[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
A DISCUSSION DRAFT OF THE UNIVERSAL SERVICE REFORM ACT OF 2009
=======================================================================
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
__________
NOVEMBER 17, 2009
__________
Serial No. 111-81
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California JOE BARTON, Texas
Chairman Ranking Member
JOHN D. DINGELL, Michigan RALPH M. HALL, Texas
Chairman Emeritus FRED UPTON, Michigan
EDWARD J. MARKEY, Massachusetts CLIFF STEARNS, Florida
RICK BOUCHER, Virginia NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey ED WHITFIELD, Kentucky
BART GORDON, Tennessee JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California ROY BLUNT, Missouri
BART STUPAK, Michigan STEVE BUYER, Indiana
ELIOT L. ENGEL, New York GEORGE RADANOVICH, California
GENE GREEN, Texas JOSEPH R. PITTS, Pennsylvania
DIANA DeGETTE, Colorado MARY BONO MACK, California
Vice Chairman GREG WALDEN, Oregon
LOIS CAPPS, California LEE TERRY, Nebraska
MICHAEL F. DOYLE, Pennsylvania MIKE ROGERS, Michigan
JANE HARMAN, California SUE WILKINS MYRICK, North Carolina
TOM ALLEN, Maine JOHN SULLIVAN, Oklahoma
JANICE D. SCHAKOWSKY, Illinois TIM MURPHY, Pennsylvania
HILDA L. SOLIS, California MICHAEL C. BURGESS, Texas
CHARLES A. GONZALEZ, Texas MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington PHIL GINGREY, Georgia
TAMMY BALDWIN, Wisconsin STEVE SCALISE, Louisiana
MIKE ROSS, Arkansas
ANTHONY D. WEINER, New York
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 S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
(II)
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 CLIFF STEARNS, Florida
ANNA G. ESHOO, California NATHAN DEAL, Georgia
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois
MICHAEL F. DOYLE, Pennsylvania GEORGE RADANOVICH, California
JAY INSLEE, Washington MARY BONO MACK, California
ANTHONY D. WEINER, New York GREG WALDEN, Oregon
G.K. BUTTERFIELD, North Carolina LEE TERRY, Nebraska
CHARLIE MELANCON, Louisiana MIKE FERGUSON, New Jersey
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
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.................... 1
Prepared statement........................................... 4
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 6
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 6
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 7
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 11
Hon. Roy Blunt, a Representative in Congress from the State of
Missouri, prepared statement................................... 17
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, prepared statement.............................. 184
Witnesses
Peter Davidson, Senior Vice President of Public Affairs, Policy,
and Communications, Verizon.................................... 22
Prepared statement........................................... 25
Leslie Greer, Chief Executive Officer, DTC Communications........ 35
Prepared statement........................................... 37
Michael Rhoda, Senior Vice President for Government Affairs,
Windstream Communications, Inc................................. 49
Prepared statement........................................... 51
Joel Lubin, Vice President of Public Policy, AT&T Services, Inc.. 57
Prepared statement........................................... 59
Catherine Moyer, Director, Legal and Regulatory Affairs, Pioneer
Communications................................................. 65
Prepared statement........................................... 67
Ray Baum, Chairman, NARUC Committee on Telecommunications, State
Chair, Federal-State Joint Board on Universal Service,
Commissioner, Oregon Public Utility Commission................. 73
Prepared statement........................................... 75
Kyle McSlarrow, President and Chief Executive Officer, National
Cable and Telecommunications Association....................... 89
Prepared statement........................................... 91
Eric Graham, Vice President of Government Relations, Cellular
South, Inc..................................................... 104
Prepared statement........................................... 106
Karen Rheuban, Senior Associate Dean for CME and External Affairs
Medical Director, Office of Telemedicine, University of
Virginia....................................................... 124
Prepared statement........................................... 126
Gregory Rosston, Deputy Director, Stanford Institute for Economic
Policy Research................................................ 143
Prepared statement........................................... 146
A DISCUSSION DRAFT OF THE UNIVERSAL SERVICE REFORM ACT OF 2009
----------
TUESDAY, NOVEMBER 17, 2009
Subcommittee on Communications,
Technology, and the Internet,
Committee on Energy and Commerce,
House of Representatives,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:39 a.m., in
Room 2123, Rayburn House Office Building, Hon. Rick Boucher
[chairman of the subcommittee] presiding.
Present: Representatives Boucher, Markey, Eshoo, Stupak,
Doyle, Inslee, Butterfield, Matsui, Christensen, Castor, Space,
McNerney, Welch, Dingell, Stearns, Shimkus, Blunt, Buyer,
Walden, Terry, Blackburn, and Barton (ex officio).
Staff Present: Roger Sherman, Chief Counsel; Greg Guice,
Counsel; Shawn Chang, Counsel; Amy Levine, Counsel; Pat
Delgado, Waxman Chief of Staff; Phil Barnett, Staff Director;
Bruce Wolpe, Senior Advisor; and Sarah Fisher, Special
Assistant.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. The subcommittee will come to order.
Good morning to everyone, and thank you for your attendance
today.
This morning, our hearing focuses on the Universal Service
High-Cost Fund and the reforms to it that are proposed in a
legislative discussion draft that is now before us.
Having affordable telephone rates for all Americans is
essential to our national wellbeing. At a time when electronic
commerce and communications are central to national economic
performance, keeping all Americans connected should be a
priority for rural and metropolitan residents alike.
While the universal service support is largely targeted to
the rural areas where costs are high because of terrain, low-
population density, and the long distances the communications
lines have to traverse, the benefits of having everyone
connected flow to urban and rural areas alike. And I hope that
members will not lose sight of that reality as we consider the
reforms that are needed to ensure the sustainability of the
Universal Service Fund.
It is now under tremendous pressure, and a comprehensive
reform is clearly called for, and I think it is urgently
needed. New technologies and business models that make local
and long-distance telephone traffic essentially
indistinguishable are combining to diminish the long-distance
revenues that are relied upon to support universal service.
Since the universal service long-distance surcharge is
being imposed on a declining revenue base, the surcharge rates
are rapidly raising. Today, the contribution rate is 12 percent
of long-distance revenues. And, in January, that contribution
rate is set to rise to a record-breaking 14.2 percent. And
unless we enact comprehensive reforms, further escalation will
continue after that.
This status quo is simply not acceptable and sustainable.
New controls must be placed on costs so that the level of
universal service support can be contained. The bill before us
caps the High-Cost Fund. It requires competitive bidding for
the provision of support to wireless carriers. It imposes
rigorous auditing and reporting requirements on the carriers
that receive support. We also expand the contribution base to
intrastate services and to all entities that provide a
connection to the network as a means of relieving pressure on
the declining-revenue long-distance base. These changes on both
the contribution and the expenditure sides should produce a
sustainable Universal Service Fund.
The bipartisan discussion draft that we now have before us
I circulated with our colleague from Nebraska, Mr. Terry. And
it results from almost 4 years of consultations that Mr. Terry
and I have undertaken with literally dozens of stakeholders
having competing interests with respect to universal service.
We have sought and now we have achieved a consensus among these
parties that have competing views with regard to universal
service.
Our draft bridges the divide on universal service issues
between large carriers, such as Verizon and AT&T, that are net
contributors into the Universal Service Fund and the smaller
rural carriers that are net recipients of universal service
funding. As we will hear from our witnesses this morning,
stakeholders on both sides of this classic divide are now
united in their support for the bill before us.
The draft makes a broad range of other changes, such as
qualifying broadband as an eligible subject for universal
service expenditures for the first time. Other elements in our
measure include a better targeting of support to high-cost
areas by switching from statewide to wire center averaging;
fixing the phantom traffic problem by requiring carriers to
pass through call identifying information; eliminating traffic
pumping, which has become a major problem of late, by
prohibiting carriers from sharing access charges with third
parties that offer free or reduced-cost services; making rural
exchanges more marketable for telephone companies that desire
to sell them by eliminating the parent trap; and making
permanent the Antideficiency Act exemption for universal
service so that annual waivers are not required on
appropriations bills on an ongoing basis.
We welcome this morning the views of our witnesses and
members of the subcommittee as we seek to broaden the consensus
on the reforms that are needed in order to make sustainable the
Universal Service Fund.
That completes my opening statement, And I am pleased to
recognize at this time for 2 minutes the gentleman from
Nebraska, Mr. Terry, for his opening statement.
I might just note, if you will excuse me for a moment, Mr.
Terry, for the benefit of our witnesses that our Republican
colleagues are having a conference at the moment, and that is
urgent business for them, I am sure. And that accounts for the
fact that on our side of the aisle we are somewhat better
represented here than on the Republican side. But they are
embarked, I am sure, on a good mission.
Mr. Terry is recognized for 2 minutes.
[The prepared statement of Mr. Boucher follows:]
[GRAPHIC] [TIFF OMITTED] T4852A.001
[GRAPHIC] [TIFF OMITTED] T4852A.002
OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Terry. Thank you, Mr. Chairman, for everything.
Reform of the Universal Service Fund has been a long time
coming, and, under your leadership and dedication to this
issue, I am confident that meaningful reform is within the
consumers' reach.
Over 4 years ago, when we set out to introduce the first
comprehensive universal service reform bill since 1996, we
agreed that the principles and goals of universal service are
still as relevant today as they were in the 1930s. However, the
USF has failed to keep up with the changing telecommunications
landscape, and today's draft legislation is needed more than
any time before.
Our draft legislation improves many of the existing USF
mechanisms. Specifically, we target USF support to high-cost
areas to ensure that USF is meeting its goal of making
telecommunication services available to all rural high-cost
consumers. The targeting provision is especially important to
address the equity issue of ensuring that all customers living
in rural America receive the benefits of USF regardless of the
carrier that serves them.
The draft legislation also makes broadband a supported
service. Including broadband as a supported service is
commonsense and brings the fund into the 21st century. For
those that fear adding broadband as a support service will
subsidize competition, I would like to highlight that the
targeting provision in our legislation will move support
outside the town centers into the high-cost areas where support
is needed the most.
And, finally, I would like to highlight that the draft
legislation addresses important issues of cost, accountability,
and fairness. The draft legislation broadens the base of
contributors while placing a cap on the overall High-Cost Fund.
I recognize that the cap has caused some heartburn with some of
our witnesses and appreciate your support throughout the
process. As the process moves forward, it is my hope that we
can continue to work together.
I yield back.
Mr. Boucher. Thank you, Mr. Terry.
The chairman emeritus of the full Energy and Commerce
Committee, the gentleman from Michigan, Mr. Dingell, is
recognized for 5 minutes.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, I thank you. I commend you for
holding today's hearing--it is important--and also for you and
Mr. Terry in your fine work on the discussion draft of the
Universal Service Reform Act of 2009. This is an important
piece of legislation.
Due to the explosive growth in the use of Internet and
wireless services for communications, the revenues of
telecommunications subject to universal service fees have
declined, thus leading to increased fees on consumers to allow
companies to meet their required universal service
contributions.
Lamentably, the Universal Service Fund has not been
modified to reflect this market dynamic. And, further, by
reason of this inaction, the fund has within denied the
necessary streams of revenue that could be derived from
assessments on nontraditional communication providers, such as
Voice over Internet Protocol, VoIP, which are now competitive
players in the telecommunications industry.
Consequently, now, more than ever, it is incumbent on the
Congress to make the necessary changes to the Universal Service
Fund's structure so as to preserve as well as to modernize its
ability to facilitate the provision for high-quality
telecommunication services at affordable rates to all Americans
regardless of geography or income.
As I have pointed out in the past, I believe that three
principles should guide our efforts in this matter. First, all
providers of telecommunications should contribute equitably to
support universal service. Second, all communications, and not
simply interstate and foreign communications, should be subject
to assessments to support universal service. Finally, we should
not play favorites with new communications technologies when it
comes to Universal Service Fund contribution requirements. This
would have the undesirable effect of shortchanging the fund, to
which I have just alluded, as well as picking winners and
losers in the marketplace. Indeed, it would constitute an
exercise in unfairness.
I am pleased that your draft, the Boucher-Terry draft
legislation, incorporates these principles. Moreover, in
keeping with Chairman Waxman's and my belief that reform in
this area should be forward-looking, the draft bill recognizes
broadband as a universal service and makes provisions to
support the expansion of its infrastructure. In brief, this
legislation is a much-needed step in the right direction for
universal service reform, and I am proud to extend my support
for it.
Mr. Chairman, I thank you for your courtesy, and I commend
you for the congenial, bipartisan process that has produced
this bill pending before the committee's consideration today.
This matter of collaboration has always been a hallmark of this
committee's finest work, and I look forward to further
improvement to this legislation under your auspices and under
these principles.
Thank you, Mr. Chairman, and I yield back the balance of my
time.
Mr. Boucher. Thank you very much, Chairman Dingell.
The gentleman from Florida, Mr. Stearns, the ranking
Republican member of our subcommittee, is recognized for 5
minutes.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Stearns. Good morning. And thank you, Mr. Chairman.
This is a very important hearing. It is nice to see a lot of
folks here, a very distinguished group of witnesses here.
I am encouraged that your view towards reforming the broken
Universal Service Fund is a high priority. There are many
different ideas on how to best achieve this, as we can see from
the number of witnesses we have today, so I look forward to
their testimony.
The Universal Service Fund needs to be reformed, and
quickly, if possible. We can all, perhaps, agree on that one
point. The system is fraught with waste, fraud, and abuse. A
major overhaul is necessary. So the question before us is, what
are the appropriate goals of the program and, obviously, how do
we best achieve that?
The 1996 Telecom Act codified universal service, but the
concept goes back decades earlier to a time when there was only
one phone company. Now the landscape looks a whole lot
different, yet the fund is still administered by outdated
rules.
Among the impacts of the growth of the Universal Service
Fund have been the growing universal service fees. This
contribution factor is a percentage of interstate end-user
revenue that telecom companies must pay and changes quarterly,
depending upon the needs of the program. Now, in the second
quarter of 2000, the fee was 5.7 percent. It has since grown to
12.3 percent. That means that consumers are paying fees in
excess of 12 percent of their monthly phone bills. And that fee
is expected to go up to 14 percent next year.
Accordingly, there is a need to reform the program away
from subsidies that may no longer be necessary as technology
and services improve and, of course, become more widespread.
Instead, we need to move towards a solution that ensures the
goals of universal services but minimizes consumer cost.
Throwing additional money at this crumbling program makes
little sense at this time.
The purpose of this hearing is to examine the discussion
draft of the Universal Service Reform Act of 2009. This draft
takes several positive steps towards reform, but it also
contains some questionable direction. In particular, it is not
clear that this draft restrains costs in any real significant
way. In fact, the size of the fund, perhaps, will ultimately
increase.
More can and should be done to rein in costs and to improve
transparency. First, we need to impose a firm cap to prevent
uncontrolled growth in the fund. While this draft bill would
cap the high-cost portion of the fund, the cap is subject to
several significant exceptions that would grow the fund, in my
opinion.
These exceptions include: an annual growth factor; changes
to increase support for certain nonrural carriers and carriers
that buy other local carriers; and an upward adjustment if the
FCC adopts an alternative recovery mechanism for intercarrier
compensation revenues that increases demand for Universal
Service Fund support.
So, it is not clear how much these exceptions would cost
the fund and consumers. The FCC and other sources have given
us, recently, an estimate that the changes to nonrural support
alone range from an increase of $200 million to $700 million.
This is only if no additional carriers request this type of
support and if the support is for voice service, not broadband
service.
In addition, reforming intercarrier compensation, as this
draft would require, could cost upwards of $1 billion. While
some of that increase would be offset, I understand, by
reductions in other charges, some customers are likely to see
their overall phone bills obviously go up.
I think we ought to know the price tag before we start
handing out subsidies. So I question the reform that is
proposed, and I am hoping that we can find out from our
witnesses today how this would work.
Moreover, we need to institute competitive bidding
procedures that apply to all carriers. This type of process
will help ensure that we are getting the most out of the
subsidies. Otherwise, we will continue to see an inefficient
use of consumers' money.
We also need to target the money to the places and the
people who obviously really need it. Cable companies, for
example, suggest that we eliminate subsidies anywhere there is
an unsubsidized wireline provider. It certainly seems to make
good sense that we eliminate subsidies where the market has
demonstrated clearly service can be offered without subsidies.
So, again, thank you, Mr. Chairman, for holding this
hearing. It is important to examine the goals, and I look
forward to hearing from our witnesses.
Mr. Boucher. Thank you, Mr. Stearns.
The gentleman from Massachusetts, Mr. Markey, is recognized
for 2 minutes.
Mr. Markey. Thank you, Mr. Chairman.
It is long overdue that we fix the bloated system that
likely overpays eligible telecommunications carriers more than
what is warranted. When approaching reform proposals, I believe
that we should harness advances in technologies and insist on
administrative efficiencies to first drive down costs and
create savings wherever and whenever possible. And, second, we
must also shift over time to more rational, stable sources of
funding while embracing broadband as a supported service.
Broadband will be indispensable in the 21st century. It
will provide our ability to be able to manage energy-efficiency
technologies, lower health-care costs, along with other social
and economic benefits. And that is why I successfully amended
the American Recovery and Reinvestment Act in February and
required the FCC to develop a national broadband plan for the
country that is due next February.
While the U.S. lags behind other countries in the world in
several key broadband metrics, there is one area where the
United States leads the world: connections to classrooms. Why?
Well, because in the 1996 Telecom Act we had a plan. As the
primary House author of the E-Rate program in that landmark
bill, I have seen firsthand what we can do when we actually
have a plan. And the 90-percent-plus of classrooms today
connected to the Internet is testimony to a forward-leading
approach.
With the national telecommunications broadband plan, the
Federal Communications Commission has a chance to give the
country a blueprint for our broadband future. I urge the
Commission to give a plan to us that is practical but
consistent with our history of tackling the big infrastructure
challenges with big ideas and a commitment to action.
Without question, any national broadband plan focused on
deployment to all Americans and on addressing affordability
must include universal service and related issues of
intercarrier compensation as a key ingredient. I congratulate
Chairman Boucher and Mr. Terry for their work on this issue.
And I yield back the balance of my time.
Mr. Boucher. Thank you very much, Mr. Markey.
The gentleman from Illinois, Mr. Shimkus, is recognized for
2 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
It is good to see so many friends here. And I applaud you
and Lee for your bulldog approach to this.
The Universal Service Fund should always be about the
customers, not the companies. And I focus on bringing broadband
to the rural areas, and I think there has been a lot of support
for that. I agree, we need to target waste, fraud, and abuse.
And we need to legislate, and we do not need the FCC to
regulate on this.
On a side note, I don't want to throw a wrench in this
whole debate, but, as we focus on pushing out, I hope,
broadband connectivity to places that don't have it, or high-
speed, this Net neutrality debate could come in here because it
could change the business plan. And so, it is not explicitly
written in this bill, but it is of concern that if we cannot
make a decision on issues like telemedicine, then you have
another problem with the whole Net neutrality debate.
And I yield back my time.
Mr. Boucher. Thank you very much, Mr. Shimkus.
The gentlelady from California, Ms. Eshoo, is recognized
for 2 minutes.
Ms. Eshoo. Thank you, Mr. Chairman, for holding this
hearing and providing us with your discussion draft of the
Universal Service Reform Act of 2009.
The draft is a springboard for a healthy discourse on the
next step for the fund. And we have held more than a few
hearings on this subject, and I think that it is time to
develop a workable piece of legislation.
I welcome all the witnesses and, certainly, Mr. Rosston,
who is a constituent and a good friend. It is wonderful to see
you here.
There are myriad range of problems with the Universal
Service Fund based, in part, on changes in the
telecommunications industry. In 1996--which is only 13 years
ago in regular years, but in telecommunications years it might
as well be a century. During that time, we have seen a virtual
explosion of new services and products.
The current system reflects the mid-20th century's
telecommunications economy, when long-distance calls were
defined as distinct from local calls and classified as a more
expensive service. This is the age of broadband and mobile
telephony, and national and international packages have made
this system a relic fit for the national history museum.
The program as it now stands is inefficient and fragmented,
with episodes of corruption. But we know that the fund would
cost too much even if its administrative problems are solved
because the ways it collects revenue and compensates vendors
doesn't make sense anymore.
We heard arguments at our last hearing about the need for
change and whether that change should come in the form of a
reverse auction or request for proposals when picking
recipients. We heard ideas about how to fix intercarrier
compensation and the identical support rule. A discussion draft
should take us to the next level, to concrete solutions. I
think it is time to integrate broadband into the fund base for
contribution purposes, and I am pleased that the draft bill
does so.
But I am concerned about issues related to minimum speed
and broadband rollout. I signed on to Congresswoman Matsui's
bill because I want to discuss the next steps for utilizing the
fund to support broadband access. Unfortunately, the bill
before us does not address the Low-Income Lifeline Program that
would support universal broadband deployment under Ms. Matsui's
bill. So I am interested in alternative methods that you would
have for addressing this issue.
It also does not discuss the Schools and Libraries Program.
That leaves a lot out of the equation. Schools and libraries
are our anchor institutions, and I have voiced my concern for
funding their broadband access. And the last mile of broadband
needs to go to urban as well as rural areas quickly, both in
terms of time and speed.
So I look forward to working on the bill, Mr. Chairman,
with you and Mr. Terry, on developing this important piece of
legislation that, I believe, needs to be comprehensive and
holistic in its approach.
And I yield back.
Mr. Boucher. Thank you very much, Ms. Eshoo.
The ranking Republican member of our full committee, the
gentleman from Texas, Mr. Barton, is recognized for 5 minutes.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman.
I want to thank all of our witnesses.
I think we need a few more, Mr. Chairman. I don't think you
have quite covered the total spectrum. My next-door neighbor
wasn't invited, and we need to get them out here.
I am going to submit my opening statement for the record.
To put it in terms that average people understand, I like
the bill. I am ready to take you to the prom, but I am not
ready to marry you. You know? There is still work that needs to
be done, cosmetic touchups, you know, a little better attitude
maybe. But you are on the right track, Mr. Chairman.
It is obvious that the fund is broken. I mean, you know,
more people have cell phones than have hardline phones. The
United States is the most wired country in the world. Those of
us that have all the ideocentric laws that we have to deal with
have two BlackBerrys, three cell phones, plus all the hardline
phones.
At my condo here in Washington, in Virginia, I basically
just have a phone there to have a phone in case there is some
emergency or something. My USF fee is probably 20 to 30 percent
of my bill because I pay the absolute minimum each month. I
just think that is not appropriate.
You and Mr. Terry's bill, which you have worked with me on
and Mr. Terry has worked with me on, I really, really want to
support. But it does concern me that, under this bill, the size
of the fund could actually increase and not decrease. I think
we need a firm cap. Obviously, that is something that we need
to work on or discuss.
There are some things that we could do that are not in the
bill to make it more competitive in the service fund. I think
it is ridiculous that some areas have 30 different phone
companies that get subsidies. I don't buy that. I can buy two,
maybe, or three for competitive purposes, but 30? I just think
that is wrong.
And while you and I have discussed this at some length,
having a mandate is a difficult concept for somebody like me to
swallow for broadband. I am not saying it is--it may not be
appropriate, but it is something that I have to think about.
So, overall, great prom date, marriage proposal possible.
And, with that, I yield back, Mr. Chairman.
Mr. Boucher. Well, thank you very much, Mr. Barton. Given
the distance that we have traveled, a prom date is good enough
for today, and I am happy to get the invitation.
The gentleman from Pennsylvania, Mr. Doyle, is recognized
for 2 minutes.
Mr. Doyle. Thank you, Mr. Chairman. I am still trying to
get that image of Mr. Barton taking you out to the prom out of
my head.
Mr. Barton. That is just metaphysical. It is not literal.
Mr. Doyle. Even that is scary.
Thank you, Mr. Chairman, for holding this hearing. I am
pleased that you are holding a hearing on your bill to reform
the Universal Service Fund.
I think we have to rethink what ``universal service'' means
and how the Universal Service Fund implements these goals. I
have said many, many times that we need an overhaul for the
broadband age, a ``Universal 2.0.'' ``Universal Service 2.0''
shouldn't build on the current structure just because it is
what we have. That structure should undergo a thorough review
to make sure that every dollar spent is a dollar that the
private sector isn't competing against and that every dollar
spent enables low-income consumers to choose the communication
services they need.
I think the bill takes a number of steps in the right
direction, but I have some concerns that I believe have to be
addressed before I can support it. Today, my constituents pay a
lot of money into that fund, and I want to make sure that the
fund just doesn't take from those in urban areas just to hand
it over to rural areas who are capable of paying for
themselves.
I think that Ms. Matsui's bill that allows for low-income
Americans to qualify for a broadband lifeline subsidy is a good
start, and I intend to add my name as a cosponsor.
However, although it is critically important in many cases,
monthly price isn't always the biggest reason that people
aren't online at home. There is the other program, Link-Up,
that needs to be addressed also in ``Universal Service 2.0,''
because there are other barriers, like access to a computer or
even a lack of understanding the benefits of broadband.
Some people suggest that we shouldn't be subsidizing
telephone service for upper-income communities in areas like
Aspen, Colorado. Perhaps we need to consider legislation that
will move the Universal Service Fund to a voucher system for
low-income consumers that will allow them to communicate in the
ways that they want to. I am interested in learning if that is
a viable solution to meet the goals of ``Universal Service
2.0.''
I look forward to hearing from our panelists today, and I
look forward to asking some questions, Mr. Chairman. Thank you.
Mr. Boucher. Thank you very much. I appreciate your
comments this morning.
The gentlelady from Tennessee, Mrs. Blackburn, is
recognized for 2 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman. I do thank you for
the hearing. I know that you and Mr. Terry are hard at work on
this issue.
And I want to say welcome to all of our visitors here
today. It looks like, with the large number of you, we are
going to be spending the day together talking about this issue.
But I am glad that you are here.
And I hope that, as we go through this hearing today, that
we are going to touch on a number of issues that really need to
be addressed: the intercarrier compensation, competitive
bidding, caps on the USF distribution, the reverse auctioning,
cost of this to the consumer. Several of us have mentioned
these, and, as you know, they are of concern to us.
I am concerned that the legislation in its current form
is--we are not really addressing hitting the problems that we
are hearing from our constituents. We are just not hitting them
head-on. And I think the American people have grown ill and
fatigued of lots of talk. They want to see some action on some
issues.
I am hearing from some of my constituents who would be
affected by this, why is it not going to dramatically increase
access or improve access? Exactly what is going to happen with
the broadband plan and expansion; how are you going to handle
that?
Mr. Shimkus mentioned Net neutrality. I term it ``fairness
doctrine for the Internet.'' Indeed, there is concern about
complications and how that would be handled.
People are concerned that we put taxes on the books and
then we don't take taxes off the books, but we cannot always
define what is a better use or a fair distribution for those
taxes.
So there is plenty for us to look at and talk about. And I
do hope we are going to have some good common sense coming from
all of you.
I want to say a special welcome, Mr. Chairman, if I may, to
Mr. Greer, who is from Tennessee and is someone that I enjoy my
conversations with when we talk about how this affects our
rural areas and as we look at the telecommunications issues in
the rural areas.
I also want to say a special welcome to Mr. Graham, who
graduated from Mississippi State University and, like me, a
fellow bulldog. Looking at you, I can tell you were there much
later in life than was I and that you probably graduated many
years after I had left. But welcome. We are glad you are here.
I yield back.
Mr. Boucher. Thank you, Mrs. Blackburn.
The gentlelady from California, Ms. Matsui, is recognized
for 2 minutes.
Ms. Matsui. Thank you, Mr. Chairman. And thank you very
much for holding this hearing today on reforming the Universal
Service Fund. I would also like to commend your efforts to
expand broadband access to more Americans in your draft USF
reform legislation.
And I would like to thank the witnesses for joining us
today.
I would also like to thank Ms. Eshoo and Mr. Doyle for
their supportive comments on my Broadband Affordability Act.
In today's economy, the Internet has become a necessity,
not a luxury. Americans need it to obtain emergency information
for educational purposes, to find low-cost health-care options,
and to seek employment assistance. In fact, about 75 percent of
all large U.S. employers now require applicants to apply
online, creating a significant disadvantage for those without
broadband.
We need to not only expand broadband access but also to
address the fact that millions of Americans simply cannot
afford to pay up to $60 a month for broadband. A recent ITIF
study found that 96 percent of Americans have access to
broadband services, while less than 65 percent actually
subscribe.
Other current prominent studies by the Pew Institute and
PPIC have strongly suggested that broadband adoption rates are
largely associated with income. Lower-income families in urban
and rural areas are severely disadvantaged in large part by the
lack of access to affordable broadband services.
To help close the digital divide, I have introduced the
``Broadband Affordability Act,'' which would direct the FCC to
create a program for universal broadband adoption similar to
the current USF Lifeline assistance program. The bill will
ensure that lower-income Americans living in urban and suburban
and rural areas all have access to affordable broadband
services. In doing so, households who currently possess
broadband options but have not subscribed because of cost would
no longer be unserved or underserved.
It is my hope that any USF reform legislation helps bridge
this Nation's digital divide by addressing affordability
barriers.
I look forward to working with Mr. Chairman and Mr. Terry
and all my colleagues, looking forward. And I yield back the
balance of my time.
Mr. Boucher. Thank you very much, Ms. Matsui.
The gentleman from Oregon, Mr. Walden, is recognized for 2
minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
The topic of today's hearing, Universal Service Fund
reform, is one that it appears everyone has something to say
about, judging by the panel of 10 witnesses. And we welcome you
all. This is a complex matter, So I appreciate your assembling
such a thorough complement of witnesses, Mr. Chairman. This
should be most helpful.
It isn't often that there are two Oregonians in the room
for one of our subcommittee hearings, but today is one of those
times. And I welcome my friend, Ray Baum, who is commissioner
with the Oregon Public Utility Commission and chair of the
National Association of Regulatory Utility Commissioners'
Committee on Telecommunications.
Wearing both these hats and as the State chair of the FCC's
Joint Board on Universal Service, Ray will share his insight
with us on USF reform. And I appreciate his testimony, which I
read through last night.
During my years as a State legislator, I worked alongside
Ray, and I found his perspective to be both thoughtful and
comprehensive. And I am pleased that he is here to help this
subcommittee in its efforts to reform the USF.
Congress continues to discuss the issue of ubiquitous
broadband deployment and how best to achieve it. The FCC, USDA,
and Commerce Department are engaged in this topic, as well.
With the Nation's unemployment rate at a 26-year high, Oregon's
unemployment rate at 11.3 percent, and some counties in my
district pushing 20 percent, the economic development potential
that broadband service provides cannot come fast enough.
I am interested to learn more about the implications,
however, of using USF to support broadband service. I would
like to hear from our witnesses about how this would
functionally work in a district as rural as mine that has
several counties with population densities less than one person
per square mile. If you overlaid my district over the East
Coast, it would start at the Atlantic and end in Ohio.
I realize that none of our witnesses here today can speak
to specific problems within, for example, the USF Schools and
Libraries Program. However, I would like the hearing record to
reflect that we should address the challenges that applicants
face in navigating this very complex program. My office has
been working with the Baker County, Oregon, library district
for a year and a half on delays it has experienced with
receiving E-Rate funds. If it is the intent of the USF program
to support schools and libraries through the E-Rate program,
then let's make sure it functions properly and remove
roadblocks which cause applicants to give up completely on that
program.
So I welcome the witnesses here today, and I yield back my
time.
Mr. Boucher. Thank you very much, Mr. Walden.
The gentlelady from the Virgin Islands, Mrs. Christensen,
is recognized for 2 minutes.
Mrs. Christensen. Thank you, Chairman Boucher. And thank
you and Ranking Member Stearns for holding this hearing to
receive testimony on the draft of the Universal Service Fund
act.
I also want to commend you, Mr. Chairman and Congressman
Terry, for your work in drafting the bill and your long-term
legislative efforts to try to keep the Universal Service Fund
program in sync with a rapidly changing technology landscape.
I am pleased that today we will have an opportunity to have
a meaningful discussion of the issues that are important to
reforming the USF, including the overall budget for the High-
Cost Fund, new contribution methodology, and expanding the USF
support broadband adoption, among others.
I think everyone is in agreement on the need for reform but
also on preserving the intent codified in the 1996 act, which
is to provide affordable telecommunication services across the
United States.
As a representative of a district that is a high-cost,
insular area which reportedly received an estimated $22.5
million in high-cost support in 2007, we have benefited from
the program. However, in some areas, like the Virgin Islands,
funding has been declining for wireline carriers, which
represents a serious threat to the need for increased
investment in the telecommunications infrastructure in rural
areas. It is important that places like the Virgin Islands,
rural areas with minimal-level competition and a small market,
that they are not left out or left behind or underserved by
this critical industry.
So I look forward to our discussion today on challenges to
reforming and taking the USF into the 21st century. And I want
to welcome the panelists, and look forward to the testimony and
their views on the bill.
Thank you.
Mr. Boucher. Thank you very much, Mrs. Christensen.
The gentleman from Missouri, Mr. Blunt, is recognized for 2
minutes.
Mr. Blunt. Thank you, Mr. Chairman.
I have a statement for the record. Let me just quickly
summarize that statement, which is really: How do we bring down
the rapidly growing cost to customers, to consumers here? The
whole topic of unserved versus underserved is of concern to me.
And how do we control the cost of the program? And is the
definition of ``underserved'' and ``served'' part of that?
And I will submit my full statement for the record, Mr.
Chairman. And thank you.
[The prepared statement of Mr. Blunt follows:]
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Mr. Boucher. Thank you very much, Mr. Blunt.
The gentlelady from Florida, Ms. Castor, is recognized for
2 minutes.
Ms. Castor. Good morning. Thank you, Mr. Chairman, for
holding this important hearing and for the progress that you
and Representative Terry have made in beginning to craft a
bill.
My State of Florida has a particular interest in universal
service reform because, out of all the States in the Union,
Florida is the single largest contributor to the fund. In 2007,
Florida consumers made a net contribution of $297 million to
the Universal Service Fund. Floridians paid in about $480
million and received $180 million of that back in support,
largely, for schools and libraries.
The overriding goal of the USF is laudable, but it is
unclear that the draft adequately addresses inequities in
distribution or modernizes the USF with concepts like those
contained in Congresswoman Matsui's bill relating to broadband
and low-income consumers.
Florida's disproportionate contribution has only been
exacerbated by the out-of-control growth in the High-Cost Fund.
So I am pleased that the discussion draft contains a cap on the
High-Cost Fund and other measures to hold down the growth in
the fund.
I am interested in the witnesses' opinions regarding the
auction mechanisms and whether such auctions will be effective
in reducing the growth in wasteful and duplicative spending
that has been driven by the identical support rule.
And, Mr. Chairman, prior to markup, it would be helpful to
see an analysis, monetarily, of the effect of these changes.
Several of the changes proposed in this bill have the potential
to further grow the fund. And, while I understand the
importance of some of these changes, I do not believe we should
expand the fund except in the context of a solution to the
inequities in the contribution and distribution methodologies
that exists today.
Thank you, and I look forward to the testimony of the
panel.
Mr. Boucher. Thank you very much, Ms. Castor.
Is Mr. Buyer here? No, he has not arrived.
The gentleman from Michigan, Mr. Stupak, is recognized for
2 minutes.
Mr. Stupak. Mr. Chairman, I will waive and ask for an extra
2 minutes for questions.
Mr. Boucher. Thank you, Mr. Stupak. Two minutes will be
added to your questioning time.
The gentleman from Ohio, Mr. Space, is recognized for 2
minutes.
Mr. Space. Thank you, Chairman Boucher and Ranking Member
Stearns, for convening today's hearing.
I would also like to thank our witnesses for taking their
time to be here today, as well.
Mr. Chairman, I applaud your efforts, along with those of
Mr. Terry, to reform the Universal Service Fund through the
draft legislation that we are considering today. As I have
shared many times before, the 18th Congressional District is
largely rural. Fourteen of my 16 counties are within
Appalachian proper. And, that said, we are the poster child for
the Universal Service Fund support.
Many of our towns are small, insular, and expensive for
providers to serve, and much of my district, consequently,
lacks access to broadband. And as my colleague from Oregon
stated, this has an extremely significant effect on our
economic development and the potential afforded by the advent
of new and diverse technology.
It also has an extremely detrimental effect on our ability
to deliver health care and education. What we are seeing now is
really the beginning of the integration of technology into
those processes, and we can no longer afford to remain so far
behind in such a vital area.
I am extremely pleased to see that Chairman Boucher and
Congressman Terry's draft bill explicitly authorizes the
coverage of broadband under the Universal High-Cost Fund. I
believe that, coupled with the investment we have made through
the American Recovery and Reinvestment Act, we are on the path
to ensuring that Americans everywhere, regardless of how rural
their hometown is, may have equitable access to vital
infrastructure.
I further support the efforts of my colleagues to restore
some accountability and cost containment to the Universal
Service Fund through sensible auditing and oversight provisions
and through capping the fund with built-in accommodations for
future changes.
I look forward to continuing to work on Universal Service
Fund reform with my colleagues on this committee. And I think
we all agree that such reform is long past overdue and that
rural areas of our country have, in the meantime, gone
shortchanged.
Thank you, and I yield back.
Mr. Boucher. Thank you, Mr. Space.
The gentleman from Vermont, Mr. Welch, is recognized for 2
minutes.
Mr. Welch. Thank you. I am going to reserve my time.
Mr. Boucher. That is fine. Thank you, Mr. Welch.
The gentleman from California, Mr. McNerney, is recognized
for 2 minutes.
Mr. McNerney. Thank you, Mr. Chairman. I will waive my
opening statement.
Mr. Boucher. Thank you, Mr. McNerney.
The gentleman from North Carolina, Mr. Butterfield, is
recognized for 2 minutes.
Mr. Butterfield. Let me thank you, Mr. Chairman, for your
outstanding work on this issue and for the work you and your
staff have put into developing your Universal Service Reform
Act discussion draft.
As a member of this committee who represents a particularly
rural district in my State of North Carolina, I am acutely
aware of the need for the USF and to ensure telecommunication
services are made available to the high-cost remote areas of
our country. At the same time, should we do nothing to reform
USF, we put ourselves on an unsustainable path, a path that
already projects the contribution factor rising to over 14
percent in the coming year.
I am pleased to see much-needed provisions addressed in the
Boucher-Terry universal service draft, including requiring USF
recipients to include broadband Internet access; broadening the
base of contributors to help bring down the rising contribution
factor; directing the FCC to address the intercarrier
compensation system; and targeting support to rural wire
centers as opposed to a formula based on statewide averaging.
And these are steps in the right direction. And I look forward
to hearing the comments from the witnesses before us today and
also from my colleagues about these and other proposals.
Finally, I remain particularly interested in the comments
of Dr. Rheuban regarding much-needed reforms in the Rural
Health Care Program. That is very special to me. We have not
been able to achieve the full effectiveness of this program,
and I look forward to discussing how the addition of broadband
services in USF will potentially enhance broadband telehealth
infrastructure and deployment in the Rural Health Care Program.
I have been an advocate of telehealth and telemedicine, and I
believe these health-care delivery tools will be vital in rural
communities across America.
And so I want to thank the 10 witnesses. I sat here and
counted all of you. I want to thank the 10 witnesses on the
panel, and I look forward to hearing your testimonies today.
I yield back.
Mr. Boucher. Thank you, Mr. Butterfield.
The gentleman from Washington State, Mr. Inslee, is
recognized for 2 minutes.
Mr. Inslee. Thank you. And I will pass. Thank you, Mr.
Chair.
Mr. Boucher. Thank you, Mr. Inslee.
All members now having had an opportunity for opening
statements, we welcome our panel of witnesses. And we thank
each of you for taking time to join us here this morning.
I will say just a brief word of introduction about our
witnesses today.
Mr. Peter Davidson is senior vice president of public
affairs, policy, and communications for Verizon.
Mr. Leslie Greer is the chief executive officer of DTC
Communications, testifying this morning on behalf of the
National Telecommunications Cooperative Association, a very
large organization representing rural carriers.
Mr. Michael Rhoda is the senior vice president for
government affairs at Windstream Communications.
Mr. Joel Lubin is a vice president of public policy for
AT&T Services, Incorporated.
Ms. Catherine Moyer is the director of legal and regulatory
affairs for Pioneer Communications, testifying today on behalf
of OPATSCO.
The Honorable Ray Baum is a commissioner of the Oregon
Public Utility Commission, testifying today on behalf of NARUC.
Kyle McSlarrow is president and chief executive officer of
the Cable Television Association.
Mr. Eric Graham is vice president of government relations
at Cellular South, Incorporated, testifying today on behalf of
the Rural Cellular Association.
Dr. Karen Rheuban is a professor of pediatrics and the
medical director of the Office of Telemedicine at the
University of Virginia Health Systems. She also serves as
president of the American Telemedicine Association and as board
chair of the Virginia Telehealth Network.
Mr. Gregory Rosston is a deputy director at the Stanford
Institute for Economic Policy Research at Stanford University.
Without objection, all of your opening statements will be
made a part of the record, and we would encourage your oral
summaries. And, given the number of you this morning, we would
ask that you try to hold those statements to approximately 5
minutes.
Mr. Davidson, we will be happy to begin with you.
STATEMENTS OF PETER DAVIDSON, SENIOR VICE PRESIDENT OF PUBLIC
AFFAIRS, POLICY, AND COMMUNICATIONS, VERIZON; LESLIE GREER,
CHIEF EXECUTIVE OFFICER, DTC COMMUNICATIONS; MICHAEL RHODA,
SENIOR VICE PRESIDENT FOR GOVERNMENT AFFAIRS, WINDSTREAM
COMMUNICATIONS, INC.; JOEL LUBIN, VICE PRESIDENT OF PUBLIC
POLICY, AT&T SERVICES, INC.; CATHERINE MOYER, DIRECTOR, LEGAL
AND REGULATORY AFFAIRS, PIONEER COMMUNICATIONS; HON. RAY BAUM,
CHAIRMAN, NARUC COMMITTEE ON TELECOMMUNICATIONS, STATE CHAIR,
FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE, COMMISSIONER,
OREGON PUBLIC UTILITY COMMISSION; KYLE McSLARROW, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, NATIONAL CABLE AND TELECOMMUNICATIONS
ASSOCIATION; ERIC GRAHAM, VICE PRESIDENT OF GOVERNMENT
RELATIONS, CELLULAR SOUTH, INC.; KAREN RHEUBAN, SENIOR
ASSOCIATE DEAN FOR CME AND EXTERNAL AFFAIRS MEDICAL DIRECTOR,
OFFICE OF TELEMEDICINE, UNIVERSITY OF VIRGINIA; AND GREGORY
ROSSTON, DEPUTY DIRECTOR, STANFORD INSTITUTE FOR ECONOMIC
POLICY RESEARCH
STATEMENT OF PETER B. DAVIDSON
Mr. Davidson. Thank you. Good morning, everyone. Thank you,
Chairman Boucher, Ranking Member Stearns, and members of the
committee. Thank you for the opportunity to address the
committee this morning on the new Universal Service Reform Act
of 2009 circulated recently by Chairman Boucher and Mr. Terry.
This committee has always been a leading voice on universal
service reform, and today we endorse the Boucher-Terry
legislation because we believe it embraces policies to reform
and sustain the fund. It directs funds to meet the true
communications needs of consumers. We will continue to work
with the sponsors and this committee to ensure that this
legislation accomplishes the objectives of modernizing the
universal service program so that it meets the needs of
Americans in the 21st century.
In the past decade, the communications industry has
invested hundreds of billions of dollars in private capital to
deploy new, innovative broadband technologies. Recently,
Congress passed mapping legislation, funded broadband grants
for unserved areas, and now we have a full complement of FCC
commissioners focusing on broadband adoption and deployment
policies.
Encouraging deployment and adoption of next-generation
networks will keep America competitive in our global economy
and will help address some of our most pressing challenges,
such as health-care reform, education, and energy conservation.
We also believe that there should be a role for the
Universal Service Fund related to broadband. But right now the
fund is in trouble and, left unchanged, is in no shape to
contribute to the broadband solution. The USF contribution
factor is near an all-time high and, just to pay the fund at
today's levels, as everyone has noted this morning, is
projected to rise again next year to more than 14 percent. When
added to other communications charges and fees, these
assessments really hit consumers hard, especially in these
economic times, and this trend is simply unsustainable.
The problem with universal service is not that we spend too
little money; it is that we do not spend it on the right
services in the right places. We cannot put off any longer the
tough choices on major issues. We must fix the broken universal
service framework before layering on additional priorities.
Verizon supports the draft Universal Service Reform Act
because it takes a big step toward addressing five of the most
pressing issues: one, an overall budget for the High-Cost Fund;
two, a contribution methodology; three, competitive bidding for
wireless support; four, a date certain for related reform of
intercarrier compensation; and, five, an end to traffic
pumping.
Allow me to briefly--and I will be brief--address each of
these points.
First, the bill recognizes the need to set an overall
budget for the High-Cost Fund. This is important because
consumers pay for the fund, and consumers have limited
resources. The High-Cost Fund is already at a tipping point,
having grown to about $4.5 billion from less than $3.5 billion
only 5 years ago while the assessable revenue base declines
rapidly. Without some restraint, the USF contribution factor
will surely rise to 15 percent, perhaps even 20 percent or
more. We simply must have the discipline at the outset of any
overhaul of the High-Cost Fund to define some reasonable
funding boundaries.
Second, the way that we fund the fund, through an
assessment on interstate revenues, is a mess. This system may
have worked in the days of one network and only two services--
local and long-distance calls--but it is not practical with the
converged, any-distance services consumers expect today. The
draft bill acknowledges the need to update the universal
service contribution system and would commit the FCC to take a
hard look at an alternative contribution system. For many
reasons, the best contribution method is one mentioned in the
bill, a flat charge on each working phone number, to pay for
all or part of the USF contribution base.
Third, a competitive bidding system is the best way to
distribute high-cost support to wireless carriers. The draft
bill recognizes the benefits of this market-based approach and
sensibly puts in place a forward-looking competitive bidding
system to support and expand the reach of wireless networks.
The FCC will need to address quality-of-service requirements
and rules in a competitive bidding system, but that is
manageable through legally enforceable contracts signed with
those wireless carriers that win the bid to provide service in
high-cost areas, just as the Federal Government does in
hundreds of procurement areas to ensure quality of goods and
services.
Fourth, we must fix the broken intercarrier compensation
system at the same time that we update the Universal Service
Fund. All that is needed is the resolve to get this done. And
the draft Universal Service Reform Act requires the FCC to act
on intercarrier compensation reform within 1 year. That is
certainly workable.
And, fifth, we have to stop the so-called ``traffic-pumping
schemes'' that have plagued the industry the last several
years. The draft Universal Service Reform Act would help do
that by making it illegal for traffic pumpers to charge other
carriers for access on traffic subject to those revenue-sharing
agreements.
Mr. Chairman, with your and the committee's leadership, the
Universal Service Reform Act, we can get the fund back on the
path of sustainability and focused on meeting the
telecommunications needs of our country. And I thank you for
the opportunity to testify here this morning.
[The prepared statement of Mr. Davidson follows:]
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Mr. Boucher. Thank you very much, Mr. Davidson.
Mr. Greer.
STATEMENT OF LESLIE GREER
Mr. Greer. Chairman Boucher, Ranking Member Stearns,
members of the subcommittee, good morning, and thank you for
the invitation to participate in today's discussion regarding
the Universal Service Reform Act of 2009.
My name is Leslie Greer. I am the CEO of DTC Communications
in Alexandria, Tennessee. As a resident of Tennessee, I would
like to take this unique opportunity to thank Representative
Gordon and Representative Blackburn for their service on the
subcommittee and to our great State.
My remarks today are on behalf of DTC Communication, as
well as NTCA and its other 580-plus community-based members
that serve rural areas throughout our Nation. NTCA would like
to recognize Chairman Boucher and Representative Terry for
their longstanding focus and awareness of the critical need for
continued universal service support for our Nation's
telecommunication network, which will help usher in the new era
of advanced communication.
The Universal Service Reform Act contains many program
modifications we have advocated for many years. I will briefly
outline our position on some of the most critical positions of
the bill from a rural provider's perspective. However, I would
like to remind the subcommittee that further analysis of these
provisions and others can be found in my written testimony.
Government policies and programs, including universal
service, are instrumental to the realization of affordable and
comparable telephone service for all. The United States public
switched telecommunication network remains the envy of the
world. The same should be true for the United States national
broadband network.
The Universal Service Reform Act takes many important steps
toward making this a reality. However, to achieve truly
ubiquitous broadband, much more needs to be done. Therefore,
NTCA looks forward to continue working with the FCC in the
coming months to develop a national broadband plan to meet the
needs of broadband networks in high-cost rural areas throughout
the country to ensure Americans living in these areas are not
denied the opportunity to realize the full promise of the
Internet.
The bill would expand assessments of contributions. NTCA
supports this change and believes all broadband access
providers should contribute to the Universal Service Fund. This
change alone will dramatically reduce the quarterly
contribution factor on all providers while simultaneously
ensuring that all those who utilize and benefit from the
network are, in fact, supporting it.
The bill gives the FCC the authority to determine whether
to use a contribution methodology based on revenues, numbers,
or a combination of the two and requires a study and findings
in support of the method chosen.
Telephone numbers have nothing to do with broadband
Internet access, which will be the basis for all communication
services in the future. With this in mind, as well as other
provisions that ensure all revenues may be assessed, it is
clear the FCC study will have to arrive at the correct
conclusion that the tested and proven revenues approach must be
used.
NTCA recognizes the fundamental roles audits play in the
oversight of policies and programs if they are conducted
appropriately. Unfortunately, the audit process has mostly been
a failure. Therefore, we support efforts by Congress and the
provisions included in this bill to ensure the FCC uses
appropriate audit methodologies.
The solution for intercarrier compensation is a simple one.
If a service provider uses another provider's network, that
service provider must compensate the other provider for such
use at an appropriate rate. We fully support the bill's
provisions directing the FCC to reform intercarrier
compensation within 1 year.
The Universal Service Reform Act requires carriers to
identify all traffic on their network and to pass through
traffic identification details. NTCA supports this provision to
eliminate phantom traffic, which has become one of the most
pervasive problems facing the telecommunications industry
today.
NTCA supports the elimination of the FCC's long-standing,
arcane and nonsensical identical support rule that allows a
competitor in a given market to receive support based on the
incumbent's embedded costs, even though the competitor's costs
are usually far less because they have not been required to
serve all customers throughout the market areas as incumbents
have to.
The draft contains other provisions that will help ensure
this program's effective operations, including primary line and
Antideficiency Act prohibitions, removal of the parent trap,
and allowances to accommodate potential future regulatory
shifts of intercarrier compensation or access charges within
the universal service system.
With these things in mind, we support passage of this bill.
Thank you, and I look forward to answering any questions
you may have.
Mr. Boucher. Thank you very much, Mr. Greer.
[The prepared statement of Mr. Greer follows:]
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Mr. Boucher. Mr. Rhoda.
STATEMENT OF MICHAEL RHODA
Mr. Rhoda. Chairman Boucher, Ranking Member Stearns and
members of the subcommittee, thank you for this opportunity
this morning to discuss our views on the draft text of the
Universal Service Fund Act of 2009. My name is Mike Rhoda, and
I am the Senior Vice President for Government Affairs at
Windstream, which provides communications and entertainment
services to consumers in 16 States.
Windstream serves more than 3 million voice customers and
more than 1 million high speed Internet customers. We provide
affordable broadband services at speeds of at least three megs
to virtually every community in our service territory and we
have deployed high speed Internet access to more than 90
percent of our voice customers. Windstream's service areas are
primarily rural, with an average density of 19 customers per
square mile.
Mr. Chairman, let me say that I have great respect for your
and Mr. Terry's work, and thanks to your bipartisan leadership,
the draft bill fairly balances the many conflicting interests
in this complex area. Windstream supports passage of this bill.
Unlike other rural carriers, Windstream receives relatively
little high cost support on a per line basis. Instead,
Windstream must implicitly subsidize service for customers in
remote high cost areas with revenues from its customers in
larger, more densely populated towns.
More than a decade ago, Congress recognized in Section 254
of the Communications Act that such implicit subsidies would be
unsustainable in a competitive telecommunications marketplace,
and, unfortunately, universal service regulations remain
virtually unchanged since that time.
We have seen the programming's shortcomings up close. A
good example is one of our customers residing in rural Nebraska
who recently contacted us to ask why he could not purchase
broadband at speeds comparable to his rural neighbors down the
road. His neighbors are served by a smaller company whose
network has been modernized by universal service. His
frustration is understandable.
Windstream's commitment to deploying affordable broadband
in rural America is undeniable, but existing universal service
mechanisms have created drastic imbalances in rural Nebraska
and rural America at large. Some high cost areas receive
arguably too much support, while many others receive far too
little or no support at all. While the neighboring companies in
this example receive an average of $800 annually per line in
support, Windstream's Nebraska operations receive approximately
$10 per line annually.
The Boucher-Terry bill takes a large step toward
eliminating these disparities in high cost rural areas by
narrowly targeting support to those areas that need it most.
The bill's use of targeting eliminates two significant
shortcomings of the current system.
First, under the rule mechanism, price kept carriers costs
are averaged across study areas, which can cover vast
geographies. A single Windstream study area stretches the full
width of Texas, a distance of more than 700 miles, and contains
more than 200 exchanges, ranging in size from 44,000 customers
to 47. With competitive pressures mounting and lower costs and
more densely populated areas, severe strains are placed on a
carrier's operations because low cost wire centers no longer
generate sufficient revenues to offset costs in remote higher
cost areas.
The second problem lies with the non-rural mechanism's
classification of entire States as either eligible or not
eligible based on statewide average costs. This limitation
disqualifies rural areas in a State like California from
receiving support, no matter how small, how remote or how
costly a community is to serve.
The Boucher-Terry draft establishes a sensible transition
path for incorporating broadband into universal service. The
strength of the Boucher-Terry draft is that it sets the Nation
on a path to universal broadband, but with recognition of the
significant costs to achieve this goal and an opportunity to
amortize those costs over time.
Finally, Windstream strongly supports the bill's
recognition of the important role that revenues from the
existing intercarrier compensation mechanisms play in
offsetting the high costs in rural areas.
Many on this subcommittee remember that one year ago, the
FCC considered a proposal to eliminate most intercarrier
compensation revenues. That proposal would have been disastrous
for consumers and businesses in high cost rural areas.
Windstream recognizes that the current rates and arcane rules
of intercarrier compensation are unsustainable and the company
has presented practical alternatives to the FCC that would not
hobble the ability of mid-sized carriers to serve rural
consumers.
In closing, Mr. Chairman, I would like to assure all
members of this subcommittee that there is broad agreement
within the telecom industry on the need for significant
universal service reform and that that reform is long overdue.
While reforms carry certain risks, the larger risk is to stand
by and watch well-documented problems continue to pull down
communities and consumers residing in rural America.
Significant change is the only way to save this program and
position it to fulfill its mission.
Thank you.
Mr. Boucher. Thank you very much, Mr. Rhoda.
[The prepared statement of Mr. Rhoda follows:]
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Mr. Boucher. Mr. Lubin.
STATEMENT OF JOEL LUBIN
Mr. Lubin. Good morning. Thank you, Chairman Boucher,
Ranking Member Stearns and other members of the subcommittee,
for again including AT&T in this continuing dialogue of
universal service reform. AT&T is the largest provider of
telephone service to rural America.
This is the second time I have had the opportunity to
address this subcommittee this year. The first time was in
March of 2009. At that point in time, when we were talking
about high cost universal service reform, AT&T identified three
critical areas that needed to be addressed.
The first one was contribution reform. Contribution reform
is so important because it is all about what customers pay and
which customers pay.
The second was intercarrier compensation. Intercarrier
compensation is critical because it is just another form of
subsidization to rural America.
The third is, once and for all, to identify an explicit
endorsement for the use of high cost universal service
mechanisms to promote the deployment of next generation
broadband and expanded and improved wireless in rural areas.
Mr. Chairman and Representative Terry, I wish to
congratulate you, for this legislation when introduced and
enacted will address the three items that AT&T highlighted in
March of 2009. We support and endorse this legislation.
From AT&T's perspective, universal service, as it exists
today at both the Federal and State levels, is fundamentally
grounded on a dying business model and a dying regulatory model
which no longer serves the foundation of sustainable social
policy. The plain old telephone service, POTS, by which local
exchange providers provide basic local exchange service with
inter-exchange access to long distance service will soon go by
the way of a slide rule, an earlier casualty of digital
technology.
In today's communication marketplace, the only thing
falling faster than subscribers on local basic service called
POTS is the switched access minutes on these collective
networks. In these circumstances, no government could hope to
prop up the POTS model for long, even if it wanted to, in order
to sustain universal service. Instead, universal service reform
must be forward-looking and policymakers must continue to work
on comprehensive national universal service reform policies in
order to promote and advance universal service objectives for
the 21st century.
The Universal Service Reform Act of 2009 both appropriately
reflects the insights of its sponsors and the committee
leadership and recognizes the reality of the rapidly eroding
implicit subsidies in the disappearing switched access world,
as well as the need to establish explicit funding mechanisms in
order to ensure universal service objectives are met for the
21st century.
Let me return to the three pressing areas of reform that I
described before.
First is with respect to contribution reform. The
importance of this provision cannot be overemphasized.
According to the preliminary numbers submitted by the Universal
Service Administration Company to the FCC a few weeks ago, the
assessment rate could approach and exceed over 14 percent of
interstate telecommunications revenues. When I was here in
March of 2009, that factor was 9.5 percent. In less than a
year, we see a 50 percent increase.
We have asked the FCC to act on a long-standing proposal by
AT&T and Verizon, which is supported by a number of individual
companies and individual associations, to implement a telephone
numbers-based contribution mechanism that would address the
problem posed by the overall reduction of interstate revenues,
which is the basis for the universal service contribution base.
This would create a more stable, robust collection mechanism
for universal service. This is of critical importance to the
goal of providing more explicit support for a broadband
deployment.
Second is the section on intercarrier compensation reform,
which is also critical for the transition to full deployment of
broadband, which will accelerate the complete, underlining the
word ``complete,'' complete elimination of access charges as a
source of universal service funding. We can debate what the
rate is, but a rate times zero minutes is going to generate
zero dollars. And ultimately the question is, if that was
supporting universal service, how does it work in a broadband
world? We have needed intercarrier compensation reform for
years, and the importance of this draft measures requirement
that the Commission act within one year to complete reform
initiatives cannot be overstated.
Further, the bill makes access stimulation charge, some
people call it access pumping, an unreasonable practice under
the Communications Act and prohibits local exchange carriers
from assessing access stimulation or traffic pumping charges.
Third, AT&T is pleased that the bill creates a statutory
framework that, once and for all, removes any doubt that it is
the policy of the United States that the Federal high cost
funding mechanism be used to promote deployment of broadband
and expanded and improved wireless in rural areas.
We look forward to hearing from the other panelists and
answering your questions. Thank you.
Mr. Boucher. Thank you very much, Mr. Lubin.
[The prepared statement of Mr. Lubin follows:]
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Mr. Boucher. Ms. Moyer.
STATEMENT OF CATHERINE MOYER
Ms. Moyer. Chairman Boucher, Ranking Member Stearns and
members of the subcommittee, thank you for inviting me to
appear before you today. I am Catherine Moyer, Director of
Legal and Regulatory Affairs for Pioneer Communications.
Pioneer Communications is a rural telephone company
headquartered in Ulysses, Kansas.
Mr. Boucher. Ms. Moyer, let me get you to move that
microphone just a little bit closer and maybe tilt it up a
little bit so that you are speaking directly into it. Thank
you.
Ms. Moyer. Pioneer provides local telephone service to
approximately 14,000 access lines within a 5,000 square mile
service area. Of these 5,000 square miles, only about 15 square
miles could be considered town. The remainder of our area is
truly rural. In addition to phone service, Pioneer
Communications provides cable television service, Internet
access and wireless phone service.
I testify today as first vice chairman of the Organization
for the Promotion and Advancement of Small Telecommunications
Companies. OPASTCO represents more than 530 independently-owned
local exchange carriers in 47 States. The companies and
cooperatives represented by this association provide numerous
services to their communities, including voice, broadband
Internet access, video and wireless.
First of all, let me state our appreciation to Chairman
Boucher and to Congressman Terry for the leadership that both
have shown on the reform of the Universal Service Fund. This
program has a successful history of assisting communications
and network providers in their service to rural and low income
consumers. We look forward to working with Congress and the
Federal Communications Commission to make the USF a part of a
forward looking solution in the ever changing communications
arena.
The goal of universal service policy has been to ensure
that every American, regardless of their location, has
affordable, high quality access to the public switch network
and thereby benefits from a variety of telecommunications and
information services.
The provision of a robust telecommunications infrastructure
in rural America would never have been possible were it not for
the Nation's long-established policy of universal service and
the Federal USF. To rural incumbent local exchange carriers,
high cost universal service support is a cost recovery program
designed to promote infrastructure investment in areas where it
would not otherwise be feasible for carriers to provide quality
service at rates that are affordable and reasonably comparable
to urban areas of the country.
I come before you today to endorse and support the draft
legislation offered by Chairman Boucher and Congressman Terry.
While the membership of OPASTCO has concerns about some of the
specifics contained in the text, the draft is a forward looking
document. We commend Congressmen Boucher and Terry for their
understanding of the ongoing revenue stream the USF provides
and how it benefits consumers in rural and hard to reach areas
of our country. This ongoing revenue stream keeps rates
affordable for rural consumers as carriers utilize it to pay
for switching, transport and network maintenance. This draft
transitions the plain old telephone support fund into a new and
modern broadband support fund.
The drafts continues the call for universal service support
that allows consumers in rural, insular or high cost areas to
have services and rates reasonably comparable to those provided
in urban areas. Its contribution mechanisms will allow for the
continued support of schools and libraries, rural health care
and low income consumers.
This draft expands universal service support to include
high speed broadband service and any other service that is
determined to be a universal service by the FCC.
We applaud this forward-looking move to provide support for
the broadband platform. Broadband is rapidly becoming the mode
of delivery for practically everything consumers may need or
want regarding communications, voice, data, education, health
care and entertainment, just to list a few.
Recipients of the high cost fund support would be required
to provide high speed broadband service defined as a download
rate of 1.5 megabytes per second. This draft mandates that the
FCC review that speed requirement by annually and make
necessary adjustments. OPASTCO suggests that the FCC also
review the USF funding level and ensure that the amount allows
for the adjusted speed requirements.
Additionally, OPASTCO supports the eligibility criteria and
waiver process included in the draft which takes into
consideration the many difficulties experienced by
communications providers in rural and hard-to-reach areas.
Additionally, OPASTCO supports, one, broadening the base of
contributors to the Universal Service Fund. Expanding this base
recognizes our modern broadband world. A broadband network with
the most possible connections, regardless of technology, is the
most valuable network.
Two, the cost controls included with the limitation of the
number of competitive carriers that receive support.
Three, the recognition of the importance of intercarrier
compensation and its contribution to the USF with the mandate
that the FCC act on intercarrier comp reform within one year.
Four, the permanent exemption ever the USF from the
Antideficiency Act.
Five, the prohibition of the primary line rule.
And six, the audit procedures, performance measures and
reports to Congress.
In closing, OPASTCO endorses and supports draft legislation
offered by Chairman Boucher and Congressman Terry. OPASTCO and
its members look forward to working with Congressmen Boucher
and Terry, members of the subcommittee and Members of Congress
to ensure that consumers in rural America are not left behind
and that they have access to services and rates that are
reasonably comparable to those provided in urban areas.
I look forward to your questions.
Mr. Boucher. Thank you very much, Ms. Moyer.
[The prepared statement of Ms. Moyer follows:]
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Mr. Boucher. Commissioner Baum.
STATEMENT OF RAY BAUM
Mr. Baum. Chairman Boucher, Ranking Member Stearns, I
appreciate the opportunity to testify in front of the committee
today.
I want to do a little side note. When Commissioner Walden
and I were serving in the Oregon legislature, we were so young
we were known as the ``pablum twins.''
Mr. Walden. Thanks for sharing that, Ray.
Mr. Baum. We have grown up, as you can tell.
Mr. Chairman, I would like to thank you and Congressman
Terry for your leadership on this important issue. I am here
today in my capacity as a member of the Oregon Public Utility
Commission and chair of the NARUC Telecommunications Committee
and State chair of the Federal State Joint Board on Universal
Service.
It is my personal belief that broadband deployment is
essential to the economic development and quality of life for
the rural communities of America. Those rural communities who
don't have adequate broadband will be just as disadvantaged
economically as those rural communities in the first half the
20th Century that didn't have access to electricity or paved
highways. Reform of intercarrier comp and USF is essential to
that broadband deployment.
I begin by testifying on behalf of NARUC. NARUC
specifically endorses the following provisions of the bill: The
provision that protects the States' ability to assess USF
funds. That that fund generates $1.3 billion for States in 23
different States through that contribution base. We are
grateful for the opportunity to continue to assess that.
We also support the Antideficiency Act exemptions. We also
support the continued role of the Federal State Joint Board on
Universal Service in recommending USF reform and designating
supportive services. We would suggest that after the initial
18-month period that the bill requires the FCC to act, that you
add an additional 1-year time clock on the FCC to act on any
further joint board recommendations.
We are very pleased with the language requiring compliance
with applicable State and Federal consumer protections and
service quality standards. This is key to consumer protection
and it keeps the State consumer cops on the beat.
We do have some concerns about the preemption language in
interstate rate setting. We would propose that we use a more
cooperative approach, conditioning receipt of USF funds in
States that mirror the interstate rate, and in return for the
foregone interstate revenues, those funds would be transferred
to the Federal fund. In any case, we are committed to working
with you on modifying this provision of the bill.
The remaining issues NARUC has not taken a position on, so
I will speak to them based on my own opinion as my experience
as Chair of the Universal Service Joint Board and as former
chairman of the NARUC Intercarrier Compensation Task Force. I
note that the draft legislation echoes many of the provisions
in the Joint Board's recommendation of 2 years ago. I applaud
you for designating broadband as a supported service. Two years
ago this month, the Joint Board made that same recommendation.
I would encourage you to make sure that deployment of
broadband should be a condition of receiving universal service
funding. The high cost fund should be transitioned to a
broadband fund and it should focus on unserved areas and anchor
institutions.
Mr. Chairman, I believe your 1.5 megabytes is a good start,
but let me just suggest to you it might be better to realize
what is coming in the future. I want to kind of up the ante. I
think that 3 to 5 megabytes for residential customers and 20 to
50 megabytes for anchor institutions has to be the minimum if
we are going to face the new broadband world, with appropriate
waivers for certain unserved areas. These service levels are
already standard in most urban areas and should be
comparatively available in check chest as required in the draft
legislation.
The wireless auction provisions of the bill are a positive
step in the right direction. It is a de facto repeal of the
identical support rule. However, there is a seismic shift in
the wireless broadband looming on the horizon in open networks.
It will be the communication device of choice. People want to
be mobile and want to have broadband. This is a looming
reality. It is coming upon us and it involves huge amounts of
spectrum and exponential increases in backbone capacity.
I would urge you too to encourage the FCC to transition
intercarrier compensation rates to zero in a 5- to 7-year
period. They are going away anyway and we might as well plan
for it, and it won't work at all in the broadband world. We
need to focus on the efficient use of the funds.
I also want to add my support to the provisions on phantom
traffic, traffic pumping, auditing, capping the fund, which the
Joint Board originally recommended, subject to appropriate
adjustments based on intercarrier compensation reform, and the
repeal of the parent trap. The Universal Service Fund should be
based as much as possible on forward-looking cost models and
based on a wire center basis as we go forward.
Mr. Chairman, expeditious implementations the major
provisions of this draft legislation will greatly mitigate the
digital divide that exists today between urban and rural
American and will prevent that divide from becoming an
irreversible chasm.
I personally support the major provisions of your bill. We
cannot address these issues soon enough. The Joint Board is
committed to working with you and the FCC in achieving these
goals. We thank you again for your leadership.
Mr. Boucher. Thank you very much, Commissioner Baum.
[The prepared statement of Mr. Baum follows:]
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Mr. Boucher. Mr. McSlarrow.
STATEMENT OF KYLE McSLARROW
Mr. McSlarrow. Mr. Chairman, Mr. Stearns, distinguished
members of the subcommittee, thank you for having me here.
Mr. Chairman, I fully appreciate the difficulty in
assembling this jigsaw puzzle known as Universal Service Fund
reform, and I congratulate you and Mr. Terry on producing a
discussion draft which, I think, is a valuable step toward
addressing issues like cost containment, injecting notions of
competitive neutrality, both on the distribution side and on
the contribution side.
I want to just in the time I have focus on one area where I
think the draft might be improved with a proposal that I think
complements the direction that you and Mr. Terry are taking,
these reforms, and it is to note, I know that members of the
subcommittee are aware that the cable industry offers broadband
service to 92 percent of American households.
Less well-known, perhaps, is that we offer phone service,
competitive phone service, to 80 percent of American
households, and I am told it is going to actually reach 90
percent by the end of this year. In less than a decade, we have
gone from less than 1 million phone customers to over 20
million, and, with very few exceptions, cable-digital phone
service is unsubsidized by the Universal Service Fund reform.
So our view is that that change in the competitive
landscape as you think about the future of universal service
ought to mean something.
Our proposal is this: That in the rural study areas, for
example, that receive high cost support today, we already know
that 40 percent of those rural study areas have a wire line
unsubsidized competitor, usually a cable company, but not
necessarily. We don't actually know the answer in those other
areas. Because of statewide averaging, it is harder to know for
the non-rural local exchange carriers.
But in those markets, in those areas where we would say
there is a competitive unsubsidized wire line phone service to
more than 75 percent of the households, we would say Universal
Service Fund, high cost Universal Service Fund support, should
cease in that marketplace.
The alternative is in those regions or States where the
State legislature has itself determined that the level of
competition means that the retail rates of an incumbent carrier
should be priced to regulated, we also say that would be
evidence there is extant competition such that Universal
Service Fund support should cease.
So a proposal that we would submit respectfully for your
consideration is that we set up a process at the FCC where
people can make a showing with one of those two triggers,
either evidence of significant competition, evidence of
deregulation by the States, and set up a process where people
can figure out how to focus on those noncompetitive areas where
there indeed might still be requirements for high cost support.
Every member of this subcommittee today I think has in one
way or another suggested that they want to put more dollars on
target in the most efficient way possible. I think injecting
notions of the changed competitive landscape will help you
toward that goal.
I look forward to answering your questions on that or other
parts of the discussion draft.
Mr. Boucher. Thank you very much, Mr. McSlarrow.
[The prepared statement of Mr. McSlarrow follows:]
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Mr. Boucher. Mr. Graham.
STATEMENT OF ERIC GRAHAM
Mr. Graham. Mr. Chairman, good morning, and thank you for
the opportunity to be here today to present testimony on behalf
of Cellular South and as a carrier member of the Rural Cellular
Association. RCA's nearly 100 carrier members provide
commercial wireless services covering approximately 83 percent
of the Nation's geography. As you would expect, much of this
territory is in rural areas, and therefore many RCA members,
including Cellular South, are eligible to participate in the
Federal Universal Service Program. These carriers are using
support to build high quality networks in some of the most
rural areas of the country.
I cannot emphasize enough that for many rural areas,
universal service support is the difference between high
quality wireless service and no coverage at all. Today,
citizens in thousands of places across the country, such as
Floyd, Virginia, Spray, Oregon, Garnavillo, Maine, Bunker Hill,
Illinois, and many others are receiving wireless service as a
result of the Universal Service Fund program.
For its part, Cellular South has a long history of serving
rural areas and has used universal service support to provide
service in places like Ellisville, Mississippi, that simply
would not have coverage otherwise. This program has allowed
Cellular South to build a network that covers over 90 percent
of the state of Mississippi, and upon which cities, counties
and state agencies depend for reliable wireless services.
RCA believes in rural America and its members value the
people who live there. In Cellular South's 20 years of serving
rural areas, we have come to understand what rural consumers
want in their wireless service. It is very simple. They want
the same things that people in Washington, D.C., Boston,
Massachusetts, Los Angeles California and New York City want:
quality coverage, modern technology, the latest devices and the
ability to access compatible networks wherever they go.
While Congress works to modernize and otherwise reform the
Universal Service Fund, it is critical to keep in mind that
device exclusivity and data roaming issues must also be
resolved if Congress still believes that rural Americans should
have services that are reasonably comparable to those in urban
areas.
Today, consumers demand broadband and mobility.
Policymakers and those of us in the telecom industry have seen
this coming for years, and everyone in this room has
acknowledged the need for more broadband services. Yet, since
2001, the FCC has not released an order that would promote
rural consumers access to these services.
Between 2000 and 2008, the FCC subsidized wire line voice
service to the tune of approximately $26.3 billion while
funding wireless voice services at approximately $4.6 billion.
Broadband services received zero.
The universal service mechanism cannot continue to support
fixed voice service, 19th century technology, at a rate of over
$3 billion per year. As the world evolves toward broadband and
mobile services, so too should the funds to distribution
mechanisms.
Accordingly, RCA supports Chairman Boucher's proposal to
include broadband as a supported service within the Universal
Service Fund. However, it is absolutely critical that the
distribution of universal service support is competitively
neutral. In other words, the distribution mechanism must not
favor or disfavor any technology or class of carrier. More than
that, it should not protect any technology or class of carrier.
Support should be portable, and new entrants and incumbents
alike should be allowed to compete for customers. This puts
consumers in charge by increasing choices and consumer choice
increases service quality and lowers prices.
RCA is not convinced that reverse options for just one
class of carrier are consistent with the principles of
competitive neutrality. To be clear, RCA fully accepts the need
to sustain the fund. However, we do not believe that reverse
auctions are the solution, because they sacrifice the goals of
universal service in the name of sustainability.
There are a number of structural issues that must be
overcome before competitive bidding can be a realistic option.
First and foremost, we have not seen an auction mechanism
proposed that eliminates the opportunity for USF opponents to
game the system by submitting artificially low bids in order to
drive out competition.
Assuming you could avoid that problem, the proposed auction
system would limit support in an area to a maximum of two
providers for a period of up to 10 years. This ensures that no
new providers will enter that area and it forces policymakers
into the position of regulating an artificial marketplace, a
monopoly or duopoly.
Furthermore, if the goal of reverse auctions is to lessen
support in a given area and thereby reduce the size of the
fund, there is no certainty that it will happen under reverse
auctions.
Finally, as proposed, reverse auctions exempt the largest
category of recipients from the high cost portion of the
Universal Service Fund.
In conclusion, RCA believes that support in high cost areas
should be fixed at the amount needed to deliver reasonably
comparable, high quality services to consumers, with support
only being awarded when a carrier gets a customer and with that
support being taken away when the carrier loses a customer. We
believe that no one should be insulated from competition, and
we believe that new entrants should be allowed into markets to
maximize competition and improve choices and service for
consumers.
Thank you again for the opportunity to participate today,
and I look forward to your questions.
Mr. Boucher. Thank you very much, Mr. Graham.
[The prepared statement of Mr. Graham follows:]
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Mr. Boucher. We have several provisions in the draft that
address the Rural Health Care Fund, and Dr. Rheuban and her
comments will address those provision. Dr. Rheuban.
STATEMENT OF KAREN RHEUBAN, M.D.
Dr. Rheuban. Good morning, and thank you, Chairman Boucher,
Ranking Member Stearns and other distinguished subcommittee
members. My name is Dr. Karen Rheuban, and I am a practicing
pediatric cardiologist and Medical Director of the Office of
Telemedicine and the University of Virginia. I am also honored
to serve as president of the American Telemedicine Association.
Thank you for this opportunity to testify and support the draft
universal service reform bill.
The health reform debate has galvanized our Nation. The
powerful tools of telemedicine and health information
technologies are key to a transition from care delivered
episodically in a balkanized model to an integrated systems
approach. Sound policies must facilitate ubiquitous and
affordable access to the broadband infrastructure to support
access to health care using advanced technologies, especially
for our rural Americans.
The need for access to care is greater than ever before.
Our Nation faces a critical shortage of physicians, with a
projected deficit of 200,000 doctors by 2020. The aging of our
population has created increasing demands for health care
services. Access to speciality care is inadequate for many
Americans.
Telemedicine programs can be found in every State offering
clinical services that span the entire spectrum of health care.
At UVA, we have been privileged to work with Chairman Boucher
to deploy an extensive telemedicine network connecting more
than 30 federally-qualified health centers, clinics, hospitals,
school and correctional facilities in his district, in addition
to other regions of the Commonwealth.
Medical specialty societies have endorsed tele-health as an
effective tool for the delivery of care. As an example, during
an acute stroke, life-saving, clot-busting therapies
administered by stroke neurologists through telemedicine have
been proven to reduce the morbidity, mortality, burden and cost
of stroke.
Telemedicine programs improve access to prenatal care. The
University of Arkansas now reports a 26 percent reduction in
neonatal mortality attributable to their high risk obstetrics
telemedicine program.
Telemedicine plays an important role in chronic disease
management. The VA's care coordination and home tele-health
program has resulted in a 19 percent reduction in readmission
to the hospital and 25 percent reduction in hospital days.
Each tele-health application relies on broadband
communication services that meet the need of the specific
clinical service required. Surgical mentoring requires high
definition and higher bandwidth, as do the transfer of large
medical imagine files and video teleconferencing. Remote
monitoring and home tele-health require less bandwidth.
Regardless of the clinical application, affordable,
reliable, secure quality of service is imperative. The rural
health care program has been critical to tele-health networks
nationwide. However, statutory and regulatory barriers have
severely undermined the programs' effectiveness.
As of June 30, 2009, USAC reports a total disbursement over
12 years, total, of only $249 million, which is only 5 percent
of the originally authorized amount.
For the rural health care program to succeed as intended, a
number of areas need to be corrected that have been addressed
in your draft bill. Statutory barriers limit the eligible
consult origination sites, excluding such important entities as
nursing homes, EMS providers, and even for-profit rural
hospitals. For purposes of emergency preparedness or for access
to emergency care there is no question that rural for-profit
hospitals serve the public interest.
The program is bound by definitions of ``rural'' that fail
to take into account our serious maldistribution of specialty
health care providers. An expansion of the ``rural'' definition
would align universal service support with these specialty
workforce shortages.
Other administrative barriers, including allowing only 25
percent support for Internet services, are counter-intuitive in
an era where most tele-health programs deploy IT-based
technologies. All communications providers should be eligible
to participate in the program.
In 2007, the FCC launched the rural health care pilot
program, recognizing 69 entities, including UVA, as eligible to
receive more than $400 million in funds to expand the
communications infrastructure for health care. As of June 30th,
beginning the third year of the program, less than $1 million
had been disbursed.
This program, albeit well intended, is equally fraught with
significant barriers. Eligible providers are restricted, no
funds are available for project management, and yet we have
applicants who are asked to provide letters of agency from each
remote site, secure 15 percent in cash as matching funds,
provide detailed quarterly reporting, even in the absence of
funding, and sign 5-year contracts for service for purposes of
sustainability. These obstacles have hindered the program.
Tele-health services both drive demand for broadband
adoption and increase access to acute care and chronic disease
management through networks that include hospitals, clinics,
physician offices, nursing homes, ambulances, the workplace and
the home. Broadband provided over wire line, wireless, cable,
satellite, power lines and other emerging technologies provide
the communications infrastructure that supports the
transformation of health care delivery.
As you have addressed in this bill, our universal service
programs must be modernized with a closer alignment with our
health care needs so that one major value proposition of our
investment in universal service can be achieved--that is an
improvement in the health of all Americans.
Thank you.
Mr. Boucher. Thank you very much, Dr. Rheuban.
[The prepared statement of Dr. Rheuban follows:]
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Mr. Boucher. Mr. Rosston.
STATEMENT OF GREGORY ROSSTON
Mr. Rosston. Good morning. Thank you. My boss has always
told me in order to do a good job, you should pick your
predecessor. Unfortunately, I have failed in that today, but I
am going to go ahead with my testimony anyway.
I would like to thank Chairman Boucher, Ranking Member
Stearns and members of the subcommittee, with special
recognition for my representative, Congressman Eshoo, for the
opportunity to appear before you here on this very important
matter.
Before I start, I want to recognize my colleagues, Brad
Wimmer of the University of Nevada Las Vegas for his work on
this testimony and our research over the past decade on
universal service.
I serve now as Deputy Director of the Stanford Institute
for Economic Policy Research and have studied universal service
for more than 10 years.
We are pleased that you have put forth legislation to
reform the current universal service program. As with any
program, it is important to implement universal service in as
efficient a manner as possible.
The current discussion draft includes some provisions that
likely increase the efficiency of the universal service
program, but changes are possible that could decrease the costs
substantially without sacrificing coverage or quality. The
committee should implement legislation that makes revenue
raising as efficient as possible and harnesses the power of the
market to drive down subsidies and increase competition for
consumers.
First I will address the revenue side. The charges to raise
money for universal service distort customer behavior and can
be very costly. The best way to minimize these distortions are
to have a low tax rate which can be achieved by keeping the
size of the program relatively small and then deriving the
revenues from a broad base.
It is good that the proposed legislation broadens the
funding base. That should reduce distortion, if the lower tax
rates do not induce increased spending. Using general tax
revenues would be a better way to funduniversal service. While
such an approach may not be politically feasible at this point
in time, it should be considered.
The discussion draft has several provisions; declaring
broadband to be universal service, using wire center averaging,
the primary line rule, and eliminating the so-called parent
trap, that have to the potential to increase the size of the
Universal Service Fund; and some draft provisions have the
potential to compound harm by decreasing efficiency without any
offsetting benefits.
So now I want to move on to service provision. The primary
reason that a household does not connect to the communication
network is because the household is not willing or able to pay
as much for telecommunication services as the price charged.
The Lifeline and Linkup programs provide subsidies to low
income households in an attempt to increase subscriptions rates
among poorer households.
Representative Matsui has introduced a bill that would
extend the Lifeline and Linkup programs to cover broadband
service. We think such a program has the potential to increase
broadband subscriptions rates among low-income populations,
although more study is needed before any firm conclusions can
be drawn.
The results of our recent research indicate that moving
money from the Lifeline program to the Linkup side has the
potential to increase the penetration rate without increasing
the program size, because Linkup is targeted to households not
connected and because low-income households face high barriers
in upfront costs to getting connected.
The high cost fund subsidizes the companies that provide
services in the high cost areas. The majority of these
subsidies are given to the incumbent local exchange carriers,
or ILECS, and the discussion draft includes several proposals
that appear to insulate the ILECS from competition for
subsidies, which, in turn, insulates them from competition.
It would be best to distribute subsidies to rural customers
themselves, not to the companies that serve them. Extending a
program like Lifeline with costs in income based vouchers to
rural customers and urban customers could accomplish this goal,
as Mr. Doyle discussed.
Every dollar in the USF program comes from someone else's
pocket, so it is important to be careful on how this is spent.
The rural high cost fund has increased substantially over the
past several years, but one cause of this, competition,
provides an indication that the current system is broken and
that there is room to reduce instead of increase subsidies.
Competition should drive down subsidies not increase them.
The discussion draft is a plan to use subsidy auctions, but
only in very limited circumstances and not for all providers.
Instead, subsidy auctions should be used pervasively. There
should be subsidy auctions when there are two or more providers
of any type, and all providers should participate in a subsidy
auction. Such expansion of the subsidy auction plan could help
drive down subsidy payments substantially while at the same
time protecting consumers.
The most important feature of the subsidy auctions is that
the incumbent local exchange providers would be subject to
competitive discipline in the amount of subsidy that they
receive for providing service.
If it truly costs a lot of money to serve households in
rural areas, companies serving the consumers in those high cost
areas will end up with relatively high subsidy payments through
the auction system. But if there are ways to serve the
customers more efficiently, as Mr. McSlarrow has stated, the
auction system will reveal it.
The current system and the system in the current draft do
not have these critical features. There is little incentive to
reduce costs or the overall size of the Universal Service Fund.
Obviously, the design of subsidy auctions needs to be
considered carefully. But the experience with subsidy auctions
in other countries and the success with spectrum auctions in
its United States shows that we can implement such a system in
a pro-competitive manner.
Major concern that we have overall is that there not only
be mechanisms to reduce the growth of the fund, but that there
also be mechanisms to make the fund as small as possible while
still satisfying the goal will of connectivity.
We think that the current bill makes a very good move
towards broadening the base of support to minimize distortion
and arbitrage incentives. We also think that it could be
improved substantially if it were to set up a framework to
allow competition to reduce the size of the subsidize, because
that would be in the interests of all consumers. More detail is
in our written testimony.
Thank you for having me here today. I am happy to answer
any questions.
Mr. Boucher. Thank you, Mr. Rosston.
[The prepared statement of Mr. Rosston follows:]
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Mr. Boucher. Our thanks to all of our witnesses for their
very thoughtful comments here this morning, and particularly
for the broad consensus in support of the draft legislation
that you have expressed today.
I am going to direct several questions to our rural
representatives, Ms. Moyer and Mr. Greer, and I am going to
begin by referencing the recommendations made by Mr. McSlarrow,
where he says that the principles of competitive neutrality may
be violated where you have wire line voice competition with one
wire line carrier receiving support and competing with a wire
line carrier that does not.
On its face, I think his argument has merit, and I am
wondering what your response to that is? If we were to consider
a provision that would prohibit support being provided in those
instances where you have actual voice competition by wire line,
limiting the unavailability of support just to the precise
areas where the competition actually exists, what would be your
response to that?
I realize it may be a question of first impression, and if
you don't have a definitive answer today, that is certainly
acceptable. But I wanted to pose that to you and get your
thoughts, at least for the record, this morning.
Mr. Greer.
Mr. Greer. Yes, Chairman Boucher. On the surface, we do
have some concerns with the competitive bidding between the
two.
Mr. Boucher. It wouldn't necessarily--let me just interrupt
to say--be a competitive bidding. I think his proposal doesn't
actually relate to competitive bidding. It relates to simply
saying that support would not be available where you have a
carrier that is offering voice service without support.
In theory, where you have a carrier that is offering the
service in that particular study area without support, it
suggests that support is not necessary in order to sustain a
service. So he is suggesting that you not have competitive
bidding. You just deny the support under that circumstance.
Mr. Greer.
Mr. Greer. I would like to think on that for just a moment
real quick.
Mr. Boucher. That is fine.
Ms. Moyer.
Ms. Moyer. I guess I would like to point out that one of
the problems with our service area with 5,000 square miles is
that roughly only 15 of those square miles would be what I
consider town. Within those 15 square miles, there is a cable
company that serves. It actually belongs to us because no one
else wanted to come in and provide cable service. But the
problem being within that 15 square miles, the majority, over
90 percent of our population is going to reside in those areas.
So when we get outside of those areas, we are talking about
very few customers and a very large service area that would
need to be served. Thus, you are talking about dollars that are
going to be exponentially related to those very few customers.
Obviously, I have read NCTA's proposal here just last week,
but we would be more than happy to submit something further to
you on the record in writing.
Mr. Boucher. Well, let me encourage you to think about it
and to engage with us on that subject. I think a number of
members are going to have those interests.
Mr. Greer, would you like to respond further?
Mr. Greer. Yes, sir. Thank you, Chairman Boucher.
In those areas to where there is wireless and wire line
competition, when we look at our USF and how we average our
costs, we average it over our whole service area. So if you
just eliminated a portion of that, then our costs in those
other areas that are unaveraged will actually go up. That is
one of the concerns we would have, is they may serve a portion
of our service area, but it doesn't do a complete coverage, so
it will actually drive up our costs, because we average that
through our service territory.
But we also want to get back to you with further comments.
Mr. Boucher. That is fine. I thank both of you for that.
Frankly, I would have been somewhat surprised if you had just
immediately agreed with the entire recommendation.
Let me pose another question to you. Some have suggested
that the high cost fund, approximately $4.5 billion per year,
be repurposed in whole or in part in order to provide broadband
services. My understanding is that that $4.5 billion each year
is spoken for. That funding is presently fully subscribed in
order for you to offer the telephone services that you are
offering. That money is subscribed for equipment, for
maintenance, for your normal operations.
My question to you is what response do you have to the idea
that some repurposing could take place, with money devoted
today to those needs being devoted tomorrow to broadband? What
would happen in your exchanges if that were to occur?
Ms. Moyer.
Ms. Moyer. One of the issues is that 2-year lag, the 2
years in between when we actually put money in the ground and 2
years later we actually receive the support or the cost
recovery for those dollars we have already spent. So part of
that problem going forward is the issue of what happens to what
I spent in 2009 if in 2010 the entire fund is repurposed.
There are ongoing maintenance costs that are always going
to be there. My company is in southwest Kansas. We are several
hundred miles from any major metropolitan area. That transport
to any major metropolitan area is huge, not just to mention
just meeting up with carriers at tandems. So those costs, those
dollars have already been spent. Then to recover those, there
needs to be, if in fact we are going to repurpose the fund,
there seems to be some attention paid to the fact of the 2 year
lag.
Mr. Boucher. Very quickly, Mr. Greer.
Mr. Greer. We concur with those comments as well.
Currently, the costs that we spend, we are not reimbursed until
2 years down the road anyway.
Mr. Boucher. So you do agree that those monies are fully
subscribed?
Mr. Greer. They are fully subscribed.
Mr. Boucher. And there is nothing available really to
support broadband deployment within the size of the existing
fund without surrendering the low cost, the affordable
telephone service that you presently provide?
Mr. Greer. That is correct.
Mr. Boucher. Thank you very much. My time has expired. The
gentleman from Florida, Mr. Stearns, is recognized for 5
minutes.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Lubin, Vice President of Public Policy, AT&T Services.
You are probably a good one to answer this, and I have limited
time so if you could just answer in a very small amount of time
by the word ``increase'' or ``decrease'' can the key terms to
use.
Could you estimate whether each of the following provisions
is more likely to increase or decrease the size of the fund.
Or, if it is unclear to you, could you please tell us what
additional information you would need to provide a cost
estimate.
The first one is moving from a geographic to wire-center
averaging. Does it increase or decrease the fund? That is
moving from geographic to wire center averaging. Just your
humble opinion. Just move the mike close to you, if you could.
Mr. Lubin. It sounds like a simple question, and I will
give you a simple answer.
Mr. Stearns. Just does it increase or decrease?
Mr. Lubin. My guess it is going to increase. However, it is
a function of what model you use, and the current language in
the bill says 2.75.
Mr. Stearns. Using that modeling, would it increase or
decrease?
Mr. Lubin. When you say ``using that modeling,'' it is not
clear to me what model which are using in the bill.
Mr. Stearns. That is a good point. That goes to the idea
that you need additional information before you could say
increase or decrease. At this point you are saying at your
first hand blush, it increases.
Mr. Lubin. That particular piece.
Mr. Stearns. The next one is eliminating the parent trap
rule. I had that explained to me. I wasn't sure what that is,
but now I do, and I think you know what the parent trap rule
is. So would it increase or decrease the fund, eliminating the
parent trap rule?
Mr. Lubin. The potential is it would increase. It is a
function of how many exchanges and lines get sold.
Mr. Stearns. Creating an alternative recovery mechanism for
intercarrier compensation revenues.
Let me repeat that. Creating an alternative recovery
mechanism for intercarrier compensation revenues. Will that
increase the size of the fund or decrease it in your opinion?
Mr. Lubin. That has the potential for increasing. Again, it
is a function of how and what the benchmarking means.
Mr. Stearns. OK. So in this question I have given you three
areas, and it looks like to me in all three areas you said it
would increase.
Mr. Lubin. I said the potential is there.
Mr. Stearns. Potential. OK. Let me have Verizon. Do they
have any disagreement on this?
Mr. Greer. No disagreement on that, Representative Stearns.
I think you are probably getting to the second half of the
question, which is are there other aspects of the legislation
that could potentially decrease the size of the fund as well.
Mr. Stearns. I am happy with the decrease. I am just
concentrating this morning on what areas that I think might
increase, just so we have an understanding where the worst case
scenario would be.
Mr. Rosston, is there anything you might want to comment on
this relative to Mr. Lubin's answers?
Mr. Rosston. No, I agree that I think those all three
provisions would increase, are likely to increase the size.
Mr. Stearns. Likely increase. Mr. Lubin has indicated in
some cases he would need additional information to provide a
real cost estimate. Do you think you can emphatically say, more
so than he, he sort of has some qualifying points here. Do you
feel pretty much that all three of them will increase in your
mind?
Mr. Rosston. Mr. Lubin has studied this in much, much more
detail than I have. But, for example, the parent trap would
have almost no chance of decreasing the fund, and any sales
would probably increase the size of the fund, as one example.
The same would be true of intercarrier compensation.
Mr. Stearns. Let me go to Mr. McSlarrow. You recommended
targeting support for broadband services to areas and consumers
that currently lack service. I guess the first question is, do
we know those areas and consumers, where they are today? Do we
know where they are?
Mr. McSlarrow. I think by and large we do, so I think we do
have the ability to target support where it is most needed.
Mr. Stearns. Shouldn't we wait on the results of the 7.2
billion broadband stimulus and the broadband mapping efforts
that are currently underway before paying companies even more
to provide broadband service in areas that may already have it?
Mr. McSlarrow. I think the answer is yes, but I think it is
going to happen. I mean, the timeline here, we are already in
November of 2009. The mapping will get done next year, and any
plausible scenario where this legislation moves, I think it
will match up so we have that data.
Mr. Stearns. So in your opinion, we shouldn't wait?
Mr. McSlarrow. No, I am not suggesting we wait. What I am
suggesting is the mapping I think will get done----
Mr. Stearns. Before the bill passes?
Mr. McSlarrow. Yes.
Mr. Stearns. Dr. Rosston, isn't it true that a tax on
broadband could decrease broadband subscription and inhibit
adoption?
Mr. Rosston. Yes. Increasing taxes on broadband to pay
for--as I said earlier, every dollar you spend comes from
someone else's pocket. So that would increase the price for
other people, and they would possibly respond by reducing their
subscriptions.
Mr. Stearns. OK.
Ms. Moyer, do you think in your heart of hearts that the
bill, as drafted right now, would lower a consumer's bill? I
mean, would you put your money on it?
Ms. Moyer. My own money?
Mr. Stearns. Your own money.
Ms. Moyer. I truly believe that, by expanding the
contribution base, yes, it would.
Mr. Stearns. So in your heart of hearts, you would put your
own money on this then?
Ms. Moyer. I guess that is what I am saying.
Mr. Stearns. OK. Well, you have some skin in the game, so I
respect your opinion. Thank you.
Ms. Moyer. Thank you.
Mr. Boucher. Thank you very much, Mr. Stearns.
The gentlelady from California, Ms. Eshoo, is recognized
for 5 minutes.
Ms. Eshoo. Thank you, Mr. Chairman.
And thank you to all of the witnesses.
I have made a point in other hearings and in my
communications with the NTIA, the FCC, and RUS that high-speed
should be a primary goal for broadband rollout. I think that
this legislation sets the floor too low. It defines broadband
as 1.5 megabits downstream without any upstream requirement,
and it locks in this speed for 6 very long years. And, as I
said in my opening statement, you know, I mean, everything has
changed and continues to change so quickly. Six years is a very
long time.
People in rural America deserve, I think, high-speed
access, as well. And I don't think we should lowball them as
part of the overall reform efforts. I think we need to keep in
mind that we have no idea what will be happening in 6 years.
Telecommunications develops so quickly that this speed might be
considered a relic by then. So why lock this in for 6 years?
In the broadband bill that I had put forward, we set forth
a 50 megabit down and 20 up requirement, which I believed would
drive investment and spur adoption. But who knows? That might
even be too slow. So I think we need to use the broadband map
to determine which speeds are appropriate for a given market.
So my question to you, the panelists, is, how can we use
the broadband map to help guide our policy, especially on
determining the appropriate speed? Do we really need one speed
for the whole country?
And I am also concerned about the bill essentially
maintaining the status quo for the High-Cost Fund. Recipients
of the fund are not required to provide broadband services,
which I think is a huge mistake. I mean, I think that we are
ignoring our future. I think we are ignoring the present, much
less the future. So I think that there is a big hole in the
bill in this area.
And so my second question is, shouldn't the bill require
the FCC to utilize the new broadband map to determine if an
area is already served by a provider that may not receive any,
you know, fund support?
Is there any sense how much could be saved if we first
determine which areas--and I think Mr. McSlarrow spoke to this,
and maybe some others did, as well. Is there any sense how much
could be saved if we first determined which areas are already
served by a provider offering voice, video, and data today and
not receiving any government support?
And, lastly, if there is anyone that would like to comment
on Ms. Matsui's bill, which will use the Lifeline Program as a
base for broadband accessibility for the unserved and the
underserved populations.
So those are my three questions, and whomever would like to
start the ball rolling.
Good. AT&T is first.
Mr. Lubin. To me, those are three very important----
Ms. Eshoo. Can you get closer to the microphone so we can
hear you? Thanks.
Mr. Lubin. Three very important questions. The first
question about speed, and I want to link that question----
Ms. Eshoo. Can you be as concise as possible, since I asked
three and I want to get as many answers in as possible? Thanks.
Mr. Lubin. OK. The issue of speed is all about how much are
we willing to pay into the fund; meaning, how big is the fund?
The higher the speed, the more the size of the fund will be. So
that is a tradeoff for the policymakers if you want it to end
up being----
Ms. Eshoo. But what is AT&T's position in this, though?
Mr. Lubin. AT&T's position with regard to speed, with
regard to USF, is, if you take USF, then you have to meet
whatever speed requirement is in the bill, and you are going to
ultimately be a form of making a commitment to provide all
comers with that speed. And so our concern with going--even 1.5
megabit is potentially too high when you start looking at what
the size of the fund would be. So that is our concern with
regard to the first question.
With regard to the second question on unserved areas in
terms of the mapping, we think that is a very important issue
to be addressed. And AT&T, April 18, 2008, made a filing teeing
up this point, where we should focus on unserved areas, thus
possibly being able to control the size of the fund. So having
focused on unserved is a very important aspect.
But I would like to highlight to you, once you do that, in
particular for the RLECs, if you start looking at the very
high-cost areas, the presumption is you may reduce the size of
the fund. I think Ms. Moyer hit right on the head, is that once
you do that, you may, in fact, start to increase the size of
the fund.
With regard to Lifeline, we think as we transition from
this POTS world to a broadband world, we think a lifeline is
going to be absolutely critical in a broadband world. Our
bottom line with regard to Lifeline is we think the whole
Lifeline plan----
Ms. Eshoo. How long do you think it is going to take to get
us to what you are describing, though? Do you think we should
set this down, the lowest numbers for 6 years, 6 long years? Do
you think that is good policy for the country?
Mr. Lubin. Again, it is a question back to how much are you
willing to fund, how big will it cause the fund--I have already
heard issues about what the concern of the growth of the fund
will be. I think if you make it much greater than 1.5, that
question is on the table.
If you want to suggest less than 6 years, I think that is a
valid thing to say. Let's look at it shorter than 6 years. But
listening to this conversation, clearly, the higher it is, the
bigger the size of the fund. That is the linkage and the issue.
Mr. Boucher. Thank you very much, Ms. Eshoo and Mr. Lubin.
The gentleman from Texas, Mr. Barton, is recognized for 5
minutes.
Mr. Barton. Thank you, Mr. Chairman.
I was watching the hearing in my office, so I heard
everyone's testimony, and I heard your questions and Mr.
Stearns's question. So I haven't been present, but I have been
observant while I have been multitasking.
I brought my bill. I just got my Verizon bill. And for
services I pay $26.53. For taxes--actually, it says ``taxes,
fees, and other Verizon charges,'' whatever that is, $10.49. So
I am paying 40 percent of my basic phone service in Virginia in
taxes, fees, and other Verizon charges.
It seems like--although I did find out that the universal
service portion of this is fairly minimal because I don't make
any long-distance charges. Although Virginia does charge me a
Virginia Federal Universal Service Fund surcharge, Mr. Boucher,
of 76 cents. And I hope you can do something about that.
If I wanted to ask a trick question, I would ask Mr.
Davidson what a sensible minute is. Verizon charges me $2 a
month for a sensible minute. I have no clue what a sensible
minute is.
Mr. Davidson. We will have to get back to you on that, Mr.
Barton, on the sensible minute. But I doubt it was our idea.
Mr. Barton. Yes.
My first question is a rhetorical question. Anybody on the
panel can answer. When did we first pass universal service?
When did it become a mandate that there be a universal service
charge? Anybody know? I would assume in the 1930s. Does anybody
on the dais know? And I don't----
Mr. Boucher. Would the gentleman yield for just a moment?
Mr. Barton. Yes.
Mr. Boucher. Universal service has been inherent in the
structure of the telephone network essentially since its
inception. And it wasn't until the Telecom Act of 1996 that we
made the universal service subsidies explicit.
Mr. Barton. But when did we first start charging universal
service----
Mr. Boucher. Well, that has been inherent in the structure
of the flow of revenues essentially ever since we began----
Mr. Barton. But it wasn't a Federal mandate----
Mr. Boucher. It was not a mandate. It was just done within
the industry, where urban residents and users of long distance
wound up paying somewhat more in order to keep telephone
service affordable elsewhere.
Mr. Barton. OK.
Well, my first question, I am going to ask this to the
gentleman from Stanford, Dr. Rosston. Is broadband today the
equivalent of basic telephone service in the 1930s?
Mr. Rosston. I think that is not an economics question that
I would answer as an economist. It is probably much--if you
look at the data, broadband is much more pervasively adopted
today than telephone service was in the 1930s. Whether you are
asking that as a values question, I can't answer that. But
just, sort of, the data shows that broadband has been adopted
much more rapidly than telephone service was and it is much
more pervasive than it was in the 1930s.
Mr. Barton. Well, the reason I ask that is because one of
the apparent premises of the Boucher-Terry draft is that
broadband should be equivalent to basic phone service, that it
is almost an entitlement and should be treated as such. And I
am not quite ready to go there yet.
I think broadband is an improvement, I think it is an
enhancement, I think it is a good thing to have. But if I
choose to live in very rural America by choice, I like that
lifestyle, I don't know that--one of the witnesses from one of
the smaller phone companies basically said, ``People that live
in rural America expect to have the same services,'' la di da
di da, ``as people that live in urban America.''
And I am not sure--I mean, I think you make a value
decision, if you have a choice of where you live. If you choose
that rural lifestyle, I don't know that you automatically are
entitled to the enhancements that require more critical mass
and a greater population density.
So that is one of the things I want to work with Mr.
Boucher and Mr. Terry on, is this broadband mandate.
My time has expired. I am going to ask one question to Mr.
McSlarrow. Does the cable industry currently pay a universal
service charge?
Mr. McSlarrow. Yes.
Mr. Barton. You do. Do you support the concept in the
Boucher-Terry draft that expands the base of who pays the tax?
Mr. McSlarrow. Yes.
Mr. Barton. You do. OK.
Thank you, Mr. Chairman.
That is not the answer I wanted, but thank you.
Mr. Boucher. It is the answer that I am glad he gave. Thank
you very much, Mr. Barton.
The gentleman from Pennsylvania, Mr. Doyle, is recognized
for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman.
Mr. Rosston, in your testimony, you said you believe that
subsidies should follow consumers, not companies, to increase
competition and choice. Do you think, is a reverse auction the
only way to accomplish that, or could a voucher work? And are
there any other ways, as well? And what are some of the pros
and cons of those approaches?
Mr. Rosston. So, what I said in the testimony is, if you
had a voucher system that, in my view, would be low-income
vouchers that were cost-adjusted--so a low-income household in
a dense, urban area would get a smaller voucher because the
company would be charging a lower price in that area, and a
higher voucher in a rural area so that they could afford it in
a rural area--you could do that. And the voucher could be
income-tested and cost-tested, sort of like health-care
vouchers might be adjusted for people's age and health
conditions, that you would have a voucher for telephone service
or broadband service.
And that could be done without an auction, and it would
cause the consumers to have the ability to choose their
provider. And the providers would have to compete for the
service. Whether they wanted 1.5-megabit service or 5-megabit
or 10-megabit or portable service so that they could use it on
their wireless phone as opposed to at their home, they would
have this ability to have companies compete for their business.
Mr. Doyle. Thank you.
Mr. McSlarrow, what do you think about those ideas?
Mr. McSlarrow. I didn't hear the question.
Mr. Doyle. What do you think about the idea of a voucher
system or----
Mr. McSlarrow. I mean, in economic terms, I agree with
that. And I think any system where we can put more money in the
hands of the consumers themselves and let them make the choices
is probably a better system.
Mr. Doyle. And I also want to give you the opportunity--I
know that several of the testimonies from the phone companies
talked about some of the concerns they had with your proposal.
And I wanted to give you an opportunity to maybe address some
of those concerns that were brought up about your proposal.
Mr. McSlarrow. Thank you.
The first thing I would say is that what we are proposing
is, in essence, a framework. There is no automatic reduction of
high-cost support. What we are saying is that you apply two
tests. One is a regulatory test; one is a market competition
test. If it shows that you have that kind of competition, it
still allows the incumbent who is receiving support to come
forward and say, ``Here are all the reasons why, if you took
out support in a competitive area, my revenues can't cover my
costs.'' So they still have an opportunity to make a showing
for some level of support.
And Ms. Eshoo actually asked a question; I didn't get a
chance to answer you. Our analysis is that there is about $2
billion that we would at least, under our proposal, take a look
at. We are not saying $2 billion goes away. People have the
opportunity to make those showings back and forth.
Mr. Doyle. Very good.
That is all I have, Mr. Chairman. Thank you. I will yield
back.
Mr. Boucher. Thank you very much, Mr. Doyle.
The gentleman from Nebraska, Mr. Terry, is recognized for 5
minutes.
Mr. Terry. Thank you, Mr. Chairman.
And, Mr. Lubin, let's continue this exercise. Assume the
cap is put in place. Will the fund go up or down?
Thank you for your answer.
And Cliff did a great job of, kind of, hitting on what the
main issue is here. We understand that, with some of these
reforms, that the costs will have additional pressures. The
pressures from those items that were brought up, other than
ICC, which I think is a different issue than what this base
bill addresses today, would make the fund increase.
The reason why our rural friends have had a difficult time
embracing this bill is because of the cap. And I think that is
an important point to make here, is with the cap, that keeps it
status quo, albeit with an FCC traditional inflation rate.
So, with the cap, do you think that that is an adequate
measure to hold down the explosive costs of high-cost USF?
Mr. Lubin. With the way in which this bill structures the
cap and the way in which you just removed three of the items, I
would say yes.
Mr. Terry. OK.
Mr. Lubin. I would also highlight that how you handled the
wireless issue, with the competitive bidding, there you have
the opportunity that the aggregate dollars would come down.
Mr. Terry. And that was my next question. Thank you. You
just eliminated that for me. I appreciate that.
But, yes, there are actually cost-cutting measures in here.
For example, limiting new entrants, especially on the wireless
side. And we appreciate Verizon and the others helping
participate in brokering that deal. Limiting new entrants,
going to actual costs. Is that something that would relieve
pressure on--the upward pressures on the fund?
Mr. Lubin. That remains to be seen.
Mr. Terry. OK.
The gentleman from Stanford, Doctor--what was your last
name again?
Mr. Rosston. Rosston.
Mr. Terry. Rosston. Economist. Based on your experience as
an economist, let me throw this scenario out. University of
Nebraska beats Kansas State. We go to the Holiday Bowl and play
Stanford. Who wins?
Mr. Rosston. I will have to get back to you on that.
Mr. Terry. OK. Good answer.
But getting to a more serious question, you brought up the
distortion in the pool. And that is that, as the pool of payers
grows smaller--and we have heard testimony here-- since those
that pay the universal service fee into the system, they just
get billed every, what, 6 months or something by USAC. And now
it could go as high as 14 to 15 percent. I mean, that is
something that was unfathomable a year or so ago.
So, broadening the pool of payers is one of the founding
principles of this bill. So at least that principle you think
economically is sound?
Mr. Rosston. Yes, I think broadening the base of the tax
will help to reduce distortions from the tax.
Mr. Terry. And the distortions here have been, I think,
well set out by the ranking member, former Chairman Barton,
when he talks about the impact on his bill. Although the USF
impact is hidden within the charges, and it is not explicit.
But the fact of the matter is, he is one of those left standing
paying, and if you broaden the base, his bill could actually go
down?
Mr. Rosston. Well, I think that depends on how many bills
he has and----
Mr. Terry. And also assuming the cap is in place.
Mr. Rosston. Well, the cap is--I think it is--it could be--
it is a question of how effective the cap is at reining in
spending, as well, because there are provisions about whether
the cap would be effective, I think, about it adjusts for
working loops as well as inflation. I think those things could
be tightened down a little bit, as well.
Mr. Terry. Well, we can look at that. I am going to
interrupt because I only have a few seconds left.
And, Ms. Moyer, one of the items that I think will help
control the costs is having professional, skilled audits done.
Do you support that? And give us examples of how the audit
process works today.
Ms. Moyer. Yes, we fully support that.
Today's audit procedure, especially at the FCC's OIG
office, the most recent three rounds of audits have
unfortunately been performed by auditors who don't know much
about telecom bookkeeping and finances and, I think, led to
some erroneous results, many of which USAC has refuted since
then.
But to actually do something that is based on FCC
methodology and with some trained auditors would be welcomed.
Mr. Boucher. Thank you very much, Mr. Terry.
The gentlelady from California, Ms. Matsui, is recognized
for 5 minutes.
Ms. Matsui. Thank you, Mr. Chairman.
As I mentioned before in my opening statement, there have
been several recent reports that strongly suggest that adoption
rates are largely associated with income. I would like to
highlight one study that particularly affects my home State of
California.
According to the Public Policy Institute of California,
only 58 percent of Californians earning under $40,000 a year
subscribe to broadband at home, but, in contrast, 97 percent of
those earning over $80,000 or more a year subscribe.
I would like to ask a question of Mr. Rosston, the
Californian there. It is my understanding that you have
conducted extensive research on the USF Lifeline/Link-Up
program. As you know, the price of broadband is not cheap these
days, usually ranging from $40 to $60 a month. In your studies,
is there strong evidence to suggest that the price of broadband
is a determining subscribership factor of many low-income
Americans in urban and rural areas?
Mr. Rosston. So, my research is focused on Lifeline and
Link-Up for telephone service and not necessarily for
broadband, but it would be sacrilegious, as an economist, not
to say that price matters.
For low-income households, I think we should study this and
make sure that any program we have we can figure out, what is
the impact of price on low-income households? The evidence, in
our research, is that--there are two programs, Lifeline and
Link-Up. In our view, we found in our research--we didn't go
into this thinking about it, but that Link-Up turned out to be
much more effective because of the high cost for telephone
service just paying the connection fee. For broadband service,
you need to not only pay the connection fee, but you also need
to have a computer and knowledge of how it might work and how
it might benefit you.
So, Link-Up targeting those who are not already online is
probably a very effective way of doing this.
Ms. Matsui. So you believe that if you had a program
similar to the Link-Up program, that if it was created for the
universal broadband, that it would be an effective vehicle to
expand increased broadband adoption rates?
Mr. Rosston. Yes, I think the Lifeline and Link-Up program
would increase broadband adoption rates.
Ms. Matsui. OK. And your analysis of the current Lifeline/
Link-Up program, would be it accurate to assume that any
expansion of the program for broadband adoption would be just
as beneficial for rural consumers as it would be for urban
consumers?
Mr. Rosston. Yes, I think so. I think that poor people live
both in urban and rural areas, and so Lifeline and Link-Up
would be beneficial in both areas.
Ms. Matsui. OK. Thank you.
I have a question for Ms. Moyer and Mr. Rhoda.
Ms. Moyer, I would like to begin with you. It is well-noted
that one of the barriers to further broadband deployment in
rural areas is getting more households to subscribe to
broadband.
In your view, would a program for broadband adoption
similar to the current Lifeline Program help increase adoption
rates in the communities in which you serve and other rural
areas across the country? And would it help further the goal of
broadband deployment in current unserved rural areas?
Ms. Moyer. Yes, I do agree. And I believe that your
legislation would spur that adoption, as well as education.
Ms. Matsui. OK. Thank you.
And, Mr. Rhoda, could you briefly address the same
question?
Mr. Rhoda. We agree, as well.
As far back as 2006, we talked to the FCC about adoption
programs. We have been in recently to do the same. And I think
they need to cover the cost of the device, the laptop, the
computer. I think that they need to cover education. Some
people just clearly don't understand the benefits that
broadband will bring to them. And then they also, finally, need
to cover the cost for those that can't handle the monthly
service in some respect.
So we are fully supportive of your efforts.
Ms. Matsui. OK. Thank you.
And I have a question for Mr. Baum. Deployment of broadband
has reached 96 percent, but subscribership rates have lagged
far behind, in both urban and rural areas.
Do you believe Lifeline for broadband would improve
subscribership rates? And at what price point do you believe or
do you think would be reasonably affordable?
Mr. Baum. First of all, the NARUC board of directors passed
today a resolution supporting your Lifeline bill.
Ms. Matsui. Oh, thank you.
Mr. Baum. And we think it is difficult to put the benchmark
out there, but I would take a wild guess, would be $25, $20,
something in that neighborhood.
Ms. Matsui. $25, $20.
Mr. Baum. But I would probably defer to my colleagues in
the industry that actually run the models and do this kind of
thing.
Ms. Matsui. Does somebody else have a comment on that?
Mr. Baum. But, yes.
Ms. Matsui. OK. Thank you.
I was actually thinking maybe in the $30 range or so, so it
is probably quite close to what you are thinking. And so that
really sounds like maybe a $10 to $15 per month subsidy, which
is in line with the reimbursement under the current Lifeline
Program. Would you consider that to be about right?
Mr. Baum. If we had broadband as a supported service, the
benchmark for that service would be in the $30, heading towards
$40 in the future, because that simply is the basic cost out
there for that 1.5-megabit service is in that range.
Ms. Matsui. OK.
Thank you very much, and I yield back my time.
Mr. Boucher. Thank you very much, Ms. Matsui.
The gentlelady from Tennessee, Mrs. Blackburn, is
recognized for 5 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman.
And I thank you all for your patience and your indulgence.
I know you have been here for quite a while.
I got just a couple of questions that I want to ask. And
let me start, Mr. Davidson, with you. And let's just go down,
if you all have something to add on this.
If you could change one part of this bill, if you think we
are getting it wrong in one area, if you wanted to change one
section of this, what would you change and why?
And quickly, we will start with you, sir.
Mr. Davidson. Sure. I think probably the first thing that
we would look at is--and this is actually a suggestion that is
in the bill, but it is directed in the bill, and that would be
going to the numbers contribution formulation. I think that is
the most efficient way in the modern world of the various
means----
Mrs. Blackburn. OK, so let me interrupt you right there.
The contribution formulation, just to give some specifics on
that, to define it.
Mr. Davidson. Sure. So today, as I mentioned in my
testimony----
Mrs. Blackburn. No, I mean, in the language. You are just
saying----
Mr. Davidson. Oh, well, it would just specify in the
language that the FCC should follow a numbers-based approach
for contributions.
Mrs. Blackburn. Great.
Mr. Greer.
Mr. Greer. We have concerns with the cap. But we look
forward to working with the FCC on the national broadband plan
when it comes out next year.
Mrs. Blackburn. OK, great.
Mr. Rhoda. From Windstream's perspective, it would be
driving efficient costs across the board. Some of the
mechanisms in today's environment don't necessarily force
carriers to be efficient and yet still get reimbursement. There
is a number of measurements in this bill that do drive
efficiency, but it is not across the board.
Mrs. Blackburn. Thank you.
Mr. Lubin. I would highlight the issue of speed. I am
concerned about the level of speed, not that it is too high--I
am sorry, that it potentially is too high. And the issue of
concern is if you can--now, I am focused on rural area, I am
focused on if there is an alternative technology that can get
it out there in a cost effective way. And that is a way to
control the size of the aggregate fund.
Mrs. Blackburn. Excellent.
Ms. Moyer.
Ms. Moyer. The rural ILECs have concerns with the cap
language.
Mrs. Blackburn. OK.
Mr. Baum. Well, NARUC has concerns about the preemption
language. But, on a personal basis, I think the speed needs to
be realistic as to what we really need in the economy.
And we have to also acknowledge that there are a lot of
rural constituencies that produce the food and fiber for the
country that need access to this kind of broadband technology.
And it is not a choice for them to live there; it is how we
feed ourselves. And their hospitals and schools have to have
that same access to broadband.
Mr. McSlarrow. Since I have already talked about my
proposal and Peter talked about numbers, I am going to cheat
and add a third, which is ensuring that if we are going to have
support for broadband, that it be restricted to truly unserved
America.
Mr. Graham. Thank you for your kind comments earlier. I
appreciate that.
RCA would change the reverse auction provision. It is
simply not a silver bullet for USF reform. Reverse auctions
encourage a race to the bottom. They do not guarantee a
reduction in cost. And they discourage new entrants.
However, if we move forward with reverse auctions, they
absolutely should apply to everyone participating in the USF
fund and not only wireless providers. If wireless providers are
subject to it as part of a greenfield build, surely wireline
providers who have depreciated plant in the ground over a
number of years could compete as well.
Dr. Rheuban. For purposes of telemedicine, we are very
supportive of the bill in its current status.
The one thing we might add is to ensure upstream bandwidth,
as well, because for telemedicine we are trying to get feedback
from the patient or from the hospital. So it should be
bidirectional.
Mr. Rosston. So I would change the whole system to be
vouchers to low-income households. But, given that that is not
going to change in this bill, I would say extend auctions, set
a time limit for the FCC, and put them in in the next 6 to 12
months and go ahead. They are not a silver bullet, but they are
better than the current system.
Mrs. Blackburn. Thank you very much.
And I have 23 seconds left. Mr. McSlarrow, I will come back
to you and not take the committee's time right now. But I think
we need to look at how quickly we are moving to an IP world and
VoIP as a primary technology. And as we looked at the
reauthorization of the 1996 Telecom Act, one of the things we
heard from all of you was, ``Well, the bill is arcane, the bill
has outlived its usefulness, technology changes so fast.'' And
I think that one of the things that we need to look at is what
we can do to ensure that the universal service mechanisms work
in a changing environment, in a VoIP environment, and making
certain that this bill is going to work in an IP world.
And I know I am out of time, but I would appreciate your
response to that question in writing as we move forward or at a
later date.
And I yield back, Mr. Chairman. Thank you.
Mr. Boucher. Thank you very much, Mrs. Blackburn.
The gentlelady from the Virgin Islands, Mrs. Christensen,
is recognized for 5 minutes.
Mrs. Christensen. Thank you, Mr. Chairman.
I will direct my first question, not surprisingly, to Dr.
Rheuban. But I wanted to thank you for some of the
recommendations that you have made, realizing how much we are
relying on telemedicine and health-care reform and to improve
outcomes and reduce costs. So I appreciate the recommendations
that you made.
The USF Reform Act requires that universal fund recipients
offer high-speed broadband services with a download rate of at
least 1.5 megabytes per second. In your testimony, you spoke to
different broadband needs for different services. And I wanted
to know if the speed that we are recommending of at least 1.5
megabytes per second is adequate for what is required to
support all of the services.
Dr. Rheuban. I think for HD and surgical mentoring it is
not sufficient. I think it is sufficient for a clinic operation
or, certainly, for the home. You know, home telehealth wouldn't
require quite as much bandwidth as some of the more
sophisticated applications.
And if you have multiple users providing health-care
services in a hospital, you can imagine that the demand for the
bandwidth would be significantly greater. So, again, 1.54 is
good for some applications but not for others.
Mrs. Christensen. Thank you.
I guess I would ask this question to Mr. Baum and Mr.
Rosston, but if anyone else wanted to jump in, it would be
fine.
Section 104 on eligible recipients of universal service
support exempts existing recipients of the USF funds, primarily
rural telecos, from the requirement to deploy and provide high-
speed broadband service for 5 years. The FCC may also grant a
3-year waiver of this provision if the provider demonstrates
that it is not technically feasible or would materially impair
its ability to continue to provide local exchange service. That
waiver is renewable for every 3 years.
Ubiquitous broadband deployment is a primary goal of the
administration and this Congress, this committee. Currently,
the FCC is working on a new national broadband plan. Even the
discussion draft requires new providers who are eligible to
receive USF support to deploy high-speed broadband service and
provide it.
So why should we exempt existing recipients of USF? Do you
agree with that exemption or waiver?
Mr. Baum. What that refers to is the fact that some of
these areas are so remote and so expensive to serve that we
really probably need to have a satellite option there. There
will be some really remote pockets of population and even
single-family dwellings that simply are too far out in the
rural areas of America to be receiving broadband by a fixed
basis. So either their service is either some kind of wireless
broadband or, in this instance, it would be satellite.
We simply can't get everywhere in the country. We might get
to 98 percent, we might get to 96 percent somewhere. And, also,
remember that we never got phone service beyond about 95
percent of the population. Some people just don't want to hook
up, and some people are just too far out, and it would be too
expensive to serve them. And they will have to do a satellite.
Mrs. Christensen. Mr. Rosston, did you want to add
anything?
Mr. Rosston. No. Just, the satellite option is an important
safety valve, in that it covers pretty much most everywhere and
especially the high-cost areas. That would be a safety valve in
this.
Mrs. Christensen. Well, let me ask you, Mr. Rosston. One of
your main points is that you suggested subsidies should go to
consumers, not companies, to increase competition and choice.
Could you elaborate on that? It sounds very attractive. It
sounds like it may be a major upheaval, though. Could you
elaborate on that recommendation?
Mr. Rosston. Sure. It is generally a way of giving
consumers choice in what they want. If you decide that the best
service for your house is a wireless service because you work
outside a lot of the time and need to be accessible, that you
would have the chance to use the subsidy to provide you service
that gets you outside.
Or if you move around, if you are a plumber that does jobs
and you need to look up stuff and you don't need 20 megabits a
second to watch videos but you need to look up parts for your
job, you would be able to do that and use the different kinds
of services that are tailored to what you want to do.
So I think that this would then give consumers the choice
to pick the service that best suits their needs.
Mrs. Christensen. Thank you.
Mr. Davidson, you, in your testimony, said the problem is
not spending too little but spending it in the wrong places.
How would you redistribute the funds? And does the bill
adequately address that change?
Mr. Davidson. Thank you for the question.
Yes, I think that is right. I mean, the question is of
finding out right now where the true needs of consumers are.
And I would also go back and focus the panel on the needs of
the consumer, too, which I think has been a great part of this
hearing. We have spent a lot of time talking about that.
So the mechanisms that the Boucher-Terry bill use to figure
out where the services are needed and where they aren't I think
are very important. So, the competitive bidding portion. Again,
I mentioned the numbers formulation before. And----
Mrs. Christensen. So you think we are adequately addressing
that issue in the bill?
Mr. Davidson. I think they are, yes. I think the bill has
many provisions in it that are trying to prioritize where the
scarce resources should be directed. So there are many aspects
of the bill that are directed towards doing that.
And there have been some other ideas raised on the panel
here, as well. Mr. McSlarrow's idea is interesting, and others
as well. So I think those should be examined to make sure that
we are prioritizing the funds.
Mrs. Christensen. Thank you.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mrs. Christensen.
The gentleman from Oregon, Mr. Walden, is recognized for 5
minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
I want to thank all the witnesses for their testimony today
on this very important piece of legislation.
I want to go to Mr. Baum. In Oregon, where certain
nationwide service providers are shedding their remaining rural
lines, can you outline for us how the parent trap may impact
other carriers' decisions to step in to provide phone service
to the rural constituents I have?
Mr. Baum. Well, the reality is that the Regional Bell
Operating Companies have been unable to do an adequate job of
deploying broadband in their high-cost rural areas. That is
because they face competition in their urban areas, and their
business model just simply doesn't allow them to do that.
The RLECs, rural companies, in contrast, do receive better
subsidies from the Universal Service Fund, which allows them to
deploy broadband. So their broadband is out there about 92
percent, and, depending on the company, the RBOCs are anywhere
from the low 70s to the high 80s.
They just don't have a business model that works. So the
parent trap would allow some of the midsized and small
companies to come into those areas and to refurbish them and
get the subsidy that they would receive as RLECs to refurbish
some of those areas and deploy broadband.
It would be important to have that dealt with in some way
because, really, the failure to deploy broadband in rural high-
cost areas is largely a Regional Bell Operating Company's issue
and affects about 50 percent of the country. And we simply have
to address that issue. And that is why it is important that we
do something in that regard about the parent trap.
It is also important that we focus some of this money, if
there is some, on the unserved areas in those RBOC areas. And
that could be done by auction; it could be done by requests for
proposal. But we need to have infrastructure built out there so
that those communities can have the same benefits that the
communities have that are served by the rural local exchange
carriers.
Mr. Walden. Let me switch gears, since we are on the
broadband build-out. And when the stimulus bill was debated
before this committee, there was a significant amount of money
put forward to engage in broadband build-out. And we had rather
extensive discussions here about the money getting out there
before the mapping was completed and the debate over
underserved versus unserved.
Now I understand they are compressing the second and third
wave of funding. And I just wonder, from your position at NARUC
and as a commissioner, what you are seeing in terms of where
this money is going. Because it seems to me that, with the
taxpayer dollars involved or the USF dollars involved, it
should go into areas that have no service to begin with if we
are going to knit this country together in a broadband world.
Mr. Baum. One of the problems of the current broadband
stimulus package is some of the bigger companies have declined
to apply because of some issues over Net neutrality and they
are not certain about what those strings mean to the deployment
of dollars. So half of the country's areas, they don't have the
major ILEC in that area even applying in the high-cost areas.
Now, there are some other people that are applying, kind
of, in a little bit of an over-built fashion. Some of them are
in other areas. You know, we have a--for instance, in Oregon,
Bend Cable is also applying to roll out broadband in an area
that is served by Qwest. And they are trying to go outside of
town and serve unserved areas, but unfortunately when you try
to serve any area, you are going to serve the populated area as
well. And so it is difficult to truly target an unserved area.
So there will be some improvements in the broadband
stimulus. It will deploy some things in some unserved areas.
But we still have major players out there who aren't in the
game.
Mr. Walden. And, Mr. McSlarrow's, Kyle's comment, his
suggestion about a different way to look at the whole model.
And, Kyle, I believe you indicated that it be in an area that
is 75 percent served? Would then be in a competitive----
Mr. McSlarrow. Yes, we are proposing, essentially, two
tests. One would be in a rural study area, say, where there is
significant competition, which we are defining as 75 percent or
more of the households can receive a competitive unsubsidized
service, or a situation where the State has actually
deregulated prices, on the theory that competition is present.
Mr. Walden. So I guess my question would be--and, again, I
have a district that is 75,000 square miles. So you could have
the urban area, to the extent we have them, in a very large
geographic area and probably serve 75 percent of the
population.
My concern is, what happens to that other 25 percent that
is out in the area? And so, how do you define that circle, if
you will, in which you score the 75 percent penetration?
Mr. McSlarrow. It is a good question, I think. And,
actually, this goes to one of the proposals in the bill. I
think moving to wireline centers actually helps. I think the
smaller you can make a certain area, the less you are going to
run into that problem.
But, remember, under our proposal, you still have the
ability, if, in fact, there is some other area that isn't being
covered, to make a showing that USF high-cost port is still
appropriate----
Mr. Walden. So if you have an area that is 100 percent and
75 percent is the area that is served and would meet your test,
do you have that ability, under your proposal, to go after that
remaining 25 percent in that area and be subsidized to reach
it?
Mr. McSlarrow. Yes. The incumbent can come make a showing
that there is 25 percent that is not covered by competition and
that there is still a need for high-cost support.
Mr. Walden. All right. My time has expired, but I
appreciate your generosity with the time.
And, again, thank you to the panelists.
Mr. Boucher. Thank you very much, Mr. Walden.
The gentleman from Michigan, Mr. Stupak, is recognized for
7 minutes.
Mr. Stupak. Thank you, Mr. Chairman.
And thank you for our witnesses for being here.
Mr. Baum, let me ask you this question, if I may. A little
different twist here. Do you believe that, as we reform USF,
that we should consider the telecommunication needs of public
safety? And, if so, how would you go about doing that?
Mr. Baum. Well, you are aware that public safety is one of
the applications that is eligible under the broadband stimulus.
Mr. Stupak. On the stimulus, right.
Mr. Baum. Yes. And there is also those 700-megahertz
applications that some of the local jurisdictions are applying
for waivers to get from the public safety trust. So that is
moving ahead on that front. So there is, kind of, some things
moving ahead.
But right now, for instance, in Oregon, we have a $440
million bonded project to build out a microwave public safety
network. And those are our local State efforts. So, nationally,
there is some funding available through the Department of
Homeland Security, there is some stimulus money there. It is,
obviously, not going to do the trick.
But we judge our applications for stimulus based on how
many of these proposals they serve, whether they provide public
safety application in their proposal, telehealth, distance
learning. All of those things are part of the application
process that we are encouraging companies to make under the
broadband stimulus, to make sure they satisfy those criteria.
Mr. Stupak. Right. But what about under USF? Should we use
law enforcement as one of them? Especially, when we talk about
interoperability, I mean, rural areas just cannot keep up with
the high cost of technology.
Mr. Baum. In my perfect world, we would focus on those
unserved areas, and anchor institutions would include law
enforcement, schools, libraries, medical facilities. And from
there you could build it out and spider-web it out to the
residences. But you need to have that for the public safety
network, as well.
Mr. Stupak. Correct. OK.
Mr. Graham, do you want to jump in on that?
Mr. Graham. Yes, thank you.
The easiest way to deploy broadband for public service, at
least within the State of Mississippi, is to make broadband a
supported service immediately. We are in the process of
preplanning some applications with the Mississippi Highway
Patrol which would allow officers to have an E-ticket program
with a wireless connection. It would also allow them to input
accident data into their laptop----
Mr. Stupak. Sure, but that is basically for State
employees, right? How do you get your local police chiefs, the
sheriff's departments in the same system so it is interoperable
so you do have a seamless flow of communication? It seems like
we are going to have a dedication of funds that is somewhere
between $20 billion and $40 billion, and every time we try to
do a trust fund so law enforcement will have the money we never
seem to get anywhere.
Mr. Graham. In one of our metro counties, we have already
launched this with the sheriff's department, a similar program.
They have broadband connectivity from their cars. Applications
are easy to envision where they will have realtime video late
at night on a county road. And you can easily extend that into
paramedics and emergency responders like that.
Mr. Stupak. Sure. The county may have it, but what about
the municipalities within there? Are they part of that same
system?
Mr. Graham. They are not part of that same system yet. They
could be part of that system.
Mr. Stupak. Could be, would be, want to be. Lack of money,
right?
Mr. Graham. As long as the services--as long as the cloud
is there, the broadband cloud is there, they can access it.
Mr. Stupak. Let me ask you this, then, Mr. Graham. Based on
your testimony, since 2000, USF has provided, like, $26 billion
in subsidies, landline, and 4,000 for wireless. The FCC capped
the wireless fund to control costs, but we still have an
increased contribution rate somewhere around--it went from
about 10 percent to 14 percent.
So we have increased the contribution that consumers are
paying, yet we capped the wireless. It seems like we are
getting less for more. So Joe Barton, when we comes in with his
telephone bill, he is paying more, but yet we have less than we
did 2 years later for wireless communication.
Isn't that really the way we are going?
Mr. Graham. We completely agree with that. We are going in
the wrong direction, capping wireless. Wireless may have seen
growth, but it is because we have gone from zero funding to the
funding we receive today. We continue to subsidize 1876
technology at cost level. Whatever it costs them to build the
network, they get the money.
Mr. Stupak. OK. The draft bill contemplates capping USF
support for high-cost areas. And, in your testimony, you assert
that the bill would allow certain high-cost carriers to receive
support indefinitely. Do we run the risk of freezing
investment, much like what has occurred with rural wireless?
Mr. Graham. We do run that risk and, in some areas, curtail
investment and, in other areas, if the cap continues to run
indefinitely----
Mr. Stupak. What would you propose for changes, then, in
the current legislation?
Mr. Graham. Well, we would target the support to areas
where it is absolutely necessary. We think a thorough review by
the expert agency must be undertaken. That has not been done.
No one has ever sat down and figured out exactly where the
support really and truly needs to go.
Mr. Stupak. OK.
Mr. Lubin, let me ask you, because, in your testimony, you
also urge a bit of caution about how we utilize a cap to
contain costs. Does AT&T believe a cap may run the risk of
freezing investment in rural areas?
Mr. Lubin. Yes, there is that risk.
Mr. Stupak. So, same thing, identifying, mapping?
Mr. Lubin. For us, the bottom line is, if you have that
cap, you have potentially constrained how much investment in
the high-cost areas. And that is a dilemma. That links back
into a lot of the different things we have discussed this
morning.
Mr. Stupak. OK.
Mr. McSlarrow, let me ask you this one. I am looking at
your map here that you submitted. How did you identify these
areas, excess high-cost support funding? And what was the data
for your economic analysis on this to come up with this map?
Mr. McSlarrow. The data that we use is the data that is
produced by the rural study areas within the High-Cost Program
itself. So what we essentially did was we took all of the rural
study areas and looked at the support that was going to each of
them. Then we overlaid that on top of what we knew about where
unsubsidized competition was.
Mr. Stupak. All right. So you get that 75 percent area,
then you get the uncompensated competition or unregulated----
Mr. McSlarrow. Yes. And I should just point out: In our
proposal, we actually made what we believe is the most
conservative case. We are not even taking into account
wireless. We are just saying if there is another unsubsidized
wireline competitor, that that is the case for taking a fresh
look.
Mr. Stupak. OK.
Let me ask you this. It is my understanding you are
concerned with broadband network connections being assessed for
contribution into the USF. How would you propose to ensure that
contribution mechanisms are there long-term? Again, we capped
off wireless, but yet we have spent--it has received more
money. How do we do it long-term----
Mr. McSlarrow. In terms of the contribution side?
Mr. Stupak. Yes.
Mr. McSlarrow. Well, like a lot of folks, we support a
numbers approach. But that is just a proxy for saying a
connection.
Mr. Stupak. Correct.
Mr. McSlarrow. Our concern about broadband revenues is
simply this. All the other services are highly penetrated. They
are at the 90-plus level. Broadband, as we have all been
talking about, still has some adoption challenges. So we are a
little leery of putting another assessment or fee on the cost
of broadband when we are actually over here trying to drive
more adoptions.
But a numbers approach or some kind of connectivity
approach that is true for everybody across the board, we think
that is the way to go. And that does broaden the base.
Mr. Stupak. But if you use a numbers approach, aren't you
still with the rural areas with small population base still
never being built with broadband? I mean, if you look at your
map, heck, my district is not even covered, hardly.
Mr. McSlarrow. If you take phone numbers--and I think there
are about 650 million phone numbers in existence. If you had
something that is something less than a dollar month, right
there you get over $7 billion for the entire Universal Service
Fund.
Mr. Stupak. Thank you.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Stupak.
The gentleman from Indiana, Mr. Buyer, is recognized for 5
minutes.
Mr. Buyer. Thank you.
Mr. McSlarrow, I wanted to give you an opportunity to
clarify. When you were answering questions of Mr. Barton
relative to the expansion, I got this sense--did you really
mean that we should be taxing broadband by implication here? I
just want you to clarify what you meant by, yes, more people
should be paying in.
Mr. McSlarrow. Well, I may have misunderstood his question,
because, as I just said to Mr. Stupak, we are against taxing
broadband. I thought what he asked was whether or not we were
for broadening the base. And we are, through a numbers
assessment.
Mr. Buyer. OK. All right.
Mr. McSlarrow. So thank you, if I misunderstood that.
Mr. Buyer. All right. Thank you.
Mr. Davidson, the cap on the High-Cost Fund in the Boucher-
Terry bill, due to exceptions, is being referred to as a soft
cap. If we don't put a firm cap on the High-Cost Fund, what
would be the impact on consumers?
Mr. Davidson. Well, as I said in my testimony, you know,
with the contribution factor going to be reaching 14 percent
next year and no end in sight unless we fix the system, I think
everyone agrees that there needs to be some kind of cap on the
process here or it will simply become unsustainable.
So what does ``unsustainable'' mean? Unsustainable means
that people like Mr. Barton and other folks who are looking at
the bottom of their telephone bill are going to say, ``I am not
going to pay 25 percent of my bill to subsidize this system
anymore.'' So it has to be fixed.
I think what Representatives Boucher and Terry have done
have introduced a cap concept. And, as you hear throughout this
panel, there are a lot of different positions on how exactly to
do that. I would just urge this committee and all of those that
are going to be participating in the legislative process to
preserve the discipline, as much discipline as possible, in
keeping that cap as concrete as it can be, as it moves through
the process. Because that is what is going to keep the system
sustainable going into the future.
So I think there has been an honest attempt to create a
cap. And talking with the various parties, they have reached
the cap they have. I just urge everyone to keep it as tight as
possible.
Mr. Buyer. In response to Mrs. Blackburn, Mr. Davidson, you
said you are an advocate for universal service fees to be based
on a numbers-based system versus revenue. That is correct?
Mr. Davidson. Yes.
Mr. Buyer. All right. I would like to get a sense, and go
right down the line, of whom would advocate a numbers-based
system versus a revenue-based system?
So, Mr. Greer.
Mr. Greer. We would advocate a revenues-based system.
Mr. Buyer. Revenue-based.
Mr. Rhoda. Connections-based.
Mr. Buyer. Connections-based?
Mr. Rhoda. Connections, numbers, yes.
Mr. Buyer. Numbers. All right.
Mr. Lubin. Telephone numbers.
Ms. Moyer. Connections.
Mr. Baum. NARUC doesn't have a position, but I would
support numbers and connections.
Mr. Buyer. Great.
Mr. McSlarrow. Telephone numbers.
Mr. Graham. RCA doesn't have a position on that yet, but
some hybrid numbers-and-contributions-based.
Dr. Rheuban. ATA doesn't have a position on that.
Mr. Buyer. OK.
Mr. Rosston. I haven't studied it much, but it seems to me
that numbers or connections would be a better way than
revenues.
Mr. Buyer. And if we go to numbers, it is better with
predictability, would you not agree?
Mr. Rosston, since the goal of the High-Cost Fund is to
make service more affordable for consumers in high-cost areas,
shouldn't the focus be on consumers and not necessarily the
carriers? Meaning, shouldn't the subsidy follow the consumer so
that, if the carrier loses a subscriber, they also lose the
subsidy?
Mr. Rosston. Absolutely.
Mr. Buyer. Very good.
I yield back.
Mr. Boucher. Thank you very much. We appreciate those
questions.
The gentleman from Vermont, Mr. Welch.
Mr. Welch. Thank you very much, Mr. Chairman. I appreciate
your work here.
I want to ask Commissioner Baum, if I could, the discussion
draft allows eligible providers basically to avoid the
requirement of offering broadband service where it is deemed
too costly for them to do that. And I gather that is about
three times the national average.
Do you see this as a clause, almost an escape clause, that
could let providers that still receive support not make
significant expansions where they are needed?
Mr. Baum. I am not sure about the impact of that 2.75
ratio.
First of all, before I say that, I want to thank you for
speaking at NARUC yesterday. We appreciate you coming out.
Now, back to your question----
Mr. Welch. Thank you.
Mr. Baum. At some point, we have to have some way by which
we are going to determine how far we are going to penetrate
into those high-cost rural areas, particularly the unserved
portions. And I am not sure if the 2.75 ratio is accurate. We
may be able to go further than that.
But, at some point, we are probably not going to be able to
afford to provide high-speed broadband to every person or
residence in America regardless of where they are located.
Mr. Welch. But I am, kind of, wondering if we have it
structured right. Because, obviously, there may be a point
where the cost is beyond what is affordable. But, on the other
hand, there are a lot of rural areas where we need that
service, Vermont among them.
And the specific question I have is whether you are going
to have, under the draft language, some possibility of
companies on the one hand receiving support but on the other
hand actually not doing build-out in some of these areas.
Mr. Baum. I just can't tell you based on--I wasn't briefed
on how that actually worked or was I part of that process. But
there has to be some way by which we can figure out how far we
are going to go, and the percentage should be in the high 90s.
And I am just not sure, between 95 and 100 percent, how far we
can go on an affordability basis.
Mr. Welch. OK. Thank you.
Mr. Rosston, how about you? I know you have studied the
economics of this pretty extensively.
Mr. Rosston. So, my view is, if you went to a system of
vouchers to consumers, you would not have to worry about this
because they would be cost-based and you would get them able to
pay in other areas. I think it is important to also consider
the satellite alternatives in very, very high-cost areas.
Mr. Welch. Right. And what is the cost of a satellite
connection?
Mr. Rosston. My impression, I haven't subscribed, but I
thought it was between $70 and $90 a month for broadband
access.
Mr. Welch. In contrast, if there was a buildout, what would
be the average costs there?
Mr. Rosston. If you think that people sort of pay in the
$40 to $50 in urban areas, and you are talking three times for
this bill, that would be getting it well more than this $70 to
$90 for a retail subscription to satellite.
Mr. Weller. Thank you. Mr. McSlarrow, your view on this? I
am interested in obviously a rural buildout, representing a
rural State. And the point has been made by you as well by
folks on this table that that buildout is really a lifeline for
the economic activity of those rural residents and they are
there for a variety of reasons.
I don't think it is quite an individual choice to be a
hermit. I come from a town of 1,800 people. That is my base. We
like broadband.
Go ahead, Mr. McSlarrow.
Mr. McSlarrow. I think our view is that there clearly are
areas that deserve high cost targeted support, and it is about
taking scarce dollars and putting them where they are needed. I
will say at least in our own industry's experience, whether it
is broadband or phone, we don't actually differentiate in terms
of the pricing in an urban area to a rural area.
Mr. Weller. You do not. Right. And you support maintaining
that nondiscrimination in pricing.
Mr. McSlarrow. We tend to just roll out across our entire
national footprint.
Mr. Weller. Thank you.
Mr. Davidson. Congressman, could I expand on that for a
minute? I think one of the things to recognize as well is the
expense in the areas you represent aren't necessarily last mile
expenses as well. We have a proposal that deals with the so-
called middle mile, which is terms of the amount of transport
that broadband needs to go over long areas to get to remote
areas and then serve those remote areas. So I would be happy to
explain and come talk to you a little more about what our
proposal is.
But basically we think if you provide some support to build
those middle mile facilities and then that subsidy goes to the
end broadband provider, it doesn't go to the middle mile
facility, but it makes it possible for that middle mile
provider to build the transport, that is enough of an incentive
perhaps to tip the balances in terms of bringing broadband to
more remote areas. So we would encourage you to look at that
proposal as well.
Mr. Weller. I look forward to seeing that. While you are
here, Verizon, I know it has left or you are in the process of
leaving 17 rural States with your wire land network. Vermont,
of course, is one where you did recently leave. And what I
understand is you are also going to discontinue providing what
is relatively high cost support for the wireless network.
I am wondering whether Verizon is willing to commit to
serve every customer and be the carrier of last resort
throughout all of your rural areas without any universal
service support?
Mr. Davidson. Well, first of all, I wanted to respond to
this question earlier that came up as well. Commissioner Baum
had mentioned the development of this new rural LEC company. We
have Windstream here, we have Century Link, we have others that
do an excellent job with the business model in terms of serving
rural areas. So issues like the parent trap and others are very
important and kind of get to your question as well.
In terms of the Verizon territories, we currently
participate in the universal service program in certain areas.
We are by far a payor into the system by a large amount and we
take a small amount out. And that amount is decreasing over
time due to merger conditions and other reasons, so we actually
participate on the payee side to a very small percent right
now. But, again, we support the bill and we support moving
through the process in terms of serving our existing customers.
Mr. Welch. Let me stop you there. Thank you for that. I
only have a few seconds left.
Mr. Lubin, in reviewing the draft legislation, what would
you see as the three most important components of it?
Mr. Lubin. The three most important components of this;
contribution reform, fixing it; intercarrier comp, fixing it;
and recognizing USF for broadband. The 21st century is all
about broadband. POTS is going away. You have to figure out how
to get broadband. I am sympathetic to your point of how do you
get it into the rural area.
Mr. Welch. Does Mr. Lubin spell for the rest of you?
Commissioner Baum.
Mr. Baum. Just one question. I have now figured out your
first question, I am sorry. But, yes, there would be a great--
that three factor that they have in there would effectively
take communities in some areas of Oregon that are under like
500 population and under who are remote, wouldn't be serviced
by this broadband effort.
Mr. Welch. Thank you.
I think Mr. Graham wants to speak, but I know my time is
up, Mr. Chairman, so I yield back.
Mr. Boucher. Mr. Graham, go ahead.
Mr. Graham. Very briefly. One other piece of discussion
draft would be true competitive neutrality. When wireless goes
into an area, we don't get support until we get a customer.
When we lose a customer, we lose that support. It seems
incredibly reasonable for us for everyone to get support when
they get customers, and lose support when they lose customers.
Mr. Boucher. Thank you very much, Mr. Welch. And the
committee's thanks to all of our witnesses today. We have had a
thorough ranging and informative conversation about universal
service. I appreciate the broad consensus of support for the
discussion draft that has been expressed by the witnesses here
today and the many recommendations that we have received for
possible additional changes that we could make which would
expand that consensus even further. We intend to focus on those
recommendations and have subsequent conversations with many of
you as we do so over the coming weeks.
Our goal will be to fashion a reform that with broad
bipartisan support, we can pass through this committee and the
House and have enacted into law during the course of this
Congress. Each of you here has contributed to that process here
today. We thank you for it.
This hearing stands adjourned.
[Whereupon, at 1:41 p.m., the subcommittee was adjourned.]
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