[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 DISCONNECTED: RURAL BROADBAND AND THE BUSINESS CASE FOR SMALL CARRIERS

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY

                               joint with

              SUBCOMMITTEE AGRICULTURE, ENERGY, AND TRADE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             MARCH 6, 2018
                               __________

 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
			                                     

            Small Business Committee Document Number 115-060
             Available via the GPO Website: www.govinfo.gov
                                  ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
28-783                    WASHINGTON : 2018                 



























                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director 






















                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Aumua Amata Coleman Radewagen...............................     1
Hon. Al Lawson...................................................     2
Hon. Rod Blum....................................................     3
Hon. Brad Schneider..............................................     4

                               WITNESSES

Ms. Erin Fitzgerald, Regulatory Counsel, Rural Wireless 
  Association, Inc., Washington, DC..............................     5
Mr. Tim Donovan, Senior Vice President, Legislative Affairs, 
  Competitive Carriers Association, Washington, DC...............     7
Mr. Paul Carliner, Co-Founder, Bloosurf, LLC., Salisbury, MD.....     9
Mr. Derrick Owens, Senior Vice President of Government & Industry 
  Affairs, WTA--Advocates for Rural Broadband, Washington, DC....    11

                                APPENDIX

Prepared Statements:
    Ms. Erin Fitzgerald, Regulatory Counsel, Rural Wireless 
      Association, Inc., Washington, DC..........................    32
    Mr. Tim Donovan, Senior Vice President, Legislative Affairs, 
      Competitive Carriers Association, Washington, DC...........    41
    Mr. Paul Carliner, Co-Founder, Bloosurf, LLC., Salisbury, MD.    56
    Mr. Derrick Owens, Senior Vice President of Government & 
      Industry Affairs, WTA--Advocates for Rural Broadband, 
      Washington, DC.............................................    61
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    NTCA - The Rural Broadband Association.......................    76

 
 DISCONNECTED: RURAL BROADBAND AND THE BUSINESS CASE FOR SMALL CARRIERS

                              ----------                              


                         TUESDAY, MARCH 6, 2018

                  House of Representatives,
               Committee on Small Business,
             Subcommittee on Health and Technology,
                                     joint with the
            Subcommittee on Agriculture, Energy, and Trade,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 10:03 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Aumua Amata 
Coleman Radewagen [chairman of the Subcommittee on Health and 
Technology] presiding.
    Present from the Subcommittee on Health and Technology: 
Representatives Radewagen, Brat, Marshall, and Lawson.
    Present from the Subcommittee on Agriculture, Energy, and 
Trade: Blum, Comer, Curtis, and Schneider.
    Also Present: Representative Chabot.
    Chairwoman RADEWAGEN. Talofa. Good morning. This hearing 
will come to order.
    First, I would like to thank our witnesses for taking the 
time to share their thoughts with us today. I look forward to 
your testimony.
    I would also like to thank Chairman Blum for co-leading 
this important discussion.
    Today's joint hearing of the Subcommittee on Health and 
Technology and the Subcommittee on Agriculture, Energy, and 
Trade will focus on challenges facing small internet service 
providers deploying broadband to rural high-cost areas. This 
hearing expands upon past conversations started in Committee 
and recently continued in a hearing led by Chairman Blum a few 
short weeks ago.
    This topic is of particular significance to the people of 
American Samoa as our telecommunications and internet 
connectivity is severely lacking, especially in the wake of 
Tropical Cyclone Gita.
    As our world becomes increasingly dependent on a robust 
telecommunications service and wireless internet, the lack of 
it in places like American Samoa and rural America becomes even 
more glaring. These high-cost areas depend upon the 
industriousness and commitment to deploying robust, accessible 
broadband by small, rural, and regional internet service 
providers.
    However, challenges facing these carriers in obtaining 
adequate financing can impede forward progress, further 
exacerbating the disparities between urban and rural 
communities.
    Having this connectivity is critical, not only to stimulate 
economic growth, but also to ensure a basic level of 
connectivity for our citizens, such as the ability to place a 
call to loved ones and first responders in the event of an 
emergency or a disaster.
    As we begin to examine the current state of America's 
infrastructure and take steps to improve our Nation's highways 
and buildings, we need to ensure that broadband is at the front 
and center of all infrastructure discussions.
    I now yield to Ranking Member Lawson for his opening 
statement.
    Mr. LAWSON. Thank you, Madam Chair.
    Today's hearing will offer the opportunity to examine the 
many changes of broadband development. The technology and 
telecommunications sector is a major contributor to the U.S. 
economy and a lifeline for small business connecting with 
customers all over the world.
    With the potential to create new jobs and keep millions of 
employees at work in the broadband sector, some carriers stand 
ready to capture the economic gains brought on by this 
technology. More small businesses are embracing broadband than 
ever before and it is rapidly changing the way business is 
conducted.
    Consumers have seen the benefit broadband technology can 
bring to our daily lives in a variety of ways, yet the 
percentage of rural and small businesses without access to 
broadband is twice as high than in urban areas.
    Even though broadband subscriptions have steadily 
increased, rural and low-income communities are being outpaced 
by the rest of the country due to a lack of network 
development. Unfortunately, the adoption gap may further widen 
without adequate support of broadband deployment.
    This is especially true for small carriers in the forefront 
of the buildout in rural areas. Federal loans and grant 
programs have helped economically disadvantaged communities 
gain access to high speed internet, resulting in attracting 
businesses, low unemployment rates, and skilled workers.
    However, there is an estimated 200 million shortfall in the 
Universal Service Fund program, the primary funder for rural 
development efforts. Among other funding challenges for small, 
rural carriers are declining roaming charges and broken 
promises to include rural broadband development in the 
infrastructure package. Instead, President Trump gave the 
States $50 billion of the $200 billion to States' rural 
infrastructure.
    Let's be clear. This will likely mean bridges and roads and 
not broadband investment. While I agree to the improvement to 
our Nation's transportation infrastructure is necessary, so is 
our investment in ensuring everyone, especially those in rural 
communities, have access to adequate internet access. Omitting 
clear funding language to broadband infrastructure hurts our 
communities who need it the most.
    In advance of the testimony, I want to thank all our 
witnesses for traveling here today for both their participation 
and insight into the important topic.
    Thank you, and I yield back.
    Chairwoman RADEWAGEN. I now yield to Chairman Blum for his 
opening statement.
    Chairman BLUM. Thank you, Chairman Radewagen.
    And welcome to our panelists today. I appreciate you all 
being here.
    Today's joint hearing focuses on a topic that is 
particularly important to many Iowa family farmers and rural 
community members I represent back in my home district of 
northeast Iowa. While rural broadband was touched upon at the 
last hearing I chaired in February, I thank the chairwoman for 
the opportunity to take a deeper dive into the specific 
challenges facing rural broadband deployment in our 
conversation today.
    It is easy to recognize the importance of seamless and 
robust internet and telecommunications service connecting rural 
America to the rest of the country. However, it is critically 
important that we fully understand how to get to that point and 
how we can continue to nurture that growth.
    Small, rural internet service providers shoulder a heavy 
burden deploying broadband across hundreds of miles of diverse 
and sparse terrain. The significant investment required to 
deploy, maintain, update, and continually service these high-
cost rural areas should not be taken lightly. It is 
imperative--imperative--that we identify and help mitigate the 
difficulties identified by small, rural carriers in deploying 
broadband so we can begin to close the urban and rural digital 
divide.
    The ability to deliver a high quality of life to rural 
Americans, spur job growth and job creation, improve access to 
education, health services, and innovation in the agritech 
sector are all dependent on the ability to transmit data and 
communication information quickly, efficiently, and at low 
cost.
    Echoing the sentiment expressed by the chairwoman, as we 
look ahead at plans to improve our Nation's infrastructure we 
need to make sure that rural broadband is part of that 
conversation. The progress of our Nation depends on it.
    I look forward to the testimony of our witnesses to 
identify the challenges for small, rural carriers and 
potentially uncover solutions that Congress may consider to 
ensure that the mobile wireless marketplace is competitive and 
fair for all businesses.
    Madam Chairwoman, I yield back the balance of my time.
    Chairwoman RADEWAGEN. I now yield to Ranking Member 
Schneider for his opening statement.
    He is not here, so we will continue.
    If Committee members have an opening statement prepared, I 
ask that they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for you. You will each have 5 minutes to deliver your 
testimony. A light will start out as green. When you have 1 
minute remaining, the light will turn yellow. Finally, at the 
end of your 5 minutes, it will turn red. I ask that you try to 
adhere to that time limit as much as possible.
    I would now like to formally introduce our witnesses.
    Our first witness is Ms. Erin Fitzgerald, regulatory 
counsel to the Rural Wireless Association, or RWA. Ms. 
Fitzgerald has extensive experience on a wide range of issues, 
including broadband deployment, universal service, spectrum 
auctions, data roaming, and wireless licensing.
    Erin advocates in rulemaking and policymaking proceedings 
on behalf of the RWA and frequently appears before the Federal 
Communications Commission.
    We look forward to hearing from you today.
    Our second witness today is Mr. Tim Donovan, senior vice 
president of legislative affairs for the Competitive Carriers 
Association, or CCA.
    Mr. Donovan advocates on the CCA's behalf on issues 
impacting wireless telecommunications providers, including 
broadband deployment, universal service, access to spectrum 
roaming, and other issues that affect the businesses of these 
carriers.
    Mr. Donovan has previously appeared before the Committee in 
the same capacity, and we welcome you back today.
    Our third witness is Mr. Paul Carliner, cofounder and CEO 
of Bloosurf, LLC. Bloosurf is one the fastest growing 
independent rural high speed internet companies in the State of 
Maryland.
    Prior to cofounding Bloosurf, Mr. Carliner served nearly 20 
years in the Federal Government, both on the Hill as a Senate 
staffer and later as a consultant.
    I now yield to Ranking Member Lawson to introduce our final 
witness.
    Mr. LAWSON. Thank you, Madam Chair.
    It is my pleasure to introduce Mr. Derrick Owens, senior 
vice president of government and industry affairs at WTA, which 
advocates for rural broadband.
    Prior to joining WTA, he worked at the U.S. Department of 
Commerce's National Telecommunications and Information 
Administration.
    Mr. Owens has a master's degree in public policy from the 
University of Maryland School of Public Policy and received his 
bachelor's degree in political science from Allegheny College 
in Pennsylvania.
    Welcome, Mr. Owens, to the Committee.
    Chairwoman RADEWAGEN. Thank you.
    Before the witnesses start their testimony, I would like to 
yield to Mr. Schneider, who is with us.
    Mr. SCHNEIDER. Thank you, Madam Chairwoman.
    And thank you for joining us today to the witnesses.
    It is an important hearing today. As a powerful tool for 
both consumers and entrepreneurs, the internet serves small 
businesses in a multitude of ways.
    Unfortunately, 34 million Americans still lack access to 
high speed internet, of which 39 percent live in our rural 
communities, compared to just 4 percent of those in urban 
communities.
    With more than 3.2 billion people online worldwide, 
internet use has increased almost sevenfold in the last 15 
years. However, for small firms in rural areas, the lack of 
broadband access too often means trouble attracting new 
businesses, creating jobs, or breaking into new markets.
    Time and again we have seen how the internet can connect 
companies large and small with new markets and new customers, 
something especially important for rural small businesses.
    The internet has helped small businesses across the country 
grow, and we want to ensure that rural small businesses are not 
left behind due to poor connectivity or an unreliable network.
    This is why we must support the expansion of broadband 
infrastructure in rural areas. All of America's entrepreneurs 
deserve a level playing field regardless of where they are 
based.
    Today we will hear more about how we can help small 
businesses connect to high speed internet. On that note, I want 
to thank today's witnesses for being here, and I look forward 
to hearing your testimony.
    Chairwoman RADEWAGEN. Ms. Fitzgerald, you are now 
recognized for 5 minutes.

 STATEMENTS OF MS. ERIN FITZGERALD, REGULATORY COUNSEL, RURAL 
 WIRELESS ASSOCIATION, INC., WASHINGTON, DC; MR. TIM DONOVAN, 
    SENIOR VICE PRESIDENT, LEGISLATIVE AFFAIRS, COMPETITIVE 
  CARRIERS ASSOCIATION, WASHINGTON, DC; MR. PAUL CARLINER, CO-
FOUNDER, BLOOSURF, LLC., SALISBURY, MD; AND MR. DERRICK OWENS, 
 SENIOR VICE PRESIDENT OF GOVERNMENT & INDUSTRY AFFAIRS, WTA--
         ADVOCATES FOR RURAL BROADBAND, WASHINGTON, DC

                  STATEMENT OF ERIN FITZGERALD

    Ms. FITZGERALD. Chairmen Radewagen and Blum, Ranking 
Members Lawson and Schneider, and members of the Subcommittee, 
thank you for this opportunity. I am Erin Fitzgerald, 
regulatory counsel for RWA, which represents wireless carriers 
with fewer than 100,000 subscribers. Our members are passionate 
about ensuring that rural America is not left behind.
    RWA members operate in areas where low population density, 
extreme weather conditions, and difficult terrain make doing so 
an expensive and challenging task. Insufficient spectrum 
access, a dysfunctional data roaming market, and declining 
universal service support exacerbate these challenges.
    Nevertheless, networks operated by small, rural-based 
wireless service providers promote public safety and encourage 
innovation and economic development each and every day.
    I want to start by briefing discussing Mobility Fund Phase 
II, the Universal Service Fund program designed to support 
mobile broadband network deployment and maintenance in areas 
where there isn't a business case for unsubsidized coverage.
    At top of mind for RWA members is the Commission's recently 
released initial eligible areas map. RWA is concerned that the 
Commission's process has failed to yield an accurate picture of 
mobile wireless service throughout the country. Issues 
regarding a too-low support budget, an onerous challenge 
process, and costs imposed by letter of credit requirements are 
also cause for concern.
    I would like to talk a bit about some of the business 
issues at play in the marketplace. Rural carriers make every 
effort to offer robust coverage throughout their entire service 
area, unlike larger carriers which tend to focus coverage on 
towns and major highways.
    The decision to offer robust coverage results in additional 
capital expenses in the form of more network equipment, towers, 
and backhaul facilities. Operational expenses are higher as 
well, and small carriers typically pay higher per-unit prices 
for the latest and greatest mobile devices because they are 
seldom offered volume discounts.
    Unlike nationwide providers, small rural carriers are not 
able to average the costs of their rural sites with more 
return-on-investment-friendly urban and suburban sites.
    I would like to turn your attention now to spectrum. 
Spectrum access promotes marketplace competition, and Section 
309(j) of the Communications Act requires the FCC to ensure 
that spectrum is available to rural telephone companies and 
small businesses.
    When designing future spectrum auctions, the FCC should 
ensure that it uses appropriately sized geographic licenses and 
bidding credits that will encourage auction participation by 
small providers.
    The secondary spectrum market is frequently touted as a 
silver bullet to address small and rural carrier spectrum 
needs. But leasing and partitioning do not provide small and 
rural entities with the spectrum needed for targeted local 
deployments. In fact, the secondary market works for 
consolidating spectrum in the hands of a few rather than 
dispersing spectrum among many.
    In order to keep spectrum in rural areas from lying fallow, 
RWA supports a keep-what-you-serve approach to spectrum 
licensing where if a licensee is not providing service to 90 
percent of its geographic license area after a 5-year post-
renewal period, any unserved area should be made available for 
relicensing to providers who wish to serve it.
    This approach provides an incentive for existing licensees 
to continue to invest in market buildout and also promotes the 
rapid deployment of wireless services in rural America.
    Roaming issues are also of serious concern to RWA's 
members. The country's nationwide carriers often refrain from 
offering their own subscribers roaming on small carrier 
networks even when their own coverage is inferior or 
nonexistent.
    While the FCC's roaming rules allow this practice, it is 
harmful to American consumers who are unable to access rural 
networks, networks those same consumers have supported through 
contributions into the Universal Service Fund.
    Further, this practice could threaten public safety. In the 
event of debilitating failure of one carrier, an untold number 
of consumers, including frontline public safety users, would be 
unable to communicate without bilateral roaming in place.
    Another problem lurking is the issue of VoLTE roaming. 
VoLTE, which stands for Voice over LTE, is the ability to make 
a telephone call over a 4G LTE network. Nearly all the Nation's 
mobile carriers are using 4G LTE networks. The country's 
nationwide carriers are also actively shutting down their 
circuit-switched 2G and 3G networks.
    What will happen when all mobile wireless carriers are LT 
only and no longer use circuit-switched networks to complete 
voice telephone calls. Will rural consumers be unable to place 
a simple telephone call because large carriers refuse to enter 
into VoLTE roaming agreements?
    There is anecdotal evidence to suggest that this is 
happening now, and action must be taken before 2G and 3G 
networks are shut down to make sure that all wireless consumers 
in America can make VoLTE voice calls when roaming.
    As I discussed earlier, universal service support is 
tremendously important to rural broadband network deployment 
and maintenance. The FCC is preparing to hold two reverse 
auctions for Universal Service Fund support. Before a winning 
bidder can receive support, it must obtain an irrevocable 
standby letter of credit.
    RWA and its members are concerned that obtaining the 
necessary letter of credit will be a burdensome and costly 
process. RWA has worked with the National Association of Surety 
Bond Producers and the Surety and Fidelity Association of 
America to explore the possibility of utilizing surety bonds as 
an alternative.
    Also, RWA has suggested that the FCC eliminate its LOC 
requirement entirely. The FCC has all the security it needs 
with respect to Commission licenses: the threat of revocation, 
or nonrenewable license should a universal service recipient 
commit any misconduct.
    On behalf of RWA, your interest in the challenges facing 
rural wireless carriers is greatly appreciated. Thank you for 
inviting me to be with you today. I look forward to your 
questions.
    Chairwoman RADEWAGEN. Thank you, Ms. Fitzgerald.
    Mr. Donovan, you are recognized for 5 minutes.

                    STATEMENT OF TIM DONOVAN

    Mr. DONOVAN. Thank you, Chairwoman Radewagen, Ranking 
Member Lawson, Chairman Blum, Ranking Member Schneider, and 
members of the Subcommittee. Thank you for inviting me to 
testify on rural broadband and the business case for small 
carriers.
    I am here on behalf of CCA representing nearly 100 wireless 
carriers as well as the companies that make up the wireless 
ecosystem. The vast majority of CCA's members are small 
businesses who employ the same consumers that live and work in 
their communities.
    Since I testified before your Committee last June, the 
Rural Prosperity Task Force has found that e-Connectivity is 
essential, and the administration, Congress, and the FCC have 
all proposed steps to support the business case to close the 
digital divide. This Committee's hearing just a few weeks ago 
on restoring rural America underscored the importance of rural 
broadband access, and today we will talk about policies to make 
that happen.
    Mobile broadband use continues to increase exponentially. 
In 2016, Americans consumed 1.8 exabytes of data per month 
using wireless connections. That is 1.8 billion gigabytes--or, 
put another way, more than 7,000 times the total of all 
information stored in the Library of Congress each month--and 
data use will grow another five times over the next 5 years.
    This staggering data consumption reflects the ways that 
mobile broadband powers every aspect of life, from jobs and 
economic growth to public health and safety. Amidst talk of 
infrastructure for the next century, including broadband, areas 
without mobile coverage cannot be left behind.
    Tech companies recently announced plans to deploy 4G mobile 
broadband on the moon. Yet too many in rural America are 
unserved or underserved despite millions invested by CCA 
members in their communities.
    With my full statement in the record, I would like to focus 
on three key issues that directly impact small carriers.
    First, you cannot manage what you cannot measure. Reliable 
coverage data is critical to determine where funding should 
flow, including the FCC's $4.5 billion for Mobility Fund Phase 
II through the Universal Service Fund and any new funding made 
available by Congress to improve infrastructure.
    While progress has been made since we discussed this issue 
last year, the underlying map for areas deemed initially 
eligible for Mobility Fund II support, released just last week, 
could prevent your districts from being eligible for support 
dollars.
    The updated data should have reduced overstated coverage 
and allow carriers to challenge claim service in those areas. 
It is now clear that the parameters selected by the FCC were 
not sufficient to produce a map that reflects the experience 
you have as you travel your districts.
    This is an acute problem for small carriers who do not have 
the time and resources to drive test vast geographic areas. Any 
areas that are presumed to be served and are not challenged, 
regardless of the consumer experience on the ground, will not 
be eligible for a decade of USF support.
    Second, rural areas suffer when small carriers must 
navigate a regulatory maze to deploy infrastructure. 
Application review delays, burdensome fees, and redundant 
studies increase uncertainty and make it more expensive to 
upgrade and expand service.
    And while technology has evolved, these rules have not. 
Today the same review process applies to deploy a small cell 
the size of a backpack as it does to build a tall tower.
    Congress has dozens of bills pending, including bills 
sponsored by members of this Committee, to streamline 
deployment, and CCA urges swift action.
    This hearing is timely as last week the FCC announced that 
it will vote on March 22 to make sure the U.S. is 5G ready. 
This is important, not only for the future, but for deployments 
of all base stations, technologies, and sizes today.
    To be clear, carriers are deploying small cells in urban 
and rural areas alike. In fact, today FCC Commissioner Carr is 
in Edinburg, Virginia, a town with no stoplights, viewing the 
economic benefits of smaller-scale network deployments in a 
rural area with CCA member Shentel.
    Third and finally, small carriers must access the resources 
all carriers need to provide service. This includes invisible 
resources like spectrum. Carriers need greater access to 
spectrum at high, mid, and low bands.
    Congress can support small carriers in this regard by first 
enacting the Spectrum Auction Deposits Act to eliminate a 
roadblock currently preventing the FCC from holding any 
spectrum auctions. Second, keeping the 600-megahertz incentive 
auction repack on time so that carriers can use this spectrum 
to serve consumers. And third, ensuring that all carriers can 
access spectrum in higher-frequency bands.
    The largest two carriers have a head start in these 
spectrum bands, and to catch up, Congress must push for rapid 
auction of all bands ready for wireless use.
    Beyond spectrum, carriers must also have reasonable access 
to equipment both for their networks and the devices consumers 
demand. This is not only a competitive issue, but a lack of 
access to devices and equipment can make it harder or 
impossible to follow regulatory mandates premised on the latest 
technology.
    Bottom line, this issue disproportionately affects small 
carriers who lack the economies of scale enjoyed by the largest 
companies.
    Policies established by Congress and implemented by the FCC 
determine whether small businesses in rural America have access 
to the latest services or are left behind the modern mobile 
economy. Competitive carriers want to be part of the solution.
    Thank you again for holding today's hearing, and I welcome 
any questions.
    Chairwoman RADEWAGEN. Thank you, Mr. Donovan. We appreciate 
your testimony.
    Mr. Carliner, you are recognized for 5 minutes.

                   STATEMENT OF PAUL CARLINER

    Mr. CARLINER. Thank you, Chairwoman Radewagen, Chairman 
Blum, Ranking Member Lawson, and Ranking Member Schneider. I am 
Paul Carliner, cofounder and CEO of Bloosurf, and I want to 
thank you for the opportunity to appear before you today.
    Bloosurf is a rural high speed internet service provider 
headquartered in Salisbury, Maryland. Our company was founded 
in 2009 with the goal of providing affordable and sustainable 
high speed internet service on the lower Eastern Shore of 
Maryland. We provide services to homes, businesses, schools, 
hospitals, even to residents living on an island in the middle 
of the Chesapeake Bay.
    In 2010, our company was awarded $3.2 million by the U.S. 
Department of Agriculture's Rural Utility Service to build a 
new state-of-the-art fixed wireless LTE network covering 
approximately 100,000 households across three rural Maryland 
counties on the lower Eastern Shore.
    I want to thank the Rural Utility Service's 
Telecommunications Program, particularly Mr. Ken Kuchno and Mr. 
Rick Gordon, who were so instrumental in helping our company 
and many others build out the rural infrastructure, as well as 
the State of Maryland and the Maryland Broadband Cooperative, 
two critical partners in our ability to bring rural high speed 
internet service.
    I would like to share with you our experiences and lessons 
learned as a small rural ISP.
    First, I think it is clear that the only way that rural 
America will cross the digital divide is through a sustained 
public investment by the local, State, and Federal governments. 
Without public investment, rural high speed internet companies 
will be limited in their ability to grow and sustain service 
over the long-term. If a rural community has a higher 
percentage of unserved households, the need for public 
investment is even greater.
    I want to applaud the FCC for moving forward with the 
Connect America Fund II Reverse Auction to allocate up to $2 
billion for rural broadband this year. This will be a very 
critical and important step to help the buildout of the 
infrastructure.
    Without public investment, the case for private investment 
in rural broadband is extremely difficult. Capital expenditures 
are very high and revenue and the subscriber base are low. This 
market structure is very unfavorable to traditional debt 
financing, and there is a limit to the amount of equity 
financing that a small business can accommodate. This is why 
public investment is so essential.
    Each community needs a customized solution because each 
rural area is different. Small rural ISPs understand and know 
the territory they operate in and are able to customize 
solutions that both work from a technologically as well as from 
a business standpoint.
    Second, any Federal strategy to expand rural high speed 
internet service must focus on the last mile, that part of the 
network that actually brings service directly into the home and 
business.
    Previous public investments focused heavily on the middle 
mile, that fiber or cable under the county road or county 
highway, and after a decade or more of public and private 
investment in the middle mile, we believe the Federal 
Government should focus now on how to monetize that investment 
and actually provide service into the homes and businesses. 
These rural communities have paid for this infrastructure 
through their tax dollars, and we believe it is time they 
actually get the service from it.
    Federal funds should be used also to encourage local and 
State governments to adopt comprehensive last mile strategies 
that work with local internet service providers that combine 
both middle mile and last mile solutions into a sustainable and 
affordable solution for high speed internet service to rural 
communities.
    Onerous financial requirements for accessing Federal funds 
should be revised. These onerous requirements, such as large 
lines of credit, as Ms. Fitzgerald mentioned, arbitrary 
operating margins, debt-to-equity ratios are not always the 
most important criteria in assessing an ISP's liability, and 
nor do they offer much guidance in judging future performance. 
Instead, emphasis should be on past performance metrics and not 
exclusively on traditional financial metrics.
    Access to spectrum is another issue that was mentioned that 
is also critically important. Our company uses licensed 
spectrum, and it makes a huge difference in the quality of our 
service and the coverage area that we are able to achieve. We 
hope that the FCC--as mentioned, both Mr. Donovan and Ms. 
Fitzgerald mentioned, that access to the spectrum, a dedicated 
spectrum for the rural ISPs, such as Bloosurf, is very, very 
important.
    Finally, I think there should also be a mechanism to share 
information between the Federal Government and ISPs on things 
such as cybersecurity. Oftentimes small companies like ours who 
are critical network operators don't always access the latest 
information or data when it comes to cybersecurity, and having 
a formal mechanism with Federal agencies to do that to keep us 
up to speed will be very, very helpful.
    Access to affordable internet service is critical for all 
rural communities to attract jobs, improve education, and 
provide basic services such as medical care. Rural ISPs are at 
the forefront of this, and we local companies are enjoying 
great popularity as we expand our service.
    And with companies like ours, there is a multiplier effect 
in the communities that you don't have with the large national 
carriers. We hire local companies, local contractors, sales and 
marketing people, and there is a multiplier effect in 
communities with companies like ours that simply is not always 
there with some of the larger companies.
    Finally, I encourage Federal agencies to adopt policies 
that encourage incentivized rural internet service providers to 
invest and grow in the marketplace and work with companies like 
Bloosurf to expand that coverage.
    Thank you, Madam Chairman.
    Chairwoman RADEWAGEN. Thank you, Mr. Carliner. We 
appreciate your testimony.
    Mr. Owens, you are recognized for 5 minutes.

                   STATEMENT OF DERRICK OWENS

    Mr. OWENS. Thank you.
    Good morning, Chairwoman Radewagen, Chairman Blum, Ranking 
Member Lawson, Ranking Member Schneider, and members of the 
Subcommittee. Thank you for the opportunity to testify today. I 
am Derrick Owens, senior vice president of government affairs 
and industry affairs for WTA--Advocates for Rural Broadband.
    WTA represents more than 340 small, rural 
telecommunications providers from across the country. Our 
members provide voice, broadband, and video-related services to 
some of the most rural high cost areas in the Nation.
    Imagine having to provide communication services to 3,900 
subscribers across 3,200 square miles. This is the reality for 
Golden Belt Telephone Association based in Rush Center, Kansas.
    Why do small companies build in these remote areas? Because 
decades ago larger providers didn't build there because it was 
too difficult to make a business case to do so.
    This is the reason why small, rural local exchange 
carriers, RLECs, came into existence, and why without them 
rural America would be left behind in this digital age.
    I would like to highlight a few areas where policymakers 
can make a difference when it comes to helping our member 
companies deploy broadband in rural America.
    First, there must be stability and predictability with the 
Universal Service Fund. The Communications Act requires 
universal service support to be sufficient and predictable.
    In 2011, the FCC adopted a $2 billion budget for the RLEC 
portion of the USF High Cost Program. To remain under budget, a 
budget control mechanism was adopted that reduces support 
automatically if the budget is exceeded.
    While the FCC approves several other cuts and constraints, 
the BCM, as we call it, is probably the most onerous. Last 
year, a WTA member testified before this Committee about the 
importance of USF and how the frozen support level, as well as 
the cap on the High Cost Program and the imposition of the BCM, 
was making it difficult to invest.
    In the last year alone, a member company in Kansas and one 
in Illinois have seen their USF support reduced by over 
$400,000 and $800,000, respectively, because of the BCM. These 
are just two examples. There are a couple more in my testimony. 
These unpredictable year-to-year support reductions are 
certainly proving to disrupt and discourage investment.
    We are beginning to see a change in that direction, 
however. A proposal by FCC Chairman Ajit Pai before his fellow 
commissioners is a step in the right direction, in our opinion. 
It seeks to restore some of the cuts in USF support while 
asking important questions about the overall sufficiency and 
size of the USF budget going forward. We greatly appreciate the 
work several members of this Committee have done to help get us 
to that point.
    Point two. It is encouraging to see much attention being 
placed on rural infrastructure in Congress and within the 
administration. WTA supports the $20 billion that is called for 
in the February budget agreement, and we support the $50 
billion in the President's infrastructure outline presented to 
Congress a few weeks ago.
    However, these proposals don't go far enough. There needs 
to be dedicated funding for rural broadband infrastructure.
    We should also do more to ensure the broadband 
infrastructure needs in Tribal areas are being met. WTA 
supports a proposal by the National Tribal Telecommunications 
Association that would increase an RLEC's USF high cost support 
if those companies actually serve Tribal areas. We understand a 
variation of this proposal is being considered at the FCC and 
may be part of Chairman Pai's proposal.
    Finally, when it comes to government regulation there is no 
argument that government needs to keep track of where and how 
Federal funds for broadband and USF dollars are being used. The 
debate is not about regulation and reporting versus no 
regulation and reporting, but how much, how often, and what 
kind.
    Regulation can often be helpful when it comes to ensuring 
small businesses that lack market power can compete against 
much larger companies. For example, our members benefit from 
regulations requiring large providers to interconnect with 
smaller ones so our communications networks function properly.
    Our member companies can also benefit from updated video 
regulations. Again, at times, regulations can enhance 
competition.
    There is also the case that some regulations are 
unnecessarily burdensome. Several of our companies have 
analyzed how much time and money they spend completing filings 
for the FCC, RUS, and other entities, estimates that run around 
$80,000 to $90,000 annually. Environmental and historical 
preservation reviews are also costly and add significant cost 
for small businesses.
    While some rules, regulations, and reviews are necessary, 
others can be eliminated or reduced without any significant 
adverse impact to the public. For instance, all regulated 
telecommunications providers are required to complete the FCC's 
Local Competition and Broadband Report, known as the Form 477. 
That is twice a year. The data are used to produce an annual 
report to Congress and to update the national broadband map.
    The FCC estimates the average company will spend 387 hours 
per semi-annual filing, or 774 hours per year. WTA believes 
this proposal can be completed annually.
    WTA has been supportive of several bills that would provide 
regulatory relief to small carriers. For example, a bill 
introduced by Representative Curtis would expedite 
environmental reviews for broadband projects using existing 
operational rights of way on Federal lands.
    Our member who testified last year had to wait 9 months to 
get an environmental approval to install fiber along a Federal 
highway after receiving a Federal stimulus grant/loan combo. 
Another company who wanted to lay conduit along a Forest 
Service road was forced to pay for an environmental impact 
assessment even though the road is regularly repaved and the 
area around the road is sprayed with herbicide. These types of 
reviews add 18 to 24 months to the length and 10 to 20 percent 
to the cost of broadband projects.
    In closing, WTA members work hard and under difficult 
circumstances to bring broadband to their communities. 
Government has an important role to play here. Predictable 
support and smarter rules and regulations will help rural 
telcos put their limited resources to best use.
    Thank you for this opportunity to testify. I look forward 
to answering your questions.
    Chairwoman RADEWAGEN. Thank you, Mr. Owens.
    Now we will begin the first round of questioning. I now 
recognize myself for 5 minutes.
    This question is for all the witnesses. What does it take 
for a small carrier to develop broadband in isolated areas, 
such as American Samoa, Puerto Rico, the various islands of the 
Marianas, or some of the most remote parts of Alaska? These are 
places that you can't drive to. You have to take a boat or fly 
to.
    Mr. DONOVAN. Well, Chairwoman, one thing that is important 
in serving remote areas like Alaska, like your home district, 
is making sure that you have certainty around the timelines 
when you need to use helicopters and boats and other mechanisms 
that you don't need to use to deploy services in places like 
Washington, D.C. You need to be able to schedule that ahead of 
time.
    This has really been seen with some of the recent natural 
disasters in several areas, including American Samoa, about how 
certainty about what you can do and when you can bring 
equipment in needs to be lined up with the permitting process 
and streamline that, especially as you are looking to expand 
coverage or restore service where it has been out so that you 
can actually provide service in some of these very remote areas 
where it is already very high cost to serve.
    Chairwoman RADEWAGEN. Ms. Fitzgerald.
    Ms. FITZGERALD. I agree with that. I also think that, you 
know, we talked about the business case here, and in some of 
these very remote, very rural places you lack subscribers. 
There are not enough subscribers to make the business case.
    And so in that case, universal service is critical. 
Adequate and reliable universal service support is what makes 
or breaks those networks.
    Chairwoman RADEWAGEN. Mr. Carliner.
    Mr. CARLINER. I certainly agree with that, that for a 
solution for an island, for example, is going to require really 
competitive planning and bringing the stakeholders together. It 
is going to be a mix of technologies, a mix of areas and 
communities.
    And I would say the most important thing, from our 
experience, is to make sure that the engineering and the 
technology matches with the business plan. They have to go 
together, and it is important that they fit together to make it 
both sustainable as well as affordable for the community.
    So proper planning and bringing the elements together, 
technology and business and the stakeholders together, is, I 
think, the most important first step.
    Chairwoman RADEWAGEN. Mr. Owens.
    Mr. OWENS. Thank you.
    I would add that, again, sufficiency and predictability and 
universal service is by far one of the biggest issues, because 
those dollars are actually used to build networks. And without 
the underlying infrastructure in place, you are not going to 
get some of the other technologies that you would use to 
complement the services that you are bringing to very rural and 
remote areas.
    Chairwoman RADEWAGEN. Ms. Fitzgerald, can you discuss what 
geographic area size might be attractive to small and regional 
providers as they compete for spectrum at auction and provide 
some background on why the FCC may have chosen not to employ 
smaller geographic area licenses in past spectrum auctions?
    Ms. FITZGERALD. Sure.
    In terms of spectrum auctions, geographic license size is 
always a point of contention, usually between large nationwide 
carriers and small rural providers.
    RWA has largely supported an area called a cellular market 
area, or a CMA, which is a subdivision. They go as large as 
nationwide and they go as small as census tract. So we tend to 
favor sizes around the CMA area. There are, I believe, a little 
over 700 of those nationwide. We have also supported, for 
instance, in the current CBRS proceeding, support county size 
or census tract license sizes.
    And, generally, if I am a small carrier, I have maybe a 
two- or three-county service area, first of all, I can't afford 
a nationwide license. I can't even afford licenses 
significantly smaller than nationwide. I want a license size 
that I can afford that I am going to be able to utilize to 
provide support to these service areas and a license size that 
I can afford to build out. Obviously there are buildout 
requirements tied to licenses won at auction. So if you win one 
of those licenses, you need to be able to build it out.
    From a nationwide carrier, smaller licenses mean more 
administrative minutia. And so it also means you have to 
compete in more markets to win licenses to cover the territory 
you want to cover. So we support smaller license sizes because 
it increases the number of bidders in an auction and it doesn't 
depress auction turn out.
    Chairwoman RADEWAGEN. Thank you.
    I am running out of time here. So, Mr. Donovan, what is 
your current view of the FCC's approach to mitigating 
overstated coverage areas on the broadband map? And can you 
elaborate on the disproportionate impact this might have on 
small carriers?
    Mr. DONOVAN. Sure. Thank you for the question.
    So the map that is out right now for the initial eligible 
areas for Mobility Fund II was supposed to have a better 
starting point, looking more like coverage on the ground.
    I think if you looked at the map, you would be surprised, 
Dr. Marshall, that most of the Big First has coverage of 4G LTE 
across just about the entire district.
    For Ranking Member Schneider, that St. Elizabeth is served, 
and you have to drive hundreds of miles to find a dead spot 
based on this initial area.
    The problem there is that if these areas are not challenged 
by a small carrier that wants to seek support in this area, and 
that means go buy a phone, go buy a plan, drive-test it, submit 
that data to the FCC for the chance to participate in an 
auction, which is costly in itself, then these areas we are 
going to keep going on marked as served, and support will not 
be eligible for them.
    Chairwoman RADEWAGEN. Thank you.
    I now recognize Mr. Lawson.
    Mr. LAWSON. Thank you, Madam Chair.
    And I am going to start with Mr. Owens. And I preface this 
by saying that I know that the administration, any 
administration, starts to look at cuts that they could make in 
the 2019 budget, but the broadband cuts that have been sent are 
by 15 percent of the cuts to 23 million in the distance 
learning program, and then 10 percent to 24 million.
    How would these cuts affect rural wireless carriers and the 
Rural Wireless Association that are recommended by the 
administration.
    Mr. OWENS. So thank you for the question.
    Our association, we represent the wired portion of 
companies. We don't necessarily represent them on the wireless 
side.
    But I will say this. Obviously, the cuts in programs are 
going to be extremely onerous on a company's overall business 
opportunities, whether they offer just voice, landline, 
broadband, fixed service, or wireless service.
    So the cuts, we wouldn't be supportive of them, because if 
you are trying to get broadband out and you are looking at all 
the modes and ways to do that, in some areas wireless is going 
to be a complementary service to a fixed service just because 
it is going to be extremely costly to try to wire an area, 
where if you can use wireless service to do so, we see that as, 
again, a complementary service. So having cuts to that part of 
the program is probably not beneficial.
    Mr. LAWSON. Mr. Carliner.
    Mr. CARLINER. I would agree, Mr. Ranking Member. I think 
that for many small rural ISPs, these grant programs are very 
important in helping them build out their networks.
    And we certainly benefited from that in 2010. It was 
critical for us launching our network. And I think that for 
many other communities around the country, a sustained Federal 
investment in these grant programs, even small ones, is really, 
really important. People forget sometimes how small these 
communities are and how small the companies are.
    Mr. LAWSON. Mr. Donovan.
    Mr. DONOVAN. Thank you.
    So I think the bigger point with your question that is 
important in the infrastructure debate going on right now is, 
what kind of a country do we want to be? Do we want to be a 
country that has mobile broadband available across the entire 
Nation, including these rural areas, or do we only want to 
focus on some and let some areas fall behind?
    If we want to have service nationwide, ubiquitous mobile 
broadband coverage, then we need to actually look at the 
problem and then size a solution to fit that and meet the 
needs. Small ISPs are going to be a critical part of serving 
that, but we need to take a step back and look at what the 
overall need is.
    Mr. LAWSON. Ms. Fitzgerald.
    Ms. FITZGERALD. I agree with the previous witnesses. I 
think that these broadband loan and grant programs are crucial. 
It is particularly true for small and rural companies because 
of the difficulties that they sometimes have in getting 
financing. And so these Federal programs really meet a need 
that doesn't get met anywhere else.
    Mr. LAWSON. Okay. And anyone can respond to this. I don't 
have much time.
    When the President recommended giving to the States $50 
billion of the $200 billion for infrastructure, do you think 
that is going to all go to roads and bridges and so forth, 
which is it was really needed. How would that affect you? 
Anyone care to respond.
    Mr. OWENS. If I may, I definitely want to answer this 
question.
    Yeah, we have a concern with these dollars being block-
granted to the States. Clearly there are some States who may 
have broadband operations or consortiums in the State that the 
governor could say, okay, these are going to be the folks who 
are actually going to decide where our money goes.
    But we have a concern that, again, as I said in my 
testimony, rural infrastructure for broadband needs to be 
identified so that that doesn't happen, where those dollars 
don't go just for roads and bridges but they actually do go to 
build rural broadband infrastructure.
    Mr. LAWSON. Anyone else? I have about 36 seconds.
    Mr. DONOVAN. Sure.
    So part of that is recognizing--we appreciate that the 
administration's proposal would allow governors to use up to 
100 percent of those rural funds for broadband. Is that likely 
to be the case? Probably not. And encourage for Congress to 
step in there and make sure that there are funds particularly 
dedicated for use for broadband purpose.
    Mr. LAWSON. I yield back, Madam Chair.
    Chairwoman RADEWAGEN. I now would like to recognize Mr. 
Blum, Chairman of the Subcommittee on Agriculture, Energy, and 
Trade.
    Chairman BLUM. Thank you, Chairwoman Radewagen.
    I would also like to take this opportunity to recognize 
Chairman Chabot, who is Chairman of our full Small Business 
Committee. Thank you for being here today.
    Mr. Carliner, in your testimony, you said in 2010 your 
company, Bloosurf, was awarded $3.2 million by the U.S. 
Department of Agriculture to do a project. In the next 
paragraph in your testimony, it says, and this is kind of 
unbelievable, you built the network on time and returned $1 
million to the government.
    Mr. CARLINER. Yes.
    Chairman BLUM. What went wrong? You are to be commended for 
returning $1 million. We don't often see that type of 
testimony.
    Mr. CARLINER. Thank you, Mr. Chairman.
    I will say that we were very fortunate in that we made a 
decision--and this is an example of how technology changes so 
rapidly--our original design was a mix of WiFi and WiMAX. But 
what happened is, as time went on, LTE came out as a new 
standard for wireless communication. We reengineered our 
network very quickly to adopt this new technology, and that 
helped lower the cost of our network. And, fortunately, with 
USDA's approval, they approved our redesign, and we ended up 
saving a million dollars to the government. We are very proud 
about that.
    Chairman BLUM. Congratulations. You are to be commended.
    I just have a quick technological question before I get 
into the other questions I want to ask you all.
    Mesh networks. I have heard about mesh networks. Mr. 
Donovan, you are grinning. And I know a little bit about them 
to be dangerous. Is this part of the solution? Is this not 
going to be part of the solution as far as rural goes?
    Mr. DONOVAN. So, Mr. Chairman, since we talked about this 
last year, I have gone back and made sure I did my homework 
before coming back before you, appreciating your focus on mesh 
networking.
    To have the mesh you need to have cells close enough to 
each other. So in order to facilitate this, this really is a 
focus on streamlining deployment of small cells or smaller 
telecommunications equipment so that you can have overlapping 
areas. To do that, there currently are significant barriers to 
being able to deploy and that increase the cost, environmental 
review, et cetera.
    I think last time we talked about how you could deploy a 
small cell on the side of your house if you were willing to go 
through an environmental assessment, historical review, pay the 
associated fees. And you made it very clear that you were not 
going to do that. And that is the case facing carriers who are 
working to densify networks today.
    Chairman BLUM. Is it a technologically limited type of an 
issue? Is it an equipment limited issues? Or, in theory, does a 
mesh network make sense? In theory. In theory.
    Mr. DONOVAN. In theory, I mean, the technology is evolving, 
and that is where we are going. You do still need to be able to 
bring that network back to backhaul access to fiber. And so 
that depends on permitting on how may hops away you can get 
from that until you truly have a mesh network.
    Chairman BLUM. It is an intriguing idea. That is why I 
asked.
    The hearing title today is ``Rural Broadband and the 
Business Case for Small Carriers.'' And we get it, the business 
case is not typically good. The income per square mile, when 
there is not a dense population, is low, and the cost to get 
the service there because of the square mileage we are talking 
about is high. Typically not a good model for small business.
    So I only have like a minute and a half here, but I would 
like to get from each of you quickly. What is the number one 
thing that Congress can focus on to help make the business case 
for small providers in rural areas? What is the number one 
thing we should focus on?
    Ms. FITZGERALD. I talked plenty about USF, so I will turn 
my attention to roaming.
    Data roaming is incredibly important, and rural carriers 
are seeing their roaming revenues decline because the large 
carriers are simply unwilling to pay it. That leaves nationwide 
customers often without service in rural areas, and it also 
impacts the rural carriers' ability to make a business case for 
serving your area.
    Chairman BLUM. Thank you.
    Mr. Donovan.
    Mr. DONOVAN. So I think in rural areas we are seeing an 
evolving business case. At your hearing a couple weeks ago, I 
appreciated one of your witnesses compared farm ag tech to 
right now with the mobile networks, that it rides on driving a 
Ferrari down a gravel road.
    That is not good enough. There are going to be new 
applications, particularly Internet of Things and narrow band 
Internet of Things in rural areas. Right now the role for 
Congress is how do we make sure that we can do the ``if you 
build it'' side of the ``if you build it, they will come'' 
equation.
    Chairman BLUM. Mr. Carliner.
    Mr. CARLINER. I would say, Mr. Chairman, the most important 
thing to be able to do would be to use Federal funds to provide 
direct grants for capital construction for the last mile. That 
is the most difficult nut to crack in rural broadband. And if 
we had assistance, direct grant assistance, to small rural ISPs 
to help do the construction element over the last mile, then 
you would make the operating plan sustainable.
    Chairman BLUM. Thank you.
    Mr. Owens.
    Mr. OWENS. Mr. Chairman, I would say predictability and 
universal service, again, is important. Our companies need that 
predictability and stability. The high cost fund needs to be--
the size of it needs to be increased as well.
    Chairman BLUM. Thank you. And my time has expired.
    I would now like to recognize the gentleman from Illinois, 
Mr. Schneider, for 5 minutes.
    Mr. SCHNEIDER. Thank you, Mr. Chairman.
    Again, thanks for your testimony today and your perspective 
and insights on this issue.
    I want to pick up a little bit on the mesh networks for a 
second. Looking forward, I think, Mr. Donovan, you mentioned 
just in passing 5G. 5G is not available today, but it is on the 
horizon. What will be the implications for 5G as we are looking 
at getting broadband into rural communities?
    Mr. DONOVAN. Sure. So 5G is not just one thing, which is 
what is so exciting about it right now, that it is many things. 
And in rural areas, it is everything from precision agriculture 
to monitoring cattle on ranchlands to the ultra high speed 
distance learning and telehealth applications.
    All of those are built on 4G networks. So as we are talking 
about policies to deploy 5G, it is not just a future issue. 
This is something that we really need to focus on today.
    At CCA we have a saying of you have to keep up with your 
G's as you go from 2G, 3G, 4G. And if we can't keep up with our 
G's, then these rural areas will be left behind as we are in a 
global race for 5G dominance.
    Mr. SCHNEIDER. Ms. Fitzgerald.
    Ms. FITZGERALD. I also wanted to note it is important to 
remember that 5G applications use--small cell applications are 
very useful in certain applications. But I think the business 
case for 5G in rural America is still really evolving. You 
can't cover hundreds of thousands of square miles with small 
cells. It doesn't work like that.
    So 4G LTE, those LTE technologies are still incredibly 
important in terms of building out the wide spaces that exist 
in rural America.
    Mr. SCHNEIDER. Well, I think it will be important, as we 
move to 5G, that that bridging technology is protected, and 
that is a role I think the Federal Government will have a say 
in.
    Anyone else want to add?
    Mr. CARLINER. Yeah.
    Mr. SCHNEIDER. Mr. Carliner.
    Mr. CARLINER. One thing I want to mention is that we 
currently have the ability, we have a fixed wireless provider, 
we are not in the mobile space, and we have the ability to 
deliver 100 megabits per second to a customer if they so 
desire. Even with that capability in our rural area, we have 
not had one customer come to us and ask for 100 megabit per 
second service. The vast majority of our customers are looking 
for 10 to 25 megabits per second into their territory.
    So I think it is terrific to push the envelope of 
technology and to keep the rural areas with their urban, 
suburban counterparts, but I would not want to see that come at 
the expense of providing much more affordable basic service to 
people who need it. Twenty-five megabytes per second is a 
great, is a robust high speed capability in most homes and 
businesses, and that, I think, is the first hurdle we all need 
to meet before we leap too much into new technology.
    Mr. SCHNEIDER. Again, picking up on something that Mr. 
Donovan said, I want to get it right, the implication of rural 
communities falling behind.
    What are the implications? Because with each G--and after 
5G, there may be 6G, Apple skipped 9G on their telephone. But 
technology is constantly moving forward. As that moves forward 
without the investment, what happens to the communities, rural 
communities?
    Mr. DONOVAN. So I will pick up on a theme, again, that your 
Subcommittee talked about a couple weeks ago in restoring rural 
America, that it is not only important for some of the ag tech 
and exciting innovations that are taking place on farmlands and 
ranchlands in rural areas, it also has to do with the quality 
of life where you have families and individuals that want to be 
able to participate in the modern economy but also want the 
quality of life of growing up where--or staying where they grew 
up and raising a family there. Being able to connect them means 
that it is not only about the farms and ranchlands, but it is 
about everything else that goes on in those communities.
    Mr. CARLINER. I will give two anecdotal examples in the 
area we serve, which is we have been told that, by economic 
development officials on one of the counties we serve, a 
company wanted to build a warehouse facility and bring jobs to 
that particular county. When they found out they would not have 
the internet service they required, that was the deal breaker. 
They would not invest there.
    The second example is we have heard actually from real 
estate agents in some of our territory that the biggest barrier 
to selling a home in these areas now is lack of high speed 
internet to the home. If there is no internet service to the 
home, the property values actually decline and it takes much 
longer to sell the home.
    Mr. SCHNEIDER. Ms. Fitzgerald.
    Ms. FITZGERALD. I also, in my testimony, mention this move 
from 2G and 3G voice service to 4G LTE. I mean, this is a 
change that could really decimate voice roaming in areas, which 
means that if that is not your home carrier, you may not have 
voice service, you couldn't make an emergency phone call. We 
want to make sure that the level of service is preserved as 
these technologies move forward.
    Mr. SCHNEIDER. In the last couple of seconds, in the half 
minute I have, it also affects education, telehealth, things 
that are moving throughout the country will affect rural 
communities, if they are left behind it will make it harder for 
people to go back home, as you said. I think it is important 
that we maintain that.
    Mr. Carliner.
    Mr. CARLINER. I would say we have one school district in an 
area near where we serve where the kids at night, the parents 
drive them to the parking lot of the school at night to get the 
free WiFi because they don't have internet service at home, and 
they do their homework in the car in the parking lot.
    Mr. SCHNEIDER. Well, thank you.
    With that, my time has expired. I yield back.
    Chairman BLUM. Thank you, Mr. Schneider.
    I would also like to mention that Mr. Schneider is the 
Ranking Member on our Subcommittee on Agriculture, Energy, and 
Trade.
    I would now like to recognize the gentleman from Utah, Mr. 
Curtis, for 5 minutes.
    Mr. CURTIS. Thank you, Mr. Chairman. We know a little bit 
about rural in Utah.
    And I would like to thank our witnesses for being here 
today.
    Mr. Owens, you were kind enough to refer to my Rural 
Broadband Permitting Efficiency Act of 2018. And I would like 
to just go back to that for just a minute.
    Is it your experience that Federal reviews and permitting 
requirements are a major challenge? And especially if you think 
about the West, where I have some counties that are 90 percent 
Federal land.
    And would you mind just expressing your opinion on that? 
And will this bill help?
    Mr. OWENS. Yeah. Thank you for the question.
    We believe this bill will help expedite the processes. As 
you alluded to and as I indicated in my testimony, we had some 
of our members that took many, many more months and almost a 
couple of years before they could actually get a project 
approved. So we think this will be helpful going forward.
    We do want to talk a little bit more about the State 
permitting authority, to understand that a little bit more. But 
we ultimately believe the bill is a good one.
    Mr. CURTIS. Thank you.
    I must admit, as I listened to the four of you, I formed a 
picture of David and Goliath in my mind. And you must feel at 
times as if you have little pebbles, right, that you are 
throwing at this big monster.
    I guess one of the questions I have for you is, can we get 
there from here? And you have got some fundamental building 
blocks. You have got subscriber revenue. You have got the USF 
fund and roaming revenue. You have all brought up some flaws, 
especially with the latter two of those.
    Are you comfortable that we have the model in place to help 
you be successful?
    Mr. Donovan, you are ready to answer that question.
    Mr. DONOVAN. Yeah. So I think if you set the right 
policies, then David has got a fighting chance here.
    With respect to your bill and your work with Senator Hatch 
on this, thank you for those efforts. One of our members, Union 
Wireless in Wyoming and parts of Utah, when I visited them last 
summer, on their yard they had rows and rows of conduit that 
were waiting to go in. They were waiting to bring service to 
cell towers that will bring LTE service, but because of Federal 
permitting to deploy this fiber along a highway, the conduit 
was just sitting there in their yard.
    So some of these policies to streamline deployment, if I 
can leave one point, it is not only talking about downtown 
urban areas, that it is critical to providing service in all 
these rural parts. And with regard to your bill, especially, 
that being able to deploy the fiber assets is a critical part 
of the wireless delivery that consumers enjoy today.
    Mr. CURTIS. Good.
    Ms. FITZGERALD. I will echo that. And Union Wireless is 
also a member of ours, so they are well represented here.
    I think streamlining, permitting, all of those issues are 
tremendously important. And let's not forgot the cost that goes 
into what--you know, they have the spectrum. They are paying 
for the spectrum. They have all of these plans. And they are 
just waiting to put them in place.
    And so the cost involved with the permitting process and 
the waiting is tremendous. And so to the extent that we can 
move that process along, and I think your bill is helpful in 
doing that, more the better.
    Mr. CURTIS. Thank you.
    Ms. Fitzgerald, you talked about letters of credit. I am 
pretty sure that anybody that put a requirement for a letter of 
credit in has never had to apply and get a letter of credit.
    So I would just like to take this time to emphasize your 
point that that is hugely problematic. Oftentimes when we 
require a letter of credit it takes the same capital to hold 
that letter of credit that we are asking for. And so no doubt 
very problematic.
    I would also like to highlight and emphasize a point that 
at least two of you made, maybe more, that we have a flawed 
map. And I don't know if any of you would like to revisit that 
again and talk about it.
    I know, Mr. Donovan, you talked about we are stuck with 
this for 10 years. And if we have a model that is tough enough 
as it is for you, right, and then we introduce something that 
is a flawed map that makes it very, very difficult, if not 
impossible for some of you to be successful, where do we go 
with that?
    Mr. Owens.
    And then, Mr. Donovan, if you will follow up.
    Mr. OWENS. Thank you.
    We actually polled our membership after the map came out 
and asked them what were some of the difficulties or if the map 
was actually accurate. And we got from a good number of our 
folks saying the service areas were highly inaccurate, the map 
was inaccurate, the map didn't reflect the most recent 
broadband bandwidth increases that they had had or their fiber 
to the home locations.
    We believe the map is important, and you need to have a map 
to show where service is. But, again, with the 477 data, that 
needs to be updated and have more accurate data there.
    Mr. CURTIS. Mr. Donovan, I am out of time. But let me just 
end my comments with a big exclamation point behind your 
concerns, and let's make sure this hearing recognizes that that 
is a major problem.
    Chairman BLUM. Thank you, Mr. Curtis.
    I now recognize the gentleman from Kansas, Mr. Marshall, 
for 5 minutes.
    Mr. MARSHALL. Okay. Thank you, Chairman.
    Mr. Owens, you mentioned Rush County, Rush Center, Kansas. 
And I think sometimes we just don't paint a good picture. I 
think most of us understand why the people in Rush County, 
Kansas, need internet, high speed internet access.
    Why does the rest of the world care? Why would the rest of 
the world care about Rush Center.
    And two businesses come to mind there. One is the Mid-State 
Farmers Co-Op in Rush Center and one is the LaCrosse Livestock 
Market.
    Why would the rest of the world even care? I think that 
they understand. I can paint this picture that I need a train 
to get those goods to California and then ship to Japan, who 
pays a premium for this good Kansas beef we have. And everybody 
wants our high protein wheat as well.
    So why would the rest of the world even care that we have 
high speed internet in Kansas, in rural America?
    Mr. OWENS. Dr. Marshall, thank you for the question.
    Because it could mean--again, I think, as Mr. Donovan said, 
it is the quality of life. You don't have to move to a city in 
order to live out on a farm. You can sell your products and 
goods across the world, not just locally. And you can do it at 
a cost that is probably much cheaper than actually going and 
having to do this in an urban environment.
    So those are some of the reasons why it is important to 
have high speed broadband connectivity in these rural areas.
    Mr. MARSHALL. And, Mr. Donovan, I know you have got quite a 
presence as well, in my district as well. And I am trying to 
understand your map here. I was looking at the little map you 
were talking about.
    Does it drive the cost down for consumers, the fact that La 
Crosse, Kansas, has high speed internet, I hope?
    Mr. DONOVAN. So I think you are right in talking about how 
the world wants the products that are created in Kansas.
    And a lot of these products are more efficient. We talked a 
little earlier about how you can have higher yields and use 
less resources if you have precision agriculture technology. 
There is a lot of focus now on self-driving vehicles. Well, 
rural America has had those for years. They are just made by 
John Deere, Case, and others.
    Those don't work if you don't have the mobile network that 
actually provides them that, then, in turn leads to greater 
productivity, drives down the cost for these goods for 
consumers all around the world while also increasing 
profitability for your constituents.
    Mr. MARSHALL. So describe, for the world that doesn't know 
what today's farmer looks like, how technologically dependent 
they are. You know, a farm that used to have--maybe it would 
take 20 or 30 people to run it. Now it has got one or two. What 
does today's farm look like?
    Mr. DONOVAN. I mean, today's farmer is more of an 
agriculture engineer than what you think of, of a blue jean 
wearing out in the field.
    Everything is connected. And if you don't have the network 
that powers those connections, everything from soil monitoring, 
that you can now have an application that ties together the 
seeds that you have in the ground with the weather forecast 
telling you how many pounds of products you need to put on what 
parts of your farm, because rain is coming, you are not going 
to be able to get there.
    How do we make sure that that is available to today's 
farmer so that they can continue to compete in a global 
economy?
    Mr. MARSHALL. Right. And I know my farmers are so 
ecologically minded today, and they always have been. They have 
been the greatest caretakers of Mother Nature, as we have water 
conservation issues going on in Kansas and we try to protect 
the environment by putting less fertilizers on.
    Ms. Fitzgerald, do you want to talk a little bit? How does 
today's farmer use technology for water conservation and maybe 
decreasing the input? It is not just to drive the cost down, 
but also to help ecology.
    Ms. FITZGERALD. Sure. We say that supporting rural America 
strengthens all America. And I think that is especially true 
when it come to the case for ag tech and things like that. I 
mean, certainly anything that the farmers out there can use to 
make them more efficient and certainly take steps to preserve 
the land, I think that they are more than happy to do so, but 
they need the connectivity to do it.
    And I will remind the Committee that those connections 
don't occur right next to the road all the time. And so it is 
really important that those networks spread into pastures, into 
fields, and are able to connect with the machines that are 
available out there.
    Mr. MARSHALL. Yeah. I have shared this story before, but my 
mother was raised on a farm where she was the last farm on a 
dead-end road that didn't have electricity until eighth grade. 
And I am just trying to imagine what that farm would be like 
from a production standpoint without electricity.
    And this is the 21st century. Getting electricity to that 
last farm. And we are blessed to live in a country where we 
spend 8 percent of our domestic product on groceries, on food, 
where most world leaders are spending 18, 25 percent. And I 
can't help but think that this high speed internet is part of 
that solution to why we can do that.
    Mr. Carliner, do you want to add anything to that? Give you 
a pulpit.
    Mr. CARLINER. No question. In our service area, Dr. 
Marshall, the Delmarva area is a large poultry processing, 
poultry growing region. And we have heard from poultry 
processors and farmers who are desperate for high speed 
internet for remote sensing, monitoring chicken houses. Farmers 
are a group that demands the internet more than any other 
group, I think, in our area. We hear from farmers all the time 
for precision agriculture, monitoring, remote sensing. It is as 
important to them now, as you just mentioned, as electricity in 
the 1930s, and then phone service. Internet service is a 
critical utility to a farmer today as anything I can engine.
    Mr. MARSHALL. Yeah. And for the record, it was the 1940s. I 
don't want to make my mom older than she is. She is going to 
turn 80. Let me see, what is today's date? I think it is 
tomorrow or the next day. Whenever March the 8th is.
    Thank you, Chairman. I yield back.
    Chairman BLUM. Thank you, Dr. Marshall.
    The gentleman from Kentucky, Mr. Comer, is recognized for 5 
minutes.
    Mr. COMER. Thank you, Mr. Chairman.
    My first question is for Mr. Donovan.
    You describe in your testimony recent actions by 
policymakers to alleviate some of the administrative burdens to 
deployment of rural broadband. Are there administrative burdens 
that policymakers have not yet addressed?
    Mr. DONOVAN. Thank you for the question. And as a table 
setting, it is an important issue for all carriers. Recently a 
group of--the leaders from several of my members, 24 non-
nationwide carriers, including Bluegrass Cellular in your 
district, weighed in on just how important this is.
    It is spring training, so maybe I will take it that maybe 
we don't need to swing for the fences and hit a home run. We 
can score a lot of runs with singles. And so where the FCC can 
act this month to start streamlining that process, they should. 
Where there are other spaces for Congress to act, like some of 
the bills that we have discussed today, that is another great 
opportunity.
    There are several pain points. And so we have prepared a 
flowchart that is going to be way too small for you to see on 
all the steps to site infrastructure. I am happy to provide it 
for the Committee.
    All of those are pain points that there are opportunities 
for relief from policymakers so that we can actually spend 
these dollars and time on getting broadband out into your 
communities instead of spending it on a team of lawyers in D.C. 
and trying to navigate through this maze.
    Mr. COMER. Good answer.
    Mr. Carliner, from your perspective as cofounder of a small 
internet service provider, can you walk us through your 
calculus as you determine whether the business case is strong 
enough to justify deploying broadband in rural, high cost 
areas?
    Mr. CARLINER. Yes, sir.
    When we look at an area where we are going to deploy 
internet service, two things are critical, or three things. The 
first is, what infrastructure already exists? Do we have access 
to a fiber network somewhere? Are there existing tower assets 
somewhere? And, finally, what is the population density?
    And we match the capital cost of construction versus what 
we anticipate the revenue stream will be. We assume a very low 
penetration rate, a very low subscriber rate, so we have to 
make the case each site to be sustainable and profitable for 
each tower, each site.
    And if we are able to do that, then we will go ahead and 
make that investment. But we make that calculation literally 
per tower per site.
    Mr. COMER. At what point are the costs too high to justify 
investing in these rural areas?
    Mr. CARLINER. I think it goes back to sort of the long-term 
of the return on investment and how long it takes to get that 
return on investment. If it is going to be many, many years to 
get that investment, we won't make that investment. We look for 
a return on investment that is in a reasonable timeframe that 
we can support, and that really is the issue. It is the time 
and the return on the investment.
    Mr. COMER. Let me follow up. This will be my last question. 
What happens if you are unable to offset your expenditures?
    Mr. CARLINER. If we can't offset our expenditures, then we 
will probably have to shut down that site. It simply costs us 
too much money. It is a loss. So we would probably be in a 
position where we would eventually just turn off the site and 
not provide that service.
    Mr. COMER. Have you ever had to do that in any area?
    Mr. CARLINER. Thus far, fortunately, we have not. But there 
have been cases where we almost did, and it would have been a 
mistake. But we are very, very careful in how we do that.
    We were careful in our business plan that we made the case 
to USDA and to others that our goal is not necessarily to cover 
100 percent of a territory or a county, but to cover 80 percent 
of the population. And that is a critical difference. When you 
start with that basic, you make it affordable. If you try and 
cover an entire territory on a map, that last 20 percent blows 
your business case.
    Mr. COMER. Thank you, Mr. Chairman. I yield back.
    Chairman BLUM. Thank you, Mr. Comer.
    Before I give my closing statement, I just have one further 
question. Dr. Marshall took one of my questions about the 
importance of rural broadband for ag, and that is a good 
question.
    I would like to have whoever feels qualified to give an 
answer to how important is rural broadband, tell the rest of 
the country here in terms they can understand for healthcare. 
And where do you see telemedicine? Where do you see the 
healthcare market going?
    Because in rural counties, and I have 17 of them, of my 20 
counties, are rural, folks have to drive a long way to receive 
healthcare. Veterans have to drive a long way.
    And just in layman's terms, how important is rural 
broadband to the healthcare market?
    Ms. FITZGERALD. I think it is tremendously important. You 
see rural markets that have a difficult time attracting and 
retaining healthcare professionals. So to the extent that you 
can do video exams for minor cases, to the extent that you can 
utilize that technology to help folks that have a difficult 
time making sometimes very long trips, it is tremendously 
important, and it helps keep the costs down as well.
    Chairman BLUM. Mr. Donovan.
    Mr. DONOVAN. I would just add on to that that it matters in 
the day-to-day as well. An important aspect of telehealth is 
some of the monitoring programs. And one of our rural carriers 
that serves Sunflower County in the Mississippi Delta has 
already saved the State Medicare program hundreds of millions 
of dollars from a remote diabetes monitoring program. That has 
reduced the need to go visit hospitals, and it is transforming 
these patients' lives, so it is important.
    Chairman BLUM. Where is that at, Mr. Donovan?
    Mr. DONOVAN. In Sunflower County in the Mississippi Delta.
    Chairman BLUM. Has saved how much?
    Mr. DONOVAN. Has saved the State of Mississippi over $100 
million so far just on monitoring. So these are real dollars 
and real changes in patients' lives.
    The comparison to electricity is an adequate one and one 
that the CEO of Qualcomm had made earlier this year, that 5G is 
going to be just as transformational as electricity or the 
automobile. That means that it affects every other industry 
that it touches, including healthcare. So it is that important 
to make sure that these areas have access to these services.
    Chairman BLUM. You are right, that is real money, even in 
Washington, D.C.
    Mr. Carliner.
    Mr. CARLINER. I would also say, Mr. Chairman, that it is 
also important, people don't realize in urban areas how 
important rural areas are in this field. For example, being in 
a rural area, it allows us to be a test-bed for new 
technologies and new approaches that you simply can't do in an 
urban area.
    For example, in our lifetime, we are going to see drones 
become regular parts of our lifetime. Drones are going to need 
networks to connect to. And I think rural areas are going be to 
the test-beds for drones and for this new world in the IoT and 
Internet of Things, that rural areas provide great test-beds, 
telemedicine, telelearning approaches and technologies and 
services that can be validated in a rural area that don't lend 
themselves to the urban area first.
    So I would say to folks who are living in the cities why 
rural areas are so important is because a lot of the 
technologies and services that have just been talked about 
start in the rural area first and then are adopted in the urban 
area.
    Chairman BLUM. Interesting.
    Mr. Owens.
    Mr. OWENS. I would agree exactly with that point. Our 
companies are definitely innovators. They bring a lot of these 
new technologies to life early on, and then they get expanded 
upon and made better when they come to the cities. So I would 
totally agree with that.
    I would also add that it is important that we talk about 
fiber building in order for these services to work, especially 
for medical. When you talk about digital imaging and things of 
that nature, you need fiber in the ground in order for those 
pictures and those diagrams and x-rays and things of that 
nature to actually go as quickly as possible, because in many 
instances you may have life-or-death circumstances.
    And I am sure you probably remember when AOL first came 
out, how long it took for you to actually download a picture. 
With fiber you are able to now do that instantaneously.
    So I don't want us to lose sight that you need to have a 
fiber backhaul and fiber in the ground to make even medical 
imaging work properly.
    Chairman BLUM. Thank you very much for those insightful 
answers.
    I would like to recognize Dr. Marshall for as much time as 
he may need.
    Mr. MARSHALL. Well, thank you so much, Chairman. My eyes 
lit up to talk about telemedicine and how important this is.
    I represent 63 counties. I think I have been to every 
hospital. People often ask me, what are rural hospitals of 
tomorrow going to look like? And they are going to be centered 
around this emergency room.
    If you think about a rural healthcare, you think about 
trauma and you think about strokes and heart attacks. Those are 
probably the three main reasons that people come to a 
healthcare facility in a rural community.
    Colby, Kansas, Citizens hospital, little Colby, Kansas, but 
they have an ER that is connected 24/7 to a trauma center. And 
we now have heart protocol and stroke protocols in place. So 
when a person presents, it is so important in that first 30-
minute window to give them a blood thinner, a tPA drug, that 
can literally save their life.
    From a healthcare cost efficiency, if you prevent that 
stroke, think how much stroke patients cost to rehab, and they 
spend maybe 60, 90 days in a hospital, and then months in a 
facility.
    So having access to that and just having a nurse on the 
other line 24/7, there are big complications from tPAs. You 
don't want to give it to the wrong patient have them bleed out 
on you.
    And then the second thing I am seeing that is incredible is 
in the veterans health. We have a minibus that goes from 
community to community, stopping at State fairs, focused on 
veterans health issues. And they are able to hook up with 
telemedicine back to the VA center where the psychologists or 
the psychiatrists are, the counselors.
    We are losing 22 veterans a day to suicide. Those folks 
aren't going to drive 300 miles to the VA center from rural 
America. This is a minivan going out to them and asking how 
they are doing.
    When it comes to telemedicine, what special needs are there 
for this minivan versus the ER versus, maybe, what, a farmer? 
Is it the same needs or is it different?
    Ms. FITZGERALD. I think in many ways it is the same. I 
mean, any time you are doing sort of realtime video, you need a 
strong mobile network, particularly in the vans that you 
mentioned. You know, they may be parked in a parking lot 
somewhere. So you really do need strong download and upload 
speeds, strong network to convey that realtime back-and-forth 
data. I mean, that is the trick.
    Mr. MARSHALL. Yeah. The realtime is the thing. I don't 
quite understand what that would take.
    Mr. Donovan.
    Mr. DONOVAN. I think the one biggest distinction between 
when you are at a fixed location like a hospital versus the van 
is by its very nature it is mobile. And so you need access not 
just to the strong fiber connections, but to strong enough 
mobile signals that you can actually still maintain that 
connectivity over the wireless network. You are not going to be 
able to drive very far if you have to haul the fiber behind you 
as you are driving around the State.
    Mr. MARSHALL. We try to.
    Mr. Carliner, do you have anything to add?
    Mr. CARLINER. Yeah, I would agree. And, also, I think we 
are living in a world where wearable technology now, the 
wearable devices are going to put further and further pressure. 
And also great opportunities. As these devices become better 
and better, the need for that connectivity with hospitals is 
going to be even more important.
    So I think the technology is going to drive the demand for 
these services even more than it is, than it is right now. And 
I think more critical, we serve an island in the middle of the 
Chesapeake Bay. And before we were able to get internet 
service, they had no connectivity.
    So now they have connectivity. It makes a big difference to 
be able to have a teleconference with a local hospital than 
have to get in a boat in the middle of winter and cross that 
bay.
    There are thousands of other examples like that around the 
country. But the wearables technology I think is going drive 
this demand even more.
    Mr. MARSHALL. Sounds great.
    Mr. Owens, what is going on in my district with healthcare 
and telemedicine that you know about?
    Mr. OWENS. Unfortunately, I can't comment too much on that. 
But I know Golden Belt Telephone is doing its best to make sure 
that the hospitals are connected with fiber connections and 
working with other carriers to make sure, as you heard Mr. 
Donovan say, ensuring mobility as well.
    Mr. MARSHALL. They all do a great job. All the carriers, 
the rural carriers, just are very committed to doing the right 
thing. Love working with them. Think that their heart is in the 
right place. We just have to empower them to do their job.
    Thank you.
    Chairman BLUM. Thank you, Dr. Marshall.
    Now I would like to recognize the Ranking Member, Mr. 
Lawson, for as time as he may take.
    Mr. LAWSON. I won't take too much, Mr. Chairman.
    Mr. Donovan, there are numerous recommendations for 
promoting broadband infrastructure deployment, as we discussed 
today. And then there are many who have proposals to create new 
Federal programs in various departments to make capital 
available for broadband infrastructure.
    What are your views on these proposals? And are any better 
suited to address the needs of rural areas?
    Mr. DONOVAN. Thank you for that question.
    I think part of it goes back to making sure that agencies 
that have an understanding of how these carriers operate and 
where service is available is a fundamental part of it. That 
is, of course, premised on having accurate data available to 
those agencies.
    So if any funding coming available, there is not enough 
Universal Service Fund support, just full stop. But for any of 
the programs, I think my colleagues on the panel would agree 
with that, anything to provide additional resources to those 
carriers is important.
    We also, in that same vein, the Universal Service Fund is 
not an appropriated budget item, and we don't want it to become 
one. It is hard to build out with a certainty that you may have 
through a couple-week continuing resolution, that you need to 
have long-term certainty in order to deploy in these networks. 
Goes back to Congress, in creating the fund, Congress directed 
reasonably comparable services, and we have heard before today 
with sufficient and predictable support. So how can we make 
sure that that happens?
    Mr. LAWSON. Okay. Anyone else care to comment on that?
    Mr. OWENS. I would just add, obviously, any moneys that are 
appropriated should be targeted to make sure that we are able 
to, again, make the most use of those dollars in building out 
the networks and using those dollars to work with the Universal 
Service Fund. As Mr. Donovan said, it is not appropriated 
dollars for USF, but any appropriated dollars that do come, I 
think it would help make it easier and better to build out 
additional broadband.
    Mr. LAWSON. I grew up in a very rural community. And when I 
was a kid my brother and I were fascinated when the electricity 
finally came. And when the light came on in the area, we stayed 
up all night trying to see when it was going to go out because 
we had never seen it before.
    In the rural area now with broadband, it kind of reminds me 
of people who don't have access, how extremely important it was 
for us to get electricity because they didn't bring it out 
there. It was the rural electrics who brought it out there.
    Do you see a similar type situation with broadband in the 
rural areas similar to what I am speaking of?
    Mr. DONOVAN. So we hear time and time again from customers 
served by rural wireless carriers how it is a breath of fresh 
air when you go from having unreliable mobile broadband 
coverage or constant dead spots to being able to seamlessly 
connect. So I think that experience is being enjoyed now. We 
need to make sure that more and more Americans are able to have 
that breath of fresh air.
    Ms. FITZGERALD. I agree. It really is a matter of quality 
of life. It is your kids being able to do their homework. It is 
you being able to be driving on a road at night and calling 911 
if you need to. It is about public safety. It is about all of 
those things. Starting a small business. It is really about the 
quality of life that we want our citizens to have throughout 
the country and also in rural areas.
    Mr. CARLINER. And also, Mr. Lawson, we have found that even 
areas where there was no internet service, people were using 
their cell phones. And their cell phone bills every month were 
$400, $500 a month because they were blowing through their data 
limits because they had no other alternative.
    When high speed internet arrives, that goes down to $40 or 
$50 a month as opposed to $400 or $500 a month. So there is 
real immediate impact even beyond the need for the service 
itself.
    Mr. OWENS. Yeah. I would add that as wireline broadband 
providers are carriers, when they get a certificate area for 
service, they have to serve that whole area. So they just can't 
pick and choose where they are going to serve.
    And we have carriers who are saying customers at the far 
extreme of their service territory are extremely happy when 
they get broadband. It may not be the full 25/3. It could be 4/
1 or 10/1. But they are extremely excited once they get it, 
because they have not had it before.
    Mr. LAWSON. I yield back, Mr. Chairman.
    Chairman BLUM. Thank you, Mr. Lawson.
    You may not have had electricity, but I will bet you had a 
basketball hoop.
    Mr. LAWSON. Oh, yeah. Absolutely.
    Chairman BLUM. I would like to thank our witnesses today 
for your excellent testimony. Make sure you stay in touch with 
the members of this community, because I think everyone would 
agree it is the most important issue, especially for those of 
us who represent rural counties.
    We have heard just how difficult it can be for small rural 
carriers and new entrants to maintain a viable and sustainable 
business. As with any small business, access to capital and 
adequate financing is the key to stability and success.
    We are reminded that should these carriers become unable to 
sustain their business models, the outcome most likely would be 
disastrous. The end result is that our communities and our 
citizens located in these high cost rural areas pay the price.
    The path to a comprehensive infrastructure plan should 
include solutions to improve rural broadband in fair 
competition for our small carriers. Our family farms, our rural 
entrepreneurs, small towns, and the next generation of 
innovators depend on it.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record. Without objection, so ordered.
    We are adjourned.
    [Whereupon, at 11:28 a.m., the Subcommittees were 
adjourned.]


                            A P P E N D I X


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                   Testimony of Paul Carliner

    Co-Founder of Bloosurf LLC before a Joint Hearing of the

   House Small Business Committee Subcommittee on Health and 
                           Technology

     and the Subcommittee on Agriculture, Energy and Trade

                         March 6, 2018

    Chairman Chabot, Ranking Member Velazquez and members of 
the Committee, I am Paul Carliner, co-founder and CEO of 
Bloosurf. Thank you for the opportunity to appear before you 
today.

    Bloosurf is rural high-speed internet service provider 
located in the Salisbury, Maryland. Our company was founded in 
2009 with the goal of providing affordable and sustainable 
high-speed internet service on the lower Eastern Shore of 
Maryland. We provide service to homes, businesses, schools, 
hospitals and even to residents living on an island in 
Chesapeake Bay.

    The digital divide between urban and rural America is 
growing and getting worse. As major urban and suburban areas 
continue to see robust capital investment in internet 
infrastructure, including the rollout of new 5G mobile service 
later this year, rural America is struggling with providing 
basic internet service.

    In 2010, Bloosurf was awarded $3.2 million by the U.S. 
Department of Agriculture's Rural Utility Service to build a 
new, state of the art fixed wireless LTE network covering 
approximately 100,000 households across three rural Maryland 
counties on the lower Eastern Shore.

    We built our network on time and returned over $1 million 
to the government. We designed, built and now operate a state 
of the art last mile network covering three counties for $2.2 
million. We have validated a new low-cost model for providing 
high speed internet service to rural areas. As a small rural 
internet service provider (ISP), I'd like to share with you our 
experience, lessons learned and recommendations for the future.

    We are grateful to the Rural Utility Service's 
Telecommunications Program in particular Ken Kuchno and Rick 
Gordon who were instrumental in helping us and so many other 
companies build out the rural broadband infrastructure. Their 
leadership and hard work has brought internet service to 
thousands of rural homes and businesses for the first time.

    The state of Maryland and the Maryland Broadband 
Cooperative, in particular Pat Mitchell and Drew Van Dopp, have 
been critical in helping our company provide internet service 
to the rural communities we serve. As a state chartered 
cooperative, Maryland Broadband provides a public fiber network 
that connects to Bloosurf's wireless last mile network. It is a 
national model of local public-private partnerships that 
combine middle mile assets with last mile solutions to serve 
rural communities.

    First, it is abundantly clear that the only way rural 
America will cross the digital divide is with sustained public 
investment by the local, state and federal governments. Without 
public investment, rural high-speed internet companies will be 
limited in their ability to grow and sustain service over the 
long term. If a rural community has a high percentage of 
unserved households, the need for public investment is even 
greater.

    We applaud the Federal Communications Commission (FCC) and 
Chairman Pai for moving forward with the Connect America Fund 
II Reverse Auction to allocate up to $2 billion for rural 
broadband expansion this year. This auction will be a critical 
step in furthering the build-out of rural broadband 
infrastructure for many rural communities across the country.

    Without public investment, the business care for private 
investment in rural broadband is poor. The capital expenditures 
are high and the revenue stream is low. The median income of 
many rural areas is often well below their urban and suburban 
counterparts, further limiting revenue. This is why large 
national wireless companies and cable companies do not invest 
in the rural market. The market structure is unfavorable to 
debt financing and there is a limit to the amount of equity 
financing that a small business can accommodate. This is why 
public investment is so essential.

    The most effective and efficient form of public investment 
would be in direct capital grants to assist small rural ISPs in 
building the last mile infrastructure. By covering the capital 
costs including design and construction it allows a small ISP 
to provide high speed internet service to a small subscriber 
and revenue base. This is one of the most effective incentives 
for promoting the expansion of rural high-speed internet.

    Small rural internet service providers are key to building 
the rural broadband infrastructure. Rural ISPs know their 
communities, have existing relationships with local and state 
governments and can engineer local solutions that meet each 
community's unique needs in a way that large national 
corporations can't. When it comes to providing high speed 
internet service in rural communities, we know from experience 
that one size does not fit all. Every rural community is 
different. Some communities have hills and mountains, some are 
surrounded by water, some are completely flat and population 
densities vary widely. Engineering a solution that works for 
each community and that is affordable and sustainable for each 
community is what rural ISPs do best.

    Each community needs a customized solution that uses the 
correct technology solution appropriate and sustainable for 
that community. In some communities, fiber to the premises may 
be a viable option, but in other areas, fixed wireless or 
satellite may be more appropriate or a combination of all 
three. The companies best suited to make these decisions are 
already working in these communities but need the support of 
all levels of government to help provide high speed internet 
service to this hard to reach market.

    Second, any federal strategy to help expand rural high-
speed internet service must focus on the last mile--that part 
of the network that actually brings internet service directly 
into the home and business.

    Previous public investments focused heavily on the middle 
mile--the fiber or cable under the highway or county road. 
After a decade or more of public and private investment in the 
middle mile, the federal government should focus on how to 
monetize that investment by actually providing service into 
homes and businesses. Rural communities paid for this 
infrastructure through their tax dollars, now it's time they 
actually get service.

    Federal funds should be used to encourage local and state 
governments to adopt comprehensive last mile strategies with 
local internet service providers that combine the middle mile 
and last mile into sustainable and affordable high-speed 
internet service for rural residents. Some states have already 
started on this path.

    Delaware is one of the state leading this effort. Last year 
under the leadership of Gov. John Carney, the Delaware 
Department of Technology and Information initiated a pilot 
project to demonstrate the feasibility of fixed wireless 
technology as a cost effective last mile solution for rural 
areas. Bloosurf participated in this effort and the data being 
collected will help shape a larger statewide initiative to 
provide affordable and sustainable high-speed internet service 
to all rural residents and businesses in Delaware.

    Several counties in Virginia have established broadband 
authorities to build last mile networks and the state of 
Maryland under Gov. Hogan's leadership established a rural 
broadband task force to explore options to expand high speed 
internet service to all rural parts of the state. The federal 
government should follow the lead of these states and focus on 
the last mile as the cornerstone of any new national rural 
broadband initiative.

    Third, federal agencies must adopt policies and regulations 
that encourage and incentivize rural internet service providers 
to invest and grow in the rural marketplace. This beings with 
looking at ways to lower the barrier to entry in this market by 
making it easier for small rural ISP's to access critical 
federal funds.

    Onerous financial requirements for accessing federal funds 
such as large lines of credit, arbitrary operating margins and 
debt to equity ratios are not the most important criteria in 
assessing an ISPs viability and do not offer guidance in 
judging future performance. Instead, these requirements, 
although well intentioned, simply discourage small ISP's from 
participating in the first place. The emphasis should be on 
past performance metrics and not exclusively on traditional 
financial metrics. Through monitoring and oversight, the 
federal government can protect the taxpayer interest instead of 
setting a financial bar so high that rural ISP's can't compete.

    One option to ensure financial viability and protect 
taxpayer investment would be to simply require a performance or 
construction bond, rather than a complex set of financial 
requirements. This would ease the path to participate for the 
ISP, protect the taxpayer investment and reduce the workload on 
the federal government.

    Access to affordable licensed spectrum for small rural ISPs 
is another critical element to providing affordable and 
sustainable broadband service in rural areas. Licensed spectrum 
has two important benefits to rural ISPs. For the consumer, it 
means greater speeds and faster service. For the ISP, it means 
lower operating costs and higher margins. Licensed spectrum 
lowers the cost for ISPs because it allows wireless service to 
travel much farther than unlicensed spectrum. Bloosurf uses 
licensed spectrum and we've seen the results. We have a 
business customer nineteen miles away from a tower that's 
getting 10 Mbps of service--more than enough to stream video 
and search the web.

    Achieving that level of service can only be done with 
licensed spectrum. It only took the construction of one tower 
to reach that customer. If Bloosurf did not have licensed 
spectrum, we could not have reached the customer or we would 
have had to build additional towers which would have made it 
too expensive. The FCC must find a way to allocate licensed 
spectrum in rural areas to local ISPs that is affordable to 
those companies.

    Bloosurf partnered with three public universities in our 
service area, Salisbury University, WorWic Community College 
and the University of Maryland Eastern Shore to sublease their 
licensed spectrum in exchange for providing high speed internet 
service to the university communities and sharing revenue 
generated from that service. We are grateful to all three 
universities for the leadership in their communities and for 
this partnership that has brought high speed internet service 
to rural communities in Maryland that previously had little or 
no access to affordable internet service.

    Small rural ISPs are also laboratories of innovation for 
implementing new approaches and the latest technologies to 
provide high speed internet service. Our company uses 
commercial off the shelf components, open source software and 
partnerships with manufacturers and local and state governments 
to improve the quality of service while reducing costs. 
Technology, particularly wireless technology is changing 
rapidly. ISPs can adapt new technologies quickly and serve as 
incubators for innovation in this space.

    Finally, there should also be a mechanism to share and 
exchange information between the federal government and rural 
ISPs when it comes to issues such as cybersecurity. A network 
is only as strong as its weakest link. Many ISPs do not have 
the expertise and resources to invest in the latest 
cybersecurity technology and are often forgotten when setting 
national policies or allocating federal resources. There should 
be a program, policy and mechanism to assist rural ISPs in 
meeting basic cybersecurity protocols and updating them as 
necessary.

    Access to affordable high-speed internet service is 
critical for rural communities to retain and attract new jobs, 
improve the quality of education and provide basic services 
such as medical care. Rural ISPs are at the forefront of this 
effort and have been for some time. Unlike the large national 
cable and wireless network companies, we are local companies 
employing local residents and hiring local companies. There is 
a multiplier effect with a rural ISP that you simply do not get 
with a large national company.

    I hope that sharing our experience will assist you and this 
Committee in its important work in helping small businesses and 
improving the lives of rural residents by ensuring that they 
have access to affordable high-speed internet service. The 
digital divide between urban and rural America is growing. The 
solution is easy. We just need the will to move forward.

    Thank you.

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