[Senate Hearing 115-280]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-280

                      THE UNIVERSAL SERVICE FUND 
                     AND RURAL BROADBAND INVESTMENT

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

                                HEARING

                               BEFORE THE
                               
    SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, INNOVATION, AND THE 
                                INTERNET

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 20, 2017

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
                             
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
MIKE LEE, Utah                       GARY PETERS, Michigan
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

    SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, INNOVATION, AND THE 
                                INTERNET

ROGER F. WICKER, Mississippi,        BRIAN SCHATZ, Hawaii, Ranking
    Chairman                         MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska                EDWARD MARKEY, Massachusetts
JERRY MORAN, Kansas                  CORY BOOKER, New Jersey
DAN SULLIVAN, Alaska                 TOM UDALL, New Mexico
DEAN HELLER, Nevada                  GARY PETERS, Michigan
JAMES INHOFE, Oklahoma               TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah                       TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin               MAGGIE HASSAN, New Hampshire
SHELLEY CAPITO, West Virginia        CATHERINE CORTEZ MASTO, Nevada
CORY GARDNER, Colorado
TODD YOUNG, Indiana
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 20, 2017....................................     1
Statement of Senator Wicker......................................     1
Statement of Senator Schatz......................................     3
Statement of Senator Nelson......................................   197
    Prepared statement...........................................   198
Statement of Senator Klobuchar...................................   198
Statement of Senator Peters......................................   200
Statement of Senator Hassan......................................   202
Statement of Senator Fischer.....................................   203
Statement of Senator Capito......................................   206
Statement of Senator Baldwin.....................................   208
Statement of Senator Cortez Masto................................   210

                               Witnesses

Michael J. Balhoff, CFA, Senior Partner and Cofounder, 
  Charlesmead Advisors, LLC......................................     3
    Prepared statement...........................................     5
Shirley Bloomfield, Chief Executive Officer, NTCA-The Rural 
  Broadband Association..........................................   172
    Prepared statement...........................................   174
Eric B. Graham, Senior Vice President, Strategic Relations, C 
  Spire..........................................................   178
    Prepared statement...........................................   180
Karen S. Rheuban, MD, Professor of Pediatrics, Senior Associate 
  Dean, Continuing Medical Education and External Affairs; and 
  Director, University of Virginia Center for Telehealth.........   186
    Prepared statement...........................................   188

 
                      THE UNIVERSAL SERVICE FUND 
                     AND RURAL BROADBAND INVESTMENT

                              ----------                              


                         TUESDAY, JUNE 20, 2017

                               U.S. Senate,
       Subcommittee on Communications, Technology, 
                      Innovation, and the Internet,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:56 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Roger Wicker, 
Chairman of the Subcommittee, presiding.
    Present: Senators Wicker [presiding], Schatz, Blunt, 
Fischer, Heller, Capito, Gardner, Young, Klobuchar, Markey, 
Peters, Baldwin, Hassan, Cortez Masto, and Nelson.

          OPENING STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    The Chairman. Good morning, the Subcommittee will come to 
order. Today we will examine the Universal Service Fund and its 
impact on broadband investment in rural America. I'm glad to 
convene this hearing with Senator Schatz, my good friend.
    When Congress passed the Telecommunications Act in 1996, it 
made clear that all Americans should have access to quality 
communications services at just, reasonable, and affordable 
rates. From that time, the Universal Service Fund, established 
by the FCC, has been a primary mechanism for achieving 
universal communications service across the country. It has 
supported the deployment of communications networks to rural 
and remote geographic areas, and it has provided essential 
support to build out networks to health care facilities and 
other institutions that would likely go without service.
    In 2011, the FCC significantly reformed parts of the USF 
program in an attempt to address past shortcomings and 
inefficiencies, particularly when deploying communications 
services to high-cost rural areas. Many of these reforms 
stemmed from economic assumptions and other judgments about how 
the Commission anticipated funding needs for service in hard-
to-reach areas. They also aimed to make support more efficient 
while modernizing programs and ensuring next generation 
communication technologies and services reach rural areas.
    Despite reforms, challenges within USF persist. These 
challenges include the program's ability to support meaningful 
investments into the broadband deployment and conduct necessary 
maintenance on established networks. As a result, this has left 
a disparity in the quality of communications service between 
urban and rural areas. Inadequate data collection methods are 
also one of USF's challenges, leading to an inefficient 
distribution of funds to truly underserved and unserved areas.
    To address this issue, I recently joined Senator Manchin in 
introducing the Rural Wireless Access Act, which has the 
support of several of my colleagues, including Senator Schatz, 
Senator Fischer, Senator Klobuchar, Senator Moran, and Senator 
Peters. This bill would require the FCC to standardize its data 
collection methods to ensure that USF support is directed to 
rural communities in Mississippi, Hawaii, Minnesota, and in 
areas across the Nation that are actually in need.
    Reliable data is a critical step toward eliminating 
inefficiencies within the USF program and fulfilling the 
statutory goal of universal service. I appreciate the efforts 
of all the stakeholders involved to improve data collection at 
the FCC. As these efforts continue, it is important that this 
data be collected quickly so as not to delay the delivery of 
essential communications services through programs like Phase 2 
of the Mobility Fund to communities in need.
    Ensuring the deployment of broadband service to rural 
health care providers is another critical component of the USF 
program. Today, Senator Schatz and I will reintroduce the 
Reaching Underserved Rural Areas to Lead on Telehealth Act. 
With this bill, several health care providers that offer 
service predominantly to rural areas would qualify for support 
under USF's Rural Health Care Program. Mississippi is a leader 
in telemedicine and is driving the use of innovative 
technologies to improve the quality, accessibility, and 
affordability of care. Robust broadband connections, supported 
through USF, are vital to the adoption of this lifesaving 
technology.
    The importance of our efforts to deliver broadband service 
to rural areas cannot be understated. Job creation, economic 
development, and access to digital innovation, such as 
telemedicine, fully self-driving cars, and smart communities 
have become increasingly reliant on the presence of high-
quality, high-capacity broadband networks. It is imperative for 
all Americans to have access to the communications services 
promised by USF programs.
    I look forward to hearing from our witnesses today about 
the state of broadband investment in rural America and how the 
USF program is affecting the market. I also hope the witnesses 
will offer recommendations on how the Commission can address 
inefficiencies within USF to ensure that the economic and 
digital opportunities afforded by broadband reach our rural 
communities.
    Our witnesses today are Mr. Michael Balhoff, Senior 
Partner, Charlesmead Advisors; Ms. Shirley Bloomfield, Chief 
Executive Officer, NTCA-The Rural Broadband Association; Mr. 
Eric Graham, Senior Vice President, Strategic Relations, of C 
Spire; and Dr. Karen Rheuban, MD, Director, University of 
Virginia Center for Telehealth.
    I am delighted to have all of these witnesses here today. I 
now recognize Senator Schatz, my teammate on this subcommittee, 
for whatever opening statement he chooses to make.

                STATEMENT OF HON. BRIAN SCHATZ, 
                    U.S. SENATOR FROM HAWAII

    Senator Schatz. Thank you, Mr. Chairman, for convening this 
important hearing on USF. USF, as you all know, was created to 
make sure that all Americans have the security and the 
opportunities that come with being connected to essential 
communications networks.
    But today it's not enough to have access to voice services; 
access to broadband is a necessity for people to be able to 
participate in society. Tasks like applying for a job, 
accessing government services, or doing homework are now nearly 
impossible without broadband. And yet too many Americans don't 
have access to broadband, particularly those living in rural 
and isolated areas.
    In fact, the FCC's yearly broadband report indicates that 
millions of Americans lack access to high-quality--excuse me--
high-speed broadband services. We can't close that divide 
without USF, which is why the FCC has done a lot of work since 
2011 to update USF and refocus it on deploying broadband.
    So what's next? First, we have to remain vigilant against 
waste, fraud, and abuse. The FCC should continue to examine 
reforms that stress transparency, accountability, and 
enforcement.
    Second, distribution mechanisms within the USF must ensure 
that support goes where it is needed the most. USF's E-rate and 
Lifeline programs are critical to bridging the digital gaps 
that exist for people living in rural and tribal areas as well 
as those from underserved communities. The programs fund 
broadband access in libraries and schools, and provide low-
income Americans access to opportunities that can lead to a 
better life.
    Another key component of USF is its Rural Health Care 
Program, which provides support to qualified health providers 
so they have the broadband service necessary to provide 
telehealth services. These are crucial services for people who 
live miles from the closest health care facility and may lack 
access to specialists.
    Finally, as the FCC thinks about the best allocation and 
use of USF funds, it must take into account the unique 
circumstances of certain localities. In Hawaii, there are 
unique geographical and topographical challenges that make 
delivering broadband very difficult and very costly. For USF to 
deliver on its promise to connect all people, it has to account 
for such challenges.
    I thank today's witnesses for joining us at this hearing. I 
thank the Chairman for convening, and I look forward to 
discussing these important topics.
    The Chairman. Well, thank you very much, Ranking Member 
Schatz.
    Thank you to our distinguished panel for joining us today.
    We will begin with Mr. Balhoff. Can you give us about 5 
minutes of opening testimony? We'll take your full statement 
into the record.

   STATEMENT OF MICHAEL J. BALHOFF, CFA, SENIOR PARTNER AND 
              COFOUNDER, CHARLESMEAD ADVISORS, LLC

    Mr. Balhoff. Thank you very much, Chairman Wicker, Ranking 
Member Schatz, and distinguished members of the Subcommittee. I 
very much appreciate the opportunity to speak to you today 
regarding ``The Universal Service Fund and Rural Broadband 
Investment.'' I've done a tremendous amount of work over the 
years, nearly 30 years, focused on this industry as a financial 
analyst.
    I was 16 years at Legg Mason, which is an investment firm 
based in Baltimore, but we provided published advice across the 
country and actually internationally. I headed the Equity 
Research Group there that focused on telecom and technology, 
and it was widely recognized during that period that we had the 
foremost practice in rural telephony in the United States. So 
we were pretty significantly in demand to provide our advice on 
strategic issues.
    I'm now an investment banker at my own firm providing 
merger and acquisition services again to rural carriers. So our 
specialized interest is rural telephony.
    I have four summary remarks.
    First, as you are aware, Universal Service Funding is 
critically important in assuring a robust and capable telecom 
network supporting voice and broadband, as you've already 
mentioned, in rural and high-cost regions. USF or the Connect 
America Fund, as it is now known, is not a subsidy program, nor 
is it a tax arising from appropriations; rather, it is a 
payment system to compensate for real network costs that 
benefit all users of the domestic network, whether those users 
are in New York City; or in Vacherie, Louisiana; in Los 
Angeles; or in Fremont, Idaho. Payment of investment and 
operating costs across the country, and notably in high-cost 
rural areas, are dependent, as Congress previously found, on 
rates paid by all Americans who rely on that universal network.
    Second, the level of universal service funding has a direct 
effect on network investment. I know, and I am not guessing, 
that carriers in rural regions have sharply curtailed network 
investment in the wake of the 2011 FCC Transformation Order. 
Among other things, it's reflected in the loans from the 
lenders to this industry.
    So specifically illustrating this, the Rural Utility 
Service at the Department of Agriculture has been able to place 
its entire loan allowance each year--that's $906 million--every 
year through 2011. In the wake of the 2011 transformation 
order, however, the following year they were able to only place 
11.6 percent, where previously they had placed the entirety. 
And it has not yet risen above 37 percent since that time. This 
year, it's running around 20 percent. Last year, it was 28 
percent.
    Illustrating what is happening at many companies, and there 
are many examples, a board of a large cooperative just told me 
days ago that it had stopped a $26 million fiber build, 
affecting 970 miles of fiber, and 6,976 customers, purely and 
simply, according to the Board, because of the FCC's budget 
control mechanism. I cannot state strongly enough, the carrier 
investment in all of my experience, and I know that this is the 
reality, is driven by available funds, and it's 
disproportionately harmed by the uncertainty in funding levels.
    Third, as I quantify in my written testimony, which is much 
longer, the FCC has acknowledged that the USF funds available 
for small rate-of-return carriers for the upcoming year is 
short by 12.4 percent. I actually state in my written 
testimony, I believe that understates the shortfall which, 
under the previous rate-of-return allowance, would have been 16 
percent, and I believe that the number is actually higher, 
which I describe.
    My belief is that it's difficult to square this with 
Section 254 of the Telecom Act, which legislates that universal 
service should be sufficient. By definition, it appears to be 
insufficient.
    Fourth, and finally, my testimony also points to what I 
believe is the greatest USF problem, which Senator Schatz 
pointed to, in underinvested areas. That is, the largest 
carriers have strategic commitments to nonrural businesses and 
are underinvesting in a way that affects the largest number of 
rural customers across the country.
    Based on my nearly 30 years analyzing this industry, I'm 
here to testify as strongly as I possibly can that the most 
widespread financial problem in rural America is found in the 
areas and customers served by the largest carriers. I believe 
that those large carriers actually are doing something that is 
responsible, which is that they're deploying their capital in a 
way that is productive for them. I believe those large 
carriers, however, are not properly incented to invest in those 
areas, and as a result, that we need to incent sales of those 
properties by the large carriers to other carriers.
    I'm happy to address any questions that this subcommittee 
may have. And I thank you for your time.
    [The prepared statement of Mr. Balhoff follows:]

   Prepared Statement of Michael J. Balhoff, CFA, Senior Partner and 
                  Cofounder, Charlesmead Advisors, LLC
    Chairman Wicker, Ranking Member Schatz, and distinguished Members 
of the Commerce Committee. Thank you for inviting me to testify today 
regarding the ``Universal Service Fund and Rural Broadband 
Investment.''
    My name is Michael J. Balhoff. I am a senior partner at Charlesmead 
Advisors, LLC, which is a Baltimore-based investment banking firm that 
I co-founded with two partners in June 2011. We provide merger-and-
acquisition as well as valuation-related services to companies in the 
telecommunications industry, notably the rural telecommunications 
industry. I have provided independent financial analysis and advice in 
the telecommunications industry for nearly 30 years. My education and 
business background are found in Appendix 1, attached to this 
testimony.
    I would like to address two questions in this hearing.

   The first concerns whether the universal service fund 
        (USF)--more recently known as the ``Connect America Fund'' 
        (CAF)--is sufficient to support networks and services required 
        in rural regions.

   The second question concerns how to improve the targeting of 
        USF/CAF monies to better achieve the policy goals associated 
        with those programs.
I. IS USF/CAF SUFFICIENT TO SUPPORT NETWORKS AND SERVICES IN RURAL 
        REGIONS?
    The simple answer is ``no.'' Setting aside the shortfall for larger 
price-cap carriers for the moment, I believe that small rate-of-return 
(RoR) carriers are insufficiently funded, possibly by $260 million 
annually. I have two comments in support of my response.
A. THE FCC ITSELF ACKNOWLEDGES THAT THE FUND, AS CURRENTLY CONSTITUTED 
        TO SUPPORT SMALLER CARRIERS, DOES NOT HAVE SUFFICIENT FUNDING
    The FCC authorizes the actual payments of universal service funding 
through the Universal Service Administrative Company (USAC). Pursuant 
to the FCC's March 2016 Rate of Return Reform Order, USAC recently 
released its calculation of a budget-driven reduction in payments to 
small RoR carriers for Fiscal Year mid-2017 to mid-2018. I summarize 
the calculation in a table below. The calculation preserves payments to 
Alaska carriers, to carriers that have chosen to receive Alternative 
Connect America Cost Model (ACAM) funding (albeit at levels lower than 
the original offer as I will explain below), and to carriers that are 
eligible for certain intercarrier support.
    Because of a cap of $2 billion on annual support for small RoR 
carriers--a cap set in the 2011 Transformation Order--funding for RoR 
carriers that continue to receive support through rate-of-return 
mechanisms will be adjusted lower by the full amount of the shortfall.
    The $2 billion cap was determined based on 2011 levels of support 
approved for RoR carriers. To the best of my knowledge, no analysis was 
performed to determine that $2 billion was sufficient in 2011 or that 
the funding would be sufficient in future years. I emphasize this 
important point because the Telecommunications Act of 1996 presents 
several fundamental principles for the Act, including at Section 
254(b)(5) where the law stated that ``[t]here should be specific, 
predictable and sufficient Federal and State mechanisms to preserve and 
advance universal service.'' (Emphasis added.)
    Because the statute mandates that USF should be sufficient, a 
question has been posed about whether there is a fundamental 
inconsistency if ``sufficiency'' was not, and is not, assessed?
    As noted above, the shortfall in payments is borne, in this 
calculation, by the small RoR carriers (those that did not elect the 
ACAM). Parenthetically, I note that small carriers with specified 
broadband buildouts to at least 90 percent of their service region 
could not accept the ACAM model and were compelled--due to their 
successful deployments--to remain under the rate-of-return regime.
    The calculated shortfall in available funding for mid-year 2017 to 
mid-year 2018 results in a $173 million, or a 12.4 percent, RoR 
reduction in ``allowed support'' in the upcoming Fiscal Year--2017 to 
2018. The shortfall appears to be prima facie evidence that the funding 
level--once assumed appropriate for 2011--is now insufficient for the 
smaller carriers. This upcoming adjustment follows on the reduction for 
smaller carriers in the first half of calendar year 2017 when the FCC 
cut CAF Broadband Loop Support (BLS) by $80 million, again to remain 
within the 2011-based budget.
    The FCC is not simply reducing funding for carriers that remain 
under rate of return. The FCC-determined ``budget'' is also affecting 
ACAM carriers. Even the carriers that accepted the ACAM are not 
receiving the support offered in the initial proposal last year. The 
reason is that the ACAM was oversubscribed.\1\ As a result, in December 
2016, the FCC chose to address the oversubscription by reducing the 
per-line offer of support by 27 percent, from the $200 per line to 
$146.10.
---------------------------------------------------------------------------
    \1\ The FCC reported on December 16, 2016 that 216 rate-of-return 
carriers submitted letters electing 274 separate offers of ACAM support 
in 43 states.
---------------------------------------------------------------------------
    I suggest that the FCC itself is effectively stipulating that the 
2011-based budget is insufficient and the Transformation Order has 
prompted the Commission to override the Telecom Act's legislative 
principle regarding the ``sufficiency'' of funding.
    The rural trade organizations have been advocating what appears to 
be a reasonable solution, which is that the FCC should fully-fund rate-
of-return service territories, both ACAM and CAF BLS. Their estimate is 
that fully funding ACAM and RoR carriers would require an annual 
increase of approximately $200-$260 million, which is not a dramatic 
increase, in my opinion, in light of growing broadband 
responsibilities.


B. MY PROFESSIONAL OPINION IS THAT THE FCC WAS MISTAKEN IN REDUCING THE 
        ALLOWED RATE OF RETURN
    I will be brief in my second point, in part because I suspect that 
Congress wants to defer to the FCC in determining the allowed rate of 
return.
    I believe that the FCC was mistaken when it ordered a reduction in 
the allowed rate of return in March 2016, in great part relying on a 
report generated by the FCC Staff in May 2013. The allowed rate of 
return was reduced from 11.25 percent in a transition that is gradually 
implemented annually through a 25-basis point reduction until the rate 
settles at 9.75 percent on July 1, 2021. The effect, obviously, is to 
reduce the potential funding available to small carriers.
    I provided a long and carefully-sourced analysis of the Commission 
Staff's report on which the FCC based its decision.\2\ That analysis 
was filed before the California Public Utilities Commission, in a 
proceeding in which I represented ten small California carriers. I have 
attached that long testimony as Appendices 2 (September 2015 prefiled 
direct testimony) and 3 (March 2016 rebuttal testimony), in the event 
the Subcommittee wishes to review the issue.
---------------------------------------------------------------------------
    \2\ See Appendix 3, which includes the Balhoff Rebuttal Testimony, 
California Public Utilities Commission, A. 15-09-005, filed March 11, 
2016, notably at pages 63-80.
---------------------------------------------------------------------------
    Because I assume the Subcommittee is not interested in technical 
cost-of-capital theory or capital asset pricing models, I will make a 
simpler comment about the trends in rural costs of capital, based on my 
real-world investment banking experience.
    Valuations of rural telephone companies have demonstrably collapsed 
from ten years ago when rural-carrier sales were valued at 
approximately eight times each dollar of operating cash flow. Since 
then, the valuations have settled generally between 4.5 and 5.5 times 
operating cash flow, which means that investors perceive new risks that 
have caused a startling contraction of 30 percent--40 percent in value. 
Certain fundamentals of the rural business have not changed 
significantly in that period as voice lines continue to contract and 
broadband continues to expand, but other risks have increased including 
competitive and regulatory developments. The effect is a valuation 
contraction that is unlikely to reverse in the foreseeable future.
    The financial principle is straightforward. When values contract 
and expected future cash flows are not appreciably changed, the 
explanation is that the cost of capital--the discount rate applied to 
those cash flows--is rising.
    I note that this analysis is similar to valuing a home in an area 
where there are demographic changes. You may believe your house should 
attract a higher value because you are aware of historical values and 
you can tabulate your actual investment; but, if the neighborhood has 
changed and other economic factors have created negative pressures, the 
best indicator of value is the price agreed to by a willing buyer and 
willing seller. Whatever the FCC may argue from a theoretical point of 
view--and I disagree with specific elements of those arguments as 
spelled out in the Appendices--the willing buyers and willing sellers 
are telling you that the cost of capital for rural carriers is up 
sharply as reflected in the deeply depressed prices. Respectfully, I 
represent that the FCC is not correct and is therefore assigning 
returns on capital that are well below those indicated by the capital 
markets.
    Quite simply, rural carriers are no longer protected, monopoly 
utilities with governmental oversight and ready access to capital. It 
is nonsense to suggest that a rural carrier's cost of capital which was 
11.25 percent in 1990 (the last time the rate was adjusted before 2011) 
or in 2001 when the 11.25 percent was reaffirmed, should now be lower 
when competition, technology and regulatory risks have dramatically 
increased.
    If I am correct, then the shortfall outlined by USAC is not 12.4 
percent, but well higher, as is supported in my California 
testimony.\3\ For further perspective, if the FCC had maintained an 
allowed rate of return at 11.25 percent--and again I believe it has 
gone higher still--the shortfall for the RoR carriers in the upcoming 
year would be approximately 16.2 percent, by my calculation. If the 
rate should be 12.00 percent, then this coming year's shortfall is 21.5 
percent.
---------------------------------------------------------------------------
    \3\ See Appendix 2, which is the prefiled testimony, September 1, 
2015, notably at pages 49-71. An analysis of the implied cost of equity 
arising from transactional data is included from pages 62 to 71.
---------------------------------------------------------------------------
    I state again that I believe that RoR carriers are insufficiently 
funded.
II. MIGHT THERE BE IMPROVED TARGETING OF THE USF/CAF MONIES TO BETTER 
        ACHIEVE THE POLICY GOALS ASSOCIATED WITH THOSE PROGRAMS?
    Yes. I respond again in two parts, one regarding small carriers and 
the second regarding larger, price-cap carriers.
A. ROR CARRIERS ARE INSUFFICIENTLY FUNDED BUT THE TARGETING APPEARS 
        GENERALLY REASONABLE
    The FCC and USAC have generally done a good job in determining how 
the funding is allocated for small RoR carriers--based on investment 
and operating costs that are carefully tracked. And the FCC models 
indicate, with some degree of accuracy, that funding levels are too 
low. I believe that the reason for the shortfall, in part, is the 
accelerating pace of required upgrades to meet customer needs in a 
rapidly evolving broadband world, but the systems appear to me at this 
time to be generally reasonable.
B. MOST RURAL AREAS OF LARGE CARRIERS, PRICE-CAP CARRIERS ARE OFTEN 
        WHERE THE PROBLEMS EXIST
    In the 2011 Transformation Order, the FCC stated at paragraph 21 
that ``[m]ore than 83 percent of the approximately 18 million Americans 
that lack access to residential fixed broadband at or above the 
Commission's broadband speed benchmark live in areas served by price 
cap carriers--Bell Operating Companies and other large and mid-sized 
carriers.''
    This paragraph is stunning in making two important points. First, 
the FCC is stating that 15 million Americans lack residential broadband 
access in larger-carrier regions. For perspective, the large price-cap 
carriers served a total of approximately 60 million lines at that time; 
it can be inferred that the vast majority of large-carrier rural lines 
are underinvested, assuming that the large-carrier broadband-capable 
lines are concentrated in non-rural regions. Second, at most, 17 
percent of the underinvested lines are in regions served by smaller 
carriers, which suggests that the former USF system was working with 
laudable effectiveness. This second insight of course raises the 
question about why the new system should further limit support to 
companies that have been investing successfully to achieve policy 
goals.
    Since the time of the Transformation Order, the FCC has attempted 
to address this underinvestment problem, notably in large-carrier, 
price-cap regions. The Commission authorized initiatives such as the 
Connect America Fund II to offer incremental funding to build out to 
specified high-cost service locations.
    Still, my experience is that very little widespread investment is 
occurring in rural regions of the large carriers. And the reason, in my 
opinion, is that many of those carriers are focused on more urban, more 
wireless, more enterprise, and more international opportunities that 
provide superior opportunity for growth. The failure to invest in rural 
areas, therefore, may not explained by insufficient capital or 
insufficient universal service funding in most cases, but by the 
strategic focus of those larger carriers which is dedicated to other 
``more productive'' businesses.
    This is the major ``targeting'' problem, in my opinion. Large 
carriers own substantial swaths of rural America, but are not likely to 
make significant financial commitments in those areas. The largest 
carriers have major other responsibilities, which are not in rural 
regions in any state. To illustrate, the table nearby indicates that 
the large carriers in Mississippi have the greatest number of high-cost 
rural properties--150,000 in the state--compared with small carriers 
that serve a total of 67,000 lines in the state.\4\ The table 
summarizes state-by-state how that illustration is the rule rather than 
the exception as the high-cost locations and extremely high-cost 
locations where large, price-cap carriers are the providers of service 
are generally larger than the number of lines served by small carriers 
(rural local exchange carriers). Again, I contend those smaller 
carriers are investing in rural America at approximately appropriate 
levels. If the FCC is right that large carriers are underinvesting--and 
I think it is correct--then the problem of targeting is not a capital-
allocation issue. It is a problem that is explained by the fact that 
the wrong carriers own those properties.
---------------------------------------------------------------------------
    \4\ USAC at https://usac.org/hc/rules-and-orders/rate-of-return-
reform-order.aspx. See, also, https://apps.fcc.gov/edocs_public/
attachmatch/DA-15-509A1_Rcd.pdf and https://apps.fcc.gov/edocs_public/
attachmatch/DA-16-929A1_Rcd.pdf. Note that the column for large, price-
cap carriers includes only FCC-designated high-cost or extremely high-
cost locations, not the total number of lines served by the large 
carriers in the states. The rural local exchange carrier (RLEC) column 
provides the total number of lines served by RLEC, that is, RoR 
carriers, in the state.
---------------------------------------------------------------------------
    I believe that there are promising solutions that involve creating 
appropriate incentives for large carriers to divest underinvested and 
non-strategic properties to smaller carriers in the state or in nearby 
states. Further, I believe it is possible to craft solutions that 
require buyers to invest at levels that assure broadband services at 
levels that are comparable to those in urban areas. One solution 
involves forgiving sale-related taxes imposed on the sellers so that 
the sale prices can contract to acceptable levels--not to reward the 
seller, but to assure that the buyer can acquire the properties at deep 
discounts to current market prices and with sufficient financial 
headroom for greater subsequent investments. Those solutions are under 
discussion at the present.


    For the purposes of this hearing, I propose that it is critically 
important to understand the nature of the problem before taking 
constructive steps toward broadband solutions. It is my testimony today 
that the major broadband challenge is centered in regions where the 
carrier-owner has no strategic intent to improve those regions. The 
solution, therefore, must involve assessing how to incent sales by 
underinvesting carriers to dedicated operators that have the obligation 
to upgrade in those regions.
III. CONCLUDING REMARKS
    I am happy to discuss the shortfall in funding or the reasons that 
large carriers are generally ill-suited to provide service in rural 
regions.
    Thank you and I look forward to answering your questions.
                                 ______
                                 
               Appendix 1--Bio of Michael J. Balhoff, CFA
    Michael Balhoff is a Senior Partner and co-founder of Charlesmead 
Advisors, LLC, and is Managing Partner at Balhoff & Williams, LLC, a 
professional services firm that provides financial-regulatory 
consulting and advisory services to companies, investors and 
policymakers in the communications and energy industries.
    Before founding Charlesmead Advisors and the predecessor firm to 
Balhoff & Williams, Mike headed the Technology and Telecommunications 
Equity Research Group at Legg Mason and, in the final seven of his 
sixteen years as a senior analyst at Legg Mason, he covered equities in 
the incumbent local exchange carrier industry.
    Prior to joining Legg Mason in 1989, Mike taught as a graduate and 
undergraduate teacher. Mike has a doctorate in Canon Law and four 
master's degrees, including an MBA--concentration finance--from the 
University of Maryland. He is a CFA charterholder and is a member of 
the Baltimore Security Analysts Society. Mike has been named in six 
annual awards as a Wall Street Journal All-Star Analyst for his 
recommendations on the Telecommunications industry. His coverage of 
telecommunications, and especially rural telecommunications, was named 
by Institutional Investor magazine as the top telecommunications 
boutique in the country in 2003.
    Mike is a Registered Representative of and Securities Products are 
offered through BA Securities, LLC Member FINRA SIPC. Any testimonial 
or endorsement may not be representative of the experience of other 
customers and is no guarantee of future performance or success.
                                 ______
                                 
  Appendix 2--California Prefiled Testimony of Michael J. Baloff, CFA
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    The Chairman. Thank you very much.
    The Subcommittee now recognizes Ms. Bloomfield.

STATEMENT OF SHIRLEY BLOOMFIELD, CHIEF EXECUTIVE OFFICER, NTCA-
                THE RURAL BROADBAND ASSOCIATION

    Ms. Bloomfield. Thank you very much, Chairman Wicker, 
Ranking Member Schatz, members of the Subcommittee. Good 
morning and thank you very much for the invitation to 
participate in today's hearing. I'm Shirley Bloomfield, CEO of 
NTCA-The Rural Broadband Association. We represent about 850 
small businesses who are deploying rural broadband 
infrastructure in 46 states.
    For decades, small rural broadband providers have led the 
charge in deploying state-of-the-art communications services to 
their consumers, who are their neighbors. However, the job is 
not done. As a country, we must both reach the unserved and 
ensure that rural America stays connected in the great 
challenges that face us with distance and density.
    Last year, the Hudson Institute, in conjunction with the 
Foundation for Rural Service, released a report examining the 
economic impacts and benefits of broadband infrastructure. The 
report determined that the investments in ongoing operations of 
small rural broadband providers contributed $24.1 billion 
annually to the Nation's gross domestic product. The report 
also found that rural broadband investment is an important 
driver of job growth in both urban and rural America. And, 
finally, the study found that rural broadband supported over 
$100 billion in e-commerce in 2015.
    None of this economic activity would be possible without 
the Universal Service Fund, or USF, which is essential to 
making the business case for investment in rural broadband. The 
High Cost USF program is the most successful example of a 
public-private partnership in the broadband space. Remade as 
the Connect America Fund in recent years, USF helps unleash 
billions of dollars in private investment in rural markets that 
are simply uneconomic to serve and would not and could not 
otherwise justify obtaining loans or using cash-flows to build 
broadband to.
    The reforms in recent years also help to ensure that USF 
support is targeted toward areas of real need spent on network 
investments and operations and tied to the delivery of service 
at very specific locations. Unfortunately, despite these 
reforms, the viability and effectiveness of universal service 
is in peril. While regulatory uncertainty in the USF program 
has frankly been a fact of life for these small network 
operators for many years, the effects of a budget that has been 
flat for almost a decade are finally coming home to roost for 
rural consumers.
    There isn't a day that goes by that I don't get a phone 
call from one of my community-based providers on how the budget 
mechanism is having them cancel broadband deployment plans, 
holding their standalone broadband rates simply too high, or 
they're laying off staff. In Mississippi, instead of upgrades 
in Fulton, the only investments will be to remain operational. 
And in the Upper Midwest, a co-op is canceling their 2018 
projects, which means 500 people who have never had broadband 
will not get broadband next year.
    There's concern in Washington and across the country about 
the USF budget shortfall. In May 2017, nearly 170 Members of 
Congress, including Chairman Wicker and many members of this 
subcommittee, wrote to the FCC expressing serious concern about 
how the USF budget shortfall will undermine private 
infrastructure investment and consumer rates. We're hopeful 
that such bipartisan congressional leadership, we will see 
these issues addressed so that the promise of last year's USF 
reforms can actually be realized by millions of rural 
consumers.
    While there are several potential options to address this 
shortfall, doing nothing is no longer an option if rural 
broadband deployment truly is going to be a public policy 
priority. The time to act really is now. One option is for the 
FCC to leverage the existing USF mechanism to fill the 
shortfall. This would involve the use of existing USF program 
funds or reserves, funds that the FCC has collected but has not 
yet disbursed, for USF program purposes. Or the FCC could 
actually increase the USF contribution factor by a very small 
amount to help pay for the shortfall. While not ideal, this 
would result in American consumers paying perhaps the cost of 
one Starbucks coffee a year so that rural Americans aren't 
paying tens or even hundreds of dollars more per month for 
broadband.
    Another longer term option could be for Congress to direct 
infrastructure funding toward supplementing of or at least for 
use in coordination with the USF program. As Congress starts to 
consider potential infrastructure initiatives, leveraging the 
USF program in some way would be an effective and immediate 
means of promoting rural broadband availability and adoption.
    Finally, one key issue that requires further emphasis is 
what sorts of broadband networks our country should be aiming 
to promote. If one is paying for it and building an asset 
intended to be future-proofed, that asset should be built to 
last for a few decades. That means not spending valuable USF or 
other funds on a network that are cheaper on the front end that 
are going to be obsolete in a few years.
    So in conclusion, small rural broadband providers are eager 
to continue deploying infrastructure and delivering services 
that rural America needs to participate in the digital economy, 
but a reasonable ability to justify investment, and then 
recover the cost of sustaining infrastructure in these high-
cost rural areas is critical to this mission's success.
    NTCA is honored to participate in this timely conversation 
regarding rural broadband. We look forward to working with all 
of you and other stakeholders on a comprehensive infrastructure 
strategy that includes the tools to actually achieve our 
Nation's shared broadband goals.
    Thank you for the opportunity to testify and for the 
Subcommittee's commitment to creating an environment conducive 
to broadband infrastructure investment in rural America.
    [The prepared statement of Ms. Bloomfield follows:]

  Prepared Statement of Shirley Bloomfield, Chief Executive Officer, 
                  NTCA-The Rural Broadband Association
Introduction
    Chairman Wicker, Ranking Member Schatz, members of the 
Subcommittee, good morning and thank you for the invitation to 
participate in today's hearing focused on broadband, economic 
development, and the Universal Service Fund (USF).
    I am Shirley Bloomfield, Chief Executive Officer of NTCA-The Rural 
Broadband Association (``NTCA''). NTCA represents approximately 850 
rural small businesses deploying broadband infrastructure in 46 states. 
All NTCA members are fixed voice and broadband providers, and many of 
our members also provide mobile, video, satellite and other 
communications-related services to their communities. The small telcos 
like those in NTCA's membership serve less than 5 percent of the 
population of the United States, but cover approximately 37 percent of 
its landmass. These companies operate in rural areas left behind by 
other service providers because the markets were too sparsely 
populated, too high cost, or just too difficult in terms of terrain.
    Small, rural broadband providers have for decades been frontrunners 
in deploying state of the art communications services to their 
customers. Services that enable local businesses to serve globally and 
connect rural America to urban America and the world. These impacts are 
felt not only in agriculture, but in all sectors of the economy that 
depend on broadband connections, such as education, commerce, health 
care and government. However, the job is far from finished. 
Communications providers must not only deploy broadband; they must 
sustain and upgrade their networks to keep pace with their consumers' 
growing demands. We also still face the challenge, of course, of 
delivering services to parts of rural America without access.
    Before turning to the USF High Cost Program--also referred to these 
days as the Connect America Fund--and the challenges of deploying and 
sustaining broadband infrastructure in rural America, it is important 
to understand the economic and other benefits that accrue to America as 
a whole when every American has reasonably comparable access to high-
quality communications services at affordable rates.
Rural Broadband: Economic Development and Job Creation
    Broadband networks facilitate greater interconnection of community 
resources and enable greater participation in the national and global 
economy. To not have access to high-speed Internet today should be 
unimaginable, yet millions of rural Americans have limited or even no 
access to robust broadband. And while it is critical to deliver 
broadband to the unserved, it is just as critical that those already 
receiving broadband remain served. There are many places in rural 
America where networks have been built by committed companies like 
those in NTCA's membership, but the sustainability of that 
infrastructure and the affordability of services remain in question--
putting the sustainability of rural communities in question as well.
    In many parts of rural America, the challenges of distance and 
density are so great that they cannot sustain even one broadband 
network. These are places where the market does not work. Section 254 
of the Communications Act therefore rightly recognizes that our 
national policy is not merely about deploying infrastructure, but also 
ensuring that such infrastructure, once deployed, means something 
lasting and ongoing for the consumer--that is, ``reasonably 
comparable'' services at ``reasonably comparable'' rates for urban and 
rural consumers alike.\1\ If a network is built but then becomes 
unsustainable, or if the services offered over it are unaffordable or 
unreliable or cannot keep pace with increasing consumer demand, then 
these outcomes deny rural Americans the benefits of broadband and 
represent a terrible waste of the resources that help to make broadband 
infrastructure available in the first instance. This is not about a 
``scoreboard'' of locations served, although public policy these days 
unfortunately seems to take just such a short-term focus all too often. 
Rather, it's about whether we are building broadband that will make a 
lasting, long-term difference for rural areas looking to attract and 
retain residents and businesses, who are in turn betting on the 
viability of those communities.
---------------------------------------------------------------------------
    \1\ 47 U.S.C. Sec. 254(b)(3) (2015).
---------------------------------------------------------------------------
    In April 2016, the Hudson Institute, in conjunction with the 
Foundation for Rural Service (FRS), released a report examining the 
economic benefits of rural broadband infrastructure.\2\ This report 
determined that the investments and ongoing operations of small rural 
broadband providers contribute $24.1 billion annually to the Nation's 
gross domestic product, with 66 percent ($15.9 billion) of that amount 
accruing to the benefit of urban areas.\3\ The report also found that 
rural broadband investment is an important driver of job growth, 
estimating that 69,595 jobs--54 percent of which are with vendors and 
suppliers in urban areas--can be attributed directly to economic 
activity of small rural broadband providers.\4\ These findings confirm 
that investment in rural broadband infrastructure yields returns that 
reach far beyond the confines of rural America.
---------------------------------------------------------------------------
    \2\ The Hudson Institute, ``The Economic Impact of Rural 
Broadband,'' April 2016, (``Hudson Paper''). https://s3.amazonaws.com/
media.hudson.org/files/publications/20160419KuttnerThe
EconomicImpactofRuralBroadband.pdf.
    \3\ Id., pp. 13-14.
    \4\ Id., p. 13.
---------------------------------------------------------------------------
    Finally, the study found that rural broadband supported over $100 
billion in e-commerce in 2015. Nearly $10 billion of that total 
involved retail sales, and Hudson estimates that if the broadband 
deployment in rural areas was equivalent to that in urban areas, sales 
would have been at least $1 billion higher.\5\ Such data underscore 
that not only is the widespread availability of robust affordable 
broadband important for our national economy, but the direct act of 
investing in and operating broadband infrastructure is itself a 
substantial economic driver.
---------------------------------------------------------------------------
    \5\ Id., pp. 19-20.
---------------------------------------------------------------------------
    But, there are also jobs beyond the telecom technicians, engineers, 
materials suppliers and manufacturers that are supported by rural 
broadband infrastructure. In Sioux Center, Iowa, a major window 
manufacturer built a 260,000 square-foot plant to employ 200 people. 
The company considered more than 50 locations throughout the Midwest, 
but selected Sioux Center in part because the rural broadband provider 
enabled this plant to connect with its other locations throughout the 
U.S. using a sophisticated ``dual entrance'' system that could route 
traffic to alternate paths, ensuring that the main headquarters 250 
miles away and other facilities would remain connected. In Cloverdale, 
Ind., a rural broadband provider met with developers and helped bring 
an industrial park to its service area. Powered by this provider's 
broadband, the facility brought more than 800 jobs to the area. In 
Havre, Mont., a rural broadband provider is partnering with a tribally-
owned economic development agency to create a Virtual Workplace Suite 
and Training Center that is expected to create about 50 jobs. These 
stories are repeated throughout NTCA member service areas.
The Universal Service Fund Successes and Challenges
    Created decades ago and modernized over the past several years, the 
Federal USF High-Cost Program is essential to the business case for 
investment in rural broadband infrastructure--it is the best, most 
successful example of a public-private partnership in the broadband 
space. Recast as the Connect America Fund within the past decade, the 
USF initiative helps unleash billions of dollars in private investment 
in rural markets that are uneconomic to serve and would not and could 
not otherwise justify obtaining loans or using cash flows to build 
broadband. The USF does not fully fund (or ``pay for'') rural network 
investments; it helps to justify the business case for private network 
investments that totaled approximately $29 billion (in terms of gross 
plant in service) just for small rural carriers as of 2015.
    The High-Cost USF programs have recently been reformed to improve 
their effectiveness and accountability. While they were already 
successful in promoting increased broadband in rural areas served 
especially by smaller rural providers, recent reforms help ensure that 
funds are targeted to areas of real need, that they are spent on 
network investments and operations, and that the locations served via 
USF can be identified. The High-Cost USF program is therefore already a 
success story in many respects, and it is positioned to achieve even 
greater things in a broadband era going forward. Unfortunately, despite 
all this progress, the viability and effectiveness of the USF is at the 
same time in serious peril. While regulatory uncertainty from USF 
reforms and budgets has seemed like a fact of life for small network 
operators for more than a decade, the effects of a budget that has been 
flat for almost a decade are finally coming home to roost.
    While the Federal Communications Commission (FCC) thankfully took 
steps to provide some level of additional funding earlier this year 
within the fixed overall USF budget for a subset of carriers that 
elected model-based High-Cost USF support, the funding was insufficient 
to achieve the goals of the model the FCC designed. An additional $110 
million per year is needed to fully fund an alternative model that the 
FCC created to promote broadband deployment. Because of this budget 
shortfall, 71,000 rural locations will receive lower-speed broadband, 
and nearly 50,000 may see no broadband investment at all.
    And the problem is even more dire for those small carrier 
recipients of High-Cost USF that could or did not elect model support. 
The High-Cost USF has been locked at the same budget level overall 
since 2011, and a lower budget target first adopted in 2011 for smaller 
carriers within that overall budget total is now being enforced via a 
strict budget control mechanism that threatens to wreak havoc on 
consumer rates and network investment. Under this tightly constrained 
USF budget, over the next 12 months, small rural network operators will 
be denied recovery of $173 million in actual costs for private 
broadband network investments that these carriers have already made. In 
other words, small rural network operators and the customers they serve 
will need to come up somehow with $173 million to pay for broadband 
investments that the USF program would have supported just a year ago--
and that the rules would still have permitted for recovery today via 
USF had it not been for ``haircuts'' made to enforce an artificial 
budget target adopted six years ago back when the program supported 
voice services only.
    Because of these support cuts, rural network operators are already 
increasing rural broadband rates for consumers and cutting back on 
future infrastructure investments. We have had one member company in 
the Southeast indicate, for example, that it cannot justify seeking a 
$26 million loan to build high-speed broadband infrastructure due to 
the USF cuts; a project that would have delivered approximately 1,000 
miles of fiber to over 7,000 rural customers is now on indefinite hold. 
Similarly, due to the USF budget cuts, a cooperative in the upper 
Midwest is on the cusp of cancelling 2018 construction projects worth 
several million dollars; these projects would have upgraded or 
delivered broadband for the first time to approximately 500 rural 
consumers and businesses, but the company now needs to scale back 
future investment because the USF cuts are taking away millions of 
dollars that were counted upon for investments already made in the 
past. In Mississippi, a small rural provider has been forced to hold 
off indefinitely on plans for future investments in communities like 
Fulton and surrounding rural areas due to the USF budget concerns, 
instead making minimal investments just to keep existing network plant 
operational rather than upgrading that network for higher-speed 
broadband that would help those areas thrive. In Nebraska, a small 
company with only 12 employees that just recently completed a 
significant fiber-to-the-home project has declined to fill four open 
positions--effectively cutting its workforce by 25 percent--because of 
concerns with declining USF support and its impact on the ability to 
pay for the network construction already completed. And in Iowa, a 
small carrier has not been able to lower its prices for standalone 
broadband because the USF budget cuts are effectively wiping out any 
support for such connections, despite the intention of the reforms and 
the repeated calls for such a fix from Congress.
    And the most insidious aspect of this budget control is that it not 
only cuts support that the rules indicate should be available, but it 
does so in unpredictable ways. For the last four months of last year, 
the budget control was 4.5 percent on average; for the first six months 
of this year, it rose to 9.1 percent on average. Now, as of July 1 of 
this year and for the 12 months after that, the budget control will on 
average reduce USF support by 12.3 percent. As if the support losses 
for investments already made were not bad enough, this lack of 
predictability makes it even harder to justify building going forward--
it hearkens back to a cap system the FCC adopted a few years ago called 
Quantile Regression Analysis or ``QRA.'' Many members of Congress, 
including many on this Committee, wrote to the FCC several years ago 
expressing grave concern about the QRA caps because they could change 
in unpredictable ways and thus severely undermined investment 
incentives. We eventually got rid of those caps, thanks in no small 
part to the efforts of the members of this Committee in pressing the 
FCC to do the right thing.
    But now with this budget control, we are venturing right back into 
the kind of unpredictability created by the QRA. If a company does not 
know whether the budget control will be 5 percent or 10 percent or 20 
percent next year--and given the growth trends, all we can guess is 
that the budget control will grow--that company cannot make informed 
decisions to invest in capital-intensive broadband infrastructure. Put 
another way and without hyperbole, the budget control--the USF budget 
shortfall--is the worst thing for promoting rural broadband investment 
since the much-maligned QRA. If it does not get fixed soon, we will be 
looking at years of lost rural broadband investment to the detriment of 
millions of rural Americans. Rather than creating new programs from 
scratch or taking flyers on untested theories of broadband deployment, 
why not use a program that has a proven track record and has just been 
improved in recent years? Why starve that program's budget while 
throwing dollars at new initiatives that might not work or, worse 
still, might conflict with this proven program? If rural broadband is 
really a priority, good public policy would indicate we should be 
building upon what has worked to promote it, rather than neglecting it.
    It's not just NTCA that is concerned about the USF budget 
shortfall. In May 2017, nearly 170 Members of Congress--including 
Chairman Wicker and other members of this Subcommittee--wrote to the 
FCC expressing serious concern about how the USF budget shortfalls will 
undermine private infrastructure investment and consumer rates. This 
letter demonstrated the shared bipartisan interest in prompt action on 
this issue, and a window of opportunity exists. We are hopeful that 
with continued congressional interest and leadership we can see these 
issues addressed, and the promise of last year's USF reforms can be 
realized by the millions of rural consumers served by smaller rural 
network operators.
A Path Forward for the Universal Service Fund
    Solving the USF budget shortfall requires a demonstrated commitment 
on the part of policymakers to rural broadband--but the shortfall is 
actually just a small fraction of the increases that other USF programs 
have received in recent years to further their mission. There are 
several potential options to address this shortfall, but what is clear 
is that doing nothing is no longer an option if rural broadband remains 
a public policy priority.
    One option would be for the FCC to leverage the existing USF 
mechanism to fill the shortfall. This could involve the use of USF 
program funds or reserves--funds that the FCC has collected but has not 
yet disbursed for USF program purposes. Certain reserves were 
previously used to help fund the model election referenced earlier in 
this testimony. It is unclear the extent to which other reserves 
remain, but getting a public accounting regarding how much is left in 
the reserves, if anything, would seem an important first step.
    Alternatively, the FCC could increase the contribution factor by a 
small amount to help pay for the shortfall. While not ideal, this would 
result in American consumers paying perhaps a few dollars more per year 
so that rural Americans are not paying tens or hundreds of dollars more 
per month for broadband, which is a clear violation of the universal 
service mandate in the Communications Act.
    Another option could be for Congress to direct infrastructure 
funding toward supplementing of (or at least for use in coordination 
with) the USF program. As Congress starts to consider potential 
infrastructure initiatives, leveraging the USF program would seem the 
most effective and immediate means of achieving a real effect on rural 
broadband availability and adoption. The USF initiative is up and 
running, so there is no need to ``reinvent a wheel'' to see results. 
Sufficient USF funding targeted for broadband infrastructure deployment 
could help fill the specific shortfalls mentioned above and accelerate 
private network investments in the most rural 37 percent of the U.S. 
landmass--while leaving substantial funding also to promote fixed 
network investments in other rural areas, for rural mobility services, 
and for unique challenges on tribal lands. The FCC's various High-Cost 
USF programs--the Connect America Fund 2 initiative and the programs 
that enable service delivery in rural areas served by smaller 
businesses--therefore offer a ready-made platform that, with additional 
resources but with very little additional ``heavy lifting'' or process, 
could ``hit the ground running'' and yield immediate, measurable 
benefits for rural consumers.
    If an infrastructure package including broadband moves forward 
through Congress and if it is not targeted toward somehow supplementing 
the USF programs, other options could include creation of new grant or 
capital infusion programs, comparable to what several states have used 
to address ``market failure areas''--places where the business case for 
investment is difficult, if not impossible, to make without additional 
resources. At the same time, creating such programs would require more 
administrative effort than leveraging existing programs, and the rules 
for any such new program must still be informed by ``lessons learned'' 
from similar prior efforts at the Federal and state levels. For 
example, as a matter of program integrity and to ensure the most 
efficient possible use of resources, it would be necessary to ensure 
such a capital infusion program is accurately targeted to unserved 
areas rather than enabling installation of duplicative infrastructure; 
in effect, this means that any new program would still require 
substantial coordination with the existing USF programs, among other 
things. And although some have alternatively touted tax incentives as 
offering promise--and while there are certainly areas in which such 
incentives might help--such measures are unlikely to make a material 
impact in most rural areas where distance and density make it 
difficult, if not impossible, to justify a business case for 
infrastructure investment to start. Put another way, if there is 
insufficient USF to help enable the business case for ongoing operation 
of networks and providing affordable broadband in rural areas, a 
capital infusion program or tax incentives may do very little to 
promote meaningful broadband deployment in many rural areas.
    Regardless of what path might be chosen in developing a broadband 
infrastructure package, one key factor that requires further 
consideration is what sorts of broadband networks we should be aiming 
as a country to promote. Presumably if one is paying for and building 
an asset intended to last for a few decades, that asset should be built 
to last a few decades. Of course, in a world of finite resources, there 
is a difficult tension between, on the one hand, trying to reach as 
many unserved Americans as possible with networks that may cost less 
upfront and, on the other hand, deploying more sustainable ``future-
proof'' networks to potentially fewer locations. This is not an easy 
choice. But NTCA submits that deploying a network that may be less 
expensive upfront--but which consumers will find substandard in just a 
few years' time, or will require much more to operate and upgrade over 
time--makes little sense for either the consumers who would use those 
networks or the American ratepayers or taxpayers who would ultimately 
help support them.
    As a more traditional infrastructure analogy that may resonate: if 
one projects that car traffic is doubling every few years on a single-
lane road, one likely does not rebuild the new highway with only two 
lanes and then go back to add two more lanes a few years later and yet 
two more lanes a few years after that. Instead, given the relatively 
high costs of infrastructure deployment and the disruption involved in 
repetitious construction, one builds the highway ``the right way'' the 
first time. The same should be true of our broadband networks. We 
should certainly look for a balanced approach to reach as many 
locations as possible, but not at the societal and economic cost of 
deploying networks that in only a few years' time will look obsolescent 
and inadequate for the users consigned to them. It is therefore 
important that any rules adopted by the FCC in connection with USF and 
any other new programs created as part of a broader rural broadband 
infrastructure initiative deliver the best, most balanced payback for 
both the American taxpayer and the users of the networks--both in the 
near-term and over the life of that infrastructure.
    Finally, I should not close without noting that the long-term 
sustainability of the universal service program depends upon 
rationalizing a contributions framework that is not built for a 21st 
century marketplace. One can have differences in opinion on how this 
should be done, but it is hard to dispute the basic notion that has 
already driven contributions policy all along--that those who make use 
of communications networks should contribute to the well-being and 
universal availability of those networks. Today, however, a shrinking 
base of legacy services that do not represent the majority users of our 
communications networks are being asked and tasked with funding 
universal service goals that are centered on broadband. Assuming all 
agree that universal service is an important public policy--and the 
Communications Act indicates that Congress thinks it is--rationalizing 
and reforming contributions requirements is essential to firm up the 
foundation of universal service for the 21st century.
Conclusion
    Small, rural broadband providers are eager to continue deploying 
infrastructure and delivering services that rural America needs to 
participate in the modern world. But the ability to justify and then 
recover the initial and ongoing costs of sustaining infrastructure 
investment in high-cost rural areas is critical to this mission's 
success.
    NTCA is excited to participate in this conversation regarding rural 
broadband. We look forward to working with policymakers and other 
stakeholders on a comprehensive infrastructure strategy that provides 
the tools and capabilities needed to achieve our Nation's shared 
broadband goals.
    Thank you for the opportunity to testify, and for the 
Subcommittee's commitment to creating an environment conducive to 
broadband infrastructure investment in rural America.

    The Chairman. Thank you, Ms. Bloomfield.
    Mr. Graham.

 STATEMENT OF ERIC B. GRAHAM, SENIOR VICE PRESIDENT, STRATEGIC 
                       RELATIONS, C SPIRE

    Mr. Graham. Thank you, Chairman Wicker, and thank you, 
Ranking Member Schatz, for having this hearing today. Thank 
you, members, for attending to discuss this incredibly 
important topic of the Universal Service Fund and rural 
broadband expansion.
    My fellow panelists so far have done a very good job of 
talking about expansion of wireline networks, so at least in my 
oral statement, I will turn most of my attention to wireless 
networks.
    It would be almost impossible to overstate the importance 
of rural areas to a company like C Spire. We trace our roots to 
1959, when our owners began the operation of a rural 
independent telephone company providing telephone service to 
areas of Mississippi that otherwise would not have had that 
service.
    We entered the wireless market as Cellular South in 1988, 
and for 30 years now have been providing wireless services 
throughout Mississippi. We began receiving universal service 
support from the High Cost mechanism in 2003. And little by 
little, we acquired customers and were able to cobble together 
enough USF support to expand our networks beyond the more 
heavily populated areas of Mississippi into the more rural 
parts of Mississippi.
    Today, we operate a wireless network that covers virtually 
the entire state. It covers over 98 percent of the population 
in Mississippi. What has been done in Mississippi is a USF 
success story, but proceeding on the path that the FCC has 
chosen to take so far, that story will not be repeated in other 
states. There are two primary reasons for this; the second is 
an outgrowth of the first.
    The first reason is that the FCC is prepared to move ahead 
on declaring areas eligible or ineligible for future mobility 
fund support based on insufficient data. This is data that is 
submitted to the FCC based on Form 477, and it's submitted by 
wireless operators across the country. So far, so good, except 
the FCC has never established a consistent standard by which 
that information should be submitted. So the FCC doesn't have 
an apples-to-apples comparison of coverage in various areas of 
the country.
    We, as operators, know that the information is bad. 
Senators know that the information is bad. Mr. Chairman, you 
wrote a letter along with Senator Manchin to the FCC addressing 
this very problem. The FCC knows the data is bad. And if anyone 
thinks that the data might still be good, if you just go to the 
FCC's website and pull up the map that shows covered areas 
according to this data, you find a disclaimer at the bottom 
that reads, ``These coverage calculations, while useful for 
measuring developments in mobile coverage, have certain 
limitations that likely result in an overstatement of the 
extent of mobile coverage.'' By my count, that's four hedges in 
one sentence, which has to be some kind of record.
    [Laughter.]
    Mr. Graham. Rather than pushing Pause and getting the 
information correct, the FCC's attitude seems to be it's close 
enough for government work, let's get the money out the door as 
quickly as we can.
    With insufficient data, we have no idea of the size of the 
problem that we're trying to address, and that's problem number 
two, issue number two. Without knowing what areas truly are 
covered and which areas lack coverage, the FCC, nor anyone 
else, can put together a model that shows the cost of covering 
unserved areas. There is no place in the record where the FCC 
has done an independent economic analysis to see what the cost 
would be to cover areas that lack wireless service today.
    CostQuest Associates made an attempt at this and determined 
that it would take approximately $25 billion to cover unserved 
areas in this country with an additional $1 billion per year 
going to operational support. That's the only number that's in 
the record so far. The Mobility Fund today has the maximum 
amount that it could recapture of approximately $450 million.
    Now, quick math will tell you that would take over 50 years 
if we use CostQuest projections. The amount of funding that's 
available today is simply not enough. Making matters worse, the 
FCC's plan at this point is to continue to sweep money from the 
legacy High Cost mechanism, which supports ongoing operational 
expenses of existing networks, into the new Mobility Fund 2 and 
use that money for new construction. Many networks that are 
supported today with USF funding for operational expenses are 
at risk of being shut down. This means that you could have 
scenarios by which towers constructed as recently as last year 
would be shut down over the next year due to a lack of support 
for ongoing expenses.
    Remember, USF would not have supported these towers in the 
first place unless there was no economic case for a private 
company or a public company to do this on their own. This 
creates a rusty tower problem where the landscape of rural 
America could be dotted with rusty towers that are no longer in 
use.
    Clearly, the FCC is on the wrong path with its current plan 
for USF, and it will take continued engagement from you, Mr. 
Chairman, from this committee, and from other Members of the 
Senate if the FCC is going to get this right.
    Thank you again for inviting C Spire to be here today. I 
look forward to your questions and dialogue this morning.
    [The prepared statement of Mr. Graham follows:]

     Prepared Statement of Eric B. Graham, Senior Vice President, 
                      Strategic Relations, C Spire
    Good morning Chairman Wicker and Ranking Member Schatz. Thank you 
for holding this hearing, and thank you for the invitation to appear 
before you this morning to offer testimony on The Universal Service 
Fund and Rural Broadband. My name is Eric Graham, and I am the Senior 
Vice President for Strategic Relations for Cellular South, Inc., the 
provider of C Spire Wireless services (``C Spire''). We are the largest 
privately-held wireless provider in the United States with an operating 
area that primarily consists of Mississippi, but also includes portions 
of southwest Tennessee (including the Memphis area), as well as coastal 
Alabama (including the Mobile area). Our company also provides both 
fiber to the home and enterprise broadband at Gigabit speeds, but the 
primary focus of my comments today will be wireless broadband, both 
mobile and fixed.
    The network that C Spire has constructed is an example of 
everything that can go right with a federally supported infrastructure 
program when a local company has the commitment to provide the latest 
technology to the people in its region. For over fifteen years, our 
company has participated in the Universal Service Fund's High Cost 
program and we have used that support to help in building a wireless 
network in Mississippi that covers virtually the entire geography of 
the state. We continue to upgrade the wireless network with the latest 
generation of technology so that Mississippians from Tunica in the 
northwest to Gautier in the southeast, have access to the same techno 
logy as people in Jackson and Tupelo. For that matter, we ensure that 
people in Jackson and Tupelo have access to the same technology as 
people in New York, San Francisco, and Washington, D.C.
A. Background on C Spire and Wireless Expansion
    Why do we do it? Quite simply, it's in our DNA to provide 
telecommunications services to hard-to-reach areas of Mississippi. Our 
company traces its roots to a pair of rural independent telephone 
companies, the first of which our owners began operating in 1959. In 
that time, in rural Mississippi, telephone service wasn't available 
everywhere. The Bell incumbent served the easy-to-reach areas, and 
people living outside those areas had no access unless an independent 
telephone company stepped in to serve the area. In one of the areas 
served by our rural independent telephone companies, two sisters lived 
within sight of each other's houses, but they were separated by a 
river. Although they could see each other from a distance, they had no 
real way to communicate until our company laid the telephone lines that 
allowed them to call each other. It was an expensive effort, and it 
would have been far more convenient not to provide telephone service to 
one or both of those ladies, but our belief then--and our belief 
today--is that people in rural and hard-to-serve areas need 
connectivity and access to modern technology just as much as those who 
live in densely-populated, easy-to-serve areas of our country.
    Congress believed the same thing in 1996 when it passed the 
Telecommunications Act. Recognizing that competition results in better 
service, the Senate and the House constructed a new Universal Service 
support mechanism that promoted competition for the first time and 
moved rural consumers away from telecommunications monopolies. The FCC 
adopted rules to implement the 1996 Act, ensuring that wireless 
providers could qualify for Universal Service funding on a 
competitively neutral basis. The result was tremendous expansion of 
wireless networks across the country, including areas where independent 
providers such as C Spire now had the missing piece of the financial 
model that made it feasible to build wireless networks in rural areas.
B. Problems with the USF Structure
1.  Distribution Problem
    There were two important flaws in the USF structure. The first flaw 
was in the way that support was distributed to carriers. Under the 
distribution mechanism, the reimbursement amounts were based on the 
local landline carrier's average cost to serve a customer. This was a 
simple exercise of dividing allowable expenses by the number of a 
landline company's subscribers in its service area, and providing an 
equal ``per customer'' amount of monthly support to the competitive 
provider that won the customer.
    As wireless networks expanded, cord-cutting became a practical 
option and there was a dramatic decline in the number of landline 
customers. However, the landline companies never lost USF support 
despite losing almost half of their lines over the past 10-15 years. 
The result was that the competitive carrier (almost always a wireless 
provider) received USF support to provide service to the customers it 
won, while at the same time the landline carrier continued to receive 
support for the customers it lost. This was a problem in 2009 when I 
testified before the House of Representatives on the topic of USF, and 
it remains a problem today.
2. Contribution Problem
    The second flaw in the USF structure is that contributions are 
based on a percentage of interstate and international 
telecommunications (long distance) revenues. Today, a small percentage 
of basic telephone service is interstate or international and that 
revenue base is shrinking rapidly as consumers now use Internet-based 
services to communicate. As interstate/international telecommunications 
revenues continue to decline, the FCC must increase the percentage 
assessed on the remaining revenue base, because it has no authority to 
assess intrastate telecommunications service revenues, or on any other 
service that is not telecommunications (such as information services).
    Accordingly, while the size of the Federal Universal Service Fund 
has not increased significantly over the past seventeen (17) years, the 
percentage of interstate/international revenues that consumers pay in 
(the ``Contribution Factor'') has risen from about four percent (4 
percent) to nearly twenty percent (20 percent).\1\ Over the years, some 
mischaracterized growth in the Contribution Factor as evidence of a USF 
crisis, when in fact it is not. Reforming the contribution mechanism 
has been on the FCC's radar for over fifteen (15) years, and the 
Federal-State Joint Board on Universal Service has recommended multiple 
solutions that have never been implemented.\2\ In today's world, where 
many connected devices use alternative means of communicating that do 
not use the public switched telephone network, and incur little or no 
interstate/international telecommunications charges the contribution 
mechanism is hopelessly outdated.
---------------------------------------------------------------------------
    \1\ See, http://www.usac.org/cont/tools/contribution-factors.aspx
    \2\ Over the years, the Joint Board has addressed contribution 
reforms on multiple occasions. Most recently, in August of 2014, the 
FCC requested the Joint Board to make recommendations, but they have 
yet to act. See, https://apps.fcc.gov/edocs_public/attachmatch/FCC-14-
116A1
.pdf, at n.5.
---------------------------------------------------------------------------
C. Compounding the USF Problems
    As shown above, rather than fix the way that Universal Service 
funds are collected, the FCC has ignored the problem. Its actions to 
date on distribution reform have protected certain classes of providers 
and short-changed mobile wireless networks that rural citizens 
desperately want and need.\3\ Today, wireless consumers contribute over 
half of the $8+ billion dollar annual USF budget, which covers schools 
and libraries, rural health care, Lifeline, and High Cost (Connect 
America Fund and Mobility Fund), yet annual High Cost support going to 
mobile broadband is approximately $600 million (only 7.5 percent of all 
USF support) and is scheduled to be cut back to only $453 million (less 
than 6 percent of all USF support) when Mobility Fund II is 
implemented.
---------------------------------------------------------------------------
    \3\ See, One Nation, Divisible/Rural America is Stranded in the 
Dial-Up Age, J. Levitz & V. Bauerlein, WSJ (June 15, 2017: https://
www.wsj.com/articles/rural-america-is-stranded-in-the-dial-up-age-
1497535841
---------------------------------------------------------------------------
    Recently, CostQuest estimated the cost of building out a high-
quality mobile broadband network throughout the unserved/underserved 
areas in rural America to be approximately $25 billion, with another $1 
billion of support needed for annual operating costs.\4\ And these 
figures don't even touch the coming 5G revolution. Does an annual 
budget of $453 million sound like the FCC has a sense of urgency to 
help build out modern 4G LTE networks in rural America? At that pace, 
it will take more than twenty years to get the job done, and even then, 
rural America will be further behind than it is today.
---------------------------------------------------------------------------
    \4\ See, https://ecfsapi.fcc.gov/file/10217086509033/
2017%200216%20CQ%20Cost%20Study%
20for%20Unserved%20Areas%20FINAL.pdf.
---------------------------------------------------------------------------
    Providers like C Spire, and many other small independent carriers 
who participated in the Universal Service program in the early years, 
used that support to expand and maintain their networks and were able 
to compete aggressively for customers in areas where networks improved. 
But starting in 2008, the Federal USF mechanism was capped, 
artificially preventing prevented many carriers from constructing 
comprehensive networks. That lack of coverage continues today in many 
of your states, and the FCC is proceeding down a path that will make 
the problem worse. In fact, history is about to repeat itself, as the 
new Universal Service mechanisms for broadband have two structural 
flaws of their own.
D. Flaws in Current USF Reform Plans
1.  Lack of Accurate Data to Direct New Network Construction
    First, the Commission is preparing to distribute funding without an 
accurate view of where support is needed. This will be the second time 
in the past five (5) years that the FCC has done this. The Commission 
intends to base funding decisions for Mobility Fund Phase II on data 
submitted by wireless providers across the country purporting to show 
where broadband exists or is lacking. This sounds reasonable on its 
face, but if you scratch slightly below the surface, you find that the 
FCC never established a consistent standard for how wireless carriers 
provide coverage information. This is a serious problem. Some providers 
submitted data showing coverage that an engineer would guarantee at all 
times and under all conditions, while others submitted data that would 
make a marketing department blush. To be clear, these differences are 
not necessarily malicious. Theoretical coverage, outdoors, in a low-
foliage, flat landscape will always appear greater than real-world, 
indoor coverage in rolling terrain. While both coverage simulations 
have legitimate purposes, the problem is the FCC permitted providers to 
submit data using factors the providers chose, and the resulting maps 
show either accurate, overstated, or understated coverage, depending 
upon how each carrier presented their respective mapping data.
    Members of this Committee have taken note and have pushed the FCC 
to take corrective action. Mr. Chairman, you and Senator Manchin 
recognized this problem in a letter to FCC Chairman Ajit Pai in April 
of this year, where you wrote:

        . . . the Commission's efforts [to promote broadband deployment 
        in unserved and underserved areas] must accurately target every 
        area that is in need of support so that no one is left behind. 
        Residents, first responders, businesses, public institutions, 
        and travelers in rural areas need reliable mobile broadband 
        access. To that end, collecting and using reliable, 
        standardized coverage data are critical steps toward ensuring 
        consumers in the most rural and remote communities have access 
        to the comparable services that Congress mandated for Universal 
        Service. \5\
---------------------------------------------------------------------------
    \5\ See, April 12, 2017 Letter to FCC Chairman: https://
www.wicker.senate.gov/public/_cache/files/d2d30dd8-76f2-4c45-8d3a-
b64c9018265c/041217-fcc-rural-broadband-auctions-task-force-letter.pdf

    It is also clear that this Committee understands what is needed to 
correct this problem because you, Mr. Chairman, Ranking Member Schatz 
and Senators Manchin, Fischer, and Moran introduced legislation in May 
of this year to help solve the data problem facing the FCC.\6\ That 
bill, the Rural Wireless Access Act of 2017, directs the FCC to 
establish a methodology to (1) ensure that wireless coverage data is 
collected in a consistent and robust way; (2) improve the validity and 
reliability of wireless coverage data; and (3) increase the efficiency 
of wireless coverage data collection. In introducing the bill, Senator 
Schatz put the need for its passage succinctly: ``We can't close the 
digital divide if we don't know where the problem is.'' \7\
---------------------------------------------------------------------------
    \6\ See, S.1104, 115th Congress, introduced May 11, 2017: https://
www.congress.gov/115/bills/s1104/BILLS-115s1104is.pdf
    \7\ May 11, 2017, Press Release, ``Manchin Introduces Bipartisan 
Bill to Expand Broadband Deployment Using Accurate Coverage Maps'': 
https://www.manchin.senate.gov/public/index.cfm/2017/5/manchin-
introduces-bipartisan-bill-to-expand-broadband-deployment-using-
accurate-coverage-maps. We note that Congressman Dave Loebsack of Iowa 
has introduced similar legislation (H.R. 1546) aimed at improving the 
quality of mobile broadband coverage data. See, H.B. 1546: https://
www.congress.gov/bill/115th-congress/house-bill/1546/text.
---------------------------------------------------------------------------
    Additionally, just last Thursday, Senators Heller and Machin 
introduced the Rural Broadband Deployment Streamlining Act.\8\ This 
legislation, as Senator Manchin noted upon its introduction, ``includes 
an assessment of whether the data in the National Broadband Map 
accurately reflects the broadband coverage currently available to rural 
consumers and . . . is a critical step towards ensuring that the 
infrastructure necessary for broadband coverage in unserved and 
underserved communities is more quickly deployed.'' \9\
---------------------------------------------------------------------------
    \8\ June 15, 2017, Press Release, ``Heller, Manchin Introduce Bill 
to Expand Access to Rural Broadband'': https://www.manchin.senate.gov/
public/index.cfm/press-releases?ContentRecord_
id=A3E25E12-1A27-47B9-B1E5-BB9B93738916
    \9\ Id.
---------------------------------------------------------------------------
    We are grateful for these efforts to correct this known problem, 
and we are hopeful that the FCC will recognize your concerns and amend 
its plan accordingly, but we believe it will take your active 
participation in this issue and vigilant oversight in order for the FCC 
to get it right.
    To the FCC's credit, the Commission opened a proceeding this spring 
seeking comments on how to get more accurate data before the upcoming 
Mobility Fund II auction. C Spire participated in stakeholders' 
workshops to develop a set of standards that work for the industry and 
that could be adopted by the FCC in their entirety, or with minimal 
changes. The working group submitted its suggestions to the Commission 
last month, but we have no indication those recommendations will be 
adopted. At this point, it is unclear whether the Commission is 
prepared to make the hard but necessary decision to require all 
carriers to submit improved coverage data based on a consistent 
standard.
    As part of this Committee's oversight responsibility, we urge you 
to see that the FCC does not spend $4.6 billion dollars until it has a 
clear picture of which areas will deliver the biggest bang for the buck 
for all Americans.
2. The FCC's Current Reform Plan Will Reduce Existing Coverage
    The Commission's current plan to proceed with its overhaul of the 
Universal Service Fund is fatally flawed because it eliminates 
operating support for the very networks that the Universal Service Fund 
helped to construct. This could have the perverse effect of forcing 
carriers to decommission cell sites over the next year that were 
constructed with Universal Service Support as recently as last year, 
thus reducing coverage and leaving towers to rust. This ``rusty tower'' 
scenario is very real because the whole purpose of the High Cost 
mechanism was to help wireless operators across the country construct 
and operate towers in areas that cannot justify the expense of 
continuing operations without support. Indeed, ensuring that networks 
in rural high-cost areas are maintained is one of the core purposes 
that Congress set forth in Section 254(e) of the Communications Act, 47 
U.S.C. Sec. 254(e). Consumers with dependable wireless broadband today 
could find themselves on the wrong side of the digital divide tomorrow, 
unable to access services they currently use for everything from social 
connectivity and directions to telehealth services and reaching first 
responders in times of emergency. Mr. Chairman, this result is exactly 
the opposite of the goals that you, Senator Manchin and twenty-eight 
(28) of your Senate colleagues set forth in a February letter to 
Chairman Pai.\10\ In that February letter, nearly one-third of the 
Senate--both Republicans and Democrats--provided this guidance to the 
FCC:
---------------------------------------------------------------------------
    \10\ See, February 2, 2017, letter to FCC Chairman Pai: https://
www.manchin.senate.gov/public/index.cfm?a=files.serve&File_id=4B24485D-
D61A-40D8-AE03-867D0139A37E

        As you move forward with MFII, we ask that your efforts help to 
        incent wireless carriers to preserve, upgrade, and expand 
        mobile broadband in rural America, rather than degrade and 
        reduce competition in areas that need it most. Competing in a 
        capital-intensive environment, wireless carriers need long-term 
        certainty of ongoing support to invest, deploy maintain and 
        update their networks that provide vital mobile broadband 
        services in rural areas. \11\
---------------------------------------------------------------------------
    \11\ Id.

    The combination of these two flaws in the new Universal Service 
mechanism--the failure to gather accurate, standardized data and the 
failure to protect the Universal Services Fund's decades of existing 
investment in rural areas--is a recipe for tremendous waste as funding 
will be directed to areas that do not require it while portions of 
existing networks will be turned off and cell towers will be abandoned. 
At this point, it will take leadership from the Senate and the House to 
ensure that the Universal Service Fund promotes broadband deployment in 
a way that preserves and expands network availability in rural areas.
F. Effect if FCC Stays on Current Path
    If network coverage and quality are reduced in rural areas, modern 
initiatives such as remote patient monitoring and precision agriculture 
are at risk along with many critical applications like distance 
learning and telecommuting that help people in rural areas participate 
in the todays digital and information economy. This is tremendously 
important because, according to the USDA's most recent figures, over 46 
million Americans live in rural communities. That's fourteen percent 
(14 percent) of the total U.S. population living in seventy-two percent 
(72 percent) of the Nation's geography.\12\
---------------------------------------------------------------------------
    \12\ USDA, Economic Research Service, Population & Migration 
Overview: https://www.ers
.usda.gov/topics/rural-economy-population/population-migration/
---------------------------------------------------------------------------
    During the Recession, almost 9 million jobs vanished from our U.S. 
economy, GDP shrank by more than five percent (5 percent),\13\ and our 
rebound has been uneven. Many of America's urban and coastal 
populations have recovered, and today they are generally ahead of where 
they were ten years ago. But, that's not true for tens of millions 
living in rural Americans, which remains well behind where it was 
before the Recession, some ten years ago.
---------------------------------------------------------------------------
    \13\ CBPP, Legacy of the Great Recession, June 9, 2017: http://
www.cbpp.org/research/economy/chart-book-the-legacy-of-the-great-
recession
---------------------------------------------------------------------------
    Just last week, Chairman Pai participated in the inaugural Rural 
Prosperity Task Force meeting,\14\ where he outlined how important 
policies that support broadband availability in rural areas are for 
demonstrating that the Federal Government cares about rural America. As 
he articulated, providing connectivity nationwide is at the core of why 
the FCC was created in 1934.\15\ Chairman Pai shared examples of 
economic growth powered by broadband with the task force, including 
remote monitoring in a meat processing plant in Nebraska, feed lot 
monitoring of cattle in Kansas, connected combines and field monitoring 
in Maryland, and healthcare, education, and job creation advances all 
made possible by broadband.
---------------------------------------------------------------------------
    \14\ See, https://www.whitehouse.gov/blog/2017/06/16/secretary-
perdue-hosts-inaugural-rural-prosperity-task-force-meeting
    \15\ Id.
---------------------------------------------------------------------------
    These examples are not purely anecdotal. The Hudson Institute 
recently found that the investments and ongoing operations of small 
rural broadband providers contribute $24.1 billion annually to the 
Nation's gross domestic product, with sixty-six percent (66 percent), 
or nearly $16 billion, of that amount benefiting urban areas. The same 
report also found that an estimated 70,000 jobs can be attributed 
directly to economic activity of small, rural broadband providers, 
underscoring how broadband is an important driver of job growth.\16\ A 
separate report has found that when a county gains access to broadband, 
there is approximately a 1.8 percentage point increase in the 
employment rate, with larger effects in rural areas.\17\
---------------------------------------------------------------------------
    \16\ See, https://hudson.org/research/12429-hudson-institute-
releases-report-on-economic-impact
-of-broadband-in-rural-communities
    \17\ See, http://digitalcommons.ilr.cornell.edu/ilrreview/vol66/
iss2/2/
---------------------------------------------------------------------------
    In testimony before this subcommittee last year, Mr. Darrington 
Seward, a Mississippi farmer, estimated a minimum ``10-15 percent loss 
of efficiency when connections are disrupted'' for their farm machinery 
alone.\18\ New remote patient monitoring services can save millions for 
rural hospitals and state Medicaid budgets. In fact, C Spire has 
partnered with the University of Mississippi Medical Center on a 
diabetes monitoring project that has the potential to save Mississippi 
Medicaid over $189 million a year in hospitalization costs.\19\ 
Secondary education, technical training, and even university degrees 
are available online, but only accessible for Americans with broadband 
services that support delivery of materials and facilitate interactive 
classes. The future of rural economic growth is directly tied to the 
availability of mobile broadband.
---------------------------------------------------------------------------
    \18\ See, https://www.commerce.senate.gov/public/_cache/files/
86a9b24c-e124-4b4b-a701-f0fe16
5be074/F3297DD6CC57D51B9EA2A54F209F07E3.darrington-seward-testimony.pdf
    \19\ See, https://www.fcc.gov/faces-connected-care-mississippi-
story
---------------------------------------------------------------------------
    We see examples nearly every week that demonstrate how we are, in 
many ways, living in a time of two Americas. Our most recent national 
election showed that there are millions of Americans who feel like they 
have been detached from the process and are being left behind, and many 
of these live in rural areas. I certainly won't claim today that 
wireless broadband availability alone will solve that complex problem, 
but I truly believe that if we do not connect our fellow citizens in 
rural areas the way that we have in urban and coastal parts of our 
country, economic and social divides will get worse. The good news is 
that policymakers can choose to connect these Americans if USF is 
properly channeled to support broadband in rural areas.
G. Options to Promote Rural Broadband Deployment
    The FCC's biggest USF shortcoming has been its unwillingness to 
aggressively pursue the core goal that Congress set before it: that 
rural citizens should have access to modern services that are 
reasonably comparable to those in urban areas in both quality and 
price.\20\ The FCC's timidity in this area is a bipartisan problem, 
stretching back more than a decade. If the FCC cannot bring itself to 
do the job Congress gave it by increasing investment to close the 
urban/rural broadband access gap, then Congress must act.
---------------------------------------------------------------------------
    \20\ See, 47 U.S.C. Sec. 254 (b)(3).
---------------------------------------------------------------------------
    Chairman Pai has suggested that, ``any direct funding for broadband 
infrastructure appropriated by Congress as part of a larger 
infrastructure package should be administered through the FCC's 
Universal Service Fund (USF) and targeted to areas that lack high-speed 
Internet access.'' \21\
---------------------------------------------------------------------------
    \21\ See, ``Bringing the Benefits of the Digital Age to All 
Americans,'' Remarks of Chairman Ajit Pai at Carnegie Mellon's Software 
Engineering Institute, March 15, 2017: https://apps.fcc.gov/
edocs_public/attachmatch/DOC-343903A1.pdf
---------------------------------------------------------------------------
    Given the big gap that exists and the efficiencies that can be 
gained from using an existing mechanism that would not require creating 
a new program or bureaucracy, one way to provide a big boost to rural 
broadband is to make a special USF appropriation in each of the next 
five years, targeted to rural infrastructure, and with accountability 
protections. Projects could be funded as soon as the FCC accurately 
determines the areas that are most in need.
    Alternatively, Congress could implement a fix to the contribution 
mechanism to spread the cost of universal service more equitably. This 
would provide the FCC with more flexibility than it has now to meet the 
needs of rural America because the Universal Service Fund would have a 
contribution base that is reflective of today's broader network usage, 
and a greater amount of funding available to provide support for rural 
broadband networks that our country clearly needs.
    What cannot happen is more of the same. Rural America has fallen 
behind and we need policymakers to demonstrate a sense of urgency to 
fix this problem now.
H. Conclusion
    Let's return, for a moment, to where I began my testimony this 
morning. I shared with you how C Spire has spent its history providing 
connectivity and modern telecommunications services to people in rural 
and hard-to-reach areas. Today, we've built an advanced fiber optics 
network that provides ultra-fast broadband connectivity to some of the 
most rural communities in Mississippi. We have almost 5,000 miles of 
fiber throughout Mississippi that can be a foundation to extend 
connections to rural communities. We're engaged in field trials of 5G 
equipment that can deliver wireless speeds of multiple Gigabits per 
second without needing a physical connection to a household or 
business. In the millimeter wave spectrum bands, technology has caught 
up with spectrum availability, and equipment is now available to 
utilize spectrum that has been fallow for decades. The missing piece is 
the financial model that proves in the deployment of advanced wireless 
networks in rural America. That's where support from the Universal 
Service Fund can, as it has throughout its history, bridge the gap. In 
order to do that, policymakers must solve the problems that I 
highlighted earlier: accurately map broadband availability so that 
support can go where it is truly needed, and preserve the networks that 
the Universal Service Fund has helped to build.
    Thank you again for inviting me to be here today. I welcome your 
questions and look forward to our dialogue this morning.

    The Chairman. Thank you, Mr. Graham.
    Dr. Rheuban.

               STATEMENT OF KAREN S. RHEUBAN, MD,

        PROFESSOR OF PEDIATRICS, SENIOR ASSOCIATE DEAN,

       CONTINUING MEDICAL EDUCATION AND EXTERNAL AFFAIRS;

   AND DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR TELEHEALTH

    Dr. Rheuban. Chairman Wicker, Ranking Member Schatz, 
members of the Subcommittee, thank you for the opportunity to 
provide testimony regarding the FCC's Rural Health Care Program 
established by the Telecommunications Act of 1996.
    I'm a pediatric cardiologist, Co-founder and Director of 
the Center for Telehealth at the University of Virginia, past 
President of the American Telemedicine Association, and Board 
Chair of Virginia Medicaid.
    UVA is home to the HRSA-funded Mid-Atlantic Telehealth 
Resource Center, through which we provide technical assistance 
to providers and systems across eight states and the District 
of Columbia. From these perspectives, I offer testimony 
regarding the critically important role of the Universal 
Service Fund.
    As committee members know, telehealth is the use of 
technology designed to enable the provision of health care 
services at a distance. Telemedicine effectively mitigates the 
significant challenges of workforce shortages and geographic 
disparities and access to care; supported by secure broadband 
communications services, a critical underpinning of any 
telehealth program.
    The UVA telemedicine program was established more than 20 
years ago to address the pervasive health disparities faced by 
rural Virginians. The same is true for Mississippi. We connect 
with 153 facilities across the Commonwealth of Virginia. Our 
program spans more than 60 different clinical subspecialties 
ranging from prenatal services to emergency and acute care 
consults, follow-up visits, and chronic disease management 
using remote patient monitoring tools. More than 200,000 
different health care services have been provided, and we have 
reduced the burden of travel for Virginians by many millions of 
miles. Most importantly, we have improved patient outcomes. We 
rely on the FCC Rural Health Care Program for connectivity 
between facilities. Absent the program, our ability to provide 
these services would be severely constrained.
    As an example, not long after we launched our telemedicine 
program in 1996, we received a grant from NTIA, which I 
understand falls under this committee's jurisdiction, to 
connect health care facilities in Appalachia to UVA. For that 
grant, the cost of a 1.54 megabit connection to one small rural 
hospital was unaffordable, at nearly $6,000 per month.
    After passage of the Telecommunications Act, through the 
Rural Health Care Program, we have secured discounts that allow 
us to purchase greater bandwidth for a fraction of that cost. 
That hospital and others participate in our telestroke program, 
facilitated by the rapid transmission of CT scans and high-
definition video conferencing that informs mutual clinical 
decisionmaking and treatment when time is brain. Lives have 
been saved and disability avoided.
    Affordable broadband connectivity is without question 
foundational to our telemedicine program. Between 1998 through 
2016, the Commonwealth of Virginia has received support of more 
than $23 million in USAC funding for health care programs, and 
we have more to go.
    USAC has accelerated its outreach efforts and streamlined 
the application process amongst other changes consistent with 
program modernization, but we have a way to go.
    Utilization has greatly increased, and recently the $400 
million funding cap established by the Commission in 1998 was 
exceeded. The Commission has recently reduced support by 7.5 
percent, and this has created hardships for many states, and in 
particular for Alaska. There is much more to be done.
    For this reason, we urge the FCC to expand the funding cap 
that it established nearly two decades ago. If this is not 
feasible, we urge Congress and the FCC to explore additional 
Federal options to support costly infrastructure buildouts for 
rural health care providers. The FCC should prioritize rural 
providers in the Rural Health Care Programs, and further 
simplify the administrative and application processes.
    Additionally, we recommend expanding eligible health care 
providers under the program to include emergency medical 
services providers, consistent with the public health and 
public safety provisions of the Act.
    We also recommend including wireless technologies as 
eligible under the Rural Health Care Program, especially as we 
strive to improve chronic disease management with remote 
monitoring tools.
    But it is important to note that the success of any 
telehealth program relates to factors that include, but also 
extend beyond the cost of broadband connectivity. Elements that 
contribute to the success of any telehealth program includes 
payment by government and private payers. Unfortunately, for 
both our rural and non-rural seniors, access to quality 
telehealth services still remains stifled by Medicare payment 
barriers related to originating site restrictions. Improving 
that will increase demand for services.
    We strongly support the CONNECT for Health Act, the Chronic 
Care Bill, and the FAST Act, along with other bills that 
include provisions to expand the use of telehealth and remote 
monitoring in Medicare.
    In summary, telehealth affords patients enhanced access, 
lowers the overall cost of care, and improves efficiency, 
quality, and clinical outcomes. The Rural Health Care Program 
is foundational to a modernized health care delivery system 
and, as such, along with other efforts, must be continued, 
expanded, and further modernized to fulfill the promise of 
health care in the 21st century.
    Thank you so much.
    [The prepared statement of Dr. Rheuban follows:]

  Prepared Statement of Karen S. Rheuban MD, Professor of Pediatrics, 
   Senior Associate Dean, Continuing Medical Education and External 
  Affairs; and Director, University of Virginia Center for Telehealth
    Chairman Wicker, Ranking Member Schatz, members of the Subcommittee 
on Communications, Technology, Innovation and the Internet, thank you 
for the opportunity to provide testimony regarding the Federal 
Communications Commission's (FCC) Universal Service Fund and in 
particular, the Rural Healthcare Support Mechanism established by the 
Telecommunications Act of 1996 (the Act).
    I am the co-founder and Director of the Center for Telehealth at 
the University of Virginia (UVA), past President of the American 
Telemedicine Association, and current Board Chair of the Virginia 
Telehealth Network. UVA is also the home of the Department of Health 
and Human Services' Health Resources and Services Administration (HRSA) 
funded Mid Atlantic Telehealth Resource Center, through which we 
provide technical assistance to providers and systems across 9 states 
including the District of Columbia. It is from these related 
perspectives that I offer testimony regarding the critically important 
role of the Universal Service Fund in advancing access to high quality 
care to rural Americans through telehealth related programs and 
services. Although the focus of this hearing relates to the Rural 
Healthcare Support Mechanism, I will also touch upon the multifactorial 
issues that continue to impact the adoption of telehealth nationwide.
    As Committee members know well, telemedicine is not a new 
specialty, a new procedure or a new clinical service . . . simply 
defined, it is the use of technology designed to enable the provision 
of healthcare services at a distance. 21st century telemedicine 
services can be provided live, via high-definition interactive 
videoconferencing supported by high resolution peripheral devices; 
asynchronously, using store and forward technologies, or through the 
use of remote patient monitoring tools. Telemedicine has been 
demonstrated to effectively mitigate the significant challenges of 
workforce shortages, geographic disparities in access to care, while 
improving patient triage and timely access to care by the right 
provider at the right time. Telemedicine tools foster patient 
engagement and self-management where appropriate.
Rural healthcare
    Where local specialty care services are not available, particularly 
in rural and underserved regions and health professional shortage 
areas, telemedicine offers timely access to care and spares patients 
the burden of long distance travel for access to that care. 
Telemedicine supports an integrated systems approach focused on disease 
prevention, enhanced wellness, chronic disease management, decision 
support, and improved efficiency, quality and patient safety.\1\
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    \1\ Agency for Healthcare Research and Quality. Effective health 
care programs. https://effectivehealthcare.ahrq.gov/ehc/products/624/
2254/telehealth-report-160630.pdf. Rockville, MD 2016
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    Although rural communities face the same basic challenges in 
access, quality and cost as their urban counterparts, they do so at far 
greater rates, attributable to a host of factors. ``Core health care 
services'' such as primary care, emergency medical services, long term 
care, mental health and substance abuse services, oral health and other 
services are considerably less accessible in rural communities.\2\ Lack 
of access to specialty care services is an even greater challenge. 
Rural communities lack sufficient patient volumes to support specialty 
and subspecialty practices and primary care providers are often 
overwhelmed with complex patients with acute and chronic illness. 
Telehealth technologies offer ready access to such services when rural 
communities and providers partner with tertiary and quaternary care 
facilities and where appropriate, with one another.\3\
---------------------------------------------------------------------------
    \2\ Institute of Medicine, Committee on the Future of Rural Health 
Care. ``Quality through collaboration: The future of rural health 
care.'' (2004).
    \3\ Lustig, Tracy A. Institute of Medicine, The role of telehealth 
in an evolving health care environment: workshop summary. National 
Academies Press, 2012.
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    Attracting health professionals to rural communities remains a 
daunting task and retaining those health professionals to practice in 
rural communities is equally difficult. Strategies to recruit and 
retain clinicians to practice in rural and frontier communities must 
also include innovative applications that enhance the management of 
patients with acute and chronic illness, and reduce the chronic sense 
of isolation experienced by those practitioners by affording enhanced 
connectivity to colleagues and educational opportunities.
    Telehealth technologies should be viewed as integral to rural 
development. In our program, more than 90 percent of patients seen via 
telehealth remain within their community healthcare environment, 
resulting in reduced burdens for patients and their families. These 
benefits include a reduction in unnecessary transfers, and related 
transportation and housing expenses for patients and family members. In 
addition, a reduction in hospital lost revenue (as might occur with 
patient transfers) can lead to enhanced economic viability of the rural 
community hospital. A viable community healthcare environment supports 
jobs, provides incentives for the relocation of industry, and enhances 
community economic development.
    The aging of our population has already created increased demand 
for specialty healthcare services to address both acute and chronic 
disease in the elderly. These challenges are exacerbated in rural 
communities. As an example, rural patients experience 25 percent higher 
death rates from ischemic heart disease than do their urban 
counterparts.\4\
---------------------------------------------------------------------------
    \4\ Texas A&M University, Rural & Community Health Institute (2017) 
What's next? Practical suggestions for rural communities facing a 
hospital closure.
---------------------------------------------------------------------------
    The FCC's Connect2Health Taskforce has created a searchable 
database to overlay health status indicators with broadband 
availability. Not surprisingly, according to the Taskforce, close to 
half of U.S. counties are ``double burden'' counties--that is, areas 
with high levels of chronic disease and need for more broadband. More 
than 36 million Americans live in these double burden counties, 
according to the FCC report, where the fixed broadband access rate is 
55 percent. The FCC also found that in these counties, as an example, 
the prevalence of obesity is 19 percent above the national average, 
while the prevalence of diabetes is 25 percent above the national 
average. A lack of Internet access is also connected with challenges in 
seeing health professional. ``Most of the counties with the worst 
access to primary care physicians are also the least connected,'' 
according to the FCC report.\5\ The 2010 National Broadband Plan sets 
achievable targets for healthcare connectivity.\6\
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    \5\ https://www.fcc.gov/health/maps
    \6\ Thomes, Cynthia. ``The National Broadband Plan: Connecting 
America. Administered by the Federal Communications Commission, 445 
12th Street SW, Washington, DC 20554. Retrieved October 15, 2010, from 
http://www. broadband. gov.'' (2011): 435-436.
---------------------------------------------------------------------------
    Although the challenges of unfavorable geography and distance tend 
to be uniquely rural, socioeconomic issues, health disparities, and 
other serious barriers to access to quality healthcare are also, of 
course, compelling in urban areas. Poverty, unhealthy behaviors and 
adverse health status indicators are also highly prevalent in our urban 
communities. Wait times for access to specialty care services adversely 
impact our urban insured beneficiaries as much as they impact our rural 
insured. Isolated vulnerable urban patients suffer from high rates of 
chronic illness. A bus ride across town with a long wait in an 
emergency room can be as challenging for an isolated, vulnerable 
uninsured urban patient as is a long ride for a rural patient. 
Telehealth tools can help to mitigate health disparities and improve 
outcomes in urban populations as well.
The University of Virginia Center for Telehealth
    The University of Virginia Health System is a 610 bed state-
supported academic medical center, and one of the two safety-net 
hospitals in the Commonwealth. The Health System is comprised of the 
UVA Medical Center, the UVA School of Medicine, the UVA School of 
Nursing, and University Physicians Group, our practice plan. Our UVA 
telemedicine program was formally established in 1996, as an effort to 
improve access to high quality care for all Virginians, regardless of 
geographic location. Recognizing the limited availability of broadband 
connectivity in rural regions of our state, we were early advocates for 
the Rural Healthcare Support Mechanism prior to the passage of the 
Telecommunications Act of 1996, and have since worked with the Federal 
Communications Commission by participating in Commission hearings, 
hosting members of the Commission at UVA and in the form of comments to 
multiple FCC proceedings. My UVA Center for Telehealth faculty 
colleague Colonel Eugene Sullivan served on the initial FCC Healthcare 
Advisory Board and Katharine Wibberly, PhD, Director of Research at our 
Center currently serves on the Universal Service Administrative Company 
(USAC) board representing rural healthcare.
    Since the establishment of our telemedicine program, we have 
developed collaborations that connect the UVA Health System with 153 
sites across the Commonwealth using high definition video-
teleconferencing, store and forward technologies, remote patient 
monitoring and mobile health tools to improve access to healthcare 
services for the citizens of the Commonwealth. We connect with 
hospitals, clinics, federally qualified health centers, free clinics, 
community service boards, health departments, medical practices, 
dialysis facilities, correctional facilities, PACE programs, rural 
schools, and skilled nursing facilities. Our telemedicine program has 
reduced the burden of travel for Virginians by more than 17 million 
miles, saved lives and fostered innovative models of care delivery and 
workforce development. We have launched a care coordination and remote 
patient monitoring program for patients at home that has significantly 
reduced hospital readmissions by more than 40 percent regardless of 
payer. UVA telemedicine spans more than 60 different clinical 
subspecialties, spanning the continuum from prenatal services, to 
emergency and acute care consultations and follow up visits, to chronic 
disease management and palliative care. We have facilitated more than 
65,000 live interactive patient consultations and follow up visits 
using high definition video-teleconferencing, monitored more than 3,000 
patients at home with remote monitoring tools, screened more than 2,500 
patients with diabetes for retinopathy, the number one cause of 
blindness in working adults, used our connectivity to support more than 
100,000 teleradiology services and through our electronic medical 
record, EPIC, facilitated more than 2,500 e-consults between providers. 
These programs and partnerships are dependent on reliable broadband 
communications services and in the majority of cases, we rely on the 
FCC Rural Healthcare Program for connectivity between facilities. 
Absent the Rural Healthcare program, our ability to provide these 
services would be severely constrained.
    As an example, not long after we launched our telemedicine program 
in 1996, we received a grant from the U.S. Department of Commerce NTIA 
TIIAP program. Prior to the passage of the Telecommunications Act, the 
cost of a 1.54 megabit connection to a small rural community hospital 
in Appalachian Virginia was unaffordable, priced nearly $6000 per 
month. After passage of the Act, with enhanced competition and through 
the Telecommunications program of the Rural Healthcare Program, we 
secured discounts that allowed us to deploy telehealth services to that 
same hospital with greater bandwidth for a fraction of that original 
cost. Lives have been saved. That community hospital participates in 
our acute telestroke program, facilitated by the rapid transmission of 
radiographic images and CT scans and high definition videoconferencing 
that informs the mutual clinical decision making processes. By 
benchmarking against urban sites, we have secured subsidies as high as 
89 percent for some eligible rural partners through the 
Telecommunications program. Since the inception of the Rural Healthcare 
Program in 1988 to 2016, the Commonwealth of Virginia has drawn down 
support of $23,588,000 in USAC funding for healthcare programs.\7\
---------------------------------------------------------------------------
    \7\ Universal Service Administrative Company 2016 Annual Report
---------------------------------------------------------------------------
    Affordable broadband connectivity is without question, the 
requisite underpinning of our telemedicine program, and as such, these 
efforts have changed the standard of care in rural Virginia. However, 
in light of the complexity of the program applications, we established 
a process by which we applied on behalf of our telemedicine partners 
across the state. Few small hospitals or federally qualified health 
centers could easily navigate the complex process inherent in the 
Program.
    In 2002, in response to a notice of proposed rulemaking, and in the 
face of low utilization of the Telecommunications Program nationwide, 
we proposed that the Commission consider inclusion of rural for-profit 
hospitals with an emergency room as eligible for subsidies. Our 
justification was that many of those rural hospitals were financially 
strapped not-for-profit hospitals later acquired by for-profit 
entities, the only healthcare facility in the rural community, were 
bound by EMTALA (Emergency Treatment and Labor Act) and as such, 
inclusion of those facilities in the Rural Healthcare program was 
consistent with the public health and public safety provisions of the 
Act, which identified the relationship between universal service and 
public safety was clearly addressed. ``The Joint Board in recommending, 
and the Commission in establishing, the definition of the services that 
are supported by Federal universal service support mechanisms shall 
consider the extent to which such telecommunications services (A) are 
essential to education, public health, or public safety . . . [and] (D) 
are consistent with the public interest, convenience and 
necessity''.\8\
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    \8\ 47 U.S.C. Section 254 (C) 1 A,D
---------------------------------------------------------------------------
    The Commission agreed, and in its subsequent rulemaking, included 
as eligible entities for-profit rural hospitals with emergency 
departments. Using a similar argument, we also suggested the Commission 
consider funding emergency medical services providers (EMS) however, 
the Commission demurred.
    In 2007, UVA was awarded a FCC Pilot Program to expand our 
telehealth and telestroke network across the Commonwealth. The pilot 
program provided broadband discounts of 85 percent, and for the first 
time, permitted inclusion of a limited number of urban entities. Our 
Pilot program ends with Funding Year 2016, on June 30, 2017 and we will 
apply as a consortium to continue through the Healthcare Connect Fund.
    The Healthcare Connect Fund (HCF), a modernized Rural Healthcare 
Program was established in 2013 to allow for consortium applications, 
for funding up to three years which reduces the cumbersome annual 
reapplication process. The Commission recently added skilled nursing 
facilities as eligible entities both for both the Telecommunications 
and the HCF fund. The HCF provides 65 percent support and limited urban 
support within consortia.
    USAC has accelerated its outreach efforts and by streamlining the 
application process (amongst other changes consistent with program 
modernization), utilization has greatly increased, such that in Funding 
Year 2016, remarkably, the $400 million funding cap was exceeded. 
Hence, to ensure equitable use of the program, the Commission has 
reduced support in Funding Year 16 by 7.5 percent. This has created 
hardships for states such as Alaska that currently draw down more than 
$100 million to support their extraordinary needs to expand telehealth 
programs within rural and frontier regions of the state. We fully 
support an expansion of the $400 million cap established by the 
Commission for the Rural Healthcare Program in 1998. If that is not 
feasible, we would suggest consideration of additional Federal options 
for infrastructure build out.
Sustainability of telehealth
    It is important to note that the success of any telehealth program 
relates to factors that include but also extend beyond the cost of 
broadband connectivity. Elements that contribute to the success of 
program operations and sustainability include payment by private and 
government payers, tracking of clinical and process quality metrics, 
workforce capacity, and careful analysis of outcomes. All play a role 
in institutional commitments to sustaining a telehealth program. Return 
on investment must be considered in the context of organizational 
mission and programmatic alignment with that mission.
    The UVA Center for Telehealth tracks a broad range of process and 
quality metrics to include such metrics as time from consult request to 
completion of encounter, data transport metrics (as they relate to the 
transfer of medical images and quality of service of the connection), 
clinical outcomes measures, miles of travel avoided, patient 
satisfaction, provider satisfaction and other organizational metrics.
    Examples of clinical outcomes include the following:

  a)  Our stroke telemedicine program has supported the evaluation and 
        treatment of more than 1,000 rural Virginians, resulting in TPA 
        (Tissue Plasminogen Activator) administration rates now 
        exceeding >20 percent in rural partner hospitals. These TPA 
        administration rates align with the rates of TPA administration 
        for stroke patients treated in our own emergency department. 
        This compares favorably to statewide TPA administration rates 
        of <1 percent prior to the initiation of our stroke 
        telemedicine program and others within the Commonwealth. In 
        addition, we have more recently accelerated time to treatment 
        by connecting EMS providers to our stroke team further 
        accelerating time to treatment when ``time is brain''. The 
        human toll and cost to society (and the payers) of a lack of 
        access to such therapies is enormous.

  b)  Our high-risk obstetrics telemedicine program serves rural high 
        risk pregnant women. We, like others, have documented a 
        reduction in NICU hospital days for the infants born to these 
        patients by 39 percent compared to control patients, reduced 
        patient no-shows by 62 percent and reduced patient travel by 
        these pregnant women by 200,000 miles.

  c)  With our partner, UVA Remote Care Solutions,, using care 
        coordination and remote patient monitoring tools, we launched a 
        program to prevent hospital readmissions for patients with 
        heart failure, acute myocardial infarction, chronic obstructive 
        pulmonary disease, pneumonia, stroke and joint replacement, and 
        have reduced all cause 30 day readmissions by > 40 percent.

  d)  Store and forward ophthalmologic screening for retinopathy, the 
        number one cause of blindness in working adults has been 
        provided to underserved adults with diabetes. Over the past two 
        years, more than 2,500 ophthalmologic screens have been 
        performed, with 46 percent of patients identified as having 
        abnormal studies, requiring follow up or sight saving 
        intervention.

  e)  Our telepsychiatry program represents the number one request for 
        services. We offer child and adolescent, adult, emergency and 
        substance use services. These programs have been shown to be 
        effective, with high rates of patient satisfaction and rely 
        upon high definition videoconferencing technologies supported 
        by reliable bandwidth.
Issues for consideration
    There remain significant barriers to the broader integration of 
telemedicine services into everyday healthcare that impact provider 
utilization. More than 16 different Federal agencies report engagement 
in telehealth, be it through research and other grant funded 
opportunities, through the establishment of broadband communications 
networks, clinical service delivery, and even device development and 
regulation. In the face of a multi-billion dollar Federal investment in 
telemedicine and broadband expansion in support of access to 
healthcare, those good faith efforts have also been stifled by 20th 
century Federal and state barriers to widespread adoption and a lack of 
alignment across the programs.
Reimbursement
    Medicare: Payment coverage restrictions remain a major impediment 
to the broader adoption of telehealth by providers. Congress, in 1997, 
through the Balanced Budget Amendment, and later in 2000, though the 
Benefits Improvement and Protection Act, authorized the Center for 
Medicare and Medicaid Services (CMS) to reimburse for telemedicine 
services provided to rural Medicare beneficiaries across a broad range 
of CPT codes and services. However, those Medicare telehealth 
provisions, as established in the Section 1834 (m) of the Social 
Security Act limit eligible patient originating sites to rural, and 
have not evolved to take advantage of subsequent analyses of best 
practices, outcomes data, and new paradigms of healthcare delivery, 
even following enactment of the Affordable Care Act. The Medicare 
definition of rural for purposes of telehealth coverage remains as non-
Metropolitan statistical areas and Health Professional Shortage Areas 
which are aligned with primary care shortages but not adequately for 
specialty workforce shortages.
    Medicare reimbursement of telehealth services remains woefully 
limited. The Center for Telehealth and e-Health Law (CTeL) reported 
that in 2015, Medicare allowed $15,664,543 in distant site 
reimbursement and $1,937,453 in originating site charges NATIONWIDE. 
Medicare payment data in the fee for service program are shown below, 
courtesy of CTeL.


    The Center for Medicare and Medicaid Innovation has funded pilot 
programs that incorporate broader telehealth reimbursement; although 
some Accountable Care Organizations remain limited to the rural 
originating site restrictions.
    The Connect for Health Act (S 1016/HR 2556), the Chronic Care Bill 
(S 870) and the FAST Act (S 431/HR 1148) along with other bills include 
provisions to expand the use of telehealth and remote patient 
monitoring in Medicare by reducing originating site restrictions.
    The American Medical Association Digital Medicine Payment Advisory 
Group is currently working to align telehealth taxonomies with use 
cases, and make recommendations to the CPT Advisory Panel and the RVUs 
Update Committee (RUC).
    Medicaid: Currently nearly every state Medicaid program provides 
some form of reimbursement for the delivery of telehealth facilitated 
care to Medicaid beneficiaries. Medicaid innovations adopted by many 
states in addition to video-based telemedicine consults and follow up 
visits include coverage for remote monitoring, home telehealth, store 
forward services.
    Private pay: Thirty three states plus the District of Columbia 
require that private insurance cover telehealth services. Many of the 
ERISA plans have chosen to cover telehealth services.
    Other Federal payers: The Office of Personnel Management offers 
some telemedicine benefits for individuals covered under the Federal 
Employee Health Benefit Plans. The Veterans Health Administration has 
long integrated telehealth solutions as has the Department of Defense.
Standards and practice guidelines
    Telemedicine does not create a new field of healthcare, but rather 
allows duly credentialed clinicians to provide care at a distance using 
technology. That being said, the American Telemedicine Association and 
its >9,000 member supported Special Interest Groups, Committees and 
Discussion groups have developed standards and practice guidelines to 
address technical applications, and clinical practice guidelines, 
endorsed by specialty societies. Many of these standards and practice 
guidelines extend beyond the practice guidelines that currently exist 
for traditional healthcare.
Acceptance of advanced technologies
    Patient acceptance of the use of telehealth technologies for 
consultation and ongoing acute and chronic care has been remarkably 
positive, attributable in part to the obvious benefit of timely access 
to locally unavailable specialty healthcare that spares patients the 
burden and expense of travel to remote tertiary and quaternary 
healthcare facilities. Indeed, we have collected data that demonstrates 
that for pediatric tele-psychiatry services, the telehealth ``no-show'' 
rate is considerably lower than the in person clinic ``no show'' rate. 
Provider acceptance of advanced technologies and telehealth tools has 
been equally gratifying for patient consultation, patient education, 
distance learning opportunities, for acquisition of timely information 
services and for clinical decision support. High bandwidth and high 
quality connections remain the underpinnings of successful telehealth 
encounters.
Recommendations

  1.  Continue the Rural Healthcare Programs and expand the $400 
        million funding cap established by the Commission in 1998. 
        There is no statutory requirement that the fund be capped at 
        that level.

  2.  If the $400 million funding cap cannot be increased, explore 
        additional Federal options to support costly infrastructure 
        build-outs for rural healthcare providers.

  3.  Additionally, if the funding cap cannot be raised, prioritize 
        rural providers in the Rural Healthcare programs.

  4.  Further simplify the administrative and application processes for 
        rural healthcare providers

  5.  Expand eligible providers for the Rural Healthcare program to 
        include emergency medical service providers and community 
        paramedics, consistent with the public health and public safety 
        provisions of the Act.

  6.  Coordinate with the effort being undertaken by the NTIA 
        Department of Commerce with FirstNet to create a nationwide 
        public safety wireless broadband network for Emergency 
        responders.

  7.  Include wireless technologies as eligible under the Rural 
        Healthcare Programs.

  8.  Further eliminate barriers to telehealth payment in the Medicare 
        program such as geographic and other originating site 
        restrictions so as to allow the nearly 80 percent of Medicare 
        beneficiaries currently not covered for telehealth services to 
        avail themselves of the benefits of telehealth mediated care.

  9.  Allow for Medicare coverage of home telehealth and remote patient 
        monitoring services, in particular, for patients with chronic 
        illnesses. Allow as eligible providers for telehealth services 
        otherwise eligible Medicare providers such as physical, 
        occupational and speech and language therapists.

 10.  Improve coordination amongst the Federal agencies such that our 
        national interests in population health, improved health 
        outcomes, emergency preparedness, workforce, and health 
        information exchange, enhanced by connected health tools and 
        strategies.

    In summary, telehealth affords patients enhanced access, lowers the 
overall cost of care, and improves efficiency, quality, clinical 
outcomes and population health. The Rural Healthcare Program is a 
critical underpinning of a modernized healthcare delivery system in the 
digital era and as such must be continued, expanded and further 
modernized to fulfill the promise of healthcare in the digital era.

    The Chairman. Well, thank you all for your excellent 
testimony. You were very helpful to the Subcommittee in keeping 
to the time constraints, and we really appreciate that.
    Mr. Graham, let me begin with you. You mentioned your 
support for the Rural Wireless Access Act and the problem with 
getting the right data collected. Let me drill down on that. 
How does the FCC currently collect mobile coverage data to 
determine areas eligible for USF support? Why is this data 
collection process inadequate? Finally, how would standardizing 
collection methods at the FCC help truly identify areas that 
are unserved or underserved?
    Mr. Graham. Thank you, Mr. Chairman. Currently, the FCC has 
wireless operators file a Form 477, which shows how the 
operator views its coverage in a given area. Now, operators 
will measure their coverage in different ways. They'll either 
measure indoor coverage or outdoor coverage or they can run 
simulations with leaves on trees, without leaves on trees. The 
terrain makes a difference. There are theoretical maximums that 
are real-world speeds that you see, real-world coverage that 
you see.
    And each operator can have a different view of what their 
coverage looks like and what the same coverage looks like just 
based on their internal metrics. There are some operators that 
would submit data that only an engineer would stand behind 
anywhere and at all times. There are other operators who submit 
data that a marketing department would maybe look crossways at 
because it may overstate things slightly. And it's not 
necessarily malicious that the data is different, it's just 
different, there's not an apples-to-apples comparison.
    The FCC needs to pause and tell operators how this 
information should be presented. Let's agree on what the signal 
strength should be. Let's agree on whether this is indoor 
coverage or whether it's outdoor only. Let's agree on the time 
of year. All of these factors make a difference in what 
wireless coverage looks like, and that needs to be standardized 
if the FCC wants to have an accurate view of what coverage 
looks like in a given area.
    Another example quickly is that in the display, it gets 
down to the actual pixels that carriers use on their maps. Some 
carriers will use larger pixels which show coverage in an 
area--more pixels that shows coverage in an area where it 
doesn't actually exist because other carriers choose to reflect 
that in smaller units.
    So right now we don't know where coverage truly exists, we 
don't know where coverage is lacking, and the FCC's answer is, 
``Unless you can come back and challenge the process and show 
us that we're somehow off with this measurement, we're going to 
assume that it's correct even though we acknowledge that it's 
not.''
    The Chairman. Who's doing the better job right now? Can you 
point to someone who's collecting data better than the FCC?
    Mr. Graham. I will tell you that our company obviously.
    The Chairman. Oh, I am shocked.
    [Laughter.]
    Mr. Graham. We stand behind our coverage maps. We don't 
have a marketing coverage map and an internal coverage map that 
shows where we really have coverage. We submit true data. We 
know that there are companies out there that compile other 
carriers' data, but the technology exists today for wireless 
devices to actually feed anonymous information back into a 
program to provide mapping of data, mapping of coverage areas, 
so you get a better sense of where coverage truly exists.
    The Chairman. You mentioned that the Commission seems to 
want to get the money out there quickly even if it's not sent 
to the right places. Do you worry that what you're suggesting 
will delay the process in a way that disadvantages rural 
America?
    Mr. Graham. My fear is that moving forward without delay is 
going to disadvantage rural America, and here's why.
    The Chairman. How quickly can they get it right?
    Mr. Graham. I don't know how quickly they can get it right, 
but when they make this decision, it will be locked in for a 
decade, meaning if they're wrong in any area that's lacking in 
coverage, that area is locked out, universal support, universal 
service support, for a decade.
    The Chairman. Let me just ask you, what's the difference 
between mobile broadband and fixed wireless broadband? From a 
consumer perspective, does that difference matter particularly 
as it relates to a consumer's access and the use of 
telemedicine?
    Mr. Graham. So we have built our network to support mobile, 
but in doing so, technology has advanced to the point that our 
network can support fixed wireless at this point as well. 
Mobility obviously will take care of that customer anywhere 
they go that's in that coverage area. With fixed wireless, we 
can increase speeds point to point up to speeds that rival 
what's available over certainly coaxial cable and even fiber, 
and even our mobile network can deliver 100 megabits per 
second.
    The Chairman. Senator Schatz.
    Senator Schatz. Thank you, Mr. Chairman.
    Ms. Bloomfield, thank you for your testimony. You know that 
Hawaii's unique geography makes it difficult and more expensive 
to deliver broadband services, and I know a lot of people are 
at this dais because they have their own unique geography. I 
worry that the way the FCC has implemented its USF mandate does 
not always account for that uniqueness. Can you comment on what 
you think the different USF programs should accommodate for the 
significant cost differences between various geographies and 
topographies?
    Ms. Bloomfield. Absolutely. And you do have your own unique 
challenges. That lava rock is pretty hard to bore some fiber 
into, much less an ocean that you have to carry your traffic 
out from.
    So there are--you know, and I look around the dais, and 
absolutely, you've got different topography, you've got 
different build seasons. You know, what you can do in terms of 
construction in Montana is very different than what you can do 
in South Carolina. Those windows also change the cost of 
actually the infrastructure that you're building.
    So one of the things that the FCC, you know, I think has 
been very interested in is trying to create a model that 
becomes kind of a one-size-fits-all, and the problem is you 
can't have a one-size-fits-all, it simply doesn't work that 
way.
    So they did recognize when they did the reforms that 
there's a model approach, which a number of carriers took, but 
an even larger number of carriers that said, ``You know what, 
our variations are simply--our swings are too great, our 
construction costs are too varied, that we're actually going to 
stay on rate of return so that we can actually try to measure 
our actual costs.'' So that does continue to be a challenge, 
and certainly something that we appreciate your recognition of.
    Senator Schatz. A quick change of topics, Ms. Bloomfield. 
You know, we're talking about the various uses of the USF fund, 
and I think we all advocate for all of the various uses, from 
E-rate to telehealth to broadband deployment in rural areas.
    I think the elephant in the room is contribution reform. 
You know, we don't talk about it enough. And here we have all 
of these wonderful uses of deploying the dollars that come into 
the Fund, and a decreasing percentage of the American 
population that pays into the Fund. And so I would like you to 
comment on that, Ms. Bloomfield, and maybe we can start to have 
an adult conversation about how to spread out the revenue, 
spread out the contribution into USF? If we're talking about 
deploying rural broadband, we can't possibly have it paid for 
by people who pay for long line, long distance telephone 
service because at some point we're going to run out of money.
    Ms. Bloomfield. Senator Schatz, what a timely question. In 
my prepared remarks, I really do address a little bit more in 
terms of contribution reform. The FCC at the time had a 
decision to kind of go forward with contribution reform. Where 
do you get the appropriate funding from or distribution, how 
you're going to actually distribute the funding? So they went 
with distribution first, which didn't appropriately size the 
pot of the resources available.
    And you're absolutely right, it's tacked on to a 
diminishing pool. And when you think about broadband and how 
when all of us are talking about broadband services here, the 
fact that broadband is not adequately captured.
    However, I will share with you, this has been bantered 
around for about 10, 15 years, we've been talking about 
contribution reform, how incredibly important it is. It seems 
to be a little bit of a political hot potato. I would love to 
see Congress address it. The immediate needs now that you are 
hearing from folks at this table is that we simply cannot build 
the infrastructure without dealing with some immediate 
resolution.
    So I would say that's critically important, but I would 
also say we've got to look at what is really right on the table 
at this point in time, and I don't think these carriers and I 
don't think rural Americans can wait 2 or 3 years for us to 
kind of go through the process that we'll need to go through on 
contribution reform, which I do hope we do, but I think that 
the immediate need is more urgent. But absolutely, we welcome 
that discussion.
    Senator Schatz. And I agree with you. I think that we have 
to be able to do things in the distribution side of this, and 
contribution reform is a challenging topic, but it's not just a 
matter of the fact that we're going to not have enough revenue 
relatively soon, it's also deeply, deeply unfair to the 
remaining people who are paying into this fund for services 
that they may or may not receive.
    In the interest of time, I'm going to reduce a couple of 
questions for Dr. Rheuban to write in for the record. I 
appreciate the work that you've done on telehealth, and I want 
to recognize the Chairman, Senator Capito, and others who have 
gotten on the CONNECT for Health Act. We have a lot of 
bipartisan support. And there is a Commerce Committee nexus 
here. We look forward to working with you and getting your 
expertise.
    Thank you.
    The Chairman. Thank you. We are joined by our Ranking 
Member, Mr. Nelson. Sir, you are recognized.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Thank you, Mr. Chairman, and I'll be quick 
because I want you all to have the opportunity to continue. I 
will insert opening comments into the record. Obviously, we're 
here dedicated and want very much to get broadband out into the 
rural areas.
    Technology changes so fast. So Elon Musk has a business 
plan where he is going to put up a constellation of 400 
satellites to distribute broadband all over the globe. Whenever 
that occurs down the road, is that going to solve the problem?
    Ms. Bloomfield. Well, I'll take a crack at that one. So 
satellite technology has its challenges, right? And I don't 
know if anybody sitting in this room actually has satellite 
broadband, but you're really subject to a lot of latency 
issues. You are subject to the whims of weather, lines of 
vision. There are a lot of things that make actually satellite 
a lot more complicated than it seems. So it seems easy out of 
the box.
    I will tell you, you know, it would be fabulous in a number 
of years if that technology hits that point in time. It is not 
there yet. And when we think about broadband, whether it is 
fixed wireless, whether it's wireless, you know, right now the 
fiber connectivity really is the most important building block 
that we have.
    Mr. Balhoff. I would agree with that. I was a financial 
analyst following Motorola and Iridium, which was, of course, 
the original satellite deployment plan, and it was found that 
there were so many technical difficulties. Now, obviously 
technology continues to move forward, but I would even suggest 
that with the fixed wireless or mobile wireless solutions that 
people talk about, there's a reason why AT&T and Verizon have 
spent over $20 billion on fiber in their networks, and that is 
the future-proofing of their network and the kinds of demands, 
because fundamentally, if you build it, they will fill it.
    And so with wireless, what you tend to find is that there 
are certain limitations eventually that people bump against in 
those cases, which is not to say that wireless is not extremely 
valuable in that plan. So C Spire and others have done a very, 
very good job in that regard, but fiber continues, as Shirley 
has mentioned, to be the building block going forward.
    Mr. Graham. I will also, if I might, say I think that 
satellite has the opportunity to be a very good tool in the 
toolbox of ways that broadband is provided across America. We 
have in our hands right now fiber, as my other panelists have 
said, and wireless and technologies that work today, and if 
satellite can come in and can improve and supplement that, I 
think that would be a great use. We have a wireless network. We 
also deliver gigabit fiber to the home as well as fiber to 
businesses. We also continue to operate the rural independent 
telephone companies that I referenced earlier in my testimony, 
and we operate a cable company. So every terrain is different, 
every use case is different, and it's an issue of matching the 
right tool in the box to the job at hand.
    [The prepared statement of Senator Nelson follows:]

   Prepared Statement of Hon. Bill Nelson, U.S. Senator from Florida
    Broadband use is an essential part of our everyday lives--but 
according to the FCC, millions of Americans throughout the country 
still lack access to an adequate high-speed broadband connection. Even 
in Florida--where we are blessed to have some of the most advanced 
networks in the country--there are still areas where our residents do 
not have access to high-speed broadband or struggle to have access to 
even the most basic of broadband services. This is unacceptable--plain 
and simple.
    Those who do not have access are being left behind. The plight 
they're facing to find good jobs, learn new skills and provide a 
foundation where their children will fare better in the future than 
themselves is being hampered by few broadband options and slow service 
in an Internet-driven economy and society. And it's only going to get 
worse unless we get serious about ensuring all Americans have access to 
fast and affordable broadband.
    All of the FCC's universal service programs are vitally important 
to our long-standing efforts to close this lingering digital divide. 
The FCC has undertaken massive and thoughtful modernization and 
updating of the universal service program funds over the past few 
years. While many of these changes are beginning to deliver substantial 
benefits to companies, schools, libraries, health care facilities and 
consumers, I look forward to hearing from our witnesses today on how we 
can do better to deliver for Americans who aren't connected and have 
been left behind.
    But, let me be clear, the FCC's universal service fund alone isn't 
the only answer to providing broadband access to every nook and cranny 
of this country. All of us on this committee should get behind the idea 
of including Federal funding to jumpstart deployment of broadband 
services and Next Generation 9-1-1 in any bipartisan infrastructure 
bill. Our rural communities and neighbors need and deserve our help. 
Mr. Chairman, I remain hopeful that we'll all come together and will 
indeed provide these Americans with the broadband access they and their 
families desperately need.

    The Chairman. Thank you.
    Senator Klobuchar.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman and 
Senator Schatz, for holding this hearing. We have worked very 
hard to expand broadband. We have our Senate Broadband Caucus. 
I see Senator Capito, who is one of the co-chairs along with 
myself. And I want to thank you so much for being here.
    I'm going to start with standalone. Ms. Bloomfield, you 
know that Senator Thune and I have worked to reform outdated 
Universal Service Fund rules. We got the FCC to make some 
changes after we got a number of people from this committee and 
other places to support that model. But shortfalls in USF 
funding have prevented the new model-based support from 
offering services to rural consumers at comparable rates. There 
are still problems. Do you have a sense of how many locations 
did not get served because of the model budget shortfall?
    Ms. Bloomfield. So, first of all, thank you very much for 
your leadership. It was very timely, Senator Klobuchar.
    Yes, there is definitely, as we talked before, and in my 
written testimony, there's a budget mechanism that is currently 
in place. And so because universal service is actually helping 
folks recover cost of investments they've already made, what 
we're seeing is that the standalone broadband piece, because of 
the gap in the programs, for example, on the ACAM, which is the 
model side, there's a shortfall of about $110 million for this 
year. On the rate-of-return side, it's about $173 million.
    So the problem with that shortfall is there are a couple of 
things. We know on the model side, for example, that there are 
about 71,000 people who will not be getting the higher speeds 
that my carriers had intended to be able to provide this year. 
And in addition, there are about 50,000 consumers that will 
actually not be getting broadband at all.
    On the non-model side of the house, you know, I am hearing 
from folks that on average--we just did a survey, and on 
average, the cost of standalone broadband right now still 
stands at about $160, $170 a month. That is simply not 
affordable. So we have not been able to get that differential. 
And I do attribute all of that to the budget mechanism just 
simply holding down those numbers.
    Senator Klobuchar. And how would you fix it?
    Ms. Bloomfield. So I would fix it. I think there are a 
couple of immediate things that we could do, but I think that, 
you know, the first thing I would say is looking to the FCC 
with hopes that there are reserves there in the universal 
service program and that those reserves be put forward to help 
support some of the gap. They were able to do a little bit of 
that on the model side early out of the box. They did not do 
that on the rate-of-return side.
    The second thing would be to take a look at the 
contribution factor. I know they held it down for good reason, 
but I think again just a slight uptick in that will be enough 
to sufficiently fund this program. We're not talking about a 
lot of money.
    Senator Klobuchar. OK. Thank you. And I also appreciate 
NTCA's support for the bill that I've done with Senator Capito, 
Sullivan, and others on measuring the economic impact of 
broadband, and I think that's going to be helpful as we work to 
get more funding either in a major infrastructure package or in 
some of the ways that you just discussed.
    Mr. Graham, in your testimony, you highlighted a letter 
that I signed along with several of my colleagues to Chairman 
Pai regarding Mobility Fund 2. We expressed concern that 
Mobility Fund 2 should encourage carriers to preserve upgrade 
and expand mobile broadband and not degrade it. How significant 
could the loss of service be in rural communities if sufficient 
operating support is not provided?
    Mr. Graham. Well, quite simply, support--excuse me--
coverage will be turned down, carriers like us, like C Spire, 
who have been participants in the Universal Service Program for 
a long time, used the support that we receive to extend our 
wireless networks into rural areas and introduce coverage, 
introduce networks that then form the foundation for advanced 
wireless services.
    Today, our receipts from the Universal Service Fund has 
been cut to the point that expansion is no longer an option. 
What we're doing now is maintaining what has been built. The 
FCC plans to take the rest of that universal service support 
away from providers like C Spire, and when that support goes 
away, the operating expense dollars go away. It is literally 
that dire. Defunding existing networks in order to fund the 
expansion or construction of new networks will have that 
effect.
    Senator Klobuchar. OK. One last with a quick answer. I'm 
Co-Chair of the Next Generation 911 Caucus. The ability to 
reach help shouldn't depend on your ZIP Code, as you know. In 
your testimony, you mentioned that some coverage maps, that the 
FCC overstate coverage. Could this result in an inability to 
call 911 in areas that appear to be served?
    Mr. Graham. Yes, it absolutely could. My answer is as 
simple as that.
    Senator Klobuchar. OK. Very good. And I had a question 
regarding a letter Senator Fischer and I did on comparable 
rates in urban and rural communities, and I'll ask that in 
writing, Ms. Bloomfield.
    So thank you very much for your work, all of you.
    The Chairman. Thank you, Senator Klobuchar.
    Senator Peters.

                STATEMENT OF HON. GARY PETERS, 
                   U.S. SENATOR FROM MICHIGAN

    Senator Peters. Thank you, Chairman Wicker and Ranking 
Member Schatz, for holding this hearing. And I would like to 
certainly thank all of our witnesses for your testimony here 
today.
    I represent the state of Michigan, which has vast rural 
areas in Northern Michigan, and, of course, our beautiful Upper 
Peninsula, and this is an incredibly important issue for the 
folks up there. I actually like to think of universal broadband 
access as something very similar to access to electricity. If 
you live in a rural area, we made a major focus as a country to 
make sure that every inch of this country was electrified, 
believing if you lived in a rural area, you should have equal 
access to electricity as someone in an urban area, and I think 
that is every bit as true in terms of this technology in order 
to advance those communities to allow for economic development 
going forward.
    But before we talk about some of the reforms, I also think 
that it's very important that we address the issue of 
incomplete and inaccurate coverage data, and there have been 
some real issues in Michigan in relation to that. So I was 
happy to join Mr. Wicker on your bill, the Rural Wireless 
Access Act of 2017. I appreciate your leadership. I'm very 
proud to be a cosponsor with you of that legislation. Hopefully 
we can get Chairman Thune and Ranking Member Nelson to take it 
up shortly in the broader committee because I think that's 
absolutely essential for us moving forward.
    But my questions are for Ms. Rheuban, and I appreciate your 
testimony regarding expanding telehealth services into rural 
America. You have called for expanded Medicaid coverage in 
those services, and, in fact, Senator Gardner and I introduced 
the Telehealth Innovation Improvement Act, which seeks to do 
just that, which would require the Department of Health and 
Human Services to allow eligible hospitals to test telehealth 
services through the Center for Medicare and Medicaid 
Innovation. It would also allow telehealth models to be covered 
by the greater Medicare program if they meet independent 
evaluation for cost effectiveness and improvement for quality 
of care, which I believe a lot of these programs will be able 
to do. Certainly the folks that I represent sometimes have to 
drive hours to get basic medical care. And now this promises to 
change that pretty dramatically, but, of course, you have to 
have access to broadband in order to do that.
    My question, though, is, what type of criteria do you 
believe a telehealth program should meet in order to match a 
national standard of care?
    Dr. Rheuban. I don't believe telehealth programs should be 
held to any higher standard of care than what we do with 
everyday health care. The National Quality Forum right now is 
doing actually an analysis of the quality metrics for 
telehealth programs. There are practice guidelines that have 
been developed both by the specialty societies in partnership 
with the American Medical Association and the American 
Telemedicine Association. And the Agency for Health Care 
Quality and Research are looking at the quality outcomes of 
telehealth services.
    So I would push back a bit and just say we should not be 
held to a higher standard in the provision of telehealth 
services as we are for everyday health care services.
    Senator Peters. Well, as a follow-up, as we push to expand 
Medicare to cover these new innovative services, how can we 
collect better data and conduct enforcement to ensure that 
these programs are truly the best that we can offer?
    Dr. Rheuban. Well, currently, when we bill Medicare, we 
bill with specific modifiers, so that data is available, but 
there are even flaws in the review by Medicare. We had a recent 
example at the University of Virginia with one of our really 
great telestroke initiatives and partners, and we had payment 
retracted by a Medicare intermediary because the originating 
site didn't bill Medicare for the service, where there is 
nowhere in statute or in regulation that requires the 
originating site to bill for the originating site fee.
    So there's a lot of misinformation, quite frankly. And I 
think we can certainly, as telehealth providers, document the 
outcomes of the services we provide. We bill with the 
appropriate modifiers, and the Agency for Health Care Research 
and Quality is evaluating those outcomes.
    Senator Peters. Are you familiar with the legislation that 
I mentioned that I'm working on with----
    Dr. Rheuban. No, I'm not.
    Senator Peters. Well, I would certainly look forward to 
having an opportunity to discuss that further with you, if you 
had an opportunity to review that bill and give us any input as 
to how we can make it better.
    Dr. Rheuban. I would love to.
    Senator Peters. I appreciate your work on this and look 
forward to working with you. Thank you.
    Dr. Rheuban. Thank you.
    The Chairman. Thank you, Senator Peters.
    Senator Hassan.

               STATEMENT OF HON. MAGGIE HASSAN, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Hassan. Thank you, Mr. Chair and Senator Schatz, 
and thank you to the witnesses for appearing today. It has been 
a very informative panel. I obviously come from a state, New 
Hampshire, where we have granite to go through. So he has lava, 
I have granite, and they both present their challenges.
    And you've answered a couple of the questions I had, but 
perhaps starting with Dr. Rheuban and then if the other 
panelists want to chime in. Obviously, universal service 
support for rural health care programs is something that we all 
care a great deal about, and I think we're beginning to gain a 
growing appreciation of how important and useful it can be.
    In states like New Hampshire, not only do we have rural 
health care programs that could really leverage this 
technology, but right now in the middle of the opioid epidemic, 
we're looking for every single tool we have, and certainly in 
rural areas, telehealth is incredibly important, and the 
Healthcare Connect Fund will provide Federal support for state 
and regional broadband health networks.
    It's my understanding that the amount for the support last 
year exceeded the amount of support available for the program. 
So how should the FCC prioritize this program while balancing 
the needs of other USF programs that Granite Staters and people 
across the country also rely on?
    Dr. Rheuban. Senator Hassan, that's a very appropriate 
comment. This is a public health emergency, the opioid 
epidemic. For our program at the University of Virginia, a full 
50 percent of our encounters relate to behavioral health 
services needed by rural patients, and I think this is 
critical.
    The Commonwealth of Virginia has just launched a project 
ECHO-like model that will connect providers to do case 
presentations with experts in substance abuse or substance use 
mitigation, and I think this is a critical element. And as we 
look to the public health safety component of the 
Telecommunications Act, we should also then include additional 
services for rural health providers who choose to participate 
in such programs.
    Senator Hassan. Thank you.
    Ms. Bloomfield. If I could also jump in. So one of the 
things, too, that's important in these rural areas is that you 
also have to have that underlying network that helps to connect 
the clinics to the teaching hospitals and the other 
infrastructure.
    When we look at the rural areas, my folks are community-
based companies, so they have every motivation to keep their 
communities alive and vibrant. And probably one of the biggest 
keys, with an elderly population, a lot of American vets, is 
access to health care. So we are--and we worked the good doctor 
a number of years on some of these initiatives because we see a 
lot of synergy between broadband providers and the ability for 
them to connect these community-based entities that really make 
a difference in the quality of life. So we look to be 
supportive as well.
    Senator Hassan. Thank you.
    Mr. Graham?
    Mr. Graham. Yes, and I'll just add, this also gets back to 
the data coverage, the bad data issue, that we've talked about. 
In the Mississippi Delta, there as a diabetes monitoring trial 
that was run, it's referenced in my written testimony, and when 
the monitoring units were sent to the patients, they were sent 
to patients for a particular carrier based on coverage maps 
that showed coverage in that area. Coverage didn't exist in 
that area, which is how C Spire ended up in the pilot program, 
a pilot program that based on projections in my written 
testimony, could save the state of Mississippi $200 million a 
year in Medicaid.
    Senator Hassan. Sure. Thank you. Well, I appreciate it very 
much.
    I guess the other couple of thoughts I have, and, Dr. 
Rheuban, maybe you can address this, is one of the other 
challenges with the opioid epidemic that we have is physician 
training because a lot of physicians haven't been trained in 
either pain management or the science of substance use 
disorders. So I'm wondering if you see, you know, if your rural 
hospitals have very strong coverage and access, whether this is 
a way we could also leverage broadband so we could do more 
physician training around this issue.
    Dr. Rheuban. Actually my other hat is I am the Associate 
Dean for Continuing Medical Education.
    Senator Hassan. Yes.
    Dr. Rheuban. And so we have used our networks in the 
Commonwealth of Virginia to do training. Now, we also have to 
do more training in Suboxone prescribing, and that's one of our 
goals actually in the Commonwealth of Virginia. And so I agree 
completely with you. The Commonwealth has also mandated, it's 
not much, but several hours of training for licensure renewal 
in pain management. And, again, telehealth technologies are a 
great tool to be able to provide distance learning and 
educational tools for providers who wish to learn more. So I 
agree completely.
    Senator Hassan. Well, I thank you all. I think what we're 
hearing this morning, and I thank the Chair and Ranking Member, 
is we can all agree on the incredible possibilities that making 
sure that our entire country sees broadband, has broadband 
coverage, and is treated as a true utility, there are great 
possibilities ahead, we just have to find a way to do it. Thank 
you.
    The Chairman. Thank you, Senator Hassan.
    Senator Fischer.

                STATEMENT OF HON. DEB FISCHER, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Fischer. Thank you, Mr. Chairman.
    Ms. Bloomfield, my colleagues and I have heard frustration 
about the prices for and also the availability of standalone 
broadband, and even after the reforms to the Universal Service 
Fund, many operators are unable or they're unwilling to offer 
such services because the prices are still very high. Recently, 
57 of my colleagues and I sent a letter to the FCC Chairman 
expressing our concern about the lack of sufficient resources 
and the reformed High Cost mechanism. So how has the FCC's 
treatment of standalone broadband impacted deployment in our 
rural communities?
    Ms. Bloomfield. So I think we're going to start to see 
that, Senator Fischer, and I think it's terrific you've been 
hearing from your carriers. The state of Nebraska is going to 
be impacted to the tune of about $3.6 million this year in 
terms of money that folks had actually invested that will not 
be coming back in on the non-model side of the house.
    So what folks are doing, we actually, as I mentioned, just 
on the survey, we found that 65 percent of our companies are 
now pulling back on their investments. So things that they had 
planned to do, infrastructure they had planned on putting into 
the ground, they are no longer going to go forward with, or 
where there were areas they thought they were going to hit 
higher speeds, they are not going to be able to go forward.
    And to your point on standalone broadband, the price point 
simply is not there because of these budget mechanisms. So we 
need to find a way. And, again, it's such a small amount, but 
it's so critical to these carriers that have already made these 
investments to get those fully funded.
    Senator Fischer. OK. Thank you.
    For the entire panel, we had the Department of 
Transportation Secretary here before the Committee not too long 
ago, and Secretary Chao has said that broadband deployment 
could be included in the administration's infrastructure 
package. As Congress considers infrastructure priorities, what 
role do you believe that the states should play in order to 
support broadband buildout? And should the Federal and state 
funding have different roles?
    Who would like to begin?
    Ms. Bloomfield. All right. I'll do the buzzer. So I will be 
honest with you, when we've been talking a lot to many folks 
across town about infrastructure, and I think it's a little bit 
of a longer term proposition, but the one thing I will say is 
to be looking at a mechanism that is in place already. So 
that's where I immediately go to universal service because 
you're not creating a new program. Now, granted, states may 
have a role, and we already see states having Universal Service 
Funds that help to supplement, which I believe you may have in 
Nebraska, that supplement the cost on the back end. I think 
there are ways to be looking at completely unserved areas; 
that's something that I know a lot of folks have looked at NTIA 
or RUS or some of these other entities for. But I will say I 
think we'd be really remiss to not look at the FCC and 
universal service with the mechanism that has now been 
reformed----
    Senator Fischer. Is that High Cost? High Cost?
    Ms. Bloomfield. High Cost, and I think, you know, 
potentially even wireless. I see the button getting ready to 
go. Because there are some needs, and we know where the needs 
are, and they're ready, it just needs the infusion into the 
system.
    Senator Fischer. OK. Mr. Graham.
    Mr. Graham. Yes, I would agree. There's a role for the 
states to play, and currently some of the states do play that 
role in certifying eligible telecommunications carriers who can 
receive universal service support. I know in Mississippi, we 
receive input from the Public Service Commission routinely 
about areas that they have identified that lack coverage, and 
we work together on what our coverage plan will be for the 
coming year.
    So there's a role for states to play, and I think states in 
particular can determine some of those areas where coverage is 
lacking and then find local providers then who are willing to 
make that initial investment to get broadband into these rural 
areas that are unserved or underserved either through fiber or 
through wireless or other technologies.
    Mr. Balhoff. On the basis of the financial issues that 
exist out there, most of the carriers will look at grant monies 
as a one-time type of thing, but ultimately their real concern 
is, what can they expect over the longer period of time? So the 
kind of support.
    And it actually goes back to what Senator Schatz was 
talking about before, which is a contribution mechanism. We 
have to find a better solution so there is more predictability. 
So the carriers that we provide advice to--and there are a 
very, very large number of those across the country--they 
wrestle with the unpredictability of the monies that will be 
there for operating the networks.
    So building the networks is one thing, which everybody pays 
attention to, and they don't really understand the nature of 
the problem. I will suggest the data collection problem is not 
simply the one that we are dealing with here where there is 
service or there is not service, it's to understand the 
evolving problems that are coming in rural America.
    So, for example, a number of the carriers are terribly 
concerned about the amount, the volume, and the over-the-top 
video services that are there, and so they're finding 
themselves more and more pressed without the necessary revenues 
to be able--that is, universal service--to be able to support 
these problems.
    The problems are different today than they were 10 years 
ago or 20 years ago. So when I first started providing 
financial analyses to these communities, it became obvious to 
me that things were relatively stable. Today things are 
changing so rapidly, and the pressures on the networks are 
very, very significant. So we need to understand the nature of 
the problems that are affecting broadband deployment and 
ongoing operating costs, and that's more than a single----
    Senator Fischer. Should the Federal Government be 
responsible for one of those roles and the state funding then 
be responsible for another; one for construction, one for 
operation?
    Mr. Balhoff. Well, I will tell you I have a bias toward the 
states because the states are very, very close to the problems 
that are there. So the Commissioners that I've worked with at 
the state level are usually very sophisticated. I will admit 
somewhat candidly, and it's impolite to say this, that the 
bench at the state level is much thinner than it used to be.
    So it used to be that there were a lot of telecom 
commissioners who understood the nature of the problems. More 
and more of the commissioners are paying attention to the 
energy issues than the telecom issues, so we find not as good 
an understanding at the state level today as it was 5, 10 years 
ago. And this is my judgment.
    Senator Fischer. Thank you, sir.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Fischer.
    Senator Capito.

            STATEMENT OF HON. SHELLEY MOORE CAPITO, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Capito. Thank you, Chairman Wicker. Thank all of 
you for being here today. I think what you hear on both sides 
obviously is we're unified in our concerns. We have very 
similar concerns, which is interesting. You've heard a lot of 
different bills that have been introduced. I'm from West 
Virginia, and we don't go through lava, we go through mountains 
and coal, and we have some of the lowest deployment of high-
speed Internet in the country, if not the lowest. Consequently, 
you're left behind. I used to say it's economic, it's medical, 
it's education, but I've now added tourism and agriculture, as 
I listen to my colleagues talk about the challenges in 
different areas.
    I recently introduced the Gigabit Opportunity Act to get to 
the money issue, which would seek expedited deployment of 
broadband services in low-income, rural, and urban communities. 
It gives the states flexibility, streamlines existing 
regulations, and eliminates barriers to investment to try to 
bring more private investment to go with the Universal Service 
Fund investments that we see in the states. I'm encouraged that 
Representative Collins, over on the House side, has introduced 
a companion bill.
    One of the questions that I have comes after hearing NTIA 
mention the FCC and rural development along with USDA rural 
development. We're dealing with three different Cabinets. I 
don't want to say maybe too far displaced from one another, but 
we have $38 million now coming to support 89,000 eligible 
locations across our state for the Universal Service Fund. I'm 
concerned when I hear the reporting and the 477 data issue 
because in a recent OIG report, it said that the BTOP funds now 
say we had showed $4.7 million in costs that were unallowable. 
So accountability is what I'm getting to here.
    I guess, what would you say are the checks and balances 
that would make you feel like mistakes like that aren't going 
to happen again?
    Mr. Graham, I'll start with you.
    Mr. Graham. Thank you for the question. I think, as Ms. 
Bloomfield said, using an existing program such as the 
Universal Service Fund prevents you from having to stand up a 
new program and create checks and balances. The Universal 
Service Fund includes audit provisions, USAC audit provisions. 
And we were audited, since 2008, we were audited, I believe 
it's seven times, including a couple of onsite visits in back-
to-back years. These were random audits that happened to spring 
up at the time when USF reform was hot and heavy, and we were 
very involved in it. But the auditing provisions are already in 
place in this existing program.
    Senator Capito. On the auditing side, are you talking 
auditing just on the financial side or are you talking auditing 
on the reporting side as to actual service deployment? How 
accurate are those numbers? Are you audited on that?
    Mr. Graham. On the onsite visits we were, so we had 
auditors who came, camped out in our office, went through the 
financials, and then verified that----
    Senator Capito. Was that service delivered at the levels 
that it was promised?
    Mr. Graham. That's right, the locations. And also the 
Public Service Commission, who certifies us as an ETC designee 
each year, verifies that the equipment that we claim to have 
put in service is in service.
    Senator Capito. Is there any clawback mechanism in that? If 
you're not delivering the service and if you're found to not be 
providing the service, are there clawback funds?
    Mr. Graham. I'm not aware. I'm not aware of a clawback 
provision other than just the practical penalty of having 
equipment deployed because the money is spent up front.
    Senator Capito. Right.
    Mr. Graham. So there is no incentive to deploy the 
equipment and then not provide the level of service that the 
equipment is designed to provide.
    Senator Capito. Did anybody else want to answer?
    Ms. Bloomfield. So I would also just jump in. I completely 
agree with Mr. Graham about that, and between the NECA pool 
oversight, the USAC audits.
    The other thing that I think is going to be really helpful, 
and particularly in a case such as West Virginia, is that with 
the reforms that the FCC approved last year, you literally now 
have to geocode where your infrastructure is going. So it is 
literally--you know, when you're doing new locations or you're 
doing upgrades, that is all geocoded to exactly where you are 
committing to spending the money. So I think we're going to see 
even more accountability and transparency going forward.
    Senator Capito. Thank you.
    Dr. Rheuban, telehealth holds great promise for a state 
like mine, many of ours. We're an elderly state, too. I'm 
wondering if in your experience, if you find that a barrier for 
your older patients, as remote patients. How is the acceptance 
level with that? And what kind of ideas you might have there 
for the deployment of telehealth for more seniors?
    Dr. Rheuban. Thank you, Senator. Actually, our seniors love 
telehealth. First of all, telehealth reduces the burden of 
travel. We've reduced the burden of travel in our UVA 
telemedicine program by more than 17 million miles for 60,000 
clinical encounters. They love remote patient monitoring, so 
we've deployed a remote patient monitoring care coordination 
program to the home for our patients, many of whom are seniors 
and Medicare beneficiaries, and they love it. The adoption rate 
is great. The continuation is great. And so I find that our 
seniors are very much supportive of receiving high-quality 
care, whether it's in home settings or in their community 
setting. It's easy and it's well done.
    Senator Capito. Well, you're making a better case then for 
better and broader broadband deployment to the rural areas 
especially where a lot of our seniors live.
    Dr. Rheuban. Absolutely.
    Senator Capito. Thank you so much.
    The Chairman. She surely is. Thank you, Senator Capito.
    Senator Baldwin.
    And a vote is taking place, but I think we can squeeze this 
in, and they'll wait just fine.

               STATEMENT OF HON. TAMMY BALDWIN, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Baldwin. Very, very good. Thank you, Mr. Chairman.
    This sort of flows well from the questions that Senator 
Fischer was asking about appropriate role of the Federal level 
and appropriate role of the state level. But, in particular, I 
wanted to share a reflection of a roundtable with stakeholders 
that I had in northern Wisconsin.
    Eagle River in Vilas County, it's about as far north as you 
can get without being in the Upper Peninsula of Michigan, and 
they have been doing some really interesting things there. 
First of all, surveying their summer residents, and asked, ``If 
there were broadband access, would you stay longer?'' and found 
on average that probably about 2 weeks a year would be the 
estimate of how much longer people would stay, with probably an 
enormous impact to the local economy.
    But the other thing that they were motivated to do in that 
community is in addition to the regular planning that 
governments go through--budget planning, infrastructure 
planning, et cetera--they put together a technology plan for 
their county. And from what I got to hear in our short time 
together, it was pretty visionary. But their frustration I 
think is that the Federal programs that are set up don't 
necessarily give their plans and their vision a voice.
    So, Ms. Bloomfield, I'm wondering if you agree that there 
should be more engagement with local and state planning 
processes especially where the local ones exist. And if so, 
what could or should that look like in USF programs or other 
ways in which we might invest in broadband in the future?
    Ms. Bloomfield. It's an excellent question, and I know 
there's a lot of frustration in areas that are currently 
unserved or underserved today. One of the things we've been 
trying to do, one of the things we find, is the first part is 
getting people to talk to each other and having these 
conversations, right? So you've got folks in Eagle River. There 
probably are--the state of Wisconsin has about 30 independent 
providers out in the state. You know, it's getting folks 
together who can actually have these conversations about, 
``What are your needs? And how can we help?''
    One of the things that we actually just released about a 
week ago is a Web portal called Partnerships in Broadband, 
where we are literally opening it up to electric cooperative 
communities, to municipalities, to folks who are looking to 
have some of those critical conversations about, ``We have a 
need, but we need somebody to potentially partner with because, 
frankly, broadband is really expensive and it's very tough to 
do. You've got to do a lot of assessments, you've got a lot of 
regulations you need to comply with.''
    So one of the things we're trying to do is take that middle 
piece out and say, ``We've got a need. How do we connect people 
with needs to possibly entities that might be interested and 
able to come in and support some of those needs themselves and 
provide that service?'' My carriers could frankly use more 
customers, and I think that rural Americans living in those 
remote communities have needs.
    So we're trying to think a little bit out of the box. But 
how do you actually connect these dots in a way that makes 
sense on a local or a state level? Where USF comes into play, 
you know, obviously I would see some of those areas increasing 
the needs even further, but we'd be happy to at least get 
enough momentum to start having some of those discussions as 
well.
    Senator Baldwin. Thank you. Pivoting now, Dr. Rheuban, in 
your testimony, you highlighted the progress that the 
University of Virginia has made in improving stroke evaluation 
and treatment through telemedicine. I've been particularly 
concerned about access to quality stroke care for our Nation's 
veterans, especially those veterans living in rural areas in 
Wisconsin. And unacceptably, there have been cases in which 
veterans have died or have suffered severe injury due to lack 
of timely stroke diagnosis and treatment.
    How can we strengthen and improve USF programs to make this 
type of care available to more veterans in particular? And 
would greater support allow your center to partner and work 
with more institutions including the VA facilities in providing 
telestroke care to veterans in rural areas?
    Dr. Rheuban. There is a tremendous opportunity with 
telemedicine in terms of reducing the burden of and 
complications of stroke. We would love to work with the 
Veterans Health Administration, and we have reached out, and we 
do have partnerships with the VHA hospitals in the Commonwealth 
of Virginia. We have a Virginia State Stroke Systems of Care 
Task Force. And, in fact, our FCC pilot program, funded a 
number of years ago, was built around our need to expand access 
to stroke services. It was the Virginia Acute Stroke 
Telemedicine Initiative.
    We have done some phenomenal work, as have others. It is 
really now considered the standard of care for stroke patients. 
And I will tell you that in our telestroke network, patients at 
a rural community hospital can receive TPA, the clot-busting 
medication, at the same rate they might receive it because of 
telemedicine if they had been a Charlottesville-based patient 
who showed up in our emergency department.
    The other element that we have also integrated into our 
telestroke program is access to stroke neurologists from the 
EMS vehicles, so that our stroke neurologists are actually 
evaluating patients the moment they set into the ambulance and 
traverse the distance to UVA, so that it can reduce the time 
for treatment, which is a 3-hour window for TPA administration. 
There are other services that can be informed by telemedicine, 
such as device retrievers and other things that can be done.
    So absolutely we all need to be at the table together. This 
is the standard of care for stroke patients. And how we can 
incent hospitals and providers to collaborate is a really 
important opportunity.
    Senator Baldwin. Thank you.
    The Chairman. Thank you, Senator Baldwin.
    Senator Cortez Masto. You got me worried there.

           STATEMENT OF HON. CATHERINE CORTEZ MASTO, 
                    U.S. SENATOR FROM NEVADA

    Senator Cortez Masto. Thank you. Thank you, Mr. Chair. And 
I'm so sorry I wasn't here for the initial start of the 
hearing. I have a competing hearing going on, and so I was 
trying to make sure I covered both. And thank you for your 
comments that I was able to take a look at prior to the hearing 
today.
    Let me just say I'm from the state of Nevada. We have rural 
and urban communities. Rural broadband is key, and it is so 
important. I believe we need to invest in this infrastructure 
to open doors to services that we know are challenged in our 
rural communities, and one of those is this telemedicine that 
is so important.
    And so let me follow up on the question that was asked by 
my colleague, Dr. Rheuban. And you may not know this, and let 
me open it up. But can you give me a sense of how advanced or 
fast the broadband infrastructure needs to be in these 
communities in order to utilize these types of services?
    Dr. Rheuban. For our telestroke network, we have deployed 
100 megabit connections, and they are affordable, quite 
frankly. Where hospitals might, you know, without the Universal 
Service Fund, spend $3,500 a month, we now, with the Universal 
Service Fund, have been able to reduce that cost to $350 a 
month for that hospital, the net cost, which is affordable for 
a community hospital. $3,600 a month is pretty pricey. So, you 
know--and we need to do a lot with that connection. So that 
hospital is sending CT scans, which are imperative for stroke 
services, as well as deploying high-quality video conferencing. 
Could we do it with less? Yes, I think we could do it with 
less, but the more we have, the better we are. The higher the 
quality, the higher quality video conferencing can be supported 
with a higher bandwidth.
    Senator Cortez Masto. Thank you. And let me just throw this 
out here as well because it's not just telemedicine, it's 
education----
    Dr. Rheuban. Sure.
    Senator Cortez Masto.--that we could bring to communities, 
right? It is treatment services, it is social services. There 
are so many benefits that we know that particularly our rural 
communities are challenged to get professional services in 
those communities.
    Let me jump onto another subject, which is siting issues. 
In Nevada, 85 percent of the land is public land, and we work 
very closely with our Federal partners, but there are 
challenges, as we all know, that, yes, we want to bring 
broadband, but there are siting issues. And so let me open this 
up again to a question on how we should be looking at better 
coordination to address this issue so that we can open the door 
for the infrastructure?
    Mr. Graham. That's an excellent question. I'll address it 
because our company is involved in permitting issues for both 
fiber construction, which we do, but also wireless 
construction. And anything that can be done to streamline that 
process, to let a report that's done for environmental impact, 
for instance, be shrunk to begin with, and then be enough to 
satisfy multiple agencies, would be a great start.
    Streamlining the process would make a tremendous difference 
for us, and we're on the larger end of a lot of the wireless 
providers that are not the big four. Smaller wireless providers 
have it even worse. And we also are on the larger end of some 
of the fiber providers, and on the smaller end of that, they 
have it even worse because the reports cost the same whether 
you're large or small, it's based on the size of the project.
    Senator Cortez Masto. Right.
    Ms. Bloomfield. I completely concur, Senator. And what 
we're finding is as you have to go through multiple agencies, 
multiple hoops, it really delays the time of actually the 
expansions. So what we're seeing is it's actually holding down 
things that actually could be done immediately are taking that 
12 to 18 months to get some of that permitting done. And what 
we find is everybody again has different processes, so if 
you've got to get something that's through RUS and through BLM 
and maybe you've got to go through some NEPA hoops, it's just 
very tough to get a project up and running. So streamlining 
that would be extraordinarily helpful.
    Senator Cortez Masto. Thank you. And thank you all for 
being here today. I appreciate the conversations and the 
comments. This is an important topic. Thank you.
    The Chairman. Thank you, Senator Cortez-Masto.
    The hearing record will remain open for 2 weeks. During 
this time, Senators are asked to submit any questions for the 
record. Upon receipt, the witnesses are requested to submit 
their written answers to the Committee as soon as possible. 
Give your own definition for that.
    [Laughter.]
    The Chairman. We would appreciate it within 2 hours, I 
think, or longer if you need be.
    So thank you very much. This has been a very good hearing. 
And this hearing is now adjourned.
    [Whereupon, at 11:19 a.m., the hearing was adjourned.]

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