas that are less densely populated. So it really is a 
program that requires more than clarification. It requires a 
rethinking.
    Mr. Conaway. Thank you.
    The Chairman. Thank you.
    I will indulge the Ranking Member for another question in a 
moment, if he would like. I would like to ask one or two more 
questions to all of you. If you would just answer this to the 
point, given that we are soon going to be called to votes 
again.
    Many of your members, of course, serve in rural areas. What 
subscribership or take rate do they see in these areas?
    Second, is it fair to consider an area with less than a 40 
percent take rate underserved as the funding notice does?
    Mr. Wilson.
    Mr. Wilson. We are seeing a significant take rate. We are 
currently at about 4,187 customers, adding about 135 a month. I 
think we are currently at about a 45 percent take rate in our 
cooperative. As our DSL footprint expands, we are seeing more 
and more customers.
    I think all areas need to be considered, sir. I would not 
want to discriminate against an area that--say is at 40 
percent. I think that DSL having broadband access these days is 
just too important not to be connected, to have access to the 
world these days. So I would say I would not want to 
discriminate against any certain group but try to get access to 
everyone.
    The Chairman. Mr. McCormick.
    Mr. McCormick. Yes. Well, obviously, we think if 
subscribership is below 40 percent, then the area is in some 
way underserved. And we think that the future of the 
information-based economy is that you have to have broadband 
that is ubiquitous and broadband that is robust. So we think 
that take rates are going to be in the 80, 90, 100 percent 
range; and they should be in those areas, because we are moving 
forward with an economy that is going to be dependent upon 
broadband communications.
    The Chairman. Mr. Stamp.
    Mr. Stamp. We will be happy to get the subscribership 
information from our members.
    I think it varies widely from company to company, but I 
would agree that less than 40 percent is probably something you 
would consider underserved. Congress and the Administration 
should be commended because there are provisions within the 
NTIA program for projects that actually do things to stimulate 
adoption as well, and that is one of the challenges.
    The Chairman. Mr. Simmons.
    Mr. Simmons. I can only speak on behalf of my company. I 
know what our take rate is. In most of the markets we serve, 
we, frankly, have take rates beyond 40 percent. But there are a 
goodly number of markets that show up, at least on my records, 
as being under 40 percent, and that is because there are other 
services in those particular markets.
    One way of understanding, I guess, of measuring what might 
be available in markets is not only what we might be doing, 
what the take rates might be of our cable broadband service, 
but if there are some other competitors in that particular 
market as well. Of course, if you have a second competitor in 
the market, one might assume that it is certainly not 
underserved. So it is an important consideration.
    I think, also, I would ask that the Committee also be 
mindful of other conditions on why that particular market might 
be underserved. It may not necessarily be just the availability 
of broadband but other conditions about that unique community, 
the individual demographics of those involved in that 
particular market. Is it a very senior market and the job we'll 
have to do in order to introduce broadband services to that 
particular market. Those are considerations also that must be 
made.
    The Chairman. Mr. Evans.
    Mr. Evans. I would agree with the 40 percent. I think below 
40 percent there are clearly other factors there.
    One piece that is missed is actually the consumer driving 
that penetration. Is the quality of the network bad and, 
therefore, they are not signing up for it? Is the pricing out 
of line and they are not signing up for it?
    So just going in, what we found in many markets is there 
may be another provider that is in there, but the quality of 
the network is bad and the pricing is out of line and, 
therefore, the take rate is well below what you would expect. 
So we are very comfortable with the 40 percent rule.
    The Chairman. Just one other criterion is that no provider 
in the area is offering 3 megabytes per second service. Such 
areas would be eligible for grants from NTIA and loan/grant 
combos from RUS. Do you believe these criteria well define an 
underserved area?
    Mr. Wilson.
    Mr. Wilson. Yes, sir. I think they do.
    Mr. McCormick. I think that they do.
    Mr. Stamp. I believe so.
    Mr. Simmons. I agree.
    Mr. Evans. I am in concurrence. I think 3 megabits is 
right.
    The Chairman. Mr. Conaway, do you have further questions?
    Mr. Conaway. Thank you.
    Let me ask a couple of questions and pitch it around.
    The national map that we are going to spend $350 million 
on--I am not sure where they came up with that number--any 
concerns you have of your data going into that national map? 
Any privacy issues or proprietary information that you are 
worried is going to get collected and made available to your 
competitors?
    And then any other comments that any of you want to make 
with respect to the interconnection and nondiscrimination 
clauses. Are your companies small enough that you can do it 
everywhere without it being a problem? Are your companies too 
big, that you don't want to have a different system? Any 
further clarification you can give us on the nondiscrimination 
charges.
    Mr. McCormick. I would be delighted to comment on both of 
those.
    First, on the nondiscrimination and interconnection, the 
FCC has a policy statement. It already says that you shall not 
block, impair, or degrade access. It says you shall allow 
attachment of any lawful device to the Internet that is running 
a lawful application.
    We all abide by and support the FCC policy statement. These 
additional requirements that, ``you shall not favor any lawful 
Internet applications and content over others,'' we're just 
simply not sure what that means. Does that mean that if 
somebody came forward with an application that would allow for 
a heart monitor service and it would require prioritization of 
our network on a non-managed basis, would we be prohibited from 
allowing that? That would not seem to be consistent with public 
policy.
    With regard to interconnection, this is a new requirement 
on interconnection to connect at any technically feasible 
point. I mean, if you just use a railroad analogy, it is one 
thing to require interconnection at railroad terminals. It is 
another thing to require construction of interconnection with a 
railroad anywhere on the railroad that is technically feasible 
to construct an interconnection point.
    So these are very expansive requirements, and they are 
potentially very costly requirements, and they are potential 
litigation risks. So they are of concern to us.
    Mr. Conaway. Should the FCC work on that area or should 
USDA and Commerce work on those?
    Mr. Wilson. We think it is essential that the FCC work on 
that area. There has got to be some consistency, and it is the 
agency of jurisdiction.
    Mr. Conaway. Privacy issues.
    Mr. Wilson. Yes. We are deeply concerned about the privacy 
issues. We support the idea of a broadband map. We think it 
makes a lot of sense. But we support it in the context of the 
Connected Nation approach that has worked so well in Kentucky, 
is working now in Ohio. Whereby, you are able to provide this 
information in a way that is not made available to your 
competitors, but is made available through public-private 
partnerships that lead to adoption and deployment.
    So we would hope that this would not be a big government 
approach but would instead be a public-private partnership 
approach.
    Mr. Stamp. I would say all of our members share those same 
concerns in terms of confidentiality. I mean, we are willing to 
participate in this process, but that is obviously a concern 
for our members as well.
    Mr. Wilson. We are concerned about some of the questions 
that are being asked, the confidentiality of them. And also we 
are concerned about the interconnection issues, too, because it 
only applies to the areas that receive a grant. For us, those 
543 customers are spread over 2,800 square miles. There is no 
way I can pull them out and separate them. So the 
interconnection issue is definitely an issue we are concerned 
about.
    Mr. Evans. No concerns on the privacy as such.
    I am concerned, longer term, about the accuracy of the data 
collection because of the speed at which technology is evolving 
and how fast it is changing. I am just afraid for future 
opportunities companies will be making decisions based on old 
and outdated data in the marketplace.
    I don't have a solution for it, by the way, but my biggest 
concern is the amount of bad data that is going to be 
circulated, and decisions are going to be made off of, as we go 
forward.
    The Chairman. We are about to conclude today's panel.
    Mr. Minnick has stepped in. We welcome you to submit 
questions or any other Members who may have stepped in or out.
    We would ask this panel, as we did the first panel, to 
please accept these questions that Members may submit just as 
if you were asked in this public forum. We would expect your 
answers within 10 days.
    We thank you for your attendance at today's hearing and 
thank you for waiting for over 2 hours for us to return from 
that long series of votes we had. We do appreciate your 
indulgence and patience.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplementary written responses from 
the witnesses, as well as any additional questions that Members 
would like to pose.
    May God bless each of you in your work to help those who 
are disadvantaged in our society, especially those that we have 
discussed living in areas of our country that we hope will be 
benefited as all American taxpayers should be.
    This hearing of the Subcommittee on Rural Development, 
Biotechnology, Specialty Crops, and Foreign Agriculture is now 
adjourned.
    [Whereupon, at 1:40 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
      
         Submitted Statement of American Farm Bureau Federation
    The American Farm Bureau Federation (Farm Bureau) believes that 
high-speed broadband services have great potential to bring opportunity 
to rural Americans. Farm Bureau represents more than six million 
families who live and work in rural America, many of whom do not have 
the same access to educational, medical, business and government 
services as Americans living in more populated areas. Existing Federal 
telecommunications programs like the Universal Service Fund (USF), 
Rural Utilities Service's loan and grant programs and new initiatives 
such as those mandated by the American Recovery and Reinvestment Act of 
2009 (ARRA) have the potential to correct this disparity.
    Many farmers and ranchers conduct their business operations from 
their homes. As government agencies increasingly rely on information 
technology to disseminate and collect information, affordable, high-
speed, home-based broadband connectivity is becoming a necessary tool 
for producers. Farmers and ranchers without access to affordable high 
speed Internet connections might eventually be unable to comply with 
government regulations, take advantage of government services or gain 
market information. Therefore, affordable home broadband access is 
especially important to keep American agriculture competitive in a 
world marketplace.
    America's farmers and ranchers need viable rural communities to 
supply the goods and services needed to support their families and that 
are required for their agricultural operations. To thrive, rural areas 
need access to health care, government services, educational and 
business opportunities. For many rural communities access can only be 
gained by using broadband services and sophisticated technologies that 
require high speed connections. Rural business owners need access to 
new markets and well educated employees for their businesses. Rural 
health care providers need access to health information technology. 
Rural students need access to educational resources and continuing 
education opportunities. Current and future generations of rural 
Americans will be left behind their fellow citizens if they are without 
affordable high-speed broadband service to tap into health care and 
educational services, government agencies and new business 
opportunities.
    Affordability is a critical component to broadband use in rural 
America because rural household incomes are typically lower than those 
in more populated regions of the nation. In rural areas where broadband 
service is available, our members have reported that the service is 
beyond the financial means of many residents of their communities. 
Therefore, we urge policy makers to consider consumers cost as part of 
the equation when defining access to broadband services.
    Farm Bureau believes that broadband access in rural areas should be 
increased through any technology, including wireless. We believe that 
technologies funded by Federal programs should support state-of-the-art 
telemedicine, education and business applications. Rural America should 
enjoy access to telecommunications services equivalent to those found 
in urban and suburban areas.
    Broadband should be designated a ``supported service'' eligible to 
receive support directly from the USF. The USF should be used to help 
with long-term deployment of broadband in rural areas. While the funds 
provided by the ARRA should help with the initial build out of rural 
broadband, on-going support will be needed to continue the build out, 
and maintain and improve the current infrastructure.
    Farm Bureau is committed to revitalizing our rural communities and 
ensuring the health and welfare of present and future generations of 
rural Americans. We look forward to working with the Committee to 
achieve this important goal.
                                 ______
                                 
  Submitted Statement of National Rural Telecommunications Cooperative
July 9, 2009

    The National Rural Telecommunications Cooperative (NRTC) and its 
nearly 1500 electric and telephone cooperative members serve the 
telecommunications interests of rural America. NRTC applauds the 
efforts of the Administration and Congress to advance the deployment of 
broadband to all Americans--particularly those in rural areas where the 
need is the greatest. We also thank Chairman McIntyre and the 
Subcommittee for holding today's hearing on this vital topic.
    The recent Notice of Funds Availability (NOFA)--issued by the 
Department of Agriculture Rural Utility Service (RUS) and the 
Department of Commerce National Telecommunications and Information 
Administration (NTIA) pursuant to the American Recovery and 
Reinvestment Act of 2009 (the Act)--has prompted deep concerns about 
the effectiveness of the broadband funding for rural America.
    The NOFA appears to have placed rural America at a significant 
funding disadvantage and seems to defeat the purpose of stimulus goals 
of expanding broadband and creating jobs in rural areas.
    Under the Act and NOFA, all ``rural'' areas must be submitted to 
RUS for funding. However, under that program only areas that are 
``remote and unserved'' are eligible for grants. To be ``remote'' an 
area must be at least 50 miles from a ``non-rural'' area, and to be 
``unserved'' at least 90% of the population must lack access to 
broadband, which is defined at a relatively low speed of 786 Kbps down 
and 200 Kbps up. If an area is rural yet not remote or unserved an 
applicant is not eligible for a grant--only a loan or loan/grant 
combination. Based on many years experience in the rural marketplace, 
particularly as a provider of broadband services, it is our analysis 
that very few populated rural areas will meet the requirements for 
grants.
    At the same time, broadband applicants for non-rural areas may 
receive grants from NTIA, whether the market is unserved or 
underserved--even if located in or near an urban or suburban market.
    It goes without saying that rural areas are less densely populated 
and more costly to serve when it comes to telecommunications. Even 
though government supported loans have been historically available, 
because of this high cost of service the deployment of broadband has 
not been feasible in many rural markets, even those that are not 
``remote''. NRTC members, anticipating the availability of grant money 
from the Act may abandon plans to provide broadband service in their 
rural markets.
    While NRTC greatly appreciates the aims and goals of the 
Administration and Congress as reflected in the Act, it is difficult to 
understand why rural areas are placed in this disadvantageous position.
                                 ______
                                 
      Submitted Statement of Jay Maxwell, President, Pixius, Inc.
    Mr. Chairman, thank you very much for holding this hearing on 
broadband technology and its importance to rural America. Recently, I 
was pleased to participate in a hearing held by the Department of 
Health and Human Services' National Advisory Committee on Rural Health 
Care in Rapid City, South Dakota.
    Broadband is critically important to the provision of health care 
services in rural America as well as other vital services including 
education.
    I am pleased to submit for the record the statement presented to 
HHS in South Dakota. Thank you very much for making this statement a 
part of your hearing record.
Statement of Jay Maxwell, President, Pixius, Inc., Before the National 
        Advisory Committee on Rural Health and Human Services, Health 
        Resources and Services Administration, Department of Health and 
        Human Services, Meeting, Rapid City, South Dakota
June 9, 2009

    Thank you for allowing me to appear today and to participate in 
this meeting. I commend our former Governor, Kathleen Sebelius, 
Secretary of HHS, for convening this forum.
    President Obama and Secretary Sebelius have made healthcare reform 
a major priority for the Administration. In rural America, the 
distances involved and the lack of specialized services compound all of 
the healthcare problems we face as a nation. There is a major disparity 
in the quality of healthcare services provided in rural America as 
compared to urban America. Those of us who live in rural America should 
not have to leave our family and our home to receive adequate medical 
attention. Our young people are leaving rural America because of the 
lack of critical services, including healthcare.
    We must maximize the use of modem technology to bridge the urban-
rural divide in America and bring health care to rural areas. Broadband 
technology can go a long way to bringing healthcare services to rural 
America.
    Let me explain how the use of broadband can bring healthcare 
services to the entire country.
    Remote disease management is a new and effective way to measure and 
monitor health status in the comfort of a patients living situation, 
and to give physicians and nurses access to medical information right 
away so they can quickly identify any changes that need to be 
addressed. This method of measuring and monitoring health status is 
interactive, easy to use, affordable, and can provide vital health 
information to not only the clinical care team but the patient's family 
as well.
    The goal of remote disease management is to keep senior citizens in 
their own homes as long as possible and out of nursing and long-term 
care facilities, as well as to minimize hospitalizations, emergency 
room visits, and scheduled physician visits. In short, technology is 
being used to improve the quality of life and reduce the nation's 
healthcare burden.
    However, none of this is possible without access to a quality high-
speed broadband Internet connection. While this access is common in 
urban and suburban areas, it is almost a luxury in rural America. Is it 
a coincidence that rural America is also an area that is unserved or 
underserved by medical facilities and practioners? Rural America is an 
area with a population that is aging and placing increased demands on 
scarce healthcare resources.
    The economies of rural communities and the lifestyle associated 
with rural communities are strong barriers to recruiting and retaining 
physicians in rural America. Salary is often stated as a barrier to 
recruitment. A study in 2007 by LocumTenens indicates that on average, 
incomes for rural doctors do not differ significantly from those in 
urban areas.
    In Kansas, 29 percent of the population is classified as rural. 
Physicians in Kansas are concentrated in urban areas with only 4% of 
physicians being located in areas that are classified as rural. Since 
the providers and services are not located where the need exists, we 
need to take a different approach to healthcare delivery.
    In South Dakota, the most remote areas of the state are the nine 
Sioux Indian Reservations. The health statistics on the Reservations 
resemble those of a third world country. The Reservations must be a 
high priority for broadband.
    Remote disease management is one effective solution, but it will 
only be effective if patients in rural areas have access to a quality 
high-speed broadband Internet connection. Funding for the improvement 
of Internet access in rural areas is included in the American Recovery 
and Reinvestment Act (ARRA).
    ARRA funds that will be administered by the Department of 
Agriculture's Rural Utility Services (USDA-RUS) are targeted toward 
telemedicine programs and broadband programs in rural America. Funds 
that will be administered by the National Telecommunications and 
Information Administration (NTIA) address broadband programs for rural 
America.
    We urge HHS to coordinate to the maximum extent possible with both 
USDA and NTIA to maximize the use of broadband funds with an eye to 
improving rural health care. Pixius Communications is committed to 
providing quality high-speed Internet service in unserved and 
underserved areas. We understand the unique challenges of communicating 
in rural America. Through partnerships with leaders in the delivery of 
remote disease management, we use modern technology to bridge the 
urban-rural divide in America and bring health care to rural areas. We 
are available to assist HHS in any way possible as you seek practical 
solutions to the challenge of extending health care in a uniform manner 
throughout all of the United States.
    Thank you.*
---------------------------------------------------------------------------
    * Pixius is a Kansas based company that specializes in broadband 
communication in rural area. www.pixius.com
---------------------------------------------------------------------------
                                 ______
                                 
                          Submitted Questions
Response from Cheryl Cook, Deputy Under Secretary for Rural 
        Development, U.S. Department of Agriculture
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress 
        from North Carolina
    Question 1. What is the status of the broadband loan program 
regulations required by last year's farm bill? How will that program be 
integrated with the stimulus programs?
    Answer. We anticipate that the regulations implementing the 2008 
Farm Bill broadband program will be published as an interim final in 
the Federal Register--with request for comment--this year. We are 
working diligently to clear the rule in the Department and submit it to 
OMB. The 2008 Farm Bill program and Recovery Act program have 
significant differences with regard to the definitions of unserved and 
underserved, and competition. There is currently demand for the 2008 
Farm Bill program as well as the loan and grant programs provided in 
the Recovery Act. We anticipate that both programs will complement each 
other and bring broadband service to rural, unserved and underserved 
communities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                              Attachment 2

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                                  
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