[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: [email protected]

    Michael Manley, RNP, MNSc
    University of Arkansas for Medical Sciences
    4301 West Markham Street, #518
    Little Rock, Arkansas 72205
    (501) 526-7453
    E-mail: [email protected]

    Tina Benton, RN
    University of Arkansas for Medical Sciences
    4301 West Markham Street, #518
    Little Rock, Arkansas 72205
    (501) 686-5986
    E-mail: [email protected]

    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.]

                                  
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