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





  OVERSIGHT OF THE AMERICAN RECOVERY AND REINVESTMENT ACT: BROADBAND, 
                                 PART 2

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

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 10, 2009

                               __________

                           Serial No. 111-62









      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

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                    COMMITTEE ON ENERGY AND COMMERCE

                       HENRY A. WAXMAN, California  
                                 Chairman

JOHN D. DINGELL, Michigan             JOE BARTON, Texas
  Chairman Emeritus                     Ranking Member
EDWARD J. MARKEY, Massachusetts       RALPH M. HALL, Texas
RICK BOUCHER, Virginia                FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey        CLIFF STEARNS, Florida
BART GORDON, Tennessee                NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois               ED WHITFIELD, Kentucky
ANNA G. ESHOO, California             JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                 JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York              ROY BLUNT, Missouri
GENE GREEN, Texas                     STEVE BUYER, Indiana
DIANA DeGETTE, Colorado               GEORGE RADANOVICH, California
  Vice Chairman                       JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California                MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania        GREG WALDEN, Oregon
JANE HARMAN, California               LEE TERRY, Nebraska
TOM ALLEN, Maine                      MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois        SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California            JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas            TIM MURPHY, Pennsylvania
JAY INSLEE, Washington                MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin              MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas                   PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York           STEVE SCALISE, Louisiana
JIM MATHESON, Utah                    
G.K. BUTTERFIELD, North Carolina      
CHARLIE MELANCON, Louisiana           
JOHN BARROW, Georgia                  
BARON P. HILL, Indiana                
DORIS O. MATSUI, California           
DONNA M. CHRISTENSEN, Virgin          
    Islands                           
KATHY CASTOR, Florida                 
JOHN P. SARBANES, Maryland            
CHRISTOPHER MURPHY, Connecticut       
ZACHARY T. SPACE, Ohio                
JERRY McNERNEY, California            
BETTY SUTTON, Ohio                    
BRUCE BRALEY, Iowa                    
PETER WELCH, Vermont                 
      Subcommittee on Communications, Technology, and the Internet

                         RICK BOUCHER, Virginia
                                 Chairman
EDWARD J. MARKEY, Massachusetts      FRED UPTON, Michigan
BART GORDON, Tennessee                 Ranking Member
BOBBY L. RUSH, Illinois              J. DENNIS HASTERT, Illinois
ANNA G. ESHOO, California            CLIFF STEARNS, Florida
BART STUPAK, Michigan                NATHAN DEAL, Georgia
DIANA DeGETTE, Colorado              BARBARA CUBIN, Wyoming
MICHAEL F. DOYLE, Pennsylvania       JOHN SHIMKUS, Illinois
JAY INSLEE, Washington               HEATHER WILSON, New Mexico
ANTHONY D. WEINER, New York          CHARLES W. ``CHIP'' PICKERING, 
G.K. BUTTERFIELD, North Carolina         Mississippi
CHARLIE MELANCON, Louisiana          VITO FOSELLA, New York
BARON P. HILL, Indiana               GEORGE RADANOVICH, California
DORIS O. MATSUI, California          MARY BONO MACK, California
DONNA M. CHRISTENSEN, Virgin         GREG WALDEN, Oregon
    Islands                          LEE TERRY, Nebraska
KATHY CASTOR, Florida                MIKE FERGUSON, New Jersey
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
PETER WELCH, Vermont
JOHN D. DINGELL, Michigan (ex 
    officio)










                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................
    Prepared statement...........................................
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................
    Prepared statement...........................................
Hon. Zachary T. Space, a Representative in Congress from the 
  State of Ohio, opening statement...............................
Hon. Donna M. Christensen, a Representative in Congress from the 
  Virgin Islands, prepared statement.............................
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, prepared statement..............................
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................
    Prepared statement...........................................
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, prepared statement.....................................

                               Witnesses

Lawrence E. Strickling, Assistant Secretary for Communications 
  and Information, National Telecommunications and Information 
  Administration.................................................
    Prepared statement...........................................
    Answers to submitted questions...............................
Jonathan S. Adelstein, Administrator, Rural Utilities Service....
    Prepared statement...........................................
    Answers to submitted questions...............................

 
  OVERSIGHT OF THE AMERICAN RECOVERY AND REINVESTMENT ACT: BROADBAND, 
                                 PART 2

                              ----------                              


                      THURSDAY, SEPTEMBER 10, 2009

              House of Representatives,    
Subcommittee on Communications, Technology,
                                  and the Internet,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher [Chairman of the Subcommittee] presiding.
    Members present: Representatives Boucher, Eshoo, Stupak, 
Inslee, Butterfield, Matsui, Christensen, Space, McNerney, 
Welch, Waxman (ex officio), Stearns, Shimkus, Walden, Terry, 
Blackburn and Barton (ex officio).
    Staff present: Roger Sherman, Chief Counsel, 
Communications, Technology, and the Internet; Pat Delgado, 
Policy Director, Communications, Technology, and the Internet; 
Tim Powderly, Counsel; Amy Levine, Counsel; Shawn Chang, 
Counsel; Greg Guice, FCC Detailee; and Matt Weiner, Special 
Assistant.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. Good morning to everyone. Today our 
subcommittee conducts a second oversight hearing regarding the 
$7.2 billion provided by the Economic Recovery act for 
broadband programs. The Act requires that the programs be 
administered by the U.S. Department of Commerce through the 
NTIA and by the Department of Agriculture through the Rural 
Utilities Service.
    It is our pleasure this morning to welcome the NTIA 
director, Assistant Secretary for Communications and 
Information, Larry Strickling, and the Rural Utilities Service 
Administrator, Jonathan Adelstein, both of whom are well known 
to members of this subcommittee. They will discuss the process 
they have undertaken for the first round of funding and the 
standards that their agencies have developed that will govern 
the funding awards.
    The Recovery Act's broadband program presents an historic 
opportunity for increasing the availability of broadband and 
elevating the standing of the United States among the developed 
nations in the world in the percentage of the population that 
uses broadband. But the program will only be as effective as 
the standards that govern the grant awards and the loans as 
those standards enable it to be. I have some concerns which I 
will express this morning that the standards that have governed 
the first round of funding need to be modified for the upcoming 
rounds, and I will encourage the agencies to consider modifying 
them accordingly.
    My first concern regards access to grant funding for rural 
applicants. In many circumstances involving very small 
communities that lack broadband, only through grant funding as 
distinct from loan funding can broadband access be achieved. 
While in some situations loan funding can be sufficient, for 
communities with very small populations that are isolated by 
mountains, the cost of building broadband can be great, and 
with populations of as few as 100 homes, that cost cannot be 
recovered through the revenues to be realized from the 
broadband service itself. In those situations which are 
commonly found only through the award of grants can broadband 
infrastructure be built. In the RUS program, a grant of between 
80 percent and 100 percent of project costs is only available 
to communities that are determined to be remote, and any 
community that is within 50 miles of a city of at least 20,000 
in population is considered to be non-remote, disqualifying 
that community from receiving grants of more than 50 percent 
under the RUS program. Almost the entire eastern United States 
is disqualified from the 80 percent to 100 percent grants by 
what I think is a very inappropriate standard, and in 
mountainous terrain, the standard of being within 50 miles or 
something less than 50 miles of a city of 20,000 is not a 
reasonable yardstick for determining need. In Virginia, in West 
Virginia and in other States in the Appalachian region, 
hundreds of communities in isolated mountain valleys may be 
within only a few miles of a city but because of the high cost 
of building the fiber optics or wireless links in those 
challenging topographies, and given the very small size of the 
population to be served, only through grants of 80 percent or 
more of a project cost can these communities receive broadband. 
The previously existing RUS Community Connect program is well 
suited to the need that I have described but that program is 
very small with only $13 million having been available for 
grants on a nationwide basis in one recent year. I would urge 
that in round 2, the definition of ``remote'' be changed to 
qualify more truly isolated communities that may be close to a 
city. In the circumstances I have described, that proximity is 
functionally irrelevant.
    My second concern is that for rural applicants to be 
considered for the NTIA program, which has more flexible rules 
for making grants of 80 percent to 100 percent, the application 
must first go to RUS and be rejected by RUS before NTIA can 
make an award to that applicant. As a practical matter, I 
wonder if by the time RUS has reviewed and rejected an 
application as not qualified under RUS rules, if there is time 
remaining within that funding cycle for NTIA to review the 
application and consider it on an equal footing with 
applications that are initially directed to NTIA, and in the 
next funding round I hope that you will consider allowing 
applicants to designate the funding agency that will be primary 
for purposes of considering an applicant's application.
    My third concern relates to the standards that are used to 
determine areas that are underserved. They appear to be highly 
restrictive. One of three standards would have to be satisfied 
for an area to be deemed underserved. The first of these is 
that no more than 50 percent of homes could have a broadband 
connection greater than 768 kilobits per second. That is a very 
slow data rate that many would not consider to be true 
broadband. A speed of at least 1.5 megabits per second might be 
more appropriate. A second standard that independently could 
qualify an application for underserved funding is that no 
provider advertises download speeds of at least 3 megabits per 
second in the area, but I would suggest that advertising is not 
a truly reliable measure of genuine broadband availability 
since advertised speeds frequently exceed the real data rate 
that subscribers receive. The third standard is that the rate 
for household subscribership is 40 percent or less in areas 
that have broadband. The national take rate, I would note, is 
55 percent, and we are told that few places where broadband is 
found have take rates of 40 percent or less, and so I am 
concerned that these standards will result in many communities 
finding that the program is less helpful to them than we 
intended for it to be.
    My final concern is that apparently the States have been 
handed NTIA's entire basket of applications for initial review. 
We intended for NTIA to have final decision making over its 
applications, and I am looking for assurance that NTIA in fact 
will have that final decision making. We have recently heard, 
in our case, from the State of Virginia, that they were 
somewhat surprised to have received the entire group of 
applications directed to NTIA from Virginians and had 
anticipated only receiving a selected group of applications 
that had been prescreened through NTIA, and frankly, the State 
doesn't feel prepared to undertake that challenge and so I 
would appreciate your response as to why that happened and also 
some suggestion that we are looking for that you are going to 
retain final decision making with regard to these.
    I have exceeded my time rather substantially and the Chair 
intends to be very generous with other members who want to 
express their concerns or make their comments with regard to 
these matters.
    Mr. Boucher. The gentleman from Florida, the ranking 
Republican on our subcommittee, Mr. Stearns, is recognized for 
his opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Good morning, and thank you, Mr. Chairman, and 
thank you for holding this hearing, and let me first of all 
congratulate Secretary Strickling on his confirmation as 
Commerce Assistant Secretary for Communications and 
Information. I believe this is your first opportunity to 
testify, so welcome. I also want to welcome Administrator 
Adelstein, who has testified before this committee before, in 
fact a number of times in different roles, so you are to be 
commended for being adaptable. From broadband deployment to 
spectrum policy, both of you certainly will have your hands 
full, and I appreciate your public service here.
    These issues are of tremendous importance to the 
telecommunications sector, and in fact, when you talk about 
that sector, you are talking about the entire economy. The 
American Recovery and Reinvestment Act of 2009 provides a total 
of $7.2 billion for broadband, $2.5 billion of which will go to 
the Rural Utilities Service and the remaining $4.7 billion will 
go to the National Telecommunications and Information 
Administration. In addition, the Federal Communications 
Commission will consult with the NTIA and RUS and develop a 
national broadband strategy. Making sure these programs are 
administered fairly, efficiently and transparently is one of 
their top priorities and my top priority also. All of us agree 
that broadband has the opportunity to transform everyday lives 
from how we work, how we receive medical information, 
telemedicine in the future and how we are entertained. What is 
needed, my colleagues, is a long-term investment in broadband 
infrastructure that is based upon free market principles and 
not just a government-run and operated system. We have a 
remarkable opportunity to start another technological 
revolution, and I hope we don't squander this opportunity.
    So I applaud the folks on this type of transformational 
infrastructure. This can be only transformational if done right 
and provides enormous long-term economic benefit. 
Unfortunately, the haste, I believe, with which the stimulus 
package was drafted and enacted and the very short time frame 
it gives the NTIA and RUS to implement the program creates sort 
of a risk in my mind that taxpayers' dollars will not be used 
effectively. Dispensing this sort of money, this amount of 
money entrusted to the NTIA and the RUS in a manner that is 
fair and efficient, that will be a significant challenge to 
both of you gentlemen. We are going to have to commit ourselves 
to vigorous oversight and so, Mr. Chairman, I recommend at a 
later time we do have further hearings to look into oversight, 
how much of this huge billions and billions of dollars that are 
going to be going out in a short amount of time, how it is 
being used to ensure that the NTIA and the RUS would prioritize 
grants and States that have completed broadband maps so that we 
know that the grants are well targeted. This can also help to 
ensure that requests are made and provide a valuable incentive 
to complete maps in the remaining States as thoroughly and 
quickly as possible. In fact, I believe that no money should be 
spent until mapping is complete and the FCC broadband plan is 
finished, which I think will be early next year. This national 
broadband plan will set forth goals and policies on how to best 
improve broadband access, so it just makes sense that we should 
know where to spend the money before it is actually spent, and 
why not have these studies complete first.
    In addition, the NTIA and the RUS should prioritize grants 
in unserved areas before underserved areas. We should ensure 
that everyone gets firsts before others are allowed to seconds 
and thirds. Allocating funds to underserved areas first could 
distort the marketplace because companies will be forced to 
compete with government-subsidized competitors. This will also 
spread the subscriber base thin in what is already a difficult 
market to serve, providing each company with even less revenue 
to upgrade their facilities.
    And finally, the funds should be targeted to projects that 
demonstrate they can exist without government continued 
subsidizing into the future so that in 3 to 4 years we do not 
need to have them come back and say we need a bailout because 
we cannot meet our continued development. The NTIA and the RUS 
should not be in the business of funding projects that will 
impose new and expansive demands on the Universal Service Fund 
tomorrow. How they recognize these projects will be a difficult 
task.
    I am also concerned about the use of the stimulus funding 
process to expand on the FCC broadband policy statement 
obligations. I have been a skeptic of net neutrality, and these 
obligations strike me as another unjustified step down the 
slippery slope towards regulation of the Internet. I doubt that 
these non-discrimination rules will benefit consumers, expand 
broadband adoption or drive network availability in areas that 
simply lack broadband access. I fail to see how the imposition 
of these obligations dovetail with the rationale for the 
stimulus package in the first place, the near-term creation of 
jobs. If done right, we have a tremendous opportunity to boost 
our economy and transform the way we live but if we throw money 
indiscriminately at the problem only to say we are doing 
something, I don't think we will accomplish our long-term 
economic goals and also will not provide broadband investment 
the best means of deployment.
    So we cannot let this opportunity pass. I welcome this 
hearing, and Mr. Chairman, I look forward to further 
discussions and talking to our witnesses. Thank you.
    Mr. Boucher. Thank you very much, Mr. Stearns, and let me 
assure you that we will be having further hearings on the 
broadband stimulus program.
    The gentleman from Michigan, Mr. Stupak, is recognized for 
2 minutes.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. Thank you, Mr. Chairman, and thank you for 
holding this second oversight hearing on the American Recovery 
and Reinvestment Act. Welcome, Mr. Strickling and Mr. 
Adelstein, to our committee. I look forward to your testimony 
today.
    I also wish to thank John Morabito with the NTIA along with 
John Claffee and Jessica Sufilo with the RUS for speaking at 
our rural caucus staff briefing on the stimulus package that we 
hosted in July. It was great help to us all of us and to our 
staffs.
    Broadband access is of high interest for rural communities 
that wish to be part of today's 21st century economy. This 
interest was demonstrated in real numbers when 2,200 entities 
filed applications to link 28 billion in requests with the 
Departments of Commerce and Agriculture for broadband grants 
and loans this August. A quick search on Broadband USA shows 
northern Michigan alone accounts for 54 of these applicants, 
totaling more than $100 million in requests in middle mile, 
last mile and remote projects. Of course, these numbers far 
exceed the actual amount Congress appropriated towards 
expanding broadband access but we all knew that the demand 
would outpace the funding. The Broadband Technology 
Opportunities Program and the Broadband Initiative Program 
represent opportunities for the federal government to 
demonstrate that the American Recovery and Reinvestment Act can 
permanently improve the quality of life for rural communities.
    Now, that is not to say that the funding distributed so far 
has not been a necessary investment in our rural 
infrastructure, but at the end of the day, it is access to 
broadband that will make rural America's economy competitive 
for years to come. That leaves an enormous challenge for our 
witnesses and the agencies they represent. There is a lot of 
questions on how the applications will be handled and what 
mechanisms will be put in place to ensure the public money is 
distributed fairly. I look forward to hearing from our 
witnesses today.
    Thank you, Mr. Chairman, for holding this hearing. I yield 
back the last 7 seconds.
    Mr. Boucher. Thank you very much, Mr. Stupak.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
2 minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman. How generous of Mr. 
Stupak with those 7 seconds. I will try to be as courageous and 
bold.
    I want to thank you for the hearing and also for Ranking 
Member Stearns. You know, we are spending and plan to spend a 
huge chunk of taxpayers' dollars and actually increase 
indebtedness for this program, and this oversight hearing and 
the next oversight hearings that the chairman has promised are 
very, very important in this process. As an opponent of the 
stimulus bill, I am receptive to being proved wrong in certain 
areas. During the district work period, I went to Carlyle Lake, 
a Corps of Engineer lake, and really 50 percent of their 
backlog of unmet needs are being filled by some stimulus 
dollars. So where I still would have voted no, I am willing to 
say there are some positive things that might be going on and 
highlight that.
    So that is the importance of the oversight, to really make 
sure that taxpayers' indebtedness, there is a good return on 
that, and that is the importance of the job that you all are 
doing. When we had our first oversight hearing, we had the 
California Public Utilities commissioner here, and the question 
I posed, which I think is already kind of precedent based upon 
some of the comments have been made is, she testified that they 
would have spent money poorly had they not had done broadband 
mapping first, and so I would like to encourage that. I would 
not go as far as the ranking member of this committee saying no 
money should be doled out before that but I do think that those 
areas that have done broadband mapping and have already 
invested should also be taken into consideration when we look 
at where this money should go. Connect Southern Illinois has 
been trying to do that in southern Illinois. That is modeled 
after the Kentucky program. We have had numerous hearings on 
that. I would hope that that would be taken into consideration. 
And Commissioner Adelstein, we talked prior to the hearing 
about 911 and PSAPs. That is my part of my opening comment. The 
public safety aspect of this is really critical as we look at 
the importance of the broadband delivery system to emergency 
services communications. And, you know, in rural parts of the 
country, they just are not at the point of major metropolitan 
areas.
    And so I did not live up to Bart Stupak's time commitment. 
I apologize, and I yield back my time, Mr. Chairman. Thank you.
    Mr. Boucher. Thank you very much, Mr. Shimkus.
    The gentlelady from California, Ms. Matsui, is recognized 
for 2 minutes.

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Matsui. Thank you, Mr. Chairman, and thank you very 
much for your leadership on this very important issue and for 
calling the second hearing. I would also like to thank Mr. 
Strickling and Mr. Adelstein for being with us here today and I 
look forward to your testimonies.
    We are here today to examine the efforts of NTIA and RUS in 
carrying out the broadband programs established by the Recovery 
Act. The broadband package included a $7.2 billion investment 
in our Nation's broadband system. This investment will help 
expand broadband access to more and more Americans across the 
Nation. I am particularly interested to hear how the broadband 
program is helping households, schools, libraries, health 
facilities, among others, in urban underserved communities to 
achieve greater access to broadband services. In the current 
economic climate, more and more hardworking families need 
access to the Internet to find a new job, manage their finances 
during this difficult period, obtain news alerts, apply to 
college. The broadband stimulus package will help build out the 
infrastructure to many more communities throughout this Nation. 
Moving forward, I believe it is critically important that we 
address affordability of Internet access for all. In doing so, 
it would truly help close the digital divide for millions of 
Americans, and that is why I will soon be introducing 
legislation that will expand the Universal Service Fund's 
Lifeline Assistance program for universal broadband adoption. 
The legislation will help more lower income Americans living in 
urban and rural areas with assistance in subscribing to 
affordable broadband services.
    I thank you, Mr. Chairman, for holding this very important 
hearing today and I yield back the balance of my time.
    Mr. Boucher. Thank you, Ms. Matsui.
    The gentleman from Nebraska, Mr. Terry, is recognized for 2 
minutes.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Terry. Thank you, Mr. Chairman. Gentlemen, thank you 
for being here today.
    I am concerned that the goal of improving the broadband 
access to those Americans without it today was not fulfilled in 
this first round of stimulus problems funding. During the 
passage of the stimulus bill, the minority was assured that 
telecommunications carriers serving rural America would have 
access to stimulus dollars to deploy networks to their unserved 
customers throughout the RUS. Somewhere between passage and the 
RUS and the NTIA releasing the rules for the first round of 
most of rural unserved America was left out. What we have today 
are rules that prohibit an applicant from receiving anything 
higher than 50 percent grant to serve a remote area. By 
definition, a remote area is a 50-mile radius from a population 
center of 20,000 or more. I am not sure if it was the intent to 
exclude most of rural America but that is exactly what 
happened. In Nebraska, you may have to drive a couple hundred 
miles to find a town that big. As a result of the ``remote'' 
definition coupled with the burdensome regulation on the 
network, the three largest carriers in Nebraska decided not to 
apply for stimulus broadband money. If the carriers that were 
shovel-ready are not willing to apply, then I am concerned that 
the NTIA and RUS may award money to applicants who do not have 
the expertise or business to sustain networks in rural high-
cost America.
    I want to associate myself with the chairman's remarks, 
particularly about the speed, and hope to learn in today's 
hearing more about how the applications will meet America's 
remote areas and rural needs.
    Mr. Boucher. Thank you very much, Mr. Terry.
    The chairman of the full Energy and Commerce Committee, the 
gentleman from California, Mr. Waxman, is recognized for 5 
minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Chairman Boucher, for holding this 
timely hearing. I want to welcome Assistant Secretary 
Strickling, who is appearing before our committee for the first 
time as the administrator of the National Telecommunications 
and Information Administration, NTIA, as well as Jonathan 
Adelstein, who left the Federal Communications Commission after 
7 years of service as a commissioner to lead the Rural 
Utilities Service. I welcome you both. I also want to 
congratulate both of you on your recent confirmations and we 
look forward to working with you.
    As you are well aware, the overriding purpose of the 
American Recovery and Reinvestment Act of 2009 was to stimulate 
the economy by creating and preserving jobs. NTIA and RUS 
deserve high praise for issuing the initial application 
guidelines in a timely fashion while incorporating enhanced 
transparency and accountability measures, and I am pleased that 
the Notice of Fund Availability broadly reflects the objectives 
of the Recovery Act in stimulating the economy, creating and 
saving jobs and extending broadband to hard-to-reach and 
underserved communities. You and your staffs have worked around 
the clock to get the program up and running so that Recovery 
Act funds might have an immediate impact, and thank you for 
your ongoing efforts.
    There are many skeptics who said you could not get it done 
and there were those who said that Congress placed so many 
conditions on these funds, there would be too few applicants to 
make this effort worthwhile. Contrary to these fears, the 
response to the NOFA has been overwhelming. It is clear that 
the public interest obligations that attach to this public 
money have not deterred interest or innovation, and it is clear 
that with 2,200 applications seeking over $28 billion in funds, 
there is a keen interest across the telecommunications and 
technology sector in providing all of our citizens with access 
to advanced broadband networks. I am confident that broadband 
stimulus funds will lead to new and innovative offerings that 
benefit our Nation.
    While we understand that your work is just beginning, now 
that you have established the framework for releasing these 
funds, you must make certain they are released wisely, 
transparently and efficiently. I think most members of this 
committee and the American public recognize that this overall 
program is an unprecedented endeavor in scope and speed. We 
understand that you will want to refine certain details to 
improve performance and maximize the benefits of the public's 
investment in these efforts, and I know you will be interested 
in receiving constructive suggestions from both sides of the 
aisle.
    I look to hearing your testimony and I thank you for being 
here today and I thank the chairman for convening the hearing.
    [The prepared statement of Mr. Waxman 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Boucher. Thank you very much, Chairman Waxman.
    The gentlelady from Tennessee, Ms. Blackburn, is recognized 
for 2 minutes.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. I want to welcome 
both of you. Mr. Adelstein, it is going to be a pleasure to 
continue our ongoing conversation about broadband and 
intellectual property. Mr. Strickling, congratulations. I have 
enjoyed my visit with you and look forward to more. I think all 
of you know that I am very concerned about broadband and the 
effect that that has on my constituents in Tennessee's 7th 
Congressional District and I am also going to look forward to 
hearing from you all not only about how we go about with that 
broadband deployment and the program that is before us and the 
oversight we need to do on this, addressing the applications, 
addressing spectrum relocation, how to best achieve our shared 
goal of universal access, and the development of a broadband 
map, the use of those maps. There are all topics that you have 
heard from others.
    This morning I do want to touch on one thing I don't think 
anyone has touched on, and that is non-discrimination in 
Internet content, and I support the policy goal of ensuring 
that all Americans do have access to broadband. Universal 
broadband access can greatly increase economic opportunity for 
all Americans. Indeed, many times we have talked about the need 
for this in the rural part of my district. They look at 
economic jobs recruitment and retention. So it is important not 
only to me but to all of us. The Internet, though, should not--
it is not and should not be neutral with respect to unlawful 
content. I fear that misguided non-discrimination regulations 
that fail to distinguish between legal and illegal content 
would undermine broadband adoption.
    So I know I am out of time but I do want to highlight that 
with you all. I am also going to want to look at how you spend 
the $7 billion in the broadband stimulus funds, where that is 
going to go, how those are going to be vetted, how we are going 
to go about vetting those applications. I have got a couple of 
concerns that I want to highlight on that.
    Thank you, Mr. Chairman. I look forward to the discussion.
    [The prepared statement of Mrs. Blackburn 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Boucher. Thank you very much, Ms. Blackburn.
    The gentleman from Ohio, Mr. Space, is recognized for 2 
minutes.

OPENING STATEMENT OF HON. ZACHARY T. SPACE, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Space. Thank you, Chairman Boucher and Ranking Member 
Stearns and to our witnesses today. Assistant Secretary 
Strickling and Mr. Adelstein, thank you for taking the time out 
of your busy schedules to be here and I would like to 
congratulate you both on your recent appointments.
    The task Congress presented to NTIA and RUS at the 
beginning of the year was daunting. I commend both of your 
teams for taking on the challenges of the statute and 
implementing a number of innovative approaches. Streamlining 
the application process to eliminate duplicity and promote 
efficiency in time and resources seems to have warranted praise 
from many sectors, and the efforts you have taken in holding 
public forums and workshops are to be commended as well. 
Furthermore, I hope that your commitment to transparency 
remains as we move ahead.
    I do believe that following the completion of the first 
round of funding, there is some room for improvement. 
Fortunately, the process is structured to allow for such 
changes to be made before progressing with the second round of 
funding. Specifically, I am concerned that the RUS's definition 
of ``remote'' may exclude regions of the country very worthy of 
seeing those Recovery Act dollars. The State of Ohio in 
particular remains essentially ineligible for these funds, and 
I think some of my constituents in Appalachia would argue that 
they live in truly remote areas. I do look to forward to 
working with you both as part of this ongoing process, and of 
course, I share your support for providing broadband access and 
the seemingly infinite benefits that such access affords to all 
Americans.
    Thank you, and I yield back my time.
    Mr. Boucher. Thank you very much, Mr. Space.
    The gentlelady from the Virgin Islands, Ms. Christensen, is 
recognized for 2 minutes.

       OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 
       REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Thank you, Mr. Chairman, and thank you 
for holding this hearing. You know, when it came to deciding my 
second subcommittee, I was torn, but your leadership, Mr. 
Chairman, and the importance of the work of this subcommittee 
to, as the President said last night, not just dealing with 
crisis but to building a future, has reaffirmed that I made a 
good choice, the right choice.
    I also want to welcome Assistant Secretary Strickling and 
Administrator Adelstein this morning. I am not going to use my 
opening remarks to lay out concerns. I will get to some of 
those in the questioning period, but I share some of them that 
have already been expressed. Today I just want to commend both 
agencies for the way you have worked together and have reached 
across the country and for your commitment to simplifying the 
process, to bringing broadband to every person in this country 
and to using the federal dollars that have been entrusted to 
you efficiently, effectively and responsible.
    The U.S. Virgin Islands and I have had a long relationship 
with RUS and so I know of your long experience in carrying out 
technology across the country, and we appreciate not only that 
you don't forget us but that you always include the 
territories, and we applaud your ability to have leverage of 
$2.5 billion to over $7 billion. NTIA, when you were here 
before, you convinced me that you were not only aware of the 
territories but embraced the fact that your responsibility 
extended to us, and being a representative both in my district 
and as a racial minority of those who are referred to in your 
testimony and your priorities as our most vulnerable 
populations, I applaud the goal to close the broadband gap and 
bring maximum broadband benefits to communities that are often 
left out and left behind.
    Speaking on behalf of my own and other providers, we also 
appreciate that stimulating broadband demand is also one of the 
priorities, so I look forward to the discussion after your 
presentations. I know the devil is in the details, but thank 
you once again for your aggressive approach to building for our 
future.
    Mr. Boucher. Thank you very much, Ms. Christensen.
    The gentleman from California, Mr. McNerney, is recognized 
for 2 minutes.
    Mr. McNerney. Thank you, Mr. Chairman. I do want to thank 
you for your leadership on this issue, and especially holding 
this hearing this morning. I want to thank Mr. Strickling and 
Mr. Adelstein for your work in developing the definitions and 
putting together a framework for releasing the funds. I 
understand that a large number of applications have been 
received, far larger than what was predicted, and so it is 
critically important that we distribute those monies in a way 
that creates jobs and improves broadband service throughout the 
country.
    So with that in mind, I look forward to working with you 
all to make sure that we meet those goals, and with that, I 
just yield back the balance of my time.
    Mr. Boucher. Thank you, Mr. McNerney.
    The gentlelady from California, Ms. Eshoo, is recognized 
for 2 minutes.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman. It is great to be back, 
and I want to welcome the two outstanding people that are here 
today, Assistant Secretary Strickling and, of course, the new 
administrator, Jonathan Adelstein. It is wonderful to see you 
in your new position, and I congratulate you.
    I am really pleased that we have this opportunity to talk 
not only about your roles in the broadband stimulus program, 
because we are really depending on you on both, NTIA and the 
RUS, to ensure that the recovery funds really spur growth and 
speed economic recovery in our country. It is why the language 
and the dollars were placed in that very large package, and I 
think one of the most important parts of it. So I know that you 
are going to work hard to meet these priorities.
    Assistant Secretary Strickland--Strickling. We had a 
Strickland on our committee so I am sorry for the slip of 
tongue. You have taken over NTIA at a time when it is really 
shifting gears and readjusting its priorities. You have gone 
from handing out DTV coupons to reviewing broadband 
applications in the space of a few weeks, so that is a big 
shift, and we want to see you prosper in this. In May of this 
year, Representative Markey and I wrote to Secretary Lock and 
Secretary Vilsack to urge the prioritization of broadband 
projects under the Recovery Act based on advanced capabilities 
and speeds. Improved access to distance learning, telemedicine, 
economic growth and job creation are dependent upon network 
construction that delivers capacity for high-bandwidth 
applications. We don't want to start out moving like a turtle. 
When this is implemented, we want it at the highest speeds 
possible. That is really how we are going to define success, in 
my view, anyway. The recovery funds should go toward this goal 
as well as projects aimed at unserved areas.
    I know that the first round of applications brought forward 
some complaints from software breakdowns to onerous application 
questions that might reveal proprietary information. There are 
concerns that the program doesn't encourage higher speeds in 
underserved markets or spur anchor institutions but focuses 
instead on lower speeds in rural regions. Rural regions should 
not be subjected to lower speeds, period. This is the United 
States of America. I think we should have the highest standards 
and the highest speeds across the entire country. Just because 
they are rural should not equate to low speeds. Thankfully, we 
are only in the first round of the process and the funds remain 
available to achieve all of Congress's priorities and goals. I 
hope you have a plan to encourage projects that utilize the 
most advanced highest bandwidth. I also hope you have a plan 
for addressing concerns about the application process and 
improving it during the next round.
    So again, thank you for taking on the jobs that you have. I 
am sure that we are going to be working closely with one 
another and tracking this because it really is so important for 
the future of our country. So congratulations again and I look 
forward to not only working with you but also questioning you 
as well. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Ms. Eshoo.
    The gentleman from North Carolina, Mr. Butterfield, is 
recognized for 2 minutes.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you, Mr. Chairman.
    Mr. Chairman, thank you for holding the second part of this 
very important hearing. This is an opportunity to hear 
testimony from Mr. Strickling as well as Administrator 
Adelstein. I want to sincerely congratulate both of you for 
your respective appointments and I certainly look forward to 
working with you to better serve the people of my state, which 
is the state of North Carolina, the 1st Congressional District. 
My district is a rural district. In fact, we have the fourth 
poorest district among the Congressional districts in the 
country.
    As you know, $3.8 billion was made available through the 
first of two Notices of Funds Availability for broadband 
deployment across the United States, and these are critically 
important funds needed to help ensure that our struggling 
communities are able to join the global economy. America's 
unserved and underserved communities are decades behind our 
technologically advanced areas of the country. I know because I 
represent many of these communities. Access to broadband is 
something many of us take for granted yet it is still out of 
reach for nearly half of all U.S. households. We have a 
responsibility to make certain that funding for broadband 
deployment be distributed to those communities with the 
greatest need. It is vitally important that these funds be 
distributed quickly and efficiently so that access to broadband 
technology will be realized throughout the country. Last 
January, during the full committee markup, I strongly advocated 
for Congress, not NTIA, to have the discretion to define 
unserved and underserved. While NTIA's definitions do identify 
a number of needed communities, many deserving communities are 
still being left behind.
    While broadband access may be available to just over 40 
percent of households, it is certainly not affordable for low-
income populations, and this is the situation in my hometown of 
Wilson, North Carolina. Since 2008, through a public effort, my 
city has spent $30 million in an effort to provide broadband 
service to every household. The city has been proactive in 
deploying broadband to households and aims to provide broadband 
services at reduced cost to every home within the city. While 
this city of Wilson is partially served by high-priced 
broadband service providers, the city's service called Green 
Light provides a fiber to home alternative. Unfortunately, 
without additional assistance, the city will be unable to 
continue to deploy affordable broadband access to low-income 
sections of the city.
    Mr. Chairman, I see that my time is expired. I ask 
unanimous consent that the entire statement be included in the 
record.
    [The prepared statement of Mr. Butterfield 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Boucher. Without objection, and the Chair thanks the 
gentleman for his comments, and we welcome now our witnesses 
for this morning, and I want to add my voice to those of the 
subcommittee--oh, I am sorry. I did not see Mr. Barton arrive, 
so my welcome to you will have to be postponed. At this time I 
am pleased to recognize the ranking member of the full Energy 
and Commerce Committee, the gentleman from Texas, Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Mr. Chairman, normally I wouldn't interrupt but 
my staff's feelings are going to be hurt if I don't read at 
least some of their excellent opening statement.
    Let me thank you, Mr. Chairman, for calling this hearing. 
Let me welcome Assistant Commerce Secretary Strickling and 
congratulate him on his recent appointment, and to our other 
witness, you have a new job now. I am used to seeing you as the 
FCC commissioner and now you have moved over, so we are glad 
that you are here.
    I am glad we got the DTV transition behind us, Mr. 
Chairman. You know, all of those worries of Armageddon turned 
out not to be true. The biggest problem was that I never got 
around to asking for a coupon so I still have television sets 
that are inoperable, and it is the Congress's fault, you know. 
But I am going to take it up with my Congressman at the 
appropriate time with the appropriate letter of strong 
condemnation.
    Let us simply say that in terms of broadband 
implementation, my staff indicates that over 2,000 requests 
have been received for $28 billion. That is four times the 
amount of money that the Congress has allotted, so let me tell 
you two gentlemen, as long as you fund the applications in my 
Congressional district, we won't have a lot of problems, and I 
guess Mr. Boucher and Mr. Shimkus and Mr. Terry, I am looking 
on the other side, my friends over there, you know, fund the 
ones that are here in attendance when the gavel sounds and we 
will be oK.
    We do think that projects should be prioritized where the 
mapping is already complete. There is nothing in the statute 
that would prevent you from taking that. My understanding is 
that maps have been completed in at least 10 States and there 
are 10 other States where they almost completed. This is an 
opinion and not necessarily a fact, but I believe that there 
should be some prioritization for areas that are totally 
unserved as opposed to underserved because underserved is in 
the eyes of the beholder but unserved is unserved and there is 
no--you know, that is an either/or digital decision. They 
either have service or they don't.
    I guess with that, Mr. Chairman, I will yield back and 
submit my formal statement for the record, but again, I welcome 
our two witnesses and we look forward to hearing your 
testimony. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Barton.
    And now I am pleased to welcome our two witnesses and 
congratulate both of them upon their appointments to head their 
respective agencies. This subcommittee is very familiar with 
both of these gentlemen, who have appeared before us 
previously. Mr. Strickling was at one time head of the common 
carrier bureau at the FCC, and Mr. Adelstein for a number of 
years served as a commissioner at the FCC, and I would say that 
both of these agencies are certainly fortunate to have your 
services as is the United States government.
    Mr. Strickling is now the assistant secretary for 
communications and information of NTIA. Mr. Adelstein is the 
administrator for the Rural Utilities Service at the U.S. 
Department of Agriculture, and I want to commend both of you 
for the way in which you have coordinated your work as the 
standards for making grants and loans under the broadband 
program have been developed. I think it is commendable that you 
have worked together this well and that you have a seamless 
program for all intents and purposes. I think that serves our 
purposes in terms of making sure the program is effective and I 
commend you for that coordination that you have undertaken.
    Without objection, your prepared written statements will be 
made a part of the record and we would welcome your oral 
presentation of approximately 5 minutes. Mr. Strickling, we 
will be pleased to begin with you.

 STATEMENTS OF LAWRENCE E. STRICKLING, ASSISTANT SECRETARY FOR 
COMMUNICATIONS AND INFORMATION, NATIONAL TELECOMMUNICATIONS AND 
    INFORMATION ADMINISTRATION; AND JONATHAN S. ADELSTEIN, 
             ADMINISTRATOR, RURAL UTILITIES SERVICE

              STATEMENT OF LAWRENCE E. STRICKLING

    Mr. Strickling. Thank you very much, Chairman Boucher and 
Ranking Members Stearns and Barton. I want to thank all of you 
for the invitation to testify today on behalf of the NTIA on 
the implementation of the Broadband Technology Opportunities 
Program and the development of the national broadband map as 
set forth in the Recovery Act. I welcome this opportunity to 
come before you early in my tenure as assistant secretary to 
begin this dialog in collaboration on our shared priorities of 
fostering innovation and growth in the communications and 
information sectors and ensuring that all of our citizens are 
able to participate in today's Information Age. I am also very 
pleased to appear here today with Jonathan Adelstein, who 
oversees the Broadband Initiatives Program at the U.S. 
Department of Agriculture. Our two agencies, as has been noted, 
have worked hand in hand the last several months to implement 
the broadband provisions of the Recovery Act, and the result 
has been a highly coordinated and well thought out approach 
that takes advantage of the individual expertise of the two 
agencies.
    The message we bring to you today is that we have put our 
programs in place. We have receiving an overwhelming response 
to our initial round of funding and we look forward to the 
challenge of awarding grants later this fall to a diverse set 
of grant recipients. I want to assure you that these funds will 
be well spent. We expect to leverage these programs into 
significant and lasting improvements in America's technological 
innovation and economic health, which will allow us to take a 
significant step forward to achieve President Obama's vision of 
bringing the benefits of broadband to all Americans.
    Today we are in the thick of reviewing the initial 
applications we received in late August. Between our two 
agencies, we received over 2,200 applications requesting nearly 
$28 billion in funding, which was seven times the funding 
available in the first round. When we include the over $10 
billion in matching funds that our applicants have committed, 
these applications represent more than $38 billion in proposed 
broadband projects. At least one application was filed for each 
State, each territory and the District of Columbia. The 
applicant pool is diverse and include States, tribal nations, 
local governments, nonprofit organizations, telephone, cable 
and wireless companies and anchor institutions such as schools, 
libraries and hospitals. I am very encouraged by this extremely 
high interest level shown by the applicants in our first round 
and I urge all of you to take a look at our Web site, 
BroadbandUSA.gov, which is now up and running with a searchable 
database containing descriptions of all the applications we 
have received. Soon we will be posting the maps of the 
geographical areas of coverage proposed by our first round 
applicants.
    In our evaluation of these applications, first at least 
three expert reviewers will grade each application against 
established criteria including the proposed project's purpose, 
benefits, viability and sustainability. These reviewers have 
been selected based on their expertise and background and we 
are carefully screening them for any actual or apparent 
conflicts of interest. The reviewer's scores for each 
application will be averaged and those applications considered 
the most highly qualified will advance for further 
consideration. Mr. Chairman, you made a comment raising a 
concern about the sequencing of our review, and I want to 
assure you that we are going to be looking at all of the 
applications that we have received and will not be waiting to 
review the joint applications submitted to both of our agencies 
until the Department of Agriculture has completed its review, 
so everything will be looked at in sequence without any delay.
    Each State and territory will be given the opportunity to 
prioritize and comment on the applications relevant to its 
jurisdiction. Again to clear up any misconception, the States 
are not reviewing the applications in lieu of the reviews that 
we are conducting, and as always we retain the decision as to 
which grants will be awarded. However, the Act does recognize 
that State and territorial officials have a unique perspective 
on broadband needs within their jurisdictions, and we look 
forward to their input.
    For those applications that merit further consideration, we 
will engage in additional due diligence, which will include our 
requesting supplementary information from applicants. NTIA 
staff will review and analyze this information and prepare 
recommendations as to which projects should be funded. Those 
recommendations will be presented to me and I will make the 
final selections consistent with the statutory directives 
established in the Recovery Act. We expect to begin announcing 
grant awards in November and hope to complete the first round 
of awards by the end of the year.
    I would also like to update the subcommittee on our 
progress to develop the national broadband map. Under the State 
broadband data and development grant program for which Congress 
appropriated $350 million, I am pleased to report that we 
received an application from every State, territory and the 
District of Columbia. We will also be awarding grants to States 
to support their own planning efforts for broadband just as the 
Recovery Act allows. With respect to those planning grants, 52 
applicants requested a total of $26 million in funding for that 
planning project. As with the broadband grants, there will be 
review by technical experts followed by a second review 
performed by our own staff. We hope to award a broadband 
mapping grant to every State and if necessary we will work with 
the States to revise and refine their proposals so that each 
proposal meets our standards. We expect to announce the first 
mapping awards by the end of September. We expect to receive a 
substantially complete set of State-level availability data by 
November followed by a complete verified set of all requested 
data by next spring. We will complete that map by February 2011 
as required by the Recovery Act.
    Even in the middle of all this activity to review the 
broadband applications and the mapping applications, we are 
constantly thinking about ways to improve the program. For 
example, our experience with this first round is leading both 
of our agencies jointly to explore the option of holding just 
one more round of funding. This may have the potential of 
yielding benefits for all stakeholders. First, it would enable 
us to complete the entire grant-making process in the summer of 
2010 as opposed to next September, and expedite the stimulative 
benefits for the economy and job creation that the Recovery Act 
promises. Combining the second and third rounds into a single 
funding round would also allow us to adjust the next 
application deadline, giving additional time first to the 
stakeholders to provide us their views as to how the first 
round worked for them and to our agencies so we can learn from 
our experience and adjust those aspects of the process that 
need to be improved. Finally, combining the two rounds may also 
save administrative expenses.
    With respect to the mapping program, we announced yesterday 
that we will initially fund the State data collection efforts 
for a 2-year period as opposed to the 5-year period originally 
contemplated. Again, this approach allows us to assess lessons 
learned, determine best practices and investigate opportunities 
for improved data collection methods prior to awarding funds 
for subsequent years. Based on what we have received, we expect 
that the funding for 2 years will cost approximately $100 
million, far less than the $350 million appropriated by 
Congress, and in no way will this change affect our ability to 
publish a comprehensive map by the February deadline.
    For both the broadband grants and the mapping grants, we 
are devoting substantial efforts to meeting our oversight 
obligations for the program. We are committed to ensuring that 
taxpayers' money is spent wisely and efficiently. Since the 
passage of the Act, we have been working with the Department of 
Commerce's inspector general to design the program in a manner 
that minimizes the risk of waste, fraud and abuse. Just last 
week we met with the inspector general's office to kick off its 
audit of the program as called for in the Recovery Act. As we 
move forward and begin to make awards, we will ramp up our 
auditing and monitoring responsibilities including site visits 
to grantees. We are working extremely hard to ensure that the 
projects funded by the Recovery Act serve as valuable inputs to 
our long-term broadband strategy. I look forward to working 
with all of you in the months ahead to ensure that the Nation's 
policies benefit our communications and information industries 
and American consumers.
    Thank you again for the opportunity to testify, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Strickling 
follows:]*************** INSERT 1 ***************
    Mr. Boucher. Thank you very much, Mr. Strickling.
    Mr. Adelstein.

                STATEMENT OF JONATHAN ADELSTEIN

    Mr. Adelstein. Thank you, Mr. Chairman, Ranking Member 
Stearns, Ranking Member Barton and members of the subcommittee, 
and thank you for inviting me back to testify. Mr. Chairman, I 
especially appreciate your longstanding leadership in support 
of our mission to serve rural America. In my previous capacity 
in the FCC, I worked closely with many of you to promote 
broadband against America in rural areas as well. Increasing 
broadband deployment and adoption rates in rural areas is a top 
priority for President Obama, for USDA Secretary Vilsack and 
all of us at RUS. I know it is for the subcommittee and for 
this Congress as well. It is a special honor to appear with my 
good friend, Larry Strickling, who has done such an outstanding 
job of leading the NTIA through this period. Our challenge is 
clear. Broadband continues to lag in America and it continues 
to lag in rural America, and we can't allow this to continue.
    A recent USDA study that we provided to the committee 
documented how rural communities with access to broadband 
create more jobs and have higher earnings. Those which lag are 
economically handicapped. You have given us an historic 
opportunity through the Recovery Act to address this challenge 
and at the same time provide urgently needed stimulus to our 
economy. RUS has long and highly successful experience 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 a newer 
technology, to broadband. We have been on the cutting edge. 
Since 1995, we have required all new telecommunications 
capacity that we finance to be broadband capable. We have also 
had great success with our Community Connect and distance 
learning and telemedicine programs. The USDA broadband loan 
program created by the 2002 Farm Bill has provided over $1.1 
billion in loans to more than 90 broadband projects in rural 
communities spanning 42 States, so we have got experience.
    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, as Assistant Secretary Strickling indicated, 
with our partners at the FCC, my former colleagues, and with 
the White House to fulfill the President's vision for promoting 
broadband access across the Nation. The collaboration between 
RUS and NTIA has been unprecedented. Our departments have 
traditionally performed very different roles but I have been 
thrilled to join forces with someone of Secretary Strickling's 
caliber as well as his talented staff to bring broadband across 
the United States.
    As Mr. Strickling indicated, we have received an 
overwhelming demand for funding. The volume of applications 
demonstrates very clearly the still unmet need for broadband in 
rural America. RUS received nearly $18 billion in requests for 
$2.4 billion in funding in this round, and applications came 
from a wide array of partners including State and local tribal 
governments, nonprofits, industry and public sector 
organizations in all 50 States and all territories. We are now 
evaluating them and we expect to begin awarding grants in 
November. We estimate that the $2.5 billion in budget authority 
entrusted to the RUS could translate into as much as $7 to $9 
billion in grants, loans and loan-grant combinations to 
applicants. The first NOFA made available $2.4 billion of this 
total. This leaves around three-quarters of the total funds 
left for subsequent rounds. So any potential applicant that as 
unsuccessful in the first round or missed the opportunity to 
apply will still have ample opportunity to compete. As we did 
with the first NOFA, we ran intensive outreach efforts to open 
this process to as many potential applicants as possible.
    We will take what we learned in the first round, and your 
concerns, as many of you have articulated them today, to heart 
in developing our next round of funding. We are aware of the 
concerns that many of you and others have 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. Without speculating about 
specific changes, we will be guided by your counsel and of 
course by the evaluation of the experience and the feedback 
from the first round of projects. We are prepared to make 
changes accordingly. This is a thoroughly collaborative process 
with our partners at NTIA. We will avoid duplication. It will 
exploit the synergies between NTIA, which is running a grant 
program, and the loan and grant authority available to the RUS. 
We are committed to very careful stewardship of taxpayers' 
dollars. We will make this process as transparent and as 
efficient as possible. In fact, yesterday we posted on the Web 
all of the applications in a searchable database. I see that 
Congressman Stupak has already looked at it and seen how many 
he has in his district, and I encourage all of you to look at 
that. You will be able o see exactly what has been proposed in 
your districts. There is a man right there Congressman Terry 
has. We plan to post maps of their service areas very shortly.
    So on behalf of all of us at USDA, we thank you again for 
your support for this critical mission. Your work has made 
possible this historic opportunity to restore economic 
prosperity and improve the quality of life in rural America. It 
is an honor to work with you on behalf of the 65 million 
Americans who live in our rural communities. I would be happy 
to answer any questions that you have.
    [The prepared statement of Mr. Adelstein 
follows:]*************** INSERT 2 ***************
    Mr. Boucher. Thank you, Mr. Adelstein, and thanks to both 
witnesses for your fine presentations here this morning.
    You heard my concerns expressed in my opening statement 
about the definition of remote, and I was pleased to hear you, 
Mr. Adelstein, say that that is one of the things that may be 
reconsidered with regard to the standards for the second round. 
Let me get you to elaborate just a bit on whether or not you 
share the concern that I have expressed. There are areas that 
are truly isolated that could be fairly close to a city. I saw 
a map yesterday that shows that virtually the entire eastern 
United States is disqualified from your highest level of grant, 
which is 80 percent to 100 percent, by virtue of the remote 
requirement, and any area that is within 50 miles of a city of 
at least 20,000 population is considered non-remote and 
therefore not qualified. This is the map. I don't know if you 
can see it. It is fairly small but as you can see, these dark 
areas around the eastern United States are the unqualified 
areas based upon your definition of remote. There are some 
places in the West that are qualified, but in the East, not, 
and in the Appalachian region we have these very small pockets 
of communities that are in mountainous areas that could be 
within 5 or 10 miles of a city but be for all practices 
purposes inaccessible. It is difficult to build the fiber links 
or wireless facilities that can serve such a community, very 
expensive, and if you have got 100 homes, the revenues that 
would be derived from a service that expensive serving that 
small a population would not be sufficient to repay a loan or 
perhaps encourage a private sector partner to apply for a grant 
that could only be 50 percent of project cost, and yet that is 
the maximum grant to which under your rules such a community 
would be eligible.
    So that is the concern broadly stated, and I would just 
welcome your response, either of you. Mr. Adelstein, it is more 
in your territory, so let me start with you.
    Mr. Adelstein. Well, I certainly understand your concern. 
All of these issues are under consideration as we review the 
results of the first NOFA. We are going to go out for comments 
shortly in October and we will make a decision based on our 
experience of the current applications in the round of data 
that we are getting from that. The RUS in the past has been 
criticized for being too urban, for going too close to urban 
areas with our funds, and we want to restore our mission to 
being as rural as possible, to go into remote areas, and that 
was the impetus behind really forcing the largest amount of 
grant funds into the most remote parts of the country. We set 
aside $400 million for remote grants and saw a huge demand. 
Some people thought that there wouldn't be interest because of 
the narrow number of areas that are eligible----
    Mr. Boucher. But let just ask you if there was a geographic 
weighting with regard to where those applications came from. I 
will bet most of them came from the western United States, 
didn't they?
    Mr. Adelstein. I can do an evaluation and supply that for 
the committee.
    Mr. Boucher. Well, it would be interesting to see the 
geographic breakdown of where that came from. Well, I hear you 
say you understand the concern we have expressed and that you 
are willing to consider it. Let me move on to some other 
issues.
    Mr. Strickling, I would like to get your further 
elaboration on the concerns we have just had expressed to us, 
at least by my State of Virginia, perhaps some other States, 
that unexpectedly they have now received your basket of 
applications whereas in the past they have been given to 
understand that you were going to do the prescreening and that 
only maybe the final applicants would be sent to them for their 
comments, and they feel unprepared from a resource standpoint 
to review the entire basket of applicants. So what is your 
response to that? Why did that happen? And what is it you are 
looking for from these States?
    Mr. Strickling. Thank you. Let me start with the second 
part of your question because I think the burden on the States 
is not as great as perhaps they fear it is. What we are looking 
for from them is their sense of prioritization of the 
applications they have seen. We are specifically interested in 
understanding what areas of their States they believe are the 
ones in greatest need where we should look the most closest as 
applications. We are not asking them to review the applications 
the way we are going to look at them at NTIA to the extent of 
is it a viable project, is it a sustainable project. They are 
welcome to do that. That is not what we are asking them to do. 
In terms of what they have been given, they have been given 
obviously the same public access to the searchable database 
that everyone has. In addition, they will have access to the 
executive summaries, which is about a 5-page description of 
each project. That will be available to them, we hope starting 
next week. Beyond that, if they want more information from the 
applications, we will facilitate getting them more information 
but we are not sending them the full applications for their 
review.
    Mr. Boucher. Well, let me ask this. You in the end are 
going to retain final decision making with regard to all of 
these applications, are you not?
    Mr. Strickling. Absolutely.
    Mr. Boucher. And so you are looking to the States for 
comments and you will consider those comments along with other 
matters in order to make those final decisions?
    Mr. Strickling. That is correct.
    Mr. Boucher. One additional question that I want to ask of 
you. You have said that you will be reviewing applications that 
are directed to both agencies where that box is checked on the 
application saying that it is to be considered by both 
agencies. You will be reviewing those applications 
simultaneously----
    Mr. Strickling. Yes.
    Mr. Boucher. --with RUS reviewing those applications?
    Mr. Strickling. Yes.
    Mr. Boucher. And you will not be waiting until RUS makes a 
decision with regard to whether or not that application is 
qualified before you start your review so it would not have to 
be rejected first at RUS before you begin to review it. Is that 
correct?
    Mr. Strickling. That's correct, but we----
    Mr. Boucher. So here is my follow-up question. While I 
understand that answer, as a practical matter, let us suppose 
that in the funding cycle RUS doesn't get around to really 
rejecting that application until fairly late in the cycle. Now, 
in theory, at least, it will have been reviewed in your office 
already, but by then you well may have made your prioritization 
of the applications you intend to fund. So would that 
application with the rejection from RUS coming so late in the 
process potentially mean that that application still as a 
practical matter would be considered on equal footing with the 
applications that were primarily directed to you?
    Mr. Strickling. Yes, sir, I think we will be able to handle 
that. We will obviously be in coordination and in contact with 
RUS through the review process, so I would hope to avoid the 
situation where there is a last-minute rejection on their part 
of a grant that we would like to fund if we know they are not 
going to fund it, and I think that through the coordination we 
expect to have, we should be able to avoid that problem.
    Mr. Boucher. So as I interpret your answer, you would be 
prioritizing all of the applications you receive whether they 
are directed solely to you or directed both to you and RUS at 
the same time and you would not be preparing one priority list 
just of the applications directed to you. Any application you 
receive, whether only to you or to you and RUS, would be 
eligible for that initial priority list so that if the 
rejection comes late, that application would in fact still be 
on equal footing with those directed just to you. Is that 
correct?
    Mr. Strickling. Yes, sir.
    Mr. Boucher. All right. Thank you, Mr. Strickling.
    My time is expired. The gentleman from Florida, Mr. 
Stearns, is recognized for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. Just to review, the 
stimulus package had $7.2 billion of which $4.7 the NTIA is 
going to spend and the RUS is going to spend $2.5 billion. Now, 
it is my understanding that the bill indicates that you have to 
spend all of this by September of next year. Is that roughly 
your understanding, both of you?
    Mr. Strickling. Yes.
    Mr. Adelstein. Yes, sir.
    Mr. Stearns. Now, when you set the criteria to determine 
who is going to get awarded this, are you going to also put 
this on the webpage so that the applicants have an 
understanding when they compete with others what is the 
criteria, what is the minimum acceptable requirements for 
proposed projects? Mr. Strickling, you start first.
    Mr. Strickling. Congressman Stearns, I would suggest that 
that has already been provided to the applicants in----
    Mr. Stearns. Is that on the Web site?
    Mr. Strickling. On the Notice of Funds Availability issued 
in July, which is on the Web site, as well as guidance to 
applicants, which was a separate set of materials, as well as 
through our workshops. We have taken folks through all of the 
criteria for the project, most of which are drawn directly from 
the legislation, so folks should have a clear understanding of 
that. We also expect that as awards are made later this fall, 
that they will also provide a lot of guidance to applicants in 
terms of seeing what it takes to be a successful applicant and 
people will be able to match up against the winning grants.
    Mr. Stearns. So they will know if they didn't get awarded 
and someone else did, they will be able to determine the reason 
why they didn't get awarded?
    Mr. Strickling. That is right, and they will have the 
examples of the ones that did get awards to see, because those 
applications will be posted. A lot of information will be made 
available on those so people can learn from those if they want 
to come back in the second round and reapply.
    Mr. Stearns. Mr. Adelstein?
    Mr. Adelstein. Yes, that is right. I agree with that 
analysis, and we are going to post information about the 
winning applicants and how they scored on----
    Mr. Stearns. And that will be on the web page, of your web 
page?
    Mr. Adelstein. We will put that on the web page. The 
applications are up now so people can see a project description 
but we are going to put much more data up as we go through the 
process.
    Mr. Stearns. Let me ask each of you, will the actual score 
that you come up with be on the web page so the person can see 
how they are scored and how the people who won are scored?
    Mr. Strickling. We will not post the scores. In our view, 
this first round is to determine a finalist pool, all of whom 
we would say would be worthy projects of funding.
    Mr. Stearns. Do you agree with that too, that you are not 
going to post the scores?
    Mr. Adelstein. We haven't determined that yet.
    Mr. Stearns. Because I think as much transparency that you 
have here, the better, so we don't look into, you know, people 
complaining that it is either politically or it is done for 
reasons they are not clear about.
    Now, is it possible that a lot of people who apply will be 
subpar? I mean, are you under the obligation that you have to 
spend all this money by next September? Is it possible you 
could say by golly, you know, 20 or 30 percent of these 
applicants are not qualified; if we give them the money, they 
can't make the project go, or two, they are going to need to 
come back for more money.
    Mr. Strickling. The measure of success of this program in 
my mind is how many of these projects are still operating 5 
years from now.
    Mr. Stearns. That is good.
    Mr. Strickling. They need to be sustainable. We will not 
fund a project unless we have a high confidence level that it 
is a sustainable project that will deliver lasting benefits.
    Mr. Stearns. Would you agree then this morning that if you 
don't find qualified people you won't spend the money and you 
will give it back to the taxpayers?
    Mr. Strickling. As a theoretical matter, I agree with that, 
but I would also say we have received $28 billion in requests. 
I am reasonably confident without having looked at a single 
application we have got a lot of high-quality applicants in 
front of us.
    Mr. Stearns. Mr. Adelstein, is that how you feel too, that 
you will give the money back if there are subpar applicants?
    Mr. Adelstein. Absolutely. If we don't get qualified 
applicants for all of the funds, we will not use those funds 
and we will return those to the Treasury. I think we have long 
experience in carefully evaluating these projects to ensure 
they are feasible, and one of the scoring criteria we have is 
the feasibility of it, and we have spent years with a less than 
1 percent default rate in our telecommunications programs----
    Mr. Stearns. That is a good point.
    Mr. Adelstein. --ensuring that we do not----
    Mr. Stearns. Now, Mr. Adelstein, you had indicated when I 
talked to you yesterday that you have a leverage of 14 to one 
for $500 million that you are going to take off the top. Do you 
have also a plan of any leverage here that you are using?
    Mr. Adelstein. No, sir. Under the legislation, RUS has a 
preexisting ability to make loans. All of our projects will be 
funded as full grants.
    Mr. Stearns. Mr. Boucher talked about and showed this map 
here, and you heard from my opening statement a concern that 
the fact that the mapping is not done. I think only 10 States 
have completed it and 10 more in the process and that the FCC 
has in place a broadband policy and none of this will be made 
available to you before, Mr. Strickling you talked about in 
early December that you will have already spent $1.6 billion, I 
think you said. Is that correct?
    Mr. Strickling. By the end of the year, we----
    Mr. Stearns. So does that concern you at all that, you 
know, the actual mapping of this for the underserved and the 
people that have never been served is not even available so 
that you can make a decision?
    Mr. Strickling. I am not sure that is fully accurate, 
Congressman.
    Mr. Stearns. OK. I would appreciate if you would tell me.
    Mr. Strickling. --be to award a grant in an area if I 
didn't know it was unserved or----
    Mr. Stearns. Well, how will you know if it has not been 
mapped for you?
    Mr. Strickling. Well, one way we will know if there is 
credible information from a previous State mapping effort, and 
as a practical matter, if such a map does exist and if the 
information on it is good, those applications will get 
additional consideration simply by that fact. However, we have 
asked all the applicants to provide that information for their 
areas as well and we will be evaluating that for its 
credibility and veracity, and if there is good information 
coming from the applicants which will be subject to a public 
review, then we feel we can rely on that information in 
determining whether an area is unserved or not.
    Mr. Stearns. Would it be safe to say that those States that 
have mapped that to use those as a priority? Will you take into 
account that some maps have already been made for 10 States and 
use that as a priority in your decision process?
    Mr. Strickling. It receives additional consideration. I 
don't know enough to say it is a priority.
    Mr. Stearns. Mr. Adelstein, what would you say?
    Mr. Adelstein. I think it is very valuable information. I 
know that Commissioner Chong testified before your committee 
that it was very helpful in California to have the map first, 
and I think it would be helpful here. Of course, the purpose of 
this project being stimulus in some sense, we are moving ahead, 
but the mapping that we are putting up on the Web as soon as 
today or tomorrow is going to allow anybody in the public to 
take a look at the service areas being proposed for our project 
and challenge that, say that in fact there is service in an 
area where somebody says there isn't and that will be a great 
way for us to evaluate that particular application in terms of 
whether that area is served or underserved.
    Mr. Stearns. Mr. Chairman, I just have one last question, 
and this is for Mr. Strickling. Your latest report indicates 
that you have roughly about $318 million in DTV money left over 
as of August 19. Now, if you take and extrapolate the 
redemption rate, 55 percent redemption rate in the remaining 
months of this program, you could have as much as $380 million 
left over. My question to you is, are you intending and will 
you return this, and this is ironical in the fact that Mr. 
Barton and I had a DTV fix bill which would have avoided the 
need for this costly delay, knowing that you are giving almost 
$380 million back. So the question is, do you plan to give this 
money back?
    Mr. Strickling. As I understand it, Congressman, the money 
goes back. We don't have the option under the current 
legislation to keep the money.
    Mr. Stearns. And when will that come back?
    Mr. Strickling. As you know, there are still coupons 
outstanding. I think folks have until November to use those 
coupons if they haven't already used them. Following that, we 
will be closing out the program so I can't give you a direct 
date today as to when that program will be closed out and all 
the accounting will be done but I would hope it would be early 
next year.
    Mr. Stearns. All right. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Stearns.
    The gentleman from Michigan, Mr. Stupak, is recognized for 
5 minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Adelstein, if I can ask you a few questions, and I want 
to know a little bit more about the funding because I think 
there is some confusion on how the RUS is releasing a total of 
$2.4 billion in its first round of funding but still has 
adequate resources available for the next round. It is my 
understanding that this is due to the loan-grant combination 
that you have authority over. Can you provide some 
clarification on that?
    Mr. Adelstein. I would be happy to. Congress gave us the 
authority to provide loans and grant combination and loans so 
that allowed us to leverage our $2.5 billion in budget 
authority to $7 billion to $9 billion in loan-grant 
combinations or loans and grants. Many rural communities can be 
served this way. We can stretch the dollars that we have. 
Because of our sound track record at USDA, we have a 7.24 
percent subsidy rate which means that we can take $72,000 and 
get $1 million worth of loans out of that amount of taxpayer 
dollars, which means that we can take $500 million from the top 
of the $2.5 billion, have $2 billion left over for grants and 
do $7 billion in loans with that amount. So even though we are 
taking $2.4 billion in this case, the $2.4 billion is of that 
total $7 to $9 billion. It is not of the $2.5 billion. This 
includes the loan amount, which is highly leveraged because of 
our good track record in getting repaid.
    Mr. Stupak. Let me ask you this then, then underneath the 
stimulus package where you received this money, the $2.5 
billion, how much more in loans is the RUS issuing than the 
agency would normally do under normal fiscal year under the RUS 
program?
    Mr. Adelstein. This is a much greater amount of loans than 
we have ever done in a single year by a large factor. I mean, 
we can do--in total we do quite a few. We can do $1 billion in 
telecommunications loans but not broadband loans. We have never 
done that. We have done $1.1 billion in broadband loans since 
2002 and now we are going to be doing $7 billion in one year, 
so it is a huge ramp-up of what we have done in the past.
    Mr. Stupak. Well, you mentioned ramp-up, and putting on my 
oversight and investigations hat, with that much more money 
then, are you going to have to be bringing on more staff? And I 
heard some concerns from Mr. Stearns and others about the 
quality of the loans. In order to make sure you can monitor 
these grants and loans in this program, obviously you are going 
to have to bring on more staff.
    Mr. Adelstein. We are in fact. We have 114 people now that 
do telecommunications projects but we are going to add 50 
temporary employees under funding from the stimulus act. We 
also have 470 field offices across the country and we are 
drafting people from all those field offices to help us 
including expert, what we call general field representatives. 
We have hired an outside contractor to assist in reviewing the 
first round of applications according to objective scoring 
criteria. Working closely with them, we are ultimately going to 
make the decisions based on their assistance. In addition, we 
have 60 years of experience in doing electric and water and 
telecom, so we are an experienced agency. We are just doing a 
large volume in short order.
    Mr. Stupak. Well, let me ask you this. Stimulus funding 
basically runs out about September of 2010, but the loans in 
that won't be repaid, so you are still going to need staff and 
monitoring of these loans to make sure they are repaid well 
after the stimulus package is basically over, correct?
    Mr. Adelstein. We absolutely will. It is very important 
that we continue to monitor these loans to ensure--and the 
grants to ensure that they are achieving the purpose for which 
they were intended. We do a very good job now with our field 
offices of following up on the loans that we have with the 
larger portfolio that we are going to rapidly develop through 
this. We are exploring our options for ensuring continued 
oversight after the funding expires.
    Mr. Stupak. Mr. Strickling, same with your agency. Are you 
going to be having more people on to monitor and even after 
2010 to still look at your loans and portfolios?
    Mr. Strickling. That is correct, and we are in I think a 
slightly different situation perhaps than RUS because they have 
an existing program. Our program was created by the Recovery 
Act and the authorization for it ends September of 2010, so 
yes, we will need both authorization and hopefully some 
appropriations to be able to carry out our oversight 
responsibilities after all these grants are awarded next 
summer.
    Mr. Stupak. Well, Mr. Strickling, let me ask you this. It 
is also my understanding the Broadband Technology Opportunities 
Program gives weight to projects that can commence immediately 
upon receiving these funds. One of the concerns that I have, 
being from northern Michigan, if we are not going to make our 
grants until about November, November where I am at, the snow 
is flying by then. It would be hard for us to immediately 
start. It would probably be about April or May before we can 
really get in there because if you try to do this in the 
winter, it will just increase your costs tremendously. Will 
that be weighed somehow so we are not having problems with 
getting this November round because we can't start the actual 
infrastructure until the spring?
    Mr. Strickling. That is correct. Shovel-ready is our 
evaluation of the project. It is not whether you are shovel-
ready in the winter. In fact, you may have a shovel-ready 
project in the general scheme of things but we are certainly 
not going to penalize applicants because we are happening to be 
awarding the money in November and someone might say well, we 
can't actually turn when it is under 6 feet of snow.
    Mr. Stupak. Let me ask you this. With my law enforcement 
background and all that, and in the stimulus--I am sorry, Mr. 
Chairman. I will follow up in writing. I have questions on 
public safety and a reluctant feeling that they don't have the 
expertise to apply. How do we make sure law enforcement and the 
value broadband can provide to them. I will follow up later. 
Thanks.
    Mr. Boucher. Thank you very much, Mr. Stupak.
    The gentleman from Texas, Mr. Barton, is recognized for 5 
minutes.
    Mr. Barton. Thank you, Mr. Chairman. I just have three 
questions. I will try to be very quick because I see we have 
some votes.
    My first one is tongue in cheek, but there is a program for 
people like me who didn't get a coupon? Have we just missed the 
boat or is there some--you know, if you are really, really 
stupid and really, really lazy we will give you one more chance 
program?
    Mr. Strickling. No, sir.
    Mr. Barton. It is gone, huh?
    Mr. Strickling. You are out of luck.
    Mr. Barton. All right. Well, I was afraid that was going to 
be the answer. That is the right answer, by the way. It should 
be that way.
    Next question is about the Universal Service Fund. I don't 
think it is any secret to you two gentlemen that I am not a big 
fan of that program, and I am working with Mr. Boucher and 
others, Mr. Markey, to come up with a reform program for it. 
But in terms of this program that you two gentlemen are 
implementing, can we be assured that you are only going to 
award funds to projects that will be sustainable without 
additional federal funds in the future?
    Mr. Strickling. Yes, sir. I think our philosophy will be 
that there will not be any additional federal dollars available 
for these projects beyond what is in front of us in the $4.7 
billion we have been given, so we will be evaluating each 
project for its sustainability past the grant period and we are 
not going to assume oh, yes, they will get Universal Service 
money or that some other grant program will rescue this 
project. It is got to be sustainable once our monies end.
    Mr. Barton. Mr. Adelstein, do you share that view?
    Mr. Adelstein. Absolutely. Our scoring criteria count 
project sustainability and project viability among the highest 
categories for awarding funds. We generally look very closely 
at the balance sheets and at the financial spreadsheets of 
these companies with our experience as basically a lender. With 
a $54 billion loan portfolio, we are very experienced at 
evaluating the financial capability of companies and their 
sustainability. Particularly when it comes to the loan 
component, we want to make sure we get paid back.
    Mr. Barton. Last question. I see some conflicts or 
potential conflicts of interest in the administration of the 
grant program that Mr. Strickling is implementing. The statute 
directs that the NTIA consult with the States about which 
applications to grant but the States themselves are eligible 
for these grants. Secondly, you are going to be soliciting 
volunteers to evaluate the grants but your volunteers might 
also be involved with the industries that would benefit from 
receiving the grants. Mr. Secretary, what mechanisms are you 
putting in place to try to prevent such conflicts of interest 
in these two areas?
    Mr. Strickling. Yes, sir. With respect to the States, the 
statute specifies that the States should have this role, so I 
think if it is a conflict, it is a conflict everybody can see, 
everybody can evaluate, and we will act accordingly. With 
respect to the reviewers, we have very strict conflict-of-
interest policies, and in fact we have already rejected about 
10 percent of the experts who have come forward to offer their 
services on either lack of expertise or because they have a 
conflict due to their employer, but basically if you work for a 
company that is making a grant application of its own, you will 
not be allowed to review any application in any State in which 
your employer's application might apply and certainly you won't 
be able to review your employer's application. If you work for 
a broadband service provider, you will not--whether or not that 
company has filed an application, you will not be allowed to 
review an application in any State in which your employer 
offers service. So we feel that we can still take advantage of 
the expertise of folks but we are going to sequester them away 
from any application where they would be any actual or apparent 
conflict of interest.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Barton.
    We now have three votes pending on the floor of the House, 
and that will probably require at least a half-hour in order to 
accomplish so I am going to recess the subcommittee and we will 
return to continue our questions with you as soon as this roll 
call is finished.
    [Recess.]
    Mr. Boucher. We will reconvene, and I want to thank Mr. 
Strickling and Mr. Adelstein for their patience as we finished 
our business on the floor of the House for the day.
    The gentlelady from California is next to propound her 
questions, and she is recognized for 5 minutes, Ms. Matsui.
    Ms. Matsui. Thank you, Mr. Chairman.
    To ensure that more Americans will have access to broadband 
Internet service, we have to address not only the populations 
who don't have access to broadband but those who have access 
but are not able to afford such services. In California, an 
estimated 96 percent of California residences have access to 
broadband but the problem is adoption since barely more than 
half of Californians have adopted broadband at home. In most 
cases, adoption rates are associated with income as seen in the 
recent data from the Public Policy Institute of California. We 
show that only 58 percent of Californians earning under $40,000 
a year subscribe to broadband at home but 97 percent of those 
earning $80,000 or more subscribe to this. And so it is clear 
that millions of Americans cannot afford either a computer or 
Internet services. In April, I along with six of my colleagues 
who serve on this subcommittee wrote urging the FCC, NTIA and 
RUS to consider low-income populations to be part of the 
definition of underserved as it applied to broadband grant 
programs. To fully close the digital divide, we must address 
the affordability of broadband for lower income families. 
Although these families may have different options for 
broadband access, in my opinion, they are underserved if none 
of these options are affordable.
    Mr. Strickling, during your rulemaking process, how much of 
a factor did you consider income and affordability in the 
definition of underserved?
    Mr. Strickling. As you know, the definition we ultimately 
adopted did not include that as a test but we absolutely were 
thinking about it, and our final judgment was that using an 
adoption rate really got at the issue and might be explained--
in other words, we have a rate that says if an area is showing 
less than 40 percent adoption, it is underserved. We feel there 
may be any number of explanations for that including the 
factors you described but we chose to go right to the heart of 
the issue which was the adoption rate and make that the 
standard in the definition, and I will point out that among the 
2,200 applications we received, we do have a separate part of 
our program that is focused on sustainable adoption projects. 
We received over 320 applications from entities that want to 
perform these sorts of sustainable adoption projects and they 
have asked for about $2.5 billion, so it is an area that we 
view very seriously. We absolutely agree with you that looking 
at the demand side of this equation is just as important as 
looking at the supply side, and we need to understand why folks 
aren't able to adopt these services and we are going to have an 
opportunity now with the monies available in the Recovery Act 
to fund a number of different approaches to increasing those 
adoption rates.
    Ms. Matsui. I certainly do appreciate that because that is 
going to be a very important factor in moving forward.
    I would like to also say that many households in 
underserved urban communities either don't have a computer or 
cannot afford Internet service, and now they rely on local 
schools and libraries for their broadband services, and 
especially in these tough economic times, more and more people 
are relying on the computers at their libraries for a job, 
employment services, managing their finances even because they 
can't afford Internet service, so I think it is critically 
important that the schools and libraries serving underserved 
communities be properly considered during the grant process. So 
Mr. Strickling, how are you handling applications for schools 
and libraries in urban underserved areas?
    Mr. Strickling. Again, we are very interested in receiving 
those applications because, as you have just pointed out, if 
folks don't have a computer in their own home, the ability to 
go to a local library or go to a local school after hours to 
get access to the Internet on a broadband service offered in 
those institutions is perhaps their only ability to go online. 
So we understand the importance of it. In our scoring criteria, 
the presence in a project application of----
    Ms. Matsui. Mr. Strickling, do you have standards that 
apply to this?
    Mr. Strickling. I was about to say that we will be giving 
additional consideration to those projects that come to us that 
are able to incorporate working with these community anchor 
institutions as part of the overall project design.
    Ms. Matsui. I would like to follow up with that later on 
too if that is possible.
    Mr. Strickling. Absolutely.
    Ms. Matsui. I see I am running out of time, so thank you 
very much.
    Mr. Boucher. Thank you very much, Ms. Matsui.
    The gentleman from Oregon, Mr. Walden, is recognized for 5 
minutes.
    Mr. Walden. Thank you, Mr. Chairman, and I am sorry I 
couldn't be with you earlier this morning. I had conflicting 
duties that I had to attend to.
    First, I would like to ask that my opening statement be 
inserted into the record at the correct place.
    [The prepared statement of Mr. Walden 
follows:]*************** COMMITTEE INSERT ***************
    Mr. Boucher. Without objection.
    Mr. Walden. I have questions for both of our witnesses. I 
am troubled that out in the State of Oregon that the two 
largest providers of telecommunications in my district cover 
about 80 percent of the territory, Qwest and Century Link. Both 
have chosen not to apply for grants and they cited uncertainty 
of the consequences of accepting grant money, issues about ill-
defined network, non-discrimination requirements, prohibition 
of sales of facilities, how all that works, the cumbersome 
application process. How will constituents in a district that 
is vast and underserved as mine benefit from the broadband 
stimulus grant program if the rules and regulations of the 
program scare away the big providers, the big folks who can 
participate and frankly the only ones that are poised to 
participate in a district like mine? Are you finding this 
elsewhere around the country?
    Mr. Strickling. Well, the first comment I would make is, 
2,200 applications were filed seeking $28 billion of funding. 
When we issued our Notice of Funds Availability, we heard from 
all manner of folks that the criteria were too strict, that the 
rules were too confusing, yet 2,200 people were able to submit 
applications who navigated their way through the process.
    Mr. Walden. Do you have a breakout by State or district?
    Mr. Adelstein. I do. Your district has 14 applications in 
it, so there were 14 applicants in your district, two in Oregon 
that were able to----
    Mr. Walden. Right. I know Bend Broadband, I believe, is 
one.
    Mr. Adelstein. And that is just for our program. There may 
be some additional ones for BTOP as well.
    Mr. Walden. Could I get that list at some point?
    Mr. Adelstein. Absolutely. I will get to that you 
immediately.
    Mr. Walden. One of the issues I raised when this was going 
through is how the process, the timing would work. I had 
concerns that, you know, and I know are going to have three 
tranches of money that goes out, because the mapping in Oregon, 
rough maps will be available in November. The complete won't be 
ready until February so in the first round you don't really 
know, you don't have the mapping done.
    Mr. Strickling. The national broadband map has a deadline 
of February 2011.
    Mr. Walden. Right. But in the State of Oregon, for example, 
the first round--we will be done with our mapping by February 
of 2010, so that will work in the second round, correct?
    Mr. Strickling. Yes, but again, I don't think the presence 
of a State map is a magic bullet here. We want to be awarding 
grants, the infrastructure grants in the unserved and 
underserved areas, we want to be confident that they are that. 
A map helps us make that judgment if it has credible data that 
went into it but there are other ways to get that information 
as well. Each applicant was required to supply that sort of 
information, and if they have given us credible data we will 
rely on that in making grants.
    Mr. Walden. So how was the definition of remote and rural 
that is used in the application developed? My understanding is 
the only remote rural areas are eligible for 100 percent 
funding from RUS. RUS defines an unserved area as remote rural 
if it is at least 50 miles from a non-rural area, and yet I am 
hearing from some that the projects may not be able to meet 
this criteria, that few, if any, will meet this criteria.
    Mr. Adelstein. We actually set aside $400 million under 
that category and we received $3.8 billion in loan requests for 
that $400 million, so we are well oversubscribed 10 to one so a 
number of applicants did find that they were in areas that were 
remote. Now, we haven't verified that in fact they were in 
remote areas but we have an overwhelming demand for that 
category. The RUS really wants to serve the hardest to reach, 
more rural areas of the United States and that was our goal. 
The previous Administration was criticized for moving some RUS 
into areas that were too suburban or too close to urban areas 
and we tried to push it out, but I certainly understand 
concerns about that and we are looking at that, but there is a 
lot of interest I those as well as people applying for the 
loan-grant combinations.
    Mr. Walden. So help me on this definition. If you define an 
unserved area as remote rural if it is at least 50 miles from a 
non-rural area, how are those terms defined? What is a non-
rural area?
    Mr. Adelstein. A non-rural area is defined as not being 
urban, and an urban area is defined as an area that is either 
20,000 people or an urbanized area contiguous to a city or town 
of 50,000 or more, so you have to be 50 miles from the limit of 
those two areas.
    Mr. Walden. I have just one other question that I wanted to 
ask. I believe that the stimulus funding should of course go 
first to those that aren't served, and you were here as a 
commissioner. I mean, you understand that debate, that 
sometimes this money goes out and has in the past to areas that 
have multiple services. And I think it ought to go to 
individuals, businesses, institutions that don't have access to 
broadband at all rather than better service to those who do. Is 
that the prioritization NTIA is going to use?
    Mr. Strickling. Well, under the statute we are going to 
focus on unserved and underserved areas, and bear in mind, an 
underserved area is an area that may only have 50 percent or 
fewer of their residents available to sign up for service. So 
there is a large body of people in an underserved area that 
they themselves individually are unserved, so I think that in 
making our grants we are going to be cognizant of both of those 
sets of issues, both the unserved and the underserved, which 
will contain many unserved people.
    Mr. Walden. All right. Well, let me be the one that weighs 
in on, for the limited amount of government resource we have, 
it ought to go to those who don't have access to any service 
first. That is my own opinion, and I know my time has expired.
    Mr. Chairman, a unanimous consent request that the written 
statement of Mr. Blunt be included in the hearing.
    [The information was unavailable at the time of printing.]
    Mr. Boucher. Without objection. Thank you very much, Mr. 
Walden.
    The gentlelady from California, Ms. Eshoo, is recognized 
for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to our 
witnesses again and for your patience in waiting for us while 
we completed our work on the floor for today.
    I have some questions and I just want to put my questions 
out and then have you respond to them. I want to go back to my 
opening statement and just reemphasize--it is not a question, 
just to set it down again, that when this charge of the 
Congress to you to implement has been completed, that when not 
only look at the map and see the work you have done in 
underserved and unserved areas, that the broadband will be 
really at the highest level in terms of speed, and that is 
really a top priority for me and I think that those communities 
deserve that and it is going to be in your hands to help to see 
that that happens.
    Now, you are in the first round, and whether you are just 
going to do a second round and not have to do a third, I mean, 
obviously that is going to be up to you, but in the first round 
of applications, how many included requests for waivers of 
information? The reason that I ask that is, because it is my 
understanding that there were applicants who claimed that they 
were unable to apply due to software issues and problems, you 
know, not being resolved before the deadline. So I would like 
to know, my first question is, what steps you are taking to 
ensure that the process runs smoother in the next round? And I 
would also like to know more about the process whereby 
incumbents can challenge applications that seek to serve 
underserved areas. Now, in the BTOP and the BIP, the notice of 
available funding, it provides for existing service providers 
an opportunity to challenge and demonstrate that a project is 
not unserved or underserved. What I want to know make sure of 
is that there is competition, and if the incumbents can just 
knock out people because they don't want any competition to 
come in, I don't really think that is the way for us to go. So 
does this mean that an applicant will have to provide 
proprietary information? That is why I was asking the question 
about requests for waivers. That I think would undercut their 
ability to compete, and other than the most obvious cases where 
there is competition, what is the criteria for deciding? How do 
you weigh in on this and what is the administrative process in 
place for challenges and counterchallenges and fact finding?
    So you can tell what my questions are, and I also would 
like to add a comment to reinforce what Congresswoman Matsui 
raised about anchor institutions. I think it is a very 
important one, and the two of us are going to follow up with 
you with some more questions in writing, but I think that these 
anchor institutions bear that designation in our communities 
because they really are anchors. That is where people go when 
they don't have these tools at home or can't afford them. So 
anyway, those are my questions. I don't know who wants to take 
them on.
    Mr. Strickling. Let me take each of your issues up. First, 
the speed question. The eligibility requirements to apply set 
the 768 kilobits per second as a threshold to make you eligible 
to apply. I would be very surprised--most of these applications 
are proposing substantially faster speeds, and if one has 
proposed a faster speed, and if one has proposed a faster 
speed, you get additional consideration in the scoring of your 
application.
    Ms. Eshoo. Oh, good. So the scoring is weighted for the 
higher speeds?
    Mr. Strickling. That is correct.
    Ms. Eshoo. That is great.
    Mr. Strickling. What we didn't want to do at the front end 
of the process was basically--there may be areas of this 
country where the only practical technology to be used is at 
roughly 768-kilobit-per-second speed. We didn't want to 
basically determine at the front end of this that nobody could 
apply from those sorts of areas. We wanted to at least be able 
to consider them. And in fact 3G wireless is the only option 
for a given area, we would like to at least be able to consider 
whether or not to fund it. But again, higher speeds get more 
votes and greater scores and should rise to the top of the 
review.
    In terms of the application processing, the 2 weeks when 
folks were rushing to put their applications through, it is 
correct that certain applicants experienced difficulties. But 
what I would urge you to consider is that during that period 
both of our agencies were in constant contact with each other 
and we were taking remedial measures to fix the problems as 
they arose, so in the first week it became apparent that 
because of the size of the attachments we were getting from 
many applicants, we didn't have enough server capacity. The 
result was, we, I think, doubled or tripled the number of 
servers that were available to receive the information. It 
later turned out that there was some sort of browser 
incompatibility. Some people using certain older browsers were 
running into some compatibility issues. We identified that as a 
problem, alerted the applicant pool that they ought to use a 
particular browser as a way to avoid that problem, and again we 
think that was fixed. We extended the deadline so anybody who 
had started an application by the original application date was 
given an extra, I think, 6 days to get their full application 
in. During that 6 days, we many days where people weren't 
coming on the system, that there was plenty of capacity, plenty 
of opportunity yet we still ran into the natural human tendency 
to wait until the last minute, and people did that even though 
every day we were e-mailing the applicant pool saying there is 
nobody online, now is the time to get on and put your 
application in. At the last minute on the last day, there were 
still some people who apparently had some problems getting 
attachments uploaded, and on the last day we alerted those 
people and gave them the option of sending those attachments on 
a thumb drive or on a disc so that we could add them to the 
application. So I think the responses of RUS and NTIA during 
those 2 weeks showed a very strong emphasis on supporting the 
applicants as they were trying to get their way through the 
system. Both of our organizations are committed to doing an 
evaluation of our systems before we do the second round, and if 
there are improvements above and beyond the ones we made, we 
absolutely intend to make them.
    On your third point, because I want to give Jonathan a 
chance to weigh in as well, the incumbents do not have a veto 
here. As we have been discussing----
    Ms. Eshoo. Can you describe the way it works?
    Mr. Strickling. I am sorry?
    Ms. Eshoo. Can you describe the way it works?
    Mr. Strickling. Yes. The applicants have indicated the 
areas that they believe are unserved or underserved as part of 
their application. That information will be going up on our 
database, and anyone, but in particular, service providers in 
those areas, will have an ability to say well, wait a second, 
we disagree with that, but if they are going to do that, they 
are going to have to provide a lot of information to us in 
order to overcome the presumption that will have been 
established by the applicant. Beyond that, that will then 
become an issue that if necessary we will have to evaluate, 
either at RUS or at NTIA, before we make a grant award, if 
something has been thrown in dispute, but we will have that 
decision. It won't be made by any incumbent. They will not have 
the ability to veto another applicant from being able to offer 
service in their area. Jonathan, I don't know if you want to 
add anything.
    Mr. Adelstein. Well, as usual, since we are so coordinated, 
we agree with everything Mr. Strickling had to say. I would 
just say for purpose at RUS, speed does matter for us as well. 
We have additional points for higher speeds. The 768 is a 
floor. That was the FCC definition that Mr. Copps and I spent 
years trying to get up from 200.
    Ms. Eshoo. I know you did. You devoted several years of 
your life to that.
    Mr. Adelstein. We sure did, and we got it moved up, but we 
don't want that to be the--that is the floor. We build from 
there, so there is rewards for higher speeds. In terms of the 
challenge process, Mr. Strickling is exactly right. We are 
going to demand real substantiation, but we also want to ensure 
that what the applicants are asserting is correct. This is an 
unprecedented transparency that we are going to conduct. We are 
going to put all those maps up on the web so anybody can look 
at them. The entire public is our other IG to make sure that 
people are being accurate about they are representing whether 
or not an area is unserved or underserved but the final 
determination is by RUS and NTIA. We are going to make that 
determination. All claims and challenges have to be verified 
and substantiated. We have field offices in every State in the 
country, many of them in California, 470 offices across the 
country, and we are planning on sending our general field 
representatives out to substantiate these things to actually 
find out what is happening in the communities. Our State 
directors have volunteered to help us as well to make sure that 
we really get an accurate picture of what is happening in those 
communities, and this can be a useful building block also of 
course for NTIA's map that they are working on to give us real 
data about what is happening in those communities, but we are 
not going to let incumbents just knock people out willy-nilly. 
They are going to have to prove their case. But on the other 
hand, we welcome them to challenge and to get to the bottom-
line truth as to what is happening in those areas to make sure 
that we are targeting our funds at areas that are truly 
underserved.
    Ms. Eshoo. Do you have the capacity to make those 
determinations with your staff?
    Mr. Strickling. It is going to be a challenge. I mean, we 
are having to basically take people that are normally doing 
other work and put them on to this job. But given what 
challenge Congress has put before us, we think that is a 
valuable re-prioritization of our staff and we are working with 
all of our staff to get them ready for that process.
    Mr. Boucher. Thank you, Ms. Eshoo. Your time has expired.
    Ms. Eshoo. Thank you, Mr. Chairman, and I thank our 
witnesses and I thank you for your patience.
    Mr. Boucher. The gentleman from Vermont, Mr. Welch, is 
recognized for 5 minutes.
    Mr. Welch. Thank you, Mr. Chairman. One of the concerns I 
had, I think, Mr. Chairman, you brought up in your opening 
remarks, and that is, Vermont is a very rural State that 
sometimes under the standards isn't considered rural, so I hope 
that the concerns expressed by the chairman I know having been 
expressed by the chairman will be taken quite seriously by you. 
Thank you for your testimony.
    Just a couple of questions. Broadband obviously is big 
everywhere including in Vermont but simply building the 
infrastructure doesn't guarantee that people will use it, and 
one way to help increase the success rate of rural broadband 
projects is to improve the business case by increasing take 
rates, and there was a way, as I understand it, in the first 
round for someone to propose a combination of sustainable 
adoption and the infrastructure project, and I am wondering 
whether the NTIA will consider this in the next rounds.
    Mr. Strickling. That is not entirely true.
    Mr. Welch. Inform me. Thank you.
    Mr. Strickling. We actually encourage people to combine 
project purposes. Our systems require that they in effect 
submit two separate applications, and we are going to look for 
the second round, is there a way to solve the administrative 
issue but we absolutely encourage people to combine adoption 
thinking with an infrastructure project, and those projects 
will be considered in tandem as they go through the process.
    Mr. Welch. Great. Thank you. In the second round, States 
like Vermont are going to be focused on filling out our 
remaining broadband service gaps. Those are likely to be found 
of course in smaller and more discontiguous pieces, and I am 
wondering what will NTIA do to help applicants qualify who are 
trying to turn what is essentially a Swiss cheese pattern of 
coverage into blocks of consistent, 100 percent coverage.
    Mr. Strickling. To the extent that we identify that as a 
problem after see the applications we have seen, because it may 
well be that folks have figured out ways to do that as we go 
through these applications and certainly if we get those sorts 
of learnings from the application pool we have, we will find a 
way to make those learnings available to the general pool, but 
if it is a continuing issue, we are going to look at how to 
continue to tweak and refine our outreach efforts for the 
second round to provide whatever guidance we can to people to 
help them navigate their way through those issues.
    Mr. Welch. Last question. One problem we see in Vermont is 
that clusters of served households tend to be distributed among 
a number of different neighboring census blocks that also in 
those census blocks contain unserved households, and it is 
making it harder to define the unserved areas using census 
blocks as a measurement, and I am wondering whether NTIA will 
allow applicants a little bit more flexibility to define their 
service areas to better conform to essentially relate to the 
facts on the ground the boundaries of served and underserved 
areas.
    Mr. Strickling. I frankly would be surprised if that is 
really a problem for folks who understood the process because 
they could define their service area by linking together 
whatever census blocks they wanted to, and in terms of meeting 
our test, all they had to do was either meet the unserved test 
for the entire set of blocks or the underserved test, either 
one, and I would expect that folks who understood their 
neighborhoods and their service areas could create those sorts 
of service areas for the purposes of our projects that would 
have qualified as underserved or unserved. There was a 
misconception early on that you had to demonstrate that each 
census block in your application was either unserved or 
underserved and that is not correct. You had to define a 
service area as a grouping of census blocks and then we looked 
at that in the aggregate to say does that satisfy the unserved 
definition or does it satisfy the underserved definition, and 
again, I think, folks, again, gauging from the 2,200 
applications we received found ways to define their services in 
a way to qualify.
    Mr. Welch. Thank you very much. I thank the witnesses and I 
think the chairman, and Mr. Chairman, I yield back the balance 
of my time.
    Mr. Boucher. Thank you very much, Mr. Welch.
    The gentleman from Washington State, Mr. Inslee, is 
recognized for 5 minutes.
    Mr. Inslee. Thank you, and I want to thank the chairman for 
holding this hearing and I look forward to discussing with the 
committee and Mr. Strickling our Spectrum Relocation 
Improvement Act, which we hope to move forward on that Mr. 
Upton and I have introduced and Ranking Member Stearns.
    I have a couple questions for Mr. Strickling. We heard from 
Washington State that the NTIA's application review process has 
changed so that it would put the first round on the States, and 
could you confirm for us that it has not changed and that NTIA 
is still going to retain the original review process?
    Mr. Strickling. Yes, Congressman. I can confirm that that 
determination, I am not sure how it arose but it is not 
accurate in terms of what the role of the States will be. As we 
discussed earlier in the hearing, the States are being asked to 
provide us prioritizations if they wish to. They are not being 
asked to review applications. No decisions have been handed 
over to them. We retain the ultimate decision-making authority 
on those grants. The States will provide input to the process 
just as the legislation expects.
    Mr. Inslee. I welcome your statement in that regard, and 
that would obviate the problems if we had 50 different sets of 
prioritization rules that could end up, so you don't see that 
as being a problem?
    Mr. Strickling. No, sir.
    Mr. Inslee. Thank you very much.
    Mr. Boucher. Thank you, Mr. Inslee.
    I am going to raise one additional concern with each of you 
that has come to my attention since my round of questions ended 
some time ago.
    Mr. Strickling. Breaking news.
    Mr. Boucher. And I want to come back to the fact that if 
you are a rural applicant, you basically have to apply through 
RUS. You can apply jointly to be considered by both agencies 
but your application has to be reviewed and acted on by RUS 
before NTIA has an opportunity to act on it. And the concern is 
this: that RUS could review the application and decide that it 
is not eligible for the 80 percent to 100 percent grant 
because, for example, it is a non-remote area, maybe one of 
these little pockets that is fairly close to a city, even if it 
is isolated, and would be deemed non-remote under that 
definition, which we hope to see changed, and if that were to 
happen, RUS might still find that that application could be 
eligible for a 50 percent grant or for some grant-loan 
combination whereas if NTIA had been looking at that 
application standing on its own, it could have been qualified 
for a grant of between 80 and 100 percent. So there is a 
barrier here that many applicants may face where under NTIA's 
standard a grant of 80 percent to 100 percent could be provided 
but where under RUS the maximum grant is only 50 percent, and I 
would hope that at a minimum as you consider modifying these 
standards for your next round, that you would enable 
applications to be acted upon based upon the higher level of 
funding that could be provided by either agency so that the 
barrier I have just identified would be removed. So I guess 
first let me ask you if I have properly interpreted the 
standards as they have been put forth, and secondly, if you 
would consider some change that would address the 
circumstances, assuming I have properly interpreted them.
    Mr. Adelstein. That could be an issue. However, I would 
respond that if they can qualify for a grant-loan combination, 
that would be a wiser use of taxpayer dollars. We want to 
minimize the amount of grant so that we can maximize the amount 
of rural broadband infrastructure that we can leverage to get 
out to the consumers. So if in fact there is an application 
that would be viable that would be able to repay that 50 
percent, we actually designed the system to encourage that. 
That is one of the reasons the system is designed the way it is 
with the RUS getting that first look at it so that we could try 
to stretch those taxpayer dollars as far as we possibly could. 
Obviously the point isn't to maximize the amount of grant that 
a particular applicant gets but rather to give them the minimum 
amount they need in order to provide broadband and have a 
viable, sustainable business.
    Mr. Boucher. And let me just say, I don't disagree with 
that. I think you are exactly right. To the extent that a full 
project as it is anticipated by the applicant and applied for 
can be built with something less than full grant, obviously it 
is optimal to do so. But in those instances where that can't 
happen and you deem the project ineligible for the full grant 
but offer a 50 percent grant and a grant of a higher level 
could be provided by your sister agency, that might enable the 
full project to be built and built more rapidly or in a better 
way. It seems to me that that potential should be preserved, 
and under the existing regulation I think it is not.
    Mr. Adelstein. It could be because a joint application, 
they could apply to us for 50 percent and apply to NTIA for 100 
percent the way we designed the application system. So they 
would apply to us at 50 percent. If it wasn't viable, and we 
are very good at doing the business analysis to determine 
whether or not that would be viable at that rate, we would then 
kick that to NTIA and say these people aren't going to be able 
to repay that loan, this business case can't be made but it is 
a very good project. That would then automatically be kicked 
over to NTIA which had simultaneously been reviewing the 
process, been reviewing that application----
    Mr. Boucher. So you are saying that if your analysis 
determines that the full project for which the application is 
made can't be built with something less than the higher level 
of grant, then that would be what the applicant receives, but 
it would be your determination that the full project can be 
built for that amount?
    Mr. Adelstein. Right. If we determine that the full project 
can't be sustained----
    Mr. Boucher. And if you determine it cannot be, that the 
full project cannot be built for that amount, for the maximum 
amount for which under the application they are qualified, then 
NTIA could take it from there and potentially fund it at the 
higher level to fund the full project. Is that accurate?
    Mr. Adelstein. Exactly.
    Mr. Strickling. Yes, sir.
    Mr. Boucher. All right. Thank you. I appreciate your 
indulgence. Let me just quickly ask my staff a question. She 
says yes. All right.
    I want to thank you. You have been very patient today 
including sitting through a lengthy recess while we finished 
our business on the floor of the House, and I appreciate the 
thorough answers you have provided to all of our questions. As 
you could hear expressions on a bipartisan basis today, there 
is concern by member about the definition of remote, and I very 
much hope that you will address that before you put the NOFA 
out for the second round of funding. You have heard our other 
concerns and to the extent that you can consider and make 
modifications to accommodate those, that would be much 
appreciated as well.
    We will be having, as Mr. Stearns recommended, at least 
another hearing to oversee this program at some appropriate 
time yet to be determined, and we will welcome you back when 
that hearing occurs. Thank you for your testimony and your 
participation today, and this hearing stands adjourned.
    [Whereupon, at 1:00 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                                 
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