[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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