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



   HEARING TO REVIEW RURAL BROADBAND PROGRAMS FUNDED BY THE AMERICAN
                     RECOVERY AND REINVESTMENT ACT

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

                                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

                               __________

                           NOVEMBER 19, 2009

                               __________

                           Serial No. 111-37


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

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54-078 PDF                WASHINGTON : 2010
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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
    Prepared statement...........................................     6
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..................................     7

                               Witnesses

Adelstein, Hon. Jonathan, Administrator, Rural Utilities Service, 
  U.S. Department of Agriculture, Washington, D.C................     8
    Prepared statement...........................................    10
Strickling, Hon. Lawrence E., Assistant Secretary for 
  Communications and Information, National Telecommunications and 
  Information Administration, U.S. Department of Commerce, 
  Washington, D.C................................................    13
    Prepared statement...........................................    14

                           Submitted Material

Submitted questions..............................................    31
Wilson, Delbert, General Manager, Hill Country Telephone 
  Cooperative; on behalf of National Telecommunications 
  Cooperative Association, submitted statement...................    33

 
   HEARING TO REVIEW RURAL BROADBAND PROGRAMS FUNDED BY THE AMERICAN
                     RECOVERY AND REINVESTMENT ACT

                              ----------                              


                      THURSDAY, NOVEMBER 19, 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 11:04 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Mike 
McIntyre [Chairman of the Subcommittee] presiding.
    Members present: Representatives McIntyre, Bright, Cuellar, 
Kissell, Minnick, Conaway, Roe, and Lummis.
    Staff present: Aleta Botts, Claiborn Crain, Tony Jackson, 
Tyler Jameson, John Konya, James Ryder, April Slayton, Patricia 
Barr, Mike Dunlap, Jamie Mitchell, and Sangina Wright.

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

    The Chairman. The Subcommittee on Rural Development, 
Biotechnology, Specialty Crops, and Foreign Agriculture to 
review rural broadband programs will now come to order. Good 
morning. Welcome to this hearing today to review rural 
broadband programs funded by the American Recovery and 
Reinvestment Act. I am Mike McIntyre, Chairman of the 
Subcommittee and I want to welcome all of you here today on 
business and those who may be visiting as well. I especially 
want to thank our witnesses who will testify before us today 
whom we just greeted up here at the front as you may have seen. 
We especially appreciate your time and effort in being here.
    This is the second hearing that this Subcommittee has held 
in the past 4 months on rural broadband deployment, indicating 
that there is a great level of interest and concern that our 
Subcommittee has with the implementation of this program. The 
funding provided in the Recovery Act has the potential to set 
the stage for many years of broadband deployment, and it can 
help, if done the right way and if done soon enough, in 
unserved and underserved rural areas.
    Alternatively, that funding could go toward areas with 
existing levels of adequate service and then the digital divide 
between areas with access and without access would only 
continue to grow. I know that members of this panel want to be 
able to look back on the Recovery Act spending and see that 
broadband access became a reality in those rural communities 
that currently do not have that benefit and that these results 
will be directly tied to the work of the broadband programs 
that we are discussing today.
    Without a doubt it is critical, it is essential that the 
Federal Government get this right. Certainly the effect on 
individuals left out of the digital loop is significant. By 
some estimates almost 80 percent of Fortune 500 companies now 
require online job applications. Most software for personal 
computers receive updates via online communication. Tax 
preparation software communicates online with parent company 
files to ensure that users have the most up-to-date 
information. Banks offer better deals to customers who go 
paperless.
    All of these are examples to show that access to broadband 
goes much beyond just getting a better bargain on a shopping 
deal, trying to compare prices, as important as we all know 
that is in today's economy and with Christmas on the horizon. 
All of this is in addition to the basic family value factors 
such as helping your children do their homework in this age of 
technology, as they are more accustomed to using computers in 
the classroom and computers in the library, and for those who 
can, computers at home.
    This speaks to the very ability of rural citizens to 
participate at a basic level in the broader economy, and like I 
have mentioned before, in months past, when President Clinton 
came to rural southeastern North Carolina, the district I 
represent, back in the year of 2000, it was one of three places 
in America where he said that we should be bridging the digital 
divide. I think now almost a decade later it is time that that 
dream is fulfilled.
    And I know that it was exciting then and even more so now 
that a farmer could compare bargains and opportunities for 
shopping not just across the street or across town, but, 
literally, across the country with broadband access and how 
much more that means to tele-health, tele-medicine, when we 
talk about healthcare reform. This is the real way to put 
people, at a local level, in touch with the very finest in 
medical research as is happening in places like Faison, North 
Carolina, in Duplin County in our district where Vice President 
Biden and Secretary of Agriculture, Tom Vilsack, visited back 
in the summer to highlight Goshen Medical Center in its tele-
medicine efforts connecting it to East Carolina University 
School of Medicine.
    The debate on universal access has assumed that the 
benefits to widespread deployment accrue only to the 
individual, but that is simply not the case. The companies who 
cannot communicate via online connection with their consumers 
will not be able to serve those consumers' needs, and will have 
to rely on less-efficient means of communications. Businesses 
in rural areas that have inadequate broadband speeds will be 
unable to participate in the online marketplace and be unable 
to build the jobs in rural areas that are most critical.
    I join many of my colleagues in expressing concerns over 
the first funding notice released by the Rural Utilities 
Service, the National Telecommunications and Information 
Administration. From a definition of remote that simply was 
unworkable to a situation whereby rural applications may be 
disadvantaged in receipt of grant funds when compared to non-
rural applications, numerous issues have arisen from the first 
funding notice.
    However, I know that these two agencies are working 
diligently to make these programs work and are attempting to 
make changes in the program to address many of these concerns 
raised. We look forward to hearing about that effort today.
    As I said back in July, the funding provided in the 
stimulus holds enormous potential to reduce the digital divide. 
Yet, we know that this 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 for providers who 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 look forward to hearing from both agencies on their plans 
for these programs and appreciate their time and interest. I 
would encourage the 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 all of it within 5 minutes.
    Pursuant to the Committee rules, testimony by witnesses, 
along with questions and answers by Members or witnesses, will 
be stopped at 5 minutes. Your complete written testimony, be 
assured, will be allowed in its entirety in the record. So 
please know that we will be happy to receive the full 
statement. The same goes for Members.
    [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 funded by the American Recovery and Reinvestment 
Act. 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.
    This is the second hearing this Subcommittee has held in the past 4 
months on rural broadband deployment, indicating the level of interest 
and concern that our Subcommittee panel has with regard to programs 
with incentives for this deployment. Quite simply, the funding provided 
in the Recovery Act has the potential to set the stage for many years 
of broadband access in rural areas. Alternatively, that funding could 
go toward areas with existing levels of adequate service, and the 
digital divide between areas with access and without access would only 
continue to grow. I know that the Members of this panel want to be able 
to look back on the Recovery Act spending and see broadband access 
where it was not prior to this funding and see rural communities 
benefiting in ways they could not before the deployment of the 
infrastructure.
    Without a doubt, it is essential that the Federal Government get 
this right. Certainly the effect on individuals left out of the digital 
loop is significant. By some estimates, almost 80% of Fortune 500 
companies require online job applications. Most software for personal 
computers receive updates via online communication. Tax preparation 
software communicates online with parent company files to ensure that 
users have the most up-to-date information. Banks offer better deals to 
customers who go paperless. All of these examples show that access to 
broadband goes much beyond doing your Christmas shopping online or 
helping your children with their homework. They speak to the very 
ability of rural citizens to participate at a basic level in the 
broader economy.
    Additionally, too often the debate on universal access has assumed 
that the benefits of widespread deployment accrue only to the 
individual. That is simply not the case. Companies who cannot 
communicate via online connections with their consumers will not be 
able to serve those consumers' needs and will have to rely on less 
efficient means of communications. Businesses in rural areas that have 
inadequate broadband speeds will be unable to participate in the online 
marketplace and be able to build the jobs in rural areas that are most 
critical.
    I joined many of my colleagues in expressing concerns over the 
first funding notice released by the Rural Utilities Service and the 
National Telecommunications and Information Administration. From a 
definition of remote that simply was unworkable to a situation whereby 
rural applications may be disadvantaged in receipt of grant funds when 
compared to non-rural applications, numerous issues have arisen from 
the first funding notice. However, I know that the two agencies are 
working diligently to make these programs work and are attempting to 
make changes in the program to address many of the concerns raised.
    As I said in July, the funding provided in the stimulus holds 
enormous potential to reduce the digital divide and yet, we know that 
this 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. I look forward to hearing 
from both agencies on their plans for these programs.
Conclusion
    I would encourage witnesses to use the 5 minutes provided for their 
statements to highlight the most important points in their testimony. 
Do not read your testimony unless you can complete it within the 
allotted 5 minutes or can read the highlights within the 5 minutes. 
Pursuant to Committee rules, testimony by witnesses along with 
questions and answers by Members of the witnesses will be stopped at 5 
minutes. Your complete written testimony will be submitted in its 
entirety in the record.
    At this time, I would like to recognize the Ranking Member of the 
Subcommittee, Rep. Mike Conaway, for any opening comments that he may 
have.

    The Chairman. At this time I would like to recognize the 
Ranking Member of the Subcommittee, Representative Mike 
Conaway, for any opening comments that he may have. Mr. 
Conaway.

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

    Mr. Conaway. Well, thank you, Mr. Chairman. I appreciate 
you agreeing to hold this hearing.
    The current economic climate has placed acute burdens on 
rural America from the small businesses in each of our 
communities to the farmers and ranchers working every daylight 
hour. The benefits of broadband access can help them compete in 
the global market. Bridging the broadband divide could send 
jobs to rural America, not overseas.
    For instance, in Mason, Texas, the heart of my district, 
with a population of 2,500, the local provider there just 
connected their first 100 megabyte line to a business which 
connects to other offices around the country. This allows them 
to centralize their locations in a small, rural town with the 
same connectivity they would have had in New York or Houston. 
It is this kind of investment that can spur tremendous economic 
growth throughout rural America.
    In July this Subcommittee reviewed the first broadband 
notice of funding availability under the stimulus bill, which 
included rules governing how funding would be made available 
for remote areas of rural America. At that time Deputy Under 
Secretary Cheryl Cook committed RUS to immediately solving 
glaring issues with the rules from that July NOFA. When we 
visited these programs in July, everyone agreed to come back 
and review these programs this fall. Here we are 4 months later 
and that action has not been taken to address the concerns of 
the Committee, concerns which have been echoed throughout the 
committees and Congress.
    Releasing funds at the same time as the very rule which 
governs that funding is an approach that may not direct $7.9 
billion in grants and loan authority to places most in need. 
The stimulus bill provided minimal guidance, but made it clear 
that reaching unserved areas of rural America was a priority.
    Unfortunately, we still do not know if the approach RUS has 
taken will effectively reach those areas. Today we are looking 
ahead to what RUS is going to do in early 2010, to effectively 
deploy broadband into those areas of rural America which are 
currently unserved, without a nationwide broadband map.
    Many of the problems that broadband applicants and 
providers experienced are the results of not having an adequate 
nationwide broadband map. The agency's decision to announce the 
final rules, awards, and comment period within a few short 
weeks has the potential to create more problems without 
allowing time for a proper resolution.
    Even though RUS has spent a great deal of time collecting 
comments and has heard criticisms of the July NOFA, by not 
providing a proposed rule in advance for comment they are 
almost guaranteed to repeat the mistakes made in July. As we 
approach the final opportunity for RUS to get this right, 
nothing we have heard has assured this Committee that RUS is 
making effective changes to the rules or their processes.
    What I am most perplexed about is the agency's position to 
include non-discrimination provisions that go beyond what the 
FCC proposed in the October 22 rule. Experts from both sides of 
this debate believe the FCC is the best governing body to find 
the right balance between protecting broadband consumers, while 
allowing broadband providers to manage their networks against 
security threats and congestion.
    We are concerned that the July NOFA inhibited and prevented 
competitive grant and loan applicants. Sixty percent of all 
applications included a wireless component, and 73 percent of 
all last-mile, non-remote applications included a wireless 
component. Existing broadband providers or providers that are 
not connected to a larger network are not applying for the 
grant and the loan funding, in part because these requirements 
will place costly restrictions on their network and will impose 
net neutrality policies that go above and beyond those 
regulated by the FCC.
    We are concerned that RUS's decision to include non-
discrimination provisions undermines the technology neutral 
mandate set forth in the statute, a statute that deliberately 
did not include non-discrimination provisions for RUS funding 
so that the most competitive applicants could apply. The next 
NOFA must use the FCC statutory authority to regulate and 
govern broadband providers network management to avoid 
conflicting policies and allow the FCC rulemaking to govern 
this controversial issue.
    Both of your agencies have committed several times to this 
Committee that you want feedback on how best to move forward. 
Listening to suggestions without effective action to implement 
those suggestions in a timely manner does not move the process 
forward. We will suggest to you that, in part, your promise to 
allow a brief comment period after you release the rules of the 
next NOFA with time enough to incorporate critical changes 
would go a long way to demonstrating your commitment to 
listening.
    I appreciate the time both of you are taking to be here 
today, and I am looking forward to discussing specific options 
with you on, perhaps, multiple rounds of questions this 
morning. So, Mr. Chairman, with that I yield back.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    Thank you, Mr. Chairman, for holding this hearing. The current 
economic climate has placed acute burdens on rural America. From the 
small businesses in each of our communities to the farmers and ranchers 
working every daylight hour, the benefits of broadband access can help 
them compete in the global market. Bridging the broadband divide could 
send jobs to rural America, not overseas. For instance, in Mason, Texas 
in the heart of my district with a population of about 2,500, the local 
provider there just connected their first 100 Mb line to a business 
which connects to other offices around the country. This allows them to 
centralize their operations in a small rural town with the same 
connectivity they would have in New York or Houston. It is this kind of 
investment which can spur tremendous economic growth throughout rural 
America.
    In July this Subcommittee reviewed the first broadband NOFA under 
the stimulus bill, which included rules governing how funding would be 
made available for the remote areas of rural America. At that time, 
Deputy Under Secretary Cheryl Cook committed RUS to immediately solving 
glaring issues with the rules from the July NOFA. When we visited these 
programs in July, everyone agreed to come back and review these 
programs this fall. Here we are 4 months later, and action has not been 
taken to address the concerns of this Committee; concerns which have 
been echoed throughout Committees in Congress.
    Releasing funds at the same time as the very rule which governs 
that funding is an approach that may not direct $7.9 billion in grant 
and loan authority to the places most in need. The stimulus bill 
provided minimal guidance but made it clear that reaching unserved 
areas of rural America was a priority. Unfortunately, we still do not 
know if the approach RUS has taken will effectively reach those areas.
    Today we are looking ahead to what RUS is going to do in early 2010 
to effectively deploy broadband into those areas of rural America which 
are currently unserved without a nationwide broadband map. Many of the 
problems that applicants and broadband providers experienced are the 
result of not having an adequate nationwide broadband map. The 
agencies' decision to announce the final rules, awards, and comment 
period within a few short weeks has the potential to create more 
problems without allowing time for a proper resolution.
    Even though RUS spent a great deal of time collecting comments and 
has heard criticisms of the July NOFA, by not providing a proposed rule 
in advance for comment they are almost guaranteed to repeat the 
mistakes made in July. As we approach the final opportunity for RUS to 
get this right, nothing we have heard has assured this Committee that 
RUS is making effective changes to the rules or to their process.
    What I am most perplexed about is the agencies' position to include 
non-discrimination provisions that go beyond what the FCC proposed in 
the October 22 rule. Experts on both sides of this debate believe the 
FCC is the best governing body to find the right balance between 
protecting broadband consumers while allowing broadband providers to 
manage their networks against security threats and congestion.
    We are concerned that the July NOFA inhibited and prevented 
competitive grant and loan applications. Sixty-percent of all 
applications included a wireless component and 73% of all Last Mile 
Non-Remote applications included a wireless component. Existing 
broadband providers or providers that are not connected to a larger 
network are not applying for the grant and loan funding, in part 
because these requirements will place costly restrictions on their 
network and will impose net-neutrality policies that go above and 
beyond what is regulated by the FCC. We are concerned that RUS' 
decision to include non-discrimination provisions undermines the 
technology neutral mandate set forth in the statue; a statue that 
deliberately does not include non-discrimination provisions for RUS 
funding so that the most competitive applicants could apply.
    The next NOFA must use the FCC's statutory authority to regulate 
and govern broadband provider's network management to avoid conflicting 
policies and allow FCC's rulemaking to govern this controversial issue.
    Both of your agencies have testified several times that you want 
feedback on how best to move forward. Listening to suggestions without 
effective action to implement those suggestions in a timely manner does 
not move the process forward. We would suggest to you that, in part, 
your promise to allow a brief comment period after you release the 
rules in the next NOFA, with time enough to incorporate critical 
changes, would go a long way to demonstrating your commitment to 
listening.
    I appreciate the time both of you are taking to be here with us 
today, and I am looking forward to discussing specific options you have 
available to keep these programs moving forward. Thank you Mr. 
Chairman.

    The Chairman. Thank you, and we are going to be moving 
fast, faster than our southern drawl would normally let us, 
because we understand we may have votes in the next 15 to 20 
minutes. So I will ask the witnesses to comply with the 5 
minute rule, and I will ask the Members to be very cognizant of 
the time constraints so that, hopefully, we can complete this 
before being interrupted by votes.
    The chair would request that other Members submit their 
opening statements for the record so witnesses may begin their 
testimony and that we ensure there is time for the answers.
    [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 what will be this year's 
second hearing of this Subcommittee to look at Federal rural broadband 
programs.
    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 an essential but 
often lacking resource in rural communities across the country. Access 
to quality broadband service creates and preserves jobs while 
encouraging economic development, business innovation, education, and 
medical technology in areas where these priorities may otherwise go 
unmet.
    On the Agriculture Committee, our Members have been watching 
carefully to be sure that the government programs dedicated to 
expanding broadband services are effectively targeting funds to areas 
that are truly rural and unserved.
    We understand that this is a complicated issue and that rules 
written too strictly may exclude deserving projects, and rules that are 
too broad might allow projects in less deserving communities to jump in 
front of other projects.
    In the 2008 Farm Bill, we made several important improvements to 
the criteria used by USDA to prioritize applications for the broadband 
loan program. We clarified the definition of rural areas so that 
communities near larger cities and towns will not get preference over 
areas that are actually rural. Areas where more than three providers 
are already providing broadband service were also made ineligible for 
the program. These are necessary changes that will help to ensure that 
the right projects receive funding, but USDA still has not finalized 
the regulations on these farm bill changes. It has been almost 18 
months since the farm bill passed, and it is inexcusable that 
regulations on this are not complete, and I hope that Mr. Adelstein can 
explain what the status is for this rule and why we are still waiting.
    For the funding provided in the stimulus bill, I warned people that 
there was no way that the Federal Government, specifically the National 
Telecommunications and Information Administration, was going to be able 
to get this much money out to the right areas in an efficient and 
effective way on the timeline they wanted. Unfortunately, I was right. 
The first funding notice contained a lot of issues that called into 
question the targeting of the programs. Now, with more than 2,200 
applications to review, I am concerned that these agencies do not have 
sufficient resources to ensure that applications receive the necessary 
review.
    The Government Accountability Office released a report just this 
week warning that the potential exists for waste, fraud and abuse in 
the distribution of these stimulus funds. This money is too important 
to the communities that really need it for us to stand by and let that 
happen, which is why this Committee has been and will continue to be 
extremely active in monitoring this process.
    I thank our witnesses for being here today. I hope they have some 
answers for us, because I know we have a lot of questions.

    The Chairman. We welcome today our panel. Jonathan 
Adelstein, Administrator for Rural Utilities Service, U.S. 
Department of Agriculture, and Lawrence Strickling, Assistant 
Secretary for Communications and Information, for the U.S. 
Department of Commerce. And a special welcome also to Mr. 
Strickling's son, who I understand lived in my hometown of 
Lumberton for a few months last year down in North Carolina.
    Mr. Adelstein, please begin.

             STATEMENT OF HON. JONATHAN ADELSTEIN,
          ADMINISTRATOR, RURAL UTILITIES SERVICE, U.S.
          DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Mr. Adelstein. Thank you, Mr. Chairman, Ranking Member 
Conaway, and Members of the Committee for this opportunity to 
testify. It is a special honor to be here with my good friend, 
Larry Strickling, who is doing such an outstanding job of 
leading the NTIA, at the Department of Commerce.
    Obviously, increasing broadband deployment and adoption in 
rural areas is a top priority for the President, USDA Secretary 
Tom Vilsack, and all of us at RUS. I know that that is true for 
this Committee as well, and this Congress. And thanks to your 
strong leadership to improve access to broadband in rural 
areas, Mr. Chairman, and that of others in Congress you have 
given USDA an historic opportunity in the Recovery Act.
    You are aware that the RUS has a long and highly-successful 
track record since its beginnings as the Rural Electrification 
Administration in 1935, in the deployment of electric, 
telephone, and water service in rural areas. We are now 
applying this expertise to broadband.
    Since 1995, we have required all new telecommunications 
capacities that we finance to be broadband capable. We have 
also had great success with our Community Connect and Distance 
Learning and Tele-medicine programs, which have allowed us to 
invest nearly $500 million in rural, underserved areas. The 
USDA Broadband Loan Program created by the 2002 Farm Bill has 
already provided over $1.1 billion in loans to more than 90 
broadband projects in rural communities spanning 42 states.
    The Recovery Act marks a major new chapter in this effort. 
Since its enactment we have worked side by side with our 
partners at NTIA, the FCC, and the White House to fulfill the 
President's vision for promoting broadband across the nation. 
This collaboration has been unprecedented. We are now immersed 
in our review of over $28 billion in applications. We have a 
long history of expertise in this area. The Telecom Program was 
initiated in 1949, so this year is our 60th anniversary that we 
have been building rural telecommunications infrastructure. To 
ensure that rural communities get access to quality broadband 
services, since 1995, RUS has ensured that all 
telecommunications infrastructure we finance be capable of 
supporting broadband, at least 1 megabit in both directions.
    Today the RUS telecommunications portfolio, built up over 
60 years, is $4.1 billion. We have recently averaged $700 
million a year in new telecom loans. Since the enactment of the 
Broadband Loan Program in 2002, we have gained great insight 
into the unique challenges in deploying rural broadband. We 
have developed regulations for the changes required in the 2008 
Farm Bill incorporating the lessons we have learned since 2002, 
regarding the wide variety of broadband networks, and we want 
to improve on our existing track record by learning from the 
current Recovery Act process as well.
    With the $2.5 billion in Recovery Act funds the RUS has 
received, we plan to deliver an even higher level of funding in 
loans, grants, and loan-grant combinations based on our ability 
to leverage our budget authority. We are now evaluating first-
round applications and expect to begin issuing awards very 
shortly. Well over half of the total investment projected under 
the BIP Program has been reserved for the next funding round. 
We have compressed the plan for the second and third rounds 
into a single round. This should give applicants more time to 
develop strong proposals and help us ensure that we obligate 
all funds by September 2010. It will also give us more time to 
analyze, as you suggested, Congressman Conaway, and to really 
evaluate and take into account what we learn.
    Subsequent funding may also include enhancements to 
criteria that we used in round one. We are certainly well aware 
of concerns that have been raised regarding a wide range of 
issues, including the definition of rural and remote areas, 
about which we have heard extensively from this Committee and 
others. We are also reviewing eligibility standards for 
unserved and underserved areas, scoring rates for various 
factors, and concerns regarding overlapping service territories 
for satellite providers.
    It would be premature to speculate about specific changes 
that we are going to make until we have completed our 
evaluation of the first round of applications. But, we are 
prepared to make changes that may be significant based on our 
experience, the feedback we have received during the RFI 
process, and of course, your views. We certainly encourage 
input from everyone on this Committee on how best to move 
forward and apply the lessons learned in round one for the work 
ahead of us in the next round.
    We will continue to ensure that our implementation of this 
program is collaborative and coordinated with our partners at 
NTIA. Our ability to continue to finance rural 
telecommunications is the result of your support of this 
mission. We can't thank you enough for your leadership on this, 
and for your longstanding support for our agency. We are 
working hard to justify the trust that you have placed in us to 
deliver affordable broadband services throughout rural America.
    It an honor and privilege to work with you on behalf of our 
65 million Americans who reside in rural communities. Thank you 
for inviting me to testify, and I would be glad to address any 
questions you may have.
    [The prepared statement of Mr. Adelstein follows:]

  Prepared Statement of Hon. Jonathan Adelstein, Administrator, Rural 
  Utilities Service, U.S. Department of Agriculture, Washington, D.C.
    Chairman McIntyre, Ranking Member Conaway, and distinguished 
Members of the Committee, thank you for the opportunity to testify on 
the U.S. Department of Agriculture's Broadband Initiatives Program 
(BIP).
    Your support as we implement this critical program is invaluable 
and much appreciated. The Obama Administration and Secretary of 
Agriculture Tom Vilsack share your goal of improving access to 
affordable broadband service. You understand the role that broadband 
plays in bridging the barriers of time and distance. It is often the 
key factor that can level the economic playing field, provide rural 
businesses access to national and international markets, and allow new, 
small and home-based businesses to thrive. It is the element that makes 
rural areas competitive.
    The funds we will administer in the next 12 months will cultivate 
new investment opportunities in as many rural communities as possible.
    On behalf of Secretary Vilsack, I am here to say that USDA stands 
committed and ready to fulfill its rural broadband mandate outlined by 
Congress and the President. Improving the quality of life for rural 
families and businesses is the centerpiece of USDA's overall mission, 
and we view broadband as an essential ingredient.
    Secretary Vilsack has striven to identify the many ways this 
Congress and the Administration have worked for our rural economy. The 
programs you are putting into place--renewable energy, local and 
regional food systems, regional collaboration and investment in 
broadband--are key components of USDA's focus toward rebuilding and 
revitalizing economic growth in rural America. Broadband provides 
connectivity for efficient delivery of not just these programs, but of 
all of the major issues facing rural residents, including health care, 
educational and financial services. These are necessary to a vital 
economy, not just for rural areas, but nationwide.
    To document the importance of broadband in renewing the rural 
economy, Secretary Vilsack directed the USDA's Economic Research 
Service (ERS) to examine the economic effects of having broadband 
access in rural communities. In August, the ERS published a report, 
entitled ``Broadband Internet's Value for Rural America,'' which 
concluded that employment growth was higher and non-farm private 
earnings greater in counties with a longer history of broadband 
availability.
    The report also cited certain key benefits of broadband access in 
rural communities. These include access to online course offerings for 
students in remote areas and the access to tele-medicine and tele-
health services for patients living in rural areas in need of urgent 
and often specialized care. Agricultural producers and farm based 
businesses are also more reliant on Internet access to conduct sales 
transactions, marketing and advertising, monitor real time changes in 
the commodities markets and track global trends that impact U.S. crop 
prices to stay in business. The direct benefits of broadband to the 
rural economy, both on and off the farm, are tangible and significant.
    The report also clearly notes that areas with low or dispersed 
populations, or demanding terrain, generally have difficulty attracting 
broadband service providers. These characteristics, as you know, can 
make the fixed cost of providing broadband service too high to make a 
business case for investment. Yet, we also know from experience that 
leadership, policy support, resources and social factors can overcome 
barriers to broadband expansion.
    And that is why we are here. This Committee is aware that since 
1935, beginning with the Rural Electrification Administration, we have 
been a premier lender for rural infrastructure investment. Our current 
loan portfolio is $54.5 billion and includes Federal financing for 
water and wastewater, telecommunications, broadband, electric and 
renewable energy infrastructure projects.
    We are now applying our technical skills, historical knowledge and 
financial expertise gained over the past 75 years to meet the new 
challenge of deploying next generation broadband capability in rural 
communities. Our goal is to recreate the successes we have achieved in 
financing the rural electric grid for rural utilities and the rural 
telephone network toward building new broadband networks in the most 
rural and difficult to serve regions of the country.
    We are grateful to Congress and the Administration for giving the 
USDA the opportunity to contribute its expertise towards rebuilding 
economic prosperity in rural America. Through the Recovery Act, 
Congress and the Administration entrusted the Rural Utilities Service 
with nearly $4 billion in stimulus funds for infrastructure investment, 
dedicating $2.5 billion for rural broadband deployment and $1.38 
billion for rural water infrastructure projects.
    Since the enactment of the Recovery Act in February, we have worked 
side by side with our partners at the National Telecommunications 
Information Administration (NTIA) and the Federal Communications 
Commission to fulfill the President's vision for promoting ubiquitous 
broadband access across the nation. Assistant Secretary Lawrence 
Strickling has been an outstanding and visionary partner throughout 
this process. The Federal Communications Commission has also been an 
active contributor to this discussion.
    RUS and NTIA are fully engaged in our respective reviews of 
applications for over $28 billion in funding requests. There is a high 
degree of interest in our respective loan and grant programs that 
reflects the great demand for broadband in rural America.
    It's worth noting that RUS has encountered several challenges as we 
have worked to review applications for this round of funding. These 
concerns have prompted us to consider alternative approaches that would 
simplify the application process and support our efforts to fund high-
quality projects for the next round of funding.
    In particular, we have seen applicants struggle to comply with the 
requirements of the ``remote'' definition for last-mile rural remote 
projects. This definition was an attempt to ensure that the program 
targets funding to some of the most remote and difficult to serve areas 
in the United States, which we understand is the intent of Congress. 
The use of this term was also part of an effort to address previous 
program criticism that RUS has historically funded less-remote project 
areas. We are contemplating major revisions that will continue to 
target highly-rural areas that are difficult to serve while making it 
easier for applicants to comply with any new definition we may 
establish.
    Among other issues, we have also seen some applicants encounter 
challenges with our program's rural definition. In addition, some 
applicants have found it difficult to comply with the 50% loan 
requirement for middle mile and last mile non-remote projects.
    The Request for Information (RFI) that NTIA and RUS released last 
week asks questions about these items and many others. We would welcome 
the Committee's input on these and any other issues of concern.
USDA's Historic Role in Telecommunications Infrastructure Investment
    Today, the RUS Telecommunications portfolio--built up over 60 
years--totals $4.1 billion. As technology continues to evolve, we will 
continue to find new ways to deliver next generation services and 
facilities to end-users in rural and high cost areas.
    We have also achieved considerable success and gained invaluable 
experience in deploying broadband and related services to remote rural 
and underserved communities. Through the Community Connect Grant 
Program and the Distance Learning and Tele-medicine Loan and Grant 
Program, RUS has invested $498 million in rural underserved areas.
Applying the Lessons Learned from the 2002 Farm Bill to Future 
        Applications
    Since the enactment of the Broadband Loan Program in 2002, we have 
gained tremendous insights into the unique challenges of deploying loan 
financing for next-generation Internet architecture in rural high-cost 
markets. As we develop the regulations for the changes required under 
the 2008 Farm Bill, we are incorporating the lessons we have learned 
since 2002 regarding the funding of broadband networks in a competitive 
environment to improve our existing track record.
    Once these regulations are published, we will launch a national 
outreach effort to help guide applicants on the new requirements and 
how to apply for funding. Outreach and education are important 
functions of our work in reaching as many rural populations as 
possible, and we will continue to dedicate resources and attention 
toward educating the American public of our farm bill once regulations 
are released.
    To further assist prospective applicants with the new farm bill 
requirements, we will utilize the expertise of our nationwide network 
of Rural Development field offices and RUS' own General Field 
Representatives (GFRs), who are stationed in local communities across 
the country to hold workshops, deliver presentations, and respond to 
inquiries about the program. Rural Development has approximately 6,000 
employees in over 470 offices nationwide. Through the outstanding local 
outreach performed by our field staff, we have enormous capacity to 
coordinate our programs and provide assistance and guidance to our 
borrowers.
Implementation of the BIP Program Under the American Recovery and 
        Reinvestment Act: Building on Our Service to Rural America
    With the funds we received in the Recovery Act for broadband, we 
estimate that we can employ the $2.5 billion in budget authority USDA 
received to deliver an even larger volume of program level in loans, 
grants and loan-grant combinations to prospective applicants, based on 
our ability to leverage our funding levels. This strategy is designed 
to build on RUS' demonstrated expertise in finance and to complement 
NTIA's Broadband Telecommunications Opportunity Program (BTOP), which 
is a grant-only program. Supporting investments through our loan 
authority will help leverage Federal resources, and is a goal that we 
intend to continue to promote.
    Under our first Notice of Funding Availability (NOFA), published on 
July 9, 2009, RUS made available up to $1.2 billion for Last Mile 
projects, up to $800 million for Middle Mile projects, and established 
$325 million for a National Reserve.
Next Steps
    We are now in the process of evaluating First Round applications 
and expect to begin issuing awards shortly. The first NOFA made 
available up to $2.4 billion in program level (loans and grants) 
funding. Well over half of the total investment projected under the BIP 
program has been reserved for subsequent funding rounds. There have 
been previous conversations regarding plans for subsequent funding. One 
suggestion, which we have now implemented, is to compress the planned-
for second and third rounds into a single round to give applicants 
additional time to develop strong proposals and to ensure that we are 
able to meet the goal of obligating all funds by September 2010. RUS 
and NTIA announced this change on November 10.
    Subsequent funding may also include enhancements to eligibility and 
scoring criteria used in Round One. We are cognizant of the concerns 
and suggestions that have been raised regarding a wide range of issues 
including the definition of rural and remote areas, eligibility 
standards for unserved and underserved areas, scoring weights for 
various factors and concerns regarding overlapping service territories 
for satellite providers. It would be premature to speculate about 
specific changes to our funding requirements until we have completed 
the evaluation of first round projects. But it is important to note 
that we are prepared to do a top-to-bottom review of what went right 
and wrong in the first round, and make major changes, as necessary, to 
improve the program and the application process. We will consider 
changes to these rules based on our experience and the feedback we have 
received during the RFI process.
    We welcome input from the Members of this Committee on how best to 
move forward and apply the lessons learned in Round One toward the work 
ahead of us in the next round of funding, which we anticipate will be 
announced in the coming months.
    We will continue to ensure that implementation of the ARRA 
broadband initiative is a collaborative and coordinated effort with our 
partners at the NTIA. We will continue to work to make this process as 
transparent and as efficient as possible. The purpose of the Recovery 
Act is to spur job creation and stimulate long-term economic growth and 
investment. To date, we are on track to obligate the $2.5 billion in 
broadband budget authority by September 30, 2010.
    On October 28, RUS celebrated our 60 year anniversary of financing 
telecommunications infrastructure, which has evolved from delivering 
voice to distance learning, tele-medicine and broadband. On behalf of 
all of us at USDA Rural Development and the Rural Utilities Service, 
thank you for your continuing and generous support of this critical 
mission. Our ability to offer programs to create economic opportunity 
and improve the quality of life in rural America is a result of your 
work. It is an honor and privilege to work with you on behalf of the 65 
million Americans in our rural communities. We look forward to working 
closely with Congress and our Federal partners throughout the Obama 
Administration in making affordable broadband service widely available 
throughout rural America.
    Thank you again for inviting me here to testify and I will be glad 
to address any questions you have.

    The Chairman. Thank you very much. You did that in less 
than 5 minutes in spite of the sirens. Thank you.
    Mr. Strickling.

      STATEMENT OF HON. LAWRENCE E. STRICKLING, ASSISTANT
    SECRETARY FOR COMMUNICATIONS AND INFORMATION, NATIONAL 
               TELECOMMUNICATIONS AND INFORMATION
          ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE,
                        WASHINGTON, D.C.

    Mr. Strickling. Mr. Chairman, Ranking Member Conaway, and 
Members of the Subcommittee, thank you for your invitation to 
testify on behalf of the Department of Commerce on the 
broadband initiatives funded by the Recovery Act. I am very 
pleased to appear here today with Jonathan Adelstein. Our two 
agencies, as he indicated, have been working hand in hand to 
implement this program, and the result it has been a highly-
coordinated and well-thought-out approach that has taken 
advantage of the individual expertise of both of our agencies.
    Under the Recovery Act, Congress has directed the 
Departments of Agriculture and Commerce to award grants to 
build broadband infrastructure in unserved and underserved 
areas of the United States. Such unserved and underserved areas 
exist in our cities, but there is little question that 
extending high-speed Internet to rural America is a particular 
focus for both of our agencies.
    A 2009 study by the Pew Internet & American Life Project 
reports that only 46 percent of rural American households 
subscribe to broadband. Now, that is an improvement from the 18 
percent reported in 2005, but it still doesn't measure up to 
the 63 percent overall adoption rate for the country, which 
itself is an unacceptably low number. The broad expanses of 
rural lands, combined with lower population densities, has made 
it difficult for private industry, on its own, to invest 
profitably in broadband infrastructure in rural America. And we 
are dedicated, along with our colleagues at the Department of 
Agriculture, to use the dollars appropriated by Congress in the 
Recovery Act to improve the availability and adoption of 
broadband services in rural America.
    Today, as Jonathan mentioned, we are working diligently to 
review the applications received in round one. These 
applications requested $28 billion in funding, which was seven 
times the funding we had allocated to the first round. We will 
begin announcing awards in mid-December, and will continue to 
announce grants on a rolling basis in 2010.
    We have a number of factors that go into the selection 
process at the Department of Commerce, but the two that I would 
like to emphasize for you this morning are, one, where can our 
dollars have the most impact, and two, the sustainability of 
these projects after the Federal grant dollars are spent.
    On the first issue, we are devoting substantial time and 
attention to determining how we can apply Recovery Act dollars 
to have the greatest impact in a number of dimensions: the 
creation of jobs, the expansion of infrastructure into unserved 
and underserved areas, the number of people subscribing or 
getting access to broadband, and the immediate and sustainable 
economic benefits of funding.
    As we compare the different types of projects that have 
been proposed, NTIA is focusing on what we call a comprehensive 
communities approach as the type of project that we think 
offers the greatest benefit per dollar spent. The paradigm for 
a comprehensive communities proposal is a Middle-Mile project 
that brings fiber or another broadband facility into one or 
more unserved and underserved communities, and then links the 
key anchor institutions in those communities to that facility. 
And by anchor institutions I mean schools, libraries, 
hospitals, and government facilities.
    We think that there needs to be the strong community 
infrastructure in place so that people are using broadband at 
their job, and their children are using broadband in their 
schools in order to bring the full benefits of high-speed 
Internet to our citizens.
    On the second issue, sustainability, we want to fund 
projects that will still serve their communities long after the 
Federal dollars have been spent. We think public-private 
partnerships may offer the greatest potential for successful 
and sustainable projects. The involvement of public entities 
ensures that the needs of communities are met, and the 
participation of qualified and experienced private companies 
gives us a greater confidence that the budget numbers and the 
financial assumptions are reasonable and that the project is 
sustainable for the long term. We will continue to test these 
assumptions as we review applications and select the best ones 
for funding.
    But even in the middle of all this activity we are 
constantly thinking about ways to improve the program. As 
Jonathan mentioned, and we continue to work with RUS on this, 
we have gone out to the community and asked for comments on how 
round one has worked for them. We want to take those comments 
as to how we can improve the application process. We are 
interested in comments on the key program definitions and 
policy judgments. We will use that information to set the rules 
for one more funding round, which we expect to launch in 
January. The key for us in setting that start date will be to 
make sure that we are able to apply the lessons learned from 
the first funding round in designing the second funding round.
    So in closing, we are working extremely hard to ensure that 
these projects serve as valuable inputs to our long-term 
broadband strategy. I look forward to working with all of you 
in the months ahead on these programs. Thank you for the 
opportunity to testify, and I look forward to your questions.
    [The prepared statement of Mr. Strickling follows:]

Prepared Statement of Hon. Lawrence E. Strickling, Assistant Secretary 
  for Communications and Information, National Telecommunications and 
 Information Administration, U.S. Department of Commerce, Washington, 
                                  D.C.
I. Introduction.
    Chairman McIntyre, Ranking Member Conaway, and Members of the 
Subcommittee, thank you for your invitation to testify on behalf of the 
National Telecommunications and Information Administration (NTIA) on 
the broadband initiatives funded in the American Recovery and 
Reinvestment Act (Recovery Act).
    For many Americans, life without broadband is becoming unthinkable. 
For all of us here, the Internet has transformed the way we live, work, 
communicate, shop, and learn. However, we have not yet succeeded in 
connecting everyone to the benefits of broadband. Despite being the 
world's leader in technological innovation and where the Internet was 
pioneered, extending fast connections to small towns and rural areas 
has proven especially daunting. Mr. Chairman, I am sure you remember 
President Clinton declaring the need to ``bridge the digital divide'' 
in Whiteville, North Carolina in 1999. Ten years later, the divide 
remains. According to the Pew Internet & American Life Project, only 38 
percent of rural American households subscribe to broadband at home. 
That's an improvement from 18 percent in 2005, but it still doesn't 
stack up to the 57 percent and 60 percent broadband uptake rate for 
cities and suburbs. Geographic challenges and sparse populations are 
real challenges, but President Obama is committed to working toward 
making the United States the world leader in broadband penetration and 
adoption.
    As we move forward in achieving President Obama's vision of 
universal access to broadband service, Recovery Act initiatives such as 
NTIA's Broadband Technology Opportunities Program (BTOP) and State 
Broadband Data and Development Grant Program (Broadband Mapping and 
Planning Program) will have significant positive impacts on the growth 
and development of businesses and communities in rural America. I am 
pleased to be here today with Jonathan Adelstein, the Administrator of 
the U.S. Department of Agriculture's Rural Utilities Service (RUS), 
which administers BTOP's sister project, the Broadband Initiatives 
Program (BIP). Our two agencies have worked together closely to 
implement the broadband provisions of the Recovery Act to ensure a 
well-coordinated and thoughtful approach that takes advantage of the 
individual expertise of each agency.
    Congress authorized NTIA to expend $4.7 billion to implement BTOP. 
We will award the bulk of the dollars in support of projects to deploy 
broadband networks in unserved and underserved areas. In addition, we 
will provide at least $250 million to projects that encourage 
sustainable adoption of broadband services, and at least $200 million 
to enhance public computer center capacity at institutions such as 
community colleges and public libraries. The Recovery Act further 
directs that up to $350 million of BTOP funding should be used for the 
development and maintenance of a national broadband inventory map.
    NTIA is implementing BTOP in line with several critical goals. 
First, the Administration is committed to reducing the broadband gap in 
America, focusing in particular on ensuring that unserved and 
underserved areas have access to modern communications services and the 
benefits those services offer for education, high-value jobs, quality 
health care, and more. Second, the Administration is committed to 
bringing the maximum broadband benefits possible to our community 
anchor institutions, such as schools, libraries, community centers, and 
medical centers. Third, the Administration is committed to improving 
broadband service for public safety users, whose ability to access 
modern communications services is of vital importance in their role as 
first responders. And fourth, the Administration is committed to 
helping stimulate broadband demand, economic growth, and job creation.
    These programs will not solve all of rural America's broadband 
challenges; however, in conjunction with BIP, and with the continued 
support of Members of this Subcommittee, NTIA will use these funds to 
take significant steps in bringing rural communities the benefits of 
broadband.
II. Recovery Act Grant Awards for Broadband Mapping and Planning.
    Our efforts to bring robust and affordable broadband to rural 
America begin with a simple question: what is the current state of 
broadband in rural America? We would like to answer this question 
definitively, and detail the extent, type, and speed of broadband 
availability throughout rural America. However, as a 2009 Federal 
Communications Commission (FCC) report on ``Bringing Broadband to Rural 
America'' concluded, ``[r]egrettably, we cannot.'' \1\ At this moment, 
no Federal agency has collected comprehensive and reliable data needed 
to answer this question.
---------------------------------------------------------------------------
    \1\ See Bringing Broadband to Rural America: Report on a Rural 
Broadband Strategy, FCC Acting Chairman Michael J. Coops (2009), 
available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-
291012A1.pdf.
---------------------------------------------------------------------------
    With the Broadband Mapping and Planning Program funded by the 
Recovery Act, NTIA is now well-positioned to obtain the most complete 
set of data on the deployment of broadband service in rural communities 
across the nation. In the past few weeks, NTIA has announced fifteen 
grant awards for broadband mapping and planning activities totaling 
nearly $28 million. States receiving awards to date are: Alabama, 
Arkansas, California, the District of Columbia, Idaho, Indiana, 
Maryland, Massachusetts, New York, North Carolina, Vermont, Washington, 
West Virginia, Wisconsin, and Wyoming. These awards fund 2 years of 
broadband mapping efforts and up to 5 years of broadband planning 
activities.
    NTIA expects to award a mapping grant to every state and territory, 
and is currently working with the remaining applicants to revise and 
refine their project proposals to ensure that each proposal meets the 
program's standards. We expect to complete all mapping awards by next 
month.
    The effort will culminate in the creation of a national broadband 
map by February 2011. The national broadband map will educate rural 
consumers and businesses about broadband availability, enable broadband 
providers and investors to make better-informed decisions regarding the 
use of their private capital, and allow Federal, state, and local 
policy-makers to make more data-driven decisions on behalf of their 
rural constituents.
III. Forthcoming BTOP Awards for Broadband Development and Expansion.
    Congress funded programs in the Recovery Act to accelerate the 
deployment of and subscription to broadband services in rural 
communities. Much like extending the reach of railroads across the 
country or bringing electricity and telephones to rural areas, NTIA's 
BTOP investments will serve as valuable building blocks for future 
private investment that will ultimately deliver significant and lasting 
improvements in rural America's broadband deployment, technological 
innovation, and economic health.
    There is much good news to report since we last testified before 
this Subcommittee. For the first funding round of BTOP, NTIA and RUS 
received almost 2,200 applications requesting nearly $28 billion in 
funding for proposed broadband projects reaching all 50 U.S. States, 
five territories, and the District of Columbia. When you include the 
approximately $10.5 billion in matching funds committed by the 
applicants, these applications represent more than $38 billion in 
proposed broadband projects. The fact that applicants requested nearly 
seven times the total amount of funding available in this initial round 
of broadband funding underscores the interest for expanded access to 
broadband service throughout the country.
    Applications came in from a diverse range of parties, including 
state, tribal, and local governments; nonprofits; industry; small 
businesses; anchor institutions, such as libraries, universities, 
community colleges, and hospitals; public safety organizations; and 
other entities in rural, suburban, and urban areas.
    As a result of NTIA and RUS coordination, applicants could apply 
for funding simultaneously under both RUS's BIP and under NTIA's BTOP, 
although pursuant to the Recovery Act, projects will only be funded in 
a single agency. Parties submitted more than 830 applications jointly, 
requesting nearly $12.8 billion in infrastructure grants and loans.
    In addition, NTIA and RUS worked together to make publicly 
available--at www.broadbandusa.gov--a searchable database containing 
information on all applications received, as well as maps of the 
geographic service areas proposed by entities applying for 
infrastructure grants. We provided each state, territory, and tribal 
government with an opportunity to prioritize and comment on 
applications relevant to its jurisdiction, and we've provided existing 
service providers with the opportunity to comment on their existing 
service offerings.
    We are now fully engaged in a thorough review of the nearly 2,200 
applications to determine which best meet the goals of the Recovery 
Act. Each eligible BTOP application is evaluated by at least three 
expert reviewers against established criteria, including the proposed 
project's purpose, benefits, viability, budget, and sustainability. For 
this phase, NTIA recruited and selected over 1,000 highly-qualified 
BTOP application reviewers. Those applications considered the most 
highly qualified then advance for further consideration by NTIA.
    Applicants in the second phase of review submit supplementary 
information to NTIA as necessary to substantiate representations made 
in their applications. NTIA staff reviews and analyzes this 
supplemental information. I will make the final selections of BTOP 
awards, consistent with the statutory directives established by 
Congress in the Recovery Act.
    I expect that BTOP grant announcements for the $1.6 billion 
available in the first funding round will begin by mid-December and 
will continue into early 2010. This is approximately 1 month later than 
we originally communicated to the Subcommittee in July. However, we 
felt it necessary to expand the review period to provide full and fair 
reviews to the large number of complex applications we received.
IV. Next Funding Round.
    Even in the middle of all this activity to review the current 
applications, we are constantly thinking about ways to improve the 
program. On November 10, 2009, NTIA and RUS announced that there will 
be one more BTOP and BIP funding round, which will begin early in 2010. 
Although NTIA and RUS previously indicated that we planned to hold up 
to three rounds of funding, our experience in the first round led us to 
opt for just one more round of funding. This more consolidated approach 
should yield multiple benefits for all stakeholders.
    First and foremost, it will enable us to complete the entire grant-
making process earlier, expediting the stimulative benefits for the 
economy and job creation that the Recovery Act promises. It also 
affords additional time--both to stakeholders, to provide us with well-
informed views on how the first round worked for applicants, and to 
NTIA and RUS, to learn from our experience and adjust those aspects of 
the process that need to be improved. Also, parties who wish to 
collaborate on an application, such as through consortia or public-
private partnerships, will have additional time to work out the details 
of those arrangements. This policy will produce better results for the 
American public, in terms of both the quality of the broadband projects 
we support and the speed with which the program will contribute to our 
economic recovery.
    On November 10, 2009, NTIA and RUS also announced the release of a 
second joint Request for Information (RFI) requesting public comment on 
issues relating to the implementation of BTOP and BIP for the next 
funding round. Stakeholders will have the opportunity to provide us 
with feedback on how the first round worked for applicants, what policy 
clarifications or changes should be made, and how the agencies can make 
improvements to the process.
    Of particular interest to potential rural applicants, we are 
seeking comment on whether more targeted regional economic development 
or ``comprehensive community'' approaches focusing on middle mile 
infrastructure projects could maximize broadband benefits to unserved 
and underserved areas. The deadline for comments is November 30, 2009, 
and we look forward to using those comments to improve the program.
V. Oversight.
    Looking forward, I must underscore the importance of our oversight 
objectives for the program. NTIA is committed to ensuring that 
taxpayers' money is spent wisely and efficiently. Since the inception 
of BTOP, we have been working with the Department of Commerce's 
Inspector General to design this program in a manner that minimizes the 
risk of waste, fraud, and abuse. As we move forward and project 
construction begins, NTIA will enhance its auditing and monitoring 
responsibilities, including site visits to grantees.
    The Recovery Act does not provide authority or funding for 
administration and oversight of BTOP-funded projects beyond the end of 
Fiscal Year 2010. NTIA intends to work with Congress in the coming 
months to ensure sufficient authority and funding to administer and 
monitor the execution of BTOP grant projects and carry the program to 
conclusion.
VI. Conclusion.
    NTIA is working diligently to make certain that the broadband 
projects funded by BTOP and the broadband mapping information developed 
under the Broadband Mapping and Planning Program serve as valuable 
inputs to our long-term broadband strategy. At its core, the broadband 
initiatives in the Recovery Act offer a tremendous opportunity to 
stimulate job creation and economic growth both in the near term and 
for the future.
    I assure you these Recovery Act funds will be money well spent and 
that we will do our best to target Recovery Act funds to areas of the 
country that need them the most. In doing so, we will make broadband 
more widely available, especially to rural anchor institutions, such as 
hospitals, schools, and libraries. We will continue to ensure that 
implementation of the Recovery Act broadband initiatives is a 
collaborative and coordinated effort with RUS and others in the 
Administration. We are also committed to making this process as 
transparent and as efficient as possible.
    Thank you again for the opportunity to testify this morning. I will 
be happy to answer your questions.

    The Chairman. Thank you, gentlemen. Thank you for your 
promptness and efficiency.
    The gentlewoman from Wyoming, Mrs. Lummis, although not a 
Member of the Subcommittee, has joined us, and we are pleased 
to have her. I have consulted with the Ranking Member, and we 
welcome you to join us at the appropriate time in questioning 
of the witnesses.
    With regard to that I am just going to ask one question for 
now, so that, hopefully, before these votes occur everybody can 
at least get in one question. To both of you or either of you, 
whichever may prefer to answer, you both may have a different 
take on this. In your statements you have recited 2,200 
applications requesting nearly $28 billion in funding as good 
news from the first round. However, in looking at some of the 
public information provided, it is clear that many of the 
applications filed under remote propose to serve areas that are 
clearly not meeting the definition of remote, and that many 
applications are proposing to serve areas that appear to have 
adequate service.
    Have you been able to determine what percentage of those 
2,200 applications that were actually viable and qualified 
under the definitions for which they applied? Can you first 
answer that question? Have you been able to determine the 
percentage?
    Mr. Adelstein. We are currently evaluating just that 
question. We are not complete yet in our evaluation, because we 
are still going through the applications. We have a number of 
them that have, indeed, displayed that there was a certain 
misunderstanding of the definition of remote. That is one of 
the reasons we think we really need to revisit the definition 
of remote. I certainly have heard loud and clear from this 
Committee that there have been major concerns about that, and 
we heard loud and clear also from applicants that there was 
some confusion out there about how it worked. I think we need 
to be much clearer in the second round. We want to scrub from 
top to bottom that idea of remote, and we are now evaluating 
how many of those applications were not, in fact, for remote 
areas.
    As to the second question that you asked about, how many of 
those areas that said they were remote, in fact, have service? 
We are finding that some areas, even the ones that are remote, 
do have service in them, and we are going through our due 
diligence. So we don't yet have the final numbers on that as we 
are still going through our evaluation.
    The Chairman. When do you think you will have the final 
numbers?
    Mr. Adelstein. We should have them pretty soon, as soon as 
we wrap up the review process for the last-mile remotes. I 
would hope we would have them when we complete that process. We 
are hoping to, at least, begin awarding grants next month and 
we should have that information around next month.
    The Chairman. All right. If you would please provide that 
to us next month, especially before the Christmas holidays.
    Mr. Adelstein. Yes, sir.
    Mr. Strickling. And could I indicate that our applications 
at the Department of Commerce, there is really a two-step 
review for us. First, we make sure that the applicant has 
appropriately defined a service area that qualifies as either 
unserved or underserved. While I don't have the figures on 
that, I would say that the vast, vast majority of our 
applicants have adequately made the prima facie showing that 
their area they wish to serve is unserved or underserved.
    But then we have also collected information from existing 
service providers and states in terms of what the availability 
is of service in these areas. We will only evaluate that 
information as applications go into due diligence, because we 
make the final determination as to whether or not an area is 
unserved or underserved that is going to be funded with 
government dollars. We won't do that for the entire application 
pool. We will only do that for those projects that have scored 
high enough to move into due diligence, and they are projects 
we are considering funding.
    The Chairman. All right. Thank you. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    Back in July this Committee expressed some concerns about 
the ability of both agencies to deal with what was expected to 
be a pretty significant response to the NOFA. Mr. Adelstein, by 
the way, thank you very much for taking the time to come see me 
yesterday ahead of this hearing. I appreciate that.
    Your agency decided to hire folks. Mr. Strickling, your 
agency decided to go with volunteers. Can you talk to us about 
how that is working for both of you? Mr. Strickling in 
particular, how you screened more than 1,000 applicants at the 
same time you are doing these other applications. Given the 
fact that you are going to roll out these grants during the 
same time-frame that you are seeking additional new 
applications, and change the rules as the result of the input 
you have gotten, for the folks who have made an application in 
the first round, will they be able to just roll their 
applications into the second round, how is that going to work?
    Mr. Adelstein. In terms of our staff capacity, as I 
mentioned, we have been making loans since 1935. The default 
rate in telecom is less than one percent. So we have a lot of 
experience. We have 114 FTEs in telecom, including 26 general 
field representatives out in the states across the country. We 
are hiring 47 additional employees, including ten more GFRs and 
ten field accountants.
    Mr. Conaway. And those have all been hired?
    Mr. Adelstein. Not yet. We are in the process of doing 
that. We have hired about half of them.
    Mr. Conaway. So the review process is almost done?
    Mr. Adelstein. Well, no. We are still in the middle of the 
review process. The second round is going to be much bigger 
than the first one, so we need to get them in place soon. We 
are relying on a lot of our staff from across the country to 
help us as well, and we have a contractor that we hired to 
assist us on top of that. So we feel that we have sufficient 
resources now to review the applications that we have.
    In terms of the other question about giving applicants a 
chance to know--we are not going to close the next round of 
funding until applicants that were denied in the first round 
have a sufficient opportunity to reapply in the second round. I 
think it is crucial that they be given a significant period of 
time in order to do that. If we need to keep the second round 
open, we will do that so that people have the opportunity to 
reapply. I don't think that it will be possible for applicants 
simply to roll over into the second round, given that we may 
make changes in the application process in the second round.
    It may be possible to take their applications. We are going 
to give all applicants that were denied some explanation as to 
what the issues were so they can take that into account in 
filing a new application for the second round.
    Mr. Conaway. Mr. Strickling.
    Mr. Strickling. On the second point, the one Jonathan just 
referred to, I am confident that by the time we open up round 
two, and open up the application window for round two, everyone 
in round one will have a good understanding of where their 
application ended up. So I don't think that there will be a 
problem of people not knowing whether or not they should apply 
in round two. They will know.
    Again, as Jonathan said, it may well be that people will 
need to reapply into round two. We just won't roll the 
applications over. It may well be that depending on the changes 
that are made in the program, if any significant ones are made, 
that they will have to tweak their application. What I would 
hope most people would do, though, is that they look at what we 
do fund in round one to see what goes into a successful 
application, learn from that, and on their own upgrade their 
application to make it more attractive in round two.
    With respect to our staffing, volunteers were only a piece 
of our overall staffing approach to this program. We have added 
approximately 40 new staff at NTIA to work on this program. 
That staff has been augmented by about 100 folks that have come 
in through Booz Allen and Hamilton, who we brought in as a 
contractor to support us.
    The issue of the independent reviewers was that all these 
applications had to be reviewed under the terms of our grant 
rules by three independent reviewers, and we did seek 
volunteers, independent experts to come in and do that. Over 
1,300 people responded to that call; 200 or 300 were rejected 
for conflicts of interest or lack of qualifications. We have 
used roughly 1,000 of these folks or will be using roughly 
1,000 of these folks to review these applications in the first 
round. The expertise of these people is quite, quite 
remarkable. We have a former chair of a Public Utility 
Commission, we have former executives from telecommunications 
companies who have built these kinds of projects. So, people 
responded to the call to serve their country and have stepped 
up and have provided a very valuable service to us.
    The Chairman. Thank you very much.
    Mr. Bright.
    Mr. Bright. Yes, sir. Thank you, Mr. Chairman and Ranking 
Member for calling this hearing, and let me thank the two guys 
for your testimony today. We appreciate you being here.
    And for the benefit of time because we do have votes coming 
up, I have one question, and I will yield back, and really 
either one of you or both of you can answer if you can. We 
recognize that only $4 billion is not enough to ensure that 
everyone in this country has access to broadband. It is key for 
communications, education, medicine in rural areas such as mine 
in southeast Alabama. But if your agencies were to award the 
full grants that we have access to today, how much closer will 
we be to deploying broadband Internet to all Americans across 
our country? Do either one of you have an intelligent or an 
expert answer to that question?
    Mr. Strickling. I am the visiting team here, but I could go 
first.
    Mr. Bright. Okay.
    Mr. Strickling. No. I don't think we truly do. We are 
awarding grants according to the applications we receive, and 
so it is impossible to predict today as to how far we are going 
to be able to move the needle overall. It will depend, in large 
part, on who applies and where we can fund the applications. 
But I am confident we are going to have a substantial impact on 
improving service in our unserved and underserved communities.
    Mr. Bright. So is it correct to assume that this is really 
just a drop in the bucket compared to what we really need 
throughout our country to make sure every American has access 
to broadband?
    Mr. Strickling. The FCC has estimated that the need is 
anywhere from $20 to $350 billion, depending on how fast a 
speed of service you want to guarantee for everyone. So, yes, I 
think it is fair to say that $4.7 billion here is not going to 
get us all the way there.
    Mr. Bright. Sure. Okay. Mr. Chairman, I will yield back my 
time for the benefit of another Member.
    The Chairman. Thank you. We will have three votes coming 
up. Mr. Roe, do you have a short question?
    Mr. Roe. Very short.
    The Chairman. Okay. We will go ahead and work you in, and 
after his question we will recess. If further Members are going 
to have questions, we will come back. If you do, we will come 
back briefly to finish up. We only have three votes, so 
hopefully we will not be gone that long. All right. We will 
conclude with Mr. Roe's question.
    Mr. Roe. Thank you, Mr. Chairman. Very quickly: One, I may 
have just gotten here too late, but I live in a rural area in 
Tennessee, what is your definition of remote, and second, do 
the applicants who have been denied, do they know to reapply? 
Have they been informed in writing so that they won't call us 
later and say, ``Well, I didn't know you had to reapply.''
    And then one very quick question. I get asked his every 
time I go home. How much of the money are we going to spend on 
signs to say that this project has been funded by the stimulus 
package? I get worn out by that every time I go home. I hope 
there are no signs. I hope you put them on the Internet. Thank 
you. I appreciate it.
    Mr. Adelstein. Well, in terms of the definition of remote, 
we are going to work on that. As far as your question about 
will applicants be informed, we are going to let every single 
applicant know what their status is before we finalize the 
second round of funding. So we will clearly indicate that we 
want to encourage them to reapply. In many cases we are going 
to give them some idea about what happened in the first round 
so they will be able to target their next application more 
effectively to meet our standards. We want to make sure that we 
give everybody an opportunity to do that.
    Mr. Roe. And the signs?
    Mr. Adelstein. It is a good idea to put them on the 
Internet. I think there might be some requirements in the Act 
about that. We want to minimize, of course, the expense that 
would be used for that purpose, and I don't anticipate there 
being extensive signage.
    Mr. Roe. Thank you, Mr. Chairman.
    The Chairman. Thank you. We will recess and reconvene 
immediately after votes.
    [Recess.]
    The Chairman. We will now reconvene this Subcommittee 
hearing on Rural Development, Biotechnology, Specialty Crops, 
and Foreign Agriculture. Thank you for your patience.
    While we are waiting on the other Members to come in from 
the votes, I am going to go ahead and yield to the Ranking 
Member for his second round of questioning.
    Mr. Conaway.
    Mr. Conaway. Thanks, Mike. I appreciate that.
    Forgive me, Mr. Adelstein, for reading this, but I need to 
get it correct. Mr. Adelstein, do you believe you violated the 
technology neutral statute by including the non-discrimination 
provisions and the provisions of the NOFA in considering the 
applicants who applied?
    And to follow up, why do the non-discrimination provisions 
go beyond the regulations proposed by the FCC in October by 
applying these rules? Existing broadband providers or providers 
that are not connected to a large network are not applying for 
the grant and loan funding, in part, because these requirements 
will place costly restrictions on the network and will impose 
neutrality policies to go above and beyond what has been 
regulated by the FCC. And I, for the record, recognize that you 
come from the FCC and know a little bit about this subject, so 
what are your thoughts.
    Mr. Adelstein. As you noted, we are not specifically 
required by the legislation to include non-discrimination 
provisions, but we do believe that we have authority to do so 
under the statute. We have found----
    Mr. Conaway. The fact that we said it once means you say 
that you have the authority to do it?
    Mr. Adelstein. Yes. I mean, NTIA is required to do it, but 
we believe we have the authority. We wanted these programs, 
basically, to operate in concert and to be as consistent as 
possible. So working in concert with the NTIA, and with the 
Administration, we came up with the exact same definition of 
non-discriminatory networks with the goal that public funds 
should support interconnected and non-discriminatory networks. 
That was an important policy goal.
    Mr. Conaway. And so you are setting yourself up now as a 
mini FCC to be the arbitrator of that, or shouldn't we defer in 
all these matters, arguments from both sides, to the FCC; 
rather than setting up your new system that is now a second 
layer that makes it even more difficult to comply with.
    Mr. Adelstein. This system was actually developed in 
consultation with the FCC with their expert input. They didn't 
have a formal role in making the decision. We did as the 
Administration, but we did consult with the FCC in terms of 
their expertise on that, and of course, also with the NTIA, 
which is an expert agency of the Federal Government on 
telecommunications.
    Mr. Conaway. Yes, and your explanation of why 60 percent of 
the applicants are wireless rather than cable or non-wireless.
    Mr. Adelstein. Well, that 60 percent is not all wireless. 
It means that 60 percent of the applications had at least a 
wireless component in them. Some of them were all wireless, but 
we believe that is because wireless technology is such an 
effective way of reaching hard-to-reach areas it can really 
shorten distance, and it can be much cheaper than laying fiber. 
Some of the very high bandwidth, microwave, for example, is not 
necessarily wireless to the last mile. Some of it is Middle-
Mile wireless that involves backhaul. So there are a variety of 
different uses of wireless in this. We did get a large number 
of applications, and we had overwhelming demand despite the 
interconnection and non-discrimination requirements for the 
program. So there were a number of wireline companies that did 
apply.
    Mr. Conaway. Okay. Thank you. The fact that you got 2,200 
applications is eye opening, but until you tell me that 2,229 
of them met all of criteria and are all viable, I am going to 
be hard-pressed to argue that that is a great statistic to use, 
and you told me earlier that you are not prepared to tell us 
that yet.
    This is not staff driven. The tyranny of an artificial 
deadline is driving much of this pace. Mr. Strickling's team 
has been working with states to build a broadband map, but it 
won't be completed until February of 2010. As a business 
person, as a protector of the taxpayer dollars, and again, I 
know it is the stimulus hard date, but does it make sense that 
we would spend all the rest of this money before we have that 
map? And I can understand maybe the first round picking up the 
low-hanging fruit, but in addition we have allocated $350 
million for the map. You have allocated $28 million so far in 
15 states, multiply that by three or 3\1/2\ to get the rest of 
the country.
    You have also included 5 years of broadband planning, which 
may be beyond the scope of what that map was supposed to be, 
but are you going to spend all $350 million on this? And why 
wouldn't we wait until we get the map to spend the rest of the 
money, except for the artificial deadline?
    Mr. Strickling. Yes, sir. You have a number of questions 
there. Let me try to address them in order, but if I miss one, 
please come back and follow up.
    In an ideal world, yes, one would probably like to have a 
map available to us from which to be making these grant 
decisions, but that is not the world that was handed to us last 
February. And it is not really our issue. Our issue is to fund 
projects in unserved and underserved areas. The presence of a 
map would assist in that effort, but it is by no means the only 
way we can make that judgment.
    And so as I indicated earlier, we have collected 
information from the applicants themselves in terms of the 
availability of broadband in the area they propose to serve. We 
have collected information from other service providers in 
those areas as to the availability of whatever they might be 
offering. We have asked the states to provide whatever 
information they can bring to bear on this, and a number of 
states have previously done maps of varying quality that 
provide----
    Mr. Conaway. So all of that information is available now to 
your decision makers?
    Mr. Strickling. Yes, sir, and our obligation is to award a 
grant only to an area that meets the standard of unserved or 
underserved. So I am confident we can do that even without the 
national broadband map.
    Mr. Conaway. And one last follow up then. Let us assume 
that you don't have enough qualified grants. Would you 
recommend that the money not get spent by September 30 if it, 
in effect, would be wasted?
    Mr. Strickling. We are not going to waste any money, 
Congressman, so----
    Mr. Conaway. Be very careful. This is $9 billion, so you 
need to be very careful making those statements.
    Mr. Strickling. Yes, sir, but avoiding waste, fraud, and 
abuse is right at the top of our list, and we would not fund a 
project that we do not think is a quality project. We will not 
fund a project that we don't think is sustainable and will not 
be continuing to serve the community 5 years from now. And so 
those are all part of our factors.
    Based on what I have seen in the pool so far, I think we 
could spend well more than $7 billion that Congress 
appropriated and fund quality projects, but if the hypothetical 
you offer were to be the case, we would certainly step back.
    The Chairman. Thank you very much. Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman. Thank you, gentlemen, 
for being with us today and staying with us through the votes.
    I have to admit that all the talk about the first round, 
second round, changing definitions of remote, underserved, it 
would seem to me to make it hard to know for some of the people 
that are wanting to participate in this just exactly where they 
stand, and you said that, that it is a work in progress.
    As I look at a map of North Carolina, which is also my home 
state, we have two remote areas, and it is the very eastern 
part of the state, Outer Banks and very western part of the 
state up in the mountains. But we have a lot of areas that do 
not have access.
    So my question is this, and for both of you, is your modus 
operandi in determining how we go about this, is to provide 
access to as large of a percentage of those that don't have 
service population wise or geography wise?
    Mr. Adelstein. We are really looking at people. I mean, how 
many people can we get this service to? The remote definition, 
which we are reviewing from top to bottom and thinking about 
what we could do, was one way of identifying the most hard-to-
serve areas. We want to target the funding towards the areas 
that are hardest to serve. I think you know that in the past--
--
    Mr. Kissell. Let me interrupt just one second. I know my 
time is limited, but remote, by definition, sometimes it means 
there are no people there, and the area where we have people 
that are underserved, who is going to get the money? Is it 
going to be where we have the people that have not fit the 
definition of remote because they are closer than whatever 
miles to a population center, but they don't have service now, 
or are we going to look at geography, which is beyond that, 
where there are not as many people?
    So my question is, is it people and percentage of 
population, or are we trying to cover percentage of the map in 
geography?
    Mr. Adelstein. Right now we have that very question out for 
comment in the RFI process. We were trying to determine exactly 
how we can reach the people that need broadband that don't have 
broadband because the marketplace left them behind.
    Now, remoteness is one factor, and certainly there are 
other factors such as density or income that we have asked for 
comment on. We haven't determined, yet, exactly how to do it, 
but our goal is, as you say, to target those people who really 
need the Federal assistance, and whether we have it right is 
certainly----
    Mr. Kissell. Well, you have to understand that it is not 
the most consoling idea to me that we are spending billions of 
dollars and still asking these questions. To have consideration 
towards the people that are asking me and my staff how can they 
go about doing this, getting the grant or whatever, but yet we 
are still so fluid that we don't have it. To say we are going 
to cover the largest percentage of people that don't have 
service, and recognize that may not be as much of the map as we 
would like to cover. But the percentage of people, that is 
where, it seems, we are heading.
    And with all the questions that are still out there, is 
that the driving force behind what we are trying to do, to 
cover the largest number of people versus the largest 
percentage of the map?
    Mr. Adelstein. The largest number of people served is one 
of the factors in our current NOFA. We do award extra points 
for those applications that have more individuals that are 
unserved that are covered. So we already have that taken into 
account.
    We also look at the remoteness issue, and next time around 
we are going to figure out how to get the mix right so that we 
can maximize the effectiveness of the dollars. In the case of 
the remote area definition, if anything, the definition 
protected us from spending money that we wouldn't otherwise 
spend. So we are not wasting any money. We have \2/3\ of the 
funding left in the next round. The idea of doing this in 
multiple rounds was to learn about exactly these kinds of 
issues to better target the funds in the second round. If 
anything, in the first round the remoteness definition was very 
tight. So, we have funds left to target in the second round, 
appropriately, to make sure that we can maximize the bang for 
the taxpayer buck.
    Mr. Kissell. Well, it would seem that we still have a lot 
of the basic questions, Mr. Chairman, that we were looking at 
last summer unanswered, yet, we are giving out the money--I 
know there is a lot of need out there, but it just seems like 
we really have to zero in on where this needs to go to do the 
most good to bring the people in for all the reasons we talked 
about.
    I yield back, Mr. Chairman.
    The Chairman. Thank you, and thank you, Mr. Kissell.
    Dr. Minnick.
    Mr. Minnick. I am from Idaho, and we are less concerned 
about Congressman Kissell's problems in North Carolina, but we 
have some problems of our own. We have the problem that you 
have addressed, and I appreciate your willingness to take 
another look at the remote definition. We have lots of places 
that are between 5 and 50 miles of metropolitan areas that have 
big mountains in-between and really no communications. So that 
definition is too restrictive for our geography for the reasons 
others have said.
    We also have another problem--I don't know if it is similar 
to what my colleagues have been addressing--but the process of 
prioritizing, to the extent there is local input, was directed 
by Congress to go through the governor or at least a portion of 
it. And in our case, perhaps inadvertently or perhaps because 
it was premature, we have many applications that were very 
worthwhile and worthy, at least as Congressman Simpson and I 
looked at it, that did not get prioritized as highly as we 
might have hoped the governor's staff would have done.
    Will there be an opportunity in the next round for 
Congressman Simpson and I, and others that participated to give 
you some direct feedback with respect to why we think a 
particular proposal is meritorious and whether or not it was 
prioritized by our governor?
    Mr. Adelstein. We would certainly welcome your input. RUS 
doesn't have a formal role for the states, so I will leave that 
to Assistant Secretary Strickling, but as far as your input, we 
would really welcome any thoughts you have on the merits of the 
application.
    Mr. Minnick. Well, thank you, and we appreciate your 
wanting to do this in rounds. We appreciate, hopefully, the 
opportunity to give feedback to the applicants who failed to 
receive a grant so that they might be able to get your advice 
in addition to just looking at other successful proposals as to 
how they could strengthen their proposal. And then if you would 
as you just stated, give those of us in the Congressional 
delegation an opportunity to at least express our opinion, we 
would be appreciative of that process.
    So thank you very much.
    Mr. Strickling. Congressman, could I just fill you in on 
how the process does work at Commerce on the state 
consultation, to clear up some confusion?
    Mr. Minnick. Certainly.
    Mr. Strickling. We did solicit each state to provide 
whatever input they wished to concerning the priority areas in 
their state for funding. If they wanted to comment on specific 
applications, they were permitted to do so, and many states did 
do that. That information is another factor in our process. If 
a project was very low-scored by our reviewers, the fact that a 
state liked it will not rescue that project, and just the same 
if it is a good project as our reviewers have determined, the 
fact that a state didn't recommend it is not the death knell 
for that project either. It is just another factor we take into 
account.
    And then I have received dozens of letters from Members of 
Congress in support of individual projects. So, again, that is 
available at the Department of Commerce and will continue to be 
available.
    Mr. Minnick. You can expect some more, and I might ask 
would it be helpful if in these subsequent rounds the state 
were to give you some additional comments with respect to how 
they view this next tier of applicants? Are you taking that 
information from them as well?
    Mr. Strickling. There is no question about that, we will. 
It is required by the statute for the program we are running at 
the Commerce Department.
    Mr. Minnick. Well, great. I appreciate that information, 
and I appreciate your receptivity, and you will be hearing from 
Idaho.
    I yield back.
    The Chairman. Thank you, sir.
    Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I do have several 
questions to add for the record, but I have one final one that 
is a bit time-sensitive, and that is that as we approach this 
final notice of funding availability to spend the remaining \2/
3\ of the money, what changes to the rulemaking processes are 
you contemplating implementing? Would you respond to the 
concerns of this Committee and allow for a comment period 
following the rules you published in January, and allow enough 
time to make some critical adjustments?
    The idea being that if we are working off of a flawed rule 
now and we don't know what the new rule is until the new NOFA 
is done, and we are off and running again with a bad rule. As 
we heard the conversation about remote areas last summer, are 
we going to repeat that same process, or will there be some 
amount of time to digest and comment on what you are doing?
    I just need a commitment from you guys on that this 
morning, and we will submit the rest of the questions for the 
record.
    Mr. Adelstein. We certainly welcome your input. It is most 
helpful to get it sooner rather than later, obviously, because 
given the time crunch as you indicated earlier, we can't afford 
to delay the process.
    Mr. Conaway. I guess the problem, though, Mr. Adelstein, is 
if you publish the NOFA and the rule and all this stuff on the 
same day, then our input would be much like the input we were 
able to give in July, which was a very similar process.
    Will there be some limited amount of time between your rule 
publishing, and all the changes you are making to what you 
decided to do in July and the NOFA, to allow a comment period 
and allow for some response?
    Mr. Adelstein. It is not currently contemplated to do that. 
Right now we do have the RFI out for comment, and we would 
welcome comments from Congress, obviously subsequent to the 
closing of the RFI. We always keep that open for Congress 
anytime that you want to make comments. Our goal now is to 
publish a NOFA that would begin the process for applicants to 
apply, because if we have another comment period on top of 
that, it would delay the actual opening of the window for 
applicants.
    Mr. Conaway. So the changes you are making to the 
definition of remote will we know those in advance before you 
publish the NOFA? Or will those be published concurrent with 
the NOFA?
    Mr. Adelstein. The NOFA would be the document in which we 
would publish those changes but we----
    Mr. Conaway. Don't you think there would be some advantage 
to publishing those changes first?
    Mr. Adelstein. If we had time, it would be an advantage.
    Mr. Conaway. Okay. So what I am hearing, Jonathan, is that 
we are going to keep the same process as we did in July. Yes or 
no?
    Mr. Adelstein. Well, we would be happy to talk to you about 
it. I mean, in other words, as we are getting closer, we could 
come to the Committee informally or formally and discuss what 
we are contemplating if that would be helpful.
    Mr. Conaway. Well, it is not just the Committee. I am not 
going to file an application, but the folks out there in the 
hinterlands who will be in the process of not knowing at that 
point whether their first application made the cut or not; or 
they may know it didn't make the cut, and they are in the 
second round, but they don't know if that is going to go 
forward. It seems to me you are putting the cart before the 
horse, and this is a classic ready, fire, aim approach that we 
saw happen in July, and you don't have to answer. I just 
encourage you that that doesn't make sense to spend, as Mr. 
Strickling said, the money in the best interest of the 
taxpayer.
    I yield back.
    The Chairman. Thank you, Mr. Conaway.
    Gentlemen, one last question during this hearing and any 
other questions as Mr. Conaway indicated can be submitted in 
writing.
    How have the agencies processed the tremendous amount of 
information provided during the public comment period by 
incumbent service providers? And in particular, what is the 
process once a competing provider asserts that there are other 
providers, or rather what is the process once a competing 
provider asserts the area is adequately served?
    Do the agencies contact the original applicant or do their 
own research, or do you determine who is correct or a 
combination? How do you resolve that?
    Mr. Adelstein. I can go first. Okay. I will go ahead. We 
make the final determination, obviously, based on everything in 
the record. We look at all of the information that was filed by 
incumbents, for example, that they have a concern in the area 
that an applicant said wasn't served, that was served. Then we 
have at that point competing information in the record. One 
person says it is served, one person says it is not. We have to 
make that determination. We look at as many sources as we 
possibly can. Some states have broadband maps. We have GFRs or 
general field representatives, that we actually have going out 
to service areas to make the determination themselves, even if 
there wasn't a challenge that was made by the applicant 
themselves.
    We have over 1,181 applications with comments on them now. 
Out of all the applications we had 11,000 responses on 80 
percent of the applications, and we plan to assess all of those 
service areas in the step two applications in particular. We 
are focusing on only those ones that we are contemplating 
funding. So, after we finalize the scores and determine what we 
send in for what we call our step two process, where we get 
additional information from applicants, we are then focusing on 
these. That is where we are sending our staff out in the field, 
that is where we are analyzing additional data that we have in 
addition to our own due diligence.
    We have 100 employees that are analyzing incumbent 
responses. We take very seriously making sure that we are not 
providing service where it is not needed, where there is 
already service provided. We are digging very deeply into this 
on an applicant-by-applicant basis, particularly those 
applications that are ones that are close to being funded.
    The Chairman. Thank you.
    Mr. Strickling.
    Mr. Strickling. Similar to what Jonathan described, we are 
only evaluating this information on projects that are in due 
diligence, so we won't do it for the entire application pool. 
But if the project scores high enough and is carried forward 
for additional detailed study, then we will evaluate the 
information the applicant provided, the information that may 
have been provided by any other service provider in the area, 
as well as the other sources of information from states and 
otherwise, to evaluate whether the service area proposed by the 
applicant meets the unserved or underserved definition.
    I would go beyond that to say that even when a project 
satisfies the tests that we set forward in the definitions, we 
are cognizant of trying to minimize the amount of overlap that 
there might be between the project and any existing 
infrastructure. As Jonathan said, it is not going to be a 
useful expenditure of Federal dollars to fund a project that 
simply duplicates facilities that are already in place without 
a very, very good reason why we might do that. So even a 
project that might meet the definition of unserved or 
underserved still might not make it through our review process 
because of the overlap question.
    The Chairman. All right. Thank you very much. Thank you for 
your attendance today and attention to these matters. As you 
can see, they are of great concern, and there have been some 
questions asked that you, I know, will need to get back with us 
on. Please do so, except for the one that I said to get back to 
us before the Christmas holidays, which I understood, would 
take longer. I would ask you otherwise for all other questions 
to submit, pursuant to the rules of the Committee, and that the 
record of today's hearing will remain open for 10 calendar days 
to receive additional material and supplementary written 
responses from the witnesses to any question posed by a Member.
    If you would do that, we would greatly appreciate it. May 
God bless all of you during this Thanksgiving season. I hope 
you will travel safely and enjoy this special time with your 
families. We wish you a happy Thanksgiving.
    I will now conclude this hearing of the Subcommittee on 
Rural Development, Biotechnology, Specialty Crops, and Foreign 
Agriculture. We are adjourned.
    [Whereupon, at 12:40 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
      
 Submitted Statement of Delbert Wilson, General Manager, Hill Country 
    Telephone Cooperative; on Behalf of National Telecommunications
                        Cooperative Association
    Chairman McIntyre, Ranking Member Conaway, Members of the 
Subcommittee, I would like to thank you for holding a hearing to review 
the American Recovery and Reinvestment Act's (Recovery Act) broadband 
programs. I offer the following statement 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 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 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, 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 often did not provide telephone 
service, much as they often today do not provide broadband service, to 
the most sparsely populated rural areas. Therefore, in part due to 
support from RUS, the unfulfilled need for telephone service was been 
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 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 telephone services.
    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 
Recovery Act's broadband initiatives are additional tools that will 
help rural communications service providers continue the effort to 
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 Recovery Act, could 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 would have an immediately stimulating 
effect during the construction stage and thereafter during the consumer 
usage stage.
    While we had hoped to apply for a RUS Broadband Initiatives Program 
grant to serve the 543 households in our outlying areas, we were 
disappointed to discover that because the proposed project was within 
50 miles of a community with a population of slightly more than 20,000, 
the project did not meet the program's definition of a remote area and 
could not be considered for a grant. While I respect RUS's efforts to 
ensure funding is not directed toward projects located near urban 
areas, it is difficult to argue that the 543 households we wish to 
serve are not in a remote area. I know many Members of the House of 
Representatives have raised similar concerns, and I hope RUS will make 
changes to this definition in subsequent rounds. Since it is not 
financially feasible to provide service to these households, without a 
stimulus grant or some other similar form of outside support, these 
households, and many households like them throughout the country, will 
continue to be left without broadband service.
    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 Recovery Act's broadband programs.
    As a recent USDA study report found, rural communities with greater 
broadband Internet access had greater economic growth than areas with 
less access. The study compared counties that had broadband access with 
similar counties that had little or no broadband access. It's not 
surprising that the study showed that employment growth was higher and 
non-farm private earnings greater in counties with a longer history of 
broadband availability.
    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 the process continues to move forward for the BIP and BTOP, we 
would like to highlight several areas we believe could be improved upon 
for subsequent rounds:

    (1) As I mentioned earlier in my testimony, BIP's definition of 
        remote should be reconsidered. In addition, the BIP evaluation 
        criteria rewards one point to a project for every 10,000 
        unserved households that receive broadband service. Considering 
        that many small, rural communication service providers have 
        only a few thousand access lines in their service area, it is 
        nearly impossible to collect points based on this scoring 
        criteria. For these smaller companies, perhaps a system that 
        rewards points based on a project's expansion in percent of 
        households served would be more equitable to providers of all 
        sizes.

    (2) As everyone knows, as a result of technical problems during the 
        first round, many applicants had difficulty submitting 
        applications. This had a significant impact on small broadband 
        providers with limited staff and other resources. We understand 
        the server capacity and browser incompatibility issues are 
        being addressed. Therefore, we remain cautiously optimistic 
        that applicants will not be confronted with delays caused by 
        these technical problems in subsequent rounds.

    (3) It's important to ensure that states and municipalities do not 
        receive stimulus funding to compete with private, incumbent 
        providers for the same services in the same location. We 
        believe the Recovery Act broadband programs should first focus 
        their resources on unserved areas, and are particularly 
        concerned that states and municipalities have submitted 
        proposals to overbuild areas which can, at best, support only 
        one broadband provider.

    (4) We are concerned about the apparent conflict of interest posed 
        by the ability of states to both apply for BTOP funds and to 
        make recommendations concerning the allocation of funds for 
        qualifying projects in each state. States must not be able to 
        prioritize their own applications above other applicants' 
        proposals without sound justification.

    (5) We hope that the lessons learned from the first round of 
        funding can be used to make the application process for 
        subsequent rounds more streamlined and efficient--taking into 
        consideration the considerable time and costs for very small 
        broadband providers with limited resources.

    (6) Without a challenge mechanism or verification measures, 
        inaccurate ``advertised'' broadband transmission speeds may 
        block broadband service providers from submitting applications 
        to serve areas that, based on actual transmission speeds, would 
        qualify as underserved and unserved areas.

    (7) As has been noted by other Associations, NTCA believes the 
        process would be more efficient if existing providers had the 
        ability to download or otherwise access Census block/group/
        tract data from applications and then match that information to 
        their own service area database which could then be uploaded to 
        the agencies.

    (8) NTCA supports lifting the current limitation that only displays 
        up to 7,500 Census blocks per proposed funded service areas. 
        The database limitation requires members to use a mapping tool 
        to zoom in on each individual Census block and manually note 
        the blocks included in a project.

    (9) The current system does not link applications to all states 
        covered by funding service area requests. The agencies can help 
        ensure more complete responses if the database links 
        applications to all states in which service is proposed.

    (10) NTCA is concerned that BIP non-remote, rural applicants can 
        receive a maximum of only 50% grant funding when BTOP projects, 
        that may not be in high cost, rural areas, may receive a grant 
        of 80% for projects.

    We 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. The nearly 
2,200 applications for broadband stimulus funding are an indication of 
the strong interest in and support needed to extend broadband service 
to unserved and underserved areas--particularly in rural areas. 
However, once these Recovery Act programs are over, it's important to 
remember that much more will have to be done if we are to achieve the 
national goal of ubiquitous broadband. According to a recent FCC task 
force study, preliminary estimates indicate that investments in the 
range of $20 billion to $350 billion may be needed for broadband 
infrastructure, depending on the speed of service.
    As for rural independent telecom providers, we emerged in these 
markets where no one else was willing to go. We understand these areas 
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 the stimulus broadband programs, 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 your work to address these important matters.
                                 ______
                                 
                          Submitted Questions
Response from Hon. Jonathan Adelstein, Administrator, Rural Utilities 
        Service, U.S. Department of Agriculture
Questions Submitted By Hon. Mike McIntyre, a Representative in Congress 
        from North Carolina
    Question 1. According to the Government Accountability Office, NTIA 
has been in talks with RUS about sharing some of RUS's field staff to 
monitor NTIA projects, although no formal agreement is in place. How do 
you expect this to work in practice?
    Answer. At this time, NTIA has not approached RUS over sharing RUS 
field staff to monitor NTIA projects. RUS and Rural Development have 
experienced field staff throughout the country that currently monitor 
our telecommunication, electric, water & environmental, renewable 
energy, business, housing and community facility loans and grants. To 
ensure our mutual interests in making the broadband recovery program a 
success, we would certainly entertain the concept of collaborating with 
NTIA on field monitoring. When one Federal agency performs services for 
another Federal agency, cost reimbursements are generally handled 
pursuant to the Economy Act.

    Question 2. It was promising to see in the GAO report that you 
anticipate extending the window for entities to submit applications in 
the second round. Do you plan to also extend the review period to allow 
incumbents to review potential violations of their service area?
    Answer. Through our Request for Information (RFI) we are seeking 
comments on ways to streamline the process by which incumbent service 
providers can provide input into whether a proposed service territory 
is unserved or underserved.

    Question 3. The Request for Information indicates that you are 
going to try and apply the regional economic development concept to 
broadband deployment. Could you elaborate on what a successful project 
within that initiative would look like?
    Answer. Just as RUS supports the concept of leveraging our $2.5 
billion in budget authority to deliver a higher level of program 
activity through loan, and loan-grant funding, we also support the 
concept of regional economic development. We believe that communities 
working together, rather than independently, may increase economies of 
scale to the project, promote broader rural economic development 
strategies, and ensure more rural Americans in unserved and underserved 
communities receive broadband service. A successful project could 
involve a regional economic development plan that includes broadband 
deployment as one of its key elements upon which business would be 
developed.

    Question 4. How have you ensured that applications applying to both 
BIP and BTOP are processed in a timely manner without disadvantaging 
rural areas seeking the higher grant funds available in NTIA? How has 
the process of working some applications through both agencies been 
handled? How successful has it been? How much delay has it caused?
    Answer. RUS has the ability to make loans, grants, and loan-grant 
combinations under ARRA. NTIA's BTOP program has grant authority and 
can provide a grant only if the applicant can document that ``but for'' 
the NTIA grant, the project could not be built.
    To best leverage taxpayer resources, the agencies decided that all 
applications for a rural area should first seek BIP funds to determine 
whether they could afford a loan product. At the same time, applicants 
could elect to apply concurrently for the BTOP program in the event 
that they did not qualify for BIP funding or provided evidence of being 
unable to support a loan.
    Once again, this approach is intended to identify whether a rural 
applicant could afford a loan product, which would reduce the cost of 
the program and target grants only to the neediest areas. If rural 
applicants cannot afford loan products, they can automatically be 
considered by the BTOP program for grants. Through this policy, the 
agencies can leverage resources, maximize the number of communities 
that can be assisted, help applicants and NTIA document compliance with 
the ``but for'' test, ensure that grant funds are used judiciously, and 
provide rural applicants with two funding opportunities.
    Both RUS and NTIA are simultaneously reviewing joint applications 
to ensure that applications are not delayed. We have closely 
coordinated with NTIA throughout this process. We believe the process 
has worked well and ensures that Recovery Act broadband resources are 
leveraged to the maximum extent possible.
    In addition, in our RFI, we asked for public comment on the joint 
application process and we will plan to address this process in the 2nd 
NOFA.

    Question 5. What is the average monthly cost to the end-user for 
broadband service in rural areas? Do you know how this compares with 
the average broadband costs in urban and suburban areas?
    Answer. The RUS is unaware of any comprehensive or conclusive study 
that provides sufficient granular or aggregate data to make this 
comparison.

    Question 6. Are you getting applications from high poverty areas? 
Do matching funds become a problem in any of these areas?
    Answer. Yes, RUS has received applications to serve areas with high 
poverty. Since RUS can provide up to 100% financial resources through 
loans, grants and loan-grant combinations, matching funds are not 
applicable to RUS's BIP program. We have asked for public comment in 
the RFI on how we can best serve low-income areas.
Questions Submitted By Hon. K. Michael Conaway, a Representative in 
        Congress from Texas
    Question 1. Please provide an update for the Committee regarding 
how much funding will be approved to devote toward expenses not 
directly related to building infrastructure, such as signs which 
advertise the use of stimulus funds for each project?
    Answer. Since no awards have been made, this information is not yet 
available.

    Question 2. We understand that 2,229 applications were received 
through the first NOFA. How many were found ineligible for RUS funding, 
and how many were ineligible for any funding?
    Answer. At this time, all applications are still under review by 
RUS, NTIA or by both agencies for jointly BIP/BTOP applications. RUS 
has notified NTIA that we have determined that a loan request would not 
appear feasible for a limited number of joint applications. Those 
applications are still under review by NTIA. To date, no applicants 
have been informed that that were ineligible for consideration for any 
Recovery Act broadband funding.

    Question 3. It is our understanding that last mile, remote 
applications constituted 18% of the 2,229 applications, and $3.84 
billion in requested funds. This is almost equal to the entire amount 
of program level funding made available in the July NOFA. In spite of 
the flaws in the July NOFA, this clearly shows a need to reach unserved 
areas in deep rural America and a desire by stakeholders to fulfill 
this mission. How is RUS viewing this response, and are you going to 
reprioritize the funding you have available for rural broadband in the 
second NOFA?
    Answer. RUS has extensive experience in handling oversubscribed 
broadband programs in unserved areas. In Fiscal Year (FY) 2009, RUS 
received over $200 million in applications for its Community Connect 
Broadband program, which serves rural communities with no broadband 
service. This was an oversubscription rate of almost twice that which 
was received under our first NOFA. Secretary Vilsack recently announced 
awards for the full $13 million under our FY 2009 appropriation.
    Through our experience with the first NOFA and the comments 
received under our RFI due by November 30, 2009, RUS is considering 
several options to ensure that limited grant funds reach the most 
rural, difficult-to-serve and unserved areas.

    Question 4. You said you are contemplating major revisions to the 
rules for the final NOFA. Could you please list in detail which options 
you are considering?
    Answer. RUS will consider what we learned in this first round in 
developing our next round of funding. We are aware of concerns that 
have been raised regarding a wide range of issues. These include the 
definition of rural and remote areas; eligibility standards for 
unserved and underserved areas; scoring weights for various factors; 
and concerns regarding satellite service. Other options that both NTIA 
and RUS are considering are outlined in our RFI published in the 
Federal Register on November 16, 2009. We look forward to the comments 
received from the public before any final decisions are made. We will 
be guided by an evaluation of the experience and feedback from the 
first round of projects and comments received under the RFI.

    Question 5. You mentioned that it was suggested combining the 
remaining funds into a single NOFA would be advantageous. Who suggested 
this?
    Answer. This was a mutual determination made by RUS and NTIA based 
upon our experience under the first NOFA. The recommendation was also 
made by the General Accountability Office (GAO).

    Question 6. You assert that moving up the timeline allows more time 
for stakeholders to create a stronger application. Could you clarify 
how an earlier deadline provides that kind of advantage over a deadline 
a few months later in 2010? For those public-private entities who might 
have been looking toward that third NOFA in 2010, how does moving up 
the deadline assist them in their planning efforts?
    Answer. With one additional NOFA as opposed to two, the agencies 
have the ability to give applicants a longer timeframe (application 
window) to submit applications. This longer application window provides 
for more opportunities for collaboration among applicants and for 
stronger and more strategic applications.

    Question 7. You mentioned that your experiences with the first NOFA 
have prompted you to consider alternative approaches to support your 
efforts going into the final NOFA. Could you please outline 
specifically what options you are considering?
    Answer. RUS will take what we learned in this first round to heart 
in developing our next round of funding. We are aware of concerns that 
have been raised regarding a wide range of issues. These include the 
definition of rural and remote areas; eligibility standards for 
unserved and underserved areas; scoring weights for various factors; 
and concerns regarding satellite service. Other options that both NTIA 
and RUS are considering are outlined in our RFI published in the 
Federal Register on November 16, 2009. We look forward to the comments 
received from the public before any final decisions are made. We will 
be guided by an evaluation of the experience and feedback from the 
first round of projects and comments received under the RFI.

    Question 8. Given that part of the intent of the stimulus bill is 
to add jobs to rural communities, can you describe the formula you use 
to calculate the number of jobs impacted through the broadband program?
    Answer. There are many factors that will be used to determine the 
success of the BIP and BTOP programs. Some of those measurements will 
include short-term through jobs created in building these projects and 
long-term through economic and social benefits that will result. At 
this time, RUS is planning to utilize and track the number of jobs that 
the applicant proposed to create. Our websites, www.broadbandusa.gov, 
and www.recovery.gov lay out the performance measures for BIP and BTOP 
and will track the success of these projects.
Questions Submitted By Hon. Glenn Thompson, a Representative in 
        Congress from Pennsylvania
    Question 1. I understand that the carriers have commented on the 
Advanced Regional Communications Cooperative's broadband application in 
my district. Each of these providers stated that everything is fine 
with broadband service in Clarion County. Well, as someone who 
represents that region and hears from residents and businesses in the 
area, I know that is not the case, with lack of reliable service the 
norm. I know that both agencies will be focusing on the definition of 
underserved and unserved, so can you talk a little more about those 
definitions?
    Answer. As required under the NOFA, to be eligible for funding 
under the Recovery Act broadband programs, the applicant must provide 
service in unserved and underserved areas. These definitions were 
created jointly by RUS and NTIA after our initial Public Hearings, RFI 
process and in collaboration with the FCC. The definitions and 
requirements were clearly outlined in the NOFA. Applicants needed to 
supply information on how they determined that their proposed service 
territory met the requirements of the NOFA. The agencies also provided 
the public and incumbent service providers the opportunity to provide 
comments on whether an applicant's proposed service territory is 
unserved or underserved through submission of documentation. The 
agencies will evaluate the information submitted by the applicant and 
documentation provided by the public and incumbent service providers 
and make a final determination of whether the applicant met the 
requirements of the NOFA.

    Question 2. What restrictions are included in the rules related to 
the sale or lease of assets by a recipient of a grant or loan?
    Answer. The Notice of Funding Availability (NOFA) provides that 
``The sale or lease of any portion of the award-funded broadband 
facilities during their life is prohibited, except as provided herein. 
The agencies may approve a sale or lease . . .'' under specific 
conditions which are outlined in the NOFA.
    This restriction was included in the NOFA to ensure that award 
recipients did not sell or lease assets which were funded under the 
Recovery Act. Such a 10 year restriction is common in other Department 
of Commerce grant programs and was utilized for the broadband recovery 
programs.

    Question 2a. For how long are the restrictions in effect, and is 
there a waiver process during the effective period?
    Answer. The restriction period is the life of the asset or 10 years 
after award. Both RUS and NTIA can generally approve the sale or lease 
of funded equipment in cases where the sale or lease was set forth in 
the original application and was part of the applicant's proposal, the 
loan or grant is repaid, the project is continuing to fulfill its 
intended purpose, and such a sale is in the best financial interests of 
the government.

    Question 2b. Does this kind of limitation discourage bona fide 
applicants with real experience in the business of deploying broadband 
networks from applying?
    Answer. We are not aware that such a restriction discouraged 
applicants from applying for the program. As mentioned, the restriction 
is typical of other Department of Commerce grant programs.

    Question 2c. Are you planning to remove this limitation for the 
next round of funding?
    Answer. Under our RFI published in the Federal Register on November 
16, 2009, both agencies are looking for ways to improve the program 
under the next NOFA. We will certainly entertain comments regarding 
this subject and balance those against the potential for waste and 
abuse.

    Question 3. Most broadband providers did not apply for stimulus 
funding in the first round, particularly incumbent telephone and cable 
providers with experience in serving rural America. Are the 
interconnection/non-discrimination provisions in the rules contributing 
to this lack of interest? Will you consider modifying them for round 
two?
    Answer. We believe the overwhelming response of 2,200 applications 
seeking $28 billion in funds clearly demonstrates that the requirements 
of the NOFA were not excessively cumbersome. We regret that some 
established phone companies chose not to participate in this NOFA, and 
welcome the participation of the widest possible number of applicants 
in the next round. All companies with concerns are encouraged to 
comment under our RFI. We will certainly entertain comments regarding 
this subject and ways to ensure that funds sought under this program 
are used to the maximum benefit for all Americans.

    Question 4. Have you established a process for the public or 
existing service providers to appeal a decision to issue a loan or 
grant if they feel an area should not have been considered eligible 
because it is already served?
    Answer. The public and existing service providers were provided a 
30 day period to submit comments on the proposed service territories of 
all infrastructure applicants. This timeframe ended for most 
applications on October 28, 2009, and both agencies are currently 
reviewing those comments.

    Question 5. In the absence of a national broadband map, isn't it 
important to have existing broadband service providers' data about 
where they are providing service in order for you to determine if an 
area is already served?
    Answer. As required under the NOFA, to be eligible for RUS's BIP 
program, any rural area proposed to be served by an applicant must be 
unserved or underserved. Applicants needed to supply information on how 
they determined that their proposed service territory meet the 
requirements of the NOFA. The agencies also provided the public and 
incumbent service providers the opportunity to provide comments on 
whether an applicant's proposed service territory is unserved or 
underserved through submission of documentation. RUS will evaluate the 
information submitted by the applicant and the documentation provided 
by the public and incumbent service providers to make a final 
determination.

    Question 6. What type of due diligence are the agencies undertaking 
to determine if an area is unserved or underserved? How are you 
verifying applicant's claims about whether an area is unserved or 
underserved? What data are you relying on? Are your field 
representatives working to verify this information?
    Answer. As required under the NOFA, to be eligible for RUS's BIP 
program, any rural area proposed to be served by an applicant must be 
unserved or underserved. Applicants needed to supply information on how 
they determined that their proposed service territory meet the 
requirements of the NOFA. The agencies also provided the public and 
incumbent service providers the opportunity to provide comments on 
whether an applicant's proposed service territory is unserved or 
underserved through submission of documentation. RUS will evaluate the 
information submitted by the applicant and the documentation provided 
by the public and incumbent service providers. We will also rely upon 
FCC data, state broadband maps where available, and other available 
data. In cases where the documentation is inconsistent, RUS may deploy 
RUS and Rural Development staff to these areas to make a final 
determination.

    Question 7. Are you planning to make public whether you've 
determined that a proposed funded service area is unserved or 
underserved?
    Answer. RUS will advise unsuccessful applicants why their 
applications were not awarded funding under the first NOFA. This could 
include eligibility concerns, low rating and ranking scores, and a 
determination that all or a portion of an applicant's proposed service 
territory may not have met the definition of unserved or underserved. 
When completed, we believe the State Broadband Maps funded by NTIA will 
provide a more comprehensive, granular and detailed map of unserved and 
underserved areas.

    Question 8. For the next round of funding is it possible that your 
agencies could make public a list of all Census blocks in a proposed 
funded service area, and allow existing broadband service providers to 
submit information about whether they provide service in those Census 
blocks, along with the number of households they serve? Wouldn't this 
make it easier for you to determine whether an area is unserved or 
underserved?
    Answer. RUS appreciates the concerns offered by the Committee and 
those from respondents to the proposed service territories. The Agency 
has also received many suggestions on ways to improve this process. 
Both RUS and NTIA are jointly seeking public comments on how the entire 
NOFA process can be streamlined in our recently published RFI. We look 
forward to carefully considering all these comments in developing our 
second and final NOFA on this issue and other concerns that have been 
raised.
Questions Submitted By Hon. Bobby Bright, a Representative in Congress 
        from Alabama
    Question 1. You have taken a great deal of heat for the remote 
definition published in the first Notice of Funding Availability. I, 
like many other Members of this body, share this concern. But I also 
understand that in past years RUS has been criticized for funding less-
remote project areas. As you move into the second round of funding, how 
do you plan to thread the needle in finding a definition of remote that 
suits your critics on both sides?
    Answer. We appreciate the comments on our definition of ``remote'' 
rural areas included in our first NOFA. Our goal was, and continues to 
be, to provide grants to the most rural and unserved areas that cannot 
make a business case for a loan or loan-grant combination. Some 
suggestions that have been offered to RUS to better define ``remote'' 
include density, population and income. These suggestions were included 
in our RFI, as we seek comments from the public on how we ensure that 
limited grant funds reach the neediest rural areas.

    Question 2. During your recent testimony in the Senate, one Member 
stated that there should only be one agency distributing this broadband 
funding, instead of both NTIA and RUS. Do you believe that this Senator 
was right? If not, why is the current dual structure appropriate?
    Answer. Since the enactment of the Recovery Act in February, we 
have worked side by side with our partners at the NTIA and the Federal 
Communications Commission (FCC) to fulfill the President's vision for 
promoting broadband access across the nation. RUS brings over 60 years 
of experience in providing loans and grants for advanced 
telecommunications in rural America. Our expertise in financing rural 
telecommunications services is unparalleled. NTIA is the President's 
advisor on telecommunications policy. Together, we have marshaled our 
talents and joined forces to meet the President's vision. Congress 
recognized this division of labor when it provided broadband funding to 
both RUS and NTIA in the Recovery Act. In fact, this is a statutory 
requirement under terms of the Act. We believe that the leverage 
created by the two agencies will increase the availability and economic 
development potential of unserved, underserved and rural communities 
throughout the United States.

    Question 3. Given that rural areas are some of the most difficult 
and economically challenging to serve, will changes be made in future 
rounds to allow 100% grant funding for all rural, unserved projects?
    Answer. Under the Broadband Initiatives Program (BIP), RUS could 
provide $2.5 billion in 100% grants to rural areas. With that same 
budget authority, RUS can leverage these resources and provide far more 
in loans, grants, and loan-grant combinations, which would increase the 
taxpayer's investment and provide more rural Americans with access to 
broadband. Our challenge is to provide a flexible mix of loans and 
loan-grant combinations to those applicants that can support a business 
case for a loan, and make grant funds available to those rural areas 
that could not be served through any other means. This is one of the 
areas that RUS is specifically seeking comments under our RFI. We look 
forward to reviewing these suggestions to determine out best approach 
to leveraging these resources under the next NOFA.

    Question 4. As you are both aware, the application process for both 
BTOP and BIP is a complex one. The ability to navigate through such an 
intricate application process is a significant hurdle for many small 
businesses. In your testimonies, you mention that you are working on a 
plan for ensuring that the second round's application process is more 
small business-friendly. Could you discuss your plans in more detail?
    Answer. Both RUS and NTIA have learned a tremendous amount under 
our first NOFA. While we have ideas for making the entire application 
more user-friendly, we have specifically sought comments on how this 
can be accomplished through our Request for Information (RFI). We will 
rely heavily upon the suggestions and experiences from those comments. 
Also, we intend to use this knowledge in developing our next series of 
Outreach and Training Workshops.

    Question 5. From news reports I have read that ARRA funding 
applications total $28 billion in loans and grants. I recognize that 
even $4 billion is likely not enough to ensure that everyone in this 
country has access to broadband, but if your agencies award the full 
amounts allowed for grants and loans in the first round of funding how 
much closer will we be to deploying broadband Internet to all Americans 
currently without it?
    Answer. We believe that funding in the first round will make a 
solid contribution toward deploying broadband to unserved and 
underserved rural areas. Further, the middle mile projects funded under 
the program will lay the foundation for future broadband expansion. The 
experiences learned through the Recovery Act programs will provide 
business models that can easily be replicated in unserved and 
underserved communities and lead to enhancements to RUS's existing 
broadband programs.

    Question 6. Many are concerned about overlapping already-served 
areas with these stimulus dollars. I strongly believe that NTIA and RUS 
should not waste taxpayer dollars on funding broadband projects that 
intend to provide service in areas already served. Is this a concern to 
your respective agencies? And how do you plan to avoid overlapping in 
the second round of funding?
    Answer. RUS shares your concern that these valuable taxpayer 
resources are put to the best use and provide broadband service in 
rural, unserved and underserved communities. As required under our 
first NOFA, to be eligible for RUS's BIP program, the applicant was 
required to predominantly serve unserved or underserved rural areas. 
Applicants needed to supply information on how they determined that 
their proposed service territory meet the requirements of the NOFA. The 
agencies also provided the public and incumbent service providers the 
opportunity to provide comments on whether an applicant's proposed 
service territory is unserved or underserved through submission of 
documentation. RUS will evaluate the information submitted by the 
applicant and the documentation provided by the public and incumbent 
service providers. We will also rely upon FCC data, state broadband 
maps where available, and other available data. In cases where the 
documentation is inconsistent, RUS may deploy RUS and Rural Development 
staff to these areas to make a final determination.
    RUS is evaluating this process and will be evaluating comments 
received under our RFI to determine how to address this concern in the 
most prudent manner.
Response from Hon. Lawrence E. Strickling, Assistant Secretary for 
        Communications and Information, 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. According to the Government Accountability Office, NTIA 
has been in talks with RUS about sharing some of RUS's field staff to 
monitor NTIA projects, although no formal agreement is in place. How do 
you expect this to work in practice?
    Answer. NTIA will monitor all BTOP projects using NTIA staff and 
the help of its contractor. NTIA will not use RUS staff to monitor 
NTIA-funded projects. NTIA is working diligently to develop 
comprehensive monitoring and reporting systems to help ensure that BTOP 
projects fulfill the purposes of the Recovery Act and spend taxpayer 
dollars wisely.

    Question 2. It was promising to see in the GAO report that you 
anticipate extending the window for entities to submit applications in 
the second round. Do you plan to also extend the review period to allow 
incumbents to review potential violations of their service area?
    Answer. NTIA generally believes the first round process provided 
existing service providers ample opportunity to submit information 
regarding their services and ensure that BTOP funds support projects in 
areas that meet the definition of unserved or underserved. 
Nevertheless, in the recent Request for Information (RFI), NTIA and RUS 
requested public comment on whether and to what extent the public 
notice comment process should be revised in the second funding round. 
We are reviewing those comments now as we consider potential changes to 
the programs in the second round.

    Question 3. You mentioned a possible targeting of ``regional 
economic development'' or ``comprehensive community'' approaches in the 
second round of funding. Please elaborate on what you intend there.
    Answer. NTIA is exploring what we call a ``comprehensive 
communities'' approach as the type of BTOP project that may offer the 
greatest benefits per dollar spent. The paradigm for a ``comprehensive 
communities'' proposal is a middle mile infrastructure project that 
also connects key anchor institutions such as schools, community 
colleges, libraries, hospitals, government facilities, public safety 
entities, and other organizations that provide important community 
services. The ideal project would also include commitments by providers 
of end-user ``last mile'' services to use the new infrastructure to 
offer broadband services throughout the relevant communities. Such 
projects may be made stronger when proposed by public-private 
partnerships, with the public involvement providing greater assurance 
that the needs of the community are met, while experienced private 
participants can bring appropriate know-how and expertise to the 
project.
    ``Comprehensive communities'' projects can leverage resources and 
better ensure sustainable community growth and prosperity. They also 
can create consumer demand and lay the foundation for the ultimate 
provision of reasonably-priced end-user or ``last mile'' broadband 
services in unserved and underserved communities. As NTIA continues to 
review BTOP projects, we will evaluate this approach and develop 
further guidance for BTOP applicants.

    Question 4. When a proposed service area is disputed by an 
incumbent provider, the RUS sends field staff out to conduct a market 
survey to investigate the claim. However, the GAO report says that NTIA 
does not yet have procedures in place to address the claims but rather 
is in the process of developing them. What has NTIA been doing for the 
first round if it doesn't yet have a process?
    Answer. NTIA has in place a process to evaluate claims regarding 
the unserved and underserved status of a proposed funded service area 
using information from several sources. NTIA considers data supplied by 
the applicant, data supplied by existing service providers who choose 
to comment, broadband maps compiled by states (if available), and 
independent research. NTIA may request additional information from 
applicants and commenters as necessary and appropriate. We are 
confident that NTIA has sufficient information on which to base our 
findings of project eligibility.

    Question 5. Can you give us a brief explanation of the expertise 
NTIA has in reviewing and making loans and grants?
    Answer. From 1994 to 2004, NTIA managed the Technology 
Opportunities Program (TOP), awarding over $230 million in grants to 
over 600 projects that demonstrated the use of new telecommunications 
and information technologies to provide education, health care, or 
public information in the public and nonprofit sectors. In addition, 
through the Public Safety Interoperable Communications (PSIC) Grant 
Program, NTIA, in consultation with DHS, provides funding to help 
state, local and Federal first responders better communicate during a 
natural or man-made disaster. The program will make payments totaling 
up to $1 billion through Fiscal Year 2010 to carry out the PSIC 
program. NTIA also manages the Public Telecommunications Facilities 
Program (PTFP), a long-running competitive grant program that helps 
public broadcasting stations, state and local governments, Indian 
Tribes, and nonprofit organizations construct facilities to bring 
educational and cultural programs using broadcast and non-broadcast 
telecommunications. For over 45 years, PTFP has awarded over $800 
million in Federal funds for approximately 4,500 grants. NTIA's Low 
Power Television and Translator Assistance Programs include the Low-
Power TV and Translator Digital-to-Analog Conversion (Conversion) 
Program and the Low-Power TV and Translator Upgrade (Upgrade) Program, 
which assist low-power TV broadcast stations to broadcast in analog 
after the June 12, 2009 digital conversion deadline for full power 
television stations or helps upgrade these types of facilities in rural 
communities to digital transmission. NTIA also managed the Digital TV 
Converter Box Coupon Program through which all U.S. households were be 
eligible to request up to two coupons, worth $40 each, to be used 
toward the purchase of digital-to-analog converter boxes. Under this 
program, consumers redeemed 34.9 million coupons with a total value of 
$1.4 billion.

    Question 6. In a GAO report released this week, it is mentioned 
that NTIA's initial risk assessment indicated that a lack of 
experienced and knowledgeable staff was a key risk to properly 
implementing the program in accordance with the priorities of the 
Recovery Act. What has been done to address this?
    Answer. NTIA has filled 42 positions with new employees and has 
utilized staff detailed from other bureaus and agencies, each of whom 
is working as hard as possible to effectively implement BTOP. NTIA also 
has entered into a contract with Booz Allen Hamilton (BAH) to assist 
NTIA staff in the grants administration process to ensure that we can 
award Recovery Act funds in the most effective, equitable, and 
accountable manner possible. NTIA has also entered into agreements with 
the Grants Offices of the National Oceanic and Atmospheric 
Administration (NOAA) and the National Institute of Standards and 
Technology (NIST) to provide Grants Office services for the NTIA BTOP 
grants. A major concern, however, is the fact that the Recovery Act 
does not provide authority or funding for administration and oversight 
of BTOP-funded projects beyond the end of Fiscal Year 2010. NTIA is 
examining options to ensure sufficient administration and monitoring of 
BTOP grant projects and to carry the program to conclusion. NTIA 
intends to work with Congress on this matter.
Questions Submitted By Hon. K. Michael Conaway, a Representative in 
        Congress from Texas
    Question 1. You referenced the current RFI (Request for 
Information) you published, with comments due by the end of this month, 
and how this will assist you in making improvements to the final NOFA. 
Do you plan to publish the rules for the final NOFA to allow 
stakeholders to comment on the rules before you open the application 
period? Does it not make sense for stakeholders to comment on the 
actual rule, rather than speculating on changes to a flawed rule?
    Answer. Although not required by the Recovery Act, NTIA sought 
public comment prior to establishing the BTOP rules in the first NOFA 
earlier this year and, as you note, we have chosen to do so again as we 
prepare the second NOFA. At the same time, we are mindful of Congress's 
intent that BTOP funds stimulate the economy and create jobs as quickly 
as possible, as well as its specific deadline requiring that all funds 
be obligated by September 30, 2010. In view of these exigencies, we do 
not have sufficient time to publish draft rules and allow for yet 
another comment period before the rules are finalized. However, NTIA 
will use the experiences and lessons learned from the first funding 
round and all comments received in response to its Request for 
Information to inform the development of the second NOFA.

    Question 2. You testified that by combining all the remaining funds 
into a single NOFA that it will yield multiple benefits for 
stakeholders. Given the difficulties you have experienced in getting 
the rules right within your artificial deadlines, how does rushing to 
finish the grant-making process well ahead of your statutory deadline 
in September add value to the program, if it does not allow you to 
adequately address the concerns of those stakeholders you claim to be 
helping?
    Answer. We believe our plans for the second NOFA will adequately 
address the concerns stakeholders raised about the first round. In the 
Recovery Act, Congress expressed its intent that NTIA adopt rules to 
stimulate economic growth and job creation and, specifically, that it 
make all grant awards by September 30, 2010. Our first NOFA established 
appropriate rules to further these goals for the first round of 
funding. By combining the second and third rounds of funding, we will 
give round two applicants more time to complete their proposals, and 
NTIA more time to review applications, than would have been available 
had we attempted to squeeze in three rounds of funding before the 
deadline of September 30, 2010. At the same time, by having only one 
additional round, we believe that we can complete funding somewhat 
ahead of that deadline, thus better fulfilling the economic recovery 
goals of the Recovery Act. NTIA is thus confident that combining the 
second and third rounds of funding will provide substantial benefits 
for taxpayers and applicants.

    Question 3. NTIA and RUS used dramatically different approaches in 
staffing the significant burden of reviewing applications. By your 
testimony, this included 1,000 volunteers to review applications. Would 
the time spent reviewing and certifying those volunteers have been 
better spent reviewing the more than 1,700 applications NTIA had before 
them? Would you have been better able to meet your intended timeline to 
fund applications if you had followed RUS's process rather than 
interviewing and training 1,000 volunteers?
    Answer. No. NTIA's size and structure prevented us from utilizing 
the same application review process as RUS. Also, the practice of using 
independent expert reviewers is common in the Federal grant making 
process, and we have used it with success at NTlA and the Commerce 
Department in the past. This practice is especially valuable when 
evaluating grant applications of a scientific or technical nature due 
to the specialized expertise needed to carefully evaluate these 
applications. We are, however, considering changes to the BTOP 
application review process to better ensure maximally-efficient and 
effective review of future applications.

    Question 4. You highlighted the efforts underway to produce a 
broadband map of America which would show exactly where broadband 
Internet is accessible. In that narrative, you indicated that no 
Federal agency has collected comprehensive and reliable data needed to 
describe Internet access across America. Has the information gathered 
by incumbent providers in response to applications been useful in 
compiling data for your mapping efforts?
    Answer. To date, our mapping efforts have focused on the review of 
grant applications submitted by states or their designated entities, 
and the awarding of grants to them, to fund the direct collection of 
data from incumbent providers and the verification of that data, as 
directed by the Recovery Act. NTIA has not determined whether or to 
what extent information collected from the public notice comment period 
will be used in the development of the national broadband map.

    Question 5. You mentioned that NTIA will be enhancing its auditing 
and monitoring responsibilities, including visits to project sites. At 
what stage of the project do you typically start making these visits? 
When do you anticipate the first projects will break ground?
    Answer. NTIA is working diligently to develop comprehensive 
monitoring and reporting systems to help ensure that BTOP projects 
fulfill the purposes of the Recovery Act and spend taxpayer dollars 
wisely. Monitoring of grant projects will commence almost immediately 
upon award, although the frequency of on-site visits has not yet been 
determined. NTIA plans to incorporate a risk assessment model that will 
be used to determine the level of monitoring associated with each 
project. Those projects with the highest risk assessment would likely 
be subject to site visits early in the award period. NTIA expects to 
perform site visits on a periodic basis through the period of 
performance of the award in accordance with the risk methodology and as 
resources permit.
    Our current plan is to begin announcing awards in December 2009 and 
complete first round award announcements in February 2010. NTIA intends 
to award funds to projects that can commence as quickly as possible in 
order to fulfill the Recovery Act's objective to jump-start investments 
in the economy and create jobs. Those projects which have addressed all 
environmental, historic preservation, and other regulatory requirements 
could move toward implementation shortly after award.
Questions Submitted By Hon. Glenn Thompson, a Representative in 
        Congress from Pennsylvania
    Question 1. I understand that the carriers have commented on the 
Advanced Regional Communications Cooperative's broadband application in 
my district. Each of these providers stated that everything is fine 
with broadband service in Clarion County. Well, as someone who 
represents that region and hears from residents and businesses in the 
area, I know that is not the case, with lack of reliable service the 
norm. I know that both agencies will be focusing on the definition of 
underserved and unserved, so can you talk a little more about those 
definitions?
    Answer. In the Recovery Act, Congress instructed NTIA to address 
the broadband needs of both unserved and underserved areas of the 
United States. The first round NOFA defined ``unserved'' as those areas 
where at least 90 percent of households lack access to facilities-
based, terrestrial broadband service. The NOFA defined ``underserved'' 
as those areas where either:

    (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 kbps and 200 
        kbps upstream;

    (2) no fixed or mobile broadband service provider advertises 
        broadband speeds of at least 3 mbps 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.

    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.
    The recently-released RFI sought public comment on a range of 
issues relating to NTIA's implementation of BTOP, including the 
definitions used to determine eligibility, such as ``unserved,'' 
``underserved,'' and ``broadband,'' and other rules governing the award 
of funds. NTIA will use the comments received from all interested 
parties to determine what, if any, changes are necessary in the second 
funding round.

    Question 2. What restrictions are included in the rules related to 
the sale or lease of assets by a recipient of a grant or loan?
    Answer. BTOP funds are intended for recipients committed to 
investing in and improving their communities, not those seeking to use 
taxpayer dollars to turn a quick profit. Thus, to help ensure that 
BTOP-funded projects are used for the purposes established by Congress 
in the Recovery Act and that they provide the maximum benefits to the 
proposed funded service area, the NOFA rules generally discourage the 
sale or lease of Recovery Act-funded broadband facilities. However, our 
rules recognize that there are instances where a grantee can 
demonstrate that a sale or lease of the property would be in the best 
interest of those that are served by the project and allow grantees to 
seek approval to sell or lease BTOP-related assets.

    Question 2a. For how long are the restrictions in effect, and is 
there a waiver process during the effective period?
    Answer. As set forth in the NOFA, the sale or lease of any portion 
of the award-funded broadband facilities during their life is generally 
prohibited. The NOFA, however, establishes a three-prong exception to 
this general prohibition. Specifically, the agencies may approve a sale 
or lease if it is for adequate consideration, the purchaser agrees to 
fulfill the terms and conditions relating to the project, and either 
the applicant includes the proposed sale or lease in its application as 
part of its original request for grant funds or the agencies waive this 
provision for any sale or lease occurring after the tenth year from the 
date the grant, loan, or loan/grant award is issued.

    Question 2b. Does this kind of limitation discourage bona fide 
applicants with real experience in the business of deploying broadband 
networks from applying?
    Answer. Given that NTIA and RUS received almost 2,200 first round 
applications requesting nearly $28 billion in funding for broadband 
projects--more than seven times the amount of available funding in the 
first round--it does not appear that applicants were deterred by this 
restriction. Nevertheless, we are examining all aspects of the first 
round of grant applications to determine what changes should be made in 
the next round.

    Question 2c. Are you planning to remove this limitation for the 
next round of funding?
    Answer. Among other topics, the recently-released RFI asks for 
comments regarding whether the section of the NOFA relating to the sale 
or lease of award-funded broadband facilities should be revised to 
adopt a more flexible approach toward awardee mergers, consistent with 
USDA and DOC regulations, while still ensuring that awardees are not 
unjustly enriched from the sale of award-funded assets for profit. NTIA 
is now reviewing those comments to determine what changes, if any, are 
appropriate in the second funding round.

    Question 3. Most broadband providers did not apply for stimulus 
funding in the first round, particularly incumbent telephone and cable 
providers with experience in serving rural America. Are the 
interconnection/non-discrimination provisions in the rules contributing 
to this lack of interest? Will you consider modifying them for round 
two?
    Answer. As noted above, NTIA and RUS received almost 2,200 first 
round applications requesting nearly $28 billion in funding for 
broadband projects--more than seven times the amount of available 
funding in the first round. These applicants were clearly not deterred 
by the interconnection and non-discrimination provisions that were 
included in the NOFA pursuant to the requirements of the Recovery Act.
    Specifically, the Recovery Act requires NTIA to establish non-
discrimination and interconnection obligations as contractual terms of 
awards under BTOP that, at a minimum, adhere to the principles 
contained in the FCC's Internet policy statement. RUS and NTIA recently 
released a second joint Request for Information (RFI) to receive public 
comment on certain issues relating to the implementation of BIP and 
BTOP. Among other topics, the RFI asked whether interconnection and 
nondiscrimination requirements should continue to be applied to all 
types of infrastructure projects regardless of the nature of the 
entity; whether the scope of the reasonable network management and 
managed services exceptions should be modified, and if so, in what way; 
and whether it is necessary to clarify the term ``interconnection'' or 
the extent of the interconnection obligation. NTIA is now reviewing 
those comments to determine what changes, if any, are appropriate in 
the second funding round.

    Question 4. Have you established a process for the public or 
existing service providers to appeal a decision to issue a loan or 
grant if they feel an area should not have been considered eligible 
because it is already served?
    Answer. As noted above, the eligibility standard for BTOP awards is 
not whether there is some level of existing broadband service in a 
project area, but whether the applicant has demonstrated that their 
proposed funded service area is unserved or underserved according to 
the provisions of the NOFA. The underserved criteria can be met by 
showing that the proposed funded service area exhibits low levels of 
availability, adoption, or broadband speeds. 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. This 
standard allows for BTOP funds to support areas where some level of 
broadband service may exist, but robust investment or adoption has not 
yet taken shape.
    The Recovery Act directed NTIA to make this determination in the 
case of BTOP applications and NTIA is taking a number of steps to 
ensure that funding goes to projects that will best fulfill the 
objectives of the Recovery Act and meet the requirements of the statute 
and the NOFA. The NOFA outlined the multi-step evaluation process and 
the criteria that are being used to review and score applications, 
including the ability of NTIA to seek additional information or 
clarification from applicants as part of the review process. NTIA has 
consulted with states, Tribes, territories, possessions and the 
District of Columbia to solicit their feedback on the initial pool of 
BTOP applications. NTIA provided existing service providers with the 
opportunity to submit information regarding their existing service 
offerings to help inform the application review process, and is also 
utilizing other data at its disposal to help evaluate claims made by 
both applicants and commenters.
    In addition, as already noted, the Recovery Act permits NTIA to 
deobligate awards to grant recipients in appropriate circumstances. 
These steps will help ensure that NTIA awards funds to projects that 
fulfill Recovery Act objectives and spend taxpayer dollars wisely. In 
view of these steps, we did not include an appeals process, which we 
believe would add uncertainty and unnecessarily prolong the funding 
cycle.

    Question 5. In the absence of a national broadband map, isn't it 
important to have existing broadband service providers' data about 
where they are providing service in order for you to determine if an 
area is already served?
    Answer. NTIA welcomes information from existing service providers 
regarding the unserved and underserved status of proposed funded 
service areas. NTIA will make the decision as to whether an area is 
unserved or underserved based on all information available to it. The 
submissions of service providers are not dispositive but do provide 
additional information we will consider. NTIA is also utilizing any 
other data at its disposal to help evaluate claims made by both 
applicants and commenters.

    Question 6. What type of due diligence are the agencies undertaking 
to determine if an area is unserved or underserved? How are you 
verifying applicant's claims about whether an area is unserved or 
underserved? What data are you relying on? Are your field 
representatives working to verify this information?
    Answer. NTIA has in place a process to evaluate claims regarding 
the unserved and underserved status of a proposed funded service area 
using information from several sources. NTIA is considering data 
supplied by the applicant, data supplied by existing service providers 
who choose to comment, broadband maps compiled by states (if 
available), and independent research. NTIA may request additional 
information from applicants and commenters as necessary and 
appropriate. We are confident that NTIA has sufficient information on 
which to base funding decisions.

    Question 7. Are you planning to make public whether you've 
determined that a proposed funded service area is unserved or 
underserved?
    Answer. The grant of an infrastructure application will indicate 
that the applicant has satisfied the definition of unserved or 
underserved. However, NTIA is developing a publicly accessible and 
regularly updated national broadband map. This map will serve to 
educate consumers and businesses about broadband availability, enable 
broadband providers and investors to make better-informed decisions 
regarding the use of their private capital, and allow Federal, state, 
and local policy-makers to make more data-driven decisions on behalf of 
their constituents.
    Additionally, RUS and NTIA have posted Public Notice Filings of the 
proposed funded service area(s) of each BIP and BTOP Infrastructure 
application at www.broadbandusa.gov. NTIA and RUS also posted online 
the name of each service provider submitting information regarding the 
unserved and underserved status of an application and a summary of 
their response.

    Question 8. For the next round of funding is it possible that your 
agencies could make public a list of all Census blocks in a proposed 
funded service area, and allow existing broadband service providers to 
submit information about whether they provide service in those Census 
blocks, along with the number of households they serve? Wouldn't this 
make it easier for you to determine whether an area is unserved or 
underserved?
    Answer. In the recently released Request for Information (RFI), 
NTIA and RUS requested public comment on whether and to what extent the 
public notice comment process should be revised in the second funding 
round. NTIA is now reviewing those comments to determine what changes, 
if any, are appropriate in the second funding round. Our intent is to 
provide existing providers with an adequate opportunity to submit 
information regarding their services and ensure that BTOP funds support 
projects in areas that meet the definition of unserved or underserved.
Questions Submitted By Hon. Bobby Bright, a Representative in Congress 
        from Alabama
    Question 1. How does the NTIA staff interact with RUS? Would it be 
faster for both agencies if you did not have to work with each other?
    Answer. NTIA and RUS have worked closely together to implement the 
broadband provisions of the Recovery Act and to ensure a well-
coordinated and thoughtful approach that takes advantage of the 
individual expertise of each agency. The agencies cooperated in the 
hosting of the initial kickoff meetings in March 2009 and in the 
development of the first NOFA, which incorporated shared definitions 
and policies to the maximum extent possible. We combined efforts to 
host 10 workshops for potential applicants in locations across the 
country. And we worked together to develop www.broadbandusa.gov as a 
single portal to provide technical assistance, accept applications, and 
communicate information about the programs. As we review and evaluate 
applications, we are in regular communication to ensure that we do not 
use Recovery Act funds for projects in the same area. We believe that 
this coordinated approach provided benefits for first round applicants 
and the general public. At the same time, as we plan for the second 
round of funding, the agencies are evaluating whether to make 
adjustments to improve efficiency as appropriate.

    Question 2. In your testimony, you mention the NTIA's upcoming 
efforts at implementing the Recovery Act's ``Broadband Mapping and 
Planning Program.'' Coming up with a nationwide broadband strategy is a 
great task, and it is vital that we do it right. Could you discuss how 
the mapping process will work and how the mapping grants will be used? 
Your goal is to complete the mapping by February 2011. Is this goal 
attainable? Are there any potential roadblocks keeping you from 
completing the map by this time?
    Answer. The State Broadband Data and Development Program (Mapping 
Program) is a competitive, merit-based matching grant program to fund 
projects that collect comprehensive and accurate state-level broadband 
mapping data, develop state-level broadband maps, aid in the 
development and maintenance of a national broadband map, and fund 
statewide initiatives directed at broadband planning. NTIA has 
announced 36 grant awards for broadband mapping and planning activities 
totaling approximately $69 million. States and territories receiving 
awards to date include: Alabama, Alaska, Arizona, Arkansas, California, 
Colorado, Delaware, the District of Columbia, Florida, Georgia, Idaho, 
Illinois, Indiana, Kansas, Louisiana, Maryland, Massachusetts, 
Michigan, Minnesota, Missouri, Nevada, New York, North Carolina, North 
Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, 
Vermont, Washington, West Virginia, Wisconsin, and Wyoming, as well as 
Puerto Rico. These awards fund 2 years of broadband mapping efforts and 
up to 5 years of broadband planning activities. NTIA expects to award a 
mapping grant to every state and territory, and is currently working 
with the remaining applicants to revise and refine their project 
proposals to ensure that each proposal meets the program's standards.
    We expect to complete all mapping awards by the end of 2009. 
Awardees will then collect and verify the availability, speed, and 
location of broadband across the state. This activity is to be 
conducted on a semi-annual basis between 2009 and 2011, with the data 
to be presented in a clear and accessible format to the public, 
government, and the research community. The initial sets of state 
broadband data will be provided to NTIA in spring 2010, and the effort 
will culminate in the creation of a national broadband map by February 
2011. The national broadband map will educate consumers and businesses 
about broadband availability, enable broadband providers and investors 
to make better-informed decisions regarding the use of their private 
capital, and allow Federal, state, and local policy-makers to make more 
data-driven decisions on behalf of their rural constituents.

    Question 3. As you are both aware, the application process for both 
BTOP and BIP is a complex one. The ability to navigate through such an 
intricate application process is a significant hurdle for many small 
businesses. In your testimonies, you mention that you are working on a 
plan for ensuring that the second round's application process is more 
small business-friendly. Could you discuss your plans in more detail?
    Answer. In the recently-released RFI, NTIA and RUS requested public 
input on whether the agencies should revise elements of the programs to 
better achieve the goals of the Recovery Act, which places a high 
priority on benefiting small and disadvantaged businesses. NTIA is now 
reviewing those comments to determine what changes, if any, are 
appropriate in the second funding round. We also intend to conduct 
additional workshops for the second funding round that will address 
issues such as collaborating on and creating winning applications and 
training on the mechanics of filing applications electronically. NTIA 
is making every effort to streamline the application process in the 
second funding round to facilitate the process of applying for grants, 
while also ensuring that we collect the information necessary to award 
grants to projects that will fulfill the objectives of the Recovery Act 
and utilize taxpayer dollars in the most effective manner possible.

    Question 4. From news reports I have read that ARRA funding 
applications total $28 billion in loans and grants. I recognize that 
even $4 billion is likely not enough to ensure that everyone in this 
country has access to broadband, but if your agencies award the full 
amounts allowed for grants and loans in the first round of funding how 
much closer will we be to deploying broadband Internet to all Americans 
currently without it?
    Answer. The $7.2 billion authorized by the Recovery Act for the 
BTOP and BIP broadband initiatives will not solve all of America's 
broadband challenges. However, NTIA is working to ensure that they are 
stretched as far as possible to bring the benefits of broadband to more 
Americans. At this time, NTlA is not able to estimate the total cost of 
deploying broadband to all Americans that currently lack it. Nor does 
NTIA have an estimate of the total cost of enhancing broadband service 
for the underserved areas of the United States that have some level of 
broadband access but exhibit lower levels of speeds, adoption, or 
availability than more fortunate areas of the country. The Federal 
Communications Commission is evaluating these questions further as part 
of its development of a national broadband plan. NTIA anticipates that 
information gathered from through BTOP applications, recipient reports, 
and through the State Broadband Data and Development Grant Program will 
help inform these estimates in the future.

    Question 5. Many are concerned about overlapping already-served 
areas with these stimulus dollars. I strongly believe that NTIA and RUS 
should not waste taxpayer dollars on funding broadband projects that 
intend to provide service in areas already served. Is this a concern to 
your respective agencies? And how do you plan to avoid overlapping in 
the second round of funding?
    Answer. While there are a number of steps NTIA is taking to ensure 
that funding goes to projects that will enhance broadband service in 
areas with demonstrated need and best fulfill the objectives of the 
Recovery Act, the eligibility standard for BTOP awards is not whether 
there is some level of existing broadband service or whether a project 
would be ``overlapping,'' but whether the applicant has demonstrated 
that their proposed funded service area is unserved or underserved. The 
underserved criteria can be met by showing that the proposed funded 
service area exhibits low levels of availability, adoption, or 
broadband speeds. 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. This standard allows for BTOP 
funds to support areas where some level of broadband service may exist, 
but robust investment or adoption has not yet taken shape.
    NTIA has provided existing service providers with the opportunity 
to submit information regarding their existing service offerings to 
help inform the application review process, and is also utilizing any 
other data at its disposal, including broadband maps compiled by states 
(if available), additional comments submitted by state Governors, and 
other databases to help evaluate claims made by both applicants and 
commenters to determine the unserved or underserved status of a 
proposed funded service area.
    In the recently released Request for Information (RFI), NTIA and 
RUS requested public comment on whether and to what extent the public 
notice comment process should be revised in the second funding round. 
NTIA is now reviewing those comments to determine what changes, if any, 
are appropriate in the second funding round.

                                  
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