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



 
                       BROADBAND LOANS AND GRANTS

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


                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 16, 2012

                               __________

                           Serial No. 112-143


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov




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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire       MIKE ROSS, Arkansas
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey            Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 7_____

             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois               MICHAEL F. DOYLE, Pennsylvania
MARY BONO MACK, California           DORIS O. MATSUI, California
MIKE ROGERS, Michigan                JOHN BARROW, Georgia
MARSHA BLACKBURN, Tennessee          DONNA M. CHRISTENSEN, Virgin 
BRIAN P. BILBRAY, California             Islands
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
PHIL GINGREY, Georgia                FRANK PALLONE, Jr., New Jersey
STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
ROBERT E. LATTA, Ohio                DIANA DeGETTE, Colorado
BRETT GUTHRIE, Kentucky              JOHN D. DINGELL, Michigan (ex 
ADAM KINZINGER, Illinois                 officio)
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     4
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     7
Hon. Charles F. Bass, a Representative in Congress from the State 
  of New Hampshire, opening statement............................     7
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     8

                               Witnesses

Larry E. Strickling, Assistant Secretary for Communications and 
  Information, National Telecommunications and Information 
  Administration, Department of Commerce.........................     9
    Prepared statement...........................................    12
    Answers to submitted questions...............................   114
Jonathan Adelstein, Administrator, Rural Utility Service, 
  Department of Agriculture......................................    26
    Prepared statement...........................................    29
    Answers to submitted questions...............................   128
Todd J. Zinser, Inspector General, Department of Commerce........    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................   134
David R. Gray, Deputy Inspector General, Department of 
  Agriculture....................................................    57
    Prepared statement...........................................    58
    Answers to submitted questions...............................   136

                           Submitted Material

Article, dated May 7, 2012, ``Firm to audit W.Va. broadband 
  stimulus spending,'' by Eric Eyre, The Charleston Gazette, 
  submitted by Mr. Walden........................................    65
Article, dated May 5, 2012, ``State paid $22K each for Internet 
  routers,'' by Eric Eyre, Saturday Gazette-Mail, submitted by 
  Mr. Walden.....................................................    67
Article, dated May 6, 2012, ``Internet routers have sat unused 
  for nearly two years,'' by Eric Eyre, The Charleston Gazette, 
  submitted by Mr. Shimkus.......................................    86
Letter, dated November 9, 2011, from committee and subcommittee 
  leadership to Mr. Adelstein, submitted by Mr. Stearns..........    97
Letter, dated Dec. 16, 2011, from Mr. Adelstein to Mr. Upton, 
  submitted by Mr. Stearns.......................................   101
Article, dated May 7, 2012, ``Congress Investigating Cable 
  Operator Allegations Around Minnesota Fiber Network Funded by 
  BIP Loan,'' Communications Daily, submitted by Mr. Stearns.....   104


                       BROADBAND LOANS AND GRANTS

                              ----------                              


                        WEDNESDAY, MAY 16, 2012

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2123, Rayburn House Office Building, Hon. Greg Walden 
(chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Terry, Stearns, 
Shimkus, Bilbray, Bass, Gingrey, Scalise, Latta, Guthrie, 
Kinzinger, Barton, Eshoo, Matsui, Barrow, Christensen, Pallone, 
and Waxman (ex officio).
    Staff present: Carl Anderson, Counsel, Oversight and 
Investigations; Ray Baum, Senior Policy Advisor/Director of 
Coalitions; Michael Beckerman, Deputy Staff Director; Nicholas 
Degani, FCC Detailee; Andy Duberstein, Deputy Press Secretary; 
Neil Fried, Chief Counsel, Communications and Technology; 
Debbee Keller, Press Secretary; Brian McCullough, Senior 
Professional Staff Member, Commerce, Manufacturing, and Trade; 
Katie Novaria, Legislative Clerk; David Redl, Counsel, 
Communications and Technology; Charlotte Savercool, Executive 
Assistant; Daniel Tyrrell, Counsel, Oversight and 
Investigations; Phil Barnett, Democratic Staff Director; Shawn 
Chang, Democratic Senior Counsel ; Elizabeth Letter, Democratic 
Assistant Press Secretary; Karen Lightfoot, Democratic 
Communications Director and Senior Policy Advisor; Margaret 
McCarthy, Democratic Professional Staff Member; Roger Sherman, 
Democratic Chief Counsel; David Strickling, Democratic FCC 
Detailee; and Kara Van Stralen, Democratic Special Assistant.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. We will call to order the Subcommittee on 
Communications and Technology for our hearing on broadband 
loans and grants, and certainly welcome our witnesses, the 
audience and our members.
    Today marks the third oversight hearing of our subcommittee 
to examine whether taxpayers are getting their money's worth 
from the broadband loan and grant programs of the National 
Telecommunications and Information Administration and the Rural 
Utilities Service.
    Our past hearings have focused on the Broadband Technology 
Opportunities Program and the Broadband Initiative Program and 
rightly so. The Recovery Act allocated $7.2 billion--billion--
to these programs, dwarfing previous broadband loan and grant 
programs in size. And even though these agencies did not have 
grant-making experience or operations scaled to such a large 
project, the Recovery Act required that all awards be doled out 
within 18 months.
    We were told such haste was necessary to get the economy 
going and the money would go to ``shovel-ready projects.'' It 
has now been 3 years since the Recovery Act created BTOP and 
BIP, and more than 18 months since the last broadband loans and 
grants were awarded.
    The fiber is beginning to fill the trenches. While all the 
money has been awarded, however, only about a third of it has 
been spent. And what have we gotten in return for that $2.5 
billion? Well the National Broadband Map is one thing; I think 
that was about $300 million for the map. And it tells us that 
98.3 percent of Americans had access to high-speed broadband 
service in mid-2011. That is up from the 95 percent estimate in 
the 2010 National Broadband Plan.
    That apparent 3.3 percent jump, however, cannot be 
attributable to the broadband funding, since the money is only 
now working its way through the system. And I know that we have 
a lot of impressive statistics.
    Administrator Strickling notes in his written testimony 
that 56,000 miles of broadband infrastructure have already been 
built or improved upon using BTOP funds. Administrator 
Adelstein notes that more than 100 colleges and technical 
schools and 600 rural health care facilities are in areas 
served by BIP grantees and loan recipients. Indeed, I have seen 
evidence of this buildout in my own rural district.
    But these statistics do raise some questions. How many of 
those miles already had broadband infrastructure, because we 
are concerned about overbuilding? How many of those colleges 
and technical schools and rural health care facilities already 
had access to high speed broadband? Overbuilding has been a 
perennial concern when government gets involved. So I would 
like to hear how the agencies are taking into account existing 
deployments when they provide us these numbers.
    And even if these were new deployments, might the private 
sector have met these needs more efficiently in the absence of 
this cumbersome subsidy program?
    So I would like to know how all of those miles translate 
into additional access. And I would like to know how much that 
additional access is costing us all.
    And before turning away from the stimulus funded broadband 
grants and loans, I wanted to thank Mr. Bass again, who is on 
the committee, who took the lead in our committee on the House 
floor last year on making sure that NTIA and RUS were properly 
looking into allegations of waste, fraud and abuse and 
returning those unused dollars or reclaimed money to the United 
States Treasury.
    So, Charlie, thank you for your work and leadership on 
that.
    Although our focus has been on BTOP and BIP, our 
responsibility to treat taxpayer money with utmost care extends 
even to the smaller broadband loans and grants programs of RUS. 
I have two primary concerns about these programs. First, many 
of them appear to fund the same names as the Universal Service 
Fund, rather than dividing management between two agencies and 
oversight between two sets of inspectors general, consolidating 
the administration of these programs might save the taxpayer 
administration costs while reducing inefficient spending.
    Second, I am concerned about the performance of these RUS 
programs. The Open Range loan alone may cost taxpayers millions 
of dollars, and other loans may fall through because RUS 
assumed that the Universal Service Fund subsidies would 
reimburse the subsidies it was providing but apparently did not 
anticipate the FCC would reform the Universal Service Fund's 
high-cost program, a scenario we have talked about in private 
and public and one that we remain concerned about just the 
funding scheme behind these loans and whether they stay 
current.
    I look forward to hearing from Administrators Strickling 
and Adelstein to explain to us the performance of their 
broadband loan and grant programs, to guide us through the 
statistics to the facts on the ground.
    And I look forward to hearing from the Inspectors General 
Zinser and Deputy Inspector General Gray on their ongoing 
oversight and how well NTIA and RUS have incorporated past 
recommendations into their work.
    So, gentlemen, thank you very much for being here today.
    And with that, I would yield back the balance of my time 
and recognize the ranking member from California, Ms. Eshoo.
    [The prepared statement of Mr. Walden follows:]

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

    Ms. Eshoo. Thank you, Mr. Chairman.
    I am pleased to welcome back to the committee Assistant 
Secretary Larry Strickling and RUS Administrator Jonathan 
Adelstein, who also served with distinction as a commissioner 
at the FCC.
    Your work to advance our Nation's broadband infrastructure 
has and will continue to bring broadband to more American 
homes, anchor institutions and public computer facilities. And 
I thank you for your work. This is a big lift, and it is 
important for us to examine all parts of it, but I want you to 
know that I appreciate and respect your work.
    Since our hearing last year, NTIA and RUS have continued to 
make progress to achieve the Recovery Act's stated goals for 
expanding broadband deployment and adoption. Notably, NTIA has 
reached 90 percent of its fiscal year 2012 goal by supporting 
the deployment of 56,000 new or upgraded network miles across 
our country. And through RUS funding, 625,000 households, about 
1.5 million people, have access to new or improved broadband 
service. So I think that this is real progress.
    These programs are creating jobs and are fueling new 
economic opportunities that would not be possible without 
broadband. For example, using NTIA funds, the Foundation For 
California Community Colleges has launched a program to 
increase digital literacy skills and broadband adoption among 
low-income residents in 18 counties in California.
    Today, the program has enrolled more than 5,800 students, 
distributed 4,400 laptops and recorded 5,305 new broadband 
subscribers. But the short- and long-term success of these and 
other projects will depend on continued oversight from the 
Inspector General's Office. I have great respect and admiration 
for the IG's work, and I am pleased that we will hear from them 
today. The important work of the IG's office, including 
investigations to determine if there is any waste or fraud, 
will ensure that the taxpayers' investment is protected.
    I recognize there will be challenges along the way. Last 
Friday's decision to partially suspend the seven regional 
public safety projects is one I know NTIA weighed very 
carefully. I think it is the correct action to protect taxpayer 
dollars and ensure that these projects are deployed consistent 
with the recently enacted legislation that we worked so hard on 
to construct a nationwide, interoperable broadband network for 
our first responders.
    So thank you to each one of you for being here and for your 
work, and I look forward to your important testimony that is 
going to guide our subcommittee's ongoing oversight of the 
Recovery Act broadband grants and loans.
    And with that, I will yield back the balance of my time.
    Mr. Walden. The gentlelady yields back the balance of her 
time.
    The chairman recognizes the gentleman from Nebraska, Mr. 
Terry, for 5 minutes.

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

    Mr. Terry. Thank you, Mr. Chairman, for holding this 
hearing so we can continue our oversight on the ARRA, dollars 
being spent on behalf of making sure that all citizens in 
unsupported areas have connectivity, have access to the 
broadband backbone.
    Now, I think some of the key areas you have already stated, 
Mr. Chairman, but I want to reiterate that ARRA funds were 
supposed to help fund shovel-ready projects that would be 
completed within 2 years, but here we are 3 and a half years 
later, and the fact is that recipients of $4 billion in NTIA 
awards have spent just $1.6 billion and less than a dozen 
projects have been completed; recipients of $2.4 billion in RUS 
awards have spent only $968 million, and only five projects 
have been completed. Maybe this is because too many have been 
found to be unwarranted or redundant and the money is pulled 
back or the project, so I want to hear why more haven't been 
completed.
    But also, the stimulus funds combined with BTOP and BIP 
grant loans, the issue of subsidizing or subsidizing overbuilds 
has been a question we have had since day one. And we have 
already received complaints in the State of Nebraska about an 
entity that was all privately funded, business, now has 
competition laid over it with government subsidized broadband. 
So those are the type of things I want to hear about as well.
    And then, Mr. Adelstein, if you reviewed and seen if any 
RUS loans have been put in jeopardy because of new projects; do 
you think there has been an impact on their ability to repay?
    Those are the questions I am listening for answers to.
    And at this point, I will yield to my friend, Charlie Bass.

OPENING STATEMENT OF HON. CHARLES F. BASS, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF NEW HAMPSHIRE

    Mr. Bass. I thank my friend from Nebraska for yielding to 
me.
    And I would like to associate myself with not only his 
remarks but also the remarks of the subcommittee chairman and 
have my regular statement, without objection, be made part of 
the record.
    Mr. Walden. Without objection.
    Mr. Bass. Mr. Chairman, thank you for having this hearing. 
And as was mentioned, we are interested in making sure that 
these funds are spent where they are supposed to be, that there 
are no, that we know a process of oversight occurs and that we 
don't have any embarrassing hearings at a later date about 
either the abuse or misuse of funding in this very large 
program.
    It is also important to focus on whether or not this 
buildout is going where it is really needed, and it is not 
paralleling any existing capacity and competing directly with 
incumbent carriers or anybody else who is trying to provide, as 
my friend from Nebraska said, competing services.
    I do have a constituent in New Hampshire who has raised 
significant capital to build out areas that are now, because of 
this program, putting this company's business plan in real 
doubt because they are going to have to compete with a vendor 
that is subsidized by the stimulus grant.
    That doesn't create jobs. For every job that is created, we 
may lose jobs on the other side, and that is not how I define 
stimulus. So I hope that this program can be implemented with a 
sensitivity to the fact that it needs to go where it is really 
needed and not parallel existing capacity and not be set up in 
direct competition with private entities that are trying to do 
it the way, the old-fashioned way, which is to build it on the 
basis of a sound, profitable business plan.
    And so, with that, Mr. Chairman, I will yield back.
    Mr. Walden. The gentleman yields back to the gentleman from 
Nebraska.
    Do you yield back your time, Mr. Terry?
    Mr. Terry. Yield back.
    Mr. Walden. Yields back.
    The chair recognizes Mr. Waxman for 5 minutes.

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

    Mr. Waxman. Thank you, Chairman Walden, for scheduling this 
hearing.
    This is our third oversight hearing regarding the broadband 
programs created by the Recovery Act, and I support the 
chairman's ongoing effort to exercise our committees's 
oversight of these programs and ensure they are being managed 
wisely and responsibly.
    I would like to welcome Assistant Secretary Strickling, 
Administrator Adelstein, back to the Energy and Commerce 
Committee.
    Your efforts to set up the broadband programs are paying 
off. Broadband will soon be available in places where this 
essential communication service has never been available 
before.
    In particular, I want to commend Assistant Secretary 
Strickling for NTIA's transparency and accountability measures. 
These show that the vast majority of broadband grants awarded 
by NTIA are meeting or exceeding project benchmarks and are 
well on the way to becoming completed by the end of next year.
    Administrator Adelstein, I would encourage you to follow 
NTIA's model. It has been harder for us to get information 
about the status of your grants than NTIA's. More regular 
tracking and reporting of all RUS projects would improve 
confidence in your programs.
    We had a vigorous debate about the merits of the Recovery 
Act and the broadband programs it funded in the last Congress. 
Our role today should not be to relitigate those issues. 
Instead, our focus should be on our joint interest in ensuring 
the funds are being well managed and the taxpayers' interests 
are being protected.
    We also have new issues to consider in light of the 
February enactment of the spectrum and public safety provisions 
in the bipartisan Middle Class Tax Relief and Job Creation Act. 
The law created a First Responder Network Authority, or 
FirstNet, to oversee the design and construction of a new 
broadband public safety network. It is essential that the 
projects funded by public safety grants awarded under the 2009 
Recovery Act be harmonized with the FirstNet network.
    And I want to commend NTIA's difficult but necessary 
decision last week to partially suspend these public safety 
awards. We all want these public safety projects to be 
completed on a timely basis, but the ultimate success of these 
projects will depend on how well they fit into the rest of the 
nationwide network.
    By going a little slower now, NTIA is helping to ensure 
that we achieve the nationwide interoperable network we should 
all want.
    This short delay is prudent because it will help achieve 
the long-term goals of these grants, but it should not become a 
prolonged slowdown. We need to do everything possible to help 
public safety grant recipients move forward as expeditiously as 
possible.
    I thank all of today's panelists for your participation. I 
look forward to your testimony, and unless any of my colleagues 
on the Democratic side wish any time--I will yield my time 
back.
    Mr. Walden. I thank the gentleman.
    The gentleman yields back his time.
    And we will now proceed with our witnesses.

  STATEMENTS OF LARRY E. STRICKLING, ASSISTANT SECRETARY FOR 
COMMUNICATIONS AND INFORMATION, NATIONAL TELECOMMUNICATIONS AND 
 INFORMATION ADMINISTRATION, DEPARTMENT OF COMMERCE; JONATHAN 
ADELSTEIN, ADMINISTRATOR, RURAL UTILITY SERVICE, DEPARTMENT OF 
 AGRICULTURE; TODD J. ZINSER, INSPECTOR GENERAL, DEPARTMENT OF 
    COMMERCE; AND DAVID R. GRAY, DEPUTY INSPECTOR GENERAL, 
                   DEPARTMENT OF AGRICULTURE

    Mr. Walden. And we will start with Mr. Strickling. Thank 
you for being here, sir, and we look forward to your testimony.

                STATEMENT OF LARRY E. STRICKLING

    Mr. Strickling. Thank you, Chairman Walden, and I would 
also like to acknowledge Ranking Member Eshoo, Vice Chair 
Terry, and Mr. Waxman.
    I want to thank you all for the opportunity to testify this 
morning regarding the status of NTIA's broadband programs. I am 
also pleased to appear here today with our Inspector General, 
Todd Zinser, who has helped us improve our oversight of these 
programs, as well as RUS Administrator Jonathan Adelstein, 
whose agency the Department of Agriculture is celebrating its 
150th anniversary this week.
    Today I am proud to report that our broadband grant 
recipients are making significant progress and delivering 
meaningful benefits to their communities. Taken as a group, our 
projects are exceeding their performance goals in deploying new 
infrastructure, constructing new public computer centers and 
encouraging greater Internet adoption.
    As of March 31, our grantees have deployed more than 56,000 
miles of broadband infrastructure. They have connected more 
than 8,000 community anchor institutions to high-speed 
broadband service. They have installed more than 30,000 work 
stations in public computer centers where they have provided 
more than 7 million hours of technology training to 
approximately 2 million users. We have generated approximately 
350,000 new broadband subscribers, and our grantees have funded 
more than 4,000 jobs in the second quarter of the fiscal year.
    As impressive as these numbers are, they only tell part of 
the story. We hear from people across the country validating 
the need for these projects and the benefits they bring. Our 
investments are helping fiberoptic cable manufacturers and 
other businesses to create jobs. We are stimulating demand for 
broadband services, such as smart grid, telehealth and remote 
learning, and we are retraining workers to give them the skills 
they need to compete in the 21st century economy.
    One of our California grantees, the California Emerging 
Technology Fund, has helped over 1,000 people find jobs through 
its training program.
    These broadband investments are also priming the pump for 
additional investment by public and private entities. Our 
philosophy to focus on middle mile projects combined with our 
open access and interconnection requirements are making it 
easier for incumbents and other last mile providers to expand 
their broadband services and speeds for American consumers and 
businesses. To date, our grantees have entered into 400 
interconnection agreements with last mile and other providers.
    As you are aware, protecting these Federal funds is of 
paramount importance to NTIA, and we have been providing 
diligent oversight and technical assistance to our recipients. 
To do so requires adequate resources, and we appreciate the 
bipartisan support you have provided to ensure that we have the 
resources we need for these tasks. Our focus, as it has always 
been, is to ensure that our grantees complete their projects on 
schedule and on budget and provide the benefits they promised 
to their communities.
    We designed our oversight program to mitigate waste, fraud 
and abuse, to ensure compliance with award conditions and to 
monitor each project's progress. Our staff is in frequent 
contact with recipients and requires them to report regularly 
on key financial and programmatic activities. To date, we have 
also conducted more than 130 site visits to projects 
representing 80 percent of the grant dollars, we have held 
three grantee workshops, hosted over 50 Webinars and conducted 
more than 3,000 check-in and conference calls. These activities 
help us to identify and resolve issues as soon as possible. We 
have been able to provide technical assistance that has helped 
some projects get back on track.
    In a few cases, however, our oversight has led to the 
cancellation of projects, and to date, eight projects, totaling 
$125 million in Federal funds, have been canceled. And while I 
am disappointed that these projects will not deliver their 
intended benefits to their communities, I am pleased that our 
diligence and oversight and our early intervention will result 
in 99 percent of the Federal dollars being returned to the 
Treasury.
    We intend to apply many of the lessons learned from our 
broadband grants to the new public safety broadband network 
called for in the Middle Class Tax Relief and Job Creation Act 
of 2012. Thanks to your work, Congress created FirstNet as an 
independent authority within NTIA and has allocated $7 billion 
of spectrum auction proceeds to build, deploy and operate a 
nationwide interoperable public safety broadband network. We 
are many committed to the success of this network because of 
what it promises in improved safety and better communications 
for first responders.
    Consistent with this goal, we recently took the difficult 
but necessary step of partially suspending the projects of our 
seven public safety broadband recipients. The new law 
dramatically changed the assumptions on which we awarded these 
grants in 2010 and allowing these seven projects to continue 
unchecked before the FirstNet board has even met, much less 
made the basic technical decisions about the new network could 
have put at risk millions of taxpayer dollars and negatively 
impacted the success of first net.
    In the coming weeks, we will work closely with each 
recipient to find the best path forward with the dual goals of 
keeping their grant dollars in their communities and ensuring 
that this equipment can ultimately be incorporated into 
FirstNet.
    Going forward, NTIA is focused on maintaining rigorous 
oversight for its broadband grants as they cross the finish 
line while working to ensure their sustainability and leverage 
the projects to the fullest extent possible. We are also 
ramping up to meet our next broadband challenge with first net, 
and I look forward to working with you as we achieve these 
goals. Thank you.
    Mr. Walden. Thank you Mr. Strickling.
    [The prepared statement of Mr. Strickling follows:]
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    Mr. Walden. Mr. Adelstein, we are delighted to have you 
back before the committee. We look forward to your testimony as 
well. Please proceed.

                STATEMENT OF JONATHAN ADELSTEIN

    Mr. Adelstein. Thank you, Mr. Chairman, Ranking Member 
Eshoo, it is great to be back and thanks for the opportunity to 
testify on the progress of our broadband investments.
    It is also good to be back together with Larry Strickling, 
who has been my partner, such a wonderful partner in all this. 
You mentioned this is our third time together, so let's hope 
the third time is the charm. And it is great to be here with 
our inspector general as well.
    I appreciate your help in getting this program running as 
well as it can be.
    I am pleased to report to you that the broadband initiative 
program is right on track. It is creating thousands of jobs. It 
is providing new and improved broadband service, and it is 
proceeding as the administration and Congress expected.
    The Recovery Act will pay dividends to rural communities 
and the entire country for years to come. These projects are 
creating high-wage high-skill jobs right now as they are being 
built. As they were being planned they were creating jobs. They 
will create more jobs as they become operational, and they will 
provide the foundation for even more jobs and economic growth 
as broadband is used by communities to spur innovation, new 
business and employment opportunities.
    RUS broadband investments will connect nearly 7 million 
rural Americans, including 360,000 businesses in more than 
30,000 critical community institutions, like schools, health 
care facilities and rural public safety agencies. They will 
bring broadband to 45 States and one U.S. territory. Grant 
dollars were targeted to those areas that were in the greatest 
need of service and to those that were the most rural. They 
overlap with 31 tribal lands, including Warm Springs, which we 
provided a grant to in your district and 125 persistent poverty 
counties, which is most of the persistent poverty counties in 
the United States. They are projected to create more than 
25,000 immediate and direct jobs for rural workers in a variety 
of industries and countless more as the communities benefit 
from the broadband once it is deployed.
    Data provided by the U.S. Department of Education show that 
more than 1 million K-12 students attend schools within areas 
served by BIP awards. More than 100 colleges and technical 
schools are located in those same areas, as you indicated. HHS 
data shows that nearly 600 rural health care facilities are 
located in areas served by BIP awardees. All of these health 
care facilities can expand use of telemedicine, electronic 
medical records initiatives and improve the quality of health 
care for citizens in those areas.
    Now the Recovery Act funded two types projects; those that 
were immediate and those that were transformative. Big 
infrastructure projects, like the ones RUS has been financing 
now for 60 years, whether done by telecommunications, water or 
electric facilities, are transformative, and they do take time 
to build out. Projects have to be carefully planned constructed 
and operated. All awardees must comply with Federal, State, 
environmental, historic preservation and, in some cases, tribal 
or intergovernmental reviews that often require significant 
consultation with the public. Based on our experience, these 
projects are on track with what we have seen historically in 
terms of the time it takes to build out these large broadband 
projects.
    But RUS is working hard to accelerate the spending of 
remaining funding. We have repeatedly urged awardees to move 
quickly. Our field employees are vigorously monitoring and 
working with our awardees to get construction underway. 
Compliance is being carefully monitored by our field staff as 
well as our staff in D.C. We are actively working with 
awardees, Federal partners and government entities to address 
issues impacting the completion of the projects. We are 
vigilant to ensure that the projects remain viable. Our goal is 
to make sure that each one of these succeeds.
    We also want to build businesses on top of these networks. 
RUS's traditional broadband programs serve as a strong 
foundation for an initiative we launched called Build Out and 
Build on. It encourages continued expansion of broadband 
economic growth impact using all of our programs, including the 
rural business services so that we can build businesses on top 
of the new broadband networks we are creating.
    One of the ongoing challenges in building out broadband in 
rural areas is ensuring the financial feasibility and 
sustainability of the proposed service providers. Strong rural 
economies buttress the availability of sufficient revenue 
sources to make these projects succeed.
    RUS appreciates our partnership with the USDA OIG to ensure 
that our programs meet their statutory objectives. All OIG 
concerns and recommendations raised with regard to the previous 
Farm Bill Broadband Loan Program have been addressed. That 
audit, which is the central topic of today's OIG testimony, was 
closed over a year ago.
    I compliment OIG for raising concerns with the statutory 
definition of rural in the 2002 Farm Bill. RUS could not, of 
course, change that definition on its own. Only Congress can do 
that, and Congress itself did act in the 2008 Farm Bill to 
revise the definition of ``rural,'' and that definition has 
been completely implemented by RUS.
    I am pleased to report that this administration made no 
loans under the broadband program until all OIG concerns and 
recommendations were addressed and RUS final actions were 
accepted.
    We look forward to continuing to work with OIG on the 
Recovery Act and look forward to any recommendations we may 
receive in the future regarding the program.
    There are a lot of challenges that remain in terms of 
getting broadband out to rural communities. These places have, 
as you know, coming from Oregon, and as many you know from 
rural parts of the country, maybe not so much our ranking 
member, there is a little bit of a rollback on the hills, but 
there is a lot of difficult terrain out there. There are high 
costs associated with distance and topography. Access to a 
skilled workforce is sometimes lacking, as long-term financial 
feasibility is more difficult when you are trying to build out 
over large areas, but we are continuing to see an explosion of 
new technology that can increase access to health care, expand 
education opportunities and facilitate all kinds of new 
business activity. But their success will rely on having 
broadband in those areas so it is an honor with your support to 
make that possible.
    I thank the committee and its members for the opportunity 
to testify and look forward to any questions you may have much.
    Mr. Walden. We appreciate your testimony. Thank you again 
for being here.
    [The prepared statement of Mr. Adelstein follows:]
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    Mr. Walden. Now we are going to hear from the inspector 
general from the Department of Commerce, the honorable Todd 
Zinser.
    Mr. Zinser, thank you for being here as well. We appreciate 
your work and we look forward to your testimony.

                  STATEMENT OF TODD J. ZINSER

    Mr. Zinser. Thank you, Mr. Chairman, Ranking Member Eshoo, 
members of the subcommittee, and thank you for the opportunity 
to testify today about the Broadband Technologies Opportunities 
Program and the challenges facing the program moving forward.
    The BTOP program is currently funding 228 grants, totaling 
$3.8 billion. The grants were awarded in three categories. 
There are 120 infrastructure grants, which total more than $3.3 
billion. This is a approximately 88 percent of the program's 
funding. Seven of these grants, totaling more than $380 
million, were awarded to fund interoperable public safety 
network projects.
    There are 65 public computer center grants, which total 
just about $200 million, around 5 percent of the program's 
funding, and 43 grants for sustainable broadband adoption, 
which total $250 million or around 6 percent of the program's 
funding.
    Since our testimony before the subcommittee last year, we 
have examined NTIA's program for monitoring its BTOP grants, 
looked into one of the public safety grants and recently 
completed an audit of how well NTIA is managing the matching 
share requirements under the program.
    This morning, we would like to highlight five issues 
concerning the BTOP program. First is the rate of spending. 
BTOP spending has improved since the end of the last fiscal 
year, from 20 percent at the end of September 2011 to 42 
percent as of the end of last month. However, the disbursement 
rate of infrastructure grants, including the public safety 
awards, remain critical watch items. Many of these 
infrastructure projects, around 41 percent of them, have spent 
40 percent or less of their grant moneys and are at some risk 
of not meeting spending deadlines.
    One common problem causing project delays, outstanding 
environmental assessments have been largely resolved. 
Nevertheless these initial delays and other reasons, such as 
local permitting and predeployment activities, still affect the 
likelihood of BTOP project's timely completion.
    Second, while NTIA is addressing our recommendations to 
strengthen its oversight, equipment procurement needs to become 
more of a focus. We think that NTIA has been successful in 
establishing a BTOP program office and addressing the 
challenges such a diverse program encounters. This past fall, 
we reviewed the agency's award monitoring program and 
recommended ways NTIA can improve the tools it uses to oversee 
the grants, including the need to verify data provided by the 
grantee and closer tracking of those projects that have 
schedule risks.
    NTIA has responded with a number of corrective actions. As 
BTOP continues, NTIA's next focus should be whether or not the 
equipment for these projects can be procured and deployed on 
schedule and meet the specifications necessary to achieve 
intended BTOP objections.
    Third, our issues concerning grant match documentation. 
Grant match is an important Federal requirement. While Federal 
funding for BTOP is $3.8 billion, the grantees have committed 
to providing more than $1.4 billion in matching funds. We have 
issued a draft report to NTIA. For the most part, we did not 
find significant problems with grantees' matching shares, but 
we will be making recommendations to strengthen NTIA's 
oversight of this area, especially with respect to how grantees 
account for and document their matching shares and their 
financial records.
    Fourth, NTIA has a new program called FirstNet which will 
impact the seven public safety projects funded by BTOP. 
FirstNet is the name given to the recently authorized first 
responder network authority, which NTIA is charged with 
establishing. Presumably, the seven BTOP public safety projects 
will need to transition to FirstNet if they are deemed 
compatible. In doing so, those projects will need to address 
issues with FCC spectrum waiver transfers, long-term evolution 
technology purchases and extensions to project deadlines 
associated with the BTOP grants.
    Finally, Mr. Chairman, we wanted to inform the subcommittee 
that we have requested a waiver from the provisions of the 
Dodd-Frank legislation that requires Recovery Act funds be 
returned to the Treasury if they are not obligated by December 
31, 2012. We requested a waiver because the Recovery Act funds 
transferred to us to oversee the BTOP program are being used to 
pay the salaries of investigators and auditors. Unlike grants 
or contracts, we cannot obligate funds for salaries in advance. 
So we have requested a waiver. Without the waiver, we will lose 
our dedicated funding 9 months before many of the projects 
funded by the BTOP grants are even required to be finished.
    As you know, Mr. Chairman, audit and investigative 
activities can extend long after the completion of a project. 
While our communications with the department and OMB have been 
positive, we do not yet have a waiver, causing a great deal of 
uncertainty about our future oversight efforts for BTOP. We 
also note in our testimony that NTIA is facing funding issues 
for its oversight of the program as well.
    This concludes my statement Mr. Chairman.
    I would be happy to answer any questions you or other 
members of the subcommittee may have.
    Mr. Walden. Mr. Zinser, thank you. Thanks for the work you 
do and your colleagues.
    [The prepared statement of Mr. Zinser follows:]
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    Mr. Walden. Mr. David Gray is up next. He is the deputy OIG 
for the U.S. Department of Agriculture, and happy 150th 
birthday to the Department.

                   STATEMENT OF DAVID R. GRAY

    Mr. Gray. Thank you. Good morning, Chairman Walden and 
Ranking Member Eshoo, and other members of the subcommittee. I 
appreciate the opportunity to appear before you today and talk 
about our oversight work of the Department of Agriculture and 
RUS's broadband grant and loan programs.
    Our inspector general appeared before you last February of 
2011 and spoke about the audits that we had performed in 2005 
and 2009 of the RUS's administration of its regular broadband 
loan programs.
    In those audits, we found that RUS was funding projects and 
communities that were close to major metropolitan areas. We 
also had concerns over the funding of projects in areas with 
preexisting broadband service.
    At the time of our second audit, RUS was soon to receive 
the $2.5 million under the Recovery Act to implement BIP. 
Following our meeting with the subcommittee, we began a two-
phased audit work. The first phase focuses on the controls that 
RUS had in place pre-award, and our second phase audit focuses 
on its post-award controls.
    Our first phase audit should be complete this September, 
and the second phase audit should be completed by the end of 
December or hopefully before then the end of December.
    We expect that our current work will identify some of the 
same issues as our prior audits as they relate to BIP 
specifically. However BIP differs from the existing and prior 
broadband programs significantly. For one thing, they received 
significantly more money than any previous RUS broadband 
program.
    Also, because BIP was a new program, it was necessary for 
RUS to define and interpret key statutory criteria including, 
to what extent served areas should be rural and which areas 
should receive priority? For our audits, we selected a 
statistical sample that allows us to provide a broad 
perspective and to provide nationwide analysis.
    Our sampling for both phases include a selection from all 
three of the projects that BIP funds, interest, infrastructure, 
satellite and technical assistance programs projects. Because 
RUS's interpretation of the Recovery Act policies will shape 
how it administers BIP, we will be looking to make sure that 
these definitions, terms and usages meet the purpose of the 
Recovery Act and the Recovery Act funds are used as intended to 
benefit rural areas and communities.
    We are committed to working with RUS to ensure that these 
broadband programs and operations fulfill their important 
missions as intended.
    This concludes my written statement. Thank you, again, for 
inviting me, and we are happy to answer any questions.
    Mr. Walden. Mr. Gray thank you for your testimony and for 
the work that you and your colleagues do.
    [The prepared statement of Mr. Gray follows:]
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    Mr. Walden. I will start out with some questions I have.
    First, without objection, I would like to submit for the 
record this article from the West Virginia Gazette regarding 
some spending under the BTOP grant.
    [The information follows:]
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    Mr. Walden. And Assistant Secretary Strickling, I don't 
know if you are familiar with the situation in West Virginia.
    Mr. Strickling. I am, sir.
    Mr. Walden. It seems pretty disturbing that they would 
spend $126 million, receive $126 million BTOP grant. It says 
the State then bought more than 1,000 Cisco 3945 series 
routers, enterprise grade routers, designed to serve a college 
campus and then installed them in local libraries with only one 
to two dozen computers. Each router costs about $22,600, or 
about $22,000 more than a smaller router that would have worked 
just as well.
    My understanding is that these routers are designed to 
handle a minimum of 500 computers, and yet, in some of these 
little libraries in West Virginia, they are handling maybe one 
public work station.
    Can you tell me what NTIA is doing about this and the $22 
million of taxpayer money that seems to be wasted here?
    Mr. Strickling. Yes, sir. First off, I would warn everyone, 
don't believe everything you read in the newspaper.
    But the facts of the situation are not exactly as described 
in the newspaper article. In West Virginia, they have bought 
routers. They chose early on, because of the deal they could 
get, to buy the same router to install in all of the anchor 
institutions that were going to be served. The average cost of 
those routers is not $22,000; it is about $12,000. And some of 
those are going into very large facilities, like universities 
and hospitals and such.
    But overall, had they tried to determine the individual 
router capacity needed for every of these anchor institutions, 
they felt they would end up spending more money, as opposed to 
being able to take advantage of the package discount Cisco 
offered them on buying all of the same gear.
    This gear is scaleable, it will be allowed to be expanded, 
and while I think you are right to be skeptical as to whether 
some of these very remote and rural locations will ever need 
the full capability of the particular router that was 
purchased, many of these anchor institutions will benefit from 
this. And overall, our sense is that this was the most 
economical way forward.
    Certainly in terms of maintaining this gear, there will be 
efficiencies gained by the State by having trained their 
technicians to only deal with one particular box as opposed to 
a variety of different pieces of equipment that might have been 
involved had they chosen a different course.
    So, overall, it appears to us, based on our review of the 
situation, that the State made an economical decision that is 
well-justified by the facts here.
    Mr. Walden. So a router that can handle 500 is, was a 
better buy for a library with half a dozen computers.
    Mr. Strickling. Now the issue here is what was the best buy 
to serve the 1,000 institutions that were being served by this 
project. And on average, West Virginia believes that they have 
found the most economic solution by buying a single product, 
getting a substantially discounted per router rate from Cisco, 
which again is a router that is necessary to meet the needs of 
many of the anchors they are connected to, but just by 
selecting out some of the specific small locations is giving a 
very, I think, distorted picture of what is actually happening 
in the State.
    Mr. Walden. So Cisco wouldn't have given them a discount 
for the big ones and also a price discounts for small ones? 
Really?
    Mr. Strickling. What West Virginia told us was this led to 
the least amount of dollars being spent on the routers on 
average.
    Mr. Walden. So they did submit then an alternative? Did 
they do any kind of deep analysis? I was a small business owner 
for 20 years--22 years--and it just seems to me that I would 
have said I have got X number of libraries out here in the 
rural areas; it would be real easy to have an intern call and 
say, how many computers do you have, and determine I only need 
a router that costs 100 bucks or 200 bucks or whatever, and 
then I have got bigger ones out there.
    I mean, I am giving them money here, right? They can't--I 
can't collect that basic information? Did they competitively 
bid this?
    Mr. Strickling. Yes, they did, and Cisco provided the 
lowest price of the bidders who responded to their competitive 
bidding process.
    Mr. Walden. So I understand there was a quarterly report on 
this project that noted that it had dramatically decreased its 
plan for fiberoptic buildout, cutting almost 40 percent of the 
community institutions on its list. One reason was that the 
grantee discovered that 88 of these community institutions on 
its buildout list already had fiber. So is that accurate?
    Mr. Strickling. I can't dispute the numbers. I don't have 
the report in front of me.
    Mr. Walden. But you are familiar with the report?
    Mr. Strickling. In general, I am aware that, yes, through 
their diligence upon receiving the grant, they have found it 
not necessary to overbuild into areas that already had fiber, 
and I think we should applaud their action in that regard.
    Mr. Walden. I do, too. I guess what I am trying to figure 
out here is the independent analysis NTIA might be doing.
    It sounds like your agency takes the word of whoever is 
asking for the grant there, in both of these cases, and then 
hands out the money before verifying the project costs wouldn't 
duplicate existing infrastructure.
    Let me put it more clearly, you are relying on whatever you 
are told is going on then.
    Mr. Strickling. If we are going back to the application 
period, you will recall that we received 10 times the 
applications than we had dollars to spend. We were under very 
tight time frames. We did, I think, an incredible amount of due 
diligence on the applications we received.
    But did we go out and check every anchor institution in all 
of these projects to determine what existing services they 
received? No. We relied instead on letters from these anchor 
institutions indicating this they were not being well-served 
and that they needed upgrades or needed broadband brought into 
them that where it didn't already exist.
    Mr. Walden. And I know the pressure you were under and I 
know I am over my time here. But when they come back and say, 
we were 40 percent off, that just raises flags for me.
    Mr. Strickling. It is not 40 percent off in terms of the 
total number of anchors that they are serving and we will be 
able to take the opportunity----
    Mr. Walden. That is in the report that they----
    Mr. Strickling. I thought you said 80 anchors.
    Mr. Walden. No, they cut almost 40 percent of the community 
institutions on their list.
    Mr. Strickling. I would want to go back and check that. I 
am not sure of the accuracy of that. But in any event, I think 
again that shows good project management and good oversight. 
And the important thing is we will now be able to use those 
dollars to reach anchors that perhaps weren't in the original 
project that now can be reached based on the additional 
information that we all have today.
    Mr. Walden. My time is more than expired.
    Thanks for the answers.
    And I will turn now to the gentlewoman from California, Mr. 
Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman.
    To Mr. Zinser, earlier this year, your office completed its 
examination of Bay Web, a public safety project covering a good 
part of Bay area. Did you find any evidence of fraud?
    Mr. Zinser. Thank you, Ms. Eshoo.
    We did not find evidence of fraud. We issued a report in 
January that detailed our findings. Our findings went more 
toward issues concerning governance and some of the information 
included in the application wasn't completely accurate, and we 
have sent our report to NTIA.
    Ms. Eshoo. Thank you.
    As a follow up to Assistant Secretary Strickling, has NTIA 
addressed the recommendations outlined in the, I mean this is 
going back because now these are suspended, but I still would 
like to know, since it is a Bay Area effort, have you addressed 
any of the recommendations outlined in the IG's Bay Web report?
    Mr. Strickling. The IG issued two reports. One was an 
audit, and one was a supplemental report. In the audit, they 
recommended that we needed a more robust complaint resolution 
process. As we received complaints from third parties about 
projects, we did institute a much more process-rich approach to 
dealing with complaints as a result of that recommendation.
    With respect to the January report that the inspector just 
mentioned, we reviewed the report. The concern that was raised 
there was whether or not any of the--what the IG had felt were 
misstatements in the application rose to the level of material 
misrepresentations that might have changed the outcome of the 
grant award.
    We had already done a thorough analysis of the application 
and all of the supporting materials we received, and we felt 
that, notwithstanding the issues that the inspector general 
raised about the application and some statements that were in 
the application, we did not feel that in any way we had been 
overall misled and that we had a full appreciation of the 
challenges of that project at the time we made the award.
    Ms. Eshoo. Thank you.
    To Administrator Adelstein, transparency and accountability 
are the essential bookends in terms of the work that is done. 
They are essential ingredients for any program involving a 
substantial taxpayer investment.
    Do you support a requirement that RUS broadband loan 
recipients file regular publicly accessible reports documenting 
their progress toward completing their project?
    Mr. Adelstein. Yes, that would be helpful I think. We get 
regular reports, and we are monitoring them on a biweekly 
basis. I have my field staff going out every 2 weeks and making 
sure they touch each one of these projects. And it has been an 
extensive effort. I just want to make sure that any 
requirements didn't release proprietary information.
    Ms. Eshoo. As I understand it, approximately 11 percent of 
the projects that RUS initially agreed to support have been 
terminated. How does this figure compare to other RUS loan 
programs? And can you help us understand the nature of these 
terminations?
    Were there any common themes, such as noncompliance or 
fraud?
    Mr. Adelstein. Not noncompliance or fraud. We find fairly 
typical when we make loans that a number of them never do 
follow through, they are drawn down. A similar percentage in 
our experience, this may be a little bit ahead----
    Ms. Eshoo. Excuse me. They applied for the loan, but they 
don't follow through with the application and therefore nothing 
comes of it?
    Mr. Adelstein. Exactly. That does happen to 5 to 10 percent 
of our loans. These projects that were rescinded, as I 
indicated, 99.9 percent of the funds were returned to Treasury. 
There was a number of reasons for it. Sometimes awardees were 
unable to produce promised funds that they said they would 
have. We make sure that every dime they say they have is there. 
Sometimes they couldn't comply with the terms as we worked with 
them on that. In some cases, competition moved closer to where 
they were, and they no longer had the business case for it.
    One case, a buyer sold the operation, and the new buyer 
didn't want to follow through with it. Another case major 
restructuring caused significant material changes. One awardee 
refused to show the necessary documents for the closing 
requirements. There are inter-creditor issues. We put a fairly 
aggressive mortgage on them to make sure we get taxpayer money 
back and other lenders----
    Ms. Eshoo. I am almost out of time. But I appreciate your 
answer because I think kind of tucked in there is something 
that we need to appreciate, and that is that there was a great 
deal of scrutiny that went on in that process, and that is why 
they did not come to fruition, which is probably the best 
outcome in terms of some of these circumstances that you just 
described.
    Between the two projects, the BTOP and the BIP, there are 
many that are far from completion. Would these be completed by 
the deadline? I think someone touched on that in their opening 
statement, but----
    Mr. Strickling. I will speak with respect to the BTOP 
program. All of our projects are on schedule to be completed 
within 3 years, with the exception now of the seven public 
safety projects, for which we will seek an extension from OMB 
given the reality we are facing with FirstNet. But the other 
ones are all on schedule. We have not granted anyone any 
extensions. I won't even entertain extensions or requests for 
extensions for these projects at this time.
    We are pushing everyone to stay on schedule, and that is 
our hope and our plan.
    Ms. Eshoo. Thank you very much.
    I am out of time, Mr. Chairman. Thank you.
    Mr. Walden. The chair recognizes the gentleman from 
Nebraska, Mr. Terry, the vice chair of the subcommittee for 5 
minutes.
    Mr. Terry. Thank you, Mr. Chairman.
    Mr. Zinser, did I say that correctly?
    Mr. Zinser. Close enough.
    Mr. Terry. I want to follow up on part your testimony, and 
we understand that the oversight components, funding oversight 
comes out of the actual funding for the program; it is not a 
separate fund. But I am curious, in your testimony, what is the 
totality of the amounts spent in oversight preventing waste, 
fraud and abuse?
    Mr. Zinser. The totality that my office has spent?
    Mr. Terry. Yes.
    Mr. Zinser. The act required that NTIA transfer $10 million 
to my office for BTOP oversight. We have spent about $6 million 
of that fund, and right now, we have about $4 million. And the 
plan was to spread it out throughout the length or life of the 
project and then a little bit beyond, and now we have, that is 
going to be abbreviated.
    Mr. Terry. It is obvious, but I want to point out for the 
record, you just, that oversight is not for RUS but just NTIA.
    Mr. Zinser. Yes, sir just NTIA.
    Mr. Terry. And Mr. Adelstein, who does the oversight for 
RUS to make sure that the RUS projects are free of waste, 
fraud, and abuse?
    Mr. Adelstein. Mr. Gray and his team.
    Mr. Terry. Mr. Gray, how much has been spent on oversight, 
fighting waste, fraud, and abuse in the allocations by the RUS?
    Mr. Gray. I am not sure that I know the specific numbers. 
Overall, we received $22.5 million under the Recovery Act to 
perform oversight of all USDA programs. I can find out the 
specific amount for RUS.
    Mr. Terry. Would you?
    And then, both for Mr. Zinser and you, Mr. Gray, the same, 
and I will ask if you are OK with this, but can you break that 
down into the number of projects that you have actually 
reviewed for waste, fraud and abuse?
    Mr. Gray. Yes, sir.
    Mr. Terry. Mr. Zinser?
    Mr. Zinser. Yes, we can itemize the kind of activities that 
we use the money for.
    Mr. Terry. That would be helpful.
    Mr. Adelstein, we go way back. I think you do good work. 
Recently, and this is probably going to be a hearing some time 
in the future on USF reform that the FCC has taken up. But I 
worry that as the RUS issues grants, that the yin and then the 
yang. And the yang is, if there is competing grants or that 
rules proposed by the FCC are making it difficult for the RUS 
loans to be paid back; have you engaged, RUSengaged in any 
review of the RUS loans to determine if any are in jeopardy 
from ARRA grants and/or other rules proposed by the FCC?
    Mr. Adelstein. Yes, Congressman Terry, we certainly have. 
We are doing an ongoing risk assessment and stress testing of 
our entire portfolio. We are going forward using sensitivity 
analysis about what would be the impact of loans that we make 
in the future. So we are very carefully monitoring the impact 
on our existing portfolio.
    Mr. Terry. Any findings from your investigations?
    Mr. Adelstein. Well, we are still determining; it is a work 
in progress. The FCC order, as you know, part of it took place 
immediately, other parts are moving targets. They are going to 
do more I think very soon. We just changed their regression 
analysis a couple weeks ago, and we are looking at the impact 
of the new regression. So we are overall looking at it on a 
company-by-company basis, and it is going to be a while before 
the FCC has completed its activity.
    Mr. Terry. True. But has RUS, at this time, found any of 
the recipients of RUS loans in the broadband telecom area to be 
stressed or kind of borderline stressed?
    Mr. Adelstein. Some of our borrowers have indicated to the 
FCC in waiver requests that they face bankruptcy if waivers are 
not allowed by the FCC, so we have had direct communication 
from a number of our borrowers who have come to us indicating 
that they are under severe stress as a result of the changes. 
Now some of that might have changed as a result of the new 
regression analysis that the FCC recently published.
    Mr. Terry. My time is nearly up. So I will yield my last 5 
seconds back.
    Mr. Walden. The gentleman yields back the reminder of his 
time.
    The chair recognizes now the gentlelady from Virgin 
Islands, Dr. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman, and welcome to 
the panel this morning. Before I ask a question, I just want to 
say to Mr. Strickling, that, you know, I really had an 
opportunity to see almost firsthand how NTIA is protecting the 
taxpayer's money, but at the same time, aggressively pursuing 
the expansion of broadband, in the unserved and underserved 
areas. So I want to thank you for working with the Virgin 
Islands project. We have had a CAP, but in coming out of it, I 
think we came out stronger with better control for our 
accountability. But it does slow down the project somewhat, and 
I was wondering, and Mr. Adelstein can also answer, did the 
collective action plans and suspensions affect meeting 
deadlines and is there any built-in consideration given for 
those kinds of delays?
    Mr. Strickling. As of now, no, we do not see them affecting 
any of the completion dates of any of the projects that are 
currently underway.
    Mrs. Christensen. OK, great. And Mr. Adelstein, we have not 
in the Virgin Islands been as successful in the BIP loan 
program, and I would like to just get a better understanding of 
how you look at the applications. So how does RUS analyze the 
financial feasibility and sustainability of BIP applications? 
Do you examine the extent to which competing broadband 
providers were present in all or part of the proposed service 
areas for BIP awardees, and did RUS consider whether and to 
what extent BIP awardees rely on other Federal funds such as 
subsidies from the Universal Service Fund?
    Mr. Adelstein. Yes, we do very carefully analyze financial 
feasibility. As a matter of fact, the main reason that we 
turned down the bulk of the nine out of ten applicants that 
applied was for either financial or technical infeasibility. 
These are very difficult projects to prove out feasibility. 
Obviously, it is difficult in rural areas to make these 
businesses work, and businesses need to come with substantial 
equity in order to be able to do the working capital because we 
don't provide for operations funding. Competition is an issue. 
Sometimes if there is not an area, if it is an area that has 
too much competition, there is not going to be a business case 
that works. If there is--if there is competitors that are about 
to build, that is an issue that we also look at, so we are 
looking at the entire market. And we ask all of our borrowers 
to do a market analysis. We also ask incumbents in the area to 
report to us whether or not there are competitors in the area, 
and then we send our field staff into verify it, so that we 
know whether or not they are not going to be able to make the 
anticipated take rates that they use as a justification for the 
revenues that they expect in their application. So we do a very 
rigorous financial analysis.
    Mrs. Christensen. Thank you. Mr. Gray, how does OIG 
determine whether or not to investigate a complaint? For 
example, could you discuss why your office declined to 
investigate allegations of fraud in the BIP award to Lake 
County, Minnesota, and did the OIG refer that complaint to RUS 
for any further action? And if you did, are you aware of any 
action taken by RUS?
    Mr. Gray. When we receive complaints, we review them. 
Usually our criminal investigators review them for potential 
allegations of crime. We review whatever evidence is submitted 
with the allegations. We do a certain amount of preliminary 
inquiry, and then determine how much further to take it.
    In the case--if it becomes apparent to us that there is no 
criminal criminality involved, usually we will let our auditors 
review it as well, but if it appears to be an administrative 
matter, perhaps policy dispute, we refer it to the program 
agency, in this case, RUS. In the case of the Lake County, we 
did that similar analysis. I think the allegations were that 
there was misrepresentations in the applications. We did not 
find that to be the case in our preliminary inquiry, and we did 
refer it to RUS.
    I believe RUS got back to us in January of this year, and 
they, in turn, found no substance to the allegations and found 
that the application was appropriate and proper.
    Mrs. Christensen. OK, thank you. I guess I will yield back 
my 5 seconds. I don't have time for other questions.
    Mr. Walden. The gentlelady yields back, and just for the 
record, we are talking about the Rural Utility Service. There 
is really not a person named Russ, not Russ Adelstein. We turn 
now to the gentleman from New Hampshire, Mr. Bass, who has 
played an important role in this effort and recognize you for 5 
minutes.
    Mr. Bass. Thank you, Mr. Chairman, and I have two questions 
for our distinguished panel today, and I want to thank you for 
being here. It is important. Under the stimulus bill, the 
purpose of the BTOP infrastructure grants was to, and I quote, 
``provide access to broadband services to consumers residing in 
underserved areas,'' and to ``provide improved access to 
broadband services to consumers residing in underserved 
areas.''
    Assistant Secretary Strickling, NTIA recently unveiled an 
online map that shows where and how BTOP grants are being 
spent. It would be more helpful, however, if the map were 
integrated with the National broadband map so that we could see 
whether the BTOP project is really going to underserved 
communities, instead of overbuilding. When can we expect to see 
that integration?
    Mr. Strickling. You are making a very good point, 
Congressman. I don't have a time frame as to when we will 
actually have them on the same platform, but I do think it is 
possible to make some comparisons, even now. But more 
importantly, I think you have to keep in mind the difference in 
the data that the two maps reflect. Our projects, for the most 
part, are middle-mile projects. They don't serve end users 
other than anchor institutions. So that what we are really 
doing is building a robust infrastructure that can be utilized 
by those last-mile providers in those communities to improve 
the speed of service they offer, and perhaps to reach, make it 
more economical for them to reach communities that they don't 
currently reach.
    So we are comparing apples and oranges a little bit when 
you look to see where the middle-mile circuits are going 
compared to where end users are being served.
    Mr. Bass. So I guess what you are may be warning us 
perhaps, is that when this does get integrated, it is not going 
to really show that you are reaching underserved areas 
directly, but that you are providing the potential to reach 
underserved areas directly, but there is no guarantee that it 
will actually happen?
    Mr. Strickling. Well, I wouldn't agree with that statement 
as made. Certainly, we are able to reach anchor institutions, 
and one of the things we find early on in this program is that 
there is really a separate market for broadband for anchor 
institutions than there is for the typical residential 
consumer. The types of speeds at 1-1/2 or 4 megabits per second 
might be adequate for consumers, although even today, that is 
increasingly coming into question. But it absolutely doesn't 
meet the needs of anchor institutions such as hospitals and 
schools and libraries, where we need to be looking at minimum 
speeds, 25 megabits per second, 50 megabits per second.
    So our projects are definitely meeting the needs of anchor 
institutions in these areas who are able to get connected to 
these facilities. But you are right, in terms of the mass 
market, the residential consumers, we are depending on these 
investments, as I said earlier, priming the pump for private 
investment by last-mile providers.
    Mr. Bass. OK, thanks. Administrator Adelstein, the FCC has 
been looking into reform of the USF, Universal Service Fund for 
a decade with serious efforts in 2008 and another call for 
reform in 2010's National broadband plan. How did RUS account 
for potential reforms in the USF in reviewing BIP applications? 
Can you address that?
    Mr. Adelstein. Yes, in fiscal year 2011, we analyzed 
infrastructure loans losing as much as 10 percent of their USF 
support to determine if they were feasible despite that loss. 
And we, of course, know that the FCC has been doing Universal 
Service Reform and was considering changes since 1997 since the 
very first order. So if we were waiting for each time the FCC 
was about to act, and I was on the FCC when we almost acted in 
2008----
    Mr. Bass. Right.
    Mr. Adelstein. --we wouldn't have been able to do any loans 
if we were assuming that they were going to change it. So given 
the statute requires that the funding be predictable and 
sufficient, we moved forward based on what we anticipated with 
some stress testing done in more recent years as the indication 
became clearer, that the FCC was, in fact, about to act.
    Mr. Bass. OK, very well. Thank you, Mr. Chairman.
    Mr. Walden. The chair now recognizes the gentleman from 
California, Mr. Waxman for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman. Assistant Secretary 
Strickling, we all agree it is critical that the administration 
implement the provisions of the Middle Class Tax Relief and Job 
Creation Act effectively. As the agency tasked with hosting 
FirstNet, the First Responders Network Authority, NTIA has a 
critical role in ensuring the success of this network. Since 
the passage of the Act, there have been concerns how the seven 
public safety recipients of Recovery Act dollars will be 
integrated into the new nationwide network. I was encouraged 
that NTIA took the difficult but necessary step of temporarily 
suspending the public safety awards until decisions are made 
about FirstNet's technical requirements. I think your action 
was prudent, but I would appreciate some clarification of a few 
points.
    Can you first explain, what do you mean by a partial 
suspension? What types of suspending are now prohibited? What 
types of suspending will be now allowed to continue?
    Mr. Strickling. Yes, sir, with respect to the partial 
suspension, all we suspended is the expenditure of dollars on 
the 4G LTE equipment, but at the same time, we have asked all 
of the recipients to come back to us within the next 45 days, 
hopefully sooner, but we put a 45-day limit on it, with how 
they would propose to move forward with their spending for all 
of the projects.
    We certainly think that things like site preparation, site 
acquisition, backhaul networks all are assets that ought to be 
able to be used in the FirstNet network, or ought to have a 
useful application in other networks or other applications for 
the community. That work we would like to see continue. And 
even with the 4G LTE gear, it is not lost upon us that we could 
learn something by allowing some percentage of these projects 
to proceed, perhaps on a scaled-down basis, even using the 4G 
LTE equipment. What I want to avoid is a situation where 
choices are being made now by individual communities that could 
actually upset our ability, FirstNet's ability to create a 
viable business model for the public-private partnership that 
the legislation envisions. And so we have to be very careful 
about that.
    So my immediate goal is to keep the dollars in the 
community. We will do that by getting an extension from OMB to 
allow those dollars to be spent past 2013. And then secondly, 
to ensure that we reduce the risk to the taxpayers by whatever 
spending goes forward, and in that regard, that is also a 
conversation that we can have with the manufacturers in terms 
of are there things they could do now to help reduce the risk 
that this equipment, if installed, becomes stranded at some 
point down the road so that we end up having wasted the 
taxpayer dollars.
    Mr. Waxman. What steps will you take to ensure that the 
Broadband Technology Opportunities Program dollars stay with 
the public safety awardees and that these project will be fully 
funded, what can we tell cities like Los Angeles, San Francisco 
and Charlotte, as well as States like New Jersey about the 
likelihood of retaining their BTOP grants?
    Mr. Strickling. I am confident that we will be able to do 
that. What has to happen is that the Office of Management & 
Budget will need to provide an extension to these projects 
beyond the September 2013 date. There is currently an order in 
place from OMB that requires all spending on Recovery Act 
projects to be completed by September of 2013, and if you can't 
make that date, you can petition OMB for an extension.
    I think it helps in this case that one of the members of 
the FirstNet board is the director of OMB, and I think they 
will work with us to secure that extension, but I obviously 
can't speak for them. But this is, I think, the paradigm case 
of where an extension would be justified.
    Mr. Waxman. Thank you very much. I yield back my time.
    Mr. Walden. The gentleman yields back the balance of his 
time. The chair now recognizes the gentleman from Illinois, Mr. 
Kinzinger, for 5 minutes.
    Mr. Kinzinger. Thank you, Mr. Chairman, and thank you, 
gentlemen, for your time today. I can tell you, one of the 
things I am not a big fan of is just too much bureaucracy. I 
mean, it seems like the bureaucracy out in Washington, D.C. in 
the limited time I have been here just grows and grows and 
grows. So my concerns deal with the duplicative nature of what 
we are talking about today. It seems as though we keep making 
more and more government bureaucracy in order to accomplish the 
same thing, which is getting broadband access out to places 
that are unserved or underserved.
    Along with the BTOP and the BIP programs that have been 
discussed at this hearing, the FCC, as was mentioned a few 
minutes ago, is transitioning to the Universal Service Fund in 
order to expand the deployment of broadband. With this many 
programs being run by different government agencies at the same 
time all with similar goals, it is pretty obvious to me that 
some overbuilding of current networks is going to take place.
    At some point I think it would be beneficial for our 
committee to take a serious look at consolidating some of these 
programs to ensure taxpayer funds are being used efficiently. 
To Administrator Adelstein, and thanks for coming in, given the 
focus of RUS, which is serving broadband in unserved areas, 
bringing broadband to unserved areas, I am sure you would share 
my concern about overbuilding. It would be something that you 
wouldn't want to see. But an additional concern that I have 
about overbuilding is it threatens the viability of a loan. So 
if an area is so rural that one broadband provider can't exist, 
it is uneconomical for them, then I think it is doubtful that a 
federally funded competitor can survive for long at all. So how 
does the RUS address overbuilding concerns when specifically 
addressing the viability of a loan?
    Mr. Adelstein. That is a great question, something we think 
a lot about. We are a financial institution, essentially, with 
a very low default rate. Our default rate in telecommunications 
programs is about 6.2 percent, so we are very careful about not 
building broadband in places where competition is going to make 
it impossible for our loan to be paid back. We do a careful 
market analysis. As a matter of fact, in the BIP program we 
required each of our awardees to do a market analysis of where 
broadband was. We open it up for public comment from incumbents 
to say where are you serving in that territory? But we didn't 
take their word for it or the market analysis' word for it. In 
the application where there was about to be a successful award, 
before we finalize that, we send our field staff in to verify 
both the market analysis and the incumbent reports to determine 
what the level of competition was.
    And if we determined there was too much competition, that 
there wouldn't be a sustainable business as a result, we denied 
the award as not being financially----
    Mr. Kinzinger. So you don't think that there has been any 
overbuilding really anywhere at this point?
    Mr. Adelstein. Well, you know, broadband doesn't follow 
neat lines, and sometimes there are places where there is 
competition, other times there is none. For example, there 
might be a small town where the cable company might have built, 
but it is surrounded by hundreds of square miles of rural area 
and the builder that--the applicant might say I am going to 
serve my entire area which might include the town, and often 
this can be very much be upsetting to the cable company that 
has made its own private investment there, but without them 
building their entire network, it wouldn't be financially 
feasible for them to serve only the rural areas that are very 
dispersed.
    Mr. Kinzinger. Another question I have for you, there is 22 
BIP products have yet to receive disbursement, I believe. The 
purpose of the Recovery Act was to stimulate the rural economy 
with shovel-ready projects, which has become so popular lately. 
Are these projects, these 22 projects, that may be slightly 
different now, but are these 22 projects in compliance with 
their awards?
    Mr. Adelstein. Well, they are so far. We would have 
rescinded them. As I indicated, we rescinded a number of 
projects. Some of those projects have begun but haven't done 
draws. Others haven't begun yet for a number of reasons.
    Mr. Kinzinger. What are some of those reasons they haven't 
begun?
    Mr. Adelstein. Well, some of the reasons include that they 
are just cleared the environmental or historic review. It has 
taken a long time. Some of them are on tribal lands.
    Mr. Kinzinger. They weren't pretty shovel ready. They were 
just kind of--it just took a number of years to get to this 
point is, in essence, where we are at?
    Mr. Adelstein. It has been a learning experience for me how 
difficult it is sometimes, particularly on tribal lands to get 
all the clearances. They might have 220 different owners of one 
little parcel that they need to get clearance from before they 
can get a right-of-way. And we have been working with DIA on 
that. So there is interagency reviews, there is historic 
reviews, environmental reviews that have slowed some down. We 
do a very careful legal.
    Mr. Kinzinger. At what point when you say, OK, they are in 
compliance versus, OK, now, this has been too long, there is 
too much stuff. There is something wrong. They are not in 
compliance. We are giving the money back to the taxpayers?
    Mr. Adelstein. Well, we have done that in a number of 
cases. We have returned over $200 million to the Treasury for 
projects that can't do that. And I anticipate some of these 22 
projects will end up being rescinded. If they don't get going 
pretty soon, some of them, we are not going to be able to 
finish by the deadline, and if they can't finish by the 
deadline, we are not going to be able to disburse funds after 
that, and therefore, the project would be no longer financially 
feasible. So if they don't get going pretty soon--we worked 
really hard on these 22 to try to get them off the ground. But 
if they don't get going soon, we are not going to be able to do 
them.
    Mr. Kinzinger. OK, thank you. I yield back.
    Mr. Walden. If I could just intercede for a second. I 
represent a district that is 70,000 square miles, 55 percent of 
which is Federal land. At some point it would be interesting to 
know, of those projects that are taking so long, how many of 
those are in these very rural districts where the Federal 
Government footprint is so large, and I would hate to see them 
get disenfranchised once again by their own government because 
of the delays required by NEPA, and all these other things. So 
I am sort of off my clock, but maybe we can follow-up on that. 
I will recognize the gentleman from New Jersey, Mr. Pallone for 
5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman. I wanted to direct my 
comments and questions to Mr. Strickling, and thank you for 
your hard work and efforts at the agency.
    As you know, my home State of New Jersey was one of seven 
regions to receive funding to early deploy a public safety LTE 
network, and now, in light of the passage of the Middle Class 
Tax Relief and Job Creation Act, which included provisions to 
create a nationwide interoperable public safety broadband 
network, it sent New Jersey a letter withholding funding out of 
concerns that their project might conflict with the forthcoming 
network. And I know this may have been a tough decision for 
you, but obviously, passage of this law was always our policy 
goal, but not a reality when these grants were first awarded. 
But as you can imagine, I am concerned that New Jersey may lose 
its critical funding and its potential for early deployment.
    So I just wanted to ask you first, are you willing to 
commit to working with me to ensure that New Jersey can still 
deploy its project, as long as they are able to ensure that 
they will not interfere with the new law?
    Mr. Strickling. Sir, we will want to work with you. We want 
to work with the grantee in New Jersey, and we want to work 
with all seven of our grantees to chart the best path forward 
given the reality of the new law. You know, your comment about 
what we knew in 2010, though, I guess I would take a little 
issue with in the sense that as partly from the grants we did, 
it helped the administration, I think, come around to the view 
that what we need here to be successful is a single, national, 
interoperable network.
    The philosophy before that time was much more one of 
cobbling together a network of networks. And on that basis, we 
provided funding back in 2010 to allow individual communities 
and States to see what they could do with this new technology. 
But we certainly learned from our projects, particularly ones 
that involved more than one community that governance 
challenges that exist when you are trying to bring together a 
large number of parties to agree on how to build these 
networks. We have talked already about the BAYWEB project in 
San Francisco, which clearly was challenged because of the need 
to bring together a number of counties and cities in the Bay 
Area into an appropriate governance structure. So I think out 
of that emerged the new philosophy that Congress adopted in the 
act in February, and it is on that basis on which we have to 
determine how best to go forward with these projects and how do 
we create that pathway that ensures that that equipment is 
going to be compatible with whatever FirstNet comes up with, 
and also provides a pathway to make that equipment available to 
the public-private partnership that has now been envisioned in 
the new legislation. But the answer to your question is yes, we 
want to work with you and the grantee to find a way forward 
here.
    Mr. Pallone. In light of what you just said, New Jersey has 
asked for an extension of time for its project which is pending 
before you. In light of what has happened, would you grant our 
extensions so we can ensure that the project would be 
interoperable with the forthcoming network? I mean, part of the 
reason why they put this request for the extension in, is to 
make sure that it is interoperable with the new network.
    Mr. Strickling. So as I indicated in responding to the 
questions from Congressman Waxman----
    Mr. Pallone. I know that mine are similar, but I am asking 
them for my State.
    Mr. Strickling. Well, we are going to seek from OMB. It 
will be OMB that will have to grant us the ability to allow 
these projects to extend beyond September of 2013. We will put 
that request to them and I am optimistic that they will grant 
that, but I don't control that. But I would hope and expect 
they will do that.
    Mr. Pallone. I appreciate that. Thank you very much. Thank 
you, Mr. Chairman.
    Mr. Walden. The gentleman yields back the balance of his 
time, the chair now recognizes the gentleman from Illinois, Mr. 
Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and welcome. It is 
good to see you all again. And let me start with Mr. Adelstein, 
welcome. If you don't know what is going on on USF, based upon 
your past life, and being inside the room, then no one does. So 
I hesitate to fully accept your answer to the question that was 
posed to you.
    Let me ask about carryover funds in the RUS, which the 
carryover stimulus and any other aspects that that might have. 
What do you plan to do it with, and obviously, with deficits 
and debts, if they haven't been spent, the Treasury might be a 
good place for it to go.
    Mr. Adelstein. That's right. All unobligated balances that 
we have go back to Treasury. We rescinded a number of projects; 
99.9 percent of the funds have gone back to Treasury, $267 
million. If any other projects are rescinded rather than carry 
them over, they will be returned to Treasury.
    Mr. Shimkus. We would love to see it out in rural America, 
and we do question some of this debate. I understand a cable 
company providing to local community, and then so you are 
trying to help get to the rest of the area. I would argue that 
maybe working with the cable company to deploy, versus, I mean, 
there is an issue about even though you build it, whether they 
come. Secondly, will they be able to still be able to afford 
it? Because you create, as we talked about numerous times, a 
competing system that may not have the base to fully survive.
    So in your example of overbuilding, I think better planning 
with the incumbents who are providing in a community might help 
strengthen the base and the portfolio of the servicer.
    Mr. Adelstein. We do work with cable companies and we are 
open to doing--lending to them. I actually recently visited the 
American Cable Association to encourage them to come in and 
borrow. We love lending to them.
    Mr. Shimkus. Why do you think they are reticent? It is 
because it is too difficult, bureaucratic, time-consuming, not 
worth their time?
    Mr. Adelstein. Some of them do borrow from us. Sometimes 
their financial structure is not one that lends itself to our 
mortgage, which can be very aggressive. Other times, frankly, 
they tend not to build outside of the town, and this is a 
business decision. I am not criticizing it. But the way cable 
has built out traditionally, it has kind of ended at the town 
line and hasn't been cost-effective for them to go outside of 
it. And that is where some of this issue comes up.
    Mr. Shimkus. Right, but if we are giving grants and low-
interest loans and stuff, and overbuilding a competitor, don't 
you think that might be incentive enough? I mean, there is a 
reason they are not. Just, I mean, they don't want a competitor 
in their backyard subsidized by the government.
    Mr. Adelstein. That is why I went to them and I suggested 
that the best defense is to be their borrower. We want them to 
borrow from us. We would love to work with them.
    Mr. Shimkus. I need to go pretty quick, so I hate to cut 
you off. Mr. Strickling, your answer to this West Virginia 
stuff is just really bad.
    And let me, if I may, Mr. Chairman, submit another story 
from the West Virginia Gazette, addresses this same issue.
    Mr. Walden. Without objection.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 79965.055
    
    [GRAPHIC] [TIFF OMITTED] 79965.056
    
    Mr. Shimkus. And it basically says, when people, when 
people spend other people's money, I don't care if it is you, I 
don't care--we spend it poorly. This story, there are 366 
routers sitting in storage.
    Mr. Strickling. There is a reason for that, sir. The 
project is not built.
    Mr. Shimkus. And we're already 2 years into the--why 
couldn't you, even if they are going to sit in storage, and the 
question is whether they will ever get out of storage, why 
would you have a 5-year maintenance agreement that 2 years have 
already ticked off the 5-year maintenance agreement?
    Mr. Strickling. Well, sir, because they could get the 5-
year maintenance agreement for the same cost as the 3-year 
maintenance agreement. Had they purchased a 3-year maintenance 
agreement they wouldn't have been----
    Mr. Shimkus. This is great and I hope people continue to 
dig into the story because you are very eloquent. But the 
bottom line is, I would like to see the bids, and I would like 
to see what West Virginia and those folks put out on the bid 
application because your premise is, they just bid out for all 
of these routers at this size, and so they got the best product 
based upon a bulk purchase.
    I would like to expect if someone did some due diligence, 
if it was my money, or if it was someone who had some fiduciary 
responsibility, they would identify the bid based upon the 
need. So Mr. Chairman, I would hope there is a way to find out 
and analyze the bid for the State of West Virginia, and whether 
the bid was so cavalier that they asked for routers that would 
serve 500 when the need was 3, and I bet if you produced a bid 
based upon the need of the State of West Virginia, and the 
locations, it would be a much competitive and a lower cost than 
this bulk purchase of tremendous routers. I don't know how we 
would do that.
    Mr. Walden. Well, let me ask----
    Mr. Strickling. Congressman, we would be happy to work with 
your office to supply any other documents from West Virginia.
    Mr. Shimkus. Yes, because I mean, as much as you try, you 
just can't defend what is going on in West Virginia, and I 
yield back my time.
    Mr. Walden. I, and so Mr. Strickling, maybe you can provide 
for the committee. I don't know in terms of the bids if there 
is confidential information we are not allowed to have.
    Mr. Strickling. Well, this is all within the confines of 
the grantee, West Virginia, but I think in our role as 
overseeing these projects we will get to the bottom of this, 
and provide any other information you all would like to have 
about it.
    Mr. Walden. Yes, we are just after the facts, as they say. 
So that would be helpful. So you can provide us with the 
various bids and all on these routers.
    Mr. Strickling. I will determine what exactly can be 
provided from the grantee, but we will endeavor to provide you 
all the information we have on this.
    Mr. Walden. And if you can let us know what other 
information that you don't have that we should have in our 
quest here, we can always, I am sure, contact West Virginia and 
get some answers as well. I think our last committee member, 
Mr. Bilbray, if you have got questions, you have got 5 minutes 
to ask them.
    Mr. Bilbray. Thank you, Mr. Chairman. Mr. Chairman, I have 
always worried that experts--what is the line they always say, 
generals always fight the last war, not the next one. In fact, 
I remind all of my colleagues that the experts in the military 
never wanted to accept the Predator; thought it was a toy. I 
think history has proven that because Congress pushed it, made 
them look at new technology, it was aligned. There is this 
broadband map that we have been given the coverage of this. You 
guys are familiar with it. Does this include, have you 
considered satellite technology in the covering of this 
broadband? OK, Billy.
    Mr. Strickling. I am not sure which map you are holding up, 
sir.
    Mr. Bilbray. Well, let's just say it shows a lot of areas 
in California and east of the Mississippi that is not being 
covered today, and it appears to me that it does not reflect 
the new satellite technology that is going on line that will 
totally cover the areas that you are saying cover. So I am 
concerned that you are fighting the last war and not using the 
next generation of opportunities. Are you considering an 
extensive use of satellite technology to cover these areas that 
you say you want to fill in?
    Mr. Strickling. You want to take that because you had a 
satellite program?
    Mr. Adelstein. In terms of our program, we did provide $100 
million in grants to make sure that people had access to 
affordable new-generation satellite service. So we certainly 
took that into account in our bid program.
    Mr. Bilbray. And how did you survey what was coming on 
line? It reminds me of the fact that those little people movers 
over at Dulles. It was a great idea until they hadn't checked 
that the 747 was on the drawing board, and as soon as those 
super jets showed up, the whole technology was obsolete. Are 
you saying that in your grid, you are covering and actually 
considering that there is private sector satellites coming on 
line that will cover these communities and provide that 
coverage?
    Mr. Adelstein. We only allowed those grants to go to areas 
that had absolutely no broadband service whatsoever. So we 
ensured that they didn't have any access to terrestrial or 
broadband before we provided an award to allow for a consumer 
to get----
    Mr. Bilbray. So let's roll back. So in other words, you 
were fighting the last war; didn't look at the fact that there 
was a new technology coming on that was going to be available. 
Basically, you created the same mistake that Dulles did. You 
didn't check with the private sector and the technology, what 
was in line to be on the service level before you start 
engineering your tactical approach to this issue.
    Mr. Adelstein. No, we did fund satellite. We funded the 
latest generation of satellite service to places that didn't 
have access to any other service. So we took into account the 
fact that for those areas that didn't get broadband through any 
of these other awards, we wanted to make sure----
    Mr. Bilbray. Well, did you check to see if there was 
private sector that was already doing this without your 
subsidies?
    Mr. Adelstein. Well, there was. I mean, satellite service 
was available. It wasn't available at the same price point. 
Wasn't available for the same--we were able to give people 
access that they wouldn't have otherwise had because of the----
    Mr. Bilbray. Because we have them going on right now where 
the whole eastern, east of the Mississippi, if not east of the 
Plains, is going to be provided by service three times of what 
the minimum that we are requiring here, but I am still seeing 
you look like there is big gaps here that somehow you are 
trying to fill in, and when the discussion of a National system 
is being considered, why would you go with a terrestrial system 
if you have got a satellite system coming on board that treats 
everybody equally, except for the fact that maybe you don't get 
to give one grant here, one grant there. Because the private 
sector looks like they see the opportunity to invest in it. 
Right now, as far as I know, the systems is moving forward 
without your subsidy. Are you saying that you are engaged with 
everybody who is involved with that expansion, or you are in 
communication with everybody that is doing the private sector 
overlay?
    Mr. Adelstein. Yes. We actually gave the awards to Hughes 
Satellite, as well as EchoStar, and Spacenet, so we were 
working with the companies providing the latest and greatest 
satellite service to make sure that they could get that to the 
most rural----
    Mr. Bilbray. So you chose which private sector you wanted 
to give the grants to, but did you interview and review 
everybody that was in the field?
    Mr. Adelstein. Yes, it was a competitive grant process and 
they put the best bang for the buck for the taxpayer dollar to 
get service out to those rural areas that didn't otherwise have 
service.
    Mr. Bilbray. The question I have, though, is why would you 
be giving a grant out for a service that is coming on line 
anyways though? Why was the taxpayer's money put on there if 
you have already got companies saying we are going to do this 
regardless?
    Mr. Adelstein. The purpose of the grants was to reduce the 
cost to the end user so that it was affordable for them. So the 
initial hookup cost was reduced and the initial subscription 
costs were reduced.
    Mr. Bilbray. What I don't understand though, is that they 
are talking about service that would be the same in New York as 
it would be in West Virginia, and that that would be the same 
service across the board. I don't understand. Again, did you 
get into this that we would use the terrestrial system the way 
you have make that extra effort in certain areas, but with this 
technology, there is no extra effort needed. It is just like, 
you know, the GPS. I mean, the guy in, you know, Cleveland gets 
the same service as somebody in Midland, Texas. But the 
question is, you picked winners and losers here, and went and 
subsidized some when you have private sector people who are 
implementing the same service without subsidy.
    Mr. Adelstein. Well, it was the same private sector people 
that were thrilled that we were doing it.
    Mr. Bilbray. Of course they are thrilled. They are getting 
fed taxpayers' money to do things that they would be doing 
anyway. This is where we got this real problem with, was there 
a benefit to the general public for the expenditure of the 
general public's money at a time when the public is pretty mad 
about how we are doing oversight for that expenditure. Let's 
face it, there is a credibility gap here and when you say 
excuse me, Congressman, I go back to San Diego, and they say 
you wrote checks for these companies and there is other 
companies that are doing the same things with no checks. Why in 
the heck did you spend my taxpayers' dollars on that? Unless it 
was just basically to get money out to our friends and be able 
to stimulate their businesses over somebody who is not our 
friends.
    Mr. Adelstein. The purpose was to get broadband to people 
who didn't have broadband through any other means. And these 
companies, as you indicated, are doing an excellent job of 
getting broadband out----
    Mr. Bilbray. My point being, I think that if you go back, 
you will see they were going to get this regardless because the 
market was being made available through new technology. I yield 
back, Mr. Chairman.
    Mr. Walden. The gentleman's time is expired. I recognize 
the gentleman from Texas, who I believe is going to go ahead 
and go with the gentleman from Georgia, Mr. Gingrey.
    Mr. Barton. I thought Mr. Gingrey would go and then I would 
go.
    Mr. Walden. That is very kind. Mr. Gingrey, you are up 
next; 5 minutes.
    Mr. Gingrey. Mr. Chairman, I thank you and I thank the 
chairman emeritus for his courtesy in regard to that. 
Administrator Adelstein, the question that I am going to put to 
you has actually already been touched on by the gentleman from 
Illinois, Mr. Kinzinger, as well as my colleague from New 
Hampshire, Mr. Bass.
    I am concerned that many of the broadband loan and grant 
programs run by RUS duplicate programs within the Universal 
Service Fund. Do you agree that duplicative Federal programs 
administered by different agencies with different oversight 
structures and rules are problematic?
    Mr. Adelstein. I don't believe--I think duplicative 
programs are problematic. I do not believe these programs 
duplicate each other at all.
    Mr. Gingrey. Well, would you commit to working with us to 
make sure, to eliminate any such programs, and consolidate 
Federal spending to get the biggest bang for the taxpayer's 
buck. You don't want that to happen, do you? You want to make 
sure that these programs are not duplicative. That is your 
answer, isn't it?
    Mr. Adelstein. Yes.
    Mr. Gingrey. Thank you. I understand that RUS will not lend 
money. I think you even said this a second ago. The RUS will 
not lend money to overbuild an area where there is an existing 
RUS borrower because doing so would put the RUS's investment at 
risk. You don't want to compete with yourselves. Doesn't that 
same logic apply to the use of RUS money to overbuild 
potentially an existing broadband provider financed by a local 
bank? Should the government really be in the business of 
putting another business's privately financed investment at 
risk, as an example, a credit union or a community bank? The 
reason I ask that question, I am from Georgia, as you probably 
know, and community banks are struggling, and we had a lot of 
bank failures, and other States as well are struggling with 
that.
    And so if the local lender, the community bank, the credit 
union, whatever, has already financed a small business in that 
area, would you want to then create competition for them? Do 
you look at things like that?
    Mr. Adelstein. Well, we don't want to create competition 
where there is adequate service. I mean, the best, I think 
defense against that, is if the existing provider is providing 
service that is of a level of quality that there is not a 
market for another provider to come in and provide service. So 
we look at that very carefully in our loan application process 
to determine whether or not there is existing competition in a 
service area that is being proposed and if there is, we often 
will----
    Mr. Gingrey. Well, I am glad to hear that answer. I have 
got another question that I am going to ask all of the 
panelists to respond quickly to. But first, before I do though 
that, let me go to Mr. Gray. Mr. Gray, in your testimony you 
noted that in past audits, RUS has not always maintained its 
focus on providing broadband service to rural communities 
without existing access to broadband service.
    I think that was your quote. Additionally, in the March 
2009 OIG report on RUS, that report stated: A structured RUS 
broadband program may not provide service to the most rural 
residents.
    I understand that another audit is underway, so please 
comment to the degree that you can on these two questions. When 
looking at the previous audit, would you consider the programs 
of RUS broadband program to be similar to what USF, Universal 
Service Fund, hopes to accomplish through this new high-cost 
fund that the FCC created?
    Mr. Gray. Currently, Congressman, we are not looking at the 
Universal Service Fund's impact in our current audit work. You 
know, we are looking at our previous recommendations as they 
relate to BIP. However, definitions did change for BIP, and so 
we are looking at that very closely as well.
    Mr. Gingrey. Well, let me suggest to you that OIG, I think, 
should rethink the need for these programs in light of what FCC 
did in creating this high-cost fund. Now, for all of you, and I 
will start with you, Mr. Strickling. I would like to ask this 
question: Congress and the administration have made it a 
National priority to provide affordable broadband services. 
However, in many instances these vital services are being taxed 
at the State and local level at rates comparable to alcohol and 
tobacco. It would seem that these regressive taxes could have a 
negative impact on continued broadband development. With this 
in mind, and do you have this in mind, do either the RUS or 
NTIA factor in what tax rate a State or locality imposes on 
broadband services before making a determination of awarding a 
grant? Let's start, Mr.----
    Mr. Strickling. I don't believe we did, no.
    Mr. Adelstein. We do look at all sorts of revenue and what 
the cost would be to the end user, and evaluating what the take 
rate would be so that would be taken into account in our 
financial feasibility analysis.
    Mr. Gingrey. Now for the Inspector General. Mr. Zinser.
    Mr. Zinser. Well, I think that is one of the issues that 
comes up in these projects that involve multiple jurisdictions. 
The jurisdictions need to know that they are not buying a pig 
in a poke where down the road they are going to be on the hook 
to pay these exorbitant fees or raise taxes to afford the 
systems, and I think that is a key issue in these 
multijurisdiction projects.
    Mr. Gingrey. Mr. Gray.
    Mr. Gray. I would agree with that. I think keeping the 
costs low to the underserved, once there is service provided, I 
think as part of that, the cost to the subscriber needs to be--
--
    Mr. Gingrey. In closing, because I know I am beyond my 
time, and Mr. Barton has already extended the courtesy to me, I 
would suggest that the Inspector Generals, you need to talk to 
these other two gentlemen and make sure they agree with you, 
because I agree with you. But you need to look at these things 
very carefully. Thank you, Mr. Chairman, I yield back.
    Mr. Walden. The chair actually recognizes the gentleman 
from Kentucky, Mr. Guthrie, who was here when the gavel came 
down. If he wants to go ahead of Mr. Barton, he should feel 
free to do so.
    Mr. Guthrie. I will certainly defer to Mr. Barton if he 
wants to go first.
    Thank you very much. I just have a question for 
Administrator Adelstein, and Secretary Strickling. I know when 
the NTIA just put out a map that has all of the BTOP programs 
where they are moving forward. My understanding is both funded 
through the stimulus, that the NTIA has the BTOP program, both 
funded through the stimulus, as the RUS has the BIP program, 
which are similar programs. And so the question is, that we 
look at, we have a map that is now through the Commerce, that 
is posted in there. I don't think there are any BIP projects on 
the map. Is there any effort to coordinate where this--am I 
going down the wrong path? Is there an effort to coordinate 
where you can see where they are, the similar programs for 
different agencies are being done separately?
    Mr. Strickling. It is a very good question, and I don't 
know the answer to it, but maybe Jonathan and I should get 
together after this hearing and talk about that.
    Mr. Guthrie. The question I was--Jack Kingston I just 
talked to--Congressman Kingston from Georgia was in Africa, and 
he was in a place where they had no running water, no 
everything, no running water, no roads, no electricity, and the 
lady's cell phone rang that he was talking to, and it dawned on 
him that the private industry was putting the cell phones in 
place and the government was responsible for everything else. 
And then if you went anywhere in the world, you can swipe a 
card and get your money from your bank account in your 
currency. And so some things that we do with the government 
sometimes, we get conflicting patterns, or it is not as smooth 
as when the free market or the private sector does it.
    These are important programs. I am not saying that, but it 
just seems like if there are similar programs through similar 
funding sources, we would have some similar administration to 
make sure we are not duplicating. Because you can't tell that 
from your map because you don't know where your map is.
    Mr. Strickling. Well, to that end though, I would say that 
during the application process back in 2009 and 2010, our two 
agencies collaborated very closely on this program, and indeed, 
we had two rounds of funding. In the second round, based on 
what we learned in the first round, we each adopted different 
funding philosophies so that we could avoid the question of 
duplication and overlap. And I think we were very successful in 
that regard in both of our rounds. In Round 1, the way we 
handled it was to make sure that we both weren't both looking 
at the same applications and stayed in close contact on the 
projects as we considered whether or not the fund had given 
applications or not, because in Round 1, people could actually 
apply to both programs.
    We actually had duplicate applications, or it was the same 
application, but they were being reviewed by both agencies. We 
fixed that in Round 2, because each of us adopted our own 
separate funding philosophy to deal with the very question you 
raise.
    Mr. Guthrie. I think that is very good, and it would be 
helpful if you all did have it coordinated and one simple place 
for us to look to see where they are all on one map. So thanks 
for your willingness to check into that. I appreciate that, and 
I yield back.
    Mr. Walden. The chair now recognizes the gentleman from 
Texas, Mr. Barton, for 5 minutes.
    Mr. Barton. I thank the chairman, and the Ranking Member, 
Ms. Eshoo, for holding this hearing. My questions are going to 
be to Mr. Strickling on this BTOP. I have had inquiries in my 
office from the State of Texas and the State of Mississippi. 
The State of Texas got a waiver to begin to implement its 
statewide system, and Mississippi actually got, I think, up to 
$70 million, and if I understand correctly, they have almost 
completed their system. And now they have gotten these letters 
from you, Mr. Strickling, saying to cease and desist.
    My understanding is that if a network is meeting its 
milestones, that there is not a requirement that work be 
stopped. It is only if the work hasn't been done, or if it 
looks as if they are doing it wastefully and inefficiently or 
outside of the scope of the law. So could you elaborate why you 
told Mississippi to stop their network, and why Texas, who has 
a waiver, and is not receiving much, if any Federal funds to 
build theirs, has been asked to stop also? Because if you stop, 
my understanding is, we are basically giving up 18 months to 24 
months. And in the case of Mississippi, their network, if I 
understand correctly, is going to be operational sometime this 
fall.
    Mr. Strickling. So, yes, sir. I can respond to all of those 
points. First off, we don't have any direct engagement with 
Texas. They did not receive any funding from us. You are 
correct that they have a--they are one of the FCC's 21 waiver 
jurisdictions. We have not filed at the FCC in terms of a 
specific recommendation to the FCC as to what they should do 
with those jurisdictions, but I think as I explained why we did 
what we did with Mississippi, you will see that the same 
considerations apply with Texas. What has changed here is that 
Congress passed the Middle Class Tax Relief Act in February and 
has now directed, through NTIA, the creation of FirstNet to 
build a national, single interoperable public safety broadband 
network.
    Our problem is the FirstNet board won't stand up until 
August. I don't know what decisions they are going to make 
about how to build this network, but it is clear from the model 
Congress has provided us, that you expect this to be a public-
private partnership that will be largely built by private 
industry, and it will have to operate as a single interoperable 
network.
    My concern is, that today, I see no path right now as to 
how we take that investment in Mississippi, and whether it will 
even be interoperable with the decisions that have yet to be 
made by FirstNet, and even if it turns out it is, how that 
equipment ever makes it to that public-private partnership that 
is now going to be created.
    Mr. Barton. Well, isn't better, though, if it is almost 
operational to go ahead and let it be built and then integrate 
it into the system, as opposed to stopping it and waiting 2 
years?
    Mr. Strickling. Well, but you have made a big assumption 
there in terms of integrating it into the National network. The 
question of interoperability of this gear in the public safety 
environment is still an open question, and if what you are 
suggesting is, I should go ahead and let $380 million of 
taxpayer money be spent unchecked in the hope that I couldn't 
verify today that this equipment will be interoperable with 
decisions that have not yet been made by FirstNet and will 
somehow be made available to the private companies that will 
eventually bid on this network, I think that is risking 
taxpayer money and we would be criticized in 2 or 3 years.
    Mr. Barton. I am not a Congressman from Mississippi, but I 
have great respect for Mississippi, and when I am told that 
their network, which I--don't hold me exactly to these numbers, 
but I think I was told that Federal taxpayers have given the 
State of Mississippi $70 million, and it has almost all been 
spent and it is almost ready to go. Why would we not make that 
network operational? I mean, maybe you have to patch, do some 
sort of an interstate patch 2 years from now, but if you just 
sit on it, it can't be used. You wasted $50- to $70 million. 
That, to me, doesn't seem to make sense. The money has been 
spent, the equipment has been bought. It is being installed. 
How much different is their network going to be than a network 
that is still on the drafting board?
    Mr. Strickling. Well, sir, the network, they haven't spent 
all of the money and the network isn't all installed. They have 
been taking delivery of equipment, largely because 
manufacturers have been asking and pushing for delivery of 
equipment and rendering bills. But as of the last time we 
checked, which was a few weeks ago, Mississippi had only spent 
$22 million of the $70 million.
    Mr. Barton. Well, is it an open question? I mean, if they, 
if officials in Mississippi can show due diligence and that 
they appear to be doing things that make sense, is it open that 
they could go ahead and complete their network, or do you 
disagree with my assessment that their network is about to be 
operational? Are you saying it is going to take them 2 or 3 
years anyway, or----
    Mr. Strickling. No, but I think it is somewhere in the 
middle between are they ready to go, versus 2 to 3 years. But 
here is our point: With respect to every one of these grants, 
we are going to work with the grantee over the next 45 days to 
determine what part of the project can go forward and on what 
basis.
    Mr. Barton. So there is some----
    Mr. Strickling. If, in fact, Mississippi has spent dollars 
that are not retrievable, I think you make a good point, which 
is why not go ahead and let them try this out. We will learn 
something from it. I don't know today that that is the case. I 
don't know to what extent they have the ability to put this 
gear back in the box and send it back to the manufacturer and 
get a refund. And I think we have to look at all of those 
questions now before we allow all of these dollars to be spent 
on a network that I can't tell you today will, in any way, end 
up in the FirstNet network that Congress has not directed to be 
designed.
    Mr. Barton. I understand that. The chair has been very 
gracious. My time is expired, but let me just give an editorial 
comment. If States that have grants are using them properly, I 
would hope we have the flexibility to let those continue with 
the understanding that they have to meet the standards and 
interact and integrate into this new program. I just hope we 
don't waste money that has already been spent, and I hope that 
you and the FCC have enough flexibility to use common sense to 
work with the States to figure out what is the most 
commonsense, cost-effective path forward. And with that, Mr. 
Chairman, I yield back.
    Mr. Walden. I thank the gentleman for his questions and 
comments, and I now recognize the gentleman from Florida, Mr. 
Stearns, for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman, and when you look at 
this hearing, Mr. Chairman, ``Broadband Loans and Grants,'' it 
reminds me of the hearing I have had dealing with loans and 
grants from the Department of Energy, as chairman of the 
Oversight Investigations Committee, particularly looking at 
Solyndra and all of these others, you come away with the 
feeling that the government obviously is not equipped to handle 
a lot of these grants and loan guarantees without a whole lot 
of supervision.
    But I would say, Mr. Strickling, that I appreciate your 
prompt response to our committee's questions, and documents 
that we requested as we investigated LightSquared/GPS interface 
interference disputes, so I appreciate your response. On the 
other hand, Mr. Adelstein, I sent you a letter on December 
16th. Mr. Chairman, if I could, I would like to make this part 
of the record in which I requested Mr. Adelstein to provide 
information by January 31st, 2012. If I could have this 
letter----
    Mr. Walden. Absolutely. I believe I was on that, as well.
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    Mr. Stearns. So I guess the question, are you familiar with 
this letter that I sent to you?
    Mr. Adelstein. Yes.
    Mr. Stearns. OK, I guess the real question then would be to 
you, considering you said in your letter back to me, you said 
that ``because files pertaining to the additional material 
requested are voluminous and under review, we anticipate that 
we can deliver the remaining documents by January 31, 2012.''
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    Mr. Stearns. So you have got February, March, April, May, 
and so we are moving along here, almost 4 months ago. So I 
guess the question is, I guess when can the committee expect to 
see the documents that involve our investigation into Open 
Range Communications' bankruptcy, and I think we even went back 
to November 9th, is when we started the original request, and 
so if you could be so kind as to provide when you will comply 
with even your own letter.
    Mr. Adelstein. We have worked very closely with your staff 
on exactly what the timing is on that, and we are going to get 
that to you forthwith. We are working now to gather that. We 
have already provided, I think, over 10,000 pages of documents 
to the committee. We are happy to provide whatever you need in 
a time frame that you need it. I mean, what we have available 
is----
    Mr. Stearns. The time frame from your own letter was 
January 31st. So it is not what we requested. You said in your 
letter you would comply by January 31st. So I think we are just 
puzzled why you are not.
    Mr. Adelstein. My understanding is we worked with your 
staff to explain exactly what it is that we have and how we can 
organize it so it best meets your needs. The scope of what we 
are doing has been clarified, and----
    Mr. Stearns. So you are saying you don't understand what we 
are requesting?
    Mr. Adelstein. No, we do. We understand very clearly.
    Mr. Stearns. Then why can't you just comply?
    Mr. Adelstein. There is a lot of documents.
    Mr. Stearns. It takes 4 months? I mean, when you wrote this 
letter and said January 31st, you would comply, did you not 
realize that you couldn't comply?
    Mr. Adelstein. Well, I think it has been more material than 
I had anticipated. In fact, this is voluminous.
    Mr. Stearns. OK, I accept that. Also you know that the Lake 
County Fiber Network Project was awarded almost $67 million 
from RUS, and this was despite data that indicated that a 
substantial majority of the housing units in that proposed 
service area were already served by existing broadband 
providers. I mean, that is hard to believe. In questions for 
the record, you submitted to Congress, you promised to seek 
repayment of all of the outstanding loans. Is that correct? 
Just yes or no.
    In questions for the record you submitted to Congress, you 
promise to seek the repayment of all outstanding loans.
    Mr. Adelstein. Well, we do, yes.
    Mr. Stearns. However, there have been allegations that the 
RUS grantee in Lake County, Minnesota, received assurances from 
a high-ranking RUS official that RUS would not seek repayment 
of the loan in the event of a default by Lake County.
    In the event this project fails, will RUS require Lake 
County to completely, completely pay off the $56.4 million 
loan, yes or no?
    Mr. Adelstein. Yes.
    Mr. Stearns. OK, that is good. We are also looking into 
Open Range Communications' bankruptcy that left $73.5 million 
in taxpayer funding at risk or of default.
    Mr. Stearns. Among the reasons for the bankruptcy was Open 
Range's reliance on a satellite network that was not fully in 
compliance with its license and which the FCC eventually 
revoked.
    How much did RUS understand about the FCC licensing process 
before it even approved the loan to Open Range Communications?
    Mr. Adelstein. I wasn't at the RUS when it was approved, so 
it was approved by my predecessor in the previous 
administration, but I think that to his credit that the RUS and 
the administrator at the time took very careful steps to look 
into that spectrum issue and to protect the taxpayer in the 
event of problems which gave us the ability later to work with 
the awardee and try to minimize the exposure to the taxpayers. 
So I think they were cognizant of the issues there.
    Mr. Stearns. But you weren't.
    Mr. Adelstein. Well, I was when I came on board. We looked 
at this thing, we worked with the FCC very closely. As a matter 
of fact the, documents indicate that we did work with the FCC 
to ensure that the operator could continue to operate and there 
was no disruption of service because of the spectrum issues, 
that was not the issue that resulted in the bankruptcy.
    Mr. Stearns. Mr. Chairman, in closing, I would like to put 
in the record, the Communications Daily has a paragraph that 
Mediacom officials predicted default, and this is going back to 
my earlier question with Lake County fiber network. And the RUS 
has given assurance to Lake County that it wouldn't be 
responsible to repay the debt beyond the proceeds of a 
foreclosure auction on a network.
    Mr. Adelstein has indicated that they will be forced to 
pay, but somebody, some official, has indicated they won't. So 
I would like to make this part of the record, so we can better 
understand why Lake County fiber network thinks they don't have 
to pay, yet Mr. Adelstein said they will.
    Without objection.
    Mr. Walden. Without objection.
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    Mr. Walden. Mr. Adelstein.
    Mr. Adelstein. To respond to that, I don't know who said 
that. I tried to track that down. I don't believe that anyone 
at RUS said that. That was not attributed directly to us. 
Somebody said that somebody said that. There is no evidence 
that it actually happened. And I certainly would reprimand 
anybody that would make that.
    That would be a violation of Federal law. We have a 
requirement under the Credit Reform Act to aggressively seek 
collections for any defaults on debts, and we always have. 
There has never been any evidence that we have done otherwise. 
So I can't imagine that anyone would say such a thing. But 
maybe there is a misunderstanding and somebody mischaracterized 
what was said.
    Mr. Stearns. Well, I can understand being an elected 
official and a politician, lots of people attribute things to 
what I say to which I didn't say. I think you win your point 
overwhelmingly there.
    Thank you, Mr. Chairman.
    Mr. Walden. With that, we will now turn to our final set of 
questions in this hearing to Mr. Scalise for 5 minutes.
    Mr. Scalise. Thank you Mr. Chairman. I appreciate you 
having this hearing.
    We just started the Spectrum Working Group in the House. I 
want to commend the chairman for putting that together, and we 
are going to be looking at a number of things that we can do to 
try to free up spectrum, especially in the government sector.
    I want to ask you, Secretary Strickling, NTIA just gave out 
with a report that looked at government spectrum, and I think 
in the report it said it would take 10 years and $18 billion to 
clear Federal users off the 1755 through 1850 megahertz range.
    Where did you get those numbers from, especially to take 
that long with that amount of money to free it up?
    Mr. Strickling. Yes, sir. The individual agencies holding 
the spectrum assignments provided the cost information and the 
schedule information in terms of how long and how much they 
thought it would take for them to totally relocate their 
systems out of the 1755 to 1850 band.
    Mr. Scalise. Was there any third party validation that was 
used to look at those numbers as well? In the past, we have 
seen some people try to guard their spectrum and even if they 
might not be utilizing it as effectively and efficiently as 
they can, and there may be capacity there. You know, you are 
asking them to give some up, and oh, by the way, can you tell 
me what you don't need? Sometimes you might not get as clear of 
an answer as if you maybe had somebody third party looking at 
what they really are using and what is available.
    Mr. Strickling. Certainly. My understanding is that each 
agency would have worked with their OMB examiners as part of 
this effort. But I honestly don't know to what extent and how 
detailed that review was. But if I could just say that what we 
learn from that report was that 10 years and $18 billion, even 
if let's assume it is now 8 years and $15 billion, if more 
detailed cost reviews had been done, it still doesn't solve our 
problem, which is that is too much money and it takes too long 
and has led us to recommend, as we did in the report, that we 
really need to have a new paradigm for how we find additional 
spectrum for commercial use----
    Mr. Scalise. Do we know how accurate those numbers are? 
Have there been estimates that you all have made in the past 
where then you had a track record of actually doing it to 
compare and see if the estimate was way off?
    Mr. Strickling. The last time this would have been done 
would have been the 1710 to 1755 review about 10 years ago, and 
there would be a track record on that, and I don't know what it 
would be, but it would be possible to look at that.
    Mr. Scalise. Can you give that to the committee? Get what 
the estimate was and then ultimately----
    Mr. Strickling. Sure. One of the things to keep in mind, 
too, was that up until now, before the spectrum act 
improvements in February, there hasn't been money for Federal 
agencies to do the kind of detailed planning for reallocation 
that has now been made available in the new law passed in 
February. And for that, we absolutely thank the committee for 
its efforts to deliver that to us. That is a very important 
improvement in the Spectrum Relocation Act and one that will 
help us immeasurably and we move forward in terms of giving 
agencies the resources they need to do this kind of planning 
before an auction.
    Mr. Scalise. Chairman Walden worked real hard on that, and 
it was something that was a major accomplishment to get 
through. And I have some questions about that.
    I have one final question on the relocation issue. If you 
could go back, I don't know if you have looked at this, if you 
would just limit it and instead of looking at the entire range 
of spectrums, from 1755 to 1850, if you narrowed that down to 
1755 to 1780 because that seems like an area that might be more 
realistic to look at instead of looking at an entire swath, if 
you could give us some estimates and projections on just that 
narrow band from 1755 to 1780 megahertz.
    Mr. Strickling. Here is our problem with that. The Federal 
agencies going back to 1710 to 1755 moved a lot of systems out 
of that band, and at that time, they were told, just move them 
up into the 1755 band, and we won't trouble you for that 
spectrum ever again.
    The problem that we have with the 1755 to 1850 band is that 
there are a number of systems in that band, such as the 
Department of Defense Air Combat Training System that utilize 
all 95 megahertz of that spectrum. Plus the agencies know that 
simply to be told, well, squeeze into the 1780 to 1850 band, 
and we won't trouble you again for that spectrum----
    Mr. Scalise. This isn't, we are not troubling you, this is 
the private sector, too, that is being troubled because they 
are being held back from their ability to create jobs. And we 
need to start creating jobs. And if some Federal agency says, 
oh, wait a minute, don't bother me, because I am holding a 
bunch of spectrum I am not using, and I just don't want to tell 
you about it, that is not their spectrum. This is the public's 
spectrum.
    And we are trying to see if there are ways to put it into 
the public using a much better way that can generate money for 
the taxpayers and that can generate a lot of jobs that are high 
paying in this country. So if somebody is worried about how 
much they are going to be put out because they have got to do a 
little bit of extra work because they are sitting on assets 
that the taxpayers of this country, because really it is their 
spectrum; it is not these Federal agencies' spectrums. So if 
they give you pushback, please give me their names, and maybe 
we will bring them in here and have a hearing if they don't 
want to do something that will comply with something that will 
create jobs in this country.
    Mr. Strickling. Sir, I agree with you 100 percent. But 
could I comment on that? Which is what we need is a new 
paradigm that will free up 95 megahertz for this band----
    Mr. Scalise. We are working on a new paradigm. We are 
working on that together. I am almost out of time.
    I want to ask you one final question. On the work that has 
been done to manage a fully operable network and a lot of 
States have been trying to get this, the Federal Government has 
been trying to get interoperable, and again, the chairman 
really did a yeoman's work in finally putting a structure in 
place. I know a number of States including mine, Louisiana, our 
Governor's office, homeland security and in the event of 
hurricanes and other disasters, our Governor's office manages 
those disasters with local law enforcement. And in cases like 
Katrina, we had New York police officers going into the City of 
New Orleans. There was no interoperability, not in September 
11, not in Katrina. We are trying to solve that, and I know at 
the Federal level now, there is a structure being put in place. 
Our State, and I am sure others have, has requested a waiver 
from the FCC so they don't have to wait a full 3 years; they 
can start putting their plan in place now using an 
interoperable system.
    It is my understanding that your agency has petitioned the 
FCC not to issue any waivers, and of course, our State doesn't 
want to wait 3 years to start moving forward on building their 
interoperable network that would work with an entire system. 
Why would you want to hold States back that already have plans 
in place like ours and have a need in place to get 
interoperability if they want to start moving forward with a 
system that is integrated?
    Mr. Strickling. Because nobody today can guarantee any of 
this will be interoperable in 3 years. The FirstNet board is 
based on a new concept from Congress, which is to build a 
single national interoperable network. It has commissioned the 
creation of a board of directors to figure out how to design 
and build that network. The reason we have pulled back on the 
$380 million of taxpayer money that was going to be spent in 
the seven jurisdictions we gave waivers in is we can't 
guarantee today that that money won't be wasted because we 
don't know yet. The board hasn't even met.
    Mr. Scalise. But if they are using LTE, for example, if 
they are using a system that is interoperable----
    Mr. Strickling. Sir, we don't know these things. People are 
using these terms----
    Mr. Scalise. The FCC----
    Mr. Strickling. ``Interoperable'' means different things to 
different people.
    Mr. Scalise. But shouldn't the FCC make that determination?
    Mr. Strickling. Well, what we want to have here is a 
network that can be built according to a business model that 
will allow this service to be provided to public safety 
entities at affordable rates. Every decision that an entity 
makes today to build their own little piece of this, even 
things as innocent as selecting a particular vendor to serve a 
particular State, can upset what the model is that Congress has 
now given us in the Middle Class Tax Relief Act.
    I am trying to preserve the flexibility and freedom and the 
prerogative of the FirstNet board to be able to design the 
network that our first responders have been asking for since 
even before 9/11, and the concern is that we are headed down a 
road to repeat all of the same mistakes we made with LMR voice, 
where individual systems were built, and then they didn't work 
together with each other.
    Give FirstNet a chance to come back with a design for a 
single interoperable network, and let them get on with the task 
of building it, and that way we can deliver the safety and the 
modern communications that our first responders need to have. 
The concern is----
    Mr. Scalise. I hope I am not suggesting that if a State 
doesn't want to have that interoperabilty, and clearly 
Louisiana does, we have had a need for it and let's let FCC 
make that decision. If they have got a good plan that is 
already in place and they are going to do all of those things 
that you were concerned about, then let FCC move forward.
    Mr. Walden. I am going to many exercise prerogative, since 
we are 4 minutes over.
    Mr. Scalise. I yield the balance of my time that is 
expired.
    Mr. Strickling. I find it interesting that I am the one 
here who wants to save the most money.
    Mr. Scalise. I would disagree with that.
    Mr. Walden. I think I voted to actually save more money. 
But anyway I do appreciate what you are doing here.
    I just want to close out the hearing. And I know Anna wants 
to make a couple of comments as well. One is FirstNet is 
supposed to come forward with their interoperable standards 
fairly soon, correct?
    Mr. Strickling. The FCC has a charge to come forward with 
the minimal interoperability requirements based on the 
committee that they were charged with creating.
    Mr. Walden. But isn't that supposed to happen?
    Mr. Strickling. Soon, yes. I think in a matter of weeks.
    Mr. Walden. And so, once that happens, then you will do a 
review of these proposals that are, that you have suspended, 
correct, to see if they meet that requirement?
    Mr. Strickling. We will certainly take that into account 
yes, sir.
    Mr. Walden. Well, I would hope so because if these ones 
that you have suspended, and we have had this discussion, if 
they do now meet the, once the interoperable standards are 
established, once they--I would think somebody needs then to 
go, ``OK that works, go ahead.'' Wouldn't that be the decision, 
or am I missing something?
    Mr. Strickling. It may not be. We will need to look at what 
the FCC comes out with and evaluate it against the projects. 
But what we have asked for is a fairly minimal set of 
standards. It may not be dispositive in terms of deciding 
whether or not to let all of these projects go forward with the 
4G aspect of their grants.
    Mr. Walden. But we should have that discussion at some 
point.
    Mr. Strickling. Happy to do so.
    Mr. Walden. The other thing I would like to know from each 
of the our two, Mr. Strickling and Mr. Adelstein, is the amount 
of, if you could provide for the subcommittee the amount of the 
unobligated management and oversight funds that you have.
    Mr. Strickling. We don't have any at this point because all 
of our, other than the IG's dollars that he told you about, we 
are operating based on appropriated dollars now in terms of 
oversight.
    Mr. Walden. All right.
    Mr. Adelstein.
    Mr. Adelstein. We have no unobligated funds for 
administration. As a matter of fact, we haven't gotten one dime 
of additional administration for this program. We have had to 
basically eat it in our existing budget.
    Mr. Walden. No good deed will go unpunished in the future, 
either.
    I turn now to the gentlelady from California.
    Ms. Eshoo. Thank you, Mr. Chairman, and I thank you for 
having yet another hearing to track all of this, which is so 
important.
    I want to conclude the hearing by thanking all of the 
witnesses today, and most especially with a renewed 
appreciation of what an enormous assignment you were given 
through the Recovery Act, some $7.3 billion, $7.5 billion 
divided almost equally between two agencies to carry this out 
in a relatively short period of time.
    Obviously, the work of the IGs has been instructive to you 
on where you can improve, and I think that that has come out in 
this hearing as well.
    But I also want to note something that I couldn't help but 
detect because it was so obvious, that there are some members 
that really want to relitigate, and it is each member's 
prerogative to say and ask for whatever they wish. But my 
observation is that there are some that want to relitigate the 
Recovery Act. They simply don't like it. They never agreed with 
it.
    I am one of the members that pushed our leadership very, 
very hard to include a significant sum of money to make sure 
that we really reach people and build broadband out to them 
because the private sector simply was not doing it; it wasn't 
profitable to do it, and that is where I think there was a need 
for public attention to that because there was private sector 
inattention, and that was their prerogative to do whatever they 
did.
    But there are Americans in different parts of our country 
that simply were not getting this service and couldn't hope to, 
even in the long term. So I think that this work is really 
significant. And there was another generation that made sure 
that people had telephone service--had telephone service. We 
take that for granted. And that was the lifeline for people in 
rural communities. And so, in this generation, we are looking 
to make sure that people have broadband. And I want America to 
be number one in broadband. That has been a goal of mine from 
the very beginning being on this subcommittee.
    So I thank the scrutiny of the IGs and what you continue to 
bring to it.
    And to Mr. Strickling and Mr. Adelstein, I think that you 
have to have real broad shoulders in this. This was really a 
huge assignment, and I think that today really highlights the 
successes of what you have done, and certainly the critique 
that the Congress offers is important and that you will follow 
up on it.
    So thank you, Mr. Chairman, for having this hearing and I 
thank the witnesses again.
    Mr. Walden. I, too, thank the witnesses and appreciate your 
participation, and we look forward to continuing the dialogue. 
And we will do our part. I know you are trying to do your part 
as well. Thank you very much. With that, the hearing is 
adjourned.
    [Whereupon, at 12:16 p.m., the subcommittee was adjourned.]
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