[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
FIELD HEARING IN NEW YORK: EXPANDING BROADBAND ACCESS AND CAPABILITIES 
                 TO SMALL BUSINESSES IN RURAL NEW YORK

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             MARCH 20, 2014

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 113-061
              Available via the GPO Website: www.fdsys.gov


                                 ______

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                      BLAINE LUETKEMEYER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

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


                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Chris Collins...............................................     1

                               WITNESSES

Mr. Mark Meyerhofer, Director, Government Relations, Northeast-
  Western New York, Time Warner, Lancaster, NY...................     3
Ms. Jill Canfield, Director, Legal & Industry and Assistant 
  General Counsel, NTCA, The Rural Broadband Association, 
  Arlington, VA..................................................     5
Mr. Robert Smith, General Manager, Frontier Communications, 
  Dansville, NY..................................................     7
Ms. Kendra Lamb, Owner, Lamb Farms Inc., Oakfield, NY, testifying 
  on behalf of the New York Farm Bureau..........................     9

                                APPENDIX

Prepared Statements:
    Mr. Mark Meyerhofer, Director, Government Relations, 
      Northeast-Western New York, Time Warner, Lancaster, NY.....    19
    Ms. Jill Canfield, Director, Legal & Industry and Assistant 
      General Counsel, NTCA, The Rural Broadband Association, 
      Arlington, VA..............................................    23
    Mr. Robert Smith, General Manager, Frontier Communications, 
      Dansville, NY..............................................    32
    Ms. Kendra Lamb, Owner, Lamb Farms Inc., Oakfield, NY, 
      testifying on behalf of the New York Farm Bureau...........    34
Questions for the Record:
    Questions and Responses from Hon. Chris Collins to Hon. Tom 
      Wheeler, Chairman, Federal Communications Commission.......    38
Additional Material for the Record:
    None.


                    EXPANDING BROADBAND ACCESS AND 
           CAPABILITIES TO SMALL BUSINESSES IN RURAL NEW YORK

                              ----------                              


                        THURSDAY, MARCH 20, 2014

                  House of Representatives,
               Committee on Small Business,
             Subcommittee on Health and Technology,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., at 
Orleans County Legislature, 3 South Main Street, Albion, New 
York, Hon. Chris Collins [chairman of the Subcommittee] 
presiding.
    Present: Representative Collins.
    Chairman Collins. The hearing is called to order.
    Good morning. First of all, I want to thank David Callard, 
the chairman of the legislature here, and all the legislators 
from Orleans County, for hosting us on this first day of 
spring, or it will be in 2 hours and 57 minutes, according to 
the exact position of the sun and the moon.
    But really, we are all appreciative of Albion hosting us 
for what we think will be a very appropriate topic as we are up 
here in a rural area.
    You hear the numbers, 97 percent coverage, and you go, 
well, that sounds great, until you understand that 3 percent of 
700,000 people is 21,000. So the 27th Congressional District is 
105 towns. The average town just a little over 6,000 people. It 
is rural America. It is agriculture that is our primary 
economic driver. And 3 percent of 700,000 people is 21,000.
    You don't want to be one of those 21,000 that doesn't have 
access to broadband.
    So while a statistic like that may sound encouraging, in 
the 27th District, it is not as much so as you might otherwise 
think. So that is something to keep in perspective.
    But again, I want to thank everyone who has joined us 
today. We have a full house. That is great. And again, I want 
to thank our four witnesses for taking time out of their busy 
day to schedule their testimony, which is focused on expanding 
broadband access to small business, which is the definition of 
all of our farms in rural areas of Western New York.
    Access to broadband service has the potential to transform 
the way small businesses and organizations fundamentally 
operate. Small firms can sell their products to buyers around 
the world. Family farmers can utilize precision mapping 
equipment to increase their productivity. And entrepreneurs can 
launch a Web site or application from their living room.
    As a small-business owner, I fully understand the benefits 
and the necessity of having access to affordable broadband to 
run a successful business. Most importantly, broadband provides 
a gateway and opportunity for economic growth and job creation, 
especially in rural areas.
    Last month, the House Committee on Small Business held a 
hearing regarding the innovation and growth around wireless 
technology. Thousands of entrepreneurs are developing dynamic 
products and services that utilize broadband to improve the way 
we live.
    According to a McKinsey study, over 1 trillion devices can 
be connected through wireless technology by 2025, resulting in 
a potential economic impact of $36 trillion.
    This means thousands of new jobs created by small, 
innovative firms, in a variety of industries, as well as new 
tools for small businesses to improve their operations.
    While it is easy to understand the limitless benefits of 
broadband Internet, those capabilities would not be available 
if not for the contributions of providers like those 
represented here today.
    To keep up with the growing demand, private sector 
enterprises have invested billions of dollars to upgrade their 
networks to provide faster and more reliable services. It is 
because of these investments that we can enjoy broadband at the 
workplace or on a wireless device.
    Currently, there are a variety of Federal initiatives aimed 
at providing broadband to everyone in the United States, 100 
percent, not 97 percent. When considering these policies, we 
must first ensure that the regulatory changes do not diminish 
the incentive for private sector investment in broadband 
infrastructure. This is especially important for small Internet 
providers who don't have the resources or the time to comply 
with the onerous regulations.
    Without private sector investment in broadband 
infrastructure, many small businesses in rural areas, like 
those here in Western New York, will be disconnected from one 
of the most powerful tools of our generation. And that would 
hamper the success of these small businesses and put them at a 
significant disadvantage in our increasingly connected economy.
    We have a distinguished panel of witnesses here today, and 
I do look forward to hearing your thoughts on the importance of 
broadband and how best to provide broadband to small businesses 
across New York and the United States.
    Now, we have a clock here, a timer, and when we are in 
Washington, we have the green light, and the testimony, we 
generally try to keep to 5 minutes. And then when the time is 
running down, the yellow light turns on. And then at 5 minutes, 
the red light. Today, we will have the lights on, but we are 
not going to be banging the gavel, if you run over. That is the 
luxury of having a field hearing like this. Afterwards, we have 
questions from the members. Since I am the only one, we will 
let you carry on.
    I think, too, it is be probably important for those here, 
when we say broadband, what does that mean? It really refers to 
the upload and download speed of what you can do on the 
Internet. In a broad definition, it is 4 MB on the download and 
1 MB of upload, so that you can get things off the Internet at 
4 MB per second versus loading back up into it at 1 MB. So that 
is the broad definition of broadband. Because there are cases 
where people are connected to the Internet, God forbid, I hope 
it is not through dial-up, but they may be able to connect but 
they are not really able to send data back and forth. So it is 
the 4 and the 1, the 4 coming down and the 1 going back up, 
that is the general thing we are talking about here today.
    So our first witness is Mark Meyerhofer. He is the director 
of government relations of Northeast-Western New York for Time 
Warner Cable. Time Warner Cable provides a variety of Internet 
options for small businesses, including speeds ranging from 2 
MB per second up to 100 MB per second. I want to thank you, Mr. 
Meyerhofer, for being here. We look forward to your testimony.

 STATEMENTS OF MARK MEYERHOFER, DIRECTOR, GOVERNMENT RELATIONS 
  OF NORTHEAST-WESTERN NEW YORK, TIME WARNER, LANCASTER, NEW 
 YORK; JILL CANFIELD, DIRECTOR, LEGAL & INDUSTRY AND ASSISTANT 
    GENERAL COUNSEL, NTCA, THE RURAL BROADBAND ASSOCIATION, 
 ARLINGTON, VIRGINIA; ROBERT SMITH, GENERAL MANAGER, FRONTIER 
COMMUNICATIONS, NEW YORK, DANSVILLE, NEW YORK; AND KENDRA LAMB, 
           OWNER, LAMB FARMS INC., OAKFIELD, NEW YORK

                  STATEMENT OF MARK MEYERHOFER

    Mr. Meyerhofer. Thank you. Good morning, my name is Mark 
Meyerhofer. I am the government relations director in the 
Northeast-Western New York region for Time Warner Cable. Thank 
you for inviting me to testify today regarding rural broadband.
    Time Warner Cable is among the largest providers of video, 
high-speed data, and voice services in the United States, 
connecting more than 15 million customers to entertainment, 
information, and each other in 29 States, employing over 50,000 
people across the U.S.
    Based on year-end 2013 data, Time Warner Cable has 
approximately 11 million residential high-speed data 
subscribers and 517,000 business high-speed data services 
subscribers. Time Warner Cable is the leading broadband 
provider in New York State, offering reliable, affordable, 
high-speed broadband to over 2.3 million customers.
    We have invested $25 billion to $30 billion of private at-
risk capital since 1996 to deploy broadband across our 
footprint, and $2 billion in New York State, in the last 4 
years alone. In the 27th Congressional District in 2012 and 
2013, we built over 335 miles of new lines, passing over 1,000 
businesses and nearly 3,000 homes.
    This investment of private at-risk capital has resulted in 
our company passing approximately 96 percent of homes and 
businesses in our New York State footprint. Access to broadband 
for New Yorkers is higher than the national average, with 95 
percent generally having access.
    These investments were made, and this success achieved, in 
a regulatory environment that encourages innovation and 
investment. However, it remains extremely challenging to extend 
broadband to the most rural areas of the State where geographic 
isolation and topographic issues make it economically 
infeasible for companies to reach these areas. Investment 
simply cannot be recouped before it is time to reinvest.
    Time Warner Cable believes government has a role to play in 
helping to meet broadband needs in these unserved areas and 
that properly structured programs or partnerships can help 
achieve rural broadband deployment goals if guided by core 
principles.
    First, such programs and partnerships must be focused on 
unserved areas so taxpayer dollars are not wasted duplicating 
existing privately funded networks. When taxpayer funds are 
used to overbuild an existing provider, the result is unfair 
competition for a limited number of customers.
    Government should not pick winners and losers in this 
competitive environment, but instead focus limited taxpayer 
funds on unserved areas that need it the most.
    Second, government programs need to focus on last-mile 
services, which is the most difficult and costly part of 
deployment.
    Third, programs should be technology and provider neutral 
so all providers and technologies are eligible to participate.
    Fourth, the cost of these programs should be broadly 
shared, rather than paid for by a tax or fee on a specific set 
of consumers or taxpayers. If rural broadband deployment is the 
public policy goal, the cost should be borne as broadly as 
possible, and the deployment costs to the individual consumer 
should be as low as possible.
    Finally, to encourage the broadest possible private 
participation in any government-sponsored program, any funding 
or incentives should come with no strings attached, so 
companies can own and operate the new networks and integrate 
them fully into their existing infrastructure and business 
plans.
    New York State's Connect NY program created by Governor 
Cuomo is a good example of an effective and well-structured 
public-private partnership program. Time Warner Cable received 
the largest Connect NY grant and is now investing $7.1 million 
in partnership with New York State to provide rural broadband 
for 52 projects in 22 counties and more than 40 towns across 
the State. Our Connect NY project will connect more than 4,100 
previously unserved homes, businesses, and community 
institutions to high-speed broadband.
    While the government's role in spurring broadband 
deployment and unserved areas remains limited, we believe there 
is a broader role for government in broadband adoption. Roughly 
one-third of Americans and 30 percent of New Yorkers with 
access to a broadband connection choose not to get connected at 
home.
    Further, adoption is not consistent across groups, where 
senior citizens, people with lower incomes, and lower economic 
status adopt at much lower rates. Aging populations, lower 
socioeconomic status, and lower educational attainment can 
often characterize New York's rural areas.
    The principal reason cited for not adopting broadband are 
digital literacy and relevance. We should all work together to 
encourage adoption, and Time Warner Cable has participated in 
numerous adoption programs, which I am happy to collaborate on 
during Q&A.
    A small investment in educating consumers about why 
broadband is relevant to them can be highly effective in 
increasing adoption rates, especially in low adopting areas.
    Thank you for the opportunity to testify today. I am happy 
to answer any questions you might have.
    Chairman Collins. Thank you. Right to the second. That is 
pretty good.
    Our next witness is Jill Canfield. She is the assistant 
General Counsel for NTCA, which is the Rural Broadband 
Association, so she is representing a variety of different 
interests here. The Rural Broadband Association represents 900 
independent telecommunications companies in rural and small 
towns throughout the United States. They provide support for 
both wired line and wireless carriers.
    Jill is a native of Derby, New York. She earned her B.A. 
and J.D. from Syracuse University and is a member of the 
Federal Communications and American Bar Association.
    Are you watching the March madness now?
    Ms. Canfield. I have my brackets.
    Chairman Collins. Welcome back to New York, and we look 
forward to your testimony.

                   STATEMENT OF JILL CANFIELD

    Ms. Canfield. Thank you. Thank you for the invitation to 
participate in today's discussion on expanding broadband access 
and capabilities to small businesses in rural New York. My 
remarks today are on behalf of NTCA, the Rural Broadband 
Association, and the Small Company Coalition.
    Small rate of return rural telecom providers, commonly 
called RLECs, serve only about 5 percent of the U.S. population 
but roughly 40 percent of its land mass. These companies deploy 
and upgrade cutting-edge networks in rural and tribal areas, 
where no other carrier could find a business case.
    As anchors in the communities they serve, rural providers 
use their networks to connect rural Americans to the health 
care, educational, economic, and public safety benefits of the 
broadband economy.
    Moreover, these small businesses are at the forefront of 
the broadband and Internet protocol, or IP, evolution, 
deploying advanced networks that respond to consumer and 
business demands for cutting-edge services. Fixed to mobile 
broadband, voice, and video are among the numerous telecom 
services that rural New Yorkers can access thanks to the rural 
telecom industry's commitment.
    Nearly all small rural carriers in New York have deployed 
broadband to 99 percent or more of the rural service areas and 
have a brilliant track record of collaborating to build fiber 
networks that benefit wide swaths of rural New York. The 
Adirondack-Champlain Telemedicine Information Network, or 
ACTION, now delivers up to 1 Gb connections to 49 hospitals and 
health care facilities from Massena to Plattsburgh, from Glens 
Falls to Hoosick Falls. Subsidiaries of RLECs like Champlain 
Telephone Company, Nicholville Telephone Company, and Chazy 
Westport Communications. Each provide service to the individual 
locations.
    The Independent Optical Network, or ION, was founded on 
vision of 15 small rural telecom providers. This Albany-based 
statewide fiber network connects more than 100 Upstate New York 
communities and their surrounding rural areas.
    Through a recently completed $50 million project that 
included a significant Federal investment supplemented with 
State investments, ION can serve more than 300 anchor 
institutions and make broadband more readily available to 
250,000 households and 38,000 businesses.
    Projects are underway in Allegheny, Cortland, and Otsego 
Counties to leverage the ION fiber backbone.
    Broadband facilitates greater interconnection of the 
community's resources and can enable citizens' participation in 
the global economy, all key to rural population growth. IP, 
wireless, and other technological advances are changing the 
marketplace in ways unimagined even a few years ago. But 
technology alone will not overcome the high cost of deploying 
the networks that enable these technologies.
    Though small, rural providers are leaders in broadband 
investment, law and policy changes are necessary. Reforms must 
be guided by the Communications Act's core principles of 
consumer protection, competition, universal service, and public 
safety.
    Unfortunately, the FCC's 2011 USF reforms appeared to have 
missed the mark in serving these principles. And as a result, 
millions of investment dollars were sidelined while Congress 
pressed the agency to update the USF program the right way and 
get rid of opaque, unpredictable USF caps.
    Small rural carriers still await a program designed to 
promote broadband investment while the legacy fund they 
currently use forces customers to take regulated voice service 
just to make broadband affordable. All the while, USF is funded 
by assessing a shrinking pool of long-distance voice revenue. 
This de facto cap on the USF will handicap our Nation's ability 
to stay seamlessly interconnected.
    Sound reforms will also ensure that USDA's Rural Utilities 
Service has sufficient certainty to continue financing rural 
telecom projects.
    The wireless industry also anxiously awaits an opportunity 
to bid on the 600 MHz spectrum, but the spectrum must be 
auctioned in a manner that provides a realistic opportunity for 
small wireless providers who have the incentive and interest in 
serving rural areas.
    To that end, NTCA, the Rural Wireless Association, and the 
Competitive Carriers Association just announced a consensus 
proposal for the use of small geographic licensing areas.
    Strict adherence to the spirit of the Regulatory 
Flexibility Act is important. It would have produced better USF 
reforms and freed more resources for broadband investment.
    Numerous, costly, and sometimes redundant reporting 
requirements also divert resources away from the network 
operation and customer service.
    Thankfully, the Regulatory Flexibility Improvement Act of 
2013 would help by involving SBA throughout the rulemaking 
process.
    The Federal Government has played a key role in promoting 
delivery of advanced telecom services to all Americans, but 
more work is needed to deliver broadband to the unserved and 
ensure that networks already built remain in place and are 
upgraded to keep pace with the IP evolution.
    The House Small Business Committee's commitment to bringing 
about an environment conducive to broadband investment and 
small-business growth is always appreciated.
    It is an honor to join you back home in Western New York, 
and I look forward to the discussion and your questions.
    Chairman Collins. Thank you very much.
    Our next witness is Robert Smith. Robert is general manager 
for Frontier Communications located up in Dansville, New York. 
Frontier Communication provides both voice and Internet service 
for small businesses. They also provide cloud and cybersecurity 
options to help small firms protect their network operations.
    Thank you for being here. We look forward to your 
testimony.

                   STATEMENT OF ROBERT SMITH

    Mr. Smith. Thank you, Mr. Chairman. I appreciate you 
inviting Frontier to be here at this important meeting.
    My name is Bob Smith, and I am general manager for Frontier 
Communications. I oversee Frontiers' service area in Western 
New York State. I am honored to be here representing Frontier.
    Frontier is the largest communications service provider 
focused on rural America, providing broadband voice and video 
services to more than 3 million residential and business 
customers across 27 States.
    The communications business has changed dramatically since 
Frontier began as a local exchange carrier, a provider of POTS, 
plain old telephone service, in 1935. But our commitment to 
providing customers with reliable and affordable products and 
services remains constant.
    Over the past decade, Frontier has transformed from a 20th-
century phone company to a 21st-century broadband company. We 
have made it our mission to deliver the life-changing benefits 
of broadband technology to rural communities across our 
footprint.
    Broadband is a key driver for economic growth in America in 
the 21st century. Broadband availability in rural America 
offers more than simple entertainment and communications. It 
translates into increased economic development, employment and 
educational opportunities, and improved health care.
    In July 2010, we completed a transformative transaction 
acquiring millions of rural and suburban communication lines 
from Verizon. As part of this acquisition, we committed to 
providing high-speed broadband access to hundreds of thousands 
of homes previously unserved.
    The wire-line broadband services that we provide ensure 
that our customers and your constituents have unlimited 
opportunities for the future.
    Frontier is relentlessly deploying and upgrading broadband 
to the communities that we serve, from midsize cities such as 
Rochester, small towns like Dansville, my favorite, and to 
rural areas others consider too difficult to serve, like the 
hamlet of Wyoming, New York.
    Since 2010, we have invested more than $2.2 billion in 
company funds to increase broadband access to improve 
infrastructure and also an additional $133 million from the 
FCC's Connect America Fund that supports broadband deployment 
exclusively to unserved high-cost areas.
    We have significant operations in New York State, having 
acquired the former Rochester Telephone Company in 1995. We now 
have 2,300 employees serving more than 275,000 customers of New 
York in major cities of Rochester, Gloversville, Johnston, and 
Middletown.
    In New York State alone, we have invested more than $200 
million in network enhancements and capital investments for 
operations over the past 2 years. We have been able to accept 
just recently $9 million in the Connect America Fund Phase 1 
process to provide broadband to more than 15,700 previously 
unserved locations in New York State.
    It is interesting to note that our costs to deploy that $9 
million worth of grant will exceed the $9 million, so we 
continue to make that private investment.
    Efforts to deploy throughout New York State do not stop 
here. We recently worked with local governments and New York 
State economic development councils to ensure that areas most 
in need of broadband are getting access. We recently assisted 
Hamilton County in receiving a $2.2 million New York State 
broadband grant to upgrade the data transfer backbone in 
Eastern New York from Gloversville to Eagle Bay. Upon 
completion, all of Hamilton County, which is in the 
Adirondacks, with very challenging geography and sparsely 
populated, will have access to broadband speeds of up to 10 MB.
    Most recently, we worked with Wyoming County and New York 
State Senator Patrick Gallivan on broadband capacity for that 
county and also assisted in confirming their agricultural 
center will have the broadband capacity required to serve their 
needs.
    Access to broadband in our rural counties provide farmers 
and spinoff agribusiness with access to world markets, 
expanding their products and services for markets from local to 
global. We are proud to be a provider of services to these 
rural communities and working with Senator Gallivan on this 
initiative.
    We continue to seek out ways to work collaboratively with 
State and local governments and organizations to provide 
businesses and residents with the broadband services they need.
    Like you, we know that high-speed broadband connectivity is 
life-changing and absolutely critical to our country's economic 
recovery and prosperity.
    Communities with access to the Internet are ripe for 
economic development and job creation. We are modernizing 
facilities and services, because we believe that our time and 
treasure, the old cable lines as well, is best used by 
extending robust broadband and networks to these communities. 
That means giving communities access to high-speed Internet 
services.
    Broadband technology offers rural America untold economic, 
educational, and social opportunities, and we consider it our 
job to deliver that access.
    Thank you very much for inviting Frontier to this hearing, 
and as always, we look forward to answering any questions.
    Chairman Collins. Good, thank you very much.
    Our final witness today, before the Q&A, is Kendra Lamb. 
She is public relations manager of Lamb Farms in Oakfield, New 
York.
    Lamb Farms is a family dairy operation with three milking 
facilities. They rely extensively on broadband Internet to 
operate their businesses, including the monitoring of milk 
output, managing their equipment, and various social media 
activities.
    Ms. Lamb is testifying on behalf of the New York Farm 
Bureau.
    Thank you for being here. We look forward to your 
testimony.

                    STATEMENT OF KENDRA LAMB

    Ms. Lamb. Thank you to the Committee on Small Business and 
to Subcommittee Chairman Chris Collins for inviting me to 
testify before you today on broadband access and its impact on 
small businesses here in rural New York.
    My name is Kendra Lamb, and my husband and his family own 
Lamb Farms, a dairy based in Oakfield with three milking 
facilities and a methane digester. We are a third-generation 
farm family with a passion for producing quality milk while 
providing excellent care to our cows and the land.
    I am also speaking on behalf of the New York Farm Bureau, 
the largest general farm organization in the State, with 25,000 
members representing all commodities, all production methods, 
and living in all corners of the State.
    It might be hard for some people to imagine, but New York 
State has some very rural locations, and we have large gaps 
where broadband access is just not available, including here in 
Western New York.
    In today's age, with access to the Internet, a small 
business can operate from anywhere, but it is hard to imagine a 
small business surviving and thriving in a rural area if it 
cannot be competitive in a world marketplace. The lack of 
reliable broadband access is a major barrier to growth in our 
rural areas, and we need the Federal Government to help solve 
this problem.
    According to a 2013 survey conducted by the USDA, 31 
percent of farms in New York, or more than 11,000 operations, 
do not currently have Internet access. A 2010 study conducted 
by the Small Business Administration found that rural 
businesses pay significantly higher prices than metro 
businesses for the same bandwidth, and small businesses in 
metro regions have access to higher bandwidth services than 
rural businesses do at higher costs.
    These kinds of inequities cannot continue if rural 
businesses are expected to compete with their counterparts in 
more developed areas.
    We are lucky that our main farm location has a broadband 
connection through our cable provider, and my home has DSL 
through our telephone service provider. Without access to this 
kind of reliable Internet service, our farm wouldn't be able to 
do many of the key things we do to educate and reach out to the 
community.
    We have found that, working in animal agriculture, it is 
becoming increasingly important to be able to educate the 
community on what we are doing on the farm and to answer their 
questions in an honest and direct manner.
    I am responsible for many of the public relations and 
outreach efforts of our farm. We have a Facebook page that I 
use to reach the community and educate consumers on our food 
supply.
    Without high-speed Internet, I wouldn't be able to update 
this page with the large picture and video files that help us 
tell our story. We also have a farm Web site that we update 
ourselves and take requests from those who wish to visit the 
farm.
    We also use the Internet across many business applications 
to take advantage of the latest technologies to collect and 
analyze data, and ultimately to make better decisions. We track 
the amount and quality of milk that we ship each day through 
our milk cooperative's Web site. We use dairy-specific software 
to help with recordkeeping, like tracking the milk production 
of each of our cows, which we download as large files off the 
Internet.
    Similarly, we are able to monitor our methane digester, 
which uses waste on the farm to create energy, and get remote 
assistance from Pennsylvania, all over the Internet.
    We grow most of the feed for our animals, and all of our 
crop recordkeeping is through Internet-based programs. These 
help us keep track of soil types, waterway locations, setbacks, 
and nutrient recommendations.
    Much of our banking is done online now, and our employee 
time clocks and payroll software are Web-based programs linked 
directly to our bank. Even our employee benefits are updated 
and communicated through Web programs, so our workers have easy 
access to comprehensive information.
    Businesses like our dairy need high-speed, affordable 
Internet to stay on top of the research and innovation that is 
available in our industry. As farm managers, we need to 
understand changes in trade and world markets, and in consumer 
demands, so we can make informed business decisions.
    In addition, more and more Federal and State agencies are 
relying on electronic reporting by farms in order to comply 
with regulations. Efforts are afoot to make environmental and 
employee safety and health reporting electronic, completely 
getting rid of paper submissions. This places extreme burdens 
on farms and other small businesses that don't have reliable 
access to the Internet.
    It is important that the Small Business Committee push back 
on electronic-only reporting requirements until all businesses 
have access to reliable broadband that is not cost-prohibitive.
    While our farm does not direct market to consumers, many 
farms in rural areas do, especially fruit and vegetable growers 
through farm stands, farm markets, or CSAs. Web sites, social 
media, and online directories are invaluable tools for these 
farms to reach their customers.
    Farmers looking for new outlets or monitoring a constantly 
changing marketplace must use the Internet to learn and explore 
new business models that can lead to success.
    Rural areas can also feel isolated without broadband. 
Combined with fewer education and health care options, these 
locations become less attractive places to live for the young 
people, families, and innovators who help drive economic 
vibrancy. But broadband can bring distance learning, 
telemedicine, and the world to anyone's door.
    In conclusion, access to broadband is essential for farms 
and other rural small businesses to manage efficient and 
successful operations, to reach their communities and 
customers, to stay on the cutting edge of their industry, and 
for our rural communities to be attractive places to live for 
our employees, customers, and the next generation to run our 
businesses.
    We can't do this on dial-up or undependable Internet 
connections.
    Thank you again for the opportunity to speak with you 
today. I would be glad to take any questions you may have.
    Chairman Collins. Thank you very much. That was great.
    For all of you, I think, as we are here in the 27th 
District, and there is no question agriculture is the primary 
economic driver of our area, I was especially taken with your 
number 31 percent of the farms don't have access. So again, 
when we talk about this broad coverage, our rural parts, the 
farms, can be quite substantial, and there may not be many 
people exactly living on the farm.
    But that is actually a number I haven't heard. That is a 
pretty staggering number.
    To help everyone here understand, I would like to maybe 
first talk about the regulatory burden a little bit. We always 
hear regulations are stifling the economy in the United States, 
an impediment to job creation. In fact, sometimes regulations 
result in job losses, and that is very good at the 30,000-foot 
level. And I think we heard some of that here today from Mr. 
Meyerhofer, Ms. Canfield, and Mr. Smith.
    But could you give us an example of perhaps one or two 
regulations that, in particular, are a thorn in the side that 
you have, and I think we may hear more about the USF here in a 
second?
    But also, how that may have impacted you, in particular, 
with jobs at the businesses you represent or within the 
association, where someone would say, ``Because of this 
regulation and the costs, I had to lay people off. I have done 
this or that,'' to try to bring home for this group a couple of 
particulars, especially come down off the 30,000-foot level, if 
you have something. That is fine, if not.
    Mr. Meyerhofer?
    Mr. Meyerhofer. Well, as I stated in the testimony, in 
terms of the regulations themselves, the good part is, is it 
somewhat of a hands-off approach, in terms of how broadband is 
operated in this country and how we have grown, particularly on 
the cable side of it.
    But what often comes up with these programs, particularly 
through Rural Utility Services, is the need to meet the 
unserved areas. That is not always at the top of the list.
    And as the country has looked more and more to get to that 
last mile, if you will, I think there has been a change of 
mindset with FCC and RUS to do that, to focus on the unserved 
area instead of the ``underserved'' or what we call the 
overbuilt, where there is already another company in there, yet 
government programs continue to bring in an additional service 
to that area.
    And as I said in my testimony, our focus as a company is 
really to look at those unserved areas.
    So I think there is starting to be a change at the Federal 
level that we are seeing more and more as these programs go on. 
And I think that Connect NY, and maybe Bob can speak to Connect 
America, we are looking at that program as well. Maybe they are 
heading in the right direction in terms of that.
    Chairman Collins. All right, thank you.
    Ms. Canfield?
    Ms. Canfield. Well, from our perspective, the Universal 
Service Fund is really the lifeblood of the independent 
telephone providers, telecommunications providers. And what 
happened in the last couple of years is the FCC did a major 
overhaul of the fund. The fund allows providers who serve the 
most rural areas to keep the rates comparable to what they are 
in urban areas.
    But with this overhaul, they created a lot of uncertainty, 
and that uncertainty meant that our members no longer knew that 
they would be able to meet their commitments.
    So we had members, without going into the specifics of the 
changes the FCC made, we had members who canceled broadband 
buildout fiber deployment plans. We had members who returned 
grants that they had received, that they decided there wasn't 
enough certainty for them to go ahead and use the grant to 
provide the broadband to the rural communities. We had members 
who laid off. We had one member who had to lay off 20 employees 
as a result of that uncertainty and the inability to move 
forward and not have that sort of guaranteed revenue stream 
going forward.
    So it had a very dramatic impact on the rural carriers.
    Fortunately, we are starting to see a change in the way it 
is being approached. Some things have been rolled back a little 
bit. They have been given a little bit of breathing room. There 
are still changes that we are waiting for.
    The independent telephone providers do not have a Connect 
America Fund that allows them to have supportive broadband 
services to rural areas. In order to get broadband, rural 
consumers have to also get the voice service.
    So that ensures that the small business cannot be 
competitive if there is a cable provider in the area that can 
offer a standalone broadband product. Our members are not able 
to do that.
    And even in areas where there is not a competitor, we have 
very progressive consumers who don't want necessarily a 
landline telephone anymore. They want to move to an all-mobile 
product for their voice service, and to have the broadband 
connection to the home, so they no longer see that need. And 
our members are not able to meet that need right now.
    Chairman Collins. Thank you.
    Mr. Smith?
    Mr. Smith. Ours is very simple and very old. Frontier 
continues to be saddled with an outmoded regulatory structure 
designed to govern old-fashioned telephone service.
    Regulations for ILECs in this country, particularly with 
switched access for telecommunications, it hurts us from a 
competitive standpoint, particularly against cable and wireless 
providers.
    We must be able to compete on a level regulatory field, 
particularly in our urban areas, so that we can use that 
capital that would be saved from those regulations in order to 
expand our footprint in the rural areas.
    Chairman Collins. Good.
    I will come back maybe in a minute and ask a little bit 
more about spectrum, but, Ms. Lamb, because I know it is a 
staggering number, how many cows are on your operation?
    Ms. Lamb. Between the three farms, we milk about 6,000 
cows.
    Chairman Collins. Yes, I think it was important to get that 
out. We sometimes talk about the definition of a large dairy 
farm being over 200. And in fact, in the farm bill that was 
just passed, there are some sections of the farm bill that deal 
with what we call the small dairy farms with under 200 cows.
    Well, 6,000 is not only large but a very, very significant 
operation, and we should point out it is a 24/7 operation. You 
basically don't go on vacation. And every cow has to be milked 
at least twice a day. I don't know, you may have some that are 
three times. If you want the most milk production, you go to 
three times a day.
    That is almost a mind-numbing kind of operation. And the 
fact that you are utilizing technology as you do, that is what 
I would like to talk about a little bit.
    To the 31 percent of farms, as you indicate, and you are 
representing the Farm Bureau, that don't have access to 
broadband, versus your operation, can you give us even just a 
rough idea of what that means to Lamb Farms, bottom line or 
otherwise? Or could you even operate today the way you do with 
6,000 cows and not have broadband?
    Ms. Lamb. I don't think we could operate without having the 
broadband for our business. So truly, we still are a family 
operation, we just have a lot more family involved.
    So in order to really put together all the information for 
this, I had to go and ask my husband, in what ways are you 
using the Internet for herd management? And to Jim Veazey, who 
manages our cropping, how does the Internet play into our 
environmental plans? And to his wife, Marlene, Marlene, how are 
you using the Internet for our bookkeeping and for our payroll?
    And that was when it really all came together. And it is 
just incredible the way that it is such an integral part of our 
business. We could not do all of this without the Internet.
    I should say I grew up on a small 70-cow dairy operation in 
the Catskills, and I still have family members in that area who 
milk cows, who have small dairy farms, and they do not have 
broadband Internet. And when I think about the impact to them, 
and the disadvantage they are at, it is significant.
    Chairman Collins. I would imagine growth, at some point, if 
you don't have Internet, there is a point you just can't grow 
because just like any business, the more complex your business 
becomes, the more you need the tools of today--computers, 
technology, and the like--to be able to manage that growth, or 
things get out of control.
    Ms. Lamb. Exactly.
    Chairman Collins. So now, as you are looking at where you 
are going next, where do you think the Internet is going to 
help you save money, become more productive, et cetera, et 
cetera. Do you have an idea of where you are heading in the 
next year or 2 or 3?
    Ms. Lamb. That is a good question. It does seem like more 
and more is coming available online.
    So one of the newer things that we are going to be trying 
out for the first time this year is incorporating GPS and some 
of the satellite services that can actually, in the field, the 
person who is running the planter can give an exact coordinate 
to the next guy, so that they can see exactly where--these 
tractors can line up perfectly.
    So we can, with that same amount of land, be even more 
efficient with the crops that we are growing on that land. So 
that is a major technology that is just coming out this year. 
But the tractors are almost going to be talking to each other, 
and it is going to take out some of that possibility for human 
error, so that will be really neat to see.
    Some of the unique things that I thought of after I did my 
testimony, but Mr. Smith was mentioning some of the farms use 
Internet now for surveillance. So on our farm, just for 
employee management and also for security, we do have 
surveillance cameras, and my husband can log on at home. If 
they are saying that maybe the parlor stopped running, he can 
log on and see what is going on without actually having to go 
into the farm. That is something that is unique.
    We also have a registered dairy sale every other year, and 
we have a live Internet feed so that people can bid from Japan 
or from anywhere around the world. They can watch the sale 
online and bid from there.
    So those are all things that we have an advantage over 
someone who doesn't have broadband.
    Chairman Collins. Yes, I think you put that in very good 
perspective. Thank you for that.
    So, Ms. Canfield, back to the spectrum issue again, there 
is always the argument of breaking it into small chunks, which 
would allow the rural carriers to bid on and be able to be 
competitive bidding on a small piece of spectrum. And then 
there is the thought of well, let's just package it all up.
    For the purpose of this hearing, could you maybe even just 
give the pros and cons of what you have heard--small, how small 
is too small versus packaging to where your carriers can't bid 
because they have no use for it?
    Ms. Canfield. Right, the first thing I want to mention is 
that it is important to remember that wireless is not a 
substitution for wired communications, because communications 
don't hop from tower to tower to tower until they make it to 
your phone. They rely on that wired network. So I just wanted 
to put that out there.
    The wireless, though, is incredibly important in rural 
areas, partly for a lot of applications that she's talking 
about over here, Ms. Lamb is talking about, and also, just to 
have mobile service in rural areas. Very often, the large 
carriers don't provide mobile service in the most rural 
communities, so we rely on small, independent 
telecommunications providers to do that.
    And when you are talking about a small telecommunications 
provider, these companies--very often are family-owned 
businesses, very often cooperatively owned businesses--are 
serving communities. They are not serving the entire State. 
They are not serving the entire Northeast, like someone like 
Verizon or AT&T actually serve the whole country.
    So they are looking for spectrum licenses that allow them 
to serve the community. Now the way that the spectrum licenses 
are put out to carriers is that they are auctioned. At an 
auction, everyone who is interested signs up and then bids.
    One of the difficulties is that when the FCC decides that 
they are going to auction the spectrum according to large 
geographic areas, you are taking the small companies completely 
out of the picture. They have neither the interest nor the 
resources to compete against someone like AT&T or Verizon to 
obtain the whole State of Wyoming, for example, or New York 
State.
    So we have advocated as an association very often for 
cellular market areas, CMAs. There are 730-some-odd CMAs in the 
country, so the country is broken up into 700 areas for 
licensing.
    The upcoming spectrum auction, which is a 600 MHz spectrum, 
is a really, really good spectrum. It has great propagation for 
rural areas, in particular. And it also allows the larger 
companies to relieve congestion in the urban areas. There is a 
tremendous amount of interest in the spectrum.
    The FCC originally proposed auctioning that spectrum 
according to economic areas. There are 176 in the country. 
Again, way too large for any small business to participate in 
that auction.
    So we have been advocating hard for the CMAs. We were told 
by the FCC that this particular auction is way too complicated 
for 700 times four auctions. So we have worked with all the 
other rural associations and also with AT&T and Verizon, 
Sprint, T-Mobile, to come up with an alternate plan that is an 
in-between plan. We call them PEAs, Partial Economic Areas. 
There is a lot of discussion about what to call them, PEA Pods.
    But there are 416 right now, and we just presented that to 
the FCC as a compromise proposal that we think will provide a 
realistic opportunity for small businesses who are interested 
in serving the rural areas to obtain that spectrum and be 
competitive in providing not only a mobile product, but also a 
fixed wireless product, which is an essential way to get to the 
very most rural areas, that very last mile, the way out ranches 
and farms. It is an economic way to get broadband to that last 
mile.
    Chairman Collins. I think, too, for the purpose of the 
hearing, we hear about gridlock in Washington, and that we 
don't get along, and we get nothing done. I would like to point 
out, certainly, on the Small Business Committee, even more so 
than most, there is unanimity when it comes to providing the 
tools small business needs. It is not a Democrat/Republican 
issue. When we talk about regulatory burdens, again, it is not 
a Republican/Democratic issue.
    The concerns are, how do help small business grow? How do 
we get out of the way of small business? And so, again, 
hearings like this, there is no partisanship in this. It is 
trying to seek ways the Federal Government can assist, can get 
out of the way.
    Spectrum is a huge issue, because if it is not done 
properly, we won't get to those 31 percent of farms that need 
it. We won't get to the last mile.
    So there is absolute agreement that we need to work 
together on this. So it is actually nice to be part of a 
Committee and chair a Subcommittee where we don't have the 
political infighting that goes on. We are actually looking to 
do what is best for America. And I think it is sometimes 
important to point some of that out.
    We keep hearing last mile, last mile. And I think we all 
have a great picture. It is a good visual.
    But, Mr. Smith, do you have any numbers on what it costs to 
go that last mile, to that last house, either cost per foot or 
per mile? And I am assuming, more than not, are we talking 
fiber when we are talking about that last mile for cable?
    Mr. Smith. Actually, there is this misconception, and Ms. 
Canfield's discussion there on the spectrum was very 
interesting and very exact. And I think it is a misnomer for 
people with the wireless telephone, that it is magically 
through the sky and satellites in the sky. But that is totally 
untrue. It is a wire-line connection.
    Wire-line capabilities exist today. A telephone passes 
nearly every home in the country, and the technology that 
exists today, it is there that would allow a DSL signal or, for 
my worthy competitor, Mr. Meyerhofer, a coaxial signal.
    The issue, as you just pointed out, is that cost per last 
mile. In some cases, with the CAF funding and the analysis that 
we did, each home past, and that is how we measure the cost per 
last mile, how many homes are we passing in order to provide 
that service, in some cases, those costs exceed $500 per 
person, per household, just to get to that last mile. In many 
cases, it is even larger than that when you are in a sparsely 
populated area.
    But it varies. Again, it depends on how many homes are 
within the last mile.
    But to extend that technology, it exists today. And it 
doesn't have to be fiber. I think that is another misconception 
that people have. Technology that exists in our world, in our 
central offices and in our field remotes, is capable of 
providing people the Internet speed they need. The issue is the 
cost to deploy that equipment in order to provide that service 
to those people.
    Chairman Collins. I think that there are so many 
misperceptions when we say ``broadband.'' And again, starting 
with what is it, and it is the 4 MB down and the 1 MB up. But 
we go into much larger chunks as well.
    The other point is, for our kids, we talked about small 
business, and that is the focus of this committee. But we hear 
a lot about Common Core, and we can agree or disagree with 
whether that is a good thing or how it is rolling out. But the 
fact is, our kids today rely on broadband to do homework 
assignments, to get homework assignments. And if someone is on 
living on one of the farms, 31 percent of which don't have 
access to broadband, we are leaving those kids behind.
    And that is why I think, again, it is a national priority 
to get 100 percent coverage. It is a disservice when we talk 
about 98 1/2 percent, because then you start doing the math 
across 300 million Americans, and that is too many being left 
behind.
    So the purpose is to get it to 100 percent. The Federal 
Government does have a role to play in making sure we have a 
level playing field, and we are not picking winners and losers, 
and that regulations aren't standing in the way. Best efforts 
aside, that is, again, what we are looking at in the hearing.
    I think we have pretty much covered what we wanted to 
cover. And the issues are well-understood. They are not 
partisan. These are bipartisan issues looking for solutions 
that we can initiate.
    It is always nice to hear that the State has their programs 
and that some of those are working. The Federal Government, 
though, when it comes to spectrum, is the one that is 
controlling that.
    And, certainly, the Universal Service Fund, that is a 
Federal program and it dates back to the days before wireless, 
before broadband. And so it has to be tweaked. It is understood 
it has to be tweaked. It is in the process of doing that, and 
hopefully in a way, again, that doesn't pick winners and 
losers, and helps us get to that last mile.
    So as we bring the hearing to a close today, I just again 
want to thank all the witnesses for coming in. And I, 
certainly, have found your testimony--I always say if you learn 
something every day, that is a good day.
    And, Ms. Lamb, the 31 percent really puts this in 
perspective.
    And, certainly, I think what we heard about the spectrum is 
very useful.
    And, Mr. Smith, your comments about wireless isn't magical, 
there are wires connecting it. I have to think, when people 
talk about cloud computing, I mean, I hate to say it, but there 
are people who think there is something in the clouds. They 
don't understand that it is the concept that it is not onsite, 
the server is not onsite. It is somewhere else, but it is 
really not in the clouds.
    I am, certainly, today a little disappointed that the FCC, 
the Federal Communications Commission, and the Rural Utilities 
Service--we talked about the Department of Agriculture and 
their role--were not able to provide a witness today. I am sure 
if we were in D.C., they probably would have. But it is 
disappointing that they are not here.
    But what we are going to do is, Andy, who is on the Small 
Business Committee--and thank you for your assistance. To the 
extent this went smoothly, it has nothing to do with me. It has 
everything to do with Andy and has preparation and his binder. 
And again, I can't say enough for my staff as well.
    But we are going to send them a letter, and we are going to 
summarize today's hearing. And as we got some very specific 
questions, we are going to ask those questions and look for 
answers. And they will be forthcoming with answers. They 
generally don't ignore a letter from a congressional hearing. 
So we will be able to get those and then share those with those 
who are here.
    So as I move forward, as the chairman of the Subcommittee 
on Health and Technology, which today is technology, it was 
delightful to have a field hearing. With budget crunches in 
Washington, last year we did not have them. The sequester we 
all heard about, and likewise, there was a lot of turmoil in 
Congress. We didn't know budgets, what they were going to be, 
and so forth. With a two-year budget now, the discretionary 
budget in place, we do know with certainty what monies we are 
going to have, and we are very careful in how we spend it.
    But I think sometimes it is very beneficial to come out 
into a district. And as chair of this Subcommittee, I have some 
latitude in where we have it. And I am very, very pleased we 
are able to hold this in Albion, which represents rural aspects 
of this district. And, certainly, the attendance today shows 
how concerned we all are, and this is quite an appropriate 
issue.
    So with that, I want to thank everyone for coming and 
officially say this hearing is now adjourned.
    [Whereupon, at 10:55 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X


                      TESTIMONY OF MARK MEYERHOFER


       DIRECTOR, GOVERNMENT RELATIONS, NORTHEAST-WESTERN NEW YORK


                        TIME WARNER CABLE, INC.


                                   on


                   Broadband Deployment and Adoption


                               before the


                      Committee on Small Business


                 Subcommittee on Health and Technology


                            Albion, New York


                             March 20, 2014

    Good Morning. My name is Mark Meyerhofer, Government 
Relations Director in the Northeast-Western New York region for 
Time Warner Cable. Thank you for inviting me to testify today 
regarding rural broadband.

    Time Warner Cable was formed in 1989 through the merger of 
Time Inc.'s cable television company, American Television and 
Communications Corp., and Warner Cable, a division of Warner 
Communications. Time Warner Cable offers residential video, 
broadband, digital phone and home monitoring and security 
services throughout its New York State footprint; as well as 
data, video and voice services to businesses of all sizes, cell 
tower backhaul services to wireless carriers, information 
technology solutions and cloud services. The Company also 
provides customers with exclusive, local, all-news TV channels 
in New York, North Carolina and Texas that provide viewers with 
content targeted to their community interests and concerns.

    Time Warner Cable is among the largest providers of video, 
high-speed data and voice services in the United States, 
connecting more than 15 million customers to entertainment, 
information and each other in 29 states, employing over 50,000 
people across the U.S. Based on year-end 2013 data, TWC has 
approximately 11 million residential high-speed data 
subscribers and 517,000 business high-speed data services 
subscribers. Time Warner Cable is headquartered in New York 
City.

                 Rural Broadband Deployment in New York


    Time Warner Cable is the leading broadband provider in NYS, 
offering reliable and affordable high speed broadband to over 
2.3 million customers. We also provide video service to 2.6 
million customers and voice service to 1.2 million customers, 
as well as Intelligent Home security and monitoring. Time 
Warner Cable also serves approximately 120,000 businesses 
across the state. We are a major employer with roughly ten 
thousand employees and a local presence in communities 
throughout the state. We pay approximately $450 million 
annually in employee wages, and our state and local taxes and 
fees exceed $270 million each year.

    Investing $25-30 billion of private ``at risk'' capital 
since 1996, Time Warner Cable has deployed broadband 
infrastructure throughout its footprint. We continue to enhance 
our infrastructure to benefit our customers and the communities 
we serve, investing $2 billion in New York State in the last 
four years alone. In the 27th Congressional District in 2012 
and 2013, we built over 335 miles of new lines, passing over 
1,000 businesses and nearly 3,000 homes.

    Time Warner Cable's substantial and sustained investment of 
private, at-risk capital has resulted in our company passing 
approximately 96% of the homes and businesses in our New York 
State footprint. Access to broadband for New Yorkers is higher 
than the national average, with 95% generally having access and 
two-thirds of New York residential customers choosing cable 
broadband. These investments were made, and this success 
achieved, in a regulatory and statutory environment that 
encourages innovation and investment. However, it remains 
extremely challenging to extend broadband to the most rural 
areas of NYS, where geographic isolation and topographic issues 
make it economically infeasible for companies to reach these 
areas--investment simply cannot be recouped before it is time 
to reinvest.

       Government's Role in Spurring Deployment in Unserved Areas


    Time Warner Cable believes government has a role to play in 
helping to meet broadband needs in these unserved areas, and 
that properly structured programs or partnerships can help 
achieve rural broadband deployment goals.

    Any government-sponsored program or partnership should be 
guided by core principles. First, such programs and 
partnerships must be focused on unserved areas so taxpayer 
dollars are not wasted duplicating existing, privately funded 
networks. When taxpayer funds are used to overbuild an existing 
provider, the result is unfair competition for a limited number 
of customers. Government should not pick winners and losers in 
this competitive environment but instead focus limited taxpayer 
funds on unserved areas that need it the most. Second, 
government programs need to focus on last mile services, which 
is the most difficult and costly part of deployment. Third, 
programs should be technology and provider neutral, so all 
providers and technologies are eligible to participate. Fourth, 
the costs of these programs should be broadly shared rather 
than paid for by a tax or fee on a specific set of consumers or 
taxpayers. If rural broadband deployment is the public policy 
goal, the cost should be born as broadly as possible and the 
deployment cost to the individual consumer should be as low as 
possible. Finally, to encourage the broadest possible private 
participation in any government-sponsored program, any funding 
or incentives should come with no strings attached, so 
companies can own and operate the new networks and integrate 
them fully into their existing infrastructure and business 
plans.

    NYS's ConnectNY program created by Governor Cuomo is a good 
example of an effective and well-structured public-private 
partnership program. Time Warner Cable received the largest 
ConnectNY grant and is now investing $7.1M in partnership with 
New York State to provide rural broadband for 52 projects in 22 
counties and more than 40 towns across the state. Our ConnectNY 
project will connect more than 4,100 previously unserved homes, 
business and community institutions to high speed broadband. We 
expect to complete these projects by the end of 2014. ConnectNY 
has a strong focus on unserved areas and a robust review 
process to prevent overbuilding; the costs are shared broadly 
through state bonds; it is provider and technology neutral; and 
there are few if any strings attached to network operations.

    Time Warner Cable also supports the NYS Rural Broadband 
Deployment Act (S. 5481-A) advanced by state Senator George 
Maziarz (NY SD 62, Newfane) because it focuses on unserved 
areas, is provider and technology neutral, and the costs are 
shared broadly through the state's general fund. This bill 
would create a 100% refundable tax credit for rural broadband 
deployment available to residents and small businesses. 
Deployment expenses are refunded over five years and available 
for unserved areas only. The tax credit program would be 
technology and provider neutral and the provider contribution 
is not eligible for the credit. This bill passed the state 
Senate unanimously in June 2013.

                  Rural Broadband Adoption in New York


    While the government's role in spurring broadband 
deployment in unserved areas remains limited, we believe there 
is a broader role for government in broadband adoption. New 
York's adoption rate of 70% is higher than the national average 
of 66%. Roughly one-third of Americans (and 30% of New Yorkers) 
with access to a broadband connection choose not to get 
connected at home. Further, adoption is not consistent across 
groups, where senior citizens, people with lower incomes and 
those with less education adopt at far lower rates. Aging 
populations, lower populations, lower socio-economic status and 
lower educational attainment can often characterize NY's rural 
areas.

    The principle reasons cited for not adopting broadband are 
digital literacy and relevance. We should all work together to 
encourage adoption and Time Warner Cable has participated in 
numerous adoption programs, as noted in the attachment. A small 
investment in educating consumers about why broadband is 
relevant to them can be highly effective in increasing adoption 
rates, especially in low-adopting populations.

                               Conclusion


    Time Warner Cable believes that private investment has 
resulted in remarkable deployment success in NYS and in the US. 
This investment has fueled innovation and the tremendous growth 
of broadband networks and services that we see today. As a 
general principle, we believe that government programs designed 
to address the needs of unserved areas in rural NYS and America 
must contain the guiding principles highlighted above. We also 
support government efforts to increase broadband adoption.

    Time Warner Cable looks forward to working with this 
committee on this issue. Thank you for the opportunity to 
testify today. I am happy to answer any questions you might 
have.

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                       TESTIMONY OF ROBERT SMITH


                GENERAL MANAGER, FRONTIER COMMUNICATIONS


                               BEFORE THE


                 U.S. HOUSE COMMITTEE ON SMALL BUSINESS


                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY


       FIELD HEARING: EXPANDING BROADBAND ACCESS AND CAPABILITIES


                 TO SMALL BUSINESSES IN RURAL NEW YORK


                                 *****


                         MARCH 20, 2014

    Good morning Chairman Collins and Members of the 
Subcommittee. Thank you for including Frontier Communications 
in this important hearing.

    My name is Bob Smith. I am the General Manager for Frontier 
Communications, overseeing Frontier's service area in western 
New York State. I am honored to be here representing Frontier 
Communications, the largest communications service provider 
focused on rural America, providing broadband, voice and video 
services to more than 3 million residential and business 
customers in 27 states.

    The communications business has changed dramatically since 
Frontier began business as a local exchange carrier--a provider 
of POTS, plain old telephone service--in 1935, but our 
commitment to providing customers with reliable and affordable 
products and services remains constant. Over the past decade, 
Frontier has transformed from a 20th Century phone company to a 
21st Century broadband company, and we have made it our mission 
to deliver the life changing benefits of broadband technology 
to rural communications across our footprint. Broadband is a 
key driver for economic growth in America in the 21st Century. 
Broadband availability in rural America offers more than simply 
entertainment and communications capabilities. It translates 
into increased economic development, employment and educational 
opportunities, and improved health care. In July 2010, Frontier 
completed a transformative transaction, acquiring millions of 
rural and suburban communications lines from Verizon. As part 
of this acquisition, we committed to provide high speed 
broadband access to hundreds of thousands of homes previously 
unserved. The wireline broadband services Frontier provides 
ensure that our customers--your constituents--have unlimited 
opportunities for the future.

    That is why Frontier is relentlessly deploying and 
upgrading broadband to the communities we serve; to mid-sized 
cities such as Rochester, to small towns like Dansville, and to 
rural areas others consider too difficult to serve like 
Wyoming, New York. Since 2010, we have invested more than $2.2 
billion in company funds to increase broadband access and 
improve infrastructure, and an additional $133.2 million from 
the FCC's Connect America Fund (CAF) supports broadband 
deployment exclusively to unserved high-cost areas.

    Frontier has significant operations in New York State, 
having acquired the former Rochester Telephone Company in 1995. 
Frontier now has 2,300 employees serving more than 275,000 
residential customers in New York, and major offices in 
Rochester as well as Gloversville, Johnstown and Middletown. In 
New York State alone, Frontier has invested more than $200 
million in network enhancements and capital investments for 
operations over the past two years. Frontier has been able to 
accept $9 million in the Connect America Fund's Phase One 
process to provide broadband to more than 15,750 previously 
unserved households in New York State.

    Our efforts to deploy broadband throughout our New York 
service area do not stop there. We have worked with local 
governments, as well as with the New York State Economic 
Development Councils, to ensure that areas most in need of 
broadband are getting access. We have assisted Hamilton County 
in receiving a $2.2 million New York State Broadband grant to 
upgrade the data transport backbone in eastern New York State, 
from Gloversville to Eagle Bay. Upon completion, all of 
Hamilton County--which includes the Adirondacks, challenging 
geography and sparsely populated in some places--will have 
access to broadband and speeds of 10 Mbps.

    Most recently, we have been working with Wyoming County and 
New York State Senator Patrick Gallivan on broadband capacity 
in that County and to assist with confirming that their 
Agriculture Center will have the broadband capacity required to 
serve their needs. Access to broadband in this rural county 
provides farmers and spin-off agri-business with access to 
world markets, expanding their product and services market from 
local to global. Frontier is proud to be the provider working 
with Senator Gallivan on this initiative.

    We continue to seek out ways to work collaboratively with 
State and local governments and organizations to provide 
businesses and residences the broadband services they need.

    Like you, we know that high-speed broadband connectivity is 
life changing and absolutely critical to our country's economic 
recovery and prosperity. Communities with access to the 
Internet are ripe for economic development and job creation. 
Frontier is modernizing facilities and services because we 
believe that our ``time and treasure'' is best used by 
extending robust broadband networks to these communities. 
Today, that means giving customers access to high-speed 
Internet service. Broadband technology offers rural America 
untold economic, educational and social opportunities and we 
consider it our job to deliver that access.

    Thank you for giving me and Frontier the opportunity to 
participate in this hearing.

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    Thank you to the Committee on Small Business and to 
Subcommittee Chairman Chris Collins for inviting me to testify 
before you today on broadband access and its impact on small 
businesses here in Rural New York. My name is Kendra Lamb and 
my husband and his family own Lamb Farms, a dairy based in 
Oakfield, N.Y., with three milking facilities and a methane 
digester. We are a third generation farm family with a passion 
for producing quality milk while providing excellent care to 
our cows and the land. I am also speaking on behalf of New York 
Farm Bureau, the largest general farm organization in the state 
with 25,000 members representing all commodities, all 
production methods and living in all corners of the state.

    It might be hard for some people to imagine, but New York 
State has some very rural locations and we have large gaps 
where broadband access is just not available, including here in 
Western New York. In today's age, with access to the internet, 
a small business can operate from anywhere. But similarly, it's 
hard to imagine a small business surviving and thriving in a 
rural area if it cannot be competitive in a world marketplace. 
The value of businesses in rural areas is recognized by New 
York State, which has been focusing on economic development in 
our Upstate communities where farms and small businesses are 
often the primary drivers of jobs and economic opportunity. But 
the lack of reliable broadband access is a major barrier to 
continued growth and we need the federal government to help 
solve this problem.

    According to a 2013 farm computer usage survey conducted by 
the U.S. Department of Agriculture, 69 percent of farms in New 
York have internet access. This leaves 31 percent of our 
farms--or more than 11,000 operations--that do not currently 
have internet access.

    But access is not the only problem, so is affordability and 
bandwidth. A 2010 study conducted by the Small Business 
Administration found that ``rural small businesses pay 
significantly higher prices than metro small businesses for the 
same bandwidth, and small businesses in metro regions have 
access to higher bandwidth services than rural businesses do 
(at higher costs).'' These kinds of inequities cannot continue 
if rural businesses are expected to compete with their 
counterparts in more developed areas. Congress must work 
through sufficient funding of the Rural Utilities Service and 
the Universal Service Fund, combined with any tax incentives, 
grants or regulations that are appropriate, to help increase 
access and affordability of broadband services in rural areas.

    We are lucky that our main farm location has a broadband 
connection through our cable provider and my home has DSL 
through our telephone service provider. Without access to this 
kind of reliable internet service our farm wouldn't be able to 
do many of the key things we do to educate and reach out to the 
community. We have found that working in animal agriculture, it 
has become increasingly important to be able to educate the 
community on what we are doing on the farm and answer their 
questions in an honest and direct manner and we like to be on 
the leading edge of communication.

    I am responsible for many of the public relations and 
outreach efforts of our farm. We have a Facebook page that I 
use to reach the community and educate consumers on our food 
supply. Without high-speed internet, I wouldn't be able to 
update this page with the large picture and video files that 
help us tell our story. We also have a farm website that we 
update ourselves and take requests online from those who wish 
to visit the farm. Twice a year we publish a farm newsletter 
for all our neighbors; moving this file back and forth across 
the internet while we perfect it would be impossible with a 
slow internet connection.

    But we don't just use high-speed internet for our 
communication initiatives. Like most other businesses, we use 
the internet across many business applications to take 
advantage of the latest technologies, to collect and analyze 
data, and ultimately, to make better decisions.

    Our farm takes advantage of the internet to connect our 
multiple locations and provide better management for our herd 
and employees. We log on each day to our milk cooperative's 
website to check on the amount and quality of milk that we have 
shipped so we can monitor any changes. We also use dairy-
specific software to help with record-keeping, like tracking 
the milk production of each of our cows, which we download as 
large files off the internet. Like any software, sometimes 
there are problems, so we can get remote technical support from 
the technology company that is located two hours away in 
Ithaca, N.Y. If a technician had to visit our farm each time 
there is a problem, we would lose valuable hours of work and it 
would be expensive to get that on-site assistance. Similarly, 
we are able to monitor our methane digester, which uses waste 
on the farm to create energy, and get remote assistance from 
Pennsylvania--all over the internet.

    We grow most of the feed for our animals and all of our 
crop record-keeping is through internet-based programs. These 
programs help us keep track of soil types, where waterways are 
located, setbacks and nutrient recommendations as well, which 
helps keep us in compliance with our CAFO permit and better 
oversee our environmental stewardship plan.

    Much of our banking is done online now and our employee 
time clocks and payroll software are web-based programs linked 
directly to our bank. Many of our vendors have gone paperless, 
so web applications allow us to view invoices online and keep 
our payments up to date. Even our employee benefits are updated 
and communicated through web programs so our workers have easy 
access to comprehensive information.

    It would be hard to imagine our business, which has 
multiple moving parts from animal care to growing crops to 
human resources management, being as successful as we are 
without the efficiency and organization we gain from these 
internet-based systems.

    Businesses like our dairy need high-speed, affordable 
internet to stay on top of the research and innovation that is 
available in our industry. As farm managers, we need to 
understand changes in trade and world markets and in consumer 
demands. This helps us make business decisions from how many 
cows to milk, to what risk management tools we need to 
investigate.

    In addition, more and more federal and state agencies are 
relying on electronic reporting from farms in order to comply 
with regulations. Efforts are afoot to make environmental and 
employee safety and health reporting electronic, completely 
getting rid of paper submissions. This is an untenable 
requirement that places extreme burdens on farms and other 
small businesses that don't have reliable access to the 
internet. While electronic reporting certainly can help 
streamline the work of government agencies, it is important 
that the Small Business Committee push back against exclusive 
electronic reporting requirements until all businesses have 
access to reliable broadband that is not cost-prohibitive.

    While our farms does not direct market to consumers, many 
farms in rural areas do, especially fruit and vegetable growers 
through farm stands, farmers markets or CSAs. Websites, social 
media and online directories are invaluable tools for these 
farms to reach their customers. Today's local food movement 
means that farms are connecting with consumers in completely 
new ways and the marketplace is constantly changing as suburban 
and rural families evolve in the way that they seek product. 
Farmers looking for new outlets are exploring home delivery 
programs, buying cooperatives and community-based farmers 
markets--the internet is how they learn and explore new 
business models that can lead to success.

    For many farms and small businesses in rural New York that 
are not connected to the world through the internet, they can 
face a feeling of rural isolation. This makes our rural areas 
less attractive places for people to live, spurring the brain 
drain and economic decline some of our formerly thriving small 
towns in rural New York have experienced. It is no secret that 
rural areas don't have the same access to education and health 
care as more densely populated areas. So rural broadband offers 
the opportunity for distance learning and telemedicine that can 
help make our communities even more attractive and viable 
places for young people, families and seniors to live. A large 
part of ensuring that our rural areas remain viable and 
contribute to economic development is making sure every citizen 
has access to broadband service.

    In conclusion, access to broadband is essential for farms 
and other rural small businesses to manage efficient and 
successful operations, to reach their communities and 
customers, to stay on the cutting edge of their industry, and 
for our rural communities to be attractive places to live for 
our employees, customers and the next generation to run our 
business. We can't do this on dial-up or undependable internet 
connections.

    Thank you again for the opportunity to share why reliable 
and affordable broadband access is important to rural New York 
and our farms and small businesses. I would be glad to take any 
questions you may have.

    ###

    [GRAPHIC] [TIFF OMITTED] T7280.011
    
Expanding Broadband Access and Capabilities to Small Businesses 
                       in Rural New York

                  Committee on Small Business

             Subcommittee on Health and Technology

                 U.S. House of Representatives

                         March 20, 2014

                    Questions for the Record

    The Honorable Chris Collins

    1. The FCC recently stated their intention to modify the 
formula for how the Universal Service Fund (USF) is distributed 
to carriers to expand broadband. How do you plan to update the 
USF in a way that accounts for the unique challenges of small 
carriers operating in diverse rural areas and allows all 
consumers the option of purchasing only broadband from their 
provider?

    Response: In April, the Commission voted to move forward 
with Phase II of the Connect America Fund. We also took several 
steps to improve the climate for broadband investment in areas 
served by incumbent rate-of-return carriers. In a Further 
Notice of Proposed Rulemaking, we seek comment on establishing 
a Connect America Fund for rate-of-return carriers. 
Specifically, the Commission proposes to adopt a standalone 
broadband funding mechanism for rate-of-return carriers, and 
seeks comment on how to support the deployment of broadband-
capable networks by rate-of-return carriers within the current 
budget for the program. We welcome a dialogue regarding how a 
standalone broadband mechanism could be structured to provide 
support consistent with the $2 billion budget for rate-of-
return territories. The Commission is focused on updating the 
universal service program to ensure that we are delivering the 
best possible voice and broadband experiences to rural America 
within the Connect America budget, while providing increased 
certainty and predictability for all carriers and a climate for 
increased broadband expansion.

    2. Many small wireless carriers have stated they are unable 
to participate in spectrum auctions that only make spectrum 
available in large geographic sizes/blocks. Can you provide 
details on the steps the FCC is taking to ensure that small 
wireless carriers have an opportunity to participate and obtain 
spectrum from upcoming auctions?

    Response: It is a priority of mine to ensure that wireless 
providers of all sizes are able to participate in upcoming 
auctions. The Commission has historically made spectrum 
available in block sizes that vary by both geography and 
frequency to meet the needs of providers of all sizes.

    On May 15, the Commission adopted service rules for the 600 
MHz Band, which will be subject to competitive bidding in the 
forward auction component of the broadcast television spectrum 
incentive auction. The 600 MHz Band Plan is comprised of paired 
5 +5 megahertz building blocks to facilitate the rapid 
deployment of networks, including by small carriers and new 
entrants. In addition, the Commission adopted Partial Economic 
Areas (PEAs) (416 license areas) as the service area for the 
600 MHz Band, to permit entry by providers that contemplate 
offering wireless broadband services on a localized basis.

    Earliers this year, the Commission also adopted service 
rules for the AWS-3 Bands, which will be auctioned this Fall. 
The 1695-1710 MHz band will be available in 5 and 10 megahertz 
unpaired blocks on an economic area basis (176 license areas). 
The 1755-1780/2155-2180 MHz band will be made available in a 5 
+ 5 megahertz paired block on a cellular market area basis (734 
license areas), two 5 + 5 megahertz paired blocks on an 
economic area basis, and one 10 + 10 megahertz paired block on 
an economic area basis. Making these bands available in 
licenses that vary in both frequency and geography will meet 
the spectrum needs of providers of all sizes.

    In addition, the Commission has historically administered 
an effective bidding credit program that promotes auction 
participation by designated entities, including small 
businesses. For the AWS-3 auction and the forward auction 
component of the incentive auction, the Commission adopted 
bidding credits of 15 percent for small businesses (entities 
with average gross revenues for the preceding the 3 years not 
exceeding $40 million), and 25 percent for very small 
businesses (entities with average gross revenues for the 
preceding 3 years not exceeding $15 million). The Commission 
will initiate a proceeding in the coming months to review its 
designated entity program to ensure that it continues to ensure 
that qualified small businesses can participate meaningfully in 
spectrum auctions. We will implement any appropriate changes 
prior to the incentive auction.

    3. At the hearing, both carriers and users voiced concerns 
over the authenticity of the National Broadband Map (NBM). Even 
though the NBM showed they have access to broadband, the local 
carriers and residents explained how they were no access to 
broadband in that area. Considering that the FCC and policy 
makers use the NBM to direct funding, including through the 
Connect America Fund, what is the FCC doing to ensure that 
we're allocating funding to the most appropriate areas? And 
what is the FCC doing to ensure that carriers are not being 
passed over in funding opportunities because of errors in the 
NBM? Finally, how are you working with state and local 
communities to collect and analyze the NBM data to ensure it 
reflects the most accurate rate of service?

    Response: The Commission uses the National Broadband Map as 
the starting point for determining which census blocks are 
unserved, but it also has adopted a challenge process to allow 
all interested stakeholders, including incumbent providers, 
competitors, state regulators, and local communities, to 
provide evidence on whether a particular census block in fact 
is unserved. Commission staff undertakes a thorough review of 
all evidence submitted in the challenge process before making 
any determination.

    4. On the day of the hearing, the FCC announced in a public 
notice that the Rate Floor, which requires small rural carriers 
to increase their telephone voice service rates to avoid losing 
universal service support, could increase from $14 to $20.46 in 
a few months. These rate hikes could lead to consumers dropping 
voice service which, under current Commission rules, could lead 
to a 2 to 3 times rate hike on broadband service. Does the 
Commission plan to take action on this issue to avoid these 
rate hikes?

    Response: In the 2011 USF/ICC Transformation Order, the 
Commission unanimously adopted reforms to make universal 
service a fairer system for all consumers and businesses. The 
Order includes a phase-out of excessive subsidies for basic 
phone service, which allowed some phone companies to charge 
their customers as little as $5 a month while average urban, 
suburban, and even some other rural consumers were paying over 
three times that amount. The Commission determined it was 
inappropriate to use limited federal high-cost support to 
subsidize local rates beyond what is necessary to ensure 
reasonable comparability between urban and suburban rates, and 
rural rates, as required by Congress. The reforms adopted in 
the 2011 Order gradually eliminate these excessive subsidies to 
level the playing field for all consumers and contain the cost 
of the program, which is funded by universal service fees paid 
by consumers.

    Importantly, the Commission's rules do not require carriers 
to raise their local rates. Nevertheless, the Commission has 
recognized concerns over potentially sizable rate increases and 
possible difficulties some carriers may experience in making 
any rate adjustments at the state level in a short period of 
time. To address these concerns, the Commission adopted an 
order on April 23, 2014 that delays any potential universal 
service support reductions for lines that remain below the rate 
floor until January 2015. In addition, the universal service 
support reductions that go into effect in January will only be 
for those lines with rates below $16, with no further increases 
until July 2016, at which time reductions in universal service 
support will be limited to an increase of no more than $2 
annually.

    5. Is it true that FCC rules effectively force some rural 
consumers to purchase regulated voice service in order to make 
broadband affordable? That is--the customer's broadband rates 
go up if they choose to stop buying voice service because the 
rules provide USF support for a line only when the customer 
actually purchases voice?

    Response: Some small carriers have suggested that they 
should be able to receive support for delivering standalone 
broadband services (i.e., without providing a voice service). 
Our current rules don't allow for this. However, as noted 
above, in a Further Notice of Proposed Rulemaking adopted last 
month, the Commission proposes to adopt a standalone broadband 
mechanism to provide support consistent with the $2 billion 
budget for rate-of-return territories.

    a. Doesn't a policy that increases local voice rates more 
or less push people over time to take only broadband--why would 
we have a rule that leads broadband rates to increase when that 
happens?

    Response: Although concerns regarding increased landline 
rates because of the increased rate floor are understandable, 
we have seen minimal impact on consumers since the Commission 
implemented this rule in 2012. The rate floor increased from 
$10 in 2012 to $14 in 2013, a 40 percent increase. However, 
consistent with our rules, many carriers continue to report 
lines with rates well below the $14 rate floor, suggesting that 
they may have made a business decision to grandfather the lower 
rates for those customers and accept the associated support 
reductions. In 2013, carriers in 34 study areas in 16 states 
were still reporting a number of lines with residential local 
service charges of $5 or less, further reinforcing that 
individual carriers may choose not to raise rates in response 
to the current rate floor.

    As noted above, the Commission has adopted both a delay 
until January 2015 and a phase-in of the reductions in 
universal service support resulting from not meeting the 2014 
rate floor. This will minimize any impact on service providers 
and customers.

                                 
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