    [Senate Hearing 113-188]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 113-188

                 CONNECTING URBAN AND RURAL AMERICA: THE STATE OF
                   COMMUNICATIONS ON THE GROUND
    =======================================================================

                                 FIELD HEARING

                                   before the

          SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                     of the

                             COMMITTEE ON COMMERCE,

                          SCIENCE, AND TRANSPORTATION

                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                AUGUST 19, 2013

                                   __________

        Printed for the use of the Committee on Commerce, Science, and
                                 Transportation

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           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                JOHN D. ROCKEFELLER IV, West Virginia, Chairman
    BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
    BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
    MARIA CANTWELL, Washington           ROY BLUNT, Missouri
    MARK PRYOR, Arkansas                 MARCO RUBIO, Florida
    CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire
    AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
    MARK WARNER, Virginia                DAN COATS, Indiana
    MARK BEGICH, Alaska                  TIM SCOTT, South Carolina
    RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
    BRIAN SCHATZ, Hawaii                 DEB FISCHER, Nebraska
    MARTIN HEINRICH, New Mexico          RON JOHNSON, Wisconsin
    EDWARD MARKEY, Massachusetts         JEFF CHIESA, New Jersey
                        Ellen L. Doneski, Staff Director
                       James Reid, Deputy Staff Director
                         John Williams, General Counsel
                  David Schwietert, Republican Staff Director
                  Nick Rossi, Republican Deputy Staff Director
       Rebecca Seidel, Republican General Counsel and Chief Investigator
                                     ------

                  SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY,
                                AND THE INTERNET

    MARK PRYOR, Arkansas, Chairman       ROGER F. WICKER, Mississippi,
    BARBARA BOXER, California                Ranking Member
    BILL NELSON, Florida                 ROY BLUNT, Missouri
    MARIA CANTWELL, Washington           MARCO RUBIO, Florida
    CLAIRE McCASKILL, Missouri           KELLY AYOTTE, New Hampshire,
    AMY KLOBUCHAR, Minnesota             DEAN HELLER, Nevada
    MARK WARNER, Virginia                DAN COATS, Indiana
    MARK BEGICH, Alaska                  TIM SCOTT, South Carolina
    RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
    BRIAN SCHATZ, Hawaii                 DEB FISCHER, Nebraska
    EDWARD MARKEY, Massachusetts         RON JOHNSON, Wisconsin
                                         JEFF CHIESA, New Jersey

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on August 19, 2013..................................     1
    Statement of Senator Pryor.......................................     1

                                   Witnesses

    Hon. Jessica Rosenworcel, Commissioner, Federal Communications
      Commission.....................................................     3
        Prepared statement...........................................     5
    Sam Walls III, President, Connect Arkansas.......................     8
        Prepared statement...........................................    10
    Michael Manley, RNP, MNSc, AR SAVES Director, Director of
      Outreach, UAMS Center for Distance Health, University of
      Arkansas for Medical Sciences..................................    12
        Prepared statement...........................................    13
    David L. Merrifield, Executive Director, Arkansas Research and
      Education Optical Network......................................    18
        Prepared statement...........................................    19
    Susan Harriman, Director of Policy and Special Projects, Arkansas
      Department of Education and Coordinator of STEM Works, State of
      Arkansas on behalf of the Fast Access for Students Teachers and
      Economic Results (FASTER) Arkansas committee...................    21
        Prepared statement...........................................    22
    Lang Zimmerman, Commissioner, Arkansas Economic Development
      Commission and Vice President, Yelcot Communications...........    24
        Prepared statement...........................................    25
    Jeffery Hall, Associate Director of Government Affairs, Arkansas
      Farm Bureau....................................................    26
        Prepared statement...........................................    27
    Jeff R. Gardner, President and Chief Executive Officer,
      Windstream Corporation.........................................    34
        Prepared statement...........................................    35
    Edward Drilling, President, AT&T Arkansas........................    38
        Prepared statement...........................................    39
    John Strode, Vice President of External Affairs, Ritter
      Communications Holdings, Inc. on behalf of Ritter
      Communications Holdings, Inc., NTCA--The Rural Broadband
      Association, and the American Cable Association................    41
        Prepared statement...........................................    42
    Dean Kurtz, Vice President, Regulatory and Legislative Affairs,
      Southern Region, CenturyLink...................................    46
        Prepared statement...........................................    47
    Greg Ashcraft, Chief Financial Officer, South Arkansas Telephone
      Company........................................................    49
        Prepared statement...........................................    50
    David Russell, Vice President of External Affairs, Verizon's
      South Area.....................................................    51
        Prepared statement...........................................    52
    L. Elizabeth Bowles, President and Chairman of the Board,
      Aristotle, Inc.................................................    53
        Prepared statement...........................................    54
    Steven G. Sanders, Jr., President and General Manager, Northern
      Arkansas Telephone Company (NATCO).............................    57
        Prepared statement...........................................    58
    Allen Weatherly, Executive Director, Arkansas Educational
      Television Network.............................................    68
        Prepared statement...........................................    69
    Len Pitcock, Director of Government Affairs, Cox Communications..    74
        Prepared statement...........................................    75
    Mike Wilson, Senior Director of Government Affairs, Comcast of
      Arkansas.......................................................    75
        Prepared statement...........................................    76
    Doug Krile, Executive Director, Arkansas Broadcasters Association    77
        Prepared statement...........................................    79
    LaDawn Fuhr, MidSouth Regional Manager of Community and
      Government Relations, Suddenlink...............................    79
        Prepared statement...........................................    80

    CONNECTING URBAN AND RURAL AMERICA: THE STATE OF COMMUNICATIONS ON THE
                                     GROUND

                                  ----------

                            MONDAY, AUGUST 19, 2013

                                   U.S. Senate,
    Subcommittee on Communications, Technology, and the
                                              Internet,
            Committee on Commerce, Science, and Transportation,
                                                       Little Rock, AR.
        The Subcommittee met, pursuant to notice, at 9 a.m. in the
    Board Room, Electric Cooperatives of Arkansas, Little Rock,
    Arkansas, Hon. Mark Pryor, presiding.

                 OPENING STATEMENT OF HON. MARK PRYOR,
                       U.S. SENATOR FROM ARKANSAS

        Senator Pryor. I will go ahead and call our meeting to
    order here. First, I want to say thank you all for being here.
        This is a committee hearing for the Senate Commerce
    Committee. And there is a subcommittee called Communications,
    Technology, and the Internet, so this is an official
    subcommittee meeting. We are following all the protocol that we
    use in the Senate.
        So let me just say thank you for everyone who is here in
    attendance, especially for our panelists and all the things
    that you are going to talk about today.
        The title for this hearing is ``Connecting Urban and Rural
    America: The State of Communications on the Ground.''
        And before I say another word, I want to thank the Arkansas
    Electric Cooperatives for allowing us to use their facilities
    today. Not only are they beautiful but they are very
    functional. And we are very appreciative to Katrina Weyland,
    who I saw earlier--she was the first person I saw when I walked
    in--and also Carmie Henry, of course, who has been at the co-
    ops for a long time and always does great things. But I want to
    thank the Arkansas Electric Cooperatives, as well as Duane and
    many others who I have met here today and just say thank you.
        Also, a special welcome to FCC Commissioner Jessica
    Rosenworcel, who is here. And she is going to stay here on the
    panel, so to speak, and certainly we would love to get her
    thoughts and insights as we go.
        You know, the nation's communications sector is the most
    dynamic and innovative part of our economy. Whether it is
    things like traditional wireline or wireless or broadcasters/
    cable/satellite, or some mixture of those things, lots of
    investment, lots of innovation, and it has been amazing to
    watch and amazing to see.
        We have a lot of people sitting around this room who really
    will play an extremely important part in Arkansas's future to
    make sure that we get this technology here in our state.
        And that kind of goes to really the driving mission, one of
    the central challenges that we have on the CTI Subcommittee and
    something that I take very personally, and that is: How do we
    make sure that these great, cutting-edge, amazing services
    reach everyone, not only urban areas but also rural areas and
    also people that either maybe don't have the economic ability
    or maybe have a disability of some sort or another? How do we
    make sure that it reaches everyone?
        And I think one of the things we do not want to see is the
    tale of two Americas, where you have urban and suburban America
    that have the latest and greatest and best technology and they
    have the investment and the innovation and all those good
    things, and then you get rural America, that is just left
    behind with second-rate, third-rate telecommunications
    services. That is not good for rural America, but really it is
    not good for anyone.
        And as we go through the day, we are going to hear things
    about why this is important and why the Congress should
    continue to create conditions for things like job creation,
    innovation, investment, and other aspects that
    telecommunications brings with it.
        So I am proud to be the Chairman of this Subcommittee. Just
    for the folks in the room from Arkansas who haven't
    participated in these in Washington, we have had four what we
    call ``state of'' hearings. And so the idea was, this year, to
    start the year with these four ``state of'' hearings. So we had
    the state of rural communications, the state of video, state of
    wireless, and the state of wireline. And we brought a lot of
    people together to look at the marketplace, look at the
    regulatory environment. We were able to talk about this
    nationally, get the big-picture view of this.
        But today's hearing is really the culmination of those four
    hearings, in the sense that Arkansas is a great microcosm, that
    we can really look at this in more detail, in a more granular
    way, because we have in this state all those same challenges.
    We have the urban versus the rural. We have, you know, income
    complexities. We have things like the diversity of terrain--
    just, you know, challenges left and right, to make sure that we
    do this right.
        But the great thing about Arkansas is we have people here
    on the ground who are very, very committed to making it run and
    run right and run well.
        So I would say, if you think about telecommunications and
    the impact that it has on all of our lives, it is pretty
    astounding. I mean, it is as simple as just calling a friend
    and talking about what is going on there, or a loved one,
    something like that, all the way to making those 911 and other
    emergency calls that when you absolutely need it, you have to
    have it, because it really does save lives. And, you know,
    there are a lot of things in between, about watching local
    news, local sports, just being involved with your community and
    finding out what is going on there. People are taking classes
    online. They are conducting more and more business online.
        Now, with all these new technologies, you can have a
    tablet, you can watch local TV on your tablet, you can stream
    movies. I mean, it is just this never-ending series of
    applications, this technology, that really is impacting lives.
        And it is not just a luxury; it is something, again, that
    has become extremely important in our economy. And one thing
    that we need to remember is that now economic growth is going
    to be tied to this, and economy opportunity. We want to see
    Arkansas stay competitive. We want to continue creating jobs.
    We want to continue to see us improve education, improve health
    care. And this is one of the real levelers when it comes to
    providing cutting-edge, best-in-class rural health care. But
    also this comes to safety and keeping people safe and being
    able to do things that we have really never been able to do
    before.
        So, here again, you look at Arkansas. We have this great
    ecosystem here. We have people that know each other, that want
    to work together, want to get it done. We have really large
    companies that are doing business here, and we have really
    small companies. We have a Fortune 500 company that is based
    here. We have innovative people. And, as I said before, we have
    lots of challenges.
        So let me just run through our three panels very quickly
    and tell you how we are setting up today. The first panel is
    designed to understand the benefits of broadband and the status
    of its deployment and adoption across the state. The second and
    third panels will be from wireless and wireline providers,
    broadcasters, and other media representatives working to bring
    services to Arkansas.
        And then at the end of today's hearing, you know, the goal
    is that we would have a more thorough understanding of the
    national and state challenges and that we would, that I would,
    know what needs to be done to not just improve
    telecommunications for the end user but also to create this
    environment where we continue to see the innovation and all the
    things, you know, that this technology promises.
        So, again, I want to thank all of you all again. And we are
    going to go with our testimony in just a minute, but first I
    wanted to introduce our FCC Commissioner, Jessica Rosenworcel.
    She was on the Senate Commerce Committee staff, and she and I
    worked on at least one piece of legislation that was signed
    into law by the President, but, actually, we worked on several
    pieces of legislation. And she has been very, very good on the
    FCC, and let me turn the microphone over to her.
        And, by the way, you push this little button, I think the
    one that is closest to you on the table.
        Go ahead.

     STATEMENT OF HON. JESSICA ROSENWORCEL, COMMISSIONER, FEDERAL
                       COMMUNICATIONS COMMISSION

        Ms. Rosenworcel. Thank you, Senator Pryor. Thank you for
    having me here. It is a treat to be here in Arkansas, and I
    look forward to hearing from the slate of witnesses we have.
        So I have been a Commissioner at the FCC for a little over
    a year, but I have actually worked on communications and rural
    communications for many years. In fact, before making my way to
    the Commission, as the Senator just said, I worked up on
    Capitol Hill as Senior Communications Counsel to the Senate
    Commerce Committee.
        So in that role I had the opportunity to work with Senator
    Pryor, and I know firsthand how he puts the people of Arkansas
    first. But more than that, I know he knows how important it is
    for all Americans, no matter who they are or where they live,
    to have access to modern communications.
        And if you want proof, you can look at his leadership in
    the passage of the 21st Century Communications and Video
    Accessibility Act. It is a law that extends access to digital-
    age communications to all Americans, including those with
    disabilities. Now, he won't brag--that is probably not the
    Arkansas way--but I will. Because of this law, he is actually
    responsible for one of the biggest and most substantial
    communications laws in decades.
        So it is a treat to be here, and I thank him and the
    Subcommittee. And I am looking forward to hearing directly from
    people who work hard every day to make sure that all Americans
    are connected.
        Because on this front we have made real progress. In fact,
    more than 80 percent of American households in this country now
    have access to broadband at 100 megabits. The United States
    leads in the world in fourth-generation LTE wireless
    deployment. And carriers serving rural America have made real
    gains in some of our most remote communities, and this progress
    has created opportunities for businesses, for jobs, for
    education, for health care, and for civic life.
        But there is no rest for the weary because laurels are not,
    in fact, good resting places. Time is marching on and
    technology advances, and every day there is work to do to make
    sure that rural America is not left behind.
        This is true right here in Arkansas, and the FCC data
    demonstrate that with clarity. It tells us that over 13 percent
    of those in Arkansas lack access to broadband, and in rural
    areas the number is even higher. Moreover, across the state,
    broadband adoption is just about 48 percent. So we have work to
    do, because it is important that nobody in this state or this
    country is consigned to the wrong side of the digital divide.
        Now, at the FCC, we have a range of programs and policies
    that can help, if we do our jobs right. We have upcoming
    spectrum auctions that can extend the reach of wireless
    broadband service to more rural areas. We have ongoing work on
    the IP transition, which is an effort to foster investment in
    next-generation networks across the country. We have a
    Universal Service Fund to help support communications in rural
    areas. But we need to make sure recent updates to this program
    help and not hurt rural deployment.
        We are updating our E-Rate program that connects schools
    and libraries to the Internet. And this is especially exciting
    because I think if we change its focus from just connection to
    capacity, we are going to make real progress with digital-age
    education.
        Finally, we have also updated our policies to support rural
    telemedicine through our Healthcare Connect Fund. And I think
    this is a good thing not just for health care; it is going to
    help further with rural broadband deployment.
        So we have a lot going on, a lot of work to do. But
    Washington is awfully long on talk and short on listening, so
    today I want to flip that script and I want to listen to you
    and I want to learn.
        So thank you for having me here, and I look forward to your
    testimony.
        [The prepared statement of Ms. Rosenworcel follows:]

         Prepared Statement of Hon. Jessica Rosenworcel, Commissioner,
                       Federal Communications Commission
        Thank you, Senator Pryor, for your kind introduction. I am honored
    to speak at today's hearing on the critical communications issues
    facing rural America. I also look forward to hearing the testimony from
    today's impressive panels of witnesses.
        I've been in this job for a little over a year, but I've worked on
    communications issues facing rural America for many years. I saw them
    when I worked down in the trenches as Commission staff and in the
    private sector. And I saw them when I had the privilege of serving the
    Senate Commerce Committee as Senior Communications Counsel. That is
    also when I had the tremendous opportunity to work directly with
    Senator Pryor. I was able to see first-hand how Senator Pryor fights
    for the people of Arkansas. I know he knows how important it is for all
    Americans--no matter who they are, or where they live--to have access
    to affordable communications. This basic truth was born out with
    Senator Pryor's leadership in the passage of the Twenty-First Century
    Communications and Video Accessibility Act, which extends access to
    digital age communications to all Americans, including those with
    disabilities.
        Today, I salute Senator Pryor for holding this hearing and for
    allowing us to hear directly from the people who work so hard to
    connect all Americans. We've made real progress on this front. Today,
    more than 80 percent of American households have access to broadband at
    speeds as high as 100 Megabits. The United States leads the world in 4G
    LTE wireless deployment. And our dedicated rural carriers have already
    brought communications to some of America's hardest-to-reach
    communities. This has created new opportunities for jobs, education,
    healthcare, and social and civic engagement. We have made progress. We
    should be proud.
        But laurels are not, in fact, good resting places. Because--as we
    have seen through a series of hearings convened by Senator Pryor--
    communications markets are changing at a breathtaking pace. Time
    marches on, technology advances, and there is work to do every day to
    make sure that our rural communities are not left behind.
        So today, I would like to mention some FCC priorities that hold
    great promise for the connectivity for rural Americans and Arkansans:
    incentive auctions, and updates to our universal service programs,
    especially the E-Rate program and the Healthcare Connect Fund.
        First up, incentive auctions.
        It is no secret that the demands on our airwaves are growing. Look
    around and the reasons why are obvious. We are now a nation with more
    wireless phones than people. Add to this that one in five households
    now has a tablet computer. But this is only the tip of the proverbial
    iceberg. Because what is emerging is a whole new world of 50 billion
    wirelessly interconnected devices--the coming Internet of Things.
        This means we are facing a seismic shift in the demand for our
    airwaves. To understand how we will manage this challenge going
    forward, it is useful to briefly look back.
        For nearly two decades, the Commission has led the world with its
    commercial spectrum auctions. We have held more than 80 auctions,
    issued more than 36,000 licenses, and raised more than $50 billion for
    the United States Treasury. Our efforts are a model for wireless
    providers and governments around the globe.
        Going forward we have a new kind of spectrum auction on the not-
    too-distant horizon.
        Courtesy of Congress and the Middle Class Tax Relief and Job
    Creation Act, the Commission now has the ability to conduct spectrum
    incentive auctions. This is different. We are now permitted to provide
    incentives to existing spectrum licensees to voluntarily return some or
    all of their airwaves in exchange for a portion of the revenue from the
    subsequent re-auction of those airwaves for new commercial uses.
        This is a smart way to make efficient use of spectrum, which is a
    limited government resource. And this is instructive. Because across
    the board in communications we are going to have to look for new and
    creative ways to make use of scarce government resources.
        But make no mistake, these auctions are an epic undertaking. They
    will require a special brew of economics, law, and engineering. Our
    rulemaking process is just underway. It will consume a lot of energy to
    do this well--and do this right.
        It also will require a lot of good ideas from anyone and everyone
    with interest in spectrum. I know many rural providers are either
    already providing wireless services or are considering how to do so.
    The 600 MHz spectrum that will be available through this auction is
    well-suited for rural applications. It has great propagation
    characteristics because it can cover vast distances with limited tower
    construction.
        Second, universal service. More than a year and a half ago, the
    Commission took historic steps to update its high-cost universal
    service fund and intercarrier compensation system. Though it predated
    my arrival at the Commission, I commend my colleagues--past and
    present--for their effort. They refocused the high-cost universal
    service system from last century's technology on the broadband and
    wireless challenges of this century. They put it on a budget. And they
    increased accountability throughout.
        But as I've said before, I worry that our reforms to the high-cost
    universal service system are extremely complex. I fear that this
    complexity can deny carriers dependent on them the certainty they need
    to confidently invest in their network infrastructure. So when
    opportunities arise to simplify our rules in a manner that is fiscally
    sound, good for rural consumers and bound to inspire investment--we
    should seize them.
        Recently, we have done just that. We did it when we adopted changes
    to our regression model to provide rate-of-return carriers with
    additional flexibility to meet our new limits. We did it when we
    adjusted our rules to distribute a second round of incremental support
    from first phase of the Connection America Fund for price cap carriers.
    We should be willing to make further changes when doing so simplifies
    our rules, does not break our budget, and brings better service and
    more investment to rural communities--Arkansas included.
        Third, the E-Rate program. The E-Rate program may not be as well
    known as our high-cost universal service program, but it has done
    mighty things to connect both rural and urban schools and libraries
    across the country. As the Nation's largest education technology
    program, it has connected 95 percent of schools and libraries to the
    Internet since its inception in 1998. But the job is not done. Because
    we are quickly moving from a world where what matters is connectivity
    to a world where what matters is capacity. Already, year-in and year-
    out, the demand for E-Rate support is double the roughly $2.3 billion
    the Commission now makes available annually. Moreover, the agency's own
    survey indicates that 80 percent of schools and libraries believe that
    their broadband connections do not meet their current needs.
        Let's be honest. Those needs are only going to grow. School
    administrators are facing tough choices about limited bandwidth in the
    classroom. How to divvy it up, what grades and classrooms get it, and
    what programs they can run on it. This means that without adequate
    capacity our students are going to fall short. They will be unable to
    realize the full potential of digital learning. That's a serious
    problem.
        But this is not just a matter of getting schools and libraries
    connected; it's a matter of our global competitiveness. Welcome to the
    world that is flat. Knowledge, jobs, and capital are going to migrate
    to places where workers have digital age skills, especially those in
    science, technology, engineering and math--or STEM fields. In fact, the
    Bureau of Labor Statistics tells us that here at home over the next
    five years we will have over 1 million STEM-related job openings. STEM
    jobs are growing at a rate three times faster than all other
    occupations. And even opportunities outside of STEM will be
    increasingly digitized, and students in Arkansas and every state will
    need technology skills to become competitive in the worldwide
    workforce.
        But we fail our students if we expect digital age learning to take
    place at near dial-up speeds. A recent Harris survey found that roughly
    half of E-Rate schools access the Internet at speeds of 3 Megabits or
    less. That is too slow for streaming high-definition video and not fast
    enough for the most innovative teaching tools. Add to this that in the
    United States, out of 42,000 high schools, only 2,100--five percent--
    offer computer science courses.
        Contrast this with efforts underway in some of our world neighbors.
    They are pouring resources into these subjects, into schools, and
    connectivity. For example, in Singapore 100 percent of schools are
    wired with high-speed broadband. In South Korea, 100 percent of schools
    are also connected to high-speed broadband. With so much capacity, an
    effort is underway to transition all students from traditional
    textbooks to digital readers in 2016. In Uruguay, through a national
    program, nearly all primary and secondary schools have been connected
    and every primary school student has access to a free laptop. Uruguay
    also has revamped its secondary school science and math curricula
    adding robotics and national math competitions.
        For now, we can recognize that these countries are smaller than the
    United States. They have different cultures. They have different
    education systems. But we can still take from these examples that
    improving broadband capacity to schools for digital age learning must
    be a national priority. If we fracture this effort and leave it to
    every local school jurisdiction we will miss opportunities for scale
    and savings. Yet in the end the point is a simple one. Access to
    adequate broadband is not a luxury--it is a necessity for our next
    generation to be able to compete. Just like in my day you wouldn't have
    a classroom without a blackboard, today we shouldn't have a classroom
    without broadband.
        We are at a crossroads. We have a choice. We can wait and see where
    the status quo takes us and let other nations lead the way. Or we can
    choose a future where all American students have the opportunity to
    gain the skills they need to compete, no matter who they are, where
    they live, or where they go to school.
        For my part, I believe that it is time to compete. It is time for
    E-Rate 2.0. We need to protect what we have already done, build on it,
    and put this program on a course to provide higher speeds and greater
    opportunities in the days ahead.
        So I am especially pleased that last month, the FCC began this
    process with a rulemaking. There are two issues I believe deserve our
    immediate focus if we want to see E-Rate 2.0 up and running fast. We
    need to focus on setting capacity goals and simplifying the application
    process.
        First, E-Rate 2.0 must be built on clear capacity goals. By the
    2015 school year, every school should have access to 100 Megabits per
    1,000 students. Before the end of the decade, every school should have
    access to 1 Gigabit per 1,000 students. Libraries, too, will need
    access on par with these capacity goals. Capacity goals will create
    scale for content and device providers that will help bring the
    potential of digital learning to all schools. And the spillover effect
    for this kind of broadband in local communities is substantial.
    Building Gigabit capacity to anchor institutions like schools and
    libraries is the ticket to Gigabit cites and the ticket to digital
    education and economic growth.
        To get to these goals, we need to take a hard look at the existing
    program. We need to collect better data from each of our applicants
    about what capacity they have and what capacity they need. Then I think
    we can make adjustments to how we prioritize funding to ensure that
    schools shorter on capacity get greater access to support.
        As part of this hard look, we should phase down the estimated $600
    million we currently spend on outdated services like paging and free up
    those funds for more high-capacity broadband. But growing this program
    is about growing national infrastructure and enhancing educational
    opportunity for the next generation. It is a conversation we need to
    have, because it is where we need to invest now.
        Second, we need ideas from stakeholders far and wide about how to
    simplify the application process. I can tell you from my experiences
    speaking about E-Rate during the last several months that nothing gets
    applause like the promise of simplifying the process. I hope we can
    take a fresh look at how the complexity of our existing system can
    deter small and rural schools from applying. To this end, in our
    rulemaking we ask about the feasibility of multi-year applications.
    This could substantially reduce paperwork and administrative expense.
    We also ask how to encourage greater use of consortia applications.
    This could mean greater scale and more cost-effective purchasing. I
    think these are good ideas. We should be open to others--especially
    from those who know the challenge of filling out these forms year-in
    and year-out.
        So let's seize the powerful combination of broadband, plummeting
    device costs, and increasing opportunity for cloud-based educational
    content. Let's work together to reboot, reinvigorate, and recharge the
    E-Rate program for the 21st Century.
        Lastly, we are working to connect rural healthcare institutions
    through the Healthcare Connect Fund. Telemedicine is no longer a dream
    for the distant future. It is here and now, and it can be an integral
    part of modern medicine. More than 5 million Americans had their
    medical images read remotely last year and 1 million Americans
    currently benefit from remote cardiac monitoring for implantable
    devices. In hospitals, a full 10 percent of all intensive care unit
    beds now use telemedicine in some form. Add to these numbers the tens
    of thousands of mobile health applications available on smartphones--
    and you quickly get the picture. Technology is changing the nature of
    medicine and the way it is practiced in communities in urban areas,
    rural areas, and everything in between.
        All of this is impressive. But the best is yet to come. Imagine how
    telemedicine can help keep local bonds strong in rural communities by
    fostering aging in place. Imagine how it can reduce the costs and risks
    of patient transport. Imagine how it can link rural patients to
    specialists in urban areas. The Commission has already contributed to
    the success of telemedicine by across the board increasing access to
    wireless and broadband networks that support a range of new health IT
    applications. And this year, for the first time, we make funding
    available under our new $400 million Healthcare Connect Fund. Under the
    program, eligible health care providers can apply to receive funding to
    cover 65 percent of the cost of either broadband services or healthcare
    provider-owned networks.
        We hope that with our updated Healthcare Connect Fund, we can
    continue to work with our Federal partners in other agencies to make
    sure that our efforts are always in concert. And we hope that we can
    work with our state partners to ensure that state medical licensing
    policies can foster, rather than hinder, the potential for telemedicine
    to improve medical care in the digital age.
        Thank you to Senator Pryor for organizing this hearing. I look
    forward to hearing from the witnesses about connecting rural and urban
    communities in Arkansas.

        Senator Pryor. Thank you, Commissioner Rosenworcel. It is
    great to have you here. And I hope when you are in Arkansas it
    is not all work, work, work. I hope you have some fun while you
    are here too.
        Let me go ahead and introduce this first panel. There is
    really no particular order on this, but I am just going to
    introduce everybody, you know, all at once, and then we will
    just go around and let everybody have their time for testimony.
        I think we are asking everyone to limit their opening
    statement to 3 minutes, if possible, and then have plenty of
    time for discussion as we go.
        So let me just say, first, we have Jeffery Hall. He is with
    the Arkansas Farm Bureau. Sam Walls III is President of Connect
    Arkansas. Michael Manley is Director of Outreach, University of
    Arkansas for Medical Sciences; he is at UAMS. Lang Zimmerman,
    he is really wearing two hats today: Vice President of Yelcot
    Communications, but he is also Commissioner of the Arkansas
    Economic Development Commission, which is great. And I just saw
    him last week. David Merrifield, he is with Arkansas Research
    and Education Optical Network. And Susan Harriman, she is a
    member of Fast Access for Students, Teachers, and Economic
    Results, which they call FASTER.
        So let me just do this. Mr. Walls, if you don't mind, why
    don't we start with you and just go around the table this way.
    How does that sound for simplicity? Thank you.

                STATEMENT OF SAM WALLS III, PRESIDENT,
                            CONNECT ARKANSAS

        Mr. Walls. I am just curious how someone with the last name
    of Walls starts first alphabetically.
        [Laughter.]
        Mr. Walls. But thank you, Senator, for the opportunity to
    present today.
        My name is Sam Walls, and I am Senior Vice President with
    Arkansas Capital Corporation and President of Connect Arkansas,
    which is a 501(c)(3) private nonprofit with a mission to
    prepare the people and businesses of Arkansas to secure the
    economic, educational, health, social, and other benefits
    available via broadband use.
        We have been primarily funded through two grants from the
    2009 Recovery Act, NTIA Broadband Technology Opportunities
    Program, as well as some state matching funds and some
    contributions from service providers.
        We are not a service provider, so our focus has been solely
    based on the idea of driving people--why are people not
    adopting the Internet, and how can we help overcome those
    obstacles? Through our surveys and outreach, we kind of broadly
    put those in two boxes. We are talking about accessibility and
    lack of broadband education.
        From the accessibility side, the first question obviously
    is, do Arkansans have access to Internet? And working with
    service providers over the last several years, we have produced
    a pretty accurate coverage map that tells us, if you take out
    satellite Internet, 98 percent of Arkansans have access to
    broadband Internet. Take out wireless broadband, that drops to
    92 percent. So, on the face, those statistics would show, at
    least from the ability to get on, that a majority of Arkansans
    have it.
        To be fair, the definition of ``broadband'' in that one is
    768-kilobits-per-second download. So there is an argument to be
    made whether that is--some people certainly would say that is
    not sufficient for a lot of today's applications. But that is
    the definition we have used. From our surveys, we do know that
    in some areas of the state speed and reliability are still an
    issue.
        We then ask, okay, if they have access, what are other
    barriers to keep them offline? And, clearly, the two big ones
    are cost of service and cost of equipment to get online. And
    cost of service is, again, going to be driven in large part by
    what type of technology you are trying to utilize, where you
    are located, and how much competition is in that particular
    footprint. And then buying the equipment is as simple as,
    obviously, some families' income levels are such that they
    can't make that initial investment to get online.
        Going to the next one, it is--all right, so you have the
    access issue. What is the other piece that is keeping people
    offline? And that is where we get a lack of broadband
    education. And we kind of break that into two categories. It is
    those that question the relevancy of it still in their life,
    and then are those that they know it is relevant but they are
    intimidated by the process. Certainly, a lot of our older
    Arkansans may fall into that box.
        Through our grants, Connect has tried to identify these
    things and has come up with various ways to try to help people
    overcome these, to explain the relevancy, to teach them and
    work with other groups to get them comfortable with the
    Internet.
        In my last few seconds here, you know, a lot of the
    conversation is and will continue to be on the delivery
    platform side--how much money we spend to expand access, to
    expand speeds. And, certainly, that is the larger question.
        We, however, have seen the value of the grassroots-type
    initiatives that we do on that end. And we would ask that, you
    know, as you continue going forward and look to put resources
    to it, it is a phenomenal ROI to continue to put forth this
    grassroots effort to support those type of things that Connect
    and other groups have done--we are certainly not the only one
    in this box--and not only build it from the outside but help us
    push the adoption from the inside.
        And the analogy that has been used often is that it is the
    same efforts that were years ago in the rural electrification
    and getting people to adopt just basic electricity in their
    homes. It is the same thing here. And this thing will grow
    faster and get the benefits quicker if we attack this on both
    ends.
        I do appreciate your time today. Thank you.
        [The prepared statement of Mr. Walls follows:]

        Prepared Statement of Sam Walls III, President, Connect Arkansas
        Good morning. My name is Sam Walls and I am a Senior Vice President
    with Arkansas Capital Corporation and President of Connect Arkansas, a
    private nonprofit dedicated to increasing high-speed Internet adoption
    in Arkansas. Connect Arkansas was created in 2007 in response to the
    Connect Arkansas Broadband Act passed by the Arkansas legislature that
    same year. The Act states that Connect Arkansas's mission is to
    ``prepare the people and businesses of Arkansas to secure the economic,
    educational, health, social, and other benefits available via broadband
    use.''
        To date, Connect's primary source of funding has been from two
    Federal grants from the 2009 American Recovery and Reinvestment Act
    through the United States Department of Commerce's National
    Telecommunications Information Agency's Broadband Technology
    Opportunities Program. This funding is projected to end by September
    2014. The State of Arkansas has also provided matching funds for these
    grants as well as many service provider.
        Connect has conducted numerous surveys of Arkansas citizens and the
    results show that barriers to Internet adoption can be stated broadly
    as: Access and Education. Connect has attempted to address issues
    within the parameters of its Federal and state grants.
        When looking at Access, Connect first asked whether Arkansans have
    the ability to connect to the Internet if they so desired. Connect
    developed, in partnership with over 75 broadband providers, a detailed
    broadband access map of Arkansas. This map is updated biannually and is
    available online. Today, not counting satellite Internet access, but
    including mobile wireless Internet, 98 percent of the Arkansas
    population has access to broadband Internet. Without mobile wireless,
    92 percent have access. Those percentages on their face would indicate
    that availability is not an issue for most Arkansans. It is important
    to note, however, that for purposes of these statistics, broadband
    Internet is defined as 768 kilobits per second download speed. There
    are those that would argue that these speeds are not adequate for many
    of today's applications. From our surveys and feedback from consumers,
    we do know that the ``quality'' of the available broadband Internet
    access is a concern for some with lack of speed and reliability are the
    most common complaints.
        Continuing to explore the issue of broadband Access, Connect has
    asked the question: Why are Arkansans that do have Internet
    availability in their area not subscribing? As one would expect there
    are a number of reasons. In no particular order:

       Cost of service is a common response to this question.
            Pricing for Internet service varies widely depending on what
            technology is being used, where a person is located and lack of
            competition. While for some people, this issue is more that
            they do not view the Internet as a necessity. For many others,
            however, it does come down to a lack of resources to pay for
            it. Connect Arkansas has worked with various services providers
            to develop a discount broadband program for low-income families
            and we are seeing more services providers offer similar
            programs on their own.

       Cost of equipment to access the Internet is another issue
            for some. Many families state that they cannot afford the
            initial expense of purchasing the equipment necessary to get
            online. Connect has attempted to address this issue through its
            Computers for Kids program and its Discount Computer Program.
            Since 2011, Connect has distributed over 1,300 free,
            refurbished, Internet ready computers and provided training to
            families utilizing the free or reduced lunch program. In a
            recent survey, over 60 percent of those families are now
            Internet subscribers.

        Lack of Access though is not the only issue that has kept Arkansans
    from adopting the Internet. Connect has looked deeper into the problem
    and asked that for those Arkansans that DO have Internet availability
    AND can afford the equipment and the cost of service why are they still
    not subscribing? Broadly speaking it is a lack of broadband education.
    Connect breaks this issue down into two categories.
        The first category is people who do not believe they need the
    Internet. Connect surveys in 2012 show that 36 percent of non-adopters
    view the Internet as not relevant to their daily life. Responders
    stated that they were, ``not interested'', ``it was a waste of time''
    or that ``they did not need or want it''. This is an improvement from
    2011 surveys that showed 47 percent with this sentiment.
        To reach out to people in this segment, Connect has applied a
    strategy where it promotes relevancy to people's lives through various
    initiatives such as:

       Connect has promoted telemedicine a number of ways. One of
            the largest efforts was through a partnership with the
            University of Arkansas for Medical Sciences to train nearly
            3,300 medical professionals and 300 community anchor
            institutions on the use of new and life-saving tele-health
            equipment.

       Connect has partnered with the Information Network of
            Arkansas to build and maintain nine transactional county
            websites in Arkansas which has allowed citizens of those
            counties access to services and information that they in the
            past did not have access to. By the Spring of 2014 that number
            will be 17 counties.

       Connect has developed resources for small business owners,
            giving them access to information that will help them start,
            manage or expand their businesses. The website, called Arkansas
            SourceLink, launched with more than 100 Arkansas nonprofit
            service providers. It also includes a calendar noting upcoming
            training and events in the state.

       Starting in 2012, Connect began its ``Get Connected''
            campaign using nearly 170 media outlets to promote broadband
            awareness, including TV, radio and newspaper advertising, as
            well as active ongoing public relations outreach to the media.
            This campaign had generated over 2,000 phone calls from people
            interested in learning more.

       Connect has worked in 17 counties as part of its E-
            Communities initiative to help leaders at the county and local
            levels to identify where Internet is relevant to their
            strategic goals in the areas of agriculture, education,
            economic development, government, health, libraries and
            tourism.

       Connect has met extensively with numerous state and local
            educational agencies to further the use and availability of the
            Internet throughout the educational system.

       Connect has set up informational booths at multiple
            community events to promote broadband usage and relevancy.

        The second category is people who do not know how to utilize the
    Internet. Current students within the Arkansas educational system are
    receiving more and more instruction using the Internet. However, many
    Arkansas adults not currently receiving an education find the Internet
    too intimidating and foreign. This is particularly true to older
    Arkansans. Surveys show that this lack of education on how to use the
    Internet is also a significant barrier to many.
        Connect independently, and at times in partnership with other
    organizations, has conducted Adult Digital Literacy training on topics
    ranging from Internet security and safety to communicating with family
    and friends using high-speed Internet. Since January, more than 500
    adults--mostly senior citizens--have taken advantage of this
    opportunity. Connect has partnered with the Arkansas Small Business and
    Technology Development Centers to offer their ``Website in a Day'' and
    Social Media/Getlisted.org Training in 57 counties. These are free
    opportunities for small business owners, tourism and history officials,
    and economic developers to see the ease of building and launching a
    website and embracing social media and promotion of virtually all
    search engines. Nearly 300 business owners and governmental workers
    have received training. Connect has taught e-entrepreneurship classes
    to 2,140 7th-12th grade students using I-pads emphasizing e-commerce
    and website development and has hosted an online high school business
    plan competition with over 220 students and teachers having
    participated.
        There is no question that broadband can have a transformative
    impact on Arkansas. State leaders are constantly striving to positively
    affect the lives of our citizens through improving education, raising
    the per capita income, expanding and enhancing access to quality
    healthcare among other efforts. Widespread access and adoption of
    broadband Internet by Arkansans arguably will be a fundamental
    necessity when trying to develop strategies for these efforts.
    Currently, 71 percent of Arkansans have Internet in their home which
    actually compares favorably to the national average of 62 percent
    according to the Pew Foundation. Service providers will continue to
    expand and improve coverage within the state and entities like Connect
    Arkansas will strive to grow Internet adoption and usage by our
    citizens.
        Connect would like to inform this hearing that on Thursday,
    September 26, there will be a one day conference held in Little Rock
    called the ``Connecting Arkansas Internet Conference'' in which state
    leaders will meet to discuss current broadband issues facing our state.
    We certainly invite anyone here today to attend, there is more
    information and registration on our website, connect-arkansas.org.
        On behalf of Connect Arkansas, I would like to thank you for the
    opportunity to present today and applaud your continued efforts on this
    subject.

        Senator Pryor. You bet. Thank you.
        Mr. Manley?

            STATEMENT OF MICHAEL MANLEY, RNP, MNSc, AR SAVES

            DIRECTOR, DIRECTOR OF OUTREACH, UAMS CENTER FOR

              DISTANCE HEALTH, UNIVERSITY OF ARKANSAS FOR
                            MEDICAL SCIENCES

        Mr. Manley. Thank you, Senator Pryor, for the opportunity
    to come today. It was almost 6 years ago to the day that we
    were before you, before an FCC Commission meeting, talking
    about the future of health care and where technology could take
    it. My boss, Dr. Curtis Lowery, and Tina Benton presented that
    day 6 years ago.
        I can tell you we have good news. Margaret Mead wrote,
    ``Never doubt that a small group of thoughtful, committed
    citizens can change the world. Indeed, it is the only thing
    that ever has.'' We were a small group of 10 individuals
    sitting around a table dreaming of how we could help health
    care here in the state of Arkansas better serve not only our
    urban areas but our rural areas as well. I can proudly say on
    August 1, 2010, the UAMS Center for Distance Health was awarded
    $102 million for the deployment of a healthcare educational
    video-imaging and data network, now known as Arkansas e-Link.
        It was a daunting task, sitting around as a small group,
    knowing that other individuals like AT&T, Windstream,
    Suddenlink, and our partners that are sitting here today were
    probably doing the same thing. But we knew something had to
    change here in the state of Arkansas with health care.
        We can say today that every county in the state is now part
    of this e-Link network. Every hospital in the state is now a
    part of this. Every 4-year, which Mr. Merrifield will talk
    about, institution and 2-year colleges, human development
    centers, federally-qualified community health centers, mental
    health clinics, home health agencies--all came together here in
    the state of Arkansas to be able to accomplish this major task
    of being able to be connected.
        Now, this was built on other things that already existed,
    such as our ANGELS Program, which took care of high-risk OB
    patients by using video technology so the moms could stay
    closer to their local provider to get their ultrasounds, to
    have access to four maternal-fetal medicine sub-specialists
    across the state. Currently, we have 23 clinics that are going,
    and we do over 3,000 consults a year. So these high-risk moms
    are getting their care closer to home.
        Built upon that, also, because it was working--Arkansas
    also, healthcare-wise, was ranked 53rd in 2009 in stroke
    mortality--53rd. That means even Puerto Rico beat us. That is
    not good. So now, through this network, we are covering 41
    hospitals across the state and their emergency department,
    again, with four vascular neurologists that are being able to
    give t-PA clot-busting drug to patients who need it.
        Does this make a difference? Absolutely. Where we used to
    deliver t-PA less than 1 percent of the time, we are now
    delivering this drug to over 30 percent of our patients that we
    are getting consults on. And this means better outcomes and not
    going to nursing homes or funeral homes but actually going
    home.
        And this doesn't matter if you live in Osceola, DeWitt, and
    Helena, because we also service hospitals in El Dorado, Hot
    Springs, and Fayetteville.
        I can report to you, Senator Pryor, that as of September
    30, 2013, the Arkansas e-Link project will be fully deployed
    and all money spent according to the terms of the grant by the
    NTIA.
        In closing, Arkansas is now one of the top connected
    telehealth educational states in the country. We are not below;
    we are in one of the top five. We are not ranked 49th or 50th
    in what we are doing with health care and education.
        This project builds upon relationships that we appreciate,
    technology, and of course the support within the healthcare
    community, with one unifying theme that we continue to be held
    by all as we continue farther: Where you live shouldn't
    determine whether you live or whether you die. And we wake up
    every morning knowing we have much more work to do.
        Thank you.
        [The prepared statement of Mr. Manley follows:]

      Prepared Statement of Michael Manley, RNP, MNSc, AR SAVES Director,
     Director of Outreach, UAMS Center for Distance Health, University of
                         Arkansas for Medical Sciences
        Margaret Mead wrote, ``Never doubt that a small group of
    thoughtful, committed citizens can change the world, indeed, it's the
    only thing that ever has.''
        A small group of 10 set around a table in 2009 and thought of how
    we could change the face of health care here in Arkansas by utilizing
    proven cutting edge technology and patient centered outcome care, while
    spreading it across the entire state. UAMS Center for Distance Health
    (CDH) applied with thousands of others for a Broadband Technology
    Opportunity Program grant being administered by the Federal Department
    of Commerce. Partnering with over 400 Community Anchor Institutions
    (CAI) state wide, the Department of Commerce saw we had something
    special that would be more than just expanding broadband. On August 1,
    2010, the UAMS Center for Distance Health was awarded $102 million for
    the deployment of a Healthcare/Educational video/imaging/and data
    network later known as Arkansas e-Link.

        The funded service areas encompass:

       Every county in the state (75)

       Every economically distressed county in the state (69)

       Every county in Arkansas within the Mississippi Delta, the
            most distressed area of the country (42)

       Every medically underserved county in the state (73)

       135 communities

        The project partners with community anchor institutions including:

       Every acute care hospital, county health clinic, and center
            on aging

       Every four-year state university and all but one state two-
            year college

       All state human development centers

       A majority of federally qualified community health centers

       A majority of mental health clinics and home health agencies

       The state's only academic medical center

       The state's only publicly owned fiber optic network (ARE-ON)

       The state's only bioterrorism network

       The state's only trauma network

       Eight public libraries

       An ambulance service

       Other clinics, centers, and educational units

        The upgraded Arkansas Telehealth Network integrated with ARE-ON in
    a ``hub-and-spoke'' system that ensures dedicated healthcare, higher
    education, public safety, and research activities, freeing existing
    circuits for public Internet use. Hubs and spokes have received
    bandwidth upgrades, interactive video equipment, and/or public
    computers based on their needs.

       Primary Hubs represent 48 sites serving large numbers of
            end-users that will connect to a statewide fiber network for
            upgrades of 100 Mbps+, enabling simultaneous management of up
            to 40 broadband transmissions, including distance education or
            clinical video conferencing, imaging transfers, record
            transfers, remote monitoring, and health information exchange.

       Secondary Spokes represent 74 regional sites upgraded to 10
            Mbps at 59 sites and 20 Mbps at 15 sites via dedicated point-
            to-point connections are providing up to 15 distance education
            or clinical video conferences, imaging transfers, record
            transfers, and remote monitoring.

       Tertiary Spokes represent 352 sites serving primarily rural
            areas that will receive upgrades or new lines of 1.5 Mbps at
            154 locations, which enables one simultaneous distance
            education or clinical video conference, image transfer, and
            record transfer. All tertiary spokes will receive equipment
            upgrades.

        This solution did not compete with Internet Service Providers but
    rather contract with ISPs to provide network services.
        Built on the backbone of existing prior telehealth programs
    infrastructure, ANGELS (Antenatal Neonatal Guidelines Education
    Learning System) and AR SAVES (Stroke Assistance through Virtual
    Emergency Support), the potential in the very near future of adding
    many healthcare specialties on this middle mile highway was possible
    through this project. ANGELS (Antenatal Neonatal Guidelines Education
    Learning System) was set up to take care of high risk pregnancy
    patients across Arkansas. The limited Maternal Fetal Medicine
    specialists in 2003, which were all centrally located in Little Rock,
    instigated the need to better serve these patients in a new way. Driven
    by having better patient outcomes by using this technology to take our
    specialists out to the patients rather than always having the patients
    come to them in Little Rock was the answer. ANGELS currently has 23
    active telemedicine clinics across the state, and are currently serving
    over 3,000 consults per year via the network. Our most fragile patients
    now have access to the care they deserve to ensure both moms and babies
    have the best outcomes possible.

        Taking that existing knowledge and broadband network that has been
    created, a proposal was again made to seek how we could better care for
    our acute stroke patients here in Arkansas. In 2009 when AR SAVES was
    started, the state was ranked 50th in stroke mortality, and overall, we
    were only administering the clot dissolving drug t-PA used in ischemic
    stroke cases to less than 1 percent of all eligible patients. Again,
    just for the fact there weren't enough vascular neurologists as
    resources in our community hospitals. After 4 years of building our
    program, AR SAVES currently serves 41 hospital Emergency Departments
    with only 4 vascular neurologists from around the state. On average, we
    are administering t-PA 30 percent of the time to all consults, with
    this number improving monthly. Time is of the essence with these
    patients, so not all make it under the time limitations. The AR SAVES
    program is not only making a difference in small rural hospitals such
    as Osceola, Dewitt, and Helena, but also in more urban areas such as El
    Dorado, Hot Springs and Fayetteville.

        I can report that as of September 30, 2013, the Arkansas E-Link
    project will be fully deployed and all money spent according to the
    terms of the grant. The AR e-Link Program has been highlighted as a
    success by the NTIA at several meetings and events. But it doesn't stop
    here. We will continue to work to put more health and educational
    applications on this highway as we continue forward. This middle mile
    infrastructure has made a great investment into the broadband
    infrastructure to benefit the local communities in many ways. The next
    level of the individual patient for healthcare, or student in
    education, is coming fast and furious. You've heard ``There's an app
    for that''? We are here to say that there is such a thing. Thousands of
    mobile healthcare and educational apps are being developed and deployed
    as we speak. The eventual migration onto this system will assist even
    more with better outcomes for the citizens of Arkansas.
        In closing, Arkansas is now one of the top connected Telehealth/
    Education states in the country. This network provides the very
    foundation required to build a comprehensive plan to tackle the state's
    laundry list of health adversities. A centrally-managed,
    comprehensively-collaborative telehealth network will allow
    opportunities to build any number of programs. Our citizens will
    benefit tremendously from the Arkansas e-Link project, meeting needs of
    healthcare access to limited resources in both rural and urban areas.
    This project builds upon relationships, technology, and support within
    the healthcare community, with one unifying theme held by all, ``where
    you live, shouldn't determine whether you live or whether you die''.
        Who may I contact for further information?

        Curtis Lowery, MD
        University of Arkansas for Medical Sciences
        4301 West Markham Street, #518
        Little Rock, Arkansas 72205
        (501) 686-5847
        E-mail: LoweryCurtisL@uams.edu

        Michael Manley, RNP, MNSc
        University of Arkansas for Medical Sciences
        4301 West Markham Street, #518
        Little Rock, Arkansas 72205
        (501) 526-7453
        E-mail: ManleyMichaelO@uams.edu

        Tina Benton, RN
        University of Arkansas for Medical Sciences
        4301 West Markham Street, #518
        Little Rock, Arkansas 72205
        (501) 686-5986
        E-mail: BentonTinaL@uams.edu

        Senator Pryor. Thank you.
        Mr. Merrifield?

              STATEMENT OF DAVID L. MERRIFIELD, EXECUTIVE

               DIRECTOR, ARKANSAS RESEARCH AND EDUCATION

                            OPTICAL NETWORK

        Mr. Merrifield. Senator Pryor and distinguished members of
    this panel, thank you for the opportunity to participate in
    today's hearing.
        My name is David Merrifield, and I am the Executive
    Director of the Arkansas Research and Education Optical
    Network, or ARE-ON. ARE-ON is a not-for-profit consortium
    created to apply advanced communications technologies to
    support and elevate education, research, and economic
    development in Arkansas. We were first established in 2008, and
    our members include all of the state's public 4-year
    universities and nearly two dozen 2-year community colleges.
        ARE-ON operates a high-speed optical network that connects
    all of our university and college members. Our network utilizes
    over 2,200 miles of dark fiber, much of which is provided by
    commercial providers throughout the state through long-term
    capital leases.
        An important distinction about ARE-ON is that we own and
    operate the equipment that lights the fiber, rather than
    purchasing that service through typical and traditional
    communications services. This gives us enormous flexibility to
    uniquely tailor our network to the often-demanding needs of the
    community of higher education institutions that we represent.
        ARE-ON delivers extremely high-speed broadband access to
    its members, with speeds up to 10 gigabits per second. And
    discussions today are under way for 100 gigabits per second.
    Our members receive general commodity Internet access as well
    as connections to national research and education networks such
    as Internet2 and the National LambdaRail.
        ARE-ON enables the development and use of applications that
    leverage the high-speed network to do research and education in
    new and innovative ways. Broadband access without limitations
    permits our users to find new approaches to educational and
    research challenges and to collaborate with their peers and
    colleagues nationally and internationally.
        As a sub-recipient of the $102 million NTIA BTOP grant
    received by the University of Arkansas system in 2010, ARE-ON
    expanded its fiber-optic network to connect the 2-year
    community colleges throughout the state and to provide
    infrastructure over which, as Mr. Manley has stated, the
    University of Arkansas for Medical Sciences has connected over
    450 healthcare institutions statewide to form the Arkansas e-
    Link network.
        ARE-ON would not be possible today without access to dark
    fiber from its commercial providers. It is our opinion that
    public policy and funding for national and state broadband
    initiatives should leverage public-private partnerships. Our
    investments have substantially benefited our providers by
    enabling them to construct more fiber, to reach more customers,
    to access more affordable telecommunications and Internet
    services, and to provide better rates and service to their
    customers.
        It has been my honor to provide testimony, and I would be
    glad to answer any questions as arise. Thank you.
        [The prepared statement of Mr. Merrifield follows:]

        Prepared Statement of David L. Merrifield, Executive Director,
                Arkansas Research and Education Optical Network
        Subcommittee Chairman Mark Pryor, and distinguished members of this
    panel, thank you for the opportunity to participate in today's field
    hearing on the state of communications in Arkansas and the impact
    broadband can have on improving consumer access to telemedicine,
    education, and business development.
        My name is David Merrifield, and I am the Executive Director of the
    Arkansas Research and Education Optical Network, or ARE-ON. I am a 36-
    year employee of the University of Arkansas, having served in
    Information Technology roles throughout my career, including the
    development and deployment of the Internet in higher education in
    Arkansas from the very beginning. I also hold an appointment by
    Governor Mike Beebe on the Arkansas State Technology Council.
        ARE-ON is a not-for-profit consortium created to develop and apply
    advanced communications technologies to support, enhance, and elevate
    education, research, public service, and economic development
    throughout the State of Arkansas. We were established in 2008 by an
    agreement among the public, four-year universities in Arkansas. Our
    members include all of the four-year universities as well as the nearly
    two dozen two-year community colleges that make up the Arkansas
    Association of Two-Year Colleges.
        ARE-ON operates a high-speed network that connects all of our four-
    year university members, and soon, most of the two-year colleges within
    the state. Our network is an optical network. That is, the network
    utilizes dark fiber optic cable throughout, which is then lit with our
    own equipment to create the communications links that tie our
    universities and colleges together. I want to draw your attention to an
    important distinction about the ARE-ON network. We own and operate the
    equipment that provides the light that passes from city to city,
    university campus to university campus, over fiber optic cable rather
    than purchasing traditional communications services from providers.
    This gives us enormous flexibility to uniquely tailor our network to
    the often demanding needs of our community of higher education
    institutions.
        ARE-ON has from its inception focused on delivery of extremely
    high-speed broadband networking to its higher education member
    institutions. Besides providing access to the general commodity
    Internet, our robust state network connects our members to each other,
    to national research and education networks such as Internet2 and
    National LambdaRail, and to our peer state networks in neighboring
    states, including Oklahoma, Texas, Louisiana, and Tennessee. ARE-ON is
    one of nearly forty state-based networks throughout the United States,
    most of which utilize their own optical networking infrastructure to
    serve their respective constituents of educational and public
    institutions.
        ARE-ON has also worked to create a leadership role in enabling the
    development and use of applications that leverage the high-speed
    network to do research and education in new and innovative ways.
    Broadband access without limitations permits our users to find new
    approaches to educational and research challenges. We encourage our
    universities and colleges to collaborate with their peers and
    colleagues statewide, nationwide, and internationally through the
    network. Such collaboration is often not possible without the ability
    to exchange large amounts of data or to effectively share resources
    such as scientific instrumentation or high performance computing
    clusters across the network.
        Researchers, faculty, and students continue to stretch the bounds
    of the available networking infrastructure. Researchers utilize high
    performance large-scale computer clusters and huge amounts of disk
    storage to study everything from genomics, drug interactions, weather
    and climate, nanoscale technologies, marketing, and economics. Video is
    indispensible, for educational content delivery, day-to-day
    communications, entertainment, and so on, and before long today's high
    definition video content will give way to ultra high definition,
    creating an even larger demand for high-speed broadband networks.
        Our choice to use dark fiber and optical networking technology was
    both deliberate and by design. Fiber optic cable provides enormous
    capacity and scalability. Today our members enjoy connection speeds up
    to 10 gigabits per second. Current technology enables us to increase
    this to 100 gigabits per second simply by swapping out electronics on
    the ends of the fiber, and technology is in development to raise the
    bar to terabit speeds. Our goal has been to build network
    infrastructure that not only meets the needs of today, but also has the
    scalability and flexibility to meet the needs of our members well into
    the future.
        In 2010 the University of Arkansas System received a $102 million
    grant \1\ through the U.S. Department of Commerce under the National
    Telecommunications and Information Administration's (NTIA) Broadband
    Technology Opportunities Program (BTOP). ARE-ON is a sub-recipient of
    that grant, receiving $41.2 million to expand its existing fiber optic
    network to connect one additional four-year public university and
    twenty-two (22) two-year community colleges. In addition, the ARE-ON
    fiber optic infrastructure provides a backbone network over which the
    University of Arkansas for Medical Sciences, as primary grant
    recipient, has connected over 450 healthcare institutions statewide to
    form the Arkansas e-Link Network. Our use of wave division technology
    in the optical network enables us to overlay multiple networks across
    our backbone, such as Arkansas e-Link, via dedicated, secure links.
    ---------------------------------------------------------------------------
        \1\ Broadband Technology Opportunities Program (BTOP) Arkansas
    Healthcare, Higher Education, Public Safety and Research Integrated
    Broadband Initiative Project, Grant Award # NT10BIX5570102.
    ---------------------------------------------------------------------------
        The ARE-ON network currently has over 2,200 miles of fiber optic
    cable extending into five states. Much of this cable comes from
    commercial fiber optic cable providers and telecommunications
    companies, although ARE-ON has itself constructed nearly 100 miles of
    its own fiber to connect the leased intercity cables to our university
    and college campuses.
        I want to point out that ARE-ON would not be possible today without
    access to the dark fiber from its commercial providers. The costs for
    overbuilding these providers are simply too high and doing so would
    have not served the best interests of the citizens of this state. When
    ARE-ON first approached providers in search of available fiber optic
    cable, there was much skepticism about the mission and intent of our
    organization. Some companies expressed concern that ARE-ON was going
    into competition with them, ultimately resulting in loss of their
    customers and revenue. We believe that the opposite has been the
    experience, however.
        Throughout the development of the ARE-ON network, especially with
    the expansion of the network through the BTOP grant, our providers have
    benefited substantially from the investments and funding received
    through ARE-ON's long-term capital leases of dark fiber. Those
    investments have enabled providers to construct more fiber optic cable
    to extend their networks, to reach more customers, to access more
    affordable providers of telecommunications and Internet services, and
    to provide better rates and service to their customers. While ARE-ON's
    ultimate goal has been to form a network for the benefit of its higher
    education institutions, the commercial and residential customers of our
    providers have received benefits also. In many cases, these customers
    are exactly the underserved and unserved population of broadband users
    in rural areas that BTOP targeted.
        It is our opinion that public policy and funding for national and
    state broadband initiatives should leverage public/private partnerships
    to successfully accomplish the ambitious goals set forth through the
    National Broadband Plan. Just as ARE-ON has done in addressing the
    broadband needs of its higher education members through its
    partnerships with commercial cable providers, we encourage use of
    similar partnerships to provide capital and incentives for expansion of
    broadband into the rural areas of the state, to use fiber swaps and
    peering arrangements to exchange facilities and network traffic between
    public and private entities, and to leverage the strengths of
    commercial providers for middle-mile and last-mile connections.
        Today, ARE-ON's member universities and colleges enjoy a level of
    service previously not available to them. ARE-ON continues to look for
    innovative ways to expand its ability to provide scalable, reliable,
    and secure broadband services to its members and to leverage its
    infrastructure to benefit all citizens of the State of Arkansas.
    Conclusion
        It has been my honor to provide testimony on our efforts for the
    members of the Arkansas Research and Education Optical Network. Thank
    you for the invitation and opportunity to speak on this very important
    issue, and I would be happy to answer any questions.

        Senator Pryor. Thank you.
        Ms. Harriman?

               STATEMENT OF HARRIMAN, DIRECTOR OF POLICY

              AND SPECIAL PROJECTS, ARKANSAS DEPARTMENT OF

             EDUCATION AND COORDINATOR OF STEM WORKS, STATE

              OF ARKANSAS ON BEHALF OF THE FAST ACCESS FOR

                 STUDENTS TEACHERS AND ECONOMIC RESULTS

                      (FASTER) ARKANSAS COMMITTEE

        Ms. Harriman. Thank you.
        Good morning. Thank you, Mr. Chairman, for the opportunity
    to speak on behalf of Fast Access for Students, Teachers, and
    Economic Results for Arkansas.
        For the last several years, I have been working with
    Governor Mike Beebe's Workforce Cabinet on the STEM Works
    initiative, an initiative designed to strengthen science,
    technology, engineering, and math education in Arkansas. Today,
    we have almost 15 percent of high schools signed up for STEM
    Works and three universities implementing the UTeach teacher
    preparation model, which is wonderful.
        But we have found that schools that wanted to participate
    in STEM Works sometimes couldn't because they lacked adequate
    broadband. So we started looking at broadband capacity around
    the entire state. How did we fare? The short answer was not
    well.
        Last year, the 2012 ``Digital Learning Now'' report from
    the Foundation for Excellence in Education gave Arkansas an F''
    for digital learning opportunities. TechNet's 2012 Broadband
    Index listed Arkansas as 50th among all states for broadband
    access. The Arkansas Association of Educational Administrators
    surveyed its members in 2011 and found that 78 percent wanted
    to implement technology initiatives but couldn't due to
    bandwidth limitations.
        Preparing students to be competitive in the 21st-century
    global economy is an imperative in any state, but in states
    with many poor and rural students 21st-century schools not only
    prepare the workforce but help reduce the burden of poverty and
    isolation.
        Arkansas faces the same challenges as other rural states
    working to increase broadband access. Service providers see
    expanding to low-population-density areas as cost-prohibitive.
    Construction and monthly service costs are too high for small
    communities to absorb. Local network infrastructure may be
    outdated. And there is a lack of sufficient technical expertise
    at the local level.
        However, none of that is stopping the state from moving
    forward. The General Assembly passed Act 1280 of 2013 that
    requires high schools to offer one or more digital learning
    courses beginning in 2014 and 2015. The legislation also
    directs the state to study the broadband necessary to deliver
    quality digital learning. The report to the legislative
    leadership is due December of this year.
        FASTER Arkansas was formed at the request of Governor Beebe
    and includes representatives from cable, telephone, and fixed
    wireless companies, secondary and post-secondary education,
    each of Arkansas's United States Senators, and, maybe most
    importantly, industry and business leaders, who recognize that
    the development of a strong broadband public policy is vital
    not only for the educational advancement of our students but is
    also vital for the economic growth and advancement of our
    state.
        By working together, we believe that FASTER can put forth,
    in a unified voice, public policy proposals to be considered by
    both the legislative and executive branches of our government.
        Arkansas is moving forward and making progress, but we need
    help. Arkansas needs access to funding for the middle--and
    last-mile build-out; access to funds to build and upgrade local
    area networks and provide technical support; a simplified,
    revenue-stable E-Rate program that prioritizes applications for
    regional educational consortiums, including Arkansas
    educational cooperatives; and ongoing support for digital
    learning.
        Mr. Chairman, many of our districts are losing residents.
    When this happens, students either miss out on opportunities to
    take high-level courses or districts are forced to consolidate.
    This endangers the rural way of life and limits economic
    opportunities for our state. Broadband expansion offers ways to
    stem the tide, and FASTER Arkansas is committed to being part
    of the solution.
        Thank you for your interest in this important issue.
        [The prepared statement of Ms. Harriman follows:]

     Prepared Statement of Susan Harriman, Director of Policy and Special
      Projects, Arkansas Department of Education and Coordinator of STEM
      Works, State of Arkansas on behalf of the Fast Access for Students
           Teachers and Economic Results (FASTER) Arkansas committee
        Good morning. Thank you Mr. Chairman for the opportunity to speak
    on behalf of the Fast Access for Students Teachers and Economic Results
    (FASTER) Arkansas committee, which is focused on broadband expansion.
        For the last several years, I have been working with Governor Mike
    Beebe's Workforce Cabinet on STEM Works, an initiative to strengthen
    Science, Technology, Engineering and Math education in Arkansas. STEM
    Works subsidizes project-and problem-based learning programs for high
    school and college students. Today, we have almost 15 percent of high
    schools signed up for a STEM Works program and three universities
    implementing the UTeach teacher preparation model, which is wonderful.
    But we found that schools that wanted to participate in STEM Works
    sometimes couldn't because they lacked adequate broadband
    infrastructure.
        So we started looking at broadband capacity across the entire
    State. How did we fare in the global bandwidth arms race? The short
    answer was not well.

       Last year, the 2012 ``Digital Learning Now'' report from the
            Foundation for Education Excellence in Education gave Arkansas
            an ``F'' for digital learning opportunities.

       TechNet's 2012 Broadband Index listed Arkansas as 50th among
            all states for broadband access.

       The Arkansas Association of Educational Administrators
            (AAEA) surveyed its members in 2011 and found that 80 percent
            of district administrators experienced problems with bandwidth
            in the previous year, 78 percent wanted to implement technology
            initiatives but couldn't due to bandwidth limitations, and 84.5
            percent had to restrict access to educationally-relevant or
            useful sites due to bandwidth concerns.

        Now, it hasn't always been this way. Arkansas was among the first
    states to recognize the importance of broadband, providing all schools
    connections to the Arkansas Public School Computer Network in 1992.
        Multiple public boards, commissions, and task forces have been
    created at the state level to research, strategize, advocate and
    propose broadband solutions, but they have achieved limited results.
    Differing business models, numerous provider territories, divergent
    constituency interests, inadequate funding, market realities, and the
    absence of strong, visionary leadership were obstacles to moving
    forward.
        Arkansas has not ignored broadband expansion but progress has been
    slow and unsteady.
    Challenges for Rural States
        Preparing students to be competitive in the 21st Century global
    economy is an imperative in any state. In states with many poor and
    rural students, 21st century schools not only prepare the workforce,
    but help reduce the burden of poverty and isolation. Meeting this
    imperative is a special challenge in places where people are relatively
    poor and distances between them are relatively large.
        Arkansas faces the same challenges as other rural states working to
    increase broadband access to schools:

       Service providers see expanding to low population density
            areas as cost-prohibitive;

       Construction and monthly service costs are too high for
            small communities to absorb;

       Local network infrastructure may be outdated; and

       The lack of sufficient technical expertise at the local
            level.
    Arkansas Is Moving Forward
        However, none of that is stopping the state from moving forward.
        Everyone involved recognizes the potential benefits of effective
    digital learning:

      1.  Students can learn anytime, anywhere, including online, blended
            or hybrid classrooms, or through digital content.

      2.  Teachers can use real-time data and adaptive software to
            individualize instruction for each student and help them reach
            their full potential.

      3.  Teachers can use digital learning and technology to participate
            in professional development and enhance their skills.

      4.  Students will gain access to courses and expertise that is not
            available at their local school.

        The possibilities are endless.
        The General Assembly passed Act 1280 of 2013 that requires high
    schools to offer one or more digital learning courses beginning with
    the 2014-2015 school year. The legislation also directs the state to
    study the broadband necessary to deliver quality digital learning to
    each school district. The report to legislative leadership is expected
    in December 2013.
        FASTER Arkansas was formed at the request of Governor Beebe and
    includes representatives from cable, telephone and fixed-wireless
    companies, secondary and post-secondary education, each of Arkansas'
    United States Senators, and maybe most importantly, industry and
    business leaders who recognize that the development of strong broadband
    public policy is vital not only for the educational advancement of our
    students but is also vital for the economic growth and advancement of
    our state. By working together, we believe that FASTER can put forth,
    in a unified voice, public policy proposals to be considered by both
    the legislative and executive branches of our government.
    How the Federal Government Can Help
        Arkansas is moving forward and making progress but will need help.
    Arkansas needs:

      1.  Access to funding for middle and last mile build/out. In some
            locations, the cost of middle mile and last mile build/out of
            broadband infrastructure is cost prohibitive. A retooled E-Rate
            program could better subsidize and prioritize this work.

      2.  Access to funds to build or upgrade local area networks and
            provide local technical support. Aging schools may not have the
            necessary local network infrastructure or technical talent to
            take advantage of high speed broadband, even if it's available.

      3.  A simplified, revenue-stable E-Rate program that prioritizes
            applications from regional educational consortiums, including
            Arkansas Educational Cooperatives. This would encourage the
            development of more comprehensive, regional solutions and
            greater economies of scale for purchasing and construction.

      4.  Ongoing support for digital learning. Having Federal officials
            talk about the importance of digital learning and broadband
            expansion helps drive home the importance of this issue.

        Mr. Chairman, Arkansas is a rural state. Many of our school
    districts are losing residents and when this happens, students either
    miss out on opportunities to take high-level courses, or districts are
    forced to consolidate. This endangers the rural way of life and limits
    economic opportunities for our state. Broadband expansion offers way to
    stem the tide and FASTER Arkansas is committed to being part of the
    solution.
        Thank you for your interest in this important issue.

        Senator Pryor. Thank you.
        Mr. Zimmerman?

               STATEMENT OF LANG ZIMMERMAN, COMMISSIONER,

              ARKANSAS ECONOMIC DEVELOPMENT COMMISSION AND

                 VICE PRESIDENT, YELCOT COMMUNICATIONS

        Mr. Zimmerman. Thank you, Mr. Chairman, for inviting me to
    participate in my dual role as a Commissioner on the Arkansas
    Economic Development Commission and also as a broadband
    provider in rural north-central Arkansas through my family
    company, Yelcot Communications.
        I appreciate you holding this field hearing back in
    Arkansas also, where the businesses run the gamut from small
    mom-and-pop all the way up to the world's largest retailer.
    Every entity throughout this gamut relies not only on the
    availability of broadband networks but also their robustness
    and reliability. And beyond the business world, where the AEDC
    focuses, the sectors of government, medicine, education,
    agriculture, and nonprofits have similar requirements.
        AEDC's primary goal is recruitment of new businesses to the
    state and the retention and expansion of those already here.
    And in recent years, redundant fiber networks have become as
    important to business site-selection experts as redundant power
    supplies. Businesses need to retain connectivity to internal
    and Web-based networks on a continual and reliable basis.
        And it is not just big businesses; small, rural firms
    making niche products without a brick-and-mortar storefront
    rely on their Websites for order taking, processing, and
    delivery. If the Internet is down, their entire business is
    down because all their sales are online.
        An excellent example is the pending Big River Steel mill in
    Osceola, Arkansas. This project represents a $1.1 billion
    investment in Arkansas and the promised creation of 525 jobs
    with an average salary of $75,000 a year.
        In talking to the AEDC project manager in preparation for
    this hearing, I made the comment that Big River Steel probably
    didn't have a big need for broadband. I learned in a hurry that
    the mill is being constructed by the German steel mill
    specialist company SMS Siemag, whose engineers will be
    performing diagnostic testing and receiving online streams of
    reports from the mill equipment here in Arkansas.
        Speaking now as a provider, I can tell you that the recent
    changes to the Federal Universal Service Fund, USF, and the
    intercarrier compensation, or ICC, mechanisms have put a big
    damper on the expansion of broadband investment from telephone
    companies like Yelcot.
        The FCC's USF and ICC transformation order and subsequent
    follow-on proceedings have--or are proposed to--significantly
    changed how rural rate-of-return telecom providers recover
    their costs. Some of the reform's proposals include caps on
    costs that can be included in the calculation of USF support,
    phased-down payments from long-distance providers for access to
    the local network, increased broadband requirements, and
    reduction in the rate of return that companies are authorized
    to earn on their investments.
        The caps depend not just on investments individual
    companies make but also on what investment is made by other
    companies across the country. A company has no way of knowing
    if any investment puts them in a position to be capped and lose
    support. In addition, the FCC has begun the process of
    reevaluating the rate of return that rural telephone companies
    are authorized to earn on their investment, including a
    proposed significant reduction in the current authorized rate
    of return.
        This lack of predictability in the application of the new
    caps on support and the reduction in revenue makes investment
    risky and has started a race to the bottom, rather than give
    companies the regulatory certainty we need to make the
    enhancements to our broadband networks that are necessitated by
    the transformation order.
        Mr. Chairman, thank you for giving me this opportunity to
    address the Committee.
        [The prepared statement of Mr. Zimmerman follows:]

     Prepared Statement of Lang Zimmerman, Commissioner, Arkansas Economic
        Development Commission and Vice President, Yelcot Communications
        Thank you, Mr. Chairman, for inviting me to participate in my dual
    role as a Commissioner on the Arkansas Economic Development Commission
    and as a broadband provider in rural north-central Arkansas through my
    family company Yelcot Communications.
        I appreciate you holding this field hearing back in Arkansas where
    the businesses run the gamut from small mom-and-pop up to the world's
    largest company. Every entity throughout this gamut relies not only on
    the availability of broadband networks, but also their robustness and
    reliability. Beyond the business world, where the AEDC focuses, the
    sectors of government, medicine, education, agriculture, and non-
    profits have similar requirements.
        AEDC's primary goal is the recruitment of new business to the state
    and the retention and expansion of those already here. In recent years
    redundant fiber networks have become as important to business site
    selection experts as redundant power supplies. Businesses need to
    retain connectivity to internal and web-based networks on a continual
    and reliable basis. And it's not just big businesses; small rural firms
    making niche products without a brick-and-mortar storefront rely on
    their websites for order taking, processing, and delivery. If the
    Internet is down, their business is down because all of their sales are
    online.
        An excellent example is the pending Big River Steel Mill in
    Osceola, Arkansas. This project represents a $1.1 billion investment in
    Arkansas and the promised creation of 525 jobs with an average salary
    of $75,000/year. In talking to the AEDC project manager in preparation
    for this hearing, I made the comment that Big River Steel probably
    didn't have a big need for broadband. I learned in a hurry that the
    mill is being constructed by the German steel-mill specialist company
    SMS Siemag, whose engineers will be performing diagnostic testing and
    receiving online streams of reports from the mill equipment in
    Arkansas. There is no way the owners of a $1.1 billion steel mill would
    want production halted because of a bad Internet connection.
        Speaking now as a provider I can tell you that the recent changes
    to the Federal Universal Service Fund (USF) and Intercarrier
    Compensation (ICC) mechanism have put a big damper on the expansion of
    broadband investment from telephone companies like Yelcot. The FCC's
    USF and ICC ``Transformation'' Order and subsequent follow on
    proceedings have, or are proposed to, significantly changed how rural
    rate-of-return telecommunications providers recover their costs. Some
    of the reforms and proposals include: caps on costs that can be
    included in the calculation of USF support; phased down payments from
    long distance providers for access to the local network; increased
    broadband requirements; and reductions in the rate of return that
    companies are authorized to earn on their investments. The caps depend
    not just on investment individual companies make, but also on what
    investment is made by other companies across the country. A company has
    no way of knowing if any investment puts them in a position to be
    ``capped'' and lose support. In addition, the FCC has begun the process
    of re-evaluating the rate of return that rural telephone companies are
    authorized to earn on their investment, including a proposed
    significant reduction in the current authorized rate of return. This
    lack of predictability in the application of the new caps on support
    and reductions in revenue makes investment risky, and has started a
    race to the bottom, rather than give companies the regulatory certainty
    we need to make the enhancements to our broadband networks necessitated
    by the Transformation Order.
        Thank you for giving me this opportunity to address the Committee.

        Senator Pryor. Thank you.
        Mr. Hall?

      STATEMENT OF JEFFERY HALL, ASSOCIATE DIRECTOR OF GOVERNMENT
                     AFFAIRS, ARKANSAS FARM BUREAU

        Mr. Hall. Mr. Chairman, thank you for the opportunity to
    testify today and talk about agriculture and how it benefits
    from rural broadband. I am the Associate Director of
    Governmental Affairs for Arkansas Farm Bureau and a cow-calf
    producer myself.
        Agriculture is Arkansas's largest industry. For agriculture
    to continue to lead our state's economy, it needs viable rural
    communities to supply the services needed to support their
    families and small businesses--no different than the 1930s with
    the need of electricity and telephone services in rural areas,
    which was accomplished by a successful public-private
    partnership.
        The obstacle then was the problem of distribution. How
    could we get the much-needed electricity and telephone service
    to homes in rural areas? The problem of access is the same for
    rural broadband. To thrive, rural areas need access to health
    care, government services, and educational and business
    opportunities.
        Precision agriculture technologies have made farmers more
    efficient today. The use of GPS and auto-steer guidance systems
    are two types of precision agriculture used to increase crop
    yields, lower cost, and reduce chemical use, which benefits the
    environment.
        The two types of technologies work together, helping
    farmers identify precisely where to plant seeds and how many
    seeds and, if needed, apply variable rates of pesticides and
    fertilizer. Auto-steer on tractors is not hands-free, but it
    allows farmers to drive equipment in straight lines while
    reducing fatigue. It also ensures consistency when different
    people take turns in the driver's seat.
        The livestock sector also utilizes technology and has
    increasing need for better services. Today, poultry farmers use
    monitoring systems to provide added protection for birds.
    Cattle are being sold through the video auctions and the
    ability to place bids from your smartphone or computers.
        The online marketplace has a great impact on the cattle
    industry. Farmers are able to research information about herd
    management and cattle markets. It is fair to say that farmers
    now buy and sell cattle all over our country. With online
    access, the perfect herd sire might be found hundreds of miles
    away. The Internet also allows cattlemen to find the right
    point of sale for their animals going to market. With the local
    auctions disappearing, this has never been more important than
    today.
        In order to get high-quality, affordable service to the
    last mile, there must be cooperation between public and private
    interests. It is important that we continue to work together to
    resolve the issues that hinder the Internet service for all
    rural Arkansans.
        Thank you for having us this morning.
        [The prepared statement of Mr. Hall follows:]

           Jeffery Hall, Associate Director of Governmental Affairs,
                              Arkansas Farm Bureau
        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to testify today.
        My name is Jeffery Hall. I am the Associate Director of
    Governmental Affairs for Arkansas Farm Bureau and a cow-calf producer.
        Arkansas agriculture needs viable rural communities to supply the
    services needed to support their families and small businesses. This is
    no different than in the 1930s with need for electricity and telephone
    service in rural areas. This was accomplished by a successful public-
    private partnership.
        The obstacle then was the problem of distribution. How could we get
    the much-needed electricity and telephone service to the homes in rural
    areas? The problem of access is the same for rural broadband.
        To thrive, rural areas need access to health care, government
    services, and educational and business opportunities. For many rural
    communities, access can only be gained by using broadband services and
    sophisticated technologies that require high-speed connections. Rural
    business owners need access to new markets and employees for their
    businesses. Rural health care providers need access to health
    information technology. Rural students need access to educational
    resources and continuing education opportunities. Current and future
    generations of rural Americans will be left behind their fellow
    citizens if they are without affordable high-speed broadband
    opportunities.
        The Small Business Administration conducted a study in 2010 that
    evaluated the methods used by small businesses to access broadband
    services and the impact of broadband on small businesses. The study
    found that broadband service is vital for small businesses in
    ``achieving strategic goals, improving competitiveness and efficiency,
    reaching customers, and interacting with vendors.'' Farmers and
    ranchers in rural America rely on broadband access to manage and
    operate successful businesses, the same as small businesses do in urban
    America. Access to broadband is essential for farmers and ranchers to
    follow commodity markets, communicate with their customers, gain access
    to new markets around the world and, increasingly, for regulatory
    compliance.
        Many farmers and ranchers conduct their business operations from
    their homes. The U.S. Department of Agriculture reports a total of 62
    percent of U.S. farms had Internet service in 2011, compared with 59
    percent in 2009. This upward trend of Internet access must continue if
    farmers, ranchers and other small businesses in rural America are going
    to thrive and be successful in a global economy.
        Precision agriculture technologies are used by about 50 percent of
    U.S. farmers and ranchers. GPS and auto-steer guidance systems are two
    types of precision agriculture used to increase crop yields, lower
    costs and reduce chemical use, which benefits the environment. These
    two types of technologies work together, helping farmers identify
    precisely where to plant seeds and how many and if needed, apply
    variable rates of pesticides and fertilizer. Auto-steer on tractors is
    not hands free, but it allows farmers to drive equipment in straight
    lines while reducing fatigue. It also ensures consistency when
    different people take a turn in the driver's seat.
        Livestock sector also utilizes technology and has increasing need
    for better service.
        Today's poultry farmer uses a monitoring system to provide added
    protection for the birds. The first is the main controller unit, which
    controls and monitors all operations of the two houses. It monitors the
    power and records temperature, humidity, water usage and exhaust fan
    run time, as well as other conditions. The second system is the SCADA
    3000 system, which monitors the performance of the main controller as
    well as specific environmental conditions like temperature, humidity,
    carbon dioxide levels and ammonia on the floor. This Sensaphone system
    monitors 48 parameters daily, collecting data on each parameter every
    minute and logging that data on a computer. The data is accessible
    through remote locations for snapshots of live conditions and trends.
        Cattle are being sold through video actions with the ability to
    place bids from your smart phone or computer. The online market place
    has had a great impact on the cattle industry. Farmers are able to
    research information about herd management and cattle markets. It is
    fair to say that farmers now buy and sell cattle all over the nation?
    With online access, the perfect herd sire might be found hundreds of
    miles away. The Internet also allows cattlemen to find the right point
    of sale for their animals going to market. With the local auctions
    disappearing this has never been more important.
        Another element that farmers and ranchers and all residents of
    rural America must consider is that the world communicates differently
    with the rise of the Internet. If elected officials are going to
    correspond with constituents via e-mail and the Web, then rural America
    must have access to the Internet. The immediacy of communication in
    today's world will leave farmers and ranchers behind if they can't have
    the same tools of advocacy that their more urban counterparts enjoy.
        The importance of agriculture and its needs are critical to
    everyone. The U.N. Food and Agriculture Organization estimates that
    farmers will have to produce 70 percent more food by 2050 to meet the
    needs of the world's expected population of 9 billion people. To meet
    that goal farmers and ranchers must have access to the technology,
    information and markets. Providing access to high quality and
    affordable Internet is a part of that equation.
        Farm Bureau supports using the Universal Service Fund (USF) to
    expand broadband deployment to rural areas. The first phase of USF
    reform was the creation of the Connect America Fund (CAF) to replace
    the current high-cost program that subsidizes telephone service. The
    CAF will begin to subsidize the deployment of broadband this year.
        Internet providers are racing to work through the problems of
    service deficits. In order to get high quality and affordable service
    to the last mile, there must be cooperation between public and private
    interests. It is important that we continue to work together to resolve
    the issues that hinder better Internet service for rural Arkansas.

        Senator Pryor. Thank you.
        And, Mr. Hall, let me start my first question with you. You
    know, agriculture is our number one industry. You talk about
    the innovations and the new technologies that are there.
        Is it a hindrance for farmers around the state no matter
    what kind of farm they are, to live in a rural area if they
    can't have access to the Internet?
        Mr. Hall. I believe that it would be a hindrance for them
    to increase their production and become more efficient.
        So we need to continue that. I know in certain places in
    Arkansas it is easier to get the type of high-quality service
    so that they can utilize those technologies so that they can
    grow. Margins in agriculture are extremely narrow, and for the
    precision agriculture, to really reduce that and be able to
    farm more acres I think would be a benefit.
        Senator Pryor. And I assume you are just going to see
    technology continue to grow in agriculture. Is that fair?
        Mr. Hall. Yes.
        Senator Pryor. Yes.
        Mr. Zimmerman, let me ask you, you mentioned the Big River
    Steel project. And given your work on the AEDC, how often do
    these companies that you are recruiting and that you are
    talking to, how often do they mention the need for broadband?
    Why is that so important to them?
        Mr. Zimmerman. I will tell you, I talked with the staff
    before the hearing just to get an idea from the actual staffers
    that deal with business recruitment on a global basis, that
    exact question: How often do these companies ask about
    broadband? Is it half the time? And the word I got back was it
    is a lot more than half the time.
        And what they are particularly interested in is redundant
    networks so that if a cut is made going east of town, they can
    still route traffic out to the west. And the redundancy really
    adds to the reliability.
        You still see newspaper articles or hear TV stories these
    days about a single fiber cut in between city X and city Y
    knocks out telephone, cable, and Internet service for hundreds
    or thousands of people for 10 to 12 hours at a time because
    they have to go splice that thing back.
        We had something happen outside of Stone County in Mountain
    View, Arkansas, where we had a major fiber running through
    there, and it got cut in the middle of the night. And we don't
    know of any construction going on. And it turned out a farmer,
    his dog died; he went out with a backhoe to dig a grave for the
    dog and dug up our fiber, buried the dog, and we had to go and
    find where the loose dirt was to get fiber turned back on for
    these people.
        So that is why it is important to have these redundant
    routes out.
        Senator Pryor. Yes, interesting. Okay, so this has become a
    major component part of getting companies to locate here and
    keeping them here and keeping them coming.
        Mr. Zimmerman. Absolutely. The reliability or the ability
    to have a ring around the metropolitan areas or where they are
    looking to locate is very essential.
        Senator Pryor. Ms. Harriman, let me ask you, I know that,
    in Arkansas, obviously, economic development is important, but
    a big piece of that is also education. You know, there is a
    direct tie there. And your group is working apparently very
    well and making good progress and you are moving forward, and
    all that is very exciting. And it looks like you are going to
    continue to do good things there.
        But let me ask about the E-Rate program that I know the FCC
    is discussing right now. Are there changes that you would like
    to see that would benefit Arkansas in the E-Rate program?
        Ms. Harriman. Very much so.
        I just started learning about E-Rate in March when this
    problem emerged in our office, and one of the first things I
    did was ask for a copy of the state's E-Rate application. And
    it was over 300 pages and took months and months and months of
    work. I think Becky Rains is here, who helped put that
    together. There are five or six forms that have to be turned in
    at certain deadlines.
        And not only is the paperwork very hard to understand and
    the process is very difficult, but the actual follow-through
    and not knowing whether or not what you want to have funded is
    going to even be funded, and then having to have the seed money
    to get the rebate back. It seems like a very huge barrier for
    districts and for states to have to deal with as they are
    trying to increase access to broadband.
        Senator Pryor. OK.
        Are you all in the process of revising that right now, the
    E-Rate?
        Ms. Rosenworcel. Yes, E-Rate is a wonderful program. It is
    a tremendous equalizer for small and rural schools to be able
    to get high-speed broadband. But we do have a problem, and you
    hit the nail on the head. We have made the program so
    complicated that small and rural schools are having a hard time
    applying. So it is my hope, as we revisit this program this
    year, we are going to address that head-on.
        Ms. Harriman. Thank you.
        Senator Pryor. Mr. Merrifield, let me ask you a kind of a
    related question. And that is, your program that you talked
    about, ARE-ON, what do we need to see just to continue to have
    ARE-ON get stronger and more relevant and, you know, just
    continue to move in the right direction?
        Mr. Merrifield. Well, ARE-ON network itself is established.
    We have built our network; we have connected to colleges and
    universities. We have a significant infrastructure that is
    state-based and state-funded in place. And, certainly, that
    infrastructure should be leveraged to its greatest degree for
    any efforts that have to do with public policy or public
    funding here in Arkansas.
        You know, our focus is on higher education today. There are
    great needs in many other areas. And so I would offer that the
    Arkansas Research and Education Optical Network should provide
    infrastructure in some fashion to help alleviate some of the
    problems we have here in the state.
        Senator Pryor. And so, for your average student--is part of
    this that they can take classes online?
        Mr. Merrifield. Yes, sir. And the broadband that we provide
    our colleges and universities are really just part of the
    problem. You know, the other half of that is that students who
    live at home who need to take courses need to have access to
    broadband and be able to get video content or coursework
    content from their local colleges or even colleges across the
    state.
        And so we are only a part of the solution. And, you know,
    the broadband development that we have done has enabled,
    through our funding, has enabled local providers or other
    providers that are represented in this room to increase the
    size and improve their networks so that they can provide better
    service to their subscribers.
        Senator Pryor. Mr. Walls, let me ask you, because Mr.
    Merrifield is touching on something that--you said in your
    testimony there are a lot of people in our state that may have
    access to broadband--and, again, some of that is going to be
    the definition of ``broadband'' and what is adequate, but,
    nonetheless, they have access, but they don't utilize it.
        And tell us why they don't utilize it. And what can we do
    to try to make sure that if they want it they can have access
    to it?
        Mr. Walls. Well, again, if they don't access it--let's
    assume for a moment--I mean, the things we have done at
    Connect, taking the next step, I mean, in pricing, those are
    the conversations you are having right now. And, again, as
    networks expand, I think those issues start resolving
    themselves. You actually see service providers now doing some
    programs and advertising them to help low-income people get
    access. So I think it is a need that we are starting to
    recognize and get our hands around.
        Things we have done--and, again, you have seen these around
    the nation--on the equipment, where we have done free or
    reduced-cost refurbed computers to kids on free or reduced
    lunch programs. I think there are a lot of opportunities there
    to try to--you know, those specific ones on access.
        Then you get on the other side, the lack of broadband
    education. For those that want to do it but are intimidated by
    the process, again, it is outreach to those particular groups.
    It is working with groups like the Farm Bureau group and
    classes and things along those lines to farmers looking to, how
    do we use this technology better?
        Senior citizens groups, the school system. You know,
    hopefully it is improving within the school system so that the
    younger generation is getting a lot of access to it. But for a
    state like Arkansas that has unfortunately a large percentage
    of people with only a high school education that graduated
    before, really, the computer generation, a lot of them--and
    they are not necessarily using them in their jobs. So how do we
    find those opportunities to find the relevancy in their life to
    show, hey, this is something that is interesting?
        And it can be as simple, candidly, I mean, with hunting,
    you know, getting licenses online. I mean, you have to find--
    for us, Connect, it is I think kind of the mantra: Give us 5
    minutes and we will figure out where it is relevant in your
    life for someone who is adamant that it is not. And so you try
    to push it from that side of the equation.
        And it is a process. Again, it is a grassroots-type effort.
    But, again, it yields a pretty good dividend on our end, as far
    as, you know, getting that take rate up. And I think any
    service provider would tell you, particularly in some of these
    more rural areas, that, hey, if we could get better take rates,
    it certainly gives a nice incentive to maybe improve what we
    are able to do, maybe bring in more competition.
        Senator Pryor. And remind the Committee again what the take
    rate is in Arkansas?
        Mr. Walls. You know, it depends on what number you are at.
    I think you used the 40-something percent. We actually have a
    70--I think it is like 78 percent. But, that said, when you
    include mobile/wireless and you get into--it depends on what
    numbers you want to use. But I think for the wireline it is
    below 50 percent. But in some communities, heck, it is 10
    percent, it is 12 percent, it is way below what we need it to
    be.
        And I go back to the economic development statement. You
    are hearing from--AEDC is hearing from the companies that look
    at us and say, ``OK, is there broadband?'' I think from a
    larger perspective, maybe the perception of Arkansas has driven
    it in part. And if someone from another state looks and maybe
    has a preconceived notion of what Arkansas is or is not because
    of our history or we are in the South or whatever, the things
    that come along with regionalism, and then you look and you see
    a take rate at 45, 46 percent, that may reinforce a particular
    perception that maybe even before they would even consider--
    they wouldn't even consider coming here.
        And I think if you can improve those types of numbers, you
    maybe have the opportunity to again shatter some perceptions of
    what Arkansas is or is not and maybe have more people look at
    us as an opportunity to do business here.
        Senator Pryor. And part of this is the availability of
    technology, but part of it is just the cost to the end user,
    right? It is just hard for a lot of our people in this state to
    afford.
        Mr. Walls. It is.
        Senator Pryor. You know, just bottom line.
        Mr. Manley, let me ask you about what you were saying
    earlier about. You know, you talked about having good news. And
    that is good news, what you shared with us today and some of
    the examples you gave us. It is great news.
        But when you are doing what you are talking about, is that
    more like a hospital-to-hospital communication? Do doctors have
    access? Or does the general public, are they able to access
    what you are talking about?
        Mr. Manley. Basically, the BTOP Arkansas e-Link program is
    the middle-mile project that we built, as far as the healthcare
    system. So it is hospital-to-hospital, clinic-to-hospital.
        But we have made it in such a fashion that, you know, they
    say, ``Is there an app for that?'' Guess what? There is an app
    for that. So from my iPad, I can now have access to any of
    these institutions, the hospitals, clinics, that we have access
    to now over the video network to be able to see those patients,
    be able to talk to the hospital's management, and different
    things like that.
        One of the newest programs we are going to have is we have
    11 hand surgeons across the state of Arkansas to handle all the
    trauma here. So our trauma is going to be one of our biggest
    programs being built. So now they are going to have access,
    wherever they are--it doesn't matter if they are in-state, out-
    of-state, or whatever--but in-state, they will have access to
    be able to evaluate those patients.
        At a patient level, it is coming. Because there are
    thousands of mobile apps that are coming out every day. I am a
    Type 1 diabetic. If I need access to my healthcare provider, I
    am going to be able to do it from my phone.
        And so that is kind of the--people called it the last mile
    when it comes to electricity. We consider this the first mile
    to the patient. And that is going to be the next largest growth
    that we see, I think, in the near future.
        Senator Pryor. Good.
        I was just at the VA up in Fayetteville and they have added
    a new wing up there. And they were showing us that, that the VA
    has this system now where--I think some of it may be iPad- or
    tablet-based, some may be on a computer, and for some of it
    they may actually have to give you a little device of some
    sort, I am not quite sure. But it helps them provide just basic
    services to veterans, and it can be things like blood pressure
    and weight and just some of your real basics.
        But the fact that you are saving the veteran the hours and
    hours of leaving their home, wherever they are, usually fairly
    remotely, and getting into a place like the Fayetteville
    hospital and do all that it is just a way to get efficiency.
    And it keeps a lot of folks who don't need to be traveling and
    the stress of getting up and down and in and out, just keeps
    them, you know, where they need to be.
        So, yes, the technology is great.
        Mr. Manley. We would love to partner closer with the VA and
    expand our program here in Arkansas. So instead of someone,
    like, from Mountain Home having to travel to Fayetteville, they
    could actually receive that care there in Mountain Home because
    of the infrastructure we have put in now. And we would be more
    than happy to work with them on any level to be able to make
    sure our veterans get that care closer to home.
        Senator Pryor. That would be great.
        Let's see now. We have just a few more minutes with this
    panel, and I know we have covered a lot of ground, and I am
    wondering if any of the panel want to chime in. If they want to
    respond or say something about something they have heard or
    something they have thought of that either we haven't covered
    or--we would like to get your thought on that.
        Anybody? Anybody have anything to add?
        All right, well, listen, what we will do then is we will
    swap out this panel and we will let our next panel come up. And
    our guys here are going to do that real quickly.
        Let me say thank you to all the panelists. And you all know
    this is the hearing but we are going to continue to talk and we
    are going to continue to try to find ways to help you make this
    a reality of just getting more and more of this all over
    Arkansas. So thank you very much for doing this and for
    preparing and being here.
        And we will get our team here to swap out the nametags and
    all that, and we will move forward.
        Thank you.
        And we will bring our next panel up here in just a minute,
    once they get this swapped out.
        While they are doing that, let me say that I know Senator
    Bozeman has someone here. I don't see anyone else from the
    other Arkansas offices, but I know Senator Bozeman wanted to
    send someone here to listen and be part of this. So thank you
    to the Bozeman office for being here.
        If the other panelists could come on up and grab a seat
    once we are ready. And it looks like we are getting ready.
        I will go ahead and run through the names of the witnesses
    here as they are getting situated. And we will try not to waste
    anyone's time on doing this.
        So our second panel will be Dean Kurtz. He is the Vice
    President of the Southern Region with CenturyLink. Elizabeth
    Bowles, who is with Aristotle. Jeff Gardner, who is President
    and CEO of Windstream. That is the Fortune 500 company I
    mentioned a few moments ago, and many of you all are very
    familiar with Windstream. Greg Ashcraft, he is with South
    Arkansas Telephone. Always great to have him here. John Strode;
    John testified before us in one of our other committee hearings
    that we talked about. He is with Ritter. Steve Sanders, who is
    here from NATCO, another great Arkansas company. Eddie Drilling
    of AT&T, and we appreciate Eddie being here. And Eddie, by the
    way, has a great reputation not just here in Arkansas but
    around the country with AT&T. I talk to his people in
    Washington a lot. And Dean Taylor with Verizon Wireless, South
    Central Region, located here on Alltel Drive.
        So let me do this. Let me just, for the ease of this, why
    don't I start with Mr. Gardner and let you jump in. And if we
    can limit our comments to 3 minutes. And, again, there is this
    little button on the table there. Just press that button when
    you begin, and then turn it off when you end.
        Go ahead, Mr. Gardner. Thank you.

      STATEMENT OF JEFF R. GARDNER, PRESIDENT AND CHIEF EXECUTIVE
                    OFFICER, WINDSTREAM CORPORATION

        Mr. Gardner. Thank you, Mr. Chairman, for your leadership
    on communications.
        Windstream started in 1948 as a local phone company in
    Sheridan, Arkansas. Sheridan is typical of the areas we serve,
    which include some of the most remote areas in the nation. In
    markets like Little Rock, Windstream is a competitive carrier,
    going head-to-head with the largest incumbent phone companies
    as well as incumbent cable companies.
        Linking our urban and rural markets is the Windstream
    network and associated infrastructure, including more than 20
    data centers that support cloud-based storage services. Our
    network includes 115,000 miles of fiber-optic cable, enough to
    circle the Earth four and a half times.
        Educational institutions are important Windstream
    customers. For example, we deliver 1-gigabit service to both
    North Little Rock high schools. Windstream understands the
    potential of replicating this service elsewhere. Governor Beebe
    has formed a state taskforce to examine our needs as a state,
    and I am a member of that taskforce.
        In rural Arkansas, the 2009 Recovery Act is funding
    broadband upgrades to about 13,000 of our customers, but
    thousands more continue to wait year after year for broadband.
    The FCC's new Connect America Fund is a work in progress but
    should help. Fortunately, CAF will begin investing in Arkansas
    in 2013. Both you and Commissioner Rosenworcel deserve great
    credit for accelerating the effort. Thank you for that.
        Today, as a part of CAF, Windstream is announcing plans for
    substantial rural investments, and this includes a significant
    incremental investment in this state.
        Windstream also serves small, medium, and large businesses
    in urban markets. In Little Rock, for instance, Windstream
    connects some of the largest medical facilities. Last year, we
    opened a state-of-the-art data center in west Little Rock.
        Especially for competitive providers, it is vital that
    Congress and the FCC proceed with care in remaking regulatory
    structures for the IP era. Some have called for a sweeping
    rollback of the powers of the FCC, but telecom is complex.
    There are risks of competitive harm. Unbalanced regulatory
    treatment among competing platforms may disincent investment.
    Reforms must be judicious and fact-based.
        Thank you, Mr. Chairman, for convening today's dialogue. We
    all need a practical understanding of the state's communication
    needs and challenges. Thank you.
        [The prepared statement of Mr. Gardner follows:]

     Prepared Statement of Jeff R. Gardner, President and Chief Executive
                        Officer, Windstream Corporation
        Chairman Pryor: Thank you for your leadership on communications
    policy and for inviting me to testify today.
        Windstream traces its roots back to Sheridan, Arkansas, where our
    predecessor began as the local phone company in 1948. This year,
    Windstream is proud to have joined the FORTUNE 500, and we are still
    proud to call Little Rock our headquarters.
        Windstream unites rural and urban America with an innovative
    business model:

       Rural--We provide universal, carrier-of-last-resort service
            to some of the most remote areas in the nation, including many
            in Arkansas. About 90 percent of Windstream's exchanges are
            smaller than Sheridan. Although we have vigorous competition
            from wireless and cable companies in the rural towns, we also
            reach many locations that those providers consider too remote
            and too costly to address.

       Urban--In urban markets like Little Rock, we are a
            competitive carrier, going head to head with the largest
            incumbent phone companies, as well as incumbent cable
            companies. Windstream caters to businesses large and small,
            offering a personalized approach to management of every aspect
            of communications infrastructure.

       National network--Linking these diverse customer groups is
            the Windstream network and associated infrastructure, including
            more than 20 data centers that support cloud-based storage and
            services. Our network includes 115,000 miles of fiber-optic
            cable--enough to circle the Earth 4\1/2\ times.

        Mr. Chairman, let me provide a few examples of how we serve your
    constituents and how those services could be affected by your work
    leading this subcommittee.
    Connecting Schools and Universities
        Educational institutions are significant and valued Windstream
    customers. Windstream serves a wide range of campuses, from small
    Arkansas districts with a few hundred students to Ivy League
    institutions.
        In particular, one of Windstream's longstanding customers is the
    Mooresville Graded School System in North Carolina, which is considered
    a national leader in using high-speed broadband and wireless devices to
    overhaul its pedagogical approach and drive significant gains in
    student achievement. Windstream data connections have helped make these
    achievements possible, as we provide 1 Gigabit connections to each of
    Mooresville's lower schools and a 5 Gigabit connection to its high
    school. Although Mooresville's achievements are widely known in
    educational circles, the district gained additional acclaim this summer
    when it hosted a visit by President Obama. At Mooresville Middle
    School, the president announced ConnectEd, his plan to expand the E-
    Rate program to enable more schools to follow in Mooresville's
    footsteps.
        Closer to home, Windstream provides 100 Megabit speeds to each of
    the 24 elementary schools in the North Little Rock district and 1
    Gigabit speeds to the district's two high schools. As in the case of
    Mooresville, this service is funded in part through the FCC's E-Rate
    program.
        Earlier this summer, I accepted an appointment by Governor Beebe to
    the FASTER Arkansas Task Force, which is studying broadband access in
    public schools and developing recommendations on areas for improvement.
    In my view, a critical threshold question is, why are some districts
    not moving up to higher-speed services? Based on Windstream's
    experience serving schools and businesses, very advanced offerings are
    deployed, even in smaller communities, and are in use by many. To the
    extent that educational entities do not use these services, we need to
    explore the cause: Is it lack of availability of facilities, lack of
    funding, or another reason like lack of computers or tablets in the
    schools, teacher training, or curriculum support?
        Clearly, there is strong interest in Arkansas and at the national
    level in capitalizing on recent technological advances. Some have said
    there are opportunities for new types of educational materials; for
    broader dissemination of educational devices, from smart boards to
    computers; for more self-paced learning; and more effective assessment
    and targeted intervention by instructors. Windstream supports these
    goals and objectives and would like to be a partner in developing a
    vision for this increasingly digital future, whether that's through
    state efforts or reforms to the FCC's existing E-Rate program.
    Connecting Rural America
        As you know, Windstream is one of the three largest providers of
    phone and broadband service to rural Arkansas. In this capacity, I have
    seen firsthand how engaged and effective you have been in improving the
    state's rural communications. Windstream is in the closing stages of an
    investment program funded jointly with the U.S. Department of
    Agriculture to upgrade broadband for about 13,000 rural Arkansans. In
    addition, Windstream contracted with the University of Arkansas to
    provide broadband links to more than 200 rural health sites. These both
    were significant projects for the state and both were made possible by
    the 2009 Recovery and Reinvestment Act, also known as the stimulus
    bill. Thank you for the important role you played in these success
    stories.
        As we think about the challenges that lie ahead for rural Arkansas,
    two basic facts remain as true today as they were 20 years ago:

      (1)  Wireline networks are essential for all communications.

      (2)  The economics of rural communications are challenging.

        I spent much of my career in the wireless industry and am as
    fascinated as anyone by the amazing changes that we have seen. But
    policy makers must not lose sight of the fact that all robust
    communications still come down to electrons or light moving along a
    wire. Wireless towers and antennas connect back to a terrestrial
    network. In fact, in Arkansas, as wireless carriers have upgraded to
    next-generation 4G services, they have come to Windstream for network
    connections. In the last two years, Windstream has constructed fiber
    backhaul facilities for 380 wireless towers in the state.
        In addition, for all wireless networks and technologies, one of the
    most important traffic management tools is offloading traffic onto
    landline networks as quickly as possible. Often, this means handing off
    traffic to Wi-Fi networks supported by wireline providers. One recent
    analysis found that Wi-Fi already handles more than two-thirds of the
    data for LTE subscribers and that its share is expanding. When
    consumers use tablets and smart phones at home, at a hotel, or in a
    shop, chances are they are connecting through a wired Wi-Fi connection.
        And, of course, many rural consumers live in places where wireless
    service is not so prevalent or reliable. The wired network--
    increasingly via broadband--remains the sole tether for rural residents
    to stay in touch with family, friends, and business interests around
    the state, country, and world.
        In rural Arkansas, a modern and reliable wireline network continues
    to serve an important role comparable to good roads and bridges.
        But the economic challenges of serving rural America are as old as
    the telephone itself. The basic question is, how can we deploy,
    operate, and maintain expensive assets in areas with low population
    density? As a general principle, network costs are lower per subscriber
    in more densely populated areas but higher in rural areas, while total
    revenue potential in an area decreases with lower density. That's why
    we have universal service programs and intercarrier compensation
    systems.
        Today's hearing is timely, because the FCC is in the process of
    dramatically reshaping the financial underpinnings of universal rural
    networks. This transition must succeed, because the stakes are very
    high for rural America, including much of Arkansas, but many details
    remain unresolved.
        ``USF/ICC reform'' has become shorthand for a top-to-bottom
    overhaul of rural communications programs, starting with the Universal
    Service Fund itself, and also including the Federal and state
    components of intercarrier compensation, as well as state USF programs.
    The FCC's reform order in 2011 mandated specific and sizable reductions
    in intercarrier compensation and proposed a fundamental overhaul of
    universal service for high-cost areas. Apparent even at a high level,
    the math here is simple and challenging. On one side of the ledger,
    intercarrier compensation has been slashed by billions of dollars,
    while Federal universal service funding remains at roughly the same
    level as before. On the other side of the ledger, the FCC's goals now
    are to sustain ubiquitous voice service while also, simultaneously,
    substantially increasing broadband access in rural America.
        We understand the need for reform--in fact we pushed for it and
    helped get the comprehensive reform order across the finish line in
    2011--but the job is far from complete.
        This spring, the FCC decided to invest $485 million in rural
    broadband expansion via Phase 1 of the Connect America Fund. You played
    an important role in that decision, Mr. Chairman, and I thank you.
    Pursuant to commitments made while the FCC was considering the rules
    for this round of Phase I funding, Windstream will match--on at least a
    dollar-for-dollar basis--the total amount of Phase I funding it
    receives. As a result, this coupling of public and private investment
    dollars will enable us to enhance broadband or deliver it for the first
    time to hundreds of thousands of consumers in Windstream's territory.
        Still, unresolved aspects of reform, coupled with slashing of
    intercarrier compensation, have created troublesome uncertainty for
    ``price cap'' carriers and the consumers they serve. For the future,
    there are plans to estimate the price cap carriers' costs of providing
    service to certain rural areas, then offer funding above a high cost
    threshold, along with a set of performance requirements, to serve the
    area. There has been an unspoken assumption that the proffered funding
    will be reasonable to the provider, but also attractive to policymakers
    who are trying to cover the Nation with ubiquitous voice and broadband
    on a constrained budget. We are hopeful that these dual objectives soon
    will be fulfilled, and that the strain from existing uncertainty will
    be lessened. But we need the FCC to continue in a transparent and
    deliberate fashion as it moves forward with the next phase of reform,
    and ask the Committee to keep a watchful eye in its oversight role.
    Connecting Urban America
        Just as in rural markets, urban communications ultimately ride
    along a wireline network. In 2012, wireline networks moved 99 percent
    of all video traffic. The most recent data for 2013 suggests that Wi-
    Fi, a technology tied to landline networks, is carrying four times the
    data load of cellular.
        Windstream's focus in urban markets is on business customers, and
    we serve more than 450,000 businesses, including most in the FORTUNE
    500. In Little Rock, for instance, Windstream serves some of the
    largest medical facilities. In the hospitality industry, Windstream
    ranks as one of the largest communications technology providers
    nationwide, supporting more than 1 million rooms. Windstream also
    serves major government entities, prominent universities, and leading
    financial institutions. Of course, we serve many small and medium-sized
    businesses and locations too.
        In the past year, Windstream has seen particularly strong growth in
    demand for off-site data storage and related services. For example, a
    financial institution in Charlotte may want to back up its data at
    Windstream's Little Rock data center to ensure 24/7 access and safety
    in the event of an unforeseen disruption to its operations in North
    Carolina. Windstream now operates more than 20 data centers, from
    Boston to Phoenix and from Chicago to Little Rock. Each has state-of-
    the-art electrical systems, secure entry, and a range of services, from
    cloud computing to disaster recovery.
        In your role as chairman, I would ask that the subcommittee pay
    close attention to sustaining competition in urban markets.
        There has been considerable discussion in Washington about the
    vigorous rivalry among firms that seek to serve residential customers.
    For phone and Internet service, most homes can choose at least between
    a legacy phone company and a legacy cable company. Wireless and
    satellite providers also are competitive for a narrower set of
    services. As a result, only about one home in four now receives voice
    service from a traditional landline phone company.
        Yet alternate infrastructure--and the range of competitors--is
    narrower for businesses that need sophisticated, high-capacity
    communications. The majority of buildings across the country continue
    to be served only by a connection from a Bell Operating Company.
        In 1996, a Republican Congress and a Democratic president agreed to
    a landmark law that reduced regulation of telecommunications in
    exchange for specific strategies to promote market competition. The
    provisions of the 1996 Telecommunications Act allow Windstream to
    compete even in markets where a Bell company still has a lock on
    critical infrastructure.
        Citing the advancement of IP technologies and competition in
    residential markets, some have called for a sweeping rollback of the
    powers of the Federal Communications Commission. But few players in
    industry believe that fact-based policy reforms--especially when
    business customers are considered--will come so easily or conform
    neatly with partisan political philosophies.
        Like Windstream, most companies are deploying IP in their networks
    and appreciate the importance of this conversation, which is enhanced
    by the creation of an FCC task force on the issue. This transition,
    however, is a process, and will unfold in different ways and at
    different times for each provider.
        Increasingly, there is no ``one size fits all'' approach. As you
    know, Windstream operates as an ILEC in some areas, in others as a
    CLEC--indeed, as one of the Nation's largest and most successful CLECs.
    So when it comes to issues such as interconnection, competitive access,
    transport, privacy, and public safety, we are keenly aware of the need
    for public policy to balance regulatory treatment among competing
    platforms; to avoid disincenting wireline investment; and, at the same
    time, to avoid competitive harm, especially during this transition
    period that we are in, a transition that is technology-driven.
        I suggest that the subcommittee seek out specifics regarding
    changes in the communications market, and that it take care when
    considering policy reforms in response. In areas where the competitive
    or economic dynamics are not fully understood or where there are gaps
    in our knowledge, we will need to gather and analyze the right data to
    understand the specifics of the situation. In particular, we need to be
    wary of using competition in residential markets as a reason to
    withdraw regulatory rights and obligations that enable competition in
    business markets. Modernizing our regulatory structure and planning for
    a smooth transition to an IP world are essential to the health of the
    wireline industry and all the benefits that it brings our Nation. It is
    critical that reforms be judicious and founded on fact-based assessment
    of the modern communications marketplace.
    The State of Communications on the Ground
        Mr. Chairman, I congratulate you on convening today's dialogue. It
    is important that the oversight and legislative efforts of the Senate
    Commerce Committee be grounded in a practical understanding of the
    challenges that lie ahead for Arkansas consumers and companies. All
    providers in rural areas have been placed under financial strain by the
    end of intercarrier compensation and the overhaul of universal service.
    This situation merits a watchful approach by your subcommittee. In
    addition, consequences of moving to the IP era may be enormous. I would
    urge you to cast a wary glance on policy reform proposals, in response,
    that sound simple and easy--as the transition to an ``all IP world'' is
    complicated and entails different consequences for different types of
    customers. Continued competition across the communications landscape
    will require reforms targeted to varying conditions.
        Again, thank you for the invitation to appear today and to testify.

        Senator Pryor. Mr. Drilling?

               STATEMENT OF EDWARD DRILLING, PRESIDENT,
                             AT&T ARKANSAS

        Mr. Drilling. Thank you, Mr. Chairman. Appreciate the
    opportunity to be here with you today and with the Commissioner
    as well. Thank you for being here.
        Certainly, access to broadband technologies has
    fundamentally changed society--the way we live, the way we
    work, the way we connect. At AT&T, we have had to fundamentally
    change the way we build and manage our network to keep up and
    stay ahead of this demand.
        You know, I can relate a story here about Arkansas,
    Senator, where in 2000, when I first came in the job as
    president of AT&T-Arkansas, we had over a million access lines,
    1.33 million, actually, access lines in Arkansas. And as of
    July of this year, that number is now 361,000 access lines, so
    that is a drop of 65 percent of our access lines over that
    period of time.
        And if somebody would have told me that in 2000, I would
    have been concerned that I would have either been fired by now
    or our company would be broke or both. But, obviously, we have
    had to make an extreme pivot in the way we manage and build our
    networks.
        That decrease is even more significant when you look at
    just the consumer access lines, which have dropped 75 percent.
    So, as of July, when you overlay the increase in the living
    units that we have in our traditional landline footprint, about
    17 percent of the living units that are in our footprint have
    landline telephone service.
        So we see a high penetration of wireless in Arkansas. Over
    50 percent of our customers have wireless only. A large number
    have gone to cable and VoIP. A very competitive marketplace out
    there.
        But we have pivoted and we have invested heavily in
    Arkansas. Just in the last 4 years alone, through July, we have
    invested over $840 million, $90 million of that just in the
    last 6 months of this year. We have invested heavily in LTE
    wireless technology. By mid-2014, we will see all of our towers
    LTE-equipped and providing wireless broadband across the state
    and increasing the number of sites that we have in rural areas
    as well. We also have invested heavily in U-verse and other IP
    technologies across the state.
        So what this means also is that are taking fiber deeper and
    deeper into our network, deeper into rural areas where we can
    more cost-effectively serve small businesses, healthcare
    institutions, educational institutions around the state as
    well. Of course, it requires more bandwidth and it requires
    more spectrum from a wireless perspective as well.
        I think the challenge that we have going forward--because
    we know what we have seen in the last 6 years, and we know what
    is going to happen going forward in the next 6 years is going
    to be even more dramatic and require even more bandwidth. But
    we also have the legacy network that we continue to have to
    invest in and keep up with, even though we are losing customers
    on that network in droves.
        So the commissioner mentioned the IP transition a few
    minutes ago in her remarks, and we sure look forward to working
    with you and the commission on this transition as we go forward
    over the next several years.
        Thank you.
        [The prepared statement of Mr. Drilling follows:]

        Prepared Statement of Edward Drilling, President, AT&T Arkansas
        Thank you, Senator Pryor, for inviting AT&T to join in today's
    discussion.
        Access to broadband technologies has fundamentally changed society
    and the way we live, work and connect. It has helped drive innovation
    in the marketplace, open new markets, expand economic growth, connect
    us to family and friends, strengthen communities, serve as a tool for
    learning, and provide news and information. High-speed broadband access
    in rural areas delivers advanced broadband technologies, applications
    and services that fuel advancements and create efficiencies in areas
    such as farming, ranching, health care and education. And, thanks to
    amazing breakthroughs in wireless technology and increased deployment
    of next-generation mobile broadband--4G LTE--all these benefits can now
    travel with us.
        Even as more Arkansans benefit from broadband deployment and access
    to the Internet, we have only just begun to reap the amazing rewards of
    high-speed broadband across this great nation. There's more to come:
    better, faster, and more reliable service and the development of even
    more applications and services.
        Our effort to modernize and upgrade our antiquated 20th Century
    telephone networks and expand our mobile broadband network is aimed at
    meeting the demands of consumers who have embraced these new
    technologies and demand the next-generation of services and
    applications that high-speed Internet networks provide.
        AT&T is committed to investing in Arkansas' future. In fact, during
    the past four years AT&T invested $840 million in Arkansas, $90 million
    of that occurred in the first half of this year alone. We continue to
    build out and deliver these state-of-the art, cutting-edge broadband
    technologies to Arkansas consumers. And we are not slowing down.
        AT&T has increased our deployment of U-Verse and 4G LTE across the
    state. Our plan is by the middle of 2014, our fastest and most reliable
    4G LTE network will be operational on the majority of our towers in
    Arkansas. We are increasing our deployment of fiber networks to more
    facilities and buildings around the state. And we are deploying fiber
    to more rural and hard-to-reach areas, particularly to more cell sites.
    What does this fiber build mean? It means that as we build out more
    fiber to more cell sites, and as we continue to increase our number of
    cell sites, we create a denser grid. This denser grid is capable of
    unlocking the full potential of the Internet and carrying the data-
    intensive traffic of these leading edge high-speed broadband
    applications and services that are serving and bringing substantial
    benefits to Arkansas' farmers and healthcare specialists. It also means
    the availability of more fiber to all areas of the state, that would
    decrease the costs of providing faster broadband service to schools and
    businesses.
        Yet, AT&T, as an incumbent telephone company, faces difficult
    circumstances and a growing challenge to maintain these significant
    infrastructure investments in Arkansas. AT&T is no longer a monopoly
    telephone service provider. We provide broadband and communications
    services in a robustly competitive marketplace where consumers have
    many choices among various providers of networks, services and devices.
    Consumers and businesses have and continue to abandon the plain old
    telephone network in droves for broadband and mobile services offered
    by those alternative providers. For example, they are increasingly
    choosing wireless over traditional home phone service, as now
    approximately 50 percent of households statewide subscribe to wireless
    only service.
        At the turn of this century, AT&T had nearly 1,033,382 residential
    and business telephone access lines delivering service in Arkansas.
    Today, the number of access lines we serve in the state has fallen
    dramatically. At the end of 2012, the number of access lines we served
    dropped to 414,020 lines--the equivalent of a 60 percent reduction in
    just twelve years. In fact, these double-digit access line losses
    happened while the number of households and businesses increased in the
    state during the past decade. The shift away from the legacy telephone
    network is happening so fast that by the end of this year we estimate
    that less than 24 percent of Arkansas households will have service from
    AT&T. But, while we thus continue to lose wireline subscribers (and the
    revenues from serving those subscribers) at a rapid pace, we retain all
    the costs of maintaining our legacy wireline network to meet our
    regulatory obligation to provide service on demand to anyone that wants
    it. One does not need a Ph.D. in economics to understand that this
    business model is no longer sustainable.
        This disappearing customer base means that incumbent telephone
    companies, like AT&T, must be provided a path that enables the
    retirement of antiquated telephone networks, and creates the right
    incentives to justify and bolster expanded investment by incumbents
    (and, indeed competing service providers) in next-generation high-speed
    Internet networks.
        What does this mean for our Arkansas customers? It means creating
    an environment for AT&T and other incumbent telephone companies that
    accelerates the modernization and upgrade towards high-speed broadband
    networks. It means bringing access to the services and applications
    brought by high-speed broadband Internet to allow farmers and ranchers
    to engage in a more globally competitive market and create greater
    efficiencies for food growth, reduction in fuel consumption, livestock
    monitoring and irrigation management. It means building more fiber to
    cell sites, and bringing fiber closer to elementary, middle and high
    schools--so that this service capacity can be used to deliver the
    incredible benefits of high-speed Internet to empower Arkansas'
    students learning potential and fuel the imaginations of our next
    generation.
        And it means bringing a modern broadband network closer to Arkansas
    to create opportunities for telemedicine consultations, in which
    specialized medical professionals from urban areas can diagnose, treat
    and provide long-term monitoring capabilities not previously available
    to rural residents and Arkansas' senior citizens.
        How can policymakers provide additional regulatory and business
    certainty to help speed the investment necessary to meet rising
    consumer demand for 21st Century broadband services? The FCC can take
    the first step, and act quickly on AT&T's request to begin a
    collaborative process with industry, public interest groups, and
    consumers to implement trials in a few local markets to create a
    ``real-world'' test of the transition away from the antiquated legacy
    telephone network and towards the deployment of networks capable of
    offering voice, video and high-speed Internet services. The trials will
    provide an opportunity for all stakeholders (including consumers,
    industry and policy makers) to identify and engage in an informed
    debate about any gaps in technology, services or policy, and to develop
    solutions that address parties' concerns. In some cases, the solution
    may entail changes to proposed replacement services to ensure that they
    will support essential features and functions following the transition.
    In others, stakeholders may conclude that particular features and
    functions no longer are necessary or make sense in an all-IP world, or
    that entities that historically relied on TDM technology and services
    will have to adapt their own products and services to be compatible
    with next generation wireless and IP-based services. The important
    thing now is to commence those trials now so that we, as a nation, can
    begin to identify and resolve the issues (both known and unknown) that
    will arise as we complete the transition to next generation wireless
    and IP-based services while a TDM safety net is still in place so that
    an orderly transition can occur, along with the proper planning to make
    that happen.
        As part of this process, the FCC must take a hard look at
    regulations that were written for a different technological and market
    landscape. Properly implemented, local market trials can play a key
    role in helping create a pro-consumer, 21st century regulatory
    framework that encourages innovation, facilitates significant and
    sustained investment, meets consumer demand for high-speed Internet
    service, and ensures that no consumer is left behind. Thank again for
    inviting me to speak on these important matters.

        Senator Pryor. Thank you.
        Mr. Strode?

              STATEMENT OF JOHN STRODE, VICE PRESIDENT OF

       EXTERNAL AFFAIRS, RITTER COMMUNICATIONS HOLDINGS, INC. ON
    BEHALF OF RITTER COMMUNICATIONS HOLDINGS, INC., NTCA--THE RURAL
       BROADBAND ASSOCIATION, AND THE AMERICAN CABLE ASSOCIATION

        Mr. Strode. Thank you, Mr. Chairman, for the opportunity to
    testify today.
        Companies such as Ritter Communications and its
    subsidiaries are state-of-the-art broadband companies providing
    for our customers' varied data, video, and voice needs. We
    connect the state, the nation, and the world by holding the
    responsibilities of consumer protection, public safety,
    equitable competition, and universal service in the highest
    regard.
        Despite our contributions, rural telecommunications
    companies face greater challenges than ever as the mechanisms
    for ensuring high-cost areas stay connected are called into
    question.
        Many in the rural telecom industry continue to struggle
    with the FCC's Universal Service Fund and intercarrier
    compensation transformation order. The order's cuts, together
    with the threat of more to come, inject substantial regulatory
    uncertainty into the operations of our companies. In fact, even
    companies that are not affected by the cuts at this point are
    deciding against network upgrades for fear of becoming the next
    to be capped.
        Thanks to your efforts and those of your colleagues, there
    has been some incremental progress toward eliminating the
    uncertainty and building a broadband future through more
    sensible modifications to the relevant programs. But this work
    isn't done, and we need a targeted Connect America Fund for
    small carriers that supports access to sustainable, affordable
    broadband.
        This is part of a larger debate about technology
    transitions in the telecom sector. We need a thoughtful
    evaluation of whether existing rules should be modified or
    eliminated as technologies evolve. However, it must not
    disregard key public policy cornerstones, including universal
    service and consumer protection.
        The epidemic of rural call-completion failures provides the
    best early indication of what can happen without sensible rules
    of the road to ensure core public policy goals are served.
        Likewise, as our Nation undertakes new initiatives like
    FirstNet and modernizing the E-Rate program, it is important to
    be thoughtful in structuring and developing such programs. We
    should be leveraging existing networks and coordinating such
    initiatives with other programs like the High-Cost USF to avoid
    wasting valuable resources and program dollars.
        Finally, we hope policymakers will update the rules
    governing the video and wireless marketplaces to ensure
    consumers are served and fair competition is enabled. In
    particular, the broken retransmission consent market,
    exemplified by the current CBS-Time Warner dispute, is governed
    by outdated rules that no longer reflect today's marketplace.
        We are aware that the Senate Commerce Committee must renew
    the Satellite Television Extension and Localism Act by the end
    of 2014. As chairman of the relevant subcommittee, we hope you
    will keep an open mind regarding whether modernizing
    retransmission consent rules should be considered as part of
    that bill's reauthorization.
        In closing, adopting and updating sensible rules of the
    road that create regulatory certainty and help build a
    broadband future for rural Arkansas will be essential to the
    success of our customers and our companies. We look forward to
    working with you.
        [The prepared statement of Mr. Strode follows:]

    Prepared Statement of John Strode, Vice President of External Affairs,
    Ritter Communications Holdings, Inc. on behalf of Ritter Communications
        Holdings, Inc., NTCA--The Rural Broadband Association, and the
                           American Cable Association
        Mr. Chairman, thank you for the opportunity to provide the
    perspective of Ritter Communications and the nearly 900 similarly
    situated small rural communications providers from around the Nation
    that are represented by NTCA--The Rural Broadband Association and about
    850 small cable providers represented by the American Cable
    Association.
        Companies such as Ritter have been, and remain, essential to ensure
    that we are an interconnected nation. We serve the Nation's highest
    cost rural areas where others would not. We hold the responsibilities
    of consumer protection, public safety, equitable competition and
    universal service in the highest regard. Today most of us are anything
    but plain old telephone companies, offering state-of-the-art broadband
    services capable of providing for our customer's varied data, video,
    and voice needs. Many, such as Ritter, are also involved in other lines
    of business such as video services and transport and wholesale Internet
    services to sustain ourselves and our communities in a challenging era
    of economic and technological transition.
        Rural telcos are responsible for sustaining 70,700 jobs nationwide
    directly or indirectly. They contribute nearly $15 billion to the
    economies of the states in which they operate. But here is the really
    interesting fact--nearly two thirds of this economic activity, almost
    $10 billion, benefits urban areas. This underscores the value--the
    payback--of an interconnected nation, and shows how a mix of
    entrepreneurial can-do spirit and reasonable public policies contribute
    to the greater well-being of our nation.
        For all of these successes in the face of great challenges, rural
    telecom today faces perhaps greater challenges than ever. Technology's
    endless rapid evolution repeatedly forces all of us to adapt quickly.
    Globalization routinely introduces new twists to be acknowledged and
    understood. Customer allegiance is no longer a given even when superior
    performance is delivered. And, perhaps most importantly, our Nation's
    commitment to universal service--which is embodied in Federal law--is
    called into question as changes to policies (and the threat of more to
    come) make it harder for companies to plan to carry out that mission.
        The low-density, high-cost areas that are served by Ritter and its
    rural industry colleagues represent special places. They contribute to
    our Nation's well-being through activities like food production, supply
    of natural resources, and a home for outdoor activities and enthusiasts
    from across the country and the world. But they are also special in
    that they are not easy markets to serve, and policies and experiments
    that might work in more densely populated areas can undermine critical
    connections in these areas if not fully thought through in advance and
    carefully calibrated.
    IP Evolution and the Need for ``Rules of the Road''
        A case in point comes in the raging debate surrounding the
    telecommunications industry's Time-Division Multiplexing (TDM) to
    Internet Protocol (IP) transition. Many suggest that if they were
    merely relieved of today's regulatory shackles they would quickly begin
    to more actively participate in this evolution. Others appear focused
    on maintaining the status quo and old rules regardless of changes in
    technology, consumer preference, or competition. By contrast, our
    position is that this technological transformation is already well
    underway independent of the existing regulatory framework or any
    potential regulatory changes. But at the same time, we believe there is
    a need for a thoughtful evaluation of whether existing rules should be
    modified or eliminated as technologies evolve. It is important,
    however, that this evaluation always hearken back to key public policy
    cornerstones of universal service, consumer protection, and equitable
    competition. Particularly in fragile rural markets, once again,
    discarding proven ``rules of the road'' that helped to provide
    certainty and justify investments on the mere basis that network
    technologies have evolved would be ill-advised and could lead to
    serious harm for consumers.
        Indeed, the epidemic of call completion failures that currently
    plagues our Nation provides perhaps the best early indicator of what
    happens when technological or competitive changes are used to justify
    avoiding basic ``rules of the road'' that keep customers connected.
    Multiple surveys conducted by NTCA--The Rural Broadband Association and
    others have revealed that, despite statutory and regulatory mandates
    designed to ensure telephone calls are successfully completed,
    consumers in rural markets continue to find themselves cut off from
    calls from other areas. While there are rules on the books that should
    preclude such behavior, some have taken the view that they are not
    responsible for self-declared ``unregulated'' providers in the middle
    of such calls, and the lack of clarity surrounding what rules may
    govern these self-declared ``unregulated'' providers has only made it
    harder to get to the root of the problem. In the meantime, rural
    America suffers.
        For this reason, I would like to acknowledge your co-sponsorship of
    Senate Resolution 157 which recognizes the public safety, economic, and
    national security implications of this situation and calls upon the FCC
    to take every possible step to satisfactorily resolve the issue. This
    resolution provides an example of how common-sense oversight is
    essential to address market failures, and shows the chaos that can
    ensue in the absence of a lack of clear ``rules of the road.'' Thank
    you also for your role in ensuring this bill was recently marked up by
    the full committee. We look forward to its approval by the full Senate
    as soon as possible.
    Universal Service in High-Cost Areas
        Of course, universal service policy remains a linchpin of helping
    to ensure high-cost areas can stay connected to the rest of America and
    the world--and another example of how uncertainty can undermine the
    ability to serve rural areas.
        Many in the rural telecom industry continue to struggle with the
    aftermath of the FCC's Universal Service Fund (USF) and Intercarrier
    Compensation (ICC) ``Transformation'' Order. In that order, the FCC's
    reforms for smaller companies like Ritter largely consisted to cuts,
    caps and constraints to existing USF mechanisms and an ultimate
    destination of zero for ICC revenues that we can receive from the
    larger companies that use rural networks.
        Our companies and the associations that represent us visit with the
    FCC and congressional offices frequently to see if improvements can be
    made to the new USF caps. The most significant concern is that some of
    these caps have injected substantial regulatory uncertainty into rural
    telecom investment, to the point where even companies that are not
    affected by the caps today are deciding against network upgrades simply
    for fear of becoming ``the next to be capped.'' In fact, NTCA conducted
    a study earlier this year that found nearly 7 in 10 small rural
    companies had postponed or cancelled broadband investments precisely
    because of uncertainty arising out of the FCC reforms.
        Exacerbating this overhang of regulatory uncertainty, the FCC is
    considering imposing additional cuts, caps, and constraints atop those
    already adopted. At a time when everyone is still implementing the cuts
    already made and evaluating the effects of those on consumers and
    broadband investment, it seems rash to plow forward with yet more
    changes that would reduce USF support and ICC revenues for responsible
    companies like Ritter. Yet that is precisely what the FCC is
    considering in the form of a Further Notice of Proposed Rulemaking.
        Thanks to your efforts and the efforts of many of your colleagues,
    we are seeing incremental progress in the effort to create regulatory
    certainty and build a broadband future through more sensible changes
    and updates to the USF and ICC mechanisms. The FCC has adopted ``phase-
    ins'' to the caps as a result of congressional attention and industry
    pressure, and we have also seen the Government Accountability Office
    commit to Congress that it will undertake an evaluation of the effects
    of the USF and ICC reforms on key issues like consumer rates and
    broadband deployment. But real long-term fixes to the caps and the
    creation of regulatory certainty for network investments that can only
    be recovered over several decades still seems many steps away. In
    short, we still have a ways to go to create regulatory certainty--and
    your continuing help will be essential in that effort.
        Even as we need to obtain some greater degree of regulatory
    certainty to facilitate investment and lending in the rural telecom
    space, there is just as great a need to do what hasn't yet been done--
    reposition USF for smaller carriers to accommodate an IP-enabled,
    broadband-capable world. Today, when a small carrier of last resort
    like Ritter sells voice telephone service, we get some USF support to
    ensure that service is affordable for the consumer. But if the same
    consumer decides later that he or she only wants to take broadband and
    drop voice telephone service--a natural part of the ``IP evolution''--
    small carriers lose USF support on that line, meaning that the rates
    often quickly become unaffordable. We still need a targeted Connect
    America Fund that provides sufficient and predictable support for
    smaller carriers like Ritter and facilitates giving consumers the
    services they want rather than compelling them to take legacy services
    to get affordable rates. Resolving this issue in short order must be
    seen as both critical to the FCC's IP Evolution agenda and the success
    of its USF policies.
    Other Universal Service Concerns
        Even as it has taken some steps to modify USF distribution rules,
    the FCC has yet to tackle in any meaningful way the question of USF
    contribution reform. Just as in the past, when those benefiting the
    most from a nationwide integrated voice network contributed to the USF
    to help sustain that network, in today's broadband era, so too must
    broadband network operators, all kinds of VoIP providers, and Web-based
    enterprises contribute to a funding mechanism that ensures the
    availability and affordability of broadband-capable networks
    nationwide. Expanding the base of USF contributors will ease pressure
    on the fund as well as all of its contributors, and ensure that the USF
    program can effectively help promote the universal availability and
    adoption of advanced communications services.
        Ultimately, it is important to ``size'' the USF for the jobs that
    need to be done. The fact is that the high-cost fund, even as it was
    placed ``on a budget'' in 2011, had not been growing materially for
    years once controls were placed on wireless identical support. Yet
    there is much more to do in high-cost areas, with the National
    Broadband Plan identifying a ``broadband availability gap'' that
    stimulus programs and existing high-cost support levels could only hope
    to dent. And even beyond making service available in the first place,
    there is the need to keep that service affordable and of reasonable
    quality over time (so consumers can actually make use of it). Even in a
    ``capped fund,'' for example, the reality is that labor costs
    associated with deploying and upgrading networks increase over time,
    and as with certain portions of the USF, there should be some
    recognition that inflationary adjustments at the very least are needed
    within any USF ``budget.''
        One area of the USF that is attracting significant attention right
    now is the USF Schools and Libraries (E-Rate) program. As a result of
    the administration's emerging ConnectEd initiative and the FCC's push
    to ``modernize'' the program, the E-Rate program will be a key focus of
    universal service policy for the rest of this year.
        Rural providers recognize the important of E-Rate as part of a
    comprehensive USF program. Smaller carriers, facing the challenges of
    distance, were early adopters of distance learning concepts and
    technology and the communities they serve have benefitted from their
    focus and this program. Yet, as with any other potential USF reforms,
    these issues are too important to gamble on through experiments or
    sound-bite driven reforms. In particular, we believe it is essential to
    coordinate any E-Rate reforms with other portions of the broader USF
    umbrella so that any expansion of E-Rate, to the extent policymakers
    deem it appropriate, does not come at the expense of other important
    programs like the already-budgeted high-cost fund.
        Similarly, the current national focus on First-Net is also one that
    presents both opportunities and challenges for the rural telecom
    industry. Certainly we should be doing everything possible to ensure
    the development of a robust nation-wide mobile first-responders
    communications network. But again, we must guard against wasteful
    duplication. Especially, given the need to ensure FirstNet dollars go
    as far as possible in covering various jurisdictions, FirstNet must
    give all due consideration to leveraging existing infrastructure where
    possible.
    Other Key Competitiveness Issues
        The success of the FirstNet initiative of course depends in
    significant part upon auctions of spectrum that will facilitate and
    finance network deployment. It will be particularly difficult to set a
    stage that ensures widespread carrier participation in such auctions,
    but we must live up to this challenge.
        To meet this challenge, the 600 Mega Hertz block of spectrum that
    is the subject of the auctions should be licensed according to Cellular
    Market Areas (CMAs). A CMA-based licensing structure will best ensure
    that a variety of providers, large and small, are able to effectively
    participate in the auction. This will also provide the best chance of
    ensuring that rural areas see meaningful deployment of this valuable
    spectrum, rather than being an afterthought in a larger provider's
    deployment. Finally, we must build upon the lessons learned from the
    700 Mega Hertz deployments and ensure the FCC adopts fair data roaming
    and interoperability provisions in conjunction with the distribution of
    this spectrum.
        Much like wireless services, video products could be a promising
    way for smaller companies to diversify their offerings, be more
    responsive to consumer needs, and stimulate broadband adoption. But
    today's small rural multichannel video programming distributors (MVPDs)
    face an array of obstacles arising from outdated, decades-old rules
    that do not reflect the programming markets of today.
        This has been a troubling issue for small rural providers for
    years, but it has become a major problem for the entire MVPD industry
    of late. Perhaps the most notable (or notorious) example right now
    comes in the recent negotiations between CBS and Time Warner Cable,
    Inc. As a result of market failures in those negotiations and a lack
    once again of clear ``rules of the road'' that put consumers first,
    Time Warner Cable and Bright House Network customers do not have access
    to local CBS broadcast programming. Equally alarming is that CBS has
    also limited access to its online content by Time Warner Cable and
    Bright House broadband customers. CBS' Internet blackout even affects
    these cable operators' broadband customers who receive their television
    service from other service providers, like DirecTV or DISH, and
    customers who get their television over-the-air.
        Examples such as these underscore the problems with the
    retransmission market, with negotiations often leading instead to
    ``take it or leave it'' choices, particularly with regard to smaller
    operators, and brinksmanship over rapidly escalating and unaffordable
    fees--and, in more and more cases, leading to programming blackouts.
        Whether viewed individually or as a whole, these tactics are
    anticompetitive, inflate consumer costs and lead to market failure.
    Congress and the FCC must act to fix the old laws that govern access to
    content and programming to reflect today's video marketplace.
        Ritter Communications and nearly all other pay television providers
    in Arkansas and around the country are well aware that renewing the
    2010 Satellite Television Extension and Localism Act (STELA) is one of
    the things that your committee must accomplish before the end of next
    year. Notwithstanding the rising number of retransmission consent
    disputes, and their impact on consumers, some lawmakers have already
    concluded, and stated publicly, that they want a ``clean
    reauthorization'' of this bill-that is, do nothing more than change a
    few dates in the existing law. Many in the industry have interpreted
    lawmakers who make such a declaration as taking a position that they
    will not address any other issues related to the pay television
    industry, regardless of the merit, need or circumstances. As Chairman
    of the Commerce, Science and Transportation Subcommittee on
    Communications, Technology and the Internet, we hope you would keep an
    open mind regarding the issues that should be considered as part of the
    STELA reauthorization, which is the most germane bill that will pass
    out of your committee in the foreseeable future.
    Additional Challenges Faced by Small Businesses
        Our diverse industry is confronting other, less obvious challenges
    as well. Increasingly, small rural communications providers have become
    targets of patent infringement claims levied by patent assertion
    entities (PAEs). Typically these PAEs purchase already existing patents
    merely for the purpose of enforcing them for financial gain, with the
    knowledge that small businesses often lack the resources to investigate
    and defend against such claims. PAEs are targeting the users or
    purchasers of the patented technologies rather than their manufacturers
    or creators, and PAEs also seem to focus on patents tied to established
    technologies and processes upon which small businesses rely.
        Many in Congress and the administration alike are concerned about
    the effects of PAEs on innovation and technology deployment. The
    President has gone so far as to note concerns about parties that fail
    to actually produce or invent anything and yet look for a payout. The
    small rural communications sector urges the Administration and Congress
    to work together to identify solutions that will protect unwitting
    small businesses from this spurious practice.
        Cybersecurity and privacy have also consumed the attention of
    policymakers and the public alike over the course of recent months.
    Secure critical infrastructure is crucial to America's national and
    economic security. Yet care must be taken to ensure our response to
    these threats does not create new unfunded mandates on small
    businesses, such as community-based carriers operating in rural areas.
        We were pleased to see that the leadership of the Senate Commerce,
    Science and Transportation Committee recently introduced an updated
    cyber security package that more closely aligns with a ``voluntary''
    industry approach advocated by the proposals put forth by the House of
    Representatives and the President's recent executive actions.
        Rural providers take cybersecurity responsibilities seriously, and
    have been deploying cyber defenses tailored to the needs and
    vulnerabilities of their networks. NTCA has been providing training to
    members and serving on the Communications Sector Coordinating Council
    which facilitates the exchange of information on this subject.
        We believe that we can best achieve the twin aims of developing
    secure networks and robust economic growth by encouraging government
    and industry sectors to work together to identify and respond to cyber
    threats.
    Conclusion
        While I have attempted to describe in reasonable detail the many
    opportunities that rural telecom providers are seeking and the
    challenges they face in doing so, there are of course any number of
    other issues that could be covered in this sort of hearing. The upshot,
    however, is that the rural telecommunications industry is committed to
    its consumers and the communities in which these small rural providers
    live and serve. Companies like Ritter are making every stride to
    respond to the challenges they face, to deliver high-quality and
    affordable services to their consumers, and to fulfill the national
    mission of universal service through the responsible and effective
    deployment of cutting-edge communications infrastructure. Adopting and
    retaining sensible ``rules of the road'' that create regulatory
    certainty and help build a broadband future will be essential to the
    success of these efforts. We look forward to ongoing efforts between
    the rural telecom industry and committed lawmakers such as those on
    this subcommittee to realize these objectives.

        Senator Pryor. Thank you.
        Mr. Kurtz?

        STATEMENT OF DEAN KURTZ, VICE PRESIDENT, REGULATORY AND
           LEGISLATIVE AFFAIRS, SOUTHERN REGION, CenturyLink

        Mr. Kurtz. Thank you, Mr. Chairman, for the opportunity to
    speak to you today. And just to prepare you, for a boy that
    takes two syllables to say one-syllable words, 3 minutes might
    not make it.
        CenturyLink offers communications services to 14 million
    homes and businesses in all 50 states and select international
    markets. Our services include broadband, voice, video
    entertainment and data, as well as fiber backhaul, cloud
    computing, and managed security solutions.
        From our roots in Oak Ridge, Louisiana, our company has
    evolved over the years through innovation and significant
    capital investment. And we are especially proud of what has
    gone on here in Arkansas.
        In 2000, CenturyLink expanded our operations in Arkansas
    and became the second-largest telecommunications provider in
    the state when we purchased 230,000 access lines from GTE. At
    the time of the purchase, broadband availability over that
    network was minimal. Since that time, CenturyLink has invested
    over $1 billion to upgrade, expand, and maintain our Arkansas
    network, and we now make broadband access available to 92
    percent of our Arkansas customers.
        We have followed a similar pattern of investment across our
    national network, bringing broadband infrastructure to many
    rural communities that would otherwise be left behind.
    Nationally, 83 percent of the areas we serve contain 10 or
    fewer customers per square mile. But we have so far brought
    broadband access to more than 90 percent of our customers.
        While we have overcome many obstacles, serving low-density
    rural markets will always be a challenge as networks evolve,
    with a higher investment requirement for each customer.
        CenturyLink has also sought to eliminate barriers to
    broadband adoption through our Internet Basics program. For
    low-income customers in our service areas who qualify for the
    FCC's Lifeline telephone program, CenturyLink also offers
    broadband service for $9.95 per month, with a netbook computer
    for $150.
        We have conducted numerous training sessions across the
    country to educate current and potential customers about the
    basics of digital literacy so they can connect to distance
    learning, telemedicine, and small-business opportunities. Since
    the creation of this program, CenturyLink has signed up over
    30,000 new low-income customers, and the growth of that program
    is accelerating.
        Looking to the future, no communications company can afford
    to stand still. In 2011, we acquired a leading cloud-computing
    company, Savvis, and have combined their award-winning cloud
    services with our backbone to help make government and business
    customers more efficient and effective. We have also expanded
    our IPTV services, offering consumers another direct competitor
    to cable and satellite TV. We have connected over 16,000 towers
    to the fiber network for 4G wireless. We have also grown our
    cybersecurity services, and we are preparing for the transition
    to an all-IP network.
        There are many corners of low-density population and
    challenging terrain where market forces alone will never put
    customers on a level playing field in the digital economy. Mr.
    Chairman, your leadership has been tremendously valuable in
    encouraging the FCC to proceed with reforms to its rural
    broadband policy that can bring targeted support to those areas
    in partnership with rural broadband providers.
        We also appreciate your thoughtful consideration of
    cybersecurity issues, STELA, and we look forward to working
    with the Committee on all these issues in the future. Thank
    you.
        [The prepared statement of Mr. Kurtz follows:]

       Prepared Statement of Dean Kurtz, Vice President, Regulatory and
               Legislative Affairs, Southern Region, CenturyLink
        Mr. Chairman and members of the Committee, thank you for the
    opportunity to testify about the state of communications on the ground,
    and the challenge of connecting urban and rural America. CenturyLink
    offers communications services to over 14 million homes and businesses
    in all 50 states and select international markets. Our services include
    broadband, voice, video entertainment and data, as well as fiber
    backhaul, cloud computing and managed security solutions.
        From our roots in Oak Ridge, Louisiana, our company has evolved
    over the years through innovation and significant capital investment,
    and we are especially proud of our story here in Arkansas.
    Rural Broadband Investments
        In 2000, CenturyLink expanded our operations in Arkansas and became
    the second largest telecommunications provider in the state when we
    purchased 230,000 access lines from GTE. At the time of the purchase,
    broadband availability over that network was minimal. In fact, many of
    our new customers in rural Arkansas did not even have access to local
    dial-up Internet access. Overall, CenturyLink has invested over $1.08
    billion to upgrade, expand and maintain our Arkansas network, and we
    now make broadband access available to 92 percent of our Arkansas
    customers, offering service in every local exchange we serve.
        These investments have been essential in enabling business
    development and community empowerment in the state. For example, in
    2010, CenturyLink provided the redundant fiber facilities that helped
    New Corp bring 100 new jobs to Russellville when it built its national
    inbound call center. Those initial 100 jobs have grown to over 500 jobs
    in the past three years. More recently in rural Mansfield, the mother
    of a student contacted us with an urgent need for home broadband
    service so her child could participate in an education project.
    CenturyLink's technicians developed a creative solution that allowed
    broadband service to several homes in her extremely rural area.
        We have followed a similar pattern of investment across our
    national network, bringing broadband infrastructure to many rural
    communities that would otherwise be left behind. Nationally, 83 percent
    of the areas we serve contain 10 or fewer customers per square mile
    (compared to 13,000 per square mile in the greater Washington, DC
    area), but we have so far brought broadband access to more than 90
    percent of our customers.
        While we have overcome many obstacles, serving low density rural
    markets will always be a challenge as networks evolve, with a higher
    investment requirement for each customer, greater pole attachment
    costs, often difficult terrain, and the challenge of persuading
    customers to actually order broadband services once the infrastructure
    investments have been made.
    Encouraging Broadband Adoption
        CenturyLink has also sought to eliminate barriers to broadband
    adoption through our Internet Basics program. For low-income customers
    in our service areas who qualify for the FCC's Lifeline telephone
    program, CenturyLink also offers broadband service for $9.95 per month,
    with a netbook computer for $150.
        We have conducted numerous training sessions across the country to
    educate current and potential customers about the basics of digital
    literacy, so they can connect to distance learning, telemedicine and
    small business opportunities. Since the creation of our Internet Basics
    program, CenturyLink has signed up over 30,000 new low-income
    customers, and the growth of that program is accelerating.
    Innovation for the Future
        Looking to the future, no communications company can afford to
    stand still for long, and CenturyLink continues to focus on investment
    and innovation. In 2011, we acquired a leading cloud computing company,
    Savvis, and have combined their award-winning cloud services with
    CenturyLink's global Internet backbone to help make our government and
    business customers more efficient and effective.
        We have also expanded our nascent IPTV services, offering consumers
    another direct competitor to cable and satellite TV with a full suite
    of sports, news and entertainment programming, video-on-demand, DVR,
    picture-in-picture and online viewing capabilities. This is a
    challenging business to enter as a new competitor, with costs for
    sports content and broadcast retransmission rising sharply, but
    customers have so far been very receptive to having additional choices.
        As wireless companies continue to expand their 4G data offerings,
    CenturyLink has connected its fiber network to over 16,000 towers
    nationally, and we expect to build fiber to at least another 4,000
    towers by the end of 2013. Another growth area has been our managed
    cybersecurity services, offered to a broad range of Fortune 500
    companies, government clients and small businesses. And finally, as the
    entire industry transitions to a world of all-IP networks, we are
    exploring creative technologies to offer consumers the reliable voice,
    data and video services they expect from us.
    Public Policy Leadership
        There are many corners of low population density and challenging
    terrain where market forces alone will never put those customers on a
    level playing field in the digital economy. Mr. Chairman, your
    leadership has been tremendously valuable in encouraging the Federal
    Communications Commission to proceed with reforms to its rural
    broadband policy that can bring targeted support to those areas in
    partnership with rural broadband providers.
        The Committee has also approved farsighted legislation to enhance
    cybersecurity by empowering the National Institute of Standards and
    Technology's mission to facilitate voluntary, industry-led standards
    and best practices that can protect our Nation's critical
    infrastructure from cyber threats. We are eager to see the Senate
    proceed with both the Cybersecurity Act of 2013 and companion
    legislation to enhance cyber threat information sharing among private
    sector providers and with the government.
        Looking forward, we encourage you to continue the Subcommittee's
    thoughtful look at the technological changes and the barriers to
    competition in the video market, especially as the Committee considers
    reauthorization of the Satellite Television Extension and Localism Act
    (STELA). In particular, we hope the Committee will consider
    modernization of the 1992 Cable Act's rules for retransmission consent.
        The Committee has also made important contributions to numerous
    other policy areas, including consumer privacy, disabled access, and
    broadband for schools and libraries. As telecommunications networks
    continue to transition to an ``all IP'' future, and carriers like
    CenturyLink continue to expand our broadband investments, we look
    forward to working with the members of the Commerce Committee.

        Senator Pryor. Thank you.
        And Mr. Ashcraft?

      STATEMENT OF GREG ASHCRAFT, CHIEF FINANCIAL OFFICER, SOUTH
                       ARKANSAS TELEPHONE COMPANY

        Mr. Ashcraft. Thank you, Senator Pryor, for allowing me to
    be on the panel today.
        My name is Greg Ashcraft. I am CFO for South Arkansas
    Telephone Company. South Arkansas Telephone Company is an
    independent local exchange carrier in Hampton. We have 2,800
    telephone customers and 1,100 broadband customers.
        Today, I would just like to go over a few of the challenges
    the telephone companies are facing today.
        The first challenge, which Mr. Drilling has already touched
    on, is the loss of customers. And it is not large into small;
    it is nationwide. Their percent was pretty high, but, for
    instance, South Arkansas Telephone Company in 1999 had 4,400
    telephone customers; today we have 2,800. So that is a loss of
    36 percent. So it is a nationwide problem, and it is a major
    challenge.
        The next challenge is uncertainty of the revenue streams,
    which Mr. Strode has touched on too. The loss of customers
    causes a loss of local service revenue, a loss of toll revenue,
    and also a loss of access revenue.
        But then in 2013 there were two plans that were implemented
    that also put more pressure on revenue streams. One was we had
    to lower our intrastate access rates down to the interstate
    access rates level, which caused a revenue reduction.
        Another plan was implemented that they would start doing a
    regression analysis on the universal service revenue each year.
    And the regression analysis is, they look at what all the
    telephone companies in the country were spending and compared
    that to what your company is spending on investment and
    expenses, and if you are in the 10 percent of that analysis,
    your universal service revenue is decreased.
        There is no benchmark level of what the regression analysis
    amounts are, so it is very difficult for the companies to
    forecast what their universal service revenues will be. That
    hampers investments in broadband. So it is kind of hard to
    gauge. So that is a challenge.
        Another challenge is meeting the broadband demands and the
    changing technologies. As you know, broadband has changed a lot
    in the last 10 years. When the South Arkansas Telephone Company
    first started offering Internet, it was dial-up at 256K speed,
    and we carried all the traffic on one T1. Now, today, the
    minimum speed we offer is 6 meg, and we carry the traffic on 1
    gig.
        So we think we have done a very good job of meeting that
    challenge, but meeting that challenges has a very big price tag
    on it. So in order to offer those kinds of speeds, we have had
    to make capital improvements in our plant to add more remotes
    and put more fiber in the ground.
        So that is just a few of the challenges that the companies
    are facing today and they will continue to face in the future.
    Thank you again.
        [The prepared statement of Mr. Ashcraft follows:]

         Prepared Statement of Greg Ashcraft, Chief Financial Officer,
                        South Arkansas Telephone Company
        I am the CFO for South Arkansas Telephone Company. South Arkansas
    Telephone Company is a small incumbent local exchange carrier (ILEC) in
    south Arkansas with 2,800 telephone customers and 1,100 DSL customers.
        I would like to go over a few challenges that confront the Rural
    Telephone companies today.
        The first challenge is the drastic loss of customers. The rural
    telephone companies are losing customers at a staggering rate.
    Customers are disconnecting their landlines and switching to mobile. At
    the end of 1999, SATCO had 4,400 customers. Today we have 2,800. That
    is a loss of 36 percent of our customers.
        Another challenge the rural telephone companies are facing is the
    uncertainty of our revenue streams. With the large loss of customers it
    has affected our local service and toll revenues and the loss of toll
    means less access minutes and less access revenue. And now in 2013 the
    FCC has implemented some plans that have put more pressure on our
    revenue streams.
        First they lowered our access rates in the access reform. Then they
    implemented the USF regression analysis, that will be ran each year to
    see which companies are affected. There is no benchmark that the
    companies can gauge this analysis on. It depends on what all the other
    companies in the country spend, compared to your company. So, this
    makes it impossible for the companies to forecast their revenues.
        Another challenge is keeping up with broadband demand and changes
    in technology. Broadband has come a long way in 10 years. We started
    offering dial up--with a speed of 256K and didn't think we would need
    more than a T-1 to carry the traffic. Today our lowest speed we offer
    is 6 meg and we have a 1GB connection to carry the traffic. We feel
    that the companies in Arkansas have done a very good job at meeting
    this challenge. But meeting this challenge comes with a very big price
    tag. In order to get these kinds of speeds to our customers, we have
    had to make major capital expenditures in our plant by putting in more
    remotes and more fiber.
        Thank you for the opportunity to be a part of this meeting.

        Senator Pryor. Thank you.
        A few moments ago, I said Dean Taylor. Of course, everybody
    understood I meant David Russell.
        [Laughter.]
        Senator Pryor. Dean Taylor couldn't be here with us today,
    but we are delighted to have you. Go ahead.

    STATEMENT OF DAVID RUSSELL, VICE PRESIDENT OF EXTERNAL AFFAIRS,
                          VERIZON'S SOUTH AREA

        Mr. Russell. Thank you, Chairman Pryor, Commissioner
    Rosenworcel, and fellow panelists and ladies and gentlemen. I
    am David Russell. I am Vice President of External Affairs for
    Verizon's South Area, representing Dean, who sends his regrets.
        I am pleased to be able to report that Verizon has invested
    significantly in Arkansas in terms of advancing its network,
    employment, and community support. We were the first wireless
    carrier to bring 4G LTE technology to Arkansas.
        I need to note here that 4G and 4G LTE are different
    technologies. ``LTE'' stands for long-term evolution, and it is
    a new technology and is viewed industry-wide as the global
    standard, the future of wireless technology. The big difference
    to the consumer, Senator, is it is a lot faster.
        Verizon launched this service in several cities in
    northwest Arkansas in July 2011. We were the only provider of
    this technology in Arkansas for about the next year. We
    continued our aggressive rollout of this technology across
    Arkansas and announced the substantial completion of our LTE
    coverage across the state just 2 months ago. Verizon Wireless's
    network covers almost 97 percent of Arkansas's population, and,
    year to date, more than 99 percent of that network is also
    covered by our 4G LTE network.
        This network is beneficial to customers because its speed
    allows them a real-time experience when they are mobile. They
    can upload, download, use the Internet, watch videos all at
    similar speeds as if they were connected by a copper landline.
        Verizon's network is continuously recognized by J.D. Power,
    RootMetrics, and other third parties as the most reliable in
    the country. And we continue to prove that reliability to our
    customers in Arkansas and across the nation. On average,
    Verizon annually invests more than $6 billion in our network
    across the country. This year in Arkansas, we will invest $100
    million in our wireless network to reinforce that reliability
    and redundancy.
        So what does it mean for business and government? Well, in
    business, it means that companies in any industry can be
    mobile. They can monitor their fleet vehicles in real time.
    First responders can provide doctors with live video triage
    while a patient is en route to a hospital. Police officers can
    access any department or state data they need from their units
    and file reports from the scene.
        As schools integrate new technology like digital tablets in
    the classroom, teachers rely on the connectivity and speed of
    LTE technology to support a child's learning experience and
    keep them connected.
        Just last week, I was up in north Arkansas to present the
    Cotter School District, which is in a very rural part of the
    state, with a Verizon Foundation grant for $50,000 that will
    support 300 students in adapting broadband technologies to
    enhance science, technology, engineering, and math education.
    Now, Cotter is very rural, but these kids are not missing an
    opportunity to learn because they are using our LTE technology
    to stay connected.
        Verizon employs a diverse workforce across Arkansas, mostly
    in sales but in a number of other fields. For example, Little
    Rock is home to a customer service center that will be hiring
    several hundred new positions this year, and we are hiring
    employees in other professional positions as well.
        Verizon is a Fortune 16 company that is a good corporate
    citizen in Arkansas, bringing new and reliable technology to
    the state, supporting businesses large and small, and enhancing
    the economy.
        Senator Pryor, we appreciate your continued leadership on
    many important issues in our industry, including your co-
    sponsorship of an amendment earlier this year that would have
    extended the moratorium on taxation of the Internet.
        Thank you very much. That concludes my remarks.
        [The prepared statement of Mr. Russell follows:]

        Prepared Statement of David Russell, Vice President of External
                         Affairs, Verizon's South Area
        Chairman Pryor, thank you for the opportunity to testify here
    today. My name is David Russell--Vice President of External Affairs for
    Verizon's South Area. I'm here today representing the President of our
    South Central Region for Verizon Wireless, Dean Taylor, who had a
    conflict and was unable to attend. Dean's region includes the entire
    states of Arkansas and Oklahoma, as well as West TN and North MS.
        Verizon Wireless acquired Alltel Corporation in 2009 and our region
    headquarters are located where Alltel's corporate headquarters
    previously were located here in Little Rock.
        Verizon has invested in Arkansas in terms of advancing its network,
    employment and community support.
    Network
        Verizon was the first wireless carrier to bring 4G LTE to Arkansas.
    I would like to note that 4G and 4G LTE are different technologies; LTE
    (Long Term Evolution) is new technology and is viewed industry-wide as
    the global standard . . . the future of wireless technology.
        Verizon launched 4G LTE in several cities in Northwest Arkansas in
    July of 2011;we were the only provider of 4G LTE in Arkansas for about
    the next year. We continued our aggressive rollout of 4G LTE across
    Arkansas in cities big and small--and announced the ``substantial
    completion'' of our 4G LTE coverage across Arkansas in June of this
    year.
        Verizon's wireless network covers almost 97 percent of Arkansas'
    population and more than 99 percent of that network is also covered by
    our 4G LTE network.
        4G LTE is beneficial to customers because its speed allows them a
    real-time experience while they're mobile. They can upload, download,
    use the Internet, watch videos--all at similar speeds as if they were
    connected by a copper landline. Verizon's network is continuously
    recognized by J.D. Power, Root Metrics and other third parties as the
    most reliable in the country, and we continue to provide that
    reliability to our customers in Arkansas and across the Nation.
    Network Investment
        On average, Verizon invests more than $6 billion in its network
    nationally.
        This year in Arkansas, we will invest around $100 million in our
    wireless network to reinforce that reliability and redundancy.
    Business
        What does this investment mean for business or government?

       In business it means companies in any industry can be
            mobile, they can monitor their fleet in real time.

       First responders can provide doctors with ``live video
            triage'' while a patient is en route to the hospital.

       Police officers can access any department or state data they
            need from their units, and file reports from the scene.

       live monitoring of Arkansas' crop fields lets a farmer know
            when the soil needs nutrients or the crops need watering.

       As schools integrate new technology like digital tablets
            into the classroom, teachers rely on the connectivity and speed
            of LTE to support a child's learning experience and keep them
            connected. Just last week I was up in north Arkansas to present
            the Cotter School District--in a rural and underserved area of
            Arkansas--with a Verizon Foundation grant for $50,000 that will
            support 300 students in adapting broadband technologies to
            enhance Science, Technology, Engineering and Math (STEM)
            education. Cotter is rural--but these kids aren't missing an
            opportunity to learn using technology because they're connected
            on 4G LTE.
    Workforce
        Verizon employs a diverse workforce across Arkansas, mostly in
    sales, but in a number of other fields. For example, little Rock is
    home to a Customer Service Center that will be hiring several hundred
    positions this year--and we are hiring employees in other professional
    positions as well--contributing to Arkansas' economy statewide.
        Verizon is a Fortune 16 company that is a good corporate citizen in
    Arkansas--bringing new and reliable technology to the state, supporting
    businesses large and small, and enhancing Arkansas' economy. Senator
    Pryor, we appreciate your continued leadership on many important issues
    to our industry, including your cosponsorship of an amendment earlier
    this year that would have extended the moratorium on taxation of the
    Internet.

        Senator Pryor. Thank you.
        Ms. Bowles?

    STATEMENT OF L. ELIZABETH BOWLES, PRESIDENT AND CHAIRMAN OF THE
                         BOARD, ARISTOTLE, INC.

        Ms. Bowles. Thank you, Chairman, Commissioner. Thank you
    for having me.
        I am Elizabeth Bowles. I am President and Chairman of the
    Board of Aristotle, Inc. We are a fixed wireless broadband
    provider and interactive media agency headquartered here in
    Little Rock. Additionally, I am the immediate past President of
    the fixed wireless trade association, Wireless Internet Service
    Providers Association, also called WISPA.
        The FCC found that 76 percent of those without broadband
    live in rural America. And Arkansas is a rural state. But more
    than that, we are a rural state with mountains and granite and
    topographical challenges that can make deployment of wireline
    solutions difficult and expensive.
        Although it is often overlooked, fixed wireless broadband
    can solve the challenges of delivering broadband to many of
    these rural areas. And WISPs like Aristotle are doing that now,
    primarily through the use of unlicensed and licensed-light
    spectrum.
        Fixed wireless broadband is as reliable as wireline
    solutions, is capable of the same speeds, and is far less
    expensive to deploy. For example, Aristotle only needs between
    40 and 120 customers to justify moving into an area. The cost
    of fixed wireless deployment is fractional compared to the cost
    of deploying fiber.
        And even if fiber is the ultimate goal, fixed wireless is
    far quicker to deploy. Aristotle can deploy a tower in less
    than a week, and fixed wireless can serve as the last-mile
    delivery mechanism while fiber is being trenched so nobody has
    to wait for fiber.
        And fixed wireless broadband can and should serve as a
    backup for wireline solutions to ensure that broadband
    connectivity is not lost. We heard earlier about a fiber cut.
    That type of thing can be resolved by a backup fixed wireless
    solution.
        When we look at broadband deployment as a policy matter, it
    is critical that we create a blended solution that takes into
    account fixed wireless broadband. Unlicensed spectrum is
    crucial to that, and a balanced policy that makes room for both
    licensed and unlicensed spectrum uses is the only responsible
    path. Licensed spectrum is important, but so is unlicensed.
        And in addition to balancing licensed versus unlicensed
    uses, the FCC should also balance the needs of urban areas with
    those of non-urban areas. The cellular congestion that is
    always in the news is a real problem--in Manhattan. It is not
    that much of a problem in Malvern. The FCC can and should make
    different sets of rules for urban and non-urban areas. For
    example, in 5 gigahertz, the FCC could prioritize small cells
    in urban areas by allowing priority for higher-power uses in
    rural areas.
        In other words, just because a policy is perfect for a
    high-density market does not make it good policy for every
    market. And we should ensure that any policies are balanced.
        We all agree that every rural Arkansan and every rural
    American deserves the same access to broadband as somebody in
    Dallas. The only way to accomplish this is through a balanced
    spectrum solution that not only protects the availability of
    usable unlicensed spectrum, but also makes additional spectrum
    available for both unlicensed and licensed-light uses.
        Thank you.
        [The prepared statement of Ms. Bowles follows:]

             Prepared Statement of L. Elizabeth Bowles, President
                   and Chairman of the Board, Aristotle Inc.
        Good morning Chairman Pryor and Members of the Subcommittee. I am
    Elizabeth Bowles, President and Chairman of the Board of Aristotle
    Inc., a broadband service provider and interactive media company based
    here in Little Rock. I am heavily involved in the local community,
    supporting and volunteering for a number of Arkansas causes. In
    addition to my local involvement, I've also served for three years as
    the President of WISPA, the Wireless Internet Service Providers
    Association, which is a national trade association that advocates on
    behalf of fixed wireless broadband providers across the country. I'm
    pleased to welcome you to my home town, and I'm privileged to speak to
    you today about the way wireless communications--and in particular,
    fixed wireless communications--are changing the lives of Arkansans and
    other consumers in rural and micropolitan America.
        As President of a local broadband company as well as of a national
    trade organization, I have a unique insight into the way that
    legislators and regulators in Washington, D.C. can help farmers,
    teachers and children in places like Scott, Stephens, Osceola, and Star
    City. Although we are currently sitting in a metropolitan area, you
    only need to go five miles outside the Little Rock city limits to find
    rural America.
        In its Eighth Broadband Progress Report issued last year,\1\ the
    FCC found that ``[a]pproximately 14.5 million of the 19 million (or 76
    percent) of Americans without access to fixed broadband meeting the
    speed benchmark reside in rural areas. . . . The percentage of
    Americans without access in rural areas is 23.7 percent as compared to
    1.8 percent in nonrural areas. These figures indicate that nearly one
    in four rural Americans lack access to fixed broadband meeting our
    speed benchmark.'' This means that children in these areas cannot
    access online educational information, rural telemedicine is not
    possible, and economic development efforts are thwarted because few
    companies will locate in an area without sufficient broadband access.
    Aristotle and similarly-situated WISPs are rectifying this broadband
    gap.
    ---------------------------------------------------------------------------
        \1\ See Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability to All Americans in a Reasonable and
    Timely Fashion, and Possible Steps to Accelerate Such Deployment
    Pursuant to Section 706 of the Telecommunications Act of 1996, as
    Amended by the Broadband Data Improvement Act, Eighth Broadband
    Progress Report, 27 FCC Rcd 10342, 10370 (2012).
    ---------------------------------------------------------------------------
        Aristotle's deployment strategy is to bring broadband access to
    unserved and underserved areas of the state. While we do offer
    broadband service in the central Arkansas metropolitan area, it is the
    areas outside of the city where fixed wireless broadband brings the
    greatest economic development benefit, and it is those markets where
    Aristotle focuses our expansion efforts. Because fixed wireless
    broadband is much less expensive and faster to deploy than fiber or
    other wireline solutions, Aristotle can make a persuasive business case
    for entering markets that larger, wireline providers cannot justify.
    Most WISPs go where the telephone company and the cable companies do
    not because it's too costly to run wires, cables, and fiber to areas
    that are sparsely populated or challenged by difficult terrain. By way
    of contrast, Aristotle only needs between 40 and 120 customers to
    recoup its investment within 18 months following deployment of a tower.
        WISPs are small, local employers who give back to their communities
    and contribute to local economies. Often WISPs are the first Internet
    providers to come back online following a national disaster. WISPs
    enable cellular data offloading that alleviates congestion of cellular
    phones. And we do this without taking a single Federal subsidy dollar.
        WISPs are able to deploy quickly and cost-effectively in no small
    part due to the availability of unlicensed spectrum. Unlike licensed
    spectrum, which belongs exclusively to a single company in a defined
    geographic area, unlicensed spectrum is shared by anyone who can come
    up with the technology to use it. As a result, a vast number of
    consumer devices, such as baby monitors and telephones, co-exist with
    fixed wireless devices in the unlicensed spectrum space. There has been
    a boom of innovation in the unlicensed space over the last few decades.
    The unlicensed economy created by this innovation has allowed for an
    unparalleled development of consumer and technological advancements and
    subsequent reduction in equipment costs. The competition created by the
    availability of unlicensed spectrum has in turn allowed WISPs like
    Aristotle to deploy affordable broadband to non-urban areas in a cost-
    effective and efficient manner.
        For this reason, it is critical that spectrum policy be balanced.
    Licensed spectrum is important and necessary, but we also must make
    sure that sufficient unlicensed spectrum is available for Wi-Fi
    offload, small cells, and--most importantly--for rural communities and
    fixed broadband services. Part of this balance is predicated on the
    fact that new spectrum is not being invented--it must be transferred to
    the government, re-purposed and shared in creative ways. Last year, the
    PCAST Report rightly found that sharing spectrum with the Federal
    Government or commercial incumbents may be the only way to bridge the
    spectrum gap when spectrum cannot be made available on a nationwide
    basis.
        WISPs support the sharing approach because our spectrum needs are
    local and regional and not nationwide, so carving out areas to protect
    government radar and satellite earth stations do not present problems,
    especially when the trade-off is more unlicensed spectrum everywhere
    else. And as WISPs build networks and put unlicensed spectrum to use,
    we employ people, incent innovation, and enable rural consumers and
    businesses to have the same broadband experience as their urban and
    suburban contemporaries.
        In the Spectrum Act that Congress passed last year, Congress took
    an important step to help promote unlicensed spectrum. It required the
    NTIA and the FCC to look at ways to make available up to 195 megahertz
    of spectrum in the 5 GHz band--120 megahertz in the 5350-5470 MHz band
    and 75 megahertz in the 5850-5925 MHz band. These bands are adjacent to
    the 3.65 band that WISPs already use, so the ability to gain access to
    more spectrum in adjacent bands is critical. This is not to diminish
    the difficult technical issues associated with sharing the adjacent
    bands with other services that already use (or are licensed to use)
    them. But these technical challenges should not stand in the way of
    creative solutions.
        And, of course, it is virtually impossible to discuss spectrum
    policy without a word on incentive auctions, the process Congress
    authorized that will transfer broadcast TV spectrum to licensed
    wireless use so the mobile carriers can increase their spectrum
    holdings. What is important to rural Americans is not so much how that
    auction plays out but rather what the impact will be on the TV white
    spaces--the vacant TV channels that will remain for unlicensed use.
    Because of the superior propagation characteristics of this spectrum,
    WISPs will be able to add spectrum to their existing inventory to
    accommodate greater capacity and to extend networks further into rural
    and remote areas. More than any other unlicensed band, TV ``white
    space'' spectrum is well suited for penetration deeper into rural areas
    where there are limited or no terrestrial options. This is especially
    true for large areas of Arkansas, where trees, foliage, and rolling
    hills make TV white space particularly attractive.
        The ability to reap the benefit of this spectrum is threatened on
    two fronts: First, the FCC may be tempted to auction every single slice
    of ``white space'' spectrum in order to maximize the money obtained
    through the incentive auction process. This would be a serious mistake.
    In rural areas where there is typically more ``white space'' spectrum
    available, the need for this spectrum is also greater. In the balance
    of equities, it is clear that the consumer welfare benefits of allowing
    unlicensed use of rural ``white space'' far surpasses any immediate and
    short-term benefit the government could gain in terms of revenue from
    an auction. Any revenue received from an incentive auction would be
    one-time and limited, whereas the ability to deploy reliable fixed
    high-speed broadband access to the town of Star City would produce far
    greater economic benefits in terms of a larger tax base and greater
    economic and workforce development.
        The second threat comes from re-packing, which is the process of
    relocating TV stations to alternative spectrum to make way for
    auctioned spectrum. When re-packing the TV band, the FCC should do what
    it can within statutory limits to optimize the remaining spectrum for
    fixed unlicensed use. Technical rules already limit the use of ``white
    spaces,'' and a re-packing process that ignores WISPs and other
    innovative users will be a lost opportunity.
        Some equipment manufacturers are pressing ahead with ``white
    space'' equipment; others are on the sidelines waiting to see how the
    auction rules are constructed and result of the auction. The ``white
    space'' economy is at a crucial tipping point, so it is particularly
    important that the FCC insures that sufficient usable ``white space''
    remains after the auction to provide the broadband benefits to rural
    America that ``white space'' spectrum affords.
        Often when discussing spectrum, the small-cell debate comes to the
    fore. Late last year, the FCC initiated a proceeding to make available
    up to 100 megahertz of spectrum in the 3.5 GHz band--a band that sits
    adjacent to the 3.65 GHz band that many WISPs use. In the three-tiered
    ``spectrum access system'' to allow sharing with Federal and commercial
    incumbents, the FCC proposed authorizing ``small cells'' in at least a
    portion of this band. This proposal, of course, is designed to provide
    additional capacity for bandwidth hungry, urban areas--and there is
    nothing wrong with that--provided that the FCC does not miss the
    opportunity to allow higher-power use in rural areas alongside small
    cells. This is not an all-or-nothing proposition--small cells and
    higher-power facilities can co-exist. In fact, the FCC can--for the
    first time--adopt different rules for urban areas and rural areas. In
    urban areas, the FCC can prioritize ``small cells,'' and in rural areas
    it can prioritize higher-power operations. Incumbents can be protected
    through geographic exclusion zones, and unlicensed users can coordinate
    through a database. This is another example of how spectrum can be
    responsibly shared through creative spectrum management policies that
    balance the interests of rural and urban areas. Creative solutions like
    this are critical if we to ensure that every Arkansan has equal access
    to broadband Internet and the economic benefits it conveys.
        I know I don't need to tell you that access to broadband is
    critical to rural and underserved areas. But as Congress and the FCC
    moves forward with spectrum policy, we must avoid the temptation to
    impose on rural America solutions designed to rectify problems limited
    primarily to large, urban areas. While bandwidth congestion and the
    need for additional spectrum for cellular carriers is often in the
    news, the fact is that most of this congestion occurs in major
    metropolitan areas like New York, L.A. and Chicago. It simply doesn't
    exist to the same extent in Little Rock, much less in Malvern. In these
    areas, its access to unlicensed spectrum for fixed service to
    residential areas that should be a focus of spectrum policy. This fact
    is self-evident, and we must ensure that a policy designed for high-
    density markets does not become the default policy for every market.
        Finally, I would be delinquent if I didn't say something about USF/
    CAF. Earlier in my remarks I mentioned that WISPs do not receive
    Federal subsidies. This is due in part because WISPs are ineligible for
    Universal Service Fund support because they do not offer
    telecommunications services as well. However, as USF reform moves
    forward, the WISP community remains concerned that the FCC's rules
    could allow subsidized carriers to obtain financial support for areas
    where WISPs already provide broadband service and where an unsubsidized
    telephone company offers voice services. Additionally, we disagree with
    the FCC's proposal to require WISPs to contribute to USF when they are
    statutorily prevented from taking funds from the program. These sorts
    of rules are inherently unjust and inequitable, but in addition they
    make it more difficult for WISPs to build out in the face of a
    subsidized competitor. Having sufficient funds for USF may be
    important, but it should not come at the expense of privately-funded
    small businesses.
        For many Arkansans--and for that matter all Americans--residing in
    rural and remote areas, access to unlicensed spectrum is the one
    element that government can and must provide. WISPs can and do use that
    resource and add their own capital, ingenuity, perseverance and good
    old-fashioned elbow grease to provide broadband access to the millions
    of Americans that today do not have access to affordable broadband
    services. We should ensure that the policies we adopt are balanced and
    enable rural families to receive the broadband access they deserve.
        Thank you for your time and interest, and I look forward to your
    questions.

        Senator Pryor. Thank you.
        Mr. Sanders?

      STATEMENT OF STEVEN G. SANDERS, JR., PRESIDENT AND GENERAL
          MANAGER, NORTHERN ARKANSAS TELEPHONE COMPANY (NATCO)

        Mr. Sanders. Thank you, Mr. Chairman.
        My name is Steven Sanders, and I am the General Manager of
    Northern Arkansas Telephone Company. NATCO is an independent
    local exchange carrier currently employing 43 people that was
    founded in 1951 by my grandfather. It presently serves about
    5,000 access lines in 6 northern Arkansas exchanges in Marion
    and Boone Counties.
        Companies like NATCO face a formidable task: building
    communications networks in areas where there often isn't a
    business case for doing so because of sparse population and
    rugged terrain. Thanks to the efforts of Senator Pryor and
    others, NATCO in 2010 received a Broadband Initiatives Program
    grant loan from the Rural Utilities Service that will soon
    enable us to provide fiber-to-the-home broadband services at
    initial speeds of 20 to 50 megabits per second to customers in
    our Diamond City exchange.
        NATCO also upgraded about half of its Bull Shoals exchange
    during 2009 and 2010 with fiber-to-the-home facilities but
    suspended that project in December 2011 due to the
    uncertainties arising from the FCC's November 2011 USF-ICC
    order. Many of the reforms to the Universal Service Fund and
    intercarrier compensation regime initiated by the FCC in the
    2011 order have caused rural ILECs to think twice about making
    further investments in their networks.
        The Federal USF program has had remarkable success in
    enabling over 95 percent of U.S. households to connect to the
    public voice network and in beginning the transition to a
    public broadband network. However, the Nation will not be well-
    served if its rural residents have access to only 4-megabits-
    per-second download and 1-megabit-per-second upload speeds
    supported by the FCC in rural areas, while their urban
    counterparts can obtain 100 megabits or better in both
    directions that are being supported by the FCC in urban
    America.
        This will have an effect which deprives them of the use of
    many business, educational, medical, and entertainment
    applications available to urban residents. This is the worst
    sort of digital divide and will deny rural families of the
    opportunity to participate fully and fairly in the economic and
    social life of the Nation.
        The quantile regression analysis model is a case in point
    where the FCC has created unpredictability and uncertainty that
    has brought broadband investment by rural ILECs to a virtual
    halt. If NATCO builds a fiber project in 2014, it will not
    begin to receive any USF support to help recover the cost until
    2016. And then the amount it receives will be subject to
    potential decreases each year due to the operation of the QRA,
    which calculates annual USF support each year on the basis of
    coefficients determined by the investment and operating costs
    of hundreds of other rural ILECs of which I have no knowledge.
    The end result is that I cannot assure lenders that NATCO can
    cover the costs of potential infrastructure projects.
        In conclusion, broadband has incredible benefits to offer
    all Arkansans, but it is the rural economy, the one that is
    most geographically isolated, that stands to gain the most from
    the way that broadband shrinks the distance between users.
        NATCO and others like it are committed to serving our
    communities. There is an opportunity here for Federal
    policymakers to assist us in building the networks of the
    future, and that is by making sure policies are in place to
    adhere to the principles and provisions of the Communications
    Act.
        Thank you.
        [The prepared statement of Mr. Sanders follows:]

      Prepared Statement of Steven G. Sanders, Jr., President and General
              Manager, Northern Arkansas Telephone Company (NATCO)
        My name is Steven Gill Sanders, Jr., and I am the President and
    General Manager of Northern Arkansas Telephone Company (NATCO).
        NATCO is an independent, incumbent local exchange carrier,
    currently employing 43 people, that was founded in 1951 by my
    grandfather. It presently serves approximately 5,000 access lines in
    six rural northern Arkansas exchanges: the Flippin, Bull Shoals and
    Pyatt exchanges in Marion County, and the Lead Hill, Diamond City and
    Omaha exchanges in Boone County.
        NATCO has a very rural and high cost service area. It is scattered
    over sections of a two-county area that no one else wanted to serve
    when my grandfather and father were putting the company together during
    the 1950s and 1960s. It is sparsely populated, with only Bull Shoals
    (2011 population: 1,948) and Flippin (2011 population: 1,354) having
    more than a couple hundred people, and the entire area having less than
    7.6 lines per square mile. Its rocky terrain makes it very expensive to
    bury telecommunications lines, while wind (periodic tornados) and
    severe electric and ice storms wreak regular havoc upon overhead lines.
        While I'm here today solely as a representative of my company and
    lifelong resident of the state of Arkansas, there are hundreds of
    small, rural independent local exchange carriers (ILECs) across the
    country that have similar thoughts and views as the ones I'm about to
    present. Companies like NATCO face a formidable task--building
    communications networks in areas where there often isn't a business
    case for doing so because of sparse population and rugged terrain. If
    it were not for the services provided by NATCO and other rural
    telecommunications providers, many Americans, small businesses and
    anchor institutions in rural areas would be cut off from the benefits
    of modern communications. In addition, much of the wireless traffic in
    rural areas runs from towers through our networks to the broader
    network. Without the underlying wireline network, cell phones would not
    work.
        Nonetheless, NATCO recognizes that the public telecommunications
    network is evolving from a voice network to a broadband network, and
    has been working hard to bring digital subscriber line (DSL) and other
    broadband services to its customers. We presently provide 65-to-70
    percent of our rural customers with some form of broadband service,
    generally at broadband speeds in the 1 Mbps to-8 Mbps range. Thanks to
    the efforts of Senator Pryor and others, NATCO in 2010 received a
    Broadband Initiatives Program (BIP) grant-loan from the Rural Utilities
    Service that will soon enable us to provide Fiber-to-the-Home (FTTH)
    broadband services at initial speeds in the 20-to-50 Megabits per
    second range to over 400 customers in our Diamond City exchange. NATCO
    also upgraded about half of its Bull Shoals exchange with FTTH
    broadband facilities during 2009 and 2010 but suspended that project in
    December 2011 due to the uncertainties arising from the FCC's November
    2011 USF/ICC Order. Many of the reforms to the Universal Service Fund
    (USF) and intercarrier compensation (ICC) regime initiated by the FCC
    in its 2011 Order have caused rural ILECs to think twice about making
    further investments in their networks.
        NATCO understands that this is a time of economic uncertainty and
    budget deficits, and that many are seeking re-examination of the
    continued need for many government programs. However, the Federal USF
    program has had remarkable success in enabling over 95 percent of U.S.
    households to connect to the public voice network, and in beginning the
    transition to a public broadband network. It is both sad and
    frustrating to people like me who have grown up in the industry that
    the FCC has limited USF support for rural telephone companies to the $2
    billion aggregate amount they received in 2011 at a time when they need
    to make substantial investments in fiber facilities to upgrade their
    broadband services. The nation will not be well served if its rural
    residents have access to only the 4 Mbps download speeds and 1 Mbps
    upload speeds supported by the FCC in rural areas while their urban and
    suburban counterparts can obtain the 100 Mbps or better broadband
    speeds in both directions that are being encouraged by the FCC for
    urban America. This not only means that rural residents will have to
    wait much longer for information to appear on their computer screens,
    but more significantly, deprives them of the use of many of the
    business, educational, medical, and entertainment applications
    available to urban residents. This is the worst sort of ``digital
    divide'' and will deprive rural families of the opportunity to
    participate fully and fairly in the economic and social life of the
    Nation.
        In fact, let me emphasize what should be one of the fundamental
    principles of telecommunications law--namely, if all Americans are
    going to have equality of opportunity, rural residents need reasonably
    comparable access to the same broadband transmission and content as
    urban residents at rates that are reasonably comparable to the rates
    paid by urban residents. This principle is already in law, as Section
    254(b)(3) of Communication Act, which states that Federal support
    mechanisms for rural communications should be ``specific, predictable
    and sufficient.'' However, it needs to be much more thoroughly
    implemented and enforced.
        Even within its $2 billion USF budget for rural telephone
    companies, the FCC has created unpredictability and uncertainty that
    has brought broadband investment by RLECs to a virtual halt. The FCC's
    Quantile Regression Analysis (QRA) model is a case in point. First, it
    is based upon the myth that RLECs have a surplus of capital available
    and that they are therefore inclined to over-invest in unnecessary
    infrastructure projects in order to maximize their USF support. I don't
    know of any such companies and can guarantee you that I have to provide
    detailed justifications and projections to my Board and lenders before
    I can get approval of NATCO's infrastructure investments. More
    important, the QRA puts managers like me in an impossible position. If
    I propose a $3 million fiber upgrade for 2014, I will not begin to
    receive any USF support to help recover the cost until 2016, and then
    the amount I receive will be subject to significant potential decreases
    each year due to the operation of the QRA which calculates my maximum
    annual USF support each year on the basis of coefficients determined by
    the investment and operating costs of approximately 800 other rural
    ILECs of which I have no knowledge. The end result is that I cannot
    assure my Board and lenders that I can recover the costs of potential
    infrastructure projects. I have had to suspend our Bull Shoals fiber
    upgrade and have not been undertaking additional broadband upgrades
    (other than the BIP project in Diamond City).
        In addition, the FCC is presently proposing to reduce significantly
    the authorized rate of return (ROR) for rural ILECs on their interstate
    infrastructure investments. The FCC's proposed process ignores the
    procedure adopted by Congress in Section 205 of the Communications Act,
    and disregards pleas from the industry to wait until the effects of its
    2011 ``reforms'' can be discerned before cutting ILEC revenues further.
    The FCC's ROR proposal is further defective because it is based upon
    interest rates that are unlikely to remain at their current historic
    lows and upon the capital costs of much larger companies which often
    have little or nothing in common with rural ILECs.
        Part of making sure that broadband continues to reach rural
    Americans is ensuring that the USF is on stable footing. As explained
    above, the FCC has begun the process of modernizing the distribution
    side of the fund with mixed results. But it also must begin reform of
    the contributions side--the method by which consumers pay into the
    fund. The traditional contribution base, which was once heavily related
    to long distance usage, is changing because of things such as e-mail,
    cellular service, and other movement away from the long distance
    network.
        As we look to expand our broadband network in rural areas, we also
    confront the issue of household broadband adoption. The FCC has
    recognized the importance of video programming in encouraging broadband
    adoption. Our customers need access to high-speed broadband connections
    in order to take full advantage of online streaming video services such
    as Netflix or Amazon Prime. Sufficient and predictable funding for
    broadband buildout is essential in enabling rural consumers to access
    the diverse video programming options available online. Rural broadband
    providers are also encountering increasing difficulties and expense to
    obtain retransmission consent from broadcast stations. When Congress
    enacted retransmission consent in 1992, it set no limits in Section
    325(b) of the Communications Act on what broadcasters could require for
    their consent. Over the years, broadcasters have determined that rural
    telephone companies and other small CATV operators need the
    broadcasters more than the broadcasters need them, and have been
    increasingly using this concept to demand larger and larger
    retransmission consent payments and other additional consideration.
    Likewise, many satellite programmers charge small operators much more
    that large CATV companies for their program channels. Even with
    programming cooperatives that many rural ILECs use, they still pay much
    more than the CATV MSOs [multiple system operators] for the most
    popular satellite channels.
        Whereas no one wants Congress to regulate program content, there
    ought to be a national debate about the non-discriminatory pricing of
    such content so that people in all portions of the country and
    customers of both large and small carriers can have reasonably
    comparable and affordable access to it.
        In conclusion, broadband has incredible benefits to offer to all
    Arkansans, whether rural, urban or suburban. But it's the rural
    economy, the one most geographically isolated, that stands to gain the
    most from the way broadband shrinks the distance between users. My
    company and others like it are committed to serving our communities.
    There's an opportunity here for Federal policymakers to assist us in
    building the networks of the future and that is by making sure policies
    are in place that adhere to principles and provisions of the
    Communications Act. I look forward to working with you to achieve this
    goal.

        Senator Pryor. Thank you.
        We have covered a lot of ground here. I want to dive in
    first, if I may, with Eddie Drilling. Mr. Drilling and I first
    met way, way, long time ago when he was with Southwestern Bell
    Telephone. And he really has had a front-row seat to so many
    changes, like many of you had, but he has had a front-row seat
    to so many changes in the industry.
        And I would like to--let me start, if I may, Eddie, with
    you on the IP transition. That is just one of the many changes
    that are coming around.
        First, could you explain to the Subcommittee what I mean by
    ``IP transition''? Second, if you could give us an update in
    terms of where your company is. Because I would like to hear
    from all the companies on where they are on IP transition.
        Mr. Drilling. So this ``years and years of front row
    seat,'' basically you are just telling me I am old?
        [Laughter.]
        Senator Pryor. Yes.
        Mr. Drilling. Is that what you are kind of getting around?
        Senator Pryor. Me, too.
        Mr. Drilling. I appreciate that, Senator. Thank you.
        Well, you know, I guess the IP transitioning is something a
    little bit different to different people, different companies.
    But, you know, basically what I was explaining in my remarks is
    that this is taking place before our very eyes. You know, the
    fact that we have customers that are leaving our traditional
    TDM switch network at the rate that they are leaving it and
    either going with a wireless-only solution, an IP solution,
    VoIP, voice over Internet protocol, cable, who is providing
    service, you know, over VoIP, it is a very competitive
    environment. So this transition away from traditional landline-
    type services to an IP solution is what we are talking about.
        And, you know, you would think--in our case, I mentioned
    that, you know, we were down to, like, 17 percent of our
    residential living units actually having a traditional
    landline, TDM-type service. And you would think that that would
    start to level off, but, in fact, what we are seeing even this
    year is that the rate of people moving away from traditional
    service is even accelerating.
        So, you know, we are obviously still investing to try to
    keep up maintaining and keep up with what traffic there is on
    our old network, but it presents a challenge just because we
    obviously see the majority of our customers going in a
    different direction, wanting higher speeds of bandwidth. They
    want, in many cases, more extensive wireless coverage and LTE
    coverage, which we are accommodating.
        And I think, you know, what we are also seeing, you know, 6
    years ago we didn't know what an app was. You know, it wasn't
    even in our vocabulary. And now there are millions of these
    being created every day. You know, most of the world now is
    carrying around a smartphone. Basically 100 percent, over 100
    percent of the people are carrying a wireless device. That is
    how their connectivity is coming to them. We are seeing more
    and more wireless data being consumed.
        So this transition to how people are communicating, the IP
    networks that are carrying all these traffic, we have seen just
    in the last 5 years that increase by 30,000 percent over our
    network. And Arkansas is no different than any other state,
    even though we are more rural; we consume a lot of wireless
    data. So the demand is there, and I think we are going to see
    over the next 6 years that continue to go up exponentially.
        Video is going to drive a lot of this. You know, the
    applications and the educational opportunities, the healthcare
    opportunities, agriculture, all these are going to be much more
    video-centric. And that is going to drive a lot more need for
    IP connectivity and bandwidth, spectrum, in order to
    accommodate that.
        Senator Pryor. And the other thing that has changed
    considerably over the years is your competitors, right? You
    have more competitors----
        Mr. Drilling. We have had a front-row seat for that, too.
        [Laughter.]
        Mr. Drilling. Very much so.
        Senator Pryor. And it is nice that----
        Mr. Drilling. They are all around me here.
        Senator Pryor. Yes, it is nice that they are all sitting
    here all calm and everybody is nice to each other.
        [Laughter.]
        Senator Pryor. Because in the marketplace, you are in there
    beating each other's brains in, right?
        Mr. Drilling. You know, I love these guys.
        [Laughter.]
        Mr. Drilling. It was good to be a monopoly.
        [Laughter.]
        Mr. Drilling. No, but it is a very, very competitive model.
        And, you know, I would say that, in our case, as well, you
    know, we have 110 wire centers or towns that we serve in
    Arkansas. Half of those have living units of under 2,500
    people--or 2,500 living units. So we serve a whole lot of rural
    territory, as well, and we still see these dynamics in that
    marketplace, as well.
        Senator Pryor. So, if I can, Mr. Gardner, let me ask you
    some of those same questions about where your company is on IP
    transition. Mr. Drilling mentioned the data usage and how that
    just seems to go up, it seems like, every year exponentially.
        So tell us where you are and how you are meeting some of
    these challenges.
        Mr. Gardner. Thank you.
        I think Mr. Drilling did a great job of describing what is
    going on on the residential side. There is a great deal of
    change, and we have seen that as well.
        At Windstream, we have really made a ton of investments on
    the enterprise side and are really converting our network very
    quickly to IP as well, adding softswitches, building fiber to
    the tower for companies like Verizon and AT&T. So it is
    happening every day. We are seeing very similar things.
        I would say that we are a bit unique in that we are a
    competitive access provider, as well, in many states and some
    large markets, as well, and here in Little Rock. And in those
    markets, we are competing with AT&T, Verizon, some of the cable
    companies, as well. And I think it is a little bit different on
    the business side.
        And so, as we think about the IP transition, I think that
    we have to think about those different models. It is not quite
    the same as on the residential side. There aren't as many
    choices for businesses. And competitive access providers like
    Windstream provide a unique option in the marketplace for
    customers. And oftentimes when we sell to a customer, we need
    to rely on a connection with AT&T or Verizon to reach that
    customer as part of our solution. And so it is something that
    we are very focused on.
        And the other thing that I think, as we think through that,
    that is really challenging in our market, because we do have
    some huge companies, some midsize companies, and some small
    companies, we are all on different paths. And I think as we
    think through these IP transition solutions, we just have to be
    aware of the fact that companies are on different migration
    paths. We want the system to all work together so that
    customers at the end of the day are best-served.
        So I absolutely agree that something needs to change. It is
    critically important. For us to serve our customers, we have to
    convert our networks very quickly to IP, and I think the
    regulatory change to support it is critical. And, again, I
    think that, when you think about it, just think about business
    a little bit differently than you do on the residential side.
        Senator Pryor. OK.
        Mr. Strode, did you have anything to add on IP transition
    and data usage, et cetera? And, by the way, how many customers
    to you have, just so we will know?
        Mr. Strode. Roughly 10,000 voice customers, 15,000-16,000
    video customers, high-speed Internet customers probably in the
    12,000 range in Arkansas.
        We provide an IP-based voice service over our hybrid fiber-
    coax cable network. Where we are the primary video provider in
    those areas, we are looking at how we can transition our
    traditional ILEC territories to an IP-based service. And,
    certainly, our transmission between exchanges and to the
    outside world, some of that has already transitioned to IP-
    based services.
        Just anecdotally--and I certainly don't say this to be
    critical of AT&T. As you commented, as Mr. Drilling said, his
    competitors are here. I looked around at this panel, and Ritter
    Communications partners with, works with, provides wholesale
    services to every company on this panel, I think, except
    Aristotle. But we are also competing with everybody on this
    side of the table.
        [Laughter.]
        Mr. Strode. And certainly, you know, to some extent, our
    services compete with wireless services that are provided by
    Verizon, although we provide wholesale transport services to
    Verizon. So it is an interesting ecosystem that we are in.
        My father-in-law has a defibrillator implanted in his chest
    and has a device on his nightstand that every night takes
    readings remotely from that defibrillator. A couple years ago,
    he became a--he lives here in Little Rock. He is a customer of
    AT&T. He decided to switch to U-Verse services, and that was
    great. They were really looking forward to the service they
    were going to get there. And after they made that transition,
    they found that the device that reads his defibrillator every
    night would not work with, is not compatible with the service
    that AT&T was providing. And so he had to go back. And they
    also maintained their U-Verse service, but they also subscribe
    to an analog line to their house to connect just to that
    device.
        So there is some work that needs to be done in the
    industry, in the medical device industry, to make those devices
    where they will be compatible with the new technologies, as
    well. And I think that is a good example of something I talked
    about in my testimony, in terms of needing reasonable rules of
    the road to make these transitions that consider all of the
    implications and ramifications of those changes.
        Senator Pryor. Do you have any comments on IP transition
    and data usage?
        Mr. Kurtz. Just quickly. Everything has pretty much been
    said. Obviously, as Mr. Gardner said, enterprise and government
    are driving a lot of that for us. We also offer our own IP
    product.
        And, once again, as you see challenges, every company is
    kind of taking a different path with their direction.
    CenturyLink does not have a wireless company. So AT&T and
    Verizon are looking at it one way. Windstream has a competitive
    access provider looking at it another way. We will be looking
    at it another way.
        So we are going through the thoughts right now. You know,
    it is being driven pretty fast, but it is going to probably
    take a 5- to 10-year period to get there for CenturyLink. And
    we look forward to working with everybody, but everybody has a
    little different look and view of how we are going.
        Senator Pryor. Mr. Ashcraft, I am curious about your
    company in terms of, are you trying to do an IP transition
    there?
        Mr. Ashcraft. We have a VoIP product that we offer. A few
    customers are on it. We know that probably people are
    migrating, using other products because of our access is
    decreasing, so we know they are utilizing some products. But we
    do offer that product.
        Senator Pryor. And, Mr. Sanders, you have that same--you do
    IP, right?
        Mr. Sanders. We do. We have invested in a softswitch, and
    our remote carrier systems are IP-based. And I think NATCO and
    a lot of small companies throughout the country have invested
    in that type of equipment.
        I guess the thing that I would say is that--I mean, there
    are a lot of efficiencies that you can gain by using IP
    technology. But it is a situation where we would like to
    proceed with caution, because the service that we can provide
    our customers in our network is dependent on the services that
    are offered to us from other companies and the connectivity
    that we have from other companies.
        The country has done a good job in building a network for
    voice communications, and we don't want to see anything fall
    apart, so to speak, when you transition to IP. And I know that
    the Committee and the FCC is somewhat familiar with call-
    termination issues, which to rural companies like ours are
    often VoIP-related. And whether it is intentional or
    unintentional, those VoIP issues do affect our customers.
        Senator Pryor. I want to follow up on that in just a
    minute, but, first, Mr. Russell, did you want to talk about IP?
        Mr. Russell. Well, Senator, I joined the communications
    industry in 1982, and I remember that at that time the
    innovations that were introduced that were remarkable in the
    marketplace was harvest gold and avocado green as colors of
    phones you could have in your home----
        [Laughter.]
        Mr. Russell.--as opposed to the basic black. And, of
    course, the phones did have dials. So the transformation has
    been remarkable, in that my company was a regulated monopoly at
    that time, as well.
        I think what you hear from us is, like these other
    companies, we see this transformation happening toward IP- and
    cloud-based services. And the reason that we have been so
    aggressive with the implementation of this long-term evolution
    technology in our wireless network has been to provide the
    faster download speeds. The average download is 10 to 12
    megabits on this technology, which is very competitive with
    cable modem or DSL services. Because we know that that is
    where--the IP- and the cloud-based services are where so many
    industries are moving, because it allows people to be more
    productive and more cost-effective.
        Senator Pryor. Yes.
        Ms. Bowles, did you have anything to add?
        Ms. Bowles. Yes. We are, of course, a company that
    everything we do is already IP-based, and so we view this as a
    huge market opportunity. And one of the things that our company
    is doing is we are looking at starting to offer Voice-over-IP
    services and some other IP-based services.
        So coming at it from the other side, we view this as a
    really promising development from our competitive perspective,
    the ability to offer phone service and other product lines that
    we don't currently offer.
        Senator Pryor. OK. Great.
        Mr. Sanders, let me follow up--oh, go ahead.
        Mr. Drilling. Could I just----
        Senator Pryor. Yes.
        Mr. Drilling.--add one more thing, Senator, in response to
    Mr. Strode's comments?
        You know, I think when we look at this transition and all
    of the different products and issues that are out there --
    certainly, you know, home monitoring, health monitoring, and
    those kinds of things--I think that kind of points to what I
    know the commissioner is very familiar with; there has been a
    lot of discussion about having a trial to kind of work through
    some of these issues.
        And I think that just points out the, you know, urgency and
    the need for us to kind of go through this and work through
    some of the issues. It is certainly not our intent, by any
    means, to leave someone without a heart-monitoring situation. I
    think the technology can keep up and we can implement that in a
    way that even makes this service and those kinds of technology
    better, more portable.
        And I think that those can be worked out, but I just think
    it points out the urgency of moving forward with a trial so we
    can work through a lot of the questions that we may not have
    answers for right now, but we want to work on getting those
    answers.
        Senator Pryor. Great.
        Mr. Sanders, let me follow up with you on something you
    mentioned a moment ago about call completion. And I assume that
    Mr. Ashcraft is having this problem, and I know that Mr. Strode
    has had it because we have talked about it before.
        But tell the Subcommittee and the group here what you mean
    by, you know, the problem with call completion and it being
    related to VoIP.
        Mr. Sanders. Well, certain carriers--and we don't always
    know who they are--they use least-cost routing formulas to try
    to route calls in the most inexpensive way that they can. And
    so, as a result, sometimes in rural areas, where it takes a
    longer path to get to the end customer, sometimes those calls
    don't come through. And it, like I say, could be intentional or
    not intentional or a result of the technology.
        But often we don't know about those calls when they happen,
    and so it is a little difficult for us to track down what
    happened. Because, typically, when the call comes in to us, we
    don't have any record of it if it does--we don't have a record
    of it if it doesn't make it in to us. So we have to rely on our
    upstream long-distance providers to help us with that if we
    hear from a customer who has reported the problem.
        Senator Pryor. And so, for the customer, what happens is
    they place a phone call and it just rings and rings and rings?
    Or what does it do?
        Mr. Sanders. Yes. I think that that is what happens on the
    other side.
        Senator Pryor. And you just don't ever--you really don't
    know unless you get a complaint.
        Mr. Sanders. Right. Our switch doesn't ever see the call,
    we don't have a chance to deliver it, and our customer doesn't
    know that they were trying to be called unless somewhere down
    the line they talked to that person and they say, oh, you know,
    we had tried to call you at one time.
        Senator Pryor. And what is the connection to Voice-over-IP?
        Mr. Sanders. Many of the long-distance companies convert
    the voice to IP or are using IP, and so they have routers that
    are set up that start handing the calls off to try to find the
    most inexpensive way to route it. And at some point the router
    either drops the call or decides not to continue trying to
    complete the call.
        Senator Pryor. And have you had that problem, Mr. Ashcraft?
        Mr. Ashcraft. Yes, sir.
        Senator Pryor. And, Mr. Strode, I think you have had that
    problem, as well.
        And I guess the FCC has released a notice of proposed
    rulemaking on this with Level 3 Communications. I guess there
    is a consent decree.
        And, Mr. Strode, from your standpoint, are those the right
    steps? Does that fix the problem? Tell me how you think this is
    going.
        Mr. Strode. It is a step in the right direction. I think
    until we can identify where all the problems are, it is hard to
    know what all the solutions are, certainly. But it is a step in
    the right direction.
        Of course, we would love to see everything move as quickly
    as possible, certainly, and our customers would like the
    problems to be fixed. It is hard to explain to our customers
    what is going on, what causes those issues.
        We appreciate your leadership on the resolution that was
    recently reported out of the full Commerce Committee, and we
    look forward to that being passed by the full Senate, as well.
        Senator Pryor. Yes. Thank you. We just passed that.
        Ms. Rosenworcel, do you want to have a comment on any of
    that you just heard?
        Ms. Rosenworcel. Well, first things first. If you are
    calling a relative in a rural area and your call just never
    goes through, that is not acceptable. And if you are trying to
    reach a business in a rural area and your call doesn't go
    through, that is a lost order. It is also not acceptable if you
    are trying to reach emergency help in a rural area and that
    call never goes through.
        So this is a problem I think the FCC has to take action on.
    We have set up a taskforce, we have issued a declaratory
    ruling, and now we have this rulemaking that Senator Pryor
    discussed. I think the good thing about that rulemaking is it
    proposes new recordkeeping requirements. And those
    recordkeeping requirements will help the agency go after the
    bad actors that do not connect these phone calls.
        And it is my hope I can go back to Washington and convince
    my colleagues that we should take action on that soon, because
    this is a problem that I think we can resolve and I think it
    needs resolving.
        Senator Pryor. Thank you.
        Ms. Bowles, let me ask you a question based on your
    testimony. You talked about licensed and unlicensed spectrum.
    You mentioned how important unlicensed spectrum is. Could you
    tell the Subcommittee and everybody else here what you mean by
    that? I think a lot of people aren't familiar with the term
    ``unlicensed spectrum.''
        Ms. Bowles. Sure.
        Licensed spectrum is spectrum that is allocated for
    specific uses and specific people. Unlicensed spectrum is open
    for anyone to use who has equipment that will work on it.
        One example of that is 900-megahertz spectrum, and you have
    running on that spectrum the wireless phones in your house, the
    cordless phones, the baby monitors, as well as fixed wireless
    broadband. And a number of fixed wireless providers around the
    country use 900 predominantly.
        You recently had a ruling out of the FCC that Progeny is
    going to use that 900 for some first-responder networks that
    they are running in some of the major metropolitan areas. And
    that unlicensed spectrum is also used in toll tags and a number
    of other areas.
        So what you see in unlicensed spectrum is, because it is
    wide-open, you have a lot of innovation and you have a lower
    cost of equipment and a lower cost for deployment of equipment
    on that spectrum because it has a larger market, I guess is a
    better way to put it.
        And the actual value of that market is somewhere between
    $17 billion and $37 billion today. And that is not even
    projecting the $25 billion savings for cellular offloading onto
    Wi-Fi networks and those types of things.
        So unlicensed is extremely critical for this country's
    infrastructure. And when I mention the importance of it, it is
    not at the exclusion of licensed spectrum; you need that too.
    But we have to bear in mind that auctioning off every piece of
    spectrum or making everything licensed is going to shoot us in
    the foot, because we absolutely need unlicensed spectrum
    available in this country for the innovation that we have seen,
    particularly for rural parts of the country.
        Senator Pryor. Good.
        All right. Now, I am going to do the same thing with this
    panel I did with the last one. We have covered a lot of ground
    here. Does anybody want to offer any comments or thoughts on
    things we didn't cover?
        Jeff?
        Mr. Gardner. Just one thing that was mentioned earlier. We
    are really excited about the E-Rate initiative and what is
    going on here in Arkansas and what Commissioner Rosenworcel has
    done with her discussion around E-Rate 2.0. I think that is a
    tremendous opportunity for all the companies here to work with
    the educators in Arkansas and across the country to really take
    full advantage of the opportunity to connect these students to
    faster bandwidth to improve the education system around the
    country.
        So we are excited about it and anxious to do whatever we
    can. And I appreciate the leadership of the commissioner and
    you, Senator Pryor, on this important initiative.
        Senator Pryor. Thank you.
        Anybody else have anything?
        Well, you guys have been great. Again, we are covering so
    much ground here. On any one of these topics, you could drill
    down and spend an hour or more just talking about the one
    thing. But I think what we were saying before is that Arkansas
    really is a microcosm of what is going on out there, some of
    the challenges, some of the opportunities, and, you know, the
    various players in the market here. It is just a great case
    study in where we are with telecommunications.
        So what we are going to do here is we are going to take a
    few-minute break between this panel and our next panel. Why
    don't we--I guess we can go 15 minutes. Why don't we try to
    reconvene right at 11 o'clock.
        And let me say thank you all for being here and doing this.
        And with that, we will just recess until 11 o'clock.
        [Recess.]
        Senator Pryor. Again, you know, part of the value here is
    all these conversations that go on during the breaks, and that
    is certainly worth doing, but we need to move forward on our
    next panel. And let's see, it looks like they are all set up
    here, so what I will do is I will just, again, run through the
    list, and we will just go around the room.
        LaDawn Fuhr, she is with Suddenlink Communications; Doug
    Krile, Arkansas Broadcasters Association; Allen Weatherly,
    AETN; Len Pitcock, Cox Communications; Mike Wilson, Comcast of
    Arkansas. I think I got everybody there.
        So, Mr. Weatherly, why don't you go ahead and start? And 3
    minutes each, and we will just go around the room. Thank you.

      STATEMENT OF ALLEN WEATHERLY, EXECUTIVE DIRECTOR, ARKANSAS
                     EDUCATIONAL TELEVISION NETWORK

        Mr. Weatherly. Thank you, Mr. Chairman. I want to thank you
    for your support of public media and that of your father,
    Senator David Pryor, who serves on the Board of the Corporation
    for Public Broadcasting. It is very important.
        Since 2000, I have been Executive Director of the Arkansas
    Educational Television Network, a statewide public media
    service. And I also serve as Vice Chair of the national PBS
    Board of Directors.
        So, from the point of view of one broadcaster and media
    content provider, in our state AETN provides free educational
    services and programming from PBS programs like Sesame Street''
    to ``NOVA,'' ``Ken Burns'' to, yes, ``Downton Abbey'' and AETN
    favorites like ``Exploring Arkansas with Chuck Dovish,''
    ``Arkansas Week,'' and documentaries like our recent ``Bayou
    Bartholomew.'' PBS ratings are up--unusual in today's broadcast
    environment. So people do respond to mission-based programming.
        Our mission is to serve everyone everywhere every day, free
    to all Arkansans no matter their station in life or location.
    All distribution options are important: broadcast, cable,
    satellite, and online services that are helping AETN reach
    schools with our ArkansasIDEAS professional development service
    in partnership with the Arkansas Department of Education.
        ArkansasIDEAS is a success, now one of, if not the, largest
    statewide online professional development portals in the
    nation, with currently 47,000 registered teachers and growing.
    Education has been at the heart of AETN for 5 decades, using
    connectivity to provide targeted educational services to
    educators--public, private, and homeschool.
        Adequate broadband is vital for expanding important
    services to education through IDEAS; the AETN-PBS
    LearningMedia, which delivers thousands of video learning
    objects for teachers to use in their classrooms; PD-credit
    Common Core State Standards resources; and a gateway to the
    Teacher Excellence and Support professional development that
    educators are now required to obtain before being evaluated by
    their administrators; and contains free online professional
    development available through AETN they can choose to support
    the teacher.
        ArkansasIDEAS has also created an open-access portal for
    nonlicensed teachers, utilized by the Teach for America
    program, the Non-Traditional Licensure Program at ADE, and
    anyone applying for an Arkansas teacher's license through
    reciprocity.
        With limited resources but using every media platform, AETN
    works to provide resources for children to learn and give
    Arkansans access to unique dramas, documentaries, history,
    public affairs, and arts programming, accessible to all, which
    is vital, rural and urban.
        Thank you for this opportunity.
        [The prepared statement of Mr. Weatherly follows:]

          Prepared Statement of Allen Weatherly, Executive Director,
                    Arkansas Educational Television Network
        I am Allen Weatherly, Executive Director of the Arkansas
    Educational Television Network, a statewide public media service with
    six transmitters covering our state. I am completing my thirteenth year
    as the Director of AETN and have been in educational television for
    thirty-three years.
        On behalf of the AETN and America's 361 public television stations,
    we appreciate the opportunity to submit testimony for the record on the
    importance of local public television stations--in partnership with PBS
    and others--in providing needed educational services to the students,
    teachers and parents of Arkansas and beyond.
        The range of distribution options remains an important part of our
    services--from broadcast--becoming even more relevant in an age when
    so-called ``cord cutters'' are returning to over the air for their
    local station options--cable, satellite and, importantly, online, which
    is crucial for state networks like AETN to reach schools all across the
    state with our Arkansas IDEAS professional development service
    delivered free in a partnership with the Arkansas Department of
    Education. Currently about 47,000 Arkansas teachers are registered for
    the service with more than 30,000 using Arkansas IDEAS on a regular
    basis.
        Obviously, broadband capability is very important to us as we
    continue to find ways to expand our services to teachers, parents and
    students through Arkansas IDEAS, the AETN/PBS Learning Media
    (delivering thousands of video learning objects for teachers to utilize
    in their teaching), AETN's mobile learning labs, kid's camps and much
    more.
        AETN also serves our state through broadcast and online
    capabilities to help showcase citizens from every part of Arkansas and
    their work through innovative projects such as ``In Their Words''--an
    extensive archive of interviews with nearly 600 Arkansas World War II
    veterans-and LOUPE, an interactive portal showcasing arts and artists
    in Arkansas.
        And I have not mentioned the tremendous and targeted programs and
    services AETN and other public stations provided throughout the year,
    from ``Downton Abbey'' to ``Sesame Street'' and ``NOVA'' to Ken Burns
    and our own popular programs like ``Exploring Arkansas with Chuck
    Dovish'', ``Arkansas Week'' and many others designed to entertain and
    to educate.
        I should mention here that the general audience programming on AETN
    described above is for the most part paid by contributions from
    thousands of Arkansans, not from the state or Federal grants that
    support infrastructure, technology and the educational services, which
    will be highlighted in more detail below.
        Federal funding of $445 million in two-year advance funding for the
    Corporation for Public Broadcasting (CPB) is crucial and while a blip
    on the radar, if that, in the Federal budget is very important to rural
    state networks like AETN and hundreds of other public media stations
    across the country. As an example, while the funding AETN receives as a
    result of Federal grants is an important part of our funding mix it
    amounts to something like 13 seconds of annual Federal spending.
        Local stations and networks like AETN continue to serve as the
    treasured educational and cultural institutions envisioned by their
    founders, reaching America's local communities with unique, essential
    and unsurpassed programming and services.
        Local stations treat their audience as citizens rather than mere
    consumers, providing essential services to all Americans, not just the
    18-49 year olds to whom advertisers hope to appeal. We serve everyone,
    everywhere, every day, and for free.
        Federal support for CPB and local public television stations has
    resulted in a nationwide system of locally owned and controlled,
    trusted, community-driven and community responsive media entities that
    form an incredibly successful public-private partnership. At an annual
    cost of about $1.35 per year for each American, public broadcasting is
    a smart investment creating important economic activity while providing
    an essential educational and cultural service.
        I should mention here that Congress eliminating the Public
    Telecommunications Facility Program, or PTFP, was a significant blow to
    all public media stations. Technology infrastructure is extremely
    important for stations, especially rural stations like AETN, and the
    lack of Federal grants and state technology funding is a difficult
    hurdle to try to jump--especially since, as mentioned before, we use
    member contributions for programming services.
        Unlike many other broadcast organizations, PBS and public media are
    seeing growth across all of our platforms. PBS has seen a 5 percent
    increase in primetime viewership compared to last year, and had six out
    of the top ten shows for moms with young kids in June. For 6 months
    running, PBS.org has been the most highly trafficked broadcast website.
        All sources of funding, Federal funding included, for public
    broadcasting is important because we are part of the Nation's public
    service infrastructure, just like public libraries, public schools and
    public highways.
        Now, if I may, I would like to describe in a bit more detail how
    AETN is using rural connectivity in providing targeted educational
    services to educators--public, private and home-schooled--all across
    our state. Efforts like what I describe, in various shapes and sizes,
    are happening across the country at public media stations when mission
    trumps demographic audience targeting in order to maximize profit
    potential. Nothing wrong with that, of course, but I believe our
    primary goal is to serve and we will continue to stretch every resource
    we have to accomplish our promise to our citizens.
        AETN and ArkansasIDEAS: An Important Tool for Educators and
    Students.
        AETN continues to do some incredible work with quality production
    related to Arkansas, community outreach, and award-winning and popular
    programming from PBS and other sources. All this, in addition to the
    outstanding educational services described below, is due to the
    infrastructure and people throughout AETN.
        Specifically for this message, education has always been at the
    heart of AETN services for nearly fifty years--both formally though
    education services and informally through all network services directly
    related to meeting AETN's stated purpose and promise:
        PURPOSE (Mission): The purpose of the Arkansas Educational
    Television Network (AETN) is to enhance and empower the lives of all
    Arkansans by offering lifelong learning opportunities through high-
    quality educational television programs and services.
        PROMISE (Core statement): The Arkansas Educational Television
    Network (AETN) fulfills its purpose by providing: educational resources
    to schools and all educators; innovative and high-quality public media
    television programs and services that illuminate the culture and
    heritage of Arkansas and the world; and opportunities to engage and
    explore new ideas. This relevant AETN content will expand the minds of
    children, inform Arkansans about public affairs and current events in
    our state, highlight arts and culture, and invite Arkansans to explore
    the outdoors and the world around them.
        With this in mind, here are some things we would like you to know
    about the unique partnership between AETN and the Arkansas Department
    of Education (ADE) known as ArkansasIDEAS.
        ArkansasIDEAS is now the largest, state-funded online professional
    development portal in the Nation. Through the visionary leadership of
    its parent organizations, the Arkansas Educational Television Network
    (AETN) and the Arkansas Department of Education (ADE), ArkansasIDEAS
    has successfully supported educators for another Fiscal Year.
        Our annual report to the state shows that the number of registered
    ArkansasIDEAS users has never been higher (46,697), and our course
    offerings (both online and face-to-face) have undergone exponential
    growth.
        As in years past, ArkansasIDEAS has sought new ways to strengthen
    the types of professional development resources offered to educators
    all while maintaining the superior level of service our users have come
    to expect from AETN.
        With the implementation of the Common Core State Standards (CCSS)
    in the upcoming school year, our Common Core micro site is one of the
    most popular services ArkansasIDEAS administers. Arkansas educators
    trust the site, which contains a plethora of Common Core State
    Standards resources, as the most reliable source of CCSS updates and
    information.
        Indeed, the site is so popular that people from every state in the
    Nation have accessed it.
        The site can be searched in a number of ways, though the English
    Language Arts and Mathematics. Mathematics-Trainer of Trainers sections
    are most common. Much of our education-specific in-studio work over the
    past fiscal year became video links that are now housed on the
    ArkansasIDEAS Common Core micro site.
        In addition to the enactment of new standards for teaching and
    learning, the teacher evaluation system is undergoing a complete
    overhaul for the 2013-2014 school year.
        This sweeping reform is the result of the 2011 General Assembly is
    passage of the Teacher Excellence and Support System (TESS). TESS,
    based largely upon Charlotte Danielson's work, A Framework for Teaching
    (Danielson, 2007), divides a teachers work into four domains.
        Each domain includes subcategories that further dissect the
    specific tasks associated with each domain.
        A rudimentary checklist will no longer evaluate a teacher's work.
    Rather, the work of an educator will be thoughtfully analyzed according
    to the educator's performance both in and out of the classroom.
        During the last fiscal year, the ArkansasIDEAS staff has spent
    hundreds of hours preparing for TESS and is currently supporting TESS
    through a variety of means.
        First, ArkansasIDEAS at AETN constructed a TESS support site.
    Teachers use this site as a gateway to the TESS professional
    development training they are required to obtain before being evaluated
    by their administrators in the upcoming school year. The mandated
    tutorials can also be accessed directly via the ArkansasIDEAS portal.
        Second, the TESS site is enhanced with a reporting feature that
    enables Arkansas administrators to get a snapshot of the amount of time
    their teachers have spent training for TESS. This component is crucial
    for administrators who are required to verify that the educators
    assigned to their building have completed TESS training.
        Managing these snapshot reports requires an enormous amount of
    effort from the IT department at ArkansasIDEAS and AETN and will
    continue to dominate a large portion of our time in the future.
        Even before the TESS website went live, ArkansasIDEAS was proactive
    in their approach to TESS.
        Our experienced team of licensed educators assigned a domain and
    sub domain to every course on the ArkansasIDEAS portal.
        The current ArkansasIDEAS course catalog includes these Arkansas
    Department of Education-approved domain assignments. In addition, the
    TESS site also includes a search-by-domain feature. Now, when an
    administrator evaluates a teacher and documents a deficiency in a
    particular domain, they will have a collection of free, online
    professional development offerings from which to choose that will help
    support that teacher.
        This prescriptive-based professional development is perhaps the
    most significant change in the new teacher evaluation system.
        ArkansasIDEAS is also reaching out to pre-licensed educators across
    the state.
        Working with the ADE Office of Professional Licensure,
    ArkansasIDEAS and AETN has created an open-access portal for non-
    licensed teachers.
        This non-licensed portal was created on June 26, 2012 and is
    utilized by the Teach for America program, several masters of teaching
    degree programs, the Non-Traditional Licensure program at ADE, and
    anyone applying for an Arkansas teacher's license through reciprocity.
    It provides the necessary professional development requirements of Act
    969 of the 2013 General Assembly.
        An example of a course offered on the pre-licensed portal is the
    child maltreatment course. This course fulfills the requirements of Act
    1236 of 2011, an act that mandates all educators to have training in
    child maltreatment awareness. The course is also offered on the
    licensed-side of the portal and hundreds of Arkansas educators have
    taken it to-date.
        During the last quarter of the past Fiscal Year, ArkansasIDEAS and
    AETN lent its talent and resources to the Science, Technology,
    Engineering and Mathematics (STEM) Foundations Institute.
        This institute took place on June 6, 2013 and was a culminating
    event for the ArkansasIDEAS production team, working with the
    professional staff and infrastructure provided by AETN. Prior to the
    daylong event, producers captured exemplary STEM lessons in several
    schools across the state of Arkansas.
        Experts in the field of STEM education highlighted each of these
    lessons on the day of the institute. Breakout sessions were recorded on
    the day of the training as well. The ArkansasIDEAS team of educators,
    producers and IT analysts are using this footage to create seven
    courses, one for each of the seven STEM frameworks, housed on the
    ArkansasIDEAS portal maintained through AETN.
        ArkansasIDEAS continues to look for ways to serve Arkansas
    educators.
        We now offer a dedicated library of Disciplinary Literacy courses.
    This library is especially helpful for educators wishing to add an area
    of licensure to their teaching certificate.
        The Disciplinary Literacy Library contains forty-five hours of ADE-
    prescribed, professional development courses all of which are offered
    on the ArkansasIDEAS portal. Upon completion, teachers can submit this
    credit, along with appropriate Praxis scores, to the Office of
    Professional Licensure at the Arkansas Department of Education for
    approval and add an area of certification to their teaching license.
        Expanding the number of high-quality professional development
    courses and resources offered on the portal continues to be a top
    priority at ArkansasIDEAS.
        In the past fiscal year alone, 253.5 hours were added to the
    ArkansasIDEAS portal, and many of these courses were produced and
    created by the ArkansasIDEAS team at AETN.
        In addition to the work done in-house, ArkansasIDEAS maintains a
    constant presence at educational conferences around the state.
        AETN and ArkansasIDEAS education professionals often present at
    these conferences while our production teams continue to be in demand
    filming keynote addresses and breakout sessions--later used to create
    ArkansasIDEAS courses or resources.
        ArkansasIDEAS provides technology training to schools that need it
    and have even acquired as a service that we now offer to educators who
    request it.
        ArkansasIDEAS acquired two mobile labs that we have loaned to
    educational conferences and schools. Both the iPad and MacBook labs are
    equipped with stand-alone, Wi-Fi capability. It is our hope that these
    transformational tools will be utilized in professional development
    trainings and checked out to school districts who want to provide their
    teachers with technology training but lack the resources available to
    do so.
        ArkansasIDEAS, a partnership of the Arkansas Educational Television
    Network (AETN) and the Arkansas Department of Education (ADE) has been
    a leader in providing educational resources during the past year and
    will continue to stay ahead of the upcoming educational changes as we
    seek out new ways to support Arkansas educators.
        AETN is also expanding services that are important to Arkansans
    both rural and urban by developing an agricultural project and a public
    safety statewide first responder system utilizing our transmitters
    located throughout the state, just to cite two examples.
        Across every platform, public media stations are working with PBS
    and others partners providing new resources for children to learn, and
    giving all Americans access to the dramas, documentaries, history, news
    and public affairs, and arts' programming that expands their horizons
    and opens up new vistas free and accessible to all.
        This is what sets us apart, and that's why I am honored to be a
    part of a public media system that continues to serve all citizens with
    educational--and, yes, even entertaining programs and services.
    Connectivity is a crucial player in all this, especially for a rural
    state like Arkansas.
        Thank you for the opportunity to speak with you. It has been a
    pleasure.

        Senator Pryor. Thank you.
        Mr. Pitcock?

     STATEMENT OF LEN PITCOCK, DIRECTOR OF GOVERNMENT AFFAIRS, COX
                             COMMUNICATIONS

        Mr. Pitcock. Thank you, Mr. Chairman. Again, I am Len
    Pitcock. I am Director of Government Affairs for Cox
    Communications here in Arkansas.
        Cox Communications is the state's largest traditional cable
    provider, offering a variety of products to our residential and
    business customers. Our footprint consists of a service area
    primarily covering the northwest corner of the state. Today we
    offer video services, broadband, and telephone to our Arkansas
    customers, and in the near future we will likely offer home
    security services, as well.
        Cox and almost all of the other providers here today offer
    a prime example of the convergence in technology found in the
    marketplace. As the Telecommunications Act of 1996 closes in on
    almost its 18th year as the primary regulatory framework for
    our industry, we see consumers gaining the full benefit of this
    legislation.
        It wasn't that long ago when Cox customers were offered
    only a handful of channels in an analog-only format and 56K
    modems. Today, we and others are using our advanced fiber-rich
    networks to deliver any number of competitive products, giving
    consumers a wide array of choices for video, Internet, and
    telephone.
        And I should mention it has just been 7 years since we
    launched our telephone product here in Arkansas. Today, we are
    the fourth-largest telephone company in the state and likely
    the largest competitive local exchange carrier. These
    advancements are made possible wholly from the investment of
    private capital into our business.
        Today, Cox Communications offers almost 500 analog,
    digital, and high-definition channels here in Arkansas, speeds
    of 150 meg downstream to every customer that we serve, and
    telephone service in almost every community that we serve.
        We heard Mr. Merrifield from the ARE-ON network on the
    first panel today talk about the size of the network and their
    capacity, and I am proud to announce that our network produces
    the same speeds. Our business customers have access to up to 10
    gigs down today. In fact, part of the ARE-ON network rides on
    our plan.
        Let me be quick to say that government-subsidized
    competition has always been a concern for the entire
    telecommunications industry. As Federal and state lawmakers
    continue to address last-mile broadband in America, we would
    again urge them and you to carefully consider the investments
    made by companies like Cox in the marketplace today before
    allowing government dollars to compete directly with those that
    have taken a financial risk.
        In 2010, Arkansas was found to be the most competitive
    state in the country for broadband services. While we recognize
    government-funded efforts to address last-mile broadband are
    needed and appropriate in areas where no service is available,
    government should focus its efforts in Arkansas and around the
    country on increasing broadband adoption through existing
    broadband providers rather than using taxpayer dollars to fund
    network construction and overbuilds in areas where broadband
    service is already available.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Pitcock follows:]

      Prepared Statement of Len Pitcock, Director of Government Affairs,
                               Cox Communications
        Good morning, Mr. Chairman. Again, I'm Len Pitcock, Director of
    Government Affairs for Cox Communications here in Arkansas.
        Cox Communications is the state's largest traditional cable
    provider offering a variety of products to our residential and business
    customers. Our footprint consists of a service area primarily covering
    the northwest corner of the state. Today we offer video services,
    broadband and telephone to our Arkansas customers and in the near
    future, will likely offer home security services as well.
        Cox, and almost all of the other providers here today, offer a
    prime example of the convergence in technology found in the market. As
    the Telecommunications Act of 1996 closes in on almost its 18th year as
    the primary regulatory framework for our industry, we now see consumers
    gaining the full benefit of the Act.
        It wasn't that long ago when Cox customers were offered a handful
    of channels in an analog-only format and 56k modems. Today, we and
    others are using our advanced fiber-rich networks to deliver any number
    of competitive products giving consumers a wide array of choices for
    video, Internet and telephone. I should mention it's been just 7 years
    since we began offering telephony in Arkansas. Today, we are the 4th
    largest telephone provider in the state and the largest among all
    competitive local exchange carriers.
        These advancements are made possible wholly from the investment of
    private capital into our business. Today Cox Communications offers
    almost 500 analog, digital and high definition channels in Arkansas,
    150 megs downstream broadband speed to every customer and phone service
    in almost every community we serve.
        Government subsidized competition has always been a concern for the
    entire communications industry. As Federal and state lawmakers continue
    efforts to address last-mile broadband in America, we would again urge
    them (and you) to carefully consider the investments made by companies
    like Cox in the marketplace today before allowing government dollars to
    compete directly with those of us that have taken the financial risk.
        In 2010, Arkansas was found to be the most competitive state in the
    country for broadband services. While we recognize government-funded
    efforts to address last mile broadband areas are needed and appropriate
    in areas where no service is available, government should focus its
    efforts in Arkansas and around the country on increasing broadband
    adoption through existing broadband providers rather than use taxpayer
    dollars to fund network construction and overbuilds in areas where
    broadband service is already available.
        Thank you, Mr. Chairman.

        Senator Pryor. Thank you.
        Mr. Wilson?

        STATEMENT OF MIKE WILSON, SENIOR DIRECTOR OF GOVERNMENT
                      AFFAIRS, COMCAST OF ARKANSAS

        Mr. Wilson. Thank you, Mr. Chairman.
        Good morning. My name is Mike Wilson, and I am the Senior
    Director of Government Affairs for Comcast of Arkansas, based
    here in Little Rock.
        Comcast provides video, broadband, phone, and home security
    services in central Arkansas and in the West Memphis area.
    Since 1996, Comcast has invested over $206 million in system
    upgrades to make sure that our Arkansas customers have access
    to the same programming and technology choices available
    anywhere in the country.
        Our core video offering, Xfinity TV, now leverages IP
    technology and cloud-based servers to deliver an enormous
    library of video content when, where, and on whatever devices
    our customers choose. Our new entertainment platform, which we
    call X1, integrates social media, search, and third-party
    applications to redefine the viewing experience.
        But even with all of these choices and capabilities that
    the cable industry offers, when it comes to broadband, there
    are still too many Americans who are on the wrong side of the
    digital divide.
        There are programs here in Arkansas that the cable industry
    has implemented to address the barriers to broadband adoption.
    Cable companies like Cox and Suddenlink and Conway Corporation,
    in addition to others, partner with Connect2Compete, which
    provides low-cost Internet access to families who have children
    participating in the free school lunch program.
        Comcast's program is called Internet Essentials and is the
    nation's largest and most comprehensive broadband-adoption
    program. It provides low-cost broadband service for $9.95 a
    month, the option to purchase a Comcast-subsidized Internet-
    ready computer for under $150, and multiple options to access
    free digital literacy training in print, online, and in person.
    Families must have one child eligible to participate in the
    free or reduced lunch programs, and it includes public,
    parochial, private, and homeschool students.
        Since Comcast introduced Internet Essentials just 22 months
    ago, we have connected more than 220,000 families, or nearly
    900,000 low-income Americans, to the power of Internet in their
    homes, many for the very first time. In Arkansas alone, Comcast
    has connected over 750 low-income families. That is over 3,000
    Arkansans who now benefit from access to the Internet.
        Comcast did not accomplish our 2-year results alone. We
    have partnered with all of our school districts, many nonprofit
    organizations like the Arkansas state PTA, the Boys and Girls
    Club, Big Brothers/Big Sisters, and many faith-based
    organizations to help get the word out and assist with our
    training. All of these organizations have played a significant
    role in the program's success.
        Senator Pryor, thank you for this opportunity to testify
    today and share information about what the cable industry is
    doing to expand broadband adoption in Arkansas.
        [The prepared statement of Mr. Wilson follows:]

       Prepared Statement of Mike Wilson, Senior Director of Government
                          Affairs, Comcast of Arkansas
        Good morning, my name is Mike Wilson and I'm the Senior Director of
    Government Affairs for Comcast of Arkansas based here in Little Rock.
        Comcast provides video, broadband, phone and home security services
    in central Arkansas and in the West Memphis area.
        Since 1996, Comcast has invested over 206 million dollars in system
    upgrades to make sure our Arkansas customers have access the same
    programming and technology choices available anywhere in the country.
        For example, Comcast provides our customers the ability to manage
    and personalize TV viewing, offering over 100,000 of the best and most
    recent TV shows and movies on their television sets, their computer and
    mobile devices in addition to thousands of choices to instantly stream
    at the customers fingertips in and out of the home.
        But even with all of these choices and capabilities that the cable
    industry offers, there are still way too many Americans who are on the
    wrong side of the digital divide. Access to the Internet for our
    children is a must and there are many low income families who do have
    access to the Internet but make a conscious decision not to subscribe.
        In understanding the barriers to Broadband adoption, the FCC has
    identified three major factors:

            47 percent of low income families don't subscribe because they
            lack digital literacy or don't feel that it's relevant to their
            lives; 24 percent state that price of Broadband service is a
            deterrent and 15 percent don't subscribe because of the cost of
            the computer.

        There are a number of programs here in Arkansas that the cable
    industry has implemented to address all three of these barriers to
    adoption.
        Cable Companies like Cox, Suddenlink and Conway Corp., in addition
    to others, partner in Connect 2 Compete, which provides low cost
    Internet access to families who have children participating in the Free
    School Lunch program.

        Comcast's program is called Internet Essentials. Internet
    Essentials costs just $9.95 a month for service, provides access to
    FREE digital literacy training and the option to purchase a computer
    for under $150. Internet Essentials is the largest and most
    comprehensive broadband adoption program of its kind and I'm proud to
    say that last week we began our third year of providing this service in
    all of the 39 states where Comcast currently provides Broadband.
        I'm very pleased to tell you that since the onset of this program,
    more than 220,000 families now have a Broadband connection in their
    homes as a result of Internet Essentials. This means an estimated
    900,000 low income Americans nationwide now have access to Broadband.
        Across the Nation, Comcast has over 30,000 partner Schools; 20,000
    individuals trained; 18,000 computers sold; 7,000 community partners
    and 27 million brochures distributed.
        Bringing it closer to home . . . In Arkansas, Comcast has connected
    over 750 low income families, that's over 3,000 Arkansans who now
    benefit from access to Broadband that didn't prior to Internet
    Essentials being introduced. And these numbers don't take into account
    the success that others are seeing with similar programs.
        Recently, Comcast announced additional enhancements which include:

       Increasing the speed to 5 Mbps downstream and 1 Mbps
            upstream;

       Streamlining the enrollment process by expanding the instant
            approval process for families whose students attend schools
            where 70 percent or more of the students are eligible to
            participate in the National School Lunch Program.

       Expanding the eligibility criteria to include parochial,
            private cyberschool and homeschooled students

       Creating an online application tool that can be used by
            families on computers at community centers, libraries or at a
            friend's house to request an application

       Introducing the Internet Essentials Opportunities card which
            can be purchased by community partners and used toward the cost
            of subsidizing Internet service for their families.

        Comcast did not accomplish our two year results alone. We have
    partnered with all of our school districts; non-profits organizations
    like the Boys and Girls clubs; Big Brothers/Big Sisters and many faith
    based organizations to help get the word out and assist with our
    training. All of these organizations have played a huge role the
    program's success.
        As all of these different adoption programs progress, I'm sure
    we'll see the similar outcomes from all of the other companies. This
    will definitely benefit the low income families in our state.
        Thank you for this opportunity to testify and share information
    about what the telecommunications industry is doing to expand the
    adoption rate to Broadband in Arkansas.

        Senator Pryor. Thank you.
        Mr. Krile?

         STATEMENT OF DOUG KRILE, EXECUTIVE DIRECTOR, ARKANSAS
                        BROADCASTERS ASSOCIATION

        Mr. Krile. Good morning. My name is Doug Krile. I am
    Executive Director of the Arkansas Broadcasters Association.
    ABA is a not-for-profit trade association representing
    approximately 190 radio stations and 15 television stations in
    Arkansas, and that is pretty much everybody.
        Thank you for the opportunity to appear before you and
    briefly discuss some of the key issues impacting broadcasters
    in Arkansas.
        Many of our member stations, particularly the radio
    stations, are locally owned and operated in the rural parts of
    Arkansas. As such, they play a vital role in providing
    emergency information and contributing to the day-to-day lives
    of listeners and viewers who live in those areas.
        When a sudden flood killed 20 campers at a remote
    campground in southwest Arkansas in 2010, radio and TV stations
    were the only sources of information as the heavy rain
    developed. The campground was outside the range of a nearby
    NOAA weather station. The broadcast stations also became the
    source of information on victims and survivors.
        After Hurricane Katrina, the Arkansas Parks and Tourism
    agency developed a system to help evacuees from nearby
    Louisiana and Mississippi get updated information about the
    availability of food and shelter in Arkansas. Key to that
    system's success was the utilization of radio and TV stations
    to tell evacuees about the system.
        Because many of our member radio stations are essentially
    family-owned and operated on very slim profit margins, ABA
    feels compelled to argue against congressional efforts to
    impose a new licensing fee for musical performers. We believe
    strongly that radio stations' provision of free airtime to play
    performers' music is, in itself, fair compensation. Any
    additional fees could literally force some stations off the
    air.
        Other key issues focus more on the television side of our
    industry. Changes to the retransmission consent system proposed
    by the pay-TV industry would harm stations here. Currently,
    financial terms of cable, satellite, and telecommunication
    coverage carriage of local-market TV stations are negotiated in
    a free and open marketplace. Many times, our small-market TV
    station members must negotiate against very large pay-TV
    providers.
        Despite this, broadcasters support the market-based system
    Congress created, which results in both sides reaching an
    agreement, keeping broadcast stations on pay-TV systems without
    interruption in almost all cases. And, of course, broadcast
    signals are always available to consumers free over the air via
    an antenna.
        The other issue of concern to TV broadcasters involves the
    FCC's upcoming auction of broadcast spectrum. While the ABA
    does not oppose a truly voluntary spectrum auction, we agree
    with the National Association of Broadcasters that the process
    must ensure that broadcasters who do not participate in the
    auction retain their current coverage areas so they can
    continue to serve their local communities.
        We also believe the FCC should work to limit the number of
    stations that must move to new channels during the repacking
    process. Currently, over 700,000 television viewers in Arkansas
    receive all of their TV programming over the air. Forced
    channel changes will disrupt those viewing habits, harming
    consumers and broadcasters.
        Thank you.
        [The prepared statement of Mr. Krile follows:]

             Prepared Statement of Doug Krile, Executive Director,
                       Arkansas Broadcasters Association
        Good morning. My name is Doug Krile. I am Executive Director of the
    Arkansas Broadcasters Association. ABA is a not-for-profit trade
    association representing approximately 190 radio stations and 15
    television stations in Arkansas.
        Thank you for the opportunity to appear before you and briefly
    discuss some of the key issues impacting broadcasters in Arkansas. Many
    of our member stations (particularly the radio stations) are locally
    owned and operate in the rural parts of Arkansas. As such, they play a
    vital role in providing emergency information AND contributing to the
    day-to-day lives of listeners and viewers who live in those areas
        When a sudden flood killed 20 campers at a remote campground in
    Southwest Arkansas in 2010, radio and TV stations were the only sources
    of information as the heavy rain developed. The campground was outside
    of the range of a nearby NOAA weather station. The broadcast stations
    also became the source of information on victims--and survivors.
        After Hurricane Katrina, the Arkansas Parks and Tourism agency
    developed a system to help evacuees from nearby Louisiana and
    Mississippi get updated information about the availability of food and
    shelter in Arkansas. Key to the system's success was the utilization of
    radio and TV stations to tell evacuees about the system.
        Because many of our radio station members are essentially family-
    owned and operate on very slim profit margins, ABA feels compelled to
    argue against Congressional efforts to impose a new licensing fee for
    musical performers. We believe strongly that radio stations' provision
    of free air time to play performers' music is fair compensation, and
    any additional fees could, literally, force some stations off the air.
        Other key issues focus more on the television side of our industry.
    Changes to the Retransmission Consent system proposed by the pay TV
    industry would harm stations here. Currently, financial terms of cable,
    satellite and telecommunication company carriage of local television
    stations are negotiated in a free and open marketplace. Many times, our
    small-market TV station members must negotiate against very large pay
    TV providers. Despite this, broadcasters support the market-based
    system Congress created, which results in both sides reaching an
    agreement keeping broadcast stations on pay TV systems without
    interruption in almost all cases. And of course, broadcast signals are
    always available to consumers free, over-the-air via an antenna.
        The pay TV industry is pushing for changes in the law that would
    tilt the retransmission consent negotiation process in its favor.
    Ultimately, altering the process to favor pay TV providers will mean
    less choice for consumers and fewer dollars for local stations to use
    for news and public affairs programming, not to mention emergency
    weather coverage.
        The other issue of concern to television broadcasters involves the
    FCC's upcoming auction of broadcast spectrum. While the ABA does not
    oppose a truly voluntary spectrum auction, we agree with the National
    Association of Broadcasters that the process must ensure that
    broadcasters who do not participate in the auction retain their current
    coverage areas so they can continue to serve their local communities.
    We also believe the FCC should work to limit the number of stations
    that must move to new channels during the repacking. Currently, over
    700,000 television viewers here in Arkansas receive ALL of their TV
    programming over-the-air. Forced channel changes will disrupt those
    viewing habits, harming consumers and broadcasters. Television stations
    (and the ABA) are STILL fielding phone calls from consumers who are
    confused by the digital conversion that happened several years ago! To
    ensure that TV viewers' interests are protected, we ask Congress to
    carefully oversee the FCC's implementation of the incentive auction
    legislation.

        Senator Pryor. Thank you.
        Ms. Fuhr?

              STATEMENT OF LaDawn FUHR, MIDSOUTH REGIONAL

       MANAGER OF COMMUNITY AND GOVERNMENT RELATIONS, SUDDENLINK

        Ms. Fuhr. Good morning, and thank you for the opportunity
    to speak.
        I am LaDawn Fuhr, an Arkansas native and the Mid-South
    Regional Manager of Community and Government Relations for
    Suddenlink. Our team oversees Suddenlink's operations here in
    Arkansas plus three other Delta states.
        Suddenlink is the second-largest cable broadband company in
    Arkansas, and we serve towns like Jonesboro, Russellville,
    Walnut Ridge, Batesville, Mountain Home, Hot Springs Village,
    El Dorado, and a vibrant mix of other larger, smaller, and
    rural communities. We also enjoy a productive working
    relationship with these communities, and we provide the most
    advanced TV, Internet, phone service, and in some places home
    security available in those areas to approximately 110,000
    residential subscribers and 70,000 business subscribers.
        We work hard every day to provide our customers with a
    superior level of care. And in addition to this customer care,
    we also work to make a real difference in the lives of our
    employees and the communities where we live and we work.
        For example, since 2008, we have helped to e-cycle more
    than 200 tons of electronic waste, keeping it out of Arkansas
    landfills. We support education in Arkansas at all levels
    through a multitude of commitments. We provide our video and
    Internet services to school districts across the state. We are
    also a participant in the national Connect2Compete initiative.
    Through that effort, we offer steeply discounted broadband
    service for qualifying low-income families with at least one
    child enrolled in the National School Lunch Program, helping to
    bridge the digital divide.
        We invest in our people, providing good jobs and benefits
    to more than 300 residents of Arkansas. And we are constantly
    improving our services, with over $170 million in capital
    invested in Arkansas since 2006, and that includes $20 million
    that is planned for 2013.
        Those investments have delivered a better TV experience
    with more high-definition channels, an expanded video-on-demand
    library, and technologies that provide our customers more ways
    to enjoy their favorite news, sports, dramas, and comedies both
    inside and outside the home. These investments have also
    delivered a better Internet experience, with download speeds of
    50 and 107 megabits per second widely available in our Arkansas
    service areas. These speeds are comparable to other large
    markets.
        Our investments in Arkansas have also extended our services
    to new areas. And, most importantly, in 2012 we invested $4
    million to construct a 162-mile fiber ring that connects our
    communities to one another, our national backbone, and the
    larger Internet. This addition enhances the reliability and the
    robustness of the broadband services. And we are able to bring
    to many Arkansas communities this service, both large and small
    communities.
        In conclusion, Suddenlink is poised for the future. We are
    a committed and conscientious member of the communities where
    we live and serve, and we are very proud to be an industry
    leader in this great state.
        Thank you for your time.
        [The prepared statement of Ms. Fuhr follows:]

        Prepared Statement of LaDawn Fuhr, MidSouth Regional Manager of
                 Community and Government Relations, Suddenlink
        Good morning and thank you for inviting us to participate in this
    panel. I'm LaDawn Fuhr, an Arkansas native, and the MidSouth Regional
    Manager of Community and Government Relations for Suddenlink. Our team
    oversees Suddenlink's operations here in Arkansas, plus three other
    Delta states.
        Suddenlink is the second largest cable broadband company in
    Arkansas. The communities we serve here--places like Jonesboro,
    Russellville, Walnut Ridge, Batesville, Mountain Home, and El Dorado--
    are a mix of vibrant, larger, smaller, and rural communities.
        We enjoy productive working relationships with our Arkansas
    communities and provide the most advanced TV, Internet, and phone
    services available in those areas to approximately 110,000 residential
    and 70,000 business customers.
        We work hard every day to provide our customers with a superior
    level of care. According to the recent J.D. Power survey, Suddenlink
    was recognized as the TV services company with the most improved
    customer satisfaction ratings since 2007.
        In addition to customer care, we work to make a real difference in
    the lives of our employees and the communities where we live and work.
    For example,

       Since 2008, we've helped ``eCycle'' more than 200 tons of
            electronic waste, keeping it out of Arkansas landfills.

       We support education in Arkansas, at all levels, through a
            multitude of commitments. We provide our video and Internet
            services to school districts across the state. We are also a
            participant in the national Connect to Compete initiative.
            Through that effort, we offer steeply discounted broadband
            service for qualifying, low-income families with at least one
            child enrolled in the National School Lunch Program.

       We invest in our people, providing good jobs and benefits to
            more than 300 residents of this state.

       We are constantly improving our services, with over $170
            million in capital invested in Arkansas since 2006, including
            $20 million planned for 2013.

       Those investments have delivered a better TV experience,
            with more high-definition channels, an expanded video-on-demand
            library, and technologies that provide our customers more ways
            to enjoy their favorite news, sports, dramas, and comedies,
            both inside and outside the home.

       These investments have also delivered a better Internet
            experience, with download speeds of 50 and 107 megabits per
            second widely available in our Arkansas service areas. These
            speeds are comparable to--and in some case better than--the
            speeds available to citizens of major urban areas.

       Our investments in Arkansas have also extended our services
            to new areas. Importantly, in early 2012, we invested $4
            million to construct a 162-mile fiber ring that connects our
            communities to each other, our national backbone, and the
            larger Internet. This addition enhances the reliability and
            robustness of the broadband services we are able to bring to
            many Arkansas communities, both large and small.

        In conclusion, Suddenlink is a committed and conscientious member
    of the communities we serve, and we're very proud to be an industry
    leader in this great state. Thank you for your time.

        Senator Pryor. Thank you.
        Let me also note that all of our panelists have done a
    great job today of keeping their comments to the 3 minutes. It
    is pretty common in Washington for them to run on and on and
    on. And so thank you all. You guys have shown great discipline,
    but also you just--typical Arkansas, you just want to get down
    to the meat and potatoes and don't have to hear yourself talk.
    So, anyway, thank you for that. We appreciate it.
        Let me start with Mr. Krile.
        I know that you have television and radio members.
        Mr. Krile. Yes, sir.
        Senator Pryor. And I assume that the number of your owners
    have gone down over the years, and so there has been some
    consolidation and whatnot.
        But I am curious about how the Internet has changed the
    broadcast business model. Tell us how it is changing the
    broadcast business model.
        Mr. Krile. Well, the broadcasters have had to adopt the
    Internet and find the best ways to utilize it. Putting their
    radio station signals on the Internet is very common, even in
    the smaller-market stations. Using a Website to provide news
    and information to their listeners and viewers has become
    crucial. It is really a matter of pairing the two together and
    providing the services to as many people as you can.
        I think radio stations that haven't adopted to that and
    started to use the Internet are few and far between. I can't
    actually tell you of any off the top of my head that don't have
    some type of Internet presence. And many of them really rely on
    it, for sporting events in particular, where there are people
    out of the market or even out of the state who want to hear the
    play-by-play broadcast the local stations are doing.
        Senator Pryor. Yes. Well, I can speak firsthand to that
    because I use that sometimes.
        Let me ask about AETN. I know you are a little different
    model than what most of Mr. Krile's members are, but how has
    the Internet changed the model, the business model, so to
    speak, for AETN?
        Mr. Weatherly. Well, certainly, the education part, which
    we have always done--it is in our name--but the ability to do
    online services, digital services, allowed us to really expand
    our educational services and jump full force into professional
    development.
        Without the Internet capability, that would have been
    extremely difficult for us to grow the way that we did. That
    happened in 2005, and now we have 47,000 teachers who are
    using--Arkansas teachers who are using it. In fact, teachers
    from every state are using the system. So if they were to try
    to find AETN broadcast, it wouldn't work.
        It is still extremely important to us, the broadcast part
    of it, as are our other partners here, but Internet-based
    activities has really been the growth area for AETN.
        Senator Pryor. And let's talk about rural areas. Are you
    having trouble getting that out into rural Arkansas?
        Mr. Weatherly. I wouldn't say particularly. We have had
    great response. In fact, the ArkansasIDEAS program really
    worked initially because of its attractiveness to rural areas.
        I think our biggest problem for rural is funding,
    obviously, to be able to replace equipment, with the loss of
    PTFP and some other programs federally. That has been a big
    hindrance to us. So when I look at what we are doing now, I
    feel pretty confident. What we can do in 5 years, especially
    capital-based, for a nonprofit like us is a difficult
    enterprise.
        Senator Pryor. And I should know this, and I don't. But
    does AETN follow the same model that the commercial broadcaster
    does in terms of getting their signal carried on a cable
    system? Tell us how that works.
        Mr. Weatherly. Well, in a rural area, they oftentimes take
    it off of our broadcast signal, off the tower. Other than that,
    we have some landlines with Conway Corp., with Comcast, and a
    few others. So, yes, we do have a--in rural, they are going to
    do very much a similar thing, especially in many rural areas
    for cable and satellite. They are going to take our signal off-
    air and translate that or----
        Senator Pryor. And how does the money work? How does the
    money work with public broadcasting and cable?
        Mr. Weatherly. Not well enough.
        [Laughter.]
        Senator Pryor. That is what we always hear, right?
        Mr. Weatherly. Yes. We don't--we are there. We appreciate
    that. That is mandated. We don't receive any income from cable
    or satellite. So that model is great for them and we are
    pleased to be there, but that is how come you occasionally see
    me on pledge drives and other things.
        We are a mix of some Federal support; certainly we are a
    state agency for the infrastructure and education; and,
    obviously, viewer contributions. But in terms of cable, while
    we are pleased to be there, and satellite, we don't receive any
    of that revenue.
        Senator Pryor. And AETN is a statewide network, in a sense.
    And can you tell if the viewers, the numbers are going down in
    terms of people that are just picking up over the air? Or is
    that staying about the same?
        Mr. Weatherly. Well, Doug's 700,000 is a very prominent
    figure for us. I think with cord cutters, I think some of the
    evidence is it is probably going up a little bit. But it
    certainly has not gone down in recent years. It has leveled
    out.
        But, again, for us, it is a little bit different to talk
    about because so much of the cable signal and satellite signal
    in very rural areas comes off of our broadcast signal. So it is
    kind of hard to kind of parse that out, if that makes any
    sense.
        Senator Pryor. Yes, that does.
        And I know that you have gone through this digital
    television transition. Is all that behind you now? And are you
    still broadcasting on analog at all?
        Mr. Weatherly. No. No.
        Senator Pryor. And so it is all digital? What is your sense
    of people adopting digital?
        Mr. Weatherly. Oh, I think it is happening pretty rapidly.
    Because it is like with LP records, you know, they didn't die
    out because anybody put a rule; it is just that nobody made
    them anymore.
        Senator Pryor. Right.
        Mr. Weatherly. And I think that is what has happened with
    analog and digital. People have responded and they have adapted
    pretty quickly to it.
        Senator Pryor. Mr. Pitcock, let me ask you--I am going to
    change gears here. I know that right now there is a dispute
    between CBS and Time Warner about the signal and who carries
    what and how much everybody pays. And is that nationwide or is
    that just in isolated areas?
        Mr. Pitcock. The disputes?
        Senator Pryor. Yes, the CBS-Time Warner one. Isn't it on
    the West Coast? Do you know?
        Mr. Pitcock. Yes, I believe it is just in California,
    Senator.
        Senator Pryor. And my memory is that we have not had those
    kinds of disputes here?
        Mr. Pitcock. No, we have.
        Senator Pryor. And my understanding is that is because
    everybody works really hard to try to make it work.
        Mr. Pitcock. So the disputes have taken place in Arkansas,
    and on some occasions broadcasters have gone dark as a result
    of being able to come to terms with the multiservice provider,
    whether it is a satellite company or a cable company. As you
    are well aware, there is legislation in Washington that has
    been proposed right now to address this to some degree.
        I think the cable industry's position and certainly the
    position of Cox Communications is we want to do what is in the
    best interest of the consumer. And if that means having some
    sort of cooling-off period where instead of the cable being
    removed--and I need to reassure everybody that we cannot carry
    a broadcaster without their specific consent. It is usually
    left to the point where it is being told that a cable provider
    or a satellite provider is being pulled off of the network. And
    the truth of it is that we can't carry them anymore. By law, we
    can't carry them.
        So it would certainly be our position that if we found
    ourselves where a contract would expire, that there be some
    type of cooling-off period that would allow us, as we continue
    to negotiate, to keep those in place.
        Senator Pryor. Yes, I think most viewers have no idea how
    this really works, all the contractual back-and-forth on that.
    But it has been on the books that way for, what, 20-plus years.
    I am not quite sure when it all started. The 96 Act, I guess? I
    am not quite sure.
        But, anyway, I know we are not going to solve that today,
    but that does come up periodically. And I think Arkansans kind
    of wonders why that is and what is going on there. And I think
    that what you have is--you know, clearly, the cable companies,
    they have legitimate reasons for taking their position. But
    also let's give the broadcasters a chance just to talk about
    their view of that. I know we are not going to solve this
    today, but since I have broached it, let's go ahead and hear
    from the broadcasters, as well.
        Mr. Krile. Well, I think the broadcast industry basically
    believes that because these negotiations do reach an agreement
    99 percent of the time--they might go right down to the 11th
    hour, and that 11th hour may get pushed back once or twice or
    three times. Fort Smith just recently went right down to the
    wire----
        Senator Pryor. That is right.
        Mr. Krile.--but there was an agreement reached. And we just
    believe the system as it is structured right now works and
    should continue to work.
        I think the biggest thing is the public needs to understand
    that 20 years ago the networks paid the local television
    stations to carry the network signal. That is completely
    upside-down now. And this is why the retransmission consent
    negotiations are so much more prominent than they were even 10
    years ago. Because, in the past, the television stations let
    the cable companies carry them under terms of the must-carry
    laws, but now that they are not getting the revenue from the
    network, the retransmission consent negotiations have become
    much more prominent even for the small television stations.
        And that is why we just believe that it is working most of
    the time. The Time Warner case right now is really a rarity.
    You don't hear about all the ones that succeed.
        Senator Pryor. Mr. Wilson, I don't want these guys to have
    all the fun.
        [Laughter.]
        Senator Pryor. I want to ask you a question, as well. And
    that is something that I know that Comcast and the other cable
    companies are acutely aware of, and that is the cost of
    programming. And I know that it is hard to talk with too much
    specificity about it because it is just hard to talk about for
    legal reasons. But my understanding is the cost of programming
    to you continues to go up. And there is a bill in Washington
    that Senator McCain is offering on a la carte.
        And, again, just because some people here in Arkansas are
    not that familiar with that issue, could you give us just the
    sort of 1-minute summary of that and sort of how Comcast views
    all that?
        Mr. Wilson. Well, I think the concerns from the cable
    industry's standpoint when it comes to a la carte is that it is
    very difficult--I mean, a lot of times, the programmers include
    groups of programs during the negotiations, and one channel may
    be required if you purchase another one. So I think it is--and,
    again, Senator, this is an issue that is handled on levels much
    higher than mine.
        Senator Pryor. Sure.
        Mr. Wilson. But it is a problem that I think that we are
    concerned. I think the biggest concern, I think, when you come
    to a la carte is that there are some programs, some niche
    programs, that if they weren't combined may not ever see--the
    viewers may never be able to see. So I think that is the
    biggest concern.
        Senator Pryor. But is it true that your cost of programming
    continues to go up in terms of what----
        Mr. Wilson. Without a doubt, yes, sir.
        Senator Pryor.--content providers are charging.
        And do you have that same experience?
        Ms. Fuhr. Yes, we do. Costs are constantly going up. And,
    you know, you actually hear it reported, you know, what the
    different networks say because they are taking on different
    programming, different sports programming. I mean, they have
    actually become very, you know, forward about talking about
    what it is costing.
        And what we try to do is to package everything as cost-
    effective for the consumers. We have tiering. We have different
    ways that they can bundle to keep all their costs down.
        And like Mr. Wilson said, there are lot of networks--I
    mean, if you look at how many networks have grown and changed
    over the years, there are networks that might not have even
    survived if they had been offered a la carte. Because they were
    in a bundle and they could offer some niche programming that
    took off and got the network some recognition.
        And that is the bottom line, is to give our consumers
    options, cost-effectiveness, and entertainment. And so by
    bundling and trying to keep our cost factors down for them is
    the best way we can do it. But it is a struggle. I mean, you
    know, we all see that.
        Senator Pryor. Because isn't it true that the more you have
    to pay for the programming, at some point you are going to have
    to pass that on to the customer?
        Ms. Fuhr. Exactly. And, you know, it is an issue of where
    do you want to do that. And we try--anytime we do take a rate
    increase, we don't ever pass on the full amount that we are
    paying to the customer, but, you know, just a slight increase
    just to help offset that. Because we want to keep a variety for
    them, we want to keep it fresh, and we want to offer them the
    most current programming possible.
        So it is a struggle, though.
        Senator Pryor. Yes.
        And, Mr. Wilson, I guess several of you mentioned this
    Connect2Compete initiative. And tell us more about that. Tell
    us what your company is doing.
        Mr. Wilson. You know, this is probably one of the most
    exciting things that the industry has become involved in, and
    the entire industry is getting behind it.
        And, again, we know that there are areas where broadband is
    available but the consumer has made a conscious decision not
    to. And I think it was mentioned earlier in some of the
    testimony that part of it is digital literacy, part of it is
    cost. And what we are trying to do with these programs is
    address all of these.
        All of the programs, I think, are basically the same. I can
    really speak more to Comcast Internet Essentials. But we are
    targeting families that have a child on the free or reduced
    lunch program and allow them service for $9.95 a month, access
    to a computer for $150. And what we have found is that the
    partnerships that were formed in order to get the word out have
    been extremely beneficial and have worked extremely well.
        And if I could give you one example of a partnership that
    we have with the Little Rock School District, they have a
    program called Computer for Kids. And what the school district
    does is--there are a number of computers that are taken out of
    the schools every single year. They take all of those
    computers, take them to the Metro Vo-Tech school, right down
    the street here as a matter of fact, and refurbish them. And
    they may get--the ratio may be 1:2 or 1:3, but they refurbish
    these computers.
        We work closely with them, and they have a Computer Power
    Day, where, again, it is the same families, families that have
    a child on the free or reduced lunch program, can come in and
    purchase a computer for $40.
        So we have worked closely with them. It has been extremely
    successful. It is partnerships like that that I think are
    really benefiting and allow us to move forward with this
    program. And we are seeing the results.
        Senator Pryor. Good.
        Mr. Krile, let me ask about--I think that you said in your
    testimony, you sort of raised the question, or maybe you and I
    talked about this separately, I can't remember if it was in
    your testimony or not, but the fact that you think more people
    are taking the over-the-air signal now. Is that right?
        Mr. Krile. Yes.
        Senator Pryor. And tell me what you attribute that to. Is
    it the quality of the picture they can get with digital, or is
    it the cost of their alternatives, either cable, satellite? Or
    what is that?
        Mr. Krile. In some cases, it is a cost factor. People are
    turning back to over-the-air television because they think
    their cable or satellite bill has gotten to be too expensive.
        And also because there is a trend, particularly among
    younger viewers, that they don't have to watch a show at 7
    o'clock at night. They can watch it the next day when it is on
    demand, or they can watch it next day via Netflix or Hulu or
    one of those types of services, which now can be pretty much
    universally put up on your television screen.
        And so, by doing the cord-cutting route, they pay $8.95 a
    month for Hulu and $8.95 a month for Netflix, take their free
    over-the-air television. What they are losing is the ESPNs of
    the world for live sporting events and things like that. So it
    is a balancing act. But, yes, people are doing that.
        And part of it is the quality of the digital picture. I am
    a Comcast customer, but in moving to a new house, we wanted a
    TV in an office area that would have required me having Comcast
    come in and rewire. So I bought a 19-inch digital TV and a
    $24.95 digital indoor antenna. It is a flat little white box
    about that thick. The picture is beautiful. I was surprised at
    how good it was. And all the local stations come in.
        And I am an old fogy, but I can begin to see what somebody
    a little bit younger--we still like to watch that 7 o'clock
    show at 7 o'clock at night, but I can see where somebody
    younger who isn't tied to the house so much, who is busy with
    outdoor activities, with kid activities, they could adapt and
    adopt to that way of watching television.
        Senator Pryor. Let me ask you, Mr. Krile--I want to ask one
    of Commissioner Rosenworcel's favorite questions here about
    spectrum. I am assuming it is too early for you to know how the
    Arkansas television stations might, in this voluntary spectrum
    auction, how much of their spectrum they might be willing to
    give up, or are you sensing where this is going in Arkansas?
        Mr. Krile. There is not the spectrum shortage in Arkansas
    there is in the major metropolitan areas and some of the border
    states in particular. We don't think there will be an
    incredible demand by the AT&Ts, the Verizons of the world for
    Arkansas spectrum. There may be one or two small television
    stations that are not profitable that might be willing to
    voluntarily give up their bandwidth and be repacked on one
    other station's signal, but I just don't see a whole lot of
    that here.
        The biggest thing we are concerned about is just moving the
    stations around channel-wise again, because we still get calls
    about the digital conversion and people are still confused
    about what happened there and where they find their TV
    stations, even after all these years. And so we are going to do
    that, to a degree, perhaps, all over again with the repacking.
        Senator Pryor. You know, one of the things we talk about in
    Washington on this subcommittee is the fact that the Federal
    Government owns a lot of spectrum. And people point to the
    Department of Defense. There are other agencies too, but DOD is
    probably the big one.
        But, you know, in talking to them, it is interesting,
    because one of the things they say is, look, ``We are just like
    the general public. We are using more spectrum. More and more
    and more of our stuff is wireless and needs that spectrum.''
    And it could be everything from, you know, some of the weapons
    systems to just how they communicate and just the things that
    they do. They are more mobile than ever, just like everybody
    else is. So that technology is out there.
        So trying to get the Federal Government--now, there is a
    plan now that is being floated, and I don't know if it is in
    the final form yet, but there is a plan being floated. So we
    will see how that works out.
        But that is another factor in all of this equation when we
    talk about spectrum. And the goal is to try to make spectrum
    available so people can have more access to wireless devices,
    you know, the consuming public can.
        Now, Commissioner Rosenworcel, I feel like you have sat
    through this and you may have some comments or you may--I mean,
    we have talked about lots of different things. Some are pending
    before the FCC, and some are things that you just talk about a
    lot at FCC. So do you have any comments?
        Ms. Rosenworcel. Well, first of all, we do have these big
    spectrum auctions coming up, and they are going to have big
    impact on the way we dole out the airwaves in this country. So
    we are keenly aware of their impact or potential impact on
    broadcasters, even in markets where there may not be that much
    demand for mobile broadband right now.
        So I would say to the Arkansas broadcasters that under the
    law we do have an obligation in the repacking process to make
    sure that stations maintain their geographic and population
    coverage. That is in the law, that is important, and it is
    certainly something we are going to do.
        With respect to retransmission consent, I think I agree
    with Senator Pryor, we may not be able to solve that today.
        [Laughter.]
        Senator Pryor. Yes, that is fair to say.
        Ms. Rosenworcel. But I do think it is important to
    acknowledge that the vast majority of those negotiations are
    uneventful and they work. It is just, we do have these
    situations where consumers get caught in the crossfire, and
    they are the collateral damage in disputes like this, where
    they can't turn on the television and see their local game or
    the local news or their favorite shows.
        So if they go on for an extended period of time, I think at
    some point the FCC or Congress will start paying more
    attention. So it is in everyone's interest to make sure that
    they are resolved quickly and cleanly and without consumer
    disruption.
        Senator Pryor. Like, maybe before football season starts?
        Ms. Rosenworcel. Like, maybe.
        [Laughter.]
        Senator Pryor. That is what they were saying on the--I
    think it was on NPR. They were saying that the other day, that
    they thought that was one of the big factors in getting that
    wrapped up.
        So let me do what I did with the other panels. Let me ask
    if anyone has any other comments or questions, because we have
    talked about a lot of different things here, and I didn't know
    if anyone wanted to add anything or comment on anything
    further.
        Mr. Weatherly. I might just add that----
        Senator Pryor. Yes?
        Mr. Weatherly.--to buttress on Doug's comment about the
    repacking, you know, our concern is the incredible cost,
    because we all went through--in AETN's case, it was $25 million
    to do six transmitters. And to have to do that again in a
    climate where fundraising is extremely difficult for us is hard
    for us to imagine. And that is at a time when people are using
    our product more than ever. So it is a concern to us,
    obviously.
        Senator Pryor. You maybe covered this earlier, but give us
    a feel for AETN's financial situation. I know you get some
    Federal Government funds. And, of course, you are a state
    entity so there is some money there, I am sure. And then you
    get a lot from your viewers and then some foundations, et
    cetera. So is there a mix you can tell us about?
        Mr. Weatherly. We get about 10 percent from Federal
    sources. Everything AETN receives from Federal sources amounts
    to 13 seconds of annual Federal spending. And all of public
    media gets--television, radio--is about an hour. So it is very
    important to us. When you hear all the arguments, it is not
    necessarily about the overall money.
        That is about 10 percent. About 50 percent, 60 percent if
    you add in the ADE work with us on education, it comes from
    state sources. And then the rest comes from viewer
    contributions. The programs that people watch at night or on
    weekends, the ``Downton Abbeys'', the ``Sesame Streets'', the
    Ken Burns, those are paid for by viewer contributions here in
    Arkansas. We have tried to, for our 50 years, always tried to
    do it that way.
        So that is basically the mix. But we are doing relatively
    well. We don't have the resources that some commercial stations
    do, but we also don't have some of the limitations they do in
    what we can broadcast and the mission-based broadcasting.
        So I don't know if that answers your question, but----
        Senator Pryor. It does. And is it true that your
    viewership, PBS's viewership, is actually going up?
        Mr. Weatherly.--it was up 5 percent last year. ``Downton
    Abbey'' certainly helps, but that is only one program. So it is
    up across the board. We don't get the same kind of ratings
    material and feedback here at AETN, but our anecdotal and the
    evidence we get is it is also up here, too, certainly our
    responses and things like that. Funding, not necessarily,
    because that is always a struggle, but certainly the use. And
    there are a lot of reasons for that.
        I think I have used the analogy before that when people
    would always say there are stations that can take our place,
    one example was The Learning Channel in 1972, but they couldn't
    make any money, so now they call themselves TLC and their big
    program is ``Honey Boo Boo.'' And that is fine for some people,
    but--not criticizing that, and certainly it has a place. But we
    have continued to maintain and somewhat grow because we haven't
    gone in that direction. Of course, we are funded differently,
    too.
        Senator Pryor. Right.
        Well, listen, this is good. Does anybody else have any
    questions or closing comments or anything?
        First, let me say thank you again for being here and doing
    this. I know you all prepared for this and have spent your
    whole day with us here at the Arkansas Electric Coops, and we
    appreciate that.
        And we again want to thank the co-ops for providing their
    facilities today. It has been a great public service, and we
    appreciate them.
        What we are going to do now is we are going to close down
    the hearing. And I, again, thank everybody for coming, all the
    work that you have done.
        And what we do on the Subcommittee is we leave the record
    open for 2 weeks. So if any of my colleagues around the
    country, if they want to submit questions, or if you all want
    to supplement some of your answers, you are welcome to do that.
    But we will leave the record open for 2 weeks.
        And, again, I want to say thank you for all that you do,
    and thank you for making sure that Arkansas doesn't get left
    behind when it comes to technology and the innovations that you
    see and the investment and all the things that you have to do.
    We really, really appreciate you.
        And also we want to say a special thanks to Commissioner
    Rosenworcel for being here and for coming to Arkansas and just
    participating around the state. And we are going to go to Cabot
    in a little bit and see what they are doing in the Cabot school
    system with some of their technology and how students use it
    and how it helps the educational process.
        So, again, thank you all for being here.
        And, with that, we will adjourn.
        [Whereupon, at 11:47 a.m., the hearing was adjourned.]