[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
            BROADBAND: A CATALYST FOR SMALL BUSINESS GROWTH

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

                                HEARING

                               before the

               SUBCOMMITTEE ON HEALTHCARE AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           FEBRUARY 15, 2012

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 112-054
              Available via the GPO Website: www.fdsys.gov


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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Renee Ellmers...............................................     1
Hon. Cedric Richmond.............................................     2

                               WITNESSES

Mitzie S. Branon, General Manager, Yadkin Valley Telecom, 
  Yadkinville, North Carolina....................................     3
Roger Bundridge, General Manager, NorthwestCell, Maryville, MO...     5
Darrell M. West, VP and Director of Governance Studies, Director 
  of the Center for Technology Innovation, Brookings Institute, 
  Washington, DC.................................................     7
Rebecca Sanders, Indiana Telehealth Network Director, Indiana 
  Rural Health Association, Plainfield, IN.......................     9

                                APPENDIX

Prepared Statements:
    Mitzie S. Branon, General Manager, Yadkin Valley Telecom, 
      Yadkinville, North Carolina................................    17
    Roger Bundridge, General Manager, NorthwestCell, Maryville, 
      MO.........................................................    29
    Darrell M. West, VP and Director of Governance Studies, 
      Director of the Center for Technology Innovation, Brookings 
      Institute, Washington, DC..................................    39
    Rebecca Sanders, Indiana Telehealth Network Director, Indiana 
      Rural Health Association, Plainfield, IN...................    47
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Materials for the Record:
    Jerry James, CEO, COMPTEL Statement for the Record...........    63


            BROADBAND: A CATALYST FOR SMALL BUSINESS GROWTH

                              ----------                              


                      WEDNESDAY, FEBRUARY 15, 2012

                  House of Representatives,
                       Committee on Small Business,
                 Subcommittee on Healthcare and Technology,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1 p.m., in room 
2360, Rayburn House Office Building. Hon. Renee Ellmers 
(chairwoman of the subcommittee) presiding.
    Present: Representatives Ellmers and Richmond.
    Chairwoman Ellmers. I call the hearing to order.
    I want to thank the witnesses for your testimony and your 
input today. We appreciate your participation at this very, 
very important hearing today.
    Access to broadband services has the potential to transform 
the way small businesses and organizations fundamentally 
operate. Small firms can communicate with potential buyers 
around the world; family farmers can better monitor and manage 
crop prices; and entrepreneurs can launch a website or 
application from their living room. As a registered nurse and a 
small business owner, I fully understand the benefits of a 
modern health care facility with broadband access. More 
importantly, broadband provides the gateway and opportunity for 
economic growth and job creation, especially in the rural 
areas.
    While it is easy to understand the limitless benefits of 
broadband Internet, those capabilities would not be available 
if not for the contributions of our small business providers 
like those represented here today. To keep up with the growing 
demand, private sector enterprises have invested billions of 
dollars to upgrade their network to provide faster and more 
reliable services. It is because of these investments that we 
can enjoy broadband at the workplace or on a wireless device.
    However, there is still a severe shortage of network 
infrastructure that limits many small businesses from utilizing 
the broadband services. In particular, rural areas of states 
are most likely to lack the necessary capabilities, as they can 
be difficult and expensive to develop. This is the reason that 
I introduced H.R. 2128, which is the Stripping the E-Prescribe 
Arbitrary Mandate Act of 2011, which would prevent the federal 
government from imposing penalties and fees on health care 
providers who are not yet able to e-Prescribe.
    Currently, there are a variety of federal initiatives aimed 
at providing broadband to everyone in the United States. When 
considering these policies, we must first ensure that the 
regulatory changes do not diminish the incentive for private 
sector investment in broadband infrastructure. Moreover, we 
must strengthen our oversight on various programs to confirm 
that federal dollars are being spent efficiently, and will 
benefit small businesses in rural areas.
    We have a distinguished panel of witnesses here today. I 
look forward to hearing their thoughts on the importance of 
broadband and how best to provide broadband to small businesses 
across the United States. I now yield to Ranking Member 
Richmond for his opening statement.
    Mr. Richmond. Thank you, Chairwoman Ellmers, one for 
recognizing me, and two for having this very appropriate 
Committee hearing. And then thank you to Ms. Sanders, Mr. West, 
Mr. Bundridge, and Ms. Branon for coming here today.
    I think we can all agree that today's hearing will offer us 
a great opportunity to examine the benefits and challenges of 
broadband deployment. The technology and telecommunication 
sectors are major contributors to the U.S. economy for engines 
for economic growth with the potential to create at least one 
million new jobs and keep over three million employees at work 
in the broadband sector. Small firms stand ready and eager to 
capture the economic gains produced by this technology.
    Most small businesses are embracing broadband more than 
ever before and it is rapidly changing the way business is 
conducted. Innovative applications and services such as video 
conferencing are helping small companies reduce costs, increase 
productivity, and expand their businesses into new 
marketplaces. We have seen the benefits broadband can bring to 
our daily lives in a variety of ways. Those fortunate enough to 
have access to broadband know how it improves efficiency while 
reducing operator costs. Yet, in rural areas the percentage of 
small businesses without broadband access is twice as high as 
urban areas. Even though broadband subscriptions have steadily 
increased, access in rural and low income communities is being 
outpaced by the rest of the country due to a lack of network 
deployment.
    Beyond the access barrier there are cost issues. Small 
firms pay two times more per employee for broadband than larger 
firms. Unfortunately, the adoption gap may further widen 
without adequate support for broadband deployment. Federal loan 
and grant programs have helped economically disadvantaged 
communities gain access to high speed Internet, resulting in 
attracting business, lower unemployment rates, and skilled 
workers. Eliminating the digital divide will not only assist 
rural and low income communities, it will help our nation's job 
creators.
    By making the virtual marketplace more accessible, the bar 
to entrepreneurship is lowered, which encourages job creation 
throughout the economy. Broadband access has significantly 
impacted tourism, agriculture, and rural health care. Improving 
the ability of patients and practitioners to use electronic 
medical records and telemedicine has been a top goal in 
Louisiana. These investments have improved patient care and 
resulted in a better integrated health system.
    Today's hearing will focus on improving broadband access in 
order to strengthen the small business economy. The insights 
gathered today will enable us to make certain that policies 
coming out of Congress and the FCC effectively support network 
deployment. This Committee will ensure that the needs of small 
firms are taken into account during the FCC's Universal Service 
Fund reform process. Our country's continued leadership in 
technological development depends on it.
    In advance of the testimony, I want to thank all of the 
witnesses who traveled here today for both their participation 
and insights into this important topic. Thank you. And I yield 
back.
    Chairwoman Ellmers. Thank you to our ranking member.

STATEMENTS OF MITZIE S. BRANON, GENERAL MANAGER, YADKIN VALLEY 
         TELECOM, TESTIFYING ON BEHALF OF THE NATIONAL 
 TELECOMMUNICATIONS COOPERATIVE ASSOCIATION, ORGANIZATION FOR 
   THE PROMOTION AND ADVANCEMENT OF SMALL TELECOMMUNICATION 
   COMPANIES, AND WESTERN TELECOMMUNICATIONS ALLIANCE; ROGER 
BUNDRIDGE, GENERAL MANAGER, NORTHWESTCELL, TESTIFYING ON BEHALF 
OF THE RURAL CELLULAR ASSOCIATION; DARRELL M. WEST, DIRECTOR OF 
 THE CENTER FOR TECHNOLOGY INNOVATION, BROOKINGS INSTITUTION; 
 REBECCA SANDERS, INDIANA TELEHEALTH NETWORK DIRECTOR, INDIANA 
RURAL HEALTH ASSOCIATION, TESTIFYING ON BEHALF OF THE NATIONAL 
                    RURAL HEALTH ASSOCIATION

    Chairwoman Ellmers. Our first witness is Mitzie Branon, who 
is the general manager of Yadkin Valley Telecom in Yadkinville, 
North Carolina. She has over 20 years of experience with the 
Yadkin Valley and currently resides in Fall Creek, North 
Carolina. She is testifying today on behalf of the National 
Telecommunications Cooperative Association, Organization for 
the Promotion and Advancement of Small Telecommunication 
Companies, and the Western Telecommunications Alliance. Thank 
you for being here, Ms. Branon, and we look forward to your 
testimony.

                 STATEMENT OF MITZIE S. BRANON

    Ms. Branon. Thank you for the invitation to participate in 
today's discussion on the role of broadband access in the 
start-up and growth of small business.
    For the past two years I have served as general manager of 
Yadkin Valley Telephone Membership Corporation, which is 
headquartered in Yadkinville, and my remarks today are on 
behalf of Yadkin Valley, as well as NTCA, OPASTCO, and WTA, and 
their several hundred community-based members that provide a 
variety of communication services throughout the rural far 
reaches of the nation.
    Our industry leads the way in deploying high speed 
sustainable broadband to rural America, thereby providing an 
incubator for small business ideas in rural America to be 
implemented and flourish. America's 1,100 rural telecom 
providers serve approximately 40 percent of the nation's 
landmass, yet about 5 percent of the population, an average of 
10 customers per square mile. Yadkin Valley serves over 26,000 
customer lines and our 670 square mile rural service area in 
the Piedmont portion of North Carolina. We employ 160 people, 
and our 2011 operating revenue was about $34 million. We offer 
1.5 megabit broadband to 96 percent of our service area with 
much faster speeds offered to a majority of customers, and we 
are working on a strategic network plan to deliver 25 megabit 
broadband to the 55 percent of our customer base that does not 
already receive it.
    Rural providers are community focused. When Internet first 
became widely available in the 1990s, Yadkin Valley donated 
time and material to wire the local schools. Yadkin Valley 
recently provided dedicated fiber circuits that connect a large 
hospital in Winston-Salem to medical facilities in our service 
area, empowering them to use state-of-the-art technology for 
transmitting patient files and images. The efficiencies of our 
broadband network mean more opportunity for small business to 
start up and grow, and companies from around the world can 
reach our customers through the Internet. Ever since Yadkin 
Valley began operating in 1950, we have been proud to serve as 
the only provider to the most rural areas of North Carolina 
while other carriers chose to serve only the most profitable, 
densely populated towns.
    Broadband has become essential to doing business in the 
United States. The Small Business Administration reported in 
2010 that 90 percent of small businesses use broadband; 71 
percent had a website; and over one-third are not satisfied 
with their Internet speed. Small, rural, community-based 
telecommunications providers alone contributed $14.5 billion to 
the economy in 2009 supporting 70,700 jobs through employment 
and purchasing goods and services. The Federal Universal 
Service Fund was created to support quality, reliable telecom 
service in high cost rural areas where low customer density, 
vast distances, and rugged terrain deter even the most 
optimistic business cases. Without universal service and 
intercarrier compensation, which is a system by which carriers 
compensate one another for the use of their networks, rural 
carriers would be forced to drastically reduce service or 
charge unaffordable prices, neither of which is consistent with 
longstanding national statutory policy.
    The FCC released its Universal Service Intercarrier 
Compensation Reform Order on November 18, 2011, with the aim of 
transitioning the program to explicitly support broadband 
service in rural America. However, the FCC's order failed to 
adopt provisions promoting broadband service in small rural 
carrier service areas. It cuts existing cost recovery 
mechanisms for rural carriers retroactively and it proposed 
further notice of rulemaking with the potential for more cuts.
    In sum, rural providers will be expected to do more with 
less opportunity for cost recovery and do not even get the 
regulatory certainty they sought as a further notice hinders 
lending and investment. Reforming universal service and 
intercarrier compensation properly is essential to achieving 
our national goal of universal broadband access and to the 
livelihood of thousands of job creating small businesses.
    We can all be proud of our nation's broadband progress over 
the past decade and the opportunities that broadband creates 
for small businesses to compete and thrive. This success has 
been made possible due to the unique cooperation between the 
industry, the American people, and policymakers, a partnership 
that will be essential to America's quest to secure and 
maintain global broadband preeminence. Rural providers and the 
rural associations are eager to continue working with you to 
move forward aggressively to fulfill the national objective of 
making broadband universally available.
    Thank you for your attention to this matter.
    Chairwoman Ellmers. Thank you so much, Ms. Branon. And I 
failed to--you were well under our five minute time so I 
appreciate that. And I did fail to mention to the rest of the 
panel you will have five minutes to give your testimony. And if 
you can see the lights in front of you, it will stay green. And 
about the point where it is one minute left it will turn 
yellow. And then you will get a red light after that. But we 
are flexible here. We want to hear as much as we can, but if I 
have to I will cut you off. So I appreciate that.
    Our next witness is Mr. Roger Bundridge. See, I knew I was 
going to get it wrong and I apologize. It is kind of a tongue 
twister. Roger Bundridge.
    Mr. Bundridge. Bundridge.
    Chairwoman Ellmers. Bundridge.
    Mr. Bundridge. Yes.
    Chairwoman Ellmers. See, I kept putting another R in there. 
That is my problem.
    Mr. Bundridge. That is fine.
    Chairwoman Ellmers. Roger Bundridge. He is the general 
manager of NorthwestCell based in Maryville, Missouri. I did 
say that correct. Yes?
    Mr. Bundridge. Yes.
    Chairwoman Ellmers. Is it Missouri to you or Missouri?
    Mr. Bundridge. I use Missouri.
    Chairwoman Ellmers. And the Maryville, okay.
    Mr. Bundridge. Maryville. Yes.
    Chairwoman Ellmers. It depends on where you are. I have 
learned this.
    Mr. Bundridge. That is right.
    Chairwoman Ellmers. Okay. As he has held this position for 
the past 10 years where he has helped to grow from 12 to 29 
employees. He is testifying on behalf of the Rural Cellular 
Association. Welcome, Mr. Bundridge.
    Mr. Bundridge. Thank you, Chairwoman Ellmers.
    Chairwoman Ellmers. I am going to get it right by the end 
of this. So thank you for your testimony. And please proceed.

                  STATEMENT OF ROGER BUNDRIDGE

    Mr. Bundridge. Chairwoman Ellmers, Ranking Member Richmond, 
and members of the Subcommittee, thank you for the opportunity 
to be here today. My name is Roger Bundridge and I am the 
general manager for NorthwestCell.
    NorthwestCell is headquartered in Maryville, Missouri, and 
provides mobile voice and broadband services to customers in 
five counties. NorthwestCell understands small business 
operations because we are a small business with 29 employees, 
one retail location, and 11 agent locations. We like to say 
that we are big enough to serve you but small enough to know 
you. I also serve on the Board of Directors for the Rural 
Cellular Association, which represents over 100 competitive 
wireless carriers just like NorthwestCell.
    The areas that we serve are primarily rural and we take 
pride in our commitment and support of these communities. 
Smaller rural and regional wireless providers connect Americans 
throughout their communities which allow them to innovate and 
compete. For example, I recently met with a group of farmers 
that will utilize our mobile broadband service along with iPads 
to control and maximize planting and harvesting. NorthwestCell 
also provides broadband data to the Nodaway County Sheriff's 
Department so that officers can access critical databases in 
real-time. NorthwestCell is the only company in our market that 
is capable of providing wireless 3G broadband service in both 
examples.
    In order to be able to continue to serve rural America, 
NorthwestCell and other competitive wireless carriers have four 
critical needs. One, sufficient and predictable service through 
the new universal service mechanisms; two, access to usable 
spectrum; three, access to cutting edge devices; and four, 
reasonable terms and conditions for roaming service.
    First, like most of the RCA members, NorthwestCell 
currently receives high cost support through universal service 
funding to construct, maintain, and upgrade high quality 
wireless networks at affordable prices in rural areas. Also, 
like many RCA members, NorthwestCell stands to lose all or a 
substantial portion of this funding as a result of the FCC's 
recent USF reform efforts. As part of these efforts, the FCC is 
working to establish the Mobility Fund to provide support for 
mobile wireless services. Unfortunately, the $400 million in 
annual non-Tribal support budgeted for the ongoing Mobility 
Fund will not be sufficient to provide continued expansion. The 
FCC must allocate additional funding. In addition, it is 
critical that the funding be distributed based on a forward 
looking cost model rather than a single winner reverse auction. 
The use of reverse auction methodology will make it virtually 
impossible for a small business to compete for funding for 
mobile broadband.
    Second, increased consumer adoption of mobile services and 
the skyrocketing use of high speed data strains the carrier 
spectrum holdings. As capacity is exhausted, a carrier must 
acquire additional licenses either through the FCC auction or 
on the secondary market. The FCC's authority to auction 
spectrum expires this year, and it is important that Congress 
extends this authority. In doing so, Congress must preserve the 
FCC's flexibility to structure the auctions and license 
services in a manner that promotes competition and allows small 
businesses to participate.
    Third, carriers have difficulties accessing the latest and 
greatest devices. Exclusivity agreements between device 
manufacturers and the largest carriers have limited the number 
of devices available to small carriers where devices will only 
work on a specific slice of spectrum. We need devices to 
continue to expand our service.
    Finally, roaming is critical to connectivity. Customers 
expect their devices to work wherever they are. With the FCC's 
Data Roaming Order last year, carriers are required to offer 
roaming for both voice and data services at fair and reasonable 
rates. The order is being challenged in court and the smaller 
and regional carriers may be unable to provide their customers 
with broadband roaming on the larger carriers' networks.
    Despite these challenges, NorthwestCell and wireless 
carriers like us play a critical role in the market. For us to 
remain competitive in an increasingly consolidated industry and 
to continue to expand service to difficult to serve areas, I 
strongly urge you to support policies at the FCC and in 
Congress that level the playing field and allow smaller 
carriers to grow. One, with sufficient and predictable 
universal service support for mobile broadband; two, for 
competitive access to spectrum; three, roaming on commercially 
reasonable rates; and four, to offer cutting edge devices.
    Thank you again for the opportunity to participate today.
    Chairwoman Ellmers. Thank you so much, Mr. Bundridge.
    And now I am going to turn to Ranking Member Richmond to 
introduce our next witness.
    Mr. Richmond. Chairwoman Ellmers, it is my honor to 
introduce to the panel and members in the audience Mr. Darrell 
West. Mr. Darrell West is the director of the Center for 
Technology Innovation at the Brookings Institution. He is the 
author of 18 books and is the winner of the American Political 
Science Association's Don K. Price award for best book on 
technology. His current research focuses on technology policy, 
the Internet, health care, education, and privacy and security. 
Welcome, Mr. West.

                  STATEMENT OF DARRELL M. WEST

    Mr. West. Thank you very much, Chairwoman Ellmers and 
Ranking Member Richmond. I appreciate the possibility of 
testifying before this Committee.
    As each of you pointed out in your opening statements, 
broadband is a crucial driver of job creation and economic 
development. Researchers have found a strong link between 
broadband innovation and overall economic prosperity. For 
example, a World Bank study of 120 nations found that each 10 
percentage point increase in broadband penetration adds 1.3 
percentage points to a country's gross domestic product. So 
there is a huge economic payoff in terms of investment in this 
area. We are also seeing tremendous growth in terms of mobile 
broadband in particular. Within four years it has been 
estimated that mobile broadband will comprise about 80 percent 
of the total broadband subscriptions. So it will become the 
dominant means of Internet connectivity. The applications that 
are enabled both by mobile, as well as fixed line broadband are 
especially important for small businesses and rural communities 
because these platforms have become the crucial areas for 
innovation in entrepreneurship, health care, and in education.
    But in order to gain the benefits of broadband innovation 
there are three particular actions that we believe would 
further economic development and help small businesses. The 
first is in regard to the research and development tax credits. 
We argue that Congress should extend and make permanent the 
research and development tax credit. This is an example of our 
national short sightedness. Oftentimes the R&D tax credit gets 
extended on an annual basis. But rather than extend it over a 
longer period of time it gets renewed episodically and never on 
a very predictable schedule. This ends up creating uncertainty 
and inefficiencies related to the vagaries of federal 
policymaking. Many other countries basically have made this 
permanent. They offer more favorable tax policies for 
infrastructure, development, and investment. So we argue first 
of all that we need to extend and make that tax credit 
permanent.
    Second, we support reasonable Universal Service Fund 
reform. As each of you knows, our current fund dates back to 
1997 when the Internet was in its infancy and there was little 
social media or few mobile devices. We think it is time to 
update our policies so that small businesses and consumers can 
take advantage of 21st century digital tools. The world has 
shifted from a communications model based on telephones and 
mail to a digital economy that relies on the Internet, mobile 
phones, e-commerce, and social media. But yet the billions 
generated for the USF continue to focus almost exclusively on 
phone services.
    My Brookings colleague, Jeff Rosen, who is also a law 
professor at George Washington University, has undertaken 
research on the Universal Service Fund and he finds that the 
programs are inefficient, they are expensive, and they are 
redundant in what they provide. He finds examples where the 
costs for terrestrial fixed line service is much more expensive 
than mobile or satellite telephone services that are available 
in those very same communities. He finds some communities have 
multiple carriers each receiving high cost program subsidies. 
So we think it is time to update the Universal Service Fund to 
allow those living in underserved communities to use the funds 
to cover both voice as well as broadband services.
    We also support the idea of reverse auctions. David Wyld, 
who is a professor in Louisiana, has undertaken research on 
this. There are a number of federal agencies that already are 
using reverse auctions--the State Department, the Defense 
Department, and so on. He finds major cost savings of over 25 
percent an increase in transparency. He also finds that more 
than 80 percent of the winning bids out of these reverse 
auctions have gone to small businesses. So they do not really 
benefit large companies; it is actually small companies.
    We support the use of incentive auctions in the spectrum 
area to reallocate a scarce spectrum. We think this is a good 
way for Congress not just to raise money for the federal budget 
but also provides a mechanism for companies to sell their 
unused spectrum. We think that the FCC should have the 
authority to set up the eligibility requirements for these 
auctions and also provide the licensing conditions that would 
then allow them to attach some provisions in order to further a 
particular goal. So with these actions we think small 
businesses would have a fair opportunity to gain the benefits 
in the new digital economy.
    Chairwoman Ellmers. Thank you so much, Mr. West.
    And our final witness is Ms. Becky Sanders. She is the 
director of the Indiana Telehealth Network based in Terre 
Haute, Indiana. She oversees the development and network 
administration of their 60 remote health care facilities. She 
is testifying on behalf of the National Rural Health 
Association. Welcome. You have five minutes for your testimony. 
Thank you.

                  STATEMENT OF REBECCA SANDERS

    Ms. Sanders. Thank you. Good afternoon, Chairwoman Ellmers, 
(coughed), Ranking Member Richmond, and members of the 
Subcommittee. I am honored to stand before you today. Thank you 
for the opportunity to testify today on behalf of the National 
Rural Health Association and the Indiana Rural Health 
Association.
    As Representative Ellmers said, the Indiana Telehealth 
Network has about 60 members right now. We are one of the 50 
remaining projects under the FCC's Rural Health Care Pilot 
Program. That program does allow for 85 percent subsidies for 
construction and monthly recurring services for rural health 
care providers.
    We have 35 critical access hospitals in the state of 
Indiana, about 20 of them are participating in our network. We 
also have about 20 community mental health centers 
participating in our network. We have found that with the 
buildout of over 200 miles of fiber constructed through the 
Federal Communications Commission's Rural Health Care Pilot 
Program and the objective scoring process that is part of the 
Pilot Program, that it is the rural telephone companies who 
have been our most successful vendors. That is their market. 
They are friends and neighbors of the rural folks that are 
operating the hospitals, clinics, and the banks in the rural 
communities we serve. We have six very strong examples of 
public-private partnerships between local economic development 
organizations and health care organizations. The average 
standard fiber construction costs are about $44,000 per mile. 
While I agree with my colleague Mr. West that it is more 
expensive than a wireless setup, health care providers will not 
rely on wireless to do their day-to-day business for 
telepharmacy, for radiology, for transferring electronic 
medical records. They do not believe that it has the five nines 
of reliability that the PSTN was built upon.
    Based upon our experiences with the Rural Health Care pilot 
program, and the regular primary RHC program, we have found 
that there are a lot of administrative burdens, a lot of 
cumbersome forms that have to be filled out. When thinking 
about USF reform I would argue that streamlining these 
programs, and continuing to allow consortiums to work together 
in a public-private partnership arena is the best way to move 
forward.
    Universal Service Reform needs to happen but there still is 
a large need for subsidies. When telephone companies like 
Yadkin Valley Telephone were built about 100 years ago, many of 
them formed co-ops. Farmers and the rural communities that came 
together with doctors in the rural communities that wanted to 
have reliable phone service in areas that larger 
telecommunications companies would not serve. If we look at 
that kind of model again and we look back to those types of 
cooperatives, I think we will find a very good model going 
forward as we look at rolling out broadband to all Americans 
across the nation.
    Just a couple other things. We talk about America being the 
land of the dreams and I thought it was very interesting last 
night in Washington, DC, in my hotel when I was trying to do 
some final research for my comments today, that I did not have 
adequate wireless access in my hotel room to do what I needed 
to do. There are huge opportunities across the nation for 
wireline providers, and for wireless providers to work together 
to bring broadband services to Americans. In those communities 
that I mentioned where we have very good public-private 
partnerships, it was the local economic development 
organizations that came to me and said, ``Hey, I hear that you 
have this program that can help us get fiber to our community. 
Not only is it going to help the hospital; it is going to help 
the community. I have businesses that want to relocate here 
that will not do it unless we have reliable broadband in our 
community. So what do we need to do to sign on?''
    Thank you for your time today.
    Chairwoman Ellmers. Thank you. Thank you so much, Ms. 
Sanders. And we will go right into questions. Thank you all for 
your opening statements. I will start with questions. This 
question is for everyone on the panel. And Ms. Sanders, since 
we ended with your testimony I will start with you first.
    The National Broadband Plan sets the goal of providing 
affordable broadband coverage to every American in the next 
decade. How would you evaluate the government's performance so 
far? That is a big question. And how are you working to help 
reach these goals? And I know, Ms. Sanders, you have already 
addressed some of those. So, please, if you will.
    Ms. Sanders. When you look at the National Broadband Plan--
I believe it is in section 10--and in my written testimony I 
have included some exhibits that talk about the needs for 
health care providers; a minimum of five megabits for a single 
physician office is the recommended broadband connection for 
electronic medical records. For those in the health care 
industry, the adoption of Meaningful Use and electronic medical 
records is very important, in coming years healthcare providers 
will be penalized for not adopting electronic medical records. 
That is one of the reasons that adequate broadband access is so 
important.
    Programs like the USF Rural Health Care Program are a huge 
step forward. It has taken a lot of time to put our program 
together but I think we are at the tip of the iceberg. And as 
the years progress and as we continue to build trust and 
relationships with all of our health care participants and the 
vendors that we are working with, we will begin to see the 
benefits of what we have built.
    Mr. West. I would say that we have made tremendous progress 
in the national broadband area. Certainly, when you look at 
some of the interesting new applications that have cone online 
in terms of health care and education in particular, there are 
lots of exciting new things. But I think there is still a lot 
of work yet to be done. The general criticism that I would have 
is I think we just need more flexibility in how we are using 
the dollars. I mean, I think we are still tied to a telephone 
landline model in an era where we are moving from telephones to 
digital outreach. And even within the digital sphere we are 
moving from fixed lines to mobile. Within five lines most 
applications are going to be mobile. And I think even in the 
health care area there are exciting new opportunities 
developing in mobile health. We have done studies at Brookings 
in terms of some of these new programs that are going online. 
So I would just encourage Congress and certainly the various 
federal agencies to try and build a little more flexibility 
into some of these programs.
    Mr. Bundridge. Speaking on behalf of NorthwestCell, my 
company in the last 10 years has constructed from 12 cell sites 
to 29-35 cell sites, I apologize. And we have even included 3G 
wireless service. I mentioned a couple examples where we have 
3G service and we have been able to support farmers and public 
safety agencies. We have done this through the support of USF 
and the system that we have been currently using has been 
working. And for the past three years our company has been 
under a cap and still we are not contributing to the growth of 
the fund. So we are still continuing to offer broadband service 
in our region. And we continue, in order to migrate to 4G 
services and support the growth of mobile broadband service we 
need to continue to receive funding to help do that in unserved 
areas.
    Ms. Branon. At Yadkin Valley Telephone we have made a lot 
of progress towards our broadband deployment. Since 2005, we 
have spent a little bit over $40 million on fiber to the home. 
We have not gotten to all of our customers yet but we are 
certainly working on that and we are constantly hearing from 
small businesses how they need more speed, more speed. And we 
are able to do that with the fiber but even now with the 
download speeds that we are offering in those areas up to 25 
meg, we are now hearing they would have demands for higher 
speeds, the upload speeds.
    So they want it both ways now and that is a requirement. 
And we have also seen a lot of small businesses in our 
territory taking advantage of the broadband. We recently had a 
company, Southern Farm Supply, and we installed 12 computers 
there. We actually are their IT provider as well. And obviously 
they are--and they use our firewall service also, so they are 
using the Internet for their business and they are in our area. 
We have another trucking dispatching company that has been able 
to put people in their homes to work out of to do the 
dispatching because of the broadband that we provide to them. 
So that has been a great efficiency builder for them and has 
enabled those people to work out of home.
    We have also had a couple of different companies who have 
bought IP phone systems. They are in the rural areas and these 
enable them to connect with other companies outside of our area 
as if they are on the same phone system. The IP system is doing 
great.
    As far as the broadband plan, we were fortunate enough to 
last year receive the loan grant dollars. So that is going to 
enable us to get even to the more rural areas where you have 
hardly, you know, very, very few customers per mile. But we can 
only use that money in underserved areas. We cannot use that in 
our home territory, but we are taking advantage of that. And 
that is working along well.
    We are striving to get 25 meg out to all of our customers 
over the next several years but with the regulatory uncertainty 
with the Universal Service Fund, you know, it really makes us 
weary of really committing ourselves to a lot of investment 
right now and not knowing what the future is going to be 
because we really rely on the universal service and 
intercarrier compensation to help us recover the cost of our 
network.
    And we have a lot of users on our network. You know, we 
have long distance carriers and we work with the wireless 
carriers to carry traffic. So lots of times for the heavy 
traffic, when it hits a tower they then connect to our fiber, 
which you have to have that to be a carrier for the heavy data 
usage that is coming and is already here. Thank you.
    Chairwoman Ellmers. Thank you. And I have one more question 
for now and this question is for Ms. Sanders.
    In your testimony, or excuse me, let me back up. I am 
looking at the wrong one. Earlier today the Gallup Poll 
actually put out some poll data that I think speaks volumes. 
Forty-eight percent of small businesses are not hiring new 
employees due to rising health care costs; and 46 percent are 
focused on uncertainties in the new government regulations.
    So my question for you is the effect of the broadband on 
health care. Do you feel, or how do you characterize the access 
of broadband in reducing the costs of health care for your 
facilities? And do you believe it has helped small business 
health care facilities become more independent and viable?
    Ms. Sanders. That is a really good question. I wish I had a 
crystal ball.
    There is a lot of uncertainty in health care reform as well 
as Universal Service Reform and intercarrier compensation. And 
the answers to those questions will help us solve and answer 
this question.
    From the rural health practitioner standpoint, I have seen 
a lot of use of telemedicine over our network and other 
networks that we have been in touch with. With electronic 
medical records, just like any new technology, or any new 
procedure, there is a little bit of chaos at the beginning, but 
once things calm down most practitioners are finding that they 
are able to see more patients and be more productive with 
electronic medical records.
    Now, in a telehealth situation, a specialist could stay in 
an urban area and see patients all over the world. That makes 
for an even more productive workday. Without telehealth, many 
physicians today from metropolitan areas in Indiana will spend 
one day a week on the road, traveling to various rural sites 
and see patients, maybe once a month in any given rural 
community. The physicians have a lot of travel time on the 
road. They are not nearly as productive as they could be over 
telemedicine.
    Chairwoman Ellmers. Thank you so much for that input.
    And now I am going to yield to Ranking Member Richmond for 
his questions.
    Mr. Richmond. Thank you, Chairwoman.
    I will start with just a small story. My mother is from the 
poorest place in the country, which is Lake Providence, 
Louisiana. When we talk about broadband and we talk about how 
that affects small and poor communities, when I visit there, 
the restaurants lose money and the hotels lose money because I 
will not say there. I will drive 30 miles to Vicksburg so that 
I can have broadband and cell service as opposed to staying in 
my mother's hometown and renting a hotel and eating there at 
night. And we typically do not think about the economic 
development in those terms. But if you do not have it, you are 
not staying there, especially people who are hooked to their 
devices and people who have to use it for their business. I 
guess I will start with Mr. West for my first question then.
    We have heard a lot of compelling testimony that broadband 
connectivity has become a critical economic driver of the U.S. 
economy. Small firms in particular rely on broadband networks 
to expand their markets and become more competitive. To that 
extent, do you believe that broadband-related dollars could 
translate quickly into jobs for American workers?
    Mr. West. Absolutely. I mean, broadband is clearly a huge 
driver of job creation. As I pointed out in my testimony, if we 
just increase people's access to broadband we are going to 
raise GDP on average 1.3 percentage points. So right now the 
United States is roughly at about a 70 percentage Internet 
usage level so there still are 30 percent of Americans who are 
outside the digital revolution. So if we can just improve 
access by getting costs down and by improving digital literacy 
programs we can get broadband out to underserved communities, 
both in rural as well as in urban areas, there is going to be 
an economic payoff. Small business is going to be a big 
beneficiary of that because a lot of the high tech jobs really 
are being created at the small business level. So anything we 
can do to ease the regulatory burden, improve access, and boost 
Internet broadband usage is going to pay off economically.
    Mr. Richmond. Thank you. And Mr. Bundridge, considering 
what Mr. West just described, I guess looking at the reports by 
the FCC and USDA with the impact of broadband on farming and 
tourism, for small rural carriers how do you promote greater 
adoption among small businesses in your local communities?
    Mr. Bundridge. I think since I live within the areas that I 
serve I have a personal relationship with those small 
businesses and the people in those communities. Within my 
market we have a county, Worth County, Missouri, and it is 
actually one of the poorest counties in Missouri. There are 
2,000 people in that county, and my company decided to go in 
and build a cell site there five years ago. I received a 
petition from somebody there within the community wanting 
service and so we moved forward on that. We started off. We 
worked with the city and we put something on a water tower. It 
just let us come in here and at a low cost try to create some 
service for you. And we went in and did that and we started 
getting customers out of it. So the perception that it was a 
poor county caused companies to stay out of it. Today we have--
over 50 percent of the customer base there has our service and 
in turn, since they have our service, you know, we find 
ourselves supporting the schools and the small businesses 
within that community on a regular basis since it is, you know, 
since we have such a large customer base there now as a 
percentage of the customers.
    So I think to go into some of these communities in these 
rural areas that you mentioned, there is a lot of need there. 
And there are a lot of people that need broadband, mobile 
broadband, along with fixed broadband services. And companies 
like ours are the ones that are going to go in there since we 
have a personal relationship with those communities to build 
that out.
    Mr. Richmond. Ms. Branon, we know that many of the rural 
service providers face high deployment costs associated with 
serving low density areas. How is your business dealing with 
those costs? And as an industry, where do we stand with respect 
to deployment of broadband services in rural and high cost 
areas?
    Ms. Branon. We have, like I mentioned a minute ago, we have 
taken advantage of the BIP Loan Grant. We received a $22 
million half loan, half grant, and we look advantage of that. 
We have slowly started, you know, we started building out our 
fiber to the home network, which goes to homes and businesses 
in 2005. And as far as the high cost with that, we were 
fortunate that we did not have to borrow a lot to do that but 
ongoing we are going to have to think about ways we are going 
to have to do things differently. And that is where the whole 
thing with the Universal Service Fund is very scary for us 
because we are not sure how we are going to be able to move 
forward with that uncertainty with what is going on with that.
    Mr. Richmond. With the grant that you all received, what 
was the process like to get it?
    Ms. Branon. It was very cumbersome. A lot of paperwork. It 
took us, you know, we had to hire outside engineers to help us 
do the paperwork. There was so much involved with that. We had 
to do in-depth analysis of who else was serving in those areas, 
if we had competition, and were they truly underserved? Because 
they had to be underserved to get that dollar. So we spent a 
lot of money doing the application. And then we had to go 
through the waiting process to see if we were going to get it. 
You know, we put in a lot of dollars to get that loan grant.
    Mr. Richmond. Do you have any idea how much you all spent?
    Ms. Branon. Just the pre-loan work, I would say $100,000 to 
$150,000 pre-loan.
    Mr. Richmond. Madam Chairwoman, I yield back now and then 
we can see if we can kind of get through.
    Chairwoman Ellmers. Just so you are aware, I have another 
question I would like to ask all of you. It is really kind of a 
three part question but we have been called for a vote so we 
are going to continue on but they will hold it open. So we have 
got a few more minutes.
    Basically, my last question for all of you is how do you 
keep track of the variety of federal regulations that are 
coming down in Washington, number one. And how does this 
influence your business strategy? And lastly to that question I 
would like to ask you, if you could eliminate one federal 
regulation, what would it be?
    And I will start with you, Ms. Sanders.
    Ms. Sanders. Wow. Can I go last? Keeping track of things, 
the Indiana Rural Health Association has 13 employees--or I am 
sorry, 12 employees. We do our best to keep track of things. We 
each have our own little areas that we keep an eye on as far as 
federal grants, that type of thing. It is very difficult to 
know.
    For example, yesterday I was at a meeting. We were talking 
about rural EMS services and somebody said, ``Oh, hey, did you 
see this grant? This would be perfect for you guys.'' I had no 
knowledge of it so she sent it over.
    In an effort towards reducing paperwork, and administrative 
work, we use grants.gov. But if there was a better way to 
consolidate all of the different grants it would be very 
helpful. For example, we have talked about BIP and BTOP a 
little bit, as well as USDA funding. Keeping track of all of 
the different grant opportunities is a very difficult process.
    And to reduce legislation, not necessarily legislation but 
just streamlining of government programs more work between 
government agencies. As a FCC rural health care pilot program, 
we looked at BIP and BTOP. We estimated maybe $100,000 on 
paperwork to try and apply for that. We did not have it. WE did 
not have the manpower. We did not have the money to hire 
anybody to do it. So we could not even think about taking 
advantage of that particular program.
    The more that the federal government can do to streamline 
the processes and reduce administrative burden, the better off 
we all will be.
    For example, the FCC Pilot Program does not include any 
administrative assistance at all. So we had to go to outside 
sources or resort to membership fees to cover our own costs.
    Chairwoman Ellmers. Thank you. Mr. West.
    Mr. West. I will try and keep my comments brief because I 
know you have time constraints.
    I agree with many of the comments that have been made and 
certainly, you are right. There are a huge number of federal 
regulatory requirements that stifle innovation, especially in 
the technology area, so whatever we can do to ease the burden 
there would be helpful. One particular thing that I would 
highlight in terms of things the federal government could do is 
to keep free and unlicensed spectrum because I think 
particularly when you are thinking about the small business 
community, it is the freedom and license spectrum that, you 
know, mothers use for baby monitors, people with smartphones 
use to access the Internet, and a wide variety of small 
businesses use to communicate with their customers. And so, you 
know, in the recent budget debates there has been a proposal to 
kind of limit the free and unlicensed spectrum. I think that 
would be devastating for small businesses and would have a very 
negative impact on entrepreneurs.
    Chairwoman Ellmers. Thank you.
    Mr. Bundridge. I depend on my trade organization, Rural 
Cellular Association, to keep up on issues. As far as your 
question what burdens our companies, there are many things. I 
would tend to think though the administration or administrative 
burdens and streamlining policies that help foster small 
businesses like mine to compete.
    Chairwoman Ellmers. Thank you.
    Ms. Branon. At Yadkin Valley, we rely heavily on NTCA, 
which is the National Telephone Cooperative Association. They 
do a great job of keeping us informed. We do also use some 
consultants for that kind of thing, who help us do some 
regulatory things that come across. New things that we have not 
dealt with before, we rely on those outside consultants. And I 
will have to agree with them; the administrative, you know, all 
the paperwork, all the extra things we have to do, especially 
like with the loan grant. We just went through an audit with 
that and there is a lot of time involved. We had a RUS auditor 
just left earlier this week and it is a lot.
    Chairwoman Ellmers. Ranking Member Richmond will have 
another question.
    Mr. Richmond. Right. Hopefully we can keep it short. I am 
not as confident as the Chairwoman, especially being in the 
minority and being a new member that they are going to keep the 
machine open for me. And the truth of the matter is as soon as 
they get to the votes I think the Chairwoman is in trouble, 
too, as soon as they get to the number they need.
    Seriously, looking at, the recommendations that have come 
from you all, I was trying to take notes. One was leveling the 
playing field, predictable universal service support, 
competitive access to spectrum, roaming, commercial reasonable 
rates and availability of cutting edge, interoperable devices, 
and making the R&D tax credit permanent so that people can 
properly plan and know that it is going to be there and can 
invest and calculate their business model accordingly. Is there 
anything else that you can think of in like a minute or so that 
we should look at that can be a legislative fix or something 
through the administration that you think could help what we 
are trying to accomplish?
    Mr. West. I mean, one issue I would highlight is the need 
for digital literacy programs because particularly with that 30 
percent of Americans who are outside the Internet revolution, I 
mean, some of it is costs, so reducing costs will help. But for 
a fair number of these people it is like they do not know how 
to use the Internet, they do not know how to set up their 
computers, they do not know the virtue of the computers. I grew 
up on a farm and I remember earlier the United States had the 
Agricultural Extension Service to kind of go out and train 
people on new techniques. For the digital world we need to 
think about the same type of thing.
    Mr. Bundridge. I think about education. Looking at e-
readers. A lot of people in these small communities do not have 
access to Internet. If they could access Internet through an e-
reader, through a mobile product, or a fixed product, then I 
think that would drastically help our education.
    Chairwoman Ellmers. Ms. Branon.
    Ms. Branon. I do not really have a comment about that right 
now.
    Mr. Richmond. Thank you very much.
    Chairwoman Ellmers. Thank you. And thank you to all of our 
distinguished panel today for your participation. Your input is 
very important to us.
    This Subcommittee will continue to closely follow the 
actions of the federal government in expanding broadband to 
small businesses. I look forward to working with my colleagues 
to ensure that the federal policies do not obstruct the private 
sector investment in broadband infrastructure, as this will 
have an adverse impact on small businesses and their ability to 
grow.
    I ask unanimous consent that members have five legislative 
days to submit statements and supporting materials for the 
record. Without objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 1:50 p.m., the Subcommittee hearing was 
adjourned.]

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