    [Senate Hearing 116-660]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-660

                      THE IMPACT OF BROADBAND INVESTMENTS
                                IN RURAL AMERICA

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

                                    HEARING

                                   BEFORE THE

                         SUBCOMMITTEE ON COMMUNICATIONS,
                     TECHNOLOGY, INNOVATION AND THE INTERNET

                                     OF THE

                             COMMITTEE ON COMMERCE,
                          SCIENCE, AND TRANSPORTATION
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 12, 2019

                                   __________

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

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available online: http://www.govinfo.gov

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    60-881 PDF                  WASHINGTON : 2025

    -----------------------------------------------------------------------------------

           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                      ROGER WICKER, Mississippi, Chairman
    JOHN THUNE, South Dakota             MARIA CANTWELL, Washington,
    ROY BLUNT, Missouri                      Ranking
    TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
    DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
    JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
    DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
    CORY GARDNER, Colorado               TOM UDALL, New Mexico
    MARSHA BLACKBURN, Tennessee          GARY PETERS, Michigan
    SHELLEY MOORE CAPITO, West Virginia  TAMMY BALDWIN, Wisconsin
    MIKE LEE, Utah                       TAMMY DUCKWORTH, Illinois
    RON JOHNSON, Wisconsin               JON TESTER, Montana
    TODD YOUNG, Indiana                  KYRSTEN SINEMA, Arizona
    RICK SCOTT, Florida                  JACKY ROSEN, Nevada
                           John Keast, Staff Director
                      Crystal Tully, Deputy Staff Director
                          Steven Wall, 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

    JOHN THUNE, South Dakota, Chairman
    ROY BLUNT, Missouri                  BRIAN SCHATZ, Hawaii, Ranking
    TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
    DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
    JERRY MORAN, Kansas                  EDWARD MARKEY, Massachusetts
    DAN SULLIVAN, Alaska                 TOM UDALL, New Mexico
    CORY GARDNER, Colorado               GARY PETERS, Michigan
    MARSHA BLACKBURN, Tennessee          TAMMY BALDWIN, Wisconsin
    SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
    MIKE LEE, Utah                       JON TESTER, Montana
    RON JOHNSON, Wisconsin               KYRSTEN SINEMA, Arizona
    TODD YOUNG, Indiana                  JACKY ROSEN, Nevada
    RICK SCOTT, Florida

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on March 12, 2019...................................     1
    Statement of Senator Thune.......................................     1
        Prepared statement of Hon. Roy Blunt, U.S. Senator from
          Missouri...................................................    52
    Statement of Senator Schatz......................................     3
    Statement of Senator Fischer.....................................    39
    Statement of Senator Klobuchar...................................    40
    Statement of Senator Moran.......................................    42
    Statement of Senator Tester......................................    44
    Statement of Senator Scott.......................................    45
    Statement of Senator Sinema......................................    47
    Statement of Senator Udall.......................................    50

                                   Witnesses

    Denny Law, General Manager and Chief Executive Officer, Golden
      West Communications............................................     4
        Prepared statement...........................................     6
    Justin Forde, Senior Director of Government Relations,
      Midcontinent Communications....................................    12
        Prepared statement...........................................    14
    Mark A. Jamison, Ph.D., Visiting Scholar, American Enterprise
      Institute......................................................    21
        Prepared statement...........................................    23
    Carol Mattey, Principal, Mattey Consulting, LLC..................    27
        Prepared statement...........................................    29

                                    Appendix

    Hon. Shelley Moore Capito, U.S. Senator from West Virginia,
      prepared statement.............................................    53
    Response to written questions submitted by Hon. Jacky Rosen to:
        Denny Law....................................................    53
        Justin Forde.................................................    55
        Mark Jamison.................................................    56
        Carol Mattey.................................................    58

              THE IMPACT OF BROADBAND INVESTMENTS IN RURAL AMERICA

                                  ----------

                            TUESDAY, MARCH 12, 2019

                                   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 2:45 p.m. in
    room SH-216, Hart Senate Office Building, Hon. John Thune,
    Chairman of the Subcommittee, presiding.
        Present: Senators Thune [presiding], Schatz, Fischer,
    Moran, Scott, Klobuchar, Tester, Sinema, and Udall.

                 OPENING STATEMENT OF HON. JOHN THUNE,
                     U.S. SENATOR FROM SOUTH DAKOTA

        Senator Thune. Good afternoon. Welcome. I apologize for
    being a little bit tardy. We had a couple of votes going on.
    We're going to have to juggle that as we proceed with the
    hearing.
        But I want to welcome everybody to today's hearing,
    examining the State of Rural Broadband Deployment.
        Given the importance of rural broadband to the Committee
    last Congress and also to my home state of South Dakota, I'm
    excited to chair the first Communications Subcommittee hearing
    of the year on this topic.
        High-speed broadband services are vital to America's
    communities. Broadband connectivity provides opportunities for
    advancements in health care, education, and economic
    development.
        Unfortunately, access to these services is often determined
    by where you live, with rural areas trailing more populated
    areas in broadband access. One of the most critical programs to
    help build out rural broadband services is the high-cost
    program within the Federal Communications Commission's
    Universal Service Fund.
        Just a little over 5 months ago, I led a hearing calling on
    the FCC to restore sufficiency and predictability to the high-
    cost program. Since that time, the FCC under the leadership of
    Chairman Pai unanimously took action to enable the continued
    deployment of broadband in rural communities in my home state
    of South Dakota and across the country.
        The Commission fulfilled an important obligation to ensure
    universal service and met its obligations under the law. By
    ensuring predictable and sufficient support, there will be more
    broadband investments in rural and tribal communities across
    America. For that, I thank the Commission.
        It is important to note that universal service cannot be
    achieved without pragmatic and bipartisan cooperation in
    Congress and without proper oversight of the FCC and other
    agencies tasked with advancing this goal, including the Rural
    Utilities Service at the U.S. Department of Agriculture.
        Last year's spending bill directed the Rural Utilities
    Service to develop a pilot program to distribute $600 million
    to advance broadband deployment in underserved areas of rural
    America. That same program received an additional $550 million
    this year.
        While both the FCC and the Rural Utilities Service share
    the goal of closing the digital divide, we have to be mindful
    of where these dollars are being directed. I have repeatedly
    said that coordination between these particular programs is
    essential if we're truly going to reach areas lacking
    sufficient access to broadband. Failure to do so will lead to
    the duplication of existing broadband services.
        As this Committee has previously discussed, accurate
    broadband maps are also essential for these programs to
    effectively target unserved areas. I'm encouraged to see that
    the FCC's latest Broadband Deployment Report shows that the
    number of Americans lacking access to a fixed broadband
    connection has dropped by more than 25 percent, but it's clear
    that more work has to be done to close the digital divide once
    and for all.
        One effort to do that is an auction for the Remote Areas
    Fund which would provide service to extremely high-cost areas,
    including both rate of return and price cap areas.
        So I'm glad that Chairman Pai has indicated an auction for
    the Remote Areas Fund may take place this year. I'm interested
    in seeing a tech-neutral approach for future support from
    programs like the Remote Areas Fund, ensuring wireline service
    along with fixed and mobile wireless service have a part to
    play in connecting Americans to broadband service.
        As I said earlier, I'm pleased to be convening this
    important hearing. I remain committed to building on the past
    successes of this committee, while also looking for new
    approaches to ensure that all Americans have access to next
    generation broadband services.
        To help in that effort, we have a very distinguished panel
    before us. Today, we're joined by representatives from two
    South Dakota-based companies: Mr. Denny Law, who's the General
    Manager and CEO of Golden West Telecommunications, and Mr.
    Justin Forde, who's the Senior Director of Government Relations
    at Midcontinent Communications.
        We're also joined by Dr. Mark Jamison, Visiting Scholar at
    the American Enterprise Institute, and Ms. Carol Mattey,
    Founder and Principal of Mattey Consulting.
        Thank you all for being here today. I look forward to
    hearing from you and having the opportunity to discuss how we
    can continue to close the digital divide.
        Before I recognize Ranking Member Schatz for his remarks,
    I'd just like to add that I'm looking forward to leading this
    subcommittee with him.
        I mentioned the importance of pragmatic bipartisan
    cooperation when confronting issues like rural broadband.
    Senator Schatz and I have partnered on many bills over the last
    several years, from efforts to streamline small cell siting and
    improved weather forecasting to bills focused on small business
    cybersecurity and reforming emergency alerts.
        So I'm optimistic about our continued collaboration on
    matters within the Subcommittee's purview, and I now want to
    turn it over to Senator Schatz for any opening remarks he'd
    like to make.

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

        Senator Schatz. Thank you, Mr. Chairman.
        Likewise, I'm looking forward to continuing our good
    bipartisan work together.
        I want to thank the testifiers for being here. We all need
    fast and affordable broadband, regardless of where we live, but
    the level of broadband Americans enjoy today did not happen
    without government policy. It's the result of smart planning
    and incentives, substantial public and private investment, and
    the ingenuity and muscle of American workers. It would not
    exist without the Federal Government, labor, and industry
    working together.
        We've made pretty good progress in a short period of time.
    In early 2009, Congress directed the FCC to develop a national
    broadband plan so that every American would have access to
    affordable broadband.
        As part of that plan, the FCC concluded that it needed to
    reform universal service and that's exactly what they've done.
    Beginning in 2011 and continuing through today, the FCC has
    fundamentally reformed the way the high-cost USF works.
        The FCC shifted the program from a 20th Century voice-
    centric model to a 21st Century broadband-centric model.
    Instead of subsidizing old phone networks, universal service
    now supports building new broadband networks, but we still have
    work to do. Despite substantial progress, the FCC's 2011
    reforms are not yet fully implemented. Broadband availability
    remains uneven, particularly in rural and insular areas.
        As anyone who lives on the big island or in the Dakotas
    will tell you, deploying affordable broadband in many rural and
    insular areas is still not possible without subsidy.
        Another important component of the FCC's 2011 reforms that
    remains unfinished is establishing a stable and sustainable USF
    contribution system. Several years ago, the FCC updated
    universal service funding to directly pay for broadband build-
    outs but it has not yet required broadband connections to
    contribute to universal service. That would be fair and that
    would be common sense. The FCC still needs to finish this task.
        We also need granular and accurate maps to know how and
    where to best direct the support and to avoid overbuilding. We
    can and should have better maps than we have today.
        One final observation: 5G holds great promise and I
    certainly support its deployment, but it does not appear that
    it will be a viable universal service solution in the near
    future.
        We need to be realistic about the costs and technical
    challenges of deploying 5G in high-cost areas. Other fixed and
    mobile technologies likely will continue to be the answer.
        I look forward to hearing insights from the witnesses and
    working with the members of the Subcommittee.
        Thank you.
        Senator Thune. Thank you, Senator Schatz.
        We'll proceed now to our panel and as I mentioned, we have
    a very distinguished panel. We have, starting out on my left
    and your right, Mr. Denny Law, Wahl, South Dakota, who, as I
    mentioned, is the General Manager and Chief Executive Officer
    of Golden West Telecommunications in Wahl, South Dakota, and
    we'll start there and then proceed accordingly across the
    panel, and we realize that we have a limited amount of time to
    get through this, and we would have to make sure that we get
    Mr. Law back to Wahl, South Dakota, because we're told he's
    going to have about two feet of snow to shovel when he gets
    home. So not something that the Senator from Hawaii probably
    has to think much about.
        [Laughter.]
        Senator Thune. But in any event, we are glad to have you
    all here and welcome you.
        So, Mr. Law, please proceed.

      STATEMENT OF DENNY LAW, GENERAL MANAGER AND CHIEF EXECUTIVE
                OFFICER, GOLDEN WEST TELECOMMUNICATIONS

        Mr. Law. Chairman Thune, Ranking Member Schatz, Members of
    the Subcommittee, thank you for this opportunity to testify on
    the importance of broadband in rural America.
        I'm Denny Law, CEO of Golden West Telecommunications
    Cooperative, based in Wahl, South Dakota.
        For over a century, Golden West Telecommunications has
    provided services to rural South Dakota. Today, we have over
    30,000 accounts and 25,000 broadband Internet subscribers
    located across 24,500 square miles of South Dakota. That's an
    area larger than Maryland, New Jersey, Connecticut, and
    Delaware combined, and equates to 1.4 persons per square mile.
        This coverage would have been impossible without support
    from the high-cost Universal Service Fund overseen by the
    Federal Communications Commission. Thankfully, Congress and the
    FCC recognizes the pivotal role that USF plays.
        Due to support from hundreds of Members of Congress,
    including many on this committee, the FCC took landmark steps
    last December to eliminate USF budget shortfalls that had
    undermined the advancement of networks in rural areas. This
    Order is poised to put the USF Programs on more sound footing
    for years to come.
        Just in our serving area, the FCC's Order will translate to
    direct benefits for rural South Dakotans. Prior to the December
    Order, Golden West had postponed nearly $4 million in network
    upgrades for 2019 due to the ever-increasing cuts in USF
    support.
        This year, however, we have renewed our efforts to improve
    or provide broadband to the communities of White River, Murdo,
    Hot Springs, Kadoka, Minnow, Interior, and Vivian, and with
    even more time now to adjust our year 2020 plans, Golden West
    expects to increase its capital budget for construction
    considerably and reach even more locations than those
    identified for 2019.
        Golden West is not alone in this mission, however.
    According to the South Dakota Telecommunications Association,
    in less than 2 years, 93 percent of SDTA customers are expected
    to be served by fiber broadband. That's up from 65 percent in
    2017.
        With a right-sized budget in place, we must ensure these
    programs are driven by good data. This committee has shown much
    concern over whether the FCC Form 477 data accurately captures
    coverage in the mobile context, but these concerns are just as
    prevalent in the context of fixed broadband services.
        In the absence of perfect data, agencies like the FCC and
    USDA, have previously used challenge processes. Mapping
    databases can be a baseline for determining where support
    should or should not go, but a challenge process confirms
    whether the maps are correct and adjust them when they are not.
    Unfortunately, the FCC has proposed to eliminate the existing
    challenge process to validate Form 477 data in the context of
    fixed USF support and instead to default to the carrier-
    reported data as gospel.
        If the Mobility Fund experience provides any lesson, it's
    that a meaningful challenge process is a necessity in
    determining how to distribute funds and make policy decisions.
        On a related note, a continued focus on coordination among
    Federal agencies is critical. It is essential to avoid the
    prospect for dueling Federal support programs and networks
    built in rural areas that cannot sustain either one without the
    assistance of Federal programs.
        Speaking of data, the FCC has taken commendable steps
    forward to promote accountability. However, it's important to
    balance the burdens of accountability measures with the urgency
    to implement them.
        To this end, new FCC performance requirements that USF
    recipients test their networks will take time to implement
    properly. To be clear, the rural telecommunications industry
    fully supports the implementation of broadband network
    performance testing.
        However, with systems standards yet to be prescribed and
    vendors only beginning to create new testing equipment, key
    questions remain unanswered even though this rule is set to go
    in effect in a matter of months.
        In addition, little attention has been paid to the
    practical concern about approaching customers and asking them
    to attach a government-mandated device to their Internet router
    in their home or business for testing purposes. For these
    reasons, time and care must be taken to work through questions
    and reach workable solutions.
        Another item of concern is permitting delays, especially
    when crossing Federal lands or railroad rights-of-way. Our
    industry appreciates this committee's bipartisan efforts to
    reduce deployment barriers through the MOBILE NOW Act, which
    developed common form applications and deadlines for agency
    action.
        With more to do to achieve a shared vision of sustained
    universal broadband access, Golden West and the hundreds of
    small broadband providers in NTCA's membership look forward to
    working with this committee to fulfill our shared vision and
    national mandate of universal service.
        I thank you for this opportunity to testify and look
    forward to your questions.
        [The prepared statement of Mr. Law follows:]

     Prepared Statement of Denny Law, Chief Executive Officer, Golden West
                      Telecommunications Cooperative, Inc.
    INTRODUCTION
        Chairman Thune, Ranking Member Schatz and members of the
    Subcommittee, thank you for the opportunity to testify on the
    importance of rural broadband.
        I am Denny Law, Chief Executive Officer of Golden West
    Telecommunications Cooperative, Inc in Wall, South Dakota. For over a
    century, Golden West Telecommunications and its subsidiaries have
    provided communications services to rural South Dakota, starting
    initially with the stringing of line along fence posts. Today, we have
    over 30,000 accounts, 25,000 broadband Internet subscribers, and 10,000
    cable television customers. These customers are located across 24,500
    square miles--an area larger than the states of Maryland, New Jersey,
    Connecticut and Delaware combined--equating to 1.42 customers per
    square mile. The largest community we serve has just over 3,500
    residents. Yet with more than 14,000 network route miles in service,
    our network could stretch from Wall, South Dakota to Hong Kong and back
    again.
        In addition to our demonstrated commitment to consumers and
    businesses across this wide swath of South Dakota, we serve numerous
    anchor institutions, including 72 K-12 schools, 62 health clinics/
    hospitals, 22 libraries, and five Veterans Administration facilities
    within our service territory. Golden West also provides
    telecommunications service on portions of five Native American tribal
    reservations in South Dakota.
        Golden West was a 2018 recipient of a ``Smart Rural Community''
    Showcase award for its efforts in connecting rural South Dakota with
    the rest of the Nation and the world. We were one of just over a dozen
    award recipients nationwide, and several dozen other smaller operators
    have received similar awards in prior years. Such awards highlight the
    importance of not only getting broadband to rural areas in the first
    instance, but the value of keeping it there and empowering consumers,
    businesses, and anchor institutions to make the most of it as part of
    ``smart communities.''
        While every rural area is unique, I think Golden West's efforts and
    its community commitment is representative of the hundreds of small,
    community-based companies and cooperatives in the membership of NTCA-
    The Rural Broadband Association. Smaller operators like those in NTCA's
    membership serve less than five percent of the U.S. population spread
    across over 35 percent of the U.S. landmass. In the vast majority of
    these wide-ranging rural areas, companies like Golden West offer the
    only full-service fixed networks available, and we provide many of the
    critical links for mobile services as well. Small broadband providers
    therefore are essential to connect rural America with the world--making
    every effort to deploy advanced networks that respond to demands for
    cutting-edge, innovative services that help rural communities overcome
    the challenges of distance and density.
    THE IMPACT OF BROADBAND INVESTMENTS IN RURAL AMERICA
        Investing in rural broadband has far-reaching effects for urban and
    rural America alike, creating critical connections and efficiencies in
    health care, education, agriculture, energy, and commerce, and
    enhancing the quality of life for citizens across the country. Indeed,
    while we are proud of the broadband speeds we deliver and the route
    miles of network we have built, the benefits of rural broadband go
    beyond sheer numbers--when looking to develop a ``Smart Rural
    Community,'' it is helpful and important to focus upon the productive
    uses of broadband and what they mean to those communities that get and
    stay connected. The last time I testified before this Committee, I
    shared stories about the benefits of rural broadband to rural South
    Dakotans, including a teacher able to offer Spanish classes to over 100
    students in 14 rural high schools from her home office; a rancher able
    to simultaneously operate a small electronics business because of
    broadband; and a professional writer able to use her Internet access to
    self-publish a book.
        In fact, the feedback that has perhaps resonated with me most about
    the importance of broadband in rural areas came from a Golden West
    customer in a very rural area near Hayes, South Dakota. She does
    software development for an international firm. After living and
    working in an urban area, she and her husband decided they wanted to
    move home to South Dakota. She was able to negotiate a telecommuting
    arrangement with her employer. As a result, she is now managing
    software teams across the world, all from her rural home near Hayes.
    Her statement to me that her broadband connection meant ``being able to
    work where you want to live instead of having to live where you want to
    work'' rings true every time we build fiber to a community or roll a
    truck to upgrade a customer's broadband service.
        These stories are not exceptions to the rule. Golden West recently
    completed a survey of our customers that posed the question ``Does
    anyone in your household telecommute, or in other words, use an
    Internet connection to work from home?'' Twenty-three percent of the
    respondents answered ``Yes,'' and of those, 40 percent indicated they
    telecommuted for their employment five days a week. Nor are these
    stories, I believe, unique to Golden West or South Dakota--instead, my
    sense is that they are repeated in rural areas across the country,
    especially in places where smaller rural operators have, like Golden
    West, led the charge in deploying robust, high-capacity, low-latency
    networks and in taking pride in the delivery of high-quality customer
    service for the communities in which we live.
        As described in a recent CoBank report on rural economic
    challenges, ``Rural America faces a unique set of economic challenges,
    but it has demonstrated resilience during the past eight years of
    recovery. The rural population, jobs and incomes are all trending in
    the right direction. And current efforts to improve rural broadband
    access offer the greatest opportunity to make a significant dent in the
    rural/urban economic divide. As broadband becomes more widely available
    in rural communities, enhanced access to education, healthcare and
    business opportunities can markedly improve the quality of life and the
    economic vitality in these communities. Rolling out broadband to rural
    communities will take several more years in some areas. But as access
    increases, so will rural America's economic potential.'' \1\
    ---------------------------------------------------------------------------
        \1\ The Year Ahead: Forces that will shape the U.S. rural economy
    in 2018, CoBank Knowledge Exchange Report.
    ---------------------------------------------------------------------------
        What's more, a report released in 2016 by the Hudson Institute in
    conjunction with the Foundation for Rural Service underscores the
    nationwide benefits that arise from rural broadband; this study found
    that investment by rural broadband companies contributed $24.2 billion
    to the economies of the states in which they operated in 2015.\2\ Of
    this amount, $8.3 billion accrued to the benefit of rural areas, while
    nearly $16 billion accrued to the benefit of urban areas. In addition,
    better broadband access in rural America is helping to drive growth in
    online transactions--a recent survey found, for example, that rural
    consumers account for more than 10.8 billion internet-driven
    transactions annually, representing approximately 15 percent of the
    national total.\3\
    ---------------------------------------------------------------------------
        \2\ The Economic Impact of Rural Broadband (2016), The Hudson
    Institute, Washington, D.C.
        \3\ A Cyber Economy: The Transactional Value of the Internet in
    Rural America, White Paper, iGR (2018), at 1.
    ---------------------------------------------------------------------------
    THE HURDLES TO REALIZING THE BENEFITS OF BROADBAND
    INVESTMENTS IN RURAL AMERICA
    The Business Case for Rural Broadband is Driven by Both Investment and
            Operating Challenges
        Building broadband networks is capital-intensive and time-
    consuming. This is hard enough in urban areas, but rural areas present
    unique considerations and complications. Indeed, the primary challenge
    of rural network deployment is simply in making the business case for
    deployment at all. This business case turns, of course, not only upon
    the one-time act of constructing networks across hundreds or thousands
    of miles where population is sparse and terrain is diverse, but it is
    also affected significantly by the ongoing costs of delivering quality
    services and maintaining and upgrading networks across such rural
    expanses.
        Many factors can affect the costs and timing of construction--an
    important consideration particularly in areas like South Dakota where
    the ``build seasons'' can be quite short due to weather. For example,
    especially when crossing Federal lands or railroad rights-of-way in
    rural America, small hometown providers must address environmental and
    historical permitting concerns or contractual obligations that can
    delay projects and increase already high costs. Then, even once
    networks are built, those networks must be maintained over hundreds or
    thousands of miles--this requires technicians who regularly travel long
    distances to make service calls and customer service representatives
    trained to deal with questions about router and device configurations
    in ways that were unimaginable for ``telephone companies.''
        Moreover, even the best ``last mile'' networks in rural markets
    depend upon ``middle mile'' or long-haul connections to Internet
    gateways dozens or hundreds of miles away in large cities. As an
    example, Golden West's operations are more than 300 air miles--not
    network route miles--from the closest Tier 1 Internet peering point.
    Reaching such distant locations is expensive, and as customer bandwidth
    demands increase--moving from Megabytes to Gigabytes to Terabytes of
    demand per month per customer--so too does the cost of ensuring
    sufficient capacity to handle customer demand.
        In fact, Golden West's analysis found that our average broadband
    customer monthly data usage was 150GB as of February 2017. As of
    February 2019, the average broadband customer monthly data usage was
    270GB. In less than two years, we estimate the average usage will
    exceed 500GB a month. By contrast, some networks that use less robust
    technologies may often impose caps on data usage and/or slow data when
    they exceed these levels; for example, even in the context of their
    ``unlimited'' plans, certain wireless operators will use thresholds far
    lower.
        These figures indicate the wisdom, the necessity, and the
    efficiency of investing in robust future-proof ``last mile'' access
    networks that can handle demands for years to come and the importance
    of robust ``long-haul'' capacity to connect rural areas to the rest of
    the world.
        The delivery of broadband in rural America is therefore an ongoing
    effort that requires, among other things: (1) a holistic and realistic
    look at the business case challenges; (2) a sustained commitment on the
    part of the providers who want to overcome them; (3) a sustainable
    partnership between committed private operators and Federal and state
    initiatives that seek to promote universal connectivity; and (4) the
    deployment of technology that will meet the test of time in the face of
    massive increases in user demand. We will miss the mark as a nation if
    we treat the broadband challenge as a one-time declaration of
    ``success'' just for the very preliminary act of connecting a certain
    number of locations with basic broadband. I am proud of Golden West's
    nearly $193 million in total capital investment in rural South Dakota
    over the past five years, and the rural broadband industry as a whole
    can tell a great story of success. But there is also much more work to
    do--and this is where public policy plays an important role in helping
    both to build and sustain broadband in rural America.
    OVERCOMING THE CHALLENGES TO THE BUSINESS CASE FOR
    SUSTAINABLE RURAL BROADBAND INVESTMENT
    The Importance of Universal Service as a National Policy--and the
            Importance of Sufficient and Predictable Support to Fulfillment
            of that Policy
        Support from the High-Cost Universal Service Fund (USF) overseen by
    the Federal Communications Commission (FCC) is essential to make the
    business case for broadband in many rural areas. In fact, while other
    programs and initiatives focus on the upfront capital costs of building
    networks, the USF is the primary, if not the only, tool to help cover
    the costs of ongoing operations and ultimately to ensure--as mandated
    by the Communications Act--that consumers in rural areas like those
    served by Golden West can purchase services that are reasonably
    comparable to what urban Americans receive at rates reasonably
    comparable to what urban consumers pay.
        In short, USF does not itself ``pay for'' upfront network
    construction. Instead, the USF program helps to justify the use of
    loans or private capital to build networks by supporting ongoing
    operations and ensuring that rural consumers can pay reasonable rates
    for their use of services atop networks. Put another way, without a
    reliable and sufficient USF program, the business case for expending
    capital and building networks in many rural markets simply does not
    ``pencil out.'' USF is thus perhaps the best, most successful example
    of a public-private partnership that exists in the broadband space,
    having helped to justify the business case for private network
    investments that can total tens of billions of dollars per year when
    measured as gross plant in service. Without USF support, it would have
    been impossible for Golden West to do all that it has done in seeking
    to continuously improve access to quality voice and broadband services
    across approximately one-third of rural South Dakota.
    The Impact of USF Programs on South Dakota Communities
        Thankfully, Congress and the FCC recognize the pivotal role that
    the USF plays in connecting--and then keeping connected--South Dakota
    specifically and rural America more broadly. In 2011, the FCC attempted
    to update the USF mechanisms for broadband, but those efforts focused
    primarily on larger operators (who frankly had not done as much to
    invest in rural America as smaller providers). An unfortunate
    collateral effect of this understandable focus upon the many unserved
    consumers in larger carriers' territories was the creation of
    significant uncertainty in the USF programs that had allowed smaller
    operators like Golden West to lead the charge in rural broadband until
    then.
        In the wake of the 2011 order, hundreds of members of Congress on
    both sides of the aisle wrote repeatedly to the FCC over several years,
    asking the agency to: (1) eliminate the persistent regulatory
    uncertainty; (2) reorient the USF programs that support smaller
    operators to enable delivery of both voice and broadband services; and
    (3) overcome shortfalls in the USF programs that flew in the face of
    the Communications Act's mandate for sufficiency and were deterring
    network investment. These bipartisan letters signed by hundreds of
    members of Congress were critical in highlighting these concerns, and
    the FCC responded in a series of orders over the past several years
    attempting to address each of these issues.
        Most notably, the FCC took landmark steps in an order released last
    December to eliminate the USF budget shortfalls that had undermined
    advancement of networks in rural areas and had precluded operators from
    offering affordable broadband services to consumers. This watershed
    order is poised to put the USF programs on more sound footing for years
    to come, and smaller operators like Golden West are eager for the
    chance to get back to focusing on the business of building and
    delivering broadband in rural America.
        Indeed, just for Golden West, I can report that the FCC's order
    will translate to direct benefits for rural South Dakotans. Prior to
    the December order, as I reported to this Committee last year, Golden
    West had postponed nearly $4 million in network upgrades for 2019 due
    to the ever-increasing cuts in USF support. The course has now reversed
    in the wake of the FCC's December order, and I have been making trips
    to communities throughout our service area in recent weeks to announce
    that Golden West will be deploying fiber and delivering high-speed
    broadband. Because we are a hometown provider, Golden West did
    everything we could even in the face of insufficient and uncertain
    support in 2018 to upgrade networks in Pine Ridge, Martin, Custer,
    Marion, Midland, and Bonesteel. This year, however, thanks in no small
    part to the FCC's December 2018 order, we have renewed our efforts to
    improve or provide broadband to the communities of Murdo, White River,
    Hot Springs, Kadoka, Menno, Interior, and Vivian. And, with even more
    time now to adjust our 2020 plans, Golden West expects to increase its
    capital budget for network construction considerably and reach even
    more locations than all of those identified for 2019.
        Golden West is not alone in this mission, however. According to the
    South Dakota Telecommunications Association (SDTA), in less than two
    years, 93 percent of SDTA customers are expected to be served by fiber
    broadband as opposed to 65 percent at the end of 2017. Likewise, by the
    end of 2021, South Dakota small carriers plan to invest an additional
    $306 million in fiber broadband, resulting in an additional 7,900 miles
    of buried fiber. In short, smaller telecommunications providers like
    Golden West are committed to making sure the USF resources provided as
    a result of the FCC's order--resources that can be attributed
    ultimately to the interest of leading policymakers like so many of
    those on this committee--will go ``back into the ground'' for the
    benefit of rural American consumers and businesses. We are therefore
    deeply grateful to the FCC for its unanimous vote on the December
    order, and for this Committee and other elected officials for their
    strong support over the years for our national universal service
    mission.
    The Need for Good Data to Make Good Policy Decisions
        There is no question that good decisions about infrastructure
    policy generally and universal service policy more specifically must be
    driven by good data. ``False positives''--claims of voice and broadband
    services where none actually exist--could leave rural consumers and
    businesses stranded without access in defiance of the national mandate
    for universal service. Meanwhile, ``false negatives''--areas that are
    perceived as unserved but actually have voice and broadband services
    available--run the risk of wasting scarce resources from important
    governmental programs on redundant networks.
        At this point, nearly every governmental communications program has
    some mechanism intended to ensure that funds are directed toward where
    they are needed most to build and sustain advanced networks. Problems
    arise, however, when the data driving these programs are incomplete or
    incorrect--and, unfortunately, it's not easy to discern when that is
    the case on the face of existing databases and maps.
        The FCC, for example, gathers data on voice and broadband service
    availability through its Form 477. There has certainly been a lot of
    concern--especially from among members of this Committee--about whether
    the Form 477 data accurately capture coverage in the mobile context.
    This is an understandable focus given the efforts to implement the
    Mobility Fund and the visceral feeling of having no cell phone coverage
    in an area where provider maps say one should.
        But what is often lost is that these concerns are just as prevalent
    in the context of fixed voice and broadband services, too. On Form 477,
    a census block is reported as served simply because one location in
    that block could be served by a provider at an advertised speed within
    10 business days. In other words, there may be no service actually
    installed in a census block, or the speeds actually delivered in that
    block may not be equal to what is advertised--and, yet, that area can
    show as served. Even more troubling in rural census blocks that can
    stretch large distances, the theoretical delivery of service to one
    customer in a census block could result in the denial of funding for
    voice and broadband to another customer located miles away, yet still
    in the same census block, who literally has no choices for such
    services.
        At this point, the reaction is often to say that we need to get
    more granular in the data--and this is probably correct as a partial
    response. But getting more granular alone is not going to solve the
    problem or potential for ``false positives'' specifically. In
    particular, no one is vetting in advance whether data submitted on Form
    477 are accurate. Providers submit the data based upon what they
    advertise. Thus, whether by accident or on purpose, Form 477 data can
    contain errors that in turn lead to support being denied in areas where
    it is in fact very much needed.
        Fortunately, there is a way to care for the fact that broadband
    coverage maps are always at risk of being inaccurate even if they get
    more granular. For years, agencies like the FCC and the Rural Utilities
    Service (RUS) under the U.S. Department of Agriculture have developed
    and used ``challenge processes'' that treat service coverage
    information like Form 477 data as informative but not dispositive.
    Mapping databases are used as a ``baseline'' for determining where
    support should or should not go, but a ``challenge process'' is then
    used to confirm whether the maps are correct and to adjust them when
    they are not.
        Certainly, the recent experiences with the Mobility Fund show the
    value and wisdom of a challenge process. Without such a process, the
    concerns that have been raised about overstated mobile coverage would
    never have been identified. At the same time then, it was disappointing
    and somewhat shocking to see the FCC now considering moving away from
    challenge processes in the fixed voice and broadband context.
    Specifically, the FCC has proposed to eliminate the prior existing
    challenge process to validate Form 477 data in the context of fixed USF
    support, and instead to default to the Form 477 data effectively as
    gospel.
        If the Mobility Fund experience provides any lessons, however, it
    is that a meaningful challenge process is a necessity in determining
    where funding should go or be denied. We therefore are hopeful that the
    FCC will reverse course on its suggestion to eliminate a challenge
    process in the context of distributing USF to support fixed networks,
    and that it will return to a data-driven process that ensure rural
    consumers are not left on the wrong side of a digital divide due to
    inaccurate information. This is more work, to be sure, for all
    involved--but the stakes of getting it wrong are too great to leave to
    chance.
    Balancing Accountability and Burdens in Ensuring that Consumers Receive
            the Services Expected
        The FCC has taken numerous commendable steps to promote
    accountability in the use of USF support in recent years. While Golden
    West has always focused on putting such resources ``into the ground''
    for the benefit of our cooperative members and their communities, we
    understand that it is important to have measures in place to ensure
    this happens systematically and to be able to show what the American
    public has realized through USF and other infrastructure programs.
        At the same time, it is important to balance the burdens of such
    accountability measures--especially on smaller operators who need to
    have their employees focus first and foremost on delivering top-notch
    services to consumers and businesses. One area in which this tension
    arises right now is a new FCC requirement that USF recipients test
    their networks. The basic concept is important, and one we agree with--
    in particular, we certainly do not want to see providers
    ``overpromise'' what their networks can do, but then ``underdeliver''
    when it comes to using technologies and architectures that are not
    capable of realizing what was expected. Testing is going to be very
    important as part of that accountability, and so we support it.
        But the process by which the testing is being implemented is a
    problem. Certain standards--such as how systems may need to be modified
    to select and then report upon testing at random locations--have yet to
    be prescribed. Moreover, nearly every association representing nearly
    every kind of potential USF recipient has filed some sort of petition
    or application asking the FCC to modify or reconsider certain aspects
    of the testing standards that present challenges or even just are
    unworkable in current form. Those petitions were filed last September,
    and the FCC has yet to act on those--but they are critical even just to
    starting to design the solutions by which testing will be accomplished.
    Key questions that are still open include how many locations need to be
    tested and the extent of the networks to be tested.
        While vendors are starting to market potential solutions and some
    providers are trying to develop their own, this task is difficult, if
    not impossible, when the rules governing testing are not yet finalized.
    In addition, there appears to be little attention to the practical
    concerns about approaching rural customers and ask them to allow a
    company to attach a device to the Internet router located in their home
    or business in order to test pursuant to a government mandate.
        All of these considerations make it such that a reasonable, right-
    sized delay should be provided to work through these questions and
    reach a workable set of solutions. Again, we support implementation of
    testing, but it should be done right from the start--and with the
    questions still to be resolved, rushing to do that this year is neither
    realistic nor practical. Instead, the FCC should work through the
    pending petitions and applications and finalize all of the standards
    that will govern testing. After that, time should be given for vendors
    and service providers to design, manufacture, and/or select from
    solutions that conform to those standards; this will almost certainly
    take many months rather than several weeks.
        Finally, more time should be provided after that to allow USF
    recipients to install the solutions and ``test the testing''--to ensure
    that the testing solution is integrated properly into the network and
    is accurately capturing the performance of the network in question. It
    is essential to do this right to strike a proper balance between
    accountability on the one hand and the potential for burdens,
    confusion, and uncertainty on the other.
    Coordination Among Agencies is Critical to Achieve a Shared Vision of
            Sustained Universal Access
        One very successful formula for the deployment and ongoing
    operation of communications networks in rural America comes in the
    combination of: (1) RUS loans that finance upfront network construction
    (with payback) in rural areas where there are often few financing
    options; and (2) the USF programs that help, as noted above, to support
    ongoing operations and ensure the affordability of rates on networks
    once built.
        RUS has long played an important role in financing rural broadband
    construction. Throughout Golden West's history, we have obtained
    financing from RUS or its predecessor agency under the U.S. Department
    of Agriculture. RUS telecommunications lending has helped enable and
    unleash billions of dollars in private capital investment in rural
    communications infrastructure. It is important that the complementary
    roles of RUS upfront financing and USF ongoing support continue. In
    particular, we can make smart and effective use of Federal resources by
    reaffirming and codifying the complementary nature of coordinated RUS
    and FCC programs, rather than allowing these programs and the resulting
    networks to be pitted against one another in a manner that undermines
    the sustainability of the networks and the integrity of the programs
    themselves.
        Indeed, with the 2018 Farm Bill and the newly minted ReConnect
    Program, RUS will take on a larger financing role for rural broadband
    deployment through grants and loan/grant combination packages. These
    new and updated programs are much-welcomed and important tools in the
    Federal government's toolkit to eliminate the digital divide. But it
    will be critical to promote the efficient and effective use of limited
    Federal resources by ensuring that a new network built by one provider
    leveraging Federal programs will not compete with and undermine the
    sustainability of an existing network operated by another provider that
    leveraged other Federal resources and is already meeting Federal
    broadband standards. Both the FCC and the RUS should therefore
    coordinate closely in administering their programs, and it is essential
    to avoid the prospect for two dueling federally-supported networks
    built in a rural area that cannot sustain either one without the
    assistance of Federal programs.
    Improving the Business Case for Rural Broadband Through Streamlined
            Permitting and Removal of Other Barriers to Deployment
        Given the deeply rural, sparsely populated nature of the area we
    serve, Golden West operates across large swaths of Federal land,
    including land owned or managed by the Bureau of Indian Affairs, Bureau
    of Land Management, USDA's National Forests, Department of Interior's
    National Parks, and Army Corps of Engineers. Barriers to broadband
    deployment such as disparate applications, fees, and reviews across
    Federal and state landowning agencies can slow down or stymie
    deployment of networks within and across such areas, and such barriers
    must be addressed as part of any holistic plan to promote and sustain
    infrastructure investment.
        Efforts to standardize Federal permitting processes and implement
    ``shot clocks'' for securing prompt approvals are important tools in
    promoting broadband investment--while they may not make the business
    case in and of themselves, efforts to eliminate regulatory barriers and
    streamline permitting can help to improve the business case and
    expedite the construction of networks, which is an important
    consideration in particular in places like South Dakota where the
    ``build season'' is relatively short due to environmental factors,
    namely winter. Streamlining permitting and other steps to remove
    barriers to deployment will also be critical in making sure USF dollars
    go further--that such resources are spent on building and operating
    networks rather than paying outrageous fees for mere feet of railroad
    crossings or spending hours and days to secure permits from a
    government agency.
        Our industry appreciates this Committee's bipartisan efforts to
    reduce barriers to deployment of communications networks. Important
    measures like the MOBILE NOW Act have laid out a roadmap for important
    steps forward like the development of common form applications (which
    are particularly useful for small businesses like Golden West that work
    with multiple landowning agencies) and deadlines for agency action.
    Building upon such provisions through additional efforts here in
    Congress and recommendations and model provisions such as those
    developed by the FCC's Broadband Deployment Advisory Committee can help
    in realizing the benefits of broadband in rural areas.
    CONCLUSION
        Recent measures such as the FCC's December 2018 USF order will help
    in achieving our shared mission of universal service, and we are
    grateful to the FCC and of course to the many members of Congress who
    wrote repeatedly to the FCC on a bipartisan basis calling for such
    action. The continuing work of the RUS in providing financing for the
    construction of networks in the first instance is also a critical piece
    of the puzzle. Because of such efforts and initiatives, companies like
    Golden West can once again focus more closely on the business of
    deploying networks and delivering quality and affordable voice and
    broadband services.
        There is certainly much more to do to overcome a digital divide
    between rural and urban America. But we must make such efforts and
    build upon existing initiatives if we want to promote the
    sustainability and vitality of rural communities, and to ensure
    American competitiveness in a global economy. Golden West and the
    hundreds of small companies and cooperatives like it look forward to
    working with this Committee, other policymakers, the FCC, and the RUS
    to fulfill our shared vision and national mandate of universal service.

        Senator Thune. Thank you, Mr. Law.
        Mr. Forde.

                       STATEMENT OF JUSTIN FORDE,

                SENIOR DIRECTOR OF GOVERNMENT RELATIONS,

                      MIDCONTINENT COMMUNICATIONS

        Mr. Forde. Chairman Thune, Ranking Member Schatz, Members
    of the Subcommittee, thank you for inviting me here today to
    discuss ways to expand broadband in rural America.
        My name is Justin Forde, and I'm the Senior Director of
    Government Relations for Midco.
        We are proud to offer internet, cable, and other services
    to over 400,000 residential and business customers in the Upper
    Midwest. Our communities range in size from Sioux Falls with a
    population of over 180,000 to most small rural communities with
    less than 500 residents.
        We have developed innovative approaches to get high-speed
    reliable broadband to all of our customers, friends, and
    neighbors. We are proud to be recognized as a national leader
    on rural broadband and we have nearly closed the digital divide
    in the Red River Valley, one of the most productive farming
    regions in the world.
        We are bridging the digital divide today. We know the role
    the Federal funding programs can play in continuing to close
    the digital divide and I am excited to share our thoughts on
    such programs.
        We have made it our mission to ensure that most rural
    communities are at the leading edge of technology. In Less than
    2 years of launching the Midco GIG Initiative, more than 90
    percent of our customers have access to gig speeds. It's
    important to note that we are bringing this service to every
    address in both our large and small communities and not just
    certain parts of certain cities.
        We also leverage our extensive fiber backbone and
    connectivity to reach the most rural and most remote areas of
    our footprint using our Midco Edge-Out Strategy. We edge out of
    our high-speed Internet from our fiber backbone from urban
    areas into very rural areas using fixed wireless technology.
        Using fixed wireless, we can reach areas that are up to 50
    miles away from our fiber network and we can implement the
    solution relatively quickly, even in the winter months, without
    the effort or the expense of constructing fiber networks.
        I myself have been a fixed wireless customer for almost 10
    years and Midco recently updated my service to our LTE 4.5G
    platform. I get my Internet from the top of a tower in Brandon,
    North Dakota, to my small farmstead six miles west of
    Hartsville. On a normal day, my three kids are streaming video
    or other content while my wife is using the Internet to run a
    small business. This has been a great asset for my family.
        My neighbors are also fixed wireless customers. One of my
    neighbors, Carl Wilson, runs a cattle ranch. He uses our fixed
    wireless to sell his animals by auction where speed and
    capacity matter. He is running a vital and thriving ranching
    business in rural North Dakota.
        We recently committed to serving most rural areas of our
    footprint using our next generation fixed wireless network
    through participation in the FCC's Connect America Fund Phase
    II Auction.
        The FCC provisionally awarded us $38.9 million to bring
    high-speed broadband to approximately 9,300 unserved homes in
    South Dakota, North Dakota, and Minnesota. In building out to
    these locations, we will pass approximately 200,000 homes with
    high-speed low-latency broadband.
        Having participated in the CAP Auction, we believe there
    are ways to better coordinate and refine Federal broadband
    programs. We have a few recommendations to ensure that future
    funding is used efficiently and effectively.
        First, with several Federal agencies and a growing number
    of states dedicating funding to broadband deployment, all
    relevant agencies must coordinate with each other to avoid
    overbuilding. They must continue this coordination throughout
    the life cycles of these programs to ensure that subsequent
    rounds of funding are not inadvertently used to overbuild hard-
    earned progress.
        Second, programs should operate in a technology-neutral
    manner. As long as providers are able to meet the specified
    broadband service requirements, it should not matter what
    technology they are using to provide the service.
        Third, programs should prioritize projects that will offer
    higher speeds and lower latency to ensure that communities
    receive the benefits of these investments for years to come.
        It's more prudent for funding programs to make a cost-
    effective investment in advanced networks than to make repeated
    investments in a series of upgrades just to keep pace with the
    broadband minimum.
        Fourth, agencies should focus on grants or partial grants
    rather than loans. Grant programs that require a company to
    expend some private capital in addition to government funds
    create better investments and accountability.
        There have been too many recent examples of providers who
    receive significant loan money only to default on their
    obligations without being able to meet their broadband build-
    out requirements.
        Finally, it's critical to foster a regulatory environment
    that encourages ongoing private investment, including in rural
    America. We can serve the unserved in rural America if we
    continue to have access to valuable spectrum, especially mid-
    band spectrum. That is why Midco strongly believes that any
    portion of the C-band that can be cleared after protecting
    incumbents should be reallocated for terrestrial uses,
    including fixed wireless, and done through an FCC auction.
        We also strongly support efforts by the FCC to make more
    effective use of the 2.5 gigahertz band which is currently only
    licensed to educational institutions who then may lease the
    spectrum to others.
        I commend the Subcommittee for its focus on ensuring that
    all Americans, including those in rural America, receive the
    full potential of America's broadband networks.
        Thank you again for inviting me here today, and I look
    forward to working with you on these important issues.
        [The prepared statement of Mr. Forde follows:]

        Prepared Statement of Justin Forde, Senior Director, Government
                     Relations, Midcontinent Communications
        Chairman Thune and Members of the Subcommittee, thank you for
    inviting me here to discuss Midco's views on ways to improve Federal
    broadband funding programs and other opportunities to expand broadband
    in rural America. The U.S. cable industry now offers 1 gigabit service
    to 80 percent of American households, and importantly this gigabit
    service is available in both urban and rural communities, including
    many that Midco serves in the Upper Midwest. Midco has developed
    innovative approaches to help get high speed and reliable broadband to
    all of our customers, and I'm excited to share our ideas with you
    today.
        My name is Justin Forde, and I am the Senior Director of Government
    Relations for Midcontinent Communications (``Midco''). Midco is the
    leading provider of Internet and connectivity, cable TV, phone, data
    center, home security and advertising services in the Upper Midwest. We
    also operate a regional sports network, Midco Sports Network, which
    broadcasts live, local high school and regional college sports.
        Over 400,000 residential and business customers count on Midco
    services in 342 communities in South Dakota, North Dakota, Minnesota,
    Kansas, and Wisconsin. Midco community populations range from less than
    100 in places like Dodge, North Dakota, to our largest community, Sioux
    Falls, South Dakota, which has a population of more than 180,000. The
    majority of the 342 communities we serve, however, are very rural--
    nearly all have less than 50,000 people, with most having a population
    closer to 500 than to 5,000.
        At the end of the day, we are a Midwestern company that is deeply
    committed to giving back to the communities we serve through service,
    financial grants, and broadband funding programs. For example, to date,
    the Midco Foundation has given or matched more than $4.2 million in
    grants to further the work of non-profits, local governments, and
    schools. We also promote the Midco Lifeline Program, administered by
    the Universal Service Administrative Company. More than 3,700
    qualifying low-income households benefited from reduced monthly
    interest or home phone rates through the Midco Lifeline Program.
    Midco's History of Innovation
        Innovation and foresight have shaped Midco's course for more than
    85 years. In particular, we have made it our mission to ensure that our
    most rural communities are at the leading edge of technology. Our goal
    throughout our footprint is always to continue to find ways not only to
    meet, but to exceed, the communications needs of our customers.
        Founded in 1931, Midco began by operating movie theatres, and then
    entered the radio business. In 1954, we became the owners of the first
    television station in South Dakota. We continued to innovate with the
    introduction of cable television and phone service, and on April 15,
    1996, in Aberdeen, South Dakota, launched our broadband Internet
    service.
        Our commitment to innovation continues to motivate our business
    initiatives. We own and operate four data centers in North Dakota and
    South Dakota to give local businesses a cost-effective way to secure
    critical data and their IT infrastructure. We provide solutions for
    regional and national banking, healthcare, energy, and government
    customers, among many other industries. We combine our data center
    services with powerful network solutions through our wholly-owned,
    operated and engineered Midco fiber network. Our data centers are
    directly connected to our fiber backbone, giving businesses access to
    some of the fastest Internet speeds in the country.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        Midco's innovation and continuing capital investment stems from our
    desire to serve the communities where we live and raise our families.
    In 2017, we launched the Midco Gig Initiative--a commitment to bring
    Gigabit Internet speeds to our entire service area--from the region's
    smallest towns to its largest cities. Midco Gig is now available to
    more than 90 percent of our customers, while the rest of our customers
    have a choice to receive speeds of anywhere from 50 Mbps to 250 Mbps.
    And we continue to make upgrades to our network and services. In 2018
    alone, we made a $91.3 million investment in capital projects
    throughout our footprint.
        But Midco and our industry aren't stopping at 1 Gig. We also
    recently announced our involvement in the 10G initiative where we will
    invest $500 million over 10 years on a global cable industry standard
    that will provide ultra-fast symmetrical speeds of 10 gigabits per
    second, combined with low latency, unmatched reliability, and rock-
    solid security for a broad range of customers. This initiative is being
    built upon our existing fiber-rich infrastructure, and the industry
    through our R&D consortium CableLabs, is currently undergoing lab
    trials--and field trials will begin in 2020. This is the future of
    broadband and companies like Midco will be bringing it to America's
    heartland in the coming years.
        We also leverage our extensive fiber backbone and connectivity to
    reach the most rural and remote areas of our footprint through our
    Midco Edge Out SM strategy. We ``edge out'' our high-speed
    Internet from our fiber backbone in urban areas to rural areas using
    fixed wireless technology. We use the initial fixed wireless expansion
    from our wired plant to meet consumers' immediate needs, and then
    leverage that expansion to justify a wired network buildout in the
    future. While some rural areas may support that wired build, other,
    more remote rural areas will continue to be served with a fixed
    wireless solution.
        I can personally speak to the benefits of the fixed wireless
    approach, as I am a Midco fixed wireless customer. I have been a fixed
    wireless customer for almost 10 years, and Midco recently updated my
    service to our LTE, 4.5G platform. I get my Internet from the top of a
    commercial tower in Grandin, North Dakota to my small farmstead six
    miles west of Argusville, North Dakota. On a normal day, my three kids
    are streaming video or other content, while my wife is using the
    Internet to run a small business, so this service has been a great
    asset for our family.
        My neighbors are also Midco fixed wireless customers. One of my
    neighbors, for example, runs a cattle ranch. He uses our fixed wireless
    to sell his animals by auction where speed and capacity matter, and
    where many individuals are participating in the auction at the same
    time. He is a happy Midco fixed wireless customer running a vital and
    thriving ranching business in rural North Dakota.
    Midco's Innovative Use of Fixed Wireless to Reach More Communities with
            Broadband
        We recently made a large commitment to serving the most rural areas
    of our footprint using our next generation fixed wireless network
    through our participation in the Connect America Fund (CAF) Phase II
    Auction. The Federal Communications Commission provisionally awarded us
    about $38.9 million to bring our high-speed broadband to approximately
    9,300 unserved homes in South Dakota, North Dakota, and Minnesota. In
    building out to serve these CAF locations, we will pass approximately
    200,000 homes with high-speed, low latency broadband.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        The combination of CAF and our Midco Edge Out SM
    strategy allows us to deploy a carrier-grade, LTE network, currently
    capable of ``4.5G.'' Assuming that we continue to have access to
    spectrum, we know that we can help close the Digital Divide. Using the
    Citizens Broadband Radio Service band on our experimental license, for
    example, we can currently offer speeds of 100/20 Mbps at a distance of
    8.8 miles away from the Thompson, North Dakota grain elevator. Full
    access of this spectrum would allow us to expand the 100/20 Mbps
    service more broadly in our footprint.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        We know that fixed wireless technology is a real solution for rural
    America. We know that we can reach remote, rural areas that are up to
    50 miles away from our fiber network. We can also implement this
    solution relatively quickly and without the effort or expense of
    constructing fiber networks. Fixed wireless technology can also be
    deployed during the winter months, when harsh weather makes fiber
    construction impossible.
    Opportunities to Improve Federal Broadband Programs to Better Serve
            Rural America
        Midco appreciates the opportunity to discuss ways to better
    coordinate and refine Federal broadband programs to ensure that they
    deliver the benefits of broadband to as many unserved Americans as
    possible. We recognize that government help may be needed to bring
    broadband to areas that are beyond the reach of private risk capital.
    In areas where it is not financially viable to build--because they are
    too difficult to reach, geographically remote, or are otherwise very
    hard to serve--broadband deployment grants can alter the financial
    calculation, making serving an area possible. It is critical, however,
    that such help and government resources used for this purpose are
    directed to bring service to areas that are truly unserved.
        We participated in the FCC's CAF auction last year. This was a
    competitive, reverse auction, and we believe a fair and economical
    method to fund those last mile technologies. Based on this experience,
    we would like to offer a few recommendations to ensure that future
    funding is used efficiently and effectively to expand the reach of
    broadband networks in rural America.
    Improving Coordination Among Federal Agencies
        With several Federal agencies and a growing number of states
    dedicating funding to broadband deployment, it is increasingly
    important to ensure that all relevant agencies are coordinating with
    each other to avoid overbuilding other government-funded projects and
    areas served by those who have invested their own private risk capital
    to deploy broadband networks. The FCC's universal service high-cost
    programs, including Connect America Fund Phase II and funding for rate-
    of-return and mobile providers, spend about $4.5 billion per year,
    while USDA programs spend about $1.4 billion per year. Together, these
    programs, at these funding levels, should be able to make significant
    progress in closing the Digital Divide, provided that the agencies
    coordinate with each other to ensure that their efforts and subsidies
    complement each other. We have three suggestions on how agencies can
    better work together.
        First, it is critical that all agencies work off the same map.
    Typically, the FCC and RUS use FCC Form 477 data on fixed broadband
    service and the associated map as a starting point to determine which
    areas are unserved. While there is widespread agreement that the map
    needs to be improved--and the FCC has an open proceeding to reform the
    data collection for the map--using a central reference point is
    essential to avoid confusion and broadband funding overlaps. As other
    agencies, such as NTIA, begin their own efforts to improve mapping,
    they should coordinate with the FCC and the RUS to harmonize the
    information and avoid conflicting maps that could deepen confusion and
    potentially lead to precious government dollars going to areas that
    already have broadband, furthering the Digital Divide.
        Second, Federal agencies should coordinate their eligibility
    requirements to maximize participation and keep the programs rowing in
    the same direction. There is a learning curve for companies to
    familiarize themselves with government programs, eligibility
    requirements, service expectations, and accountability requirements--
    and that comes at a cost, particularly for smaller providers who have
    not traditionally received government subsidies. At a minimum,
    standardizing eligibility requirements based on best practices learned
    across agency programs would encourage a broader range of providers to
    invest the time to learn about and apply to participate in these
    programs. For instance, partnerships were eligible for the FCC's CAF
    Phase II auction, but apparently are not eligible for RUS's ReConnect
    program, even if they have decades of operational experience. Midco has
    operated as a partnership for almost 20 years, and our predecessor
    companies operated as partnerships for decades prior. We have invested
    well over $800 million in capital projects as a partnership, and remain
    committed to servicing our customers. We are a sound investment for the
    Federal Government, and our legal status as a partnership should not
    preclude eligibility in funding programs. These types of needless
    inconsistencies deter participation by qualified companies who could be
    part of the solution to reach unserved communities.
        Third, this inter-agency coordination should continue throughout
    the entire life cycles of these programs. As providers receive funding,
    meet project milestones, and complete their required buildouts,
    information on interim and final deployments should feed back into the
    coordination process and broadband map to ensure that subsequent rounds
    of funding are not inadvertently used to overbuild this hard-earned
    progress. Indeed, with billions of dollars being spent each year to
    extend the reach of broadband in rural America, agencies and funding
    recipients must be accountable to show not only where the subsidies are
    awarded but also where and how these dollars are being used.
    Making Programs More Effective
        In addition to improving coordination among agencies, there are
    four steps that agencies can take to make their own programs more
    effective in serving rural America.
        First, programs should operate in a technology-neutral manner. As
    long as providers are able to meet the specified broadband service
    requirements, it should not matter what technology they use to provide
    the service. For example, we have demonstrated that fixed wireless can
    be an effective tool to edge out our fiber backbone and connectivity,
    particularly in lower density rural areas where it can be very costly
    to deploy last-mile fiber.
        Second, programs should prioritize projects that will offer higher
    speeds to ensure that communities receive the benefits of these
    investments for years to come. In the CAF Phase II auction, the FCC
    used a weighting system that favored companies willing to invest in
    networks capable of offering higher speeds of service. For example, our
    next generation, LTE fixed wireless network is currently ``4.5G''
    capable--and will be 5G capable once the ecosystem has developed. We
    can offer speeds of 100/20 Mbps currently (without data caps) and our
    speeds will keep increasing with more available spectrum and continuing
    innovation. Areas that are only upgraded to 10/1 Mbps will soon become
    the new ``unserved'' areas as demand for bandwidth increases. Simply
    put, it is a better financial investment than one made to build a
    network limited to 10/1 Mbps. Therefore, it is prudent for funding
    programs to make a cost-effective investment in networks offering
    higher speeds than to make repeated investments in a series of upgrades
    just to keep pace with the bare minimum of what is considered
    broadband.
        Third, broadband programs should target funding to truly unserved
    areas. In the past, some government broadband programs have allowed
    funding to be used in places that already have broadband service. Midco
    has been overbuilt with our own tax dollars in places like Mitchell and
    Yankton, South Dakota, as have others in our region. In Yankton, South
    Dakota, for example, government dollars were used by a fiber company to
    overbuild two existing providers; and the new provider used those
    government funds to ``cherry pick'' a few business customers. We
    believe that scarce government resources should be targeted to those
    who will build out areas that do not yet have access to all the
    benefits broadband provides.
        Fortunately, both the FCC and RUS have taken steps to direct new
    broadband funding where it is truly needed. The FCC requires areas
    receiving new funding to be unserved and, in the ReConnect pilot
    program, RUS requires that areas be at least 90 percent unserved.
    Additionally, both the FCC and the RUS allow stakeholders to supplement
    the initial eligibility maps with information about recent broadband
    deployment to ensure that funding is directed to areas that are truly
    unserved. This guards against using government subsidies to overbuild
    private investment or broadband deployment funded through other Federal
    or state government programs, ensuring that any such programs will make
    meaningful headway in closing the Digital Divide.
        Fourth, agencies should focus on grants or partial grants rather
    than loans. We've found that grant programs that will require a company
    to expend some private capital, in addition to government funds, create
    better investments and accountability. There have been too many recent
    examples of providers who received significant loan money defaulting on
    their obligations and being otherwise unable to meet their buildout
    requirements. Moreover, at least in the past, the RUS broadband loan
    program resulted in overbuilding of served areas rather than reaching
    unserved areas.
    Additional Opportunities to Increase Broadband Availability in Rural
            America
        Finally, it is critical to continue to foster a regulatory
    environment that encourages ongoing private investment, including in
    rural America.
    Removing Barriers to Entry and Deployment
        It is appropriate to examine the regulatory landscape at the
    federal, state, and local levels to ensure that obligations and costs
    placed on providers--whether they offer wireless or wireline service--
    are reasonable, lawful, competitively neutral, and not unduly
    burdensome.
        As an example, some franchising authorities around the country have
    begun seeking additional ``in kind'' contributions beyond what is
    required by law, and even duplicative franchise fees, in order to grant
    or renew franchises. Given our deep connections to the communities we
    serve, we have generally been able to work effectively and
    collaboratively with our local franchising authority partners. But, we
    support the FCC's ``Section 621 proceeding'' to clarify that these
    extra fees and requirements are not allowed because every dollar paid
    in excessive fees and taxes is a dollar that cannot be invested in
    broadband, making the rollout and upgrading of rural broadband slower
    and less ubiquitous.
    Ensuring Equal Access to Spectrum for Rural America
        Additionally, as Congress and the FCC work to free up additional
    spectrum, it is vital that companies like Midco, that provide high-
    speed and reliable broadband to the most rural areas of our country,
    have equal access to spectrum. It would be detrimental to rural America
    if valuable and limited spectrum was allocated only to 5G, especially
    as 5G requires a high concentration of small cells to operate.
        Current 5G technology measures the distance from the small cell to
    the customer in feet. Rural solutions, however, must be measured in
    miles. In our area, for example, we may have one or two farmsteads
    every mile. These remote rural areas lack the heavy infrastructure
    needed to support a 5G small cell deployment, and such infrastructure
    is unrealistic to build to serve a few homes with mobile 5G when we can
    offer high-speed and proven broadband solutions. Therefore, 5G small
    cell, mobile technology is not currently a realistic solution to close
    the Digital Divide in rural areas. Fixed wireless, however, is a
    realistic solution--we are closing the Digital Divide now with our
    high-speed, low latency fixed wireless.
        We can continue to serve the unserved in rural America if we
    continue having access to valuable spectrum, especially mid-band
    spectrum. Mid-band spectrum is especially valuable to fixed wireless
    operators like Midco because, as shown in Figure 3, it balances speed
    and propagation.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        Midco strongly believes that any portion of the C-Band that can be
    cleared after protecting incumbents should be reallocated for
    terrestrial uses, including rural fixed wireless. We are concerned that
    proposals in the record about a private sale of this valuable spectrum
    would neglect rural America and exclude operators like Midco. We hope
    the FCC will balance the needs of incumbent operators, urban 5G
    deployments, and next generation fixed wireless's potential to close
    the Digital Divide. Additionally, any auction must be conducted by the
    FCC, because the Commission has the Congressional direction to auction
    spectrum, and the expertise to do so in an efficient and equitable
    manner. A Commission-led auction is especially needed when, as with the
    C-Band, there are multiple applicants with various technologies
    interested in the spectrum.
        Moreover, when I testified last fall, I noted that that the FCC
    should make more effective use of the 2.5 GHz band. The band is
    attractive because its propagation characteristics and high power
    allowance allows the broadband signal to penetrate through multiple
    shelter belts and forests to provide broadband and an Internet solution
    for our most rural customers. Currently, however, the 2.5 GHz band can
    only be licensed to educational institutions, who may then lease the
    spectrum to others. But, the FCC estimates that current licensees only
    cover about half of the geographic area of the United States today,
    with significant amounts of spectrum going unused in rural areas.
    Figure 4 shows the current 2.5 GHz ``Educational Broadband Service''
    licenses in the three-state area--only 38 percent of this area has even
    a single license.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        Opening the 2.5 GHz band for licensing by other, non-educational
    entities would allow Midco to provide fixed wireless service to even
    more rural residents. For example, as shown in Figure 5, the 2.5 GHz
    band would allow us to serve residents 18 miles away from the elevator.
    A single sector deployment at 200 feet on the Thompson elevator, for
    example, would cover 443.04 square miles and a population of 3,863. As
    technology continues to improve, we expect to be able to serve even
    more residents with high-speed fixed wireless.
    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                                     * * *
        I commend the Subcommittee for its focus on ensuring that all
    Americans--including those in rural America--receive the full potential
    of America's broadband networks. Thank you again for inviting me here
    today, and we look forward to working with you on these important
    issues.

        Senator Thune. Thank you, Mr. Forde.
        Dr. Jamison.

        STATEMENT OF MARK A. JAMISON, Ph.D., VISITING SCHOLAR,
                     AMERICAN ENTERPRISE INSTITUTE

        Dr. Jamison. Chairman Thune, Ranking Member Schatz, and
    Members of the Subcommittee, thank you for the opportunity to
    appear before you at today's hearing on the Impact of Broadband
    Investments in Rural America.
        I can summarize my testimony in four sentences. First,
    promoting universal access to modern telecommunications
    services and the Internet is an appropriate and pragmatic
    objective.
        Second, the FCC's recent improvements in its Rural
    Broadband Programs are based on sound economic thinking and
    empirical evidence.
        Third, the FCC's parallel deregulatory efforts to allow
    Internet service providers to increase the value of their
    service offerings may be just as important as the agency's
    subsidy programs.
        Last, it is crucial that overlap between Federal universal
    service programs be diminished and that coordination be
    improved.
        Let me summarize my thoughts on each. It's well known that
    broadband infrastructure is an essential feature of a modern
    economy. People use broadband for their social relationships,
    interacting with governments, shopping, entertainment, and
    employment, just to name a few.
        Businesses use it for marketing and sales, management,
    planning, and seeking employees. A 2016 Hudson Institute study
    found that rural broadband industry supported over 69,000 jobs
    and $10 billion in e-commerce in 2015.
        The FCC's committed considerable resources to promoting
    universal service. Its programs spent over $42 billion from
    2012 through 2016 with slightly more than half of that going to
    rural telecommunications.
        Ensuring that these programs are beneficial and run
    efficiently is important because if the households that funded
    the $42 billion had spent that money themselves, they might
    have purchased an additional $16 billion in housing, $4 billion
    in health care, $672 million in education, and many other
    important items.
        Fortunately, the FCC has been improving its rural subsidy
    programs, so that they are up to the task. It has done this by
    improving targeting, using competition where it can, and using
    incentive regulation where competition is impractical.
        The FCC based its service benchmark, 25 megabits per second
    down and three megabits per second up, on actual customer
    demand. This was appropriate because regulations should avoid
    promoting services that customers may not want. Customers
    should lead.
        The FCC uses competitive reverse auctions to ensure that
    subsidies are as small as possible. This was done in 2018 with
    great success. The auction process resulted in a 70 percent
    savings or $3.51 billion over 10 years. This savings will allow
    Americans to purchase more--excuse me--an additional $1.2
    billion in housing, $326 million more in health care, $38.6
    million more in education, and other essential items over the
    next 10 years.
        Where auctions are impractical, the FCC adopted a form of
    incentive regulation to encourage efficiency and minimize
    subsidize amounts. The incentive regulation is in the form of
    subsidy caps and cost limits. The subsidy caps allow the FCC to
    challenge carriers to improve their efficiency in exchange for
    them being allowed to keep more of whatever profits they earn
    by lowering costs.
        The cost limits are used in situations where the FCC
    subsidy caps appear inappropriate, because the computer
    modelers are unable to emulate in the computer the unique
    circumstances of some rural regions.
        The FCC has been careful to avoid subsidizing overbuilds of
    areas where broadband is provided. Overbuilds have been
    problems in other rural broadband programs. Economists Janice
    Hauge and James Prieger examined the effects of the U.S.
    Department of Commerce Broadband Technology Opportunities
    Program, for example, that was funded by the ARRA Program, by
    the ARRA legislation.
        Their study could find no clear correlation between the
    funds spent in that program and increased broadband
    penetration, pointing to the importance of following through
    and making sure our programs are effective.
        In the past, rural subsidies focused exclusively on the
    cost side, ignoring opportunities that providers might have to
    gain new revenues. This one-dimensional approach was no longer
    appropriate. Today's broadband service providers offer a myriad
    of value propositions, including different speeds, payment
    methods, quality commitments, and offer those to consumers and
    content providers alike.
        Exploiting this opportunity to gain value from multiple
    services and sources is how companies, such as Google and
    Facebook, have been able to build Internet access in poor
    areas.
        Be glad to answer any questions you might have. Thank you.
        [The prepared statement of Dr. Jamison follows:]

        Prepared Statement of Mark A. Jamison, Ph.D., Visiting Scholar,
                         American Enterprise Institute
        Chairman Thune, Ranking Member Schatz, and members of the
    subcommittee, thank you for the opportunity to appear before you at
    today's hearing on ``The Impact of Broadband Investments in Rural
    America.''
        I have had the opportunity to study communications, media, and
    Internet policy issues over many years and in several capacities,
    including in my current positions as a visiting scholar at the American
    Enterprise Institute and as the director and Gunter Professor of the
    Public Utility Research Center at the University of Florida, where I am
    also the director of the newly launching Digital Markets Initiative.
    While I am proud to be affiliated with these organizations, I am
    appearing today solely on my own behalf, and the views and opinions I
    express should not be attributed to any of the organizations with which
    I am or have been affiliated. Earlier in my career I served on the
    staffs of two state utility regulatory agencies: The Kansas Corporation
    Commission and the Iowa Utilities Board. One of my duties while working
    for the state of Iowa was to serve the staff of the Federal-State Joint
    Board that dealt with an issue called separations, which was the system
    that provided rural telecommunications subsidies for many years.
        I can summarize my testimony in four sentences. First, promoting
    universal access to modern communication services and the Internet is
    an appropriate and pragmatic objective. Second, the Federal
    Communications Commission's (FCC) recent policies to improve the
    effectiveness of its rural broadband programs are based on sound
    economic thinking and empirical evidence. Third, the FCC's parallel
    deregulatory efforts to allow Internet service providers to increase
    the value of their service offerings may be just as important as the
    agency's subsidy programs. Lastly, it is crucial that overlap across
    Federal and state universal service programs be diminished and that
    coordination be improved.
        Let me address each in turn.
    Importance of Rural Broadband
        First, it is well-known that broadband infrastructure is an
    essential feature of a modern economy. As my AEI colleague Jeffrey
    Eisenach said testifying before the Committee on Commerce, Science and
    Transportation of the United States Senate on September 6, 2017:\1\
    ---------------------------------------------------------------------------
        \1\ Jeffrey Eisenach, ``Testimony of Jeffrey A. Eisenach, Ph.D.,''
    statement before the Committee on Commerce, Science and Transportation
    on Addressing the Risk of Waste, Fraud and Abuse of the Federal
    Communications Commission's Lifeline Program, U.S. Senate, September 6,
    2017, http://www.aei.org/wp-content/uploads/2017/09/090617-Eisenach-
    Senate-Commerce-Testimony-on-Lifeline.pdf.

            There is a broad and deep literature on overall economic
            effects [of broadband communications services] which has
            consistently demonstrated a positive relationship between
            broadband and economic growth, employment and productivity.\2\
            Research is also increasingly demonstrating the socioeconomic
            benefits of broadband for disadvantaged populations. For
            example, new research published in the Journal of Medical
            Internet Research shows that when people from low socioeconomic
            positions begin using the Internet they use it for a variety of
            capital enhancing activities, including education, job seeking
            and obtaining health information.\3\ Recent research from the
            Pew Internet Center also shows that broadband plays an
            important role in facilitating job search activity.\4\ There is
            also substantial research demonstrating the benefits of
            broadband expansion in rural areas. For example, Atasoy found
            that gaining access to broadband in a county increased the
            employment rate by approximately 1.8 percentage points, with
            larger effects in rural areas.\5\ A 2016 Hudson Institute study
            found that the rural broadband industry supported over 69,000
            jobs and $100 billion in e-commerce in 2015.\6\ (Brackets
            added. Endnotes in original.)
    ---------------------------------------------------------------------------
        \2\ See, for example, I. Bertschek et al., ``The Economic Impacts
    of Broadband Internet: A Survey,'' Review of Network Economics 14, no.
    4 (2015): 201-27 at 222. ``In sum, we find strong evidence for positive
    impacts of broadband Internet on economic outcomes.''
        \3\ See R. McCloud et al., ``Entertainment or Health? Exploring the
    Internet Usage Patterns of the Urban Poor: A Secondary Analysis of a
    Randomized Controlled Trial,'' Journal of Medical Internet Research 18,
    no. 3 (2016), http://www.jmir.org/2016/3/e46/f. The study also finds
    that ``familiarity and skills in using the Internet enhance the
    capacity to use it for diverse purposes, including health and to
    increase capital.''
        \4\ See Aaron Smith, ``Lack of Broadband Can Be a Key Obstacle,
    Especially for Job Seekers,'' Pew Research Center, October 28, 2015,
    http://www.pewresearch.org/fact-tank/2015/12/28/lack-of-broadband-can-
    be-a-keyobstacle-especially-for-job-seekers/; and Council of Economic
    Advisers, ``The Digital Divide and Economic Benefits of Broadband
    Access,'' March 2016.
        \5\ See Hilal Atasoy, ``The Effects of Broadband Internet Expansion
    on Labor Market Outcomes,'' ILRReview 66, no. 32 (April 2013): 315-45.
        \6\ See Hanns Kuttner, The Economic Impact of Rural Broadband,
    Hudson Institute, 2016, https://s3.amazonaws.com/media.hudson.org/
    files/publications/
    20160419KuttnerTheEconomicImpactofRuralBroadband.pdf.

        The FCC has committed considerable resources to promoting universal
    service. According to the agency's 2017 report\7\ on universal service
    programs, the programs spent over $42 billion from 2012 through 2016 on
    high cost, Lifeline, schools and libraries, and rural health care
    programs. The high-cost program, which covers the rural subsidies that
    are the subject of this hearing, made up slightly more than half of
    this $42 billion.
    ---------------------------------------------------------------------------
        \7\ Federal Communications Commission, Universal Service Monitoring
    Report, 2017, https://www.fcc.gov/sites/default/files/
    2017_universal_service_monitoring_report.pdf.
    ---------------------------------------------------------------------------
        While this $42 billion subsidy clearly benefited the service
    providers and some customers, it came at a cost. If, for example, the
    households that funded the $42 billion had spent that money themselves,
    they might have spent an additional $16 billion on housing, $4 billion
    on health care, and $672 million on education among other important
    items (assuming their additional spending was in proportion to how they
    spent their household incomes in 2015).\8\
    ---------------------------------------------------------------------------
        \8\ Calculations are derived from the Bureau of Labor Statistics,
    ``Consumer Expenditure Survey,'' 2015, https://www.bls.gov/cex/2015/
    combined/income.pdf.
    ---------------------------------------------------------------------------
        Given the importance of rural broadband infrastructure, the
    magnitude of resources committed to its expansion, and the sacrifices
    that Americans make to provide the subsidies, it is vital that
    universal service programs be efficient. By this I mean that they be
    well targeted and provide Americans with great value for their dollars.
    Improved Efficiency and Effectiveness of the FCC's Rural Broadband
            Programs
        This takes me to my second point, which is that the FCC's recent
    policy changes to improve the effectiveness of its rural broadband
    programs are based on sound economic thinking and empirical evidence.
    To be efficient, a rural broadband program should target the right
    services and should support them at minimal cost.
        Targeting. The FCC, regarding its rural target, is using as its
    benchmark Internet services that customers are demonstrating they want
    and are willing to pay for. The FCC's target speed is 25/3 megabits per
    second (Mbps), which means that customers are to receive 25 Mbps
    downstream and 3 Mbps upstream. The agency found in its 2018 broadband
    report that 59 percent of residential fixed connections equaled or
    exceeded that speed,\9\ indicating that 25/3 Mbps is now normal
    service. That it is a norm makes 25/3 Mbps an appropriate standard for
    universal service obligations. However, that 59 percent of these
    customers are buying 25/3 Mbps does not mean that all customers should
    have this service: Different customers have different preferences,
    which should be respected. So it is also appropriate that the FCC's
    standards allow for differing speeds.
    ---------------------------------------------------------------------------
        \9\ Federal Communications Commission, ``Inquiry Concerning
    Deployment of Advanced Telecommunications Capability to All Americans
    in a Reasonable and Timely Fashion,'' February 2018, https://
    www.fcc.gov/document/fcc-releases-2018-broadband-deployment-report.
    ---------------------------------------------------------------------------
        My understanding from reviewing FCC documents is that the agency
    will revise its targets as customer preferences evolve. This is
    appropriate, and it is important that the FCC made this explicit in its
    December 13, 2018,\10\ decision regarding rural broadband. By being
    explicit the FCC effectively told carriers that they need to ensure
    that their systems can economically scale as the FCC's consumer-based
    requirements change. I would like for the FCC to further hone its
    targeting to allow for differences between urban and rural customer
    preferences, but that is simply a refinement of the FCC's already
    appropriate regulatory direction.
    ---------------------------------------------------------------------------
        \10\ Federal Communications Commission, ``In the Matter of Connect
    America Fund, ETC Annual Reports and Certification, Establishing Just
    and Reasonable Rates for Local Exchange Carriers, and Developing a
    Unified Intercarrier Compensation Regime,'' December 13, 2018.
    ---------------------------------------------------------------------------
        Using Competitive Auctions to Minimize Cost. Regarding ensuring
    that the chosen target for rural broadband is supported at minimal
    cost, the FCC has taken important steps to use competition where it can
    and to use regulatory incentives where competition is impractical. The
    FCC introduced competition by adopting a reverse auction process for
    determining which carrier would receive a universal service subsidy.
    This was done in 2018 with great success. As economist Joseph Gillan
    observed, the auction process resulted in a 70 percent savings--or
    $3.51 billion over 10 years--over the amount of subsidy the agency
    projected that it would need to provide.\11\ This savings will allow
    Americans to purchase about $1.2 billion more in housing, $326 million
    more in health care, and $38.6 million more in education, as well as
    other additional household essentials, over the next 10 years.\12\
    ---------------------------------------------------------------------------
        \11\ Joseph Gillan, ``Lessons from the CAF II Auction and the
    Implications for Rural Broadband Deployment and the IP Transition,''
    National Regulatory Research Institute, forthcoming.
        \12\ Calculations are derived from the Bureau of Labor Statistics,
    ``Consumer Expenditure Survey.''
    ---------------------------------------------------------------------------
        Using Regulatory Incentives to Minimize Cost. For instances in
    which the FCC has determined that a competitive reverse auction is
    impractical, the agency has taken other steps to encourage carriers to
    control their costs. In the past the FCC largely used rate of return
    regulation--the traditional U.S. system for regulating utility and
    telephone company prices--to estimate amounts for universal service
    subsidies. It is well-known that rate of return regulation provides
    poor incentives for companies to operate efficiently and that
    alternative forms of regulation, such as price cap regulation, provide
    better results.\13\ The problem with rate of return regulation has been
    that it allows service providers to flow through to customers whatever
    investments, operating expenses, taxes, and other costs that the
    providers incur unless the regulator can find and demonstrate that a
    provider has made wasteful, inappropriate management decisions.
    Research has found that regulators have not caught many of the
    companies' management inefficiencies and that incentive schemes, such
    as price cap regulation, have improved efficiency. Properly performed,
    these incentive schemes reward providers for improving efficiency by
    allowing them to keep some portion of the profits that occur with
    improved efficiency.
    ---------------------------------------------------------------------------
        \13\ See, for example, D. Kridel, D. Sappington, and D. Weisman,
    ``The Effects of Incentive Regulation in the Telecommunications
    Industry: A Survey,'' Journal of Regulatory Economics 9, no. 3 (May
    1996): 269-306; C. Ai and D. Sappington, ``The Impact of State
    Incentive Regulation on the U.S. Telecommunications Industry,'' Journal
    of Regulatory Economics 22, no. 2 (September 2002): 133-59; and D.
    Sappington, ``The Effects of Incentive Regulation on Retail Telephone
    Service Quality in the United States,'' Review of Network Economics 2,
    no. 4 (December 2003): 355-75.
    ---------------------------------------------------------------------------
        The FCC has appropriately reflected these economic lessons in its
    rural broadband programs. One method the FCC adopted has been using
    cost models for estimating subsidy needs and using these estimates as a
    form of subsidy cap. Rather than allow companies to recover from the
    subsidy system the costs the companies report to the FCC, the cost
    model system estimates what costs should be and then the FCC caps
    subsidies at those levels. To the extent companies accept these subsidy
    estimates, the system results in savings for those who fund the
    subsidies.
        This modelling approach for determining costs has been used
    extensively around the world for determining prices for
    telecommunications and other types of regulated companies. One of the
    lessons is that it is hard for a computer model to provide realistic
    cost estimates. That is one of the reasons why the FCC auction provided
    the 70 percent savings previously mentioned. This problem of missing
    the mark is especially true when services are to be provided in areas
    that are fairly unique. The reason for this is that a computer model
    needs large amounts of relevant data to accurately project costs, and
    unique or rare circumstances that provide too little data. Another
    reason is that the model builders need to understand the geographic
    areas for which they are making estimates. That is hard for the model
    builders to do when there are many diverse features and areas. What
    regulators do in such circumstances is use other tools, such as
    earnings sharing, limits on particular costs or cost changes, and
    benchmarking to provide incentives for efficiency. The specific tool or
    tools chosen depend on the regulator's and providers' circumstances.
        The FCC has chosen a combination of tools--including the cost-model
    based caps and limits on certain types of cost recovery--to create
    incentives for efficiency while anchoring the subsidy amounts in the
    real world. This is an appropriate approach. I am not in a position to
    assess whether the FCC has made optimal decisions with respect to its
    chosen combination of tools, but I am confident that the agency's new
    emphasis on economic analysis will inform the commission as it adjusts
    and fine-tunes its program.
        Eliminating Overbuilds. It is normal in competitive markets for
    rivals to duplicate each other's infrastructure. This duplication is
    important for rivals to be able to compete for customers and for
    companies to test alternative services for the future. This duplication
    of infrastructure can be wasteful at best, and perhaps even
    destructive, when the government is subsidizing one of the providers.
        This is why it is important that subsidies be provided only in
    places where there is no service and where service would not be
    commercially viable absent the subsidy. The FCC has taken steps to
    avoid subsidizing overbuilds--that is, situations where broadband
    service is already in place and the subsidy is provided to another
    competitor. Broadband mapping is central to this effort.
        Other Federal subsidy systems in the past have not been as focused
    on eliminating subsidies for overbuilds. For example, Jeffrey Eisenach
    and Kevin Caves examined the effectiveness of the $2.5 billion provided
    in the American Recovery and Reinvestment Act (ARRA) to the Rural
    Utilities Service (RUS) for the ARRA-created Broadband Initiatives
    Program (BIP).\14\ Focusing on three case studies, Eisenach and Caves
    found that ``more than 85 percent of households in the three project
    areas are already passed by existing cable broadband, DSL, and/or fixed
    wireless broadband providers. In one of the project areas, more than 98
    percent of households are already passed by at least one of these
    modalities.'' This was a waste of taxpayer dollars, so much so that the
    study estimated the cost of providing service to a home that had no
    service before was ``$30,104 if existing coverage by mobile broadband
    providers is ignored, and $349,234 if mobile broadband coverage is
    taken into account.''
    ---------------------------------------------------------------------------
        \14\ J. Eisenach and K. Caves, Examining the Cost-Effectiveness of
    RUS Broadband Subsidies: Three Case Studies, Navigant Economics, April
    13, 2011, https://prodnet.www.neca.org/publicationsdocs/wwpdf/
    41311rus.pdf.
    ---------------------------------------------------------------------------
        Such problems were not unique to the BIP program. Economists Janice
    Hauge and James Prieger examined the effects of the U.S. Department of
    Commerce's Broadband Technology Opportunities Program (BTOP), which was
    also funded by ARRA. Their study could find no clear correlation
    between funds spent and increased broadband penetration.\15\ Some BTOP
    projects were also overbuilds.
    ---------------------------------------------------------------------------
        \15\ J. Hauge and J. Prieger, ``Evaluating the Impact of the
    American Recovery and Reinvestment Act's BTOP on Broadband Adoption,''
    Applied Economics 47, no. 60 (2015): 6553-79.
    ---------------------------------------------------------------------------
    Importance of Deregulatory Efforts
        Customers choose what they purchase based on their perspectives on
    the value the various services offer and the prices charged.
    Historically, residential telecommunications services were all the
    same, so universal service programs focused only on the cost side,
    presuming that subsidizing telecommunications companies would result in
    affordable prices. The value side of the consumer equation was ignored.
        This one-dimensional approach is no longer appropriate. Today's
    broadband service providers offer a myriad of value propositions,
    including different speeds, payment methods, and quality commitments,
    and offer them to both consumers and content providers. Exploiting this
    opportunity to gain value from multiple services and sources is how
    companies such as Google and Facebook have been able to build Internet
    access networks in poor areas: They leverage revenues from advertising
    to help make the infrastructure commercially viable.
        The FCC's recent deregulatory path--the highlight of which is its
    decision to restore Internet freedom--allows Internet service providers
    the opportunity to enhance their revenue by offering greater varieties
    of services to more types of customers. This may not be feasible for
    all service providers, but at least some will be able to enhance the
    commercial viability of their broadband offerings.
        For example, it might cost a broadband provider $100 million to
    provide service in a rural area. The consumers in the area may be able
    to pay only $90 million for the service, implying that the provider
    needs $10 million in subsidy to make the service commercially viable.
    But if the carrier can offer fast lanes or other enhanced services and
    receive say $15 million from customers who are willing to pay for these
    services, then the need for the subsidy is eliminated because the total
    revenue--$105 million--exceeds the $100 million cost.
    Diminishing Program Overlap
        In the portion of my testimony addressing the efficiency of the
    FCC's programs, I mentioned historic problems with BIP and BTOP, two
    Federal programs that have also subsidized rural broadband. Rural
    broadband customers and the citizens that subsidize rural broadband
    would benefit from diminishing or eliminating this overlap.
        One reason that overlap is counterproductive is that it allows
    companies to receive duplicative subsidies. For example, it is my
    understanding that a company receiving an FCC subsidy could still
    qualify for a low interest loan from RUS. It would be useful for the
    FCC staff and the RUS staff to coordinate to ensure that companies are
    not effectively receiving two subsidies for the same thing. I do not
    know of situations in which the new programs are duplicating subsidies,
    but it did happen under the old system.
        Perhaps even better than staff coordination would be a
    consolidation of the Federal broadband programs so that there is a
    single system that is focused, provides a single point for reporting
    and enforcement, and applies a coherent incentive system. Optimally,
    this would be conducted by an independent regulatory agency to restrict
    political interference. The FCC is now well positioned to do this, but
    a future system could be managed by state utility regulators that apply
    the FCC's approach, or cooperatively managed by Federal and state
    regulators.
                                     * * *
        Chairman Thune, Ranking Member Schatz, and members of the
    subcommittee, this completes my written testimony. I look forward to
    answering any questions you may have.

        Senator Thune. Thank you, Dr. Jamison.
        Ms. Mattey.

                 STATEMENT OF CAROL MATTEY, PRINCIPAL,
                         MATTEY CONSULTING, LLC

        Ms. Mattey. Chairman Thune, Ranking Member Schatz, and
    Members of the Subcommittee, I'm honored to appear before you
    today to share my personal views on efforts to expand broadband
    access in rural America.
        I bring the perspective of a former government official
    with 22 years of experience at the FCC and NTIA with the last
    decade focused on the FCC's Connect America Fund.
        As a result of the FCC's reforms, USF recipients now have
    enforceable requirements to meet broadband performance
    obligations in exchange for support. With a known cash flow for
    a defined period, companies will be more willing to make
    investments in rural America.
        I view the recent Phase II Auction as a success. A diverse
    group of providers using a variety of technologies bid for
    support. They are promising to provide better service for less
    support than otherwise might have been the case.
        The FCC has adopted a regime with improved accountability
    and consequences for noncompliance. There may be more work to
    be done around the margins but, big picture, we now have
    verification of performance and an ability to track progress in
    closing the digital divide. This is a massive multi-year
    project and the Nation is moving in the right direction.
        In my remaining time, I want to highlight five points for
    future action.
        First, it may make sense to discard the notion of a
    separate remote areas fund and roll the areas that did not get
    bids in the recent Phase II Auction into the FCC's upcoming
    auction for the geographic areas now receiving Phase II support
    which I'll refer to as the Phase III Auction.
        Effectively, the Phase II Auction implemented the original
    vision for the Remote Areas Fund because it included the areas
    that were expected to be the most expensive to serve with
    varying performance standards.
        Ultimately, it was the market through competitive bidding
    that determined which areas of the country would be served by
    what types of service, not government regulators. There could
    be further efficiencies in conducting the RAF and the Phase III
    Auctions on a consolidated basis.
        Second, the FCC needs to recalibrate its vision for what is
    the minimum requirement in any future auction. 10.1 megabits is
    yesterday technology. Raising the minimum performance standard
    logically would expand the geographic areas that would be
    eligible for funding in a Phase III Auction.
        Third, efforts to develop a better understanding of fixed
    broadband service availability should not prevent the FCC from
    moving to the Phase III Auction in a timely manner.
        Everyone wants a comprehensive national database of
    broadband availability that could be used by all agencies,
    Federal and state, to make informed funding decisions, but we
    should not let the perfect become the enemy of the good. Rural
    consumers have waited long enough. It has been more than 7
    years since the FCC laid out its original vision. There must be
    some areas of the country where it's clear there's no broadband
    provider offering service that meets the FCC's requirements.
        The FCC potentially could auction those areas first, using
    a portion of the budget, and then hold a second nationwide
    auction later when there's an improved dataset of service
    availability.
        Fourth, the Federal Government needs to share information
    in near real time, both across Federal agencies and with state
    and local officials engaged in similar efforts, regarding the
    specific geographic areas where parties have applied for
    funding or where funding has been authorized, even if
    construction has not yet occurred.
        Ideally, there would be a shared standard at least among
    Federal agencies for what constitutes an unsubsidized
    competitor. In my view, all states should provide some level of
    funding to supplement Federal funding. Achieving universal
    broadband should not be the job of the Federal Government
    alone.
        Fifth and finally, the current USF contribution system
    needs an overhaul. Parsing revenues into accessible and non-
    accessible buckets is like counting how many angels are dancing
    on the head of a pin. With modes of communications changing and
    business models evolving, it's time to have a thoughtful
    conversation about new ways to ensure that the Universal
    Service Fund remains on a solid footing.
        I believe that it is appropriate for the FCC to exercise
    the permissive authority granted to it by Congress in Section
    254(d) to assess retail broadband Internet access. In my
    opinion, it makes sense for broadband to contribute to a fund
    that is intended to advance the deployment of broadband
    infrastructure in rural America.
        Thank you for the opportunity to appear before you today. I
    will be happy to answer any questions.
        [The prepared statement of Ms. Mattey follows:]

      Prepared Statement of Carol Mattey, Principal, Mattey Consulting LLC
        Thank you very much, Chairman Thune and members of the
    Subcommittee. I am deeply honored to appear before you today to share
    my perspective on efforts to expand broadband access in rural America.
        While I'm a consultant with both private sector and governmental
    clients, I appear before you today to share my personal views on issues
    I have wrestled with for many years. I bring the perspective of a
    former government official and regulator, with 22 years of experience
    at the Federal Communications Commission (FCC) and the National
    Telecommunications & Information Administration.
        In 2009-2010, I developed the universal service recommendations in
    the FCC's National Broadband Plan. Then, as Deputy Chief at the FCC, I
    implemented those recommendations over the next seven years,
    transforming the FCC's Universal Service Fund (USF) voice-focused high-
    cost program into a modern, data-driven program that supports broadband
    networks only in those areas of our Nation where there is no private
    sector business case. I am mindful that government resources must be
    carefully targeted and invested wisely. I bring to you firsthand
    experience with designing and implementing one Federal government
    program to address the lack of broadband in rural areas and personal
    knowledge of the practical and political impediments to completing the
    task.
        In this testimony, I review the progress the FCC has made and then
    offer some observations on next steps for the FCC now that it has
    largely completed its initial implementation of the Connect America
    Fund reforms adopted in 2011. I address the need to coordinate among
    broadband funding programs and then conclude with my thoughts on
    reforming the system for raising the funds that finance the Federal
    USF, also known as contributions reform. Throughout, my intent is to
    highlight the key issues that public policymakers must resolve so that
    our Nation can complete the job of ensuring that all Americans in rural
    areas have full access to opportunities for jobs, education,
    healthcare, economic development, and more through broadband
    connectivity.
    Taking Stock of Where We Are
        When the FCC reformed the existing high-cost program in 2011, it
    observed that there was a digital divide within rural America. Some
    rural communities had state-of-the-art communications connectivity, and
    other communities had nothing. The system in place at the time had
    numerous shortcomings and was never going to close that gap.
        To get broadband service to challenging areas requires money and a
    willing provider. The reason why certain areas aren't served is that
    they are viewed by the existing incumbent telecommunications carrier as
    non-profitable. The costs to serve are too high compared to the
    anticipated revenues from the customers. That's it--plain and simple.
    It does not make economic sense for a private sector firm to invest
    more capital in low-return rural areas if it has opportunities to earn
    a higher return elsewhere. Without viable and willing providers, and
    access to capital, there will be no solution to the broadband
    availability gap that exists today.
        As a result of the FCC's reform efforts, universal access to
    broadband now is an explicit goal of the FCC's universal service
    program.
        The FCC has moved from a program that handed out money with no
    specific requirements to upgrade network infrastructure to a new
    program with defined obligations for recipients to deploy broadband by
    a date certain in exchange for support.
        The FCC has adopted a regime with improved accountability and
    consequences for non-compliance. There may be more work to be done on
    the margins, in terms of how specific details are administered, but big
    picture--we now have verification of performance and an ability to
    track progress in closing the digital divide.
        The FCC has moved from a system in which support was available
    throughout an incumbent's service territory, and subsidies could be
    used to upgrade infrastructure to compete against unsubsidized
    competitors in areas that aren't even that costly to serve, to one in
    which support is more narrowly targeted to high-cost areas lacking an
    unsubsidized competitor.
        The FCC has created a pathway to allow non-incumbents into the
    universal service program, recognizing that the incumbent
    telecommunications carrier is not necessarily interested in serving
    rural markets, and others may be better situated to serve consumers.
        The FCC has adopted a technology-neutrality approach, concluding
    that it would set performance standards and not dictate what type of
    provider or technology would be allowed to receive funding so long as
    the recipient meets the standards.
        And the FCC has begun to use auctions to award support, which
    ensures that subsidies are subject to market discipline.
        More than seven years later, we now have a situation where a
    variety of providers have access to a stable amount of Connect America
    Fund support for a defined term of years with requirements to meet
    certain broadband performance obligations. Essentially, the FCC
    committed a revenue stream for a period of years in order to stimulate
    additional investment in rural America. The private sector will be more
    willing to make those investments, and banks will be more willing to
    finance those upfront costs to build infrastructure, because there is
    an assurance of a known cash flow for a defined period. And people,
    your constituents, are benefitting from these changes. More people in
    rural America will be able to access the Internet and all the benefits
    that come with broadband connectivity.
        There have been a few bumps, and course corrections, along the way.
    That's to be expected.
        In 2011, the FCC defined fixed broadband for purposes of the
    Connect America Fund as 4 megabits per second (Mbps) upstream/1 Mbps
    downstream and decided that high-cost recipients with fixed broadband
    public interest obligations should provide a minimum of 4/1 Mbps
    service. At that time, the FCC rightly recognized the definition of
    broadband should evolve over time, and it committed to initiating a
    proceeding no later than 2014 to review the minimum performance
    characteristics to ensure that the Connect America Fund would continue
    to support broadband service that is reasonably comparable to broadband
    service in urban areas.
        In late 2014, the FCC adjusted the minimum performance standard for
    fixed broadband for Connect America Fund recipients upward to 10/1
    Mbps. More recently, in the December 2018 Rate-of-Return Reform Order,
    the FCC adopted 25/3 Mbps as the new minimum speed requirement for
    rate-of-return carriers. It has not yet addressed what the minimum
    should be for the rest of the country.
        It is notable that each time the FCC has set a minimum standard,
    that standard has become outmoded before funding recipients complete
    their required deployments. If past experience is any indication of the
    future, the 25/3 Mbps standard will become out-of-date as well.
        It has taken a long time to implement the initial vision for
    reform. It's been nine years since the release of the National
    Broadband Plan, and more than seven years since the release of the 2011
    USF Transformation Order. There are a lot of reasons why it took so
    long, but it's a cautionary tale for anyone urging dramatic changes to
    the system now in place.
        Rural consumers are impatient. Once they hear that government
    funding is bringing broadband to their area, they expect it to appear
    overnight. It took decades to bring electricity and telephony to all
    corners of America. Hopefully, this time, it won't take so long. But
    there's no question, this is a massive, multi-year project.
    Next Steps for the FCC
        With that as the backdrop, I'd like to turn now to next steps for
    the FCC.
        I want to personally congratulate the FCC for conducting the Phase
    II auction last summer, and its recent announcement that it is ready to
    authorize the first group of Phase II winning bidders. I authored the
    chapter in the National Broadband Plan that recommended, among other
    things, that ``the FCC should identify ways to drive funding to
    efficient levels, including market-based mechanisms where appropriate,
    to determine the firms that will receive CAF support and the amount of
    support they receive.'' I believed it then, and I still support that
    recommendation today. Thoughtfully designed auctions are an important
    component of the FCC's toolkit.
        I view the FCC's Phase II auction as a success. The auction
    demonstrated unequivocally that alternative providers using a variety
    of technologies are willing to compete for support--and that is a
    positive development. There were winning bids for about three-quarters
    of the locations up for bid. More than half of the locations with
    winning bids are slated to get 100 Mbps or better service. Providers
    planning to use fixed wireless technology, in some cases in conjunction
    with fiber, won about 65 percent of the dollars, to serve about 53
    percent of the locations up for auction. Electric providers won about
    18 percent of the dollars to serve about 13 percent of the locations.
    Satellite won 8 percent of the dollars, to serve 27 percent of the
    locations.
        The larger incumbents (the price cap companies) won less than 2
    percent of the dollars, to serve only 1 percent of the locations. But
    there's an important caveat--several of them did not even bid in the
    auction. Those price cap carriers that did bid only bid on a very small
    number of locations. In my view, the bidding activity of price cap
    carriers as a group in this auction is not necessarily indicative of
    how those companies might act in the context of future auctions.
        I am heartened to see a variety of providers willing to provide
    better service, for less support, than otherwise might have been the
    case. That enables the FCC to stretch those dollars farther to serve
    more consumers.
        There are several pieces of unfinished business remaining from the
    2011 USF Transformation Order: implementing the Mobility Fund Phase II
    auction and the Remote Areas Fund (RAF). In addition, the FCC has
    promised to hold an auction before the end of the Phase II term for the
    larger carriers to award support in those areas on a competitive basis,
    often referred to as Phase III of the Connect America Fund.
        I'll focus my attention today on efforts to expand access to fixed
    broadband, while recognizing that there is much yet to do to reach the
    FCC's goal of universal access to mobile broadband.
        With the benefit of hindsight, I question the FCC's decision back
    in 2011 to adopt a separate fund called the Remote Areas Fund. The
    theory was well intentioned, but the structure was wrong. I've come to
    appreciate that segregating one set of communities into a separate fund
    tends to make those folks feel like they are second class citizens.
        The theory was that some areas of the country are just too
    expensive to serve with fiber; consumers in those areas instead would
    be served by alternative technologies, like fixed wireless and
    satellite. There'd be a separate pot of money available to providers
    willing to serve those areas, possibly with lowered service standards.
        So, what happened? For one thing, we came to realize that RAF areas
    are sprinkled around and within other high-cost areas, a proverbial
    checkerboard on a map that does not necessarily reflect how companies
    build networks. Some commenters said, ``Don't implement the Remote
    Areas Fund in my backyard.'' The service providers using alternative
    technologies that the FCC originally intended for the Remote Areas Fund
    said, ``Don't relegate me to the Remote Areas Fund. I shouldn't be
    limited to the most expensive, least profitable locations in the
    country. I want the opportunity to compete for funding on a technology-
    neutral basis everywhere.''
        Eventually, the FCC decided to put those extremely high-cost areas
    located within the territories of the price cap companies into the
    Phase II auction, along with the high-cost areas in the states where
    the price cap carrier turned down the offer of Phase II support. The
    FCC figured out a way to conduct an auction in which providers using
    different technologies, and proposing to offer different levels of
    service, could compete head to head.
        Effectively, the Phase II auction implemented the original vision
    for the Remote Areas Fund because it included the areas expected to be
    the most expensive to serve.
        Ultimately, it was the market that determined which areas of the
    country would be served by alternative technologies, offering whatever
    level of service, not government regulators based on estimates of cost
    to serve from a hypothetical cost model. That's a good thing, in my
    opinion.
        To be sure, some areas lacked winning bidders in the Phase II
    auction. Those areas logically would be the ones up for bid in a RAF
    auction, if the FCC still intends to go forward with that. It's worth
    considering whether the better course would be to discard the notion of
    the Remote Areas Fund as a standalone fund and roll those geographic
    areas into the upcoming Phase III auction.
        The Phase II term of support for the larger price cap companies
    ends on December 31, 2020. In the big scheme of things, that's not that
    far away.
        Back in 2014, the FCC decided that it would provide a six-year term
    of support to the companies that accepted the offer of Phase II
    support, with the option to receive an additional year of support
    through the end of 2021.
        Given the usual timeline for FCC auctions, the FCC needs to get
    started on the Phase III auction as soon as possible. Start to finish,
    it generally takes 9-12 months to implement an auction after adopting
    the substantive rules for what is going to be auctioned, and that
    doesn't even include the time to solicit comment on those rules. After
    the bidding is over, it typically takes a minimum of six months before
    funding is authorized to some winning bidders and even longer to
    authorize all of the winning bidders.
        Here are just a few of the key decisions that the FCC will need to
    make regarding the Phase III auction:

       What is the minimum performance standard for the Phase III
            auction?

        In the recent Phase II auction, the FCC allowed bidders to bid on
    one of four performance tiers, with 10/1 Mbps service as the minimum
    tier. A mere quarter of 1 percent of the winning bids were in the 10/1
    Mbps tier. The market has spoken: 10/1 Mbps is yesterday's technology.
    The FCC needs to recalibrate its vision for what is the minimum
    requirement in any future auction.

       Which geographic areas will be eligible?

        A logical corollary of increasing the minimum performance standard
    is that the FCC would readjust the standard for determining whether
    there's an unsubsidized competitor that makes an area ineligible for
    Connect America Fund support. That would expand the geographic areas
    eligible for the Phase III auction, compared to the areas now receiving
    model-based support or slated to receive support from the Phase II
    auction.

       What data sources should the FCC use to decide what areas
            are eligible in the Phase III auction?

        Many are dissatisfied with the FCC's current Form 477 data
    collection. The problem is that a data collection originally adopted
    for another purpose many years ago now is forming the foundation for
    funding decisions that have enormous implications for the American
    public.
        I am personally acquainted from my tenure at the FCC with the
    difficulties of conducting a challenge process to determine the
    specific geographic areas eligible for Connect America Fund support.
    There must be a better way to do this.
        The FCC is considering modifications to its Form 477 data
    collection. We all want a comprehensive national database of broadband
    service availability that could be used by all agencies, both Federal
    and state, to make informed funding decisions.
        If I were still at the FCC, while fully supporting the need for
    better datasets to make funding decisions, I'd be worried if efforts to
    develop a more comprehensive database of service availability were to
    prevent the FCC from moving to the Phase III auction in a timely
    manner. We should not let the perfect become the enemy of the good:
    there are ways to move forward so that we can achieve the shared goal
    of getting more broadband out to consumers sooner rather than later.
        There are no silver bullet solutions that will quickly update the
    national broadband availability maps to a state of perfection. Any
    significant changes to existing data collections are going to require
    time and money. Any new data collection will require Paperwork
    Reduction Act approval from the Office of Management and Budget, and it
    will take time to collect and clean up the data. The first filing in a
    new data collection often surfaces inconsistencies amongst filers and
    questions that need to be ironed out. New mapping requirements will
    impose burdens on small businesses as well as larger companies.
        Any process to gather input from folks on the ground requires local
    government officials and consumers to speak up if they want Washington,
    DC to know they aren't served.
        At a minimum, there must be some areas of the country where it's
    clear there's no broadband provider offering service that meets the
    FCC's requirements: the incumbent isn't offering the requisite level of
    service, and there are no unsubsidized competitors. One potential
    solution would be to proceed immediately to auction those areas, and
    hold a second nationwide auction later, after there's an improved
    dataset of service availability.

       What should the budget for the Phase III auction be?

        I do not ascribe to the view that the budgets adopted in 2011 for
    various components of the Connect America Fund should be carved in
    stone. Just because $1.5 billion was accepted by the price cap carriers
    back in 2015, based on a decision made in 2011, that does not mean
    that's the right number for Phase III of the Connect America Fund.

       Is there a way to auction partially served census blocks?

        One of the problems with the current approach is that it ignores
    the plight of people who live in partially served census blocks. Thus
    far, the FCC has treated any census block that is partially served as
    if it were fully served, and therefore ineligible for funding. As a
    consequence, the FCC's December 2018 estimate that nearly 12 million
    rural Americans lack 25/3 Mbps fixed broadband undoubtedly is too
    low.\1\ If the FCC at some future date has more granular information
    about actual service availability at the sub-census block level, the
    next step would be to figure out how to include the unserved portions
    of high-cost census blocks in any auction.
    ---------------------------------------------------------------------------
        \1\ Communications Marketplace Report et al., GN Docket No. 18-231,
    FCC 18-181, para. 248 (rel. Dec. 26, 2018) (finding that 24 percent of
    rural Americans lack 25/3 Mbps fixed terrestrial broadband).
    ---------------------------------------------------------------------------
        This is just the tip of the iceberg. There are many more decisions
    to make. It's time to get started.
    Coordination Among Government Programs
        It is critically important to coordinate and harmonize various
    programs administered by different Federal and state agencies, so that
    the government as a whole is efficiently tackling the problem and not
    potentially working at cross purposes. It's a concern if one government
    agency is providing funding to overbuild a service provider that
    currently is receiving funding from another government agency.
        Some state and local governments are not satisfied with the extent
    of private sector broadband investment in their communities and are
    actively taking steps to provide funding above and beyond what is
    available from the Federal government. This is a welcome development.
    In my view, all states should provide some level of funding to
    supplement Federal funding. Achieving universal broadband should not be
    the job of the Federal government alone.
        Coordination requires more than periodic touchpoints between
    agencies to talk generally about their respective programs and new
    initiatives. The Federal government needs to share information in near
    real time--both within the Federal government, and with state and local
    officials engaged in similar efforts--regarding the specific geographic
    areas where parties have applied for funding, or where funding has been
    authorized, even if construction has not yet occurred. The information
    needs to be sufficiently detailed that other agencies can map the
    location of planned deployments when making their own funding decisions
    and evaluate whether there is an overlap. Ideally, there would be a
    shared standard, at least among Federal agencies, for what constitutes
    an unsubsidized competitor so that everyone's working on the same page.
        Coordination should not be a one-way street. The Federal government
    needs to share information with state and local officials, but state
    and local officials also have a responsibility to share their deep
    local knowledge about service availability with the Federal government.
        I presided over several challenge processes while at the FCC. We
    invited the states to weigh in on those challenges. My recollection is
    there was little to no participation from state or local officials. I
    sincerely hope that all states and localities will play a more visible
    and proactive role in whatever processes the FCC uses in the future to
    decide which areas are eligible for the Phase III auction. They ought
    to; it is their citizens who will be directly impacted.
    Contributions Reform
        I oversaw the FCC's contributions reform docket when it started
    back in 2001. I worked on this docket for much of my FCC career,
    including the two Further Notices of Proposed Rulemaking in 2002, the
    more recent Notice of Proposed Rulemaking in 2012, and the referral to
    the Federal-State Universal Service Joint Board in 2014. I also have
    assisted numerous clients while consulting in the private sector,
    including competitive providers, mobile providers, and interconnected
    Voice over Internet Protocol (VoIP) providers, on complying with their
    USF contributions obligations. I've seen the many problems with the
    current system from both sides of the fence.
        Under today's system, there are several thousand contributors to
    the Federal USF. Contributions are based on interstate and
    international retail revenues. Notably, the top five contributors
    (alphabetically, AT&T, CenturyLink, Sprint, T-Mobile, and Verizon)
    collectively fund about two-thirds of the entire USF.\2\ A couple of
    the major cable operators probably are among the top 10 contributors.
    Think about that, basically a handful of the large communications firms
    collectively contribute most of the money that goes into the USF (and
    pass through those amounts to their end user customers), and thousands
    of smaller contributors (and their customers) pick up the balance.
    ---------------------------------------------------------------------------
        \2\ FCC, Universal Service Monitoring Report, CC Docket No. 96-45
    et al., Tables 1.7 (2017), available at https://www.fcc.gov/sites/
    default/files/2017_universal_service_monitoring_report
    .pdf.
    ---------------------------------------------------------------------------
        The current system is built on regulatory constructs from decades
    ago. Only revenues from interstate and international telecommunications
    services and certain other telecommunications are subject to
    assessment. The form used to collect information from potential
    contributors uses terminology and categories that do not reflect
    today's marketplace. Companies are making judgments as to whether
    certain data services are telecommunications services (assessable) or
    information services (non-assessable). Dividing revenues into mythical
    buckets of intrastate and interstate jurisdiction is like counting how
    many angels are dancing on the head of a pin. The compliance burden,
    particularly for the thousands of smaller contributors that are not
    familiar with arcane regulatory details, is non-trivial. The major
    wireless and cable providers--who principally contribute today based on
    their voice revenues--probably could cause the system to collapse on a
    moment's notice if they decided to provide voice for free when bundled
    with broadband. The system we have today needs an overhaul.
        The trend lines are not good. According to the FCC, while non-
    telecommunications revenues (which are not assessed) have more than
    tripled between 2006 and 2016, there has been a steady decline in
    assessable revenues over the last decade, by more than 20 percent.\3\
    ---------------------------------------------------------------------------
        \3\ Universal Service Monitoring Report, Tables 1.2, 1.5.
    ---------------------------------------------------------------------------
        The FCC has sought comment on alternative contributions
    methodologies multiple times, from connections to numbers to hybrids.
    It also has sought comment multiple times on whether to assess
    broadband Internet access under its permissive authority granted by
    Congress in section 254(d).
        Meanwhile, several states are looking at alternative contribution
    methodologies for their own state universal service funds. For
    instance, Nebraska will shortly implement a new hybrid contributions
    system--assessing a flat fee on all voice connections, with business
    services continuing to contribute based on revenues.
        At the outset, it's important to step back and ask: what are we
    trying to accomplish with contributions reform?
        People often say the current Federal contributions system is
    ``unsustainable'' and rail about the fact that the contribution factor
    is hovering around 20 percent. In my opinion, focusing on the
    contribution factor is a red herring. It's not 20 percent of your total
    bill; it's 20 percent of a small fraction of your communications bill.
        Many argue that ``We should expand the contribution base,'' which
    implies that contributions reform would assess firms that are not
    subject to assessment today.
        Some apparently believe that expanding the contribution base would
    bring more money into the USF. That's not the case. The budgets for the
    disbursement programs are set independently of any decision regarding
    how the money is collected.
        When people say, ``We need to expand the contributions base,'' they
    often look to broadband. And then the conversation morphs into a
    ``Don't tax the internet'' debate. This is unfortunate, because it may
    prevent us from having a thoughtful conversation about new ways to
    ensure that universal service remains on a solid footing.
        Because most firms pass these assessments through to their end
    users, I would suggest that it's useful to look at the impact on end
    users, rather than focusing exclusively on which industry sector has
    the obligation to report and contribute in the first instance.
        Assessing retail broadband Internet access would not likely bring
    in new contributors, at least on the residential side. Do you know any
    person who has a broadband connection, but no voice connection, either
    landline or mobile? In today's world, people with broadband also have
    some form of voice connection, whether it's a traditional landline
    connection, a VoIP connection or a cell phone. That's why changing the
    contributions methodology to assess broadband effectively would just
    shift the universal service line item from one bill to another or, in
    the case of a bundled voice/broadband offering, be a wash. One amount
    goes down, while another amount goes up. Either way, that residential
    customer still is paying for it.
        Nonetheless, I believe as a matter of logic and fairness it's
    appropriate to assess retail broadband Internet access. We all agree
    that universal broadband is a public policy goal, and that broadband is
    essential to our lives in the 21st century. To me, it makes sense to
    assess broadband to contribute to a fund that is intended to advance
    the deployment of broadband infrastructure.
        Some fear that assessing broadband would suppress adoption.
    Broadband is not some fragile nascent service. With consumers cutting
    the cord on traditional voice service, it's broadband and the cell
    phones that are the necessities; if anything, landline voice is the
    service that people increasingly are willing to do without.
        The more difficult question is what to do on the business side.
        For many years, the FCC has estimated that contributions based on
    services typically sold to residential users represent roughly half of
    overall contributions.\4\ Stated another way, residential households
    bear roughly half of the contribution burden, with the balance falling
    on businesses. It's worth asking whether residential consumers will
    increasingly be contributing a greater percentage of the total USF,
    based on assessments imposed on voice service (whether it's traditional
    landline service, mobile voice, or VoIP), as businesses shift away from
    services that historically have been subject to assessment into new
    service offerings that fall within the definition of information
    services. The concern is that as the marketplace shifts to new services
    and new technologies, businesses will increasingly be able to escape
    any responsibility for financing USF under the current system.
    ---------------------------------------------------------------------------
        \4\ Universal Service Monitoring Report, Tables 1.12.
    ---------------------------------------------------------------------------
        Is that we want?
    Conclusion
        To conclude, the need for coordinated action to fulfill the promise
    of access to broadband in rural America is compelling. It will take a
    careful and a concerted effort involving federal, state and local
    governments, private sector investment, and American ingenuity to
    connect all of rural America.
        I appreciate the opportunity to appear before you today. I will be
    happy to answer any questions you might have.

        Senator Thune. Thank you, Ms. Mattey.
        Let me just start out by asking, Mr. Law. Your testimony
    highlighted some of the positive steps the FCC has taken to put
    Federal universe service programs on a more solid foundation
    for the future.
        Could you describe how the recent Order will help Golden
    West and other companies like yours better deploy broadband and
    perhaps what this will mean for rural consumers and businesses?
        Mr. Law. Thank you, Mr. Chairman.
        I think it really focuses on two aspects from the December
    Order from the FCC. First would be prescribing an adequate
    budget for the Universal Service High-Cost Fund, which had been
    lacking in several years.
        Demand had exceeded supply and also the way the system
    works, the ability to recover costs for funds already expended
    had diminished. So I applaud the Commission for increasing the
    budget to be a workable budget for the foreseeable future,
    which brings me to the second item.
        They set a budget which is between a five and a 10 year
    budget for those elements. In order for network operators to
    have the confidence to make multi-million dollar decisions in
    terms of investments, you have to have some level of confidence
    that those mechanisms that will provide portions of the funding
    will remain for a period of time. Five to 10 years is a
    reasonable window to make those investments. So Golden West is
    proceeding with accelerating our capital deployment plans.
        Senator Thune. Thank you.
        Mr. Forde, the FCC's Connect America Fund Phase II Auction
    consisted of over a hundred bidders who are going to be awarded
    $1.5 billion in support over the next 10 years. Of that $1.5
    billion, Midco was provisionally awarded $38.9 million.
        Could you speak to how that funding will help you expand
    your services in rural areas throughout South Dakota and other
    parts of the country?
        Mr. Forde. Yes, we are able to use those funds to edge out
    from our fiber network to some of the remote areas. That allows
    us to serve--when we go up on those towers and fix wireless,
    that allows us to bring that high-speed 100 megabit down
    connection that we're going to provide through that Connect
    America Funds to every acre in that area and that's so
    important for our rural states, for precision ag, and it's not
    just every address that we're providing. It's for grain dryers
    and it's for water pumps and other equipment out there.
        So that high-speed connection becomes so important for all
    of the enterprises in our rural areas.
        Senator Thune. As a follow-up, what are some of the lessons
    learned from that auction that should be applied in future
    rounds of funding or to other Federal programs?
        Mr. Forde. We are very happy with the way that the auction
    process worked out. Not only was our bidding able to keep those
    costs down for us at the level we provide service, but there
    was several other areas where we did not receive the CAF
    funding that we were able to save the taxpayer dollars by
    bidding down other folks in those areas.
        Senator Thune. Let me just direct this to all the
    panelists. With both the FCC and USDA providing broadband
    funding as well as a number of states, it's easy to see how
    funding from one program could be inadvertently used to
    overbuild projects funded through another program.
        It's also important to note that a company can get support
    for deployment over a period of years. So simply examining what
    is currently deployed is not going to be enough to prevent
    overbuilding.
        How can we all do a better job of making sure that these
    various programs work together and complement each other, and
    should we require Federal agencies to coordinate with each
    other to avoid the risk of wasteful overbuilding?
        Ms. Mattey.
        Ms. Mattey. I think it's important that Federal agencies
    and state agencies, as well, share information and specifically
    they need to share real information. They need to share maps,
    maps and geo files that folks can then lay and see where there
    is an expectation that new construction will occur in the
    future, so that additional government funds don't go to those
    areas just because today they're not served.
        Senator Thune. Mr. Law and Mr. Forde, when you're applying
    for broadband funding from Federal agencies in the past, were
    you required as an applicant to disclose support from other
    Federal, state, or local government sources?
        Mr. Forde. No, we were not in our FCC Connect America
    funds, and we have many examples throughout the Midwest where
    we have been overbuilt with Federal dollars.
        In fact, there was a recent example where we had provided
    gig service in an area and a competitor was able to get a USDA
    loan, Universal Service Funds and Connect America funds, to
    overbuild us in that area where we already provided gigabit
    Internet service.
        Senator Thune. So do you think that a requirement like that
    would prevent overbuilding or help prevent it?
        Mr. Forde. Absolutely. We have to have that coordination to
    prevent it. Otherwise, we're going to still have areas that are
    not going to be able to get broadband service.
        Senator Thune. OK.
        Mr. Law. Mr. Chairman, I do feel that it is reasonable to
    expect that there should be coordination as well as some level
    of non-duplicity amongst programs. You know, you kind of at
    times have two thoughts that go with it.
        There should be no duplicity period. At the same time,
    there are funds that are expended for deployment of networks.
    There are funds that are expended for sustainability of
    networks, so kind of two different items. However, at a base, I
    absolutely agree there should be some level of coordination so
    that duplicate funds are not used to overbuild existing
    broadband networks.
        Senator Thune. OK. So in your testimony, you mentioned
    barriers to deployment on Federal lands and across railroad
    rights-of-way.
        Could you describe in more detail how these issues affect
    broadband deployment in rural areas?
        Mr. Law. Thank you, Mr. Chairman.
        I think there are two aspects of that. From the Federal
    lands perspective, Golden West serves a large portion of
    Federal lands from the Department of Interior, National Parks,
    National Forest, Bureau of Land Management, BIA. I'm probably
    missing a few other Federal agencies there.
        The timeframes involved in making the applications as well
    as the approvals range at the low side months, and I'm being
    generous with months. I would probably more characterize it in
    terms of years. Those are opportunities that are either lost or
    delayed and also when you are dealing with the Upper Midwest
    and roughly a 5-month construction window in order to build
    things, you miss that window or you get a permit back from a
    Federal agency in October means it's next year's or the
    following year's project.
        As it relates to railroad rights-of-way, given the vast
    expanses that companies in rural areas cover and the railroads
    do, as well, oftentimes two things, both the delay in terms of
    permits in a timely fashion on railroad rights-of-way and then
    the inordinate amount of fees that railroads feel free to
    charge providers for the privilege of directional boring a line
    underneath their tracks.
        I do not believe that railroads should be able to treat
    that as a profit center. I understand they have reasonable
    expense. I don't feel it should be a profit center.
        Senator Thune. Thank you.
        Senator Schatz.
        Senator Schatz. Thank you, Mr. Chairman.
        Ms. Mattey, thank you. Thank you to all of you for being
    here.
        Ms. Mattey, in 2010, the FCC concluded in its National
    Broadband Plan that it would need to ``broaden the USF
    contribution base to ensure USF remains sustainable over
    time.''
        Has the need for contribution reform increased, decreased,
    or stayed the same since then?
        Ms. Mattey. First of all, I wrote that paragraph and I
    still believe it.
        [Laughter.]
        Ms. Mattey. I think contributions reform still is something
    that needs to be done. Thank you.
        Senator Schatz. So the FCC has the legal authority to do
    everything that it needs to, correct?
        Ms. Mattey. In my opinion, it does. Congress gave its
    permissive authority to assess telecommunications back in the
    1996 Act.
        Senator Schatz. OK. I want to talk a little bit about
    mapping and then maybe get a little bit more into USF reform.
        It's without dispute that the FCC's broadband map is a
    mess, that it doesn't reflect what's really happening for
    Hawaii. For instance, the FCC's maps overstate speeds and the
    number of competitors in many places, and, of course, if we
    don't know where the funding is needed, we can't spend it in
    the right places and sometimes we spend it three times in one
    place and not at all in others.
        What is holding the FCC back from collecting this granular
    data and producing accurate maps?
        Ms. Mattey. The FCC has had a pending proceeding for a
    number of years to modify the Form 477 data collection. I know
    that various parties have been trying to develop new ideas
    about how to get better information.
        At the end of the day, though, one of the things that you
    need to understand is that it takes time and any new data
    collection will also impose burdens, burdens on industry,
    burdens on others, and last but not least, there's a need for
    more funding.
        Congress needs to appropriate funding, more funding to help
    whatever is being done to develop these better maps.
        Senator Schatz. For the development of maps.
        Ms. Mattey. Yes.
        Senator Schatz. So it seems to me it's a couple of
    problems.
        Ms. Mattey. Yes.
        Senator Schatz. One is, I don't feel there is--I think the
    staff are very motivated, but I think there is a desire among
    some to declare victory and to say we've got coverage, we're
    making great progress, when I think I'm looking at all the
    members of this committee. You go to a place and you say, well,
    that's--I don't know who did this map but they don't know
    because I talked to folks right there and there is no coverage.
        And so I think there's this sort of political instinct at
    the FCC level, at the leadership level to declare victory
    prematurely here, but it seems to me there's also an
    organizational capacity question.
        In other words, even if they really wanted to do this, this
    stuff is hard. Is that about right?
        Ms. Mattey. Well, one of the things you have to understand
    is different efforts--ultimately, the information comes from
    service providers and so it's not all in one place just waiting
    to be found. It actually requires effort to collect the
    information and if you want to have a third party in any
    capacity to be part of that process or to validate information,
    then there needs to be funding for that, as well.
        Senator Schatz. Right. It just seems to me to be a pretty
    reasonable investment, to the extent that we're collecting all
    this revenue and pushing it all out, that it's not unreasonable
    for us to spend a few dollars to make sure that we know where
    it ought to go.
        Let me ask you about where we are in the process of
    implementing the 2011 USF Reform Order. What remains to be
    done?
        Ms. Mattey. Well, the big thing obviously is the Mobility
    Fund Phase II Auction. The second thing is the Remote Areas
    Fund, which I talked about in my testimony, and there my
    thoughts have evolved over time.
        I've come to realize that you can't designate specific
    areas as the Remote Areas Fund. That leads people to feel like
    they are second-class citizens and that it is better to allow
    those areas to be served in conjunction with what I call the
    main Connect America Fund because of how networks are actually
    built in the real world and so that is why I am suggesting that
    it may make sense to take the money that was originally
    dedicated for the Remote Areas Fund and combine it with what
    will be the budget for the next auction, the Phase III Auction.
        Senator Schatz. One last question about 5G. How do we
    ensure as we move forward with 5G where density is the name of
    the game, where I think urban areas, even cities within rural
    communities where the math adds up, but what do we do about
    rural areas and the sort of practical aspect of this is that
    we're not going to get 5G in places where we don't even have
    regular broadband?
        And so what technologies ought to fill the void as we push
    forward with 5G where we can, what technologies work best and
    are practicable in rural communities?
        Ms. Mattey. Well, honestly, I think it's a variety of
    technologies and as some of the folks on this panel have
    indicated, you know, in some areas, it makes sense to do fixed
    wireless. In other areas, it may make sense to do fiber and
    there's no single solution.
        Senator Schatz. Thank you.

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

        Senator Fischer. Thank you, Senator Schatz.
        Mr. Law, in Nebraska, we have carriers that are receiving
    model-based and cost-based Universal Service Port and I was
    glad that the FCC's High-Cost Order from December significantly
    addressed the needs of both of those.
        According to the Order, I understand that the FCC is likely
    to open the ACAM Program up for rural carriers who opted not to
    participate in the first round of that program.
        For carriers that are eligible for ACAM, what advantages
    can consumers expect if their service provider chooses to opt
    into that ACAM Program? What's going to help people?
        Mr. Law. Thank you, Senator Fischer.
        I think the primary thing that would help consumers in that
    case is again from the investment perspective for a provider
    the stability or ability to accurately, in the case of the ACAM
    model for 10 years, know exactly what it is you will receive,
    what your obligations are at a minimum and hopefully then some
    to provide broadband.
        And so what I believe consumers should expect to receive
    from companies that do elect to follow on the ACAM model,
    Senator, is significant buildout as well as the ability to
    invest because of the stability provided by that long of a term
    in that election.
        Senator Fischer. You're from Wahl, South Dakota, is that
    correct?
        Mr. Law. Yes, ma'am.
        Senator Fischer. I know where that is. I'm just south of
    you in Nebraska, by Valentine, and when we look at the needs of
    consumers and the needs to have correct mapping, how would you
    respond as a carrier if you're questioned on the mapping that
    you provide?
        Because I travel the state of Nebraska a lot and I can tell
    you a lot of places, as Senator Schatz said, where you can look
    at your phone and you have no connectivity. How do you respond
    to that?
        Mr. Law. Thank you, Senator, and with your roots in
    Valentine and Golden West service of the mission area as part
    of our service area, so we're just located just north of you.
        A couple of things as it relates to mapping and coverage
    and certainly there is mobile coverage and there's fixed
    coverage. As Ms. Mattey alluded to in her testimony, coverage
    data, I believe, or provider data will always be a key
    component, like it or not, of developing service maps, where is
    service available, whether it be fixed or whether it be mobile.
        The key for that will be, and I think we've seen it in the
    last Mobility Fund round, is the key for that is an additional
    step in confirmation to determine, all right, and whether it is
    a company like Golden West or a mobile provider or someone
    else, what are the validation or verification methods used to
    determine that I as a provider said accurately depicts the
    services I am able to provide, and I think that perhaps has
    been missing.
        Senator Fischer. Thank you.
        In your testimony, you also remarked on the FCC's effort to
    improve accountability and implement performance testing
    requirements that are related to universal service support.
        What's the status of implementing those requirements and do
    you have any concerns with that process?
        Mr. Law. Thank you, Senator.
        The status is the clock is ticking very loudly in
    providers' heads because the deadline as set by the FCC, I
    believe, is third quarter of this year, so merely months away
    for performance testing of networks that are recipient of
    Universal Service Fund dollars.
        As I indicated in my oral statement, I strongly support
    there should be performance testing. The issues that I have
    with how the FCC has set this up is that I believe it is
    challenging, if not impossible, for a rural carrier to meet the
    requirements of the testing procedures as well as it requires
    us--in Golden West's case, it will require us to go to over 200
    of our customers' homes and install a device in their home to
    monitor the performance of their network.
        Senator Fischer. Is that just a problem for rural carriers
    because of distance? Wouldn't it also be a problem in urban
    areas just to cover that many residences or businesses?
        Mr. Law. I believe most of the associations involved in the
    telecommunications industry have asked the FCC to reconsider
    and I hope that they will take heed of that reconsideration.
        Senator Fischer. Thank you very much.
        Next, Senator Klobuchar.

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

        Senator Klobuchar. Thank you very much.
        And I thought I'd start with the mapping issue, something
    I'm working on right now. Earlier this month, Minnesota was
    actually selected as one of seven states to partner with
    National Telecom and Info Administration to improve the
    accuracy of broadband mapping, and I'm glad we're doing that,
    but I think we need to change this nationally.
        Mr. Forde, do you believe allowing consumers and state and
    local entities to report data could help create more accurate
    maps?
        And, Dr. Jamison, why are these maps important in
    eliminating overbuilding?
        Mr. Forde. Thank you, Senator.
        We absolutely love it when customers and folks in the
    region let us know where areas they don't have service. We love
    hearing from them and for us providing that data allows us to
    know if we've got an unserved area and unserved farms, we love
    to know that data so we can go and try reaching them.
        In fact, we've been in conversations in Minnesota with the
    broadband folks there, you know, helping us identify areas that
    are unserved or underserved. So it has been very fun to work
    with them to find those pockets and try to provide service.
        Senator Klobuchar. OK. Dr. Jamison.
        Dr. Jamison. Yes. Thank you for the opportunity to be here.
        The issue of mapping and the overbuilding is critical
    because none of us spending our own budgets would pay two
    people to do exactly the same thing for us. The fact is this
    doesn't make economic sense for the people paying the bills.
        The use of the maps, as people have talked about and as you
    indicated, partnering with the Federal Government on that, that
    type of state and local participation is also important.
        Part of my work at the University of Florida is conducting
    courses for telecommunications regulators around the world and
    as I talk with them about their systems, they're always feet on
    the ground trying to figure out where service is and service is
    not and that's not something the Federal Government can do by
    itself.
        Senator Klobuchar. OK. Very good. Chairman Wicker and I
    introduced the Precision Agricultural Connectivity Act. It was
    signed into law in the Farm Bill, the last Farm Bill, and the
    bill directs the FCC to establish a task force to look at gaps
    in rural broadband service and I actually figure this is one
    way to get at the kind of information we're going to need to
    get the money to actually get it out there and I like your
    ideas, Ms. Mattey. It's something we've been looking at quite a
    bit, as well.
        How has broadband supported precision agriculture, Mr.
    Forde?
        Mr. Forde. I think it has been great to take a look at the
    area. Red River Valley in your state, one of the best farming
    areas in the entire world, to be able to use the mix of
    technology we have and to use that fixed wireless technology,
    serving off of elevators in your service territory out to the
    deep piling stations, out to a grain dryer.
        We had a farmer that recently hooked up four of his grain
    dryers on various parts of his farm and instead of sitting at
    those all day long monitoring them for fire, he was able to
    monitor that from his home using fixed wireless connections,
    you know, in the winter months. Just has been an unbelievable
    tool to reach all those farming assets that people are now
    having on those farms with a mix of technologies and it's
    really going to help us move things forward.
        Senator Klobuchar. Right. Following up on Senator Schatz's
    questions on funding and Senator Thune was actually getting at
    the coordination, we know there are a lot of different funding
    sources designed to support broadband build-outs in rural
    areas, FCC, USDA, and while these programs all help reduce the
    digital divide, it's crucial they're working effectively
    together.
        Last month, Senator Cramer and I introduced the Office of
    Rural Broadband Act to establish someone or an office that's
    coordinating between all these so we're not giving the same
    money. I've seen this happen in my own state.
        Do you think--I guess this is to the whole panel. Do you
    think that this would be helpful, more coordination, instead of
    just having the doubling? I know, Dr. Jamison, you already
    answered that on the maps, but anyone else want to chime in?
        Mr. Law. I would absolutely concur that whether it is an
    Office of Rural Broadband or other agency that more
    coordination is crucial as we go forward and as more dollars
    are allocated for rural broadband. So I would be supportive.
        Senator Klobuchar. OK. Very good. That's it. Thank you.
        Senator Fischer. Thank you, Senator Klobuchar.
        Senator Moran.

                    STATEMENT OF HON. JERRY MORAN,
                        U.S. SENATOR FROM KANSAS

        Senator Moran. Senator Fischer, thank you.
        Mr. Law, I'm going to direct this question to you. Welcome
    to the entire panel. Thank you for your presence today.
        In 2011, the FCC adopted a rate floor policy that denies
    USF support to carriers to the extent that they charge rural
    customers less than the rate for local voice service for the
    average urban customer.
        The FCC froze the rate floor in 2017, pending a rulemaking
    to reconsider whether it was still necessary and, if so, how it
    should be calculated. This freeze is scheduled to expire July 1
    of this year, and in the absence of FCC action, the rate floor
    is expected to nearly double to meet the average urban rate of
    2019. That has significant consequences, I would think, in
    South Dakota. It does in Kansas.
        The Kansas statute, in fact, requires the carriers to
    authorize rate increases 45 days in advance with the Kansas
    Corporation Commission essentially shortening that deadline
    July 1 to something less than that. Otherwise, we've got
    significant harm to our Kansas consumers.
        The FCC has indicated an intent to address this issue but
    nothing has occurred to date, and I would ask for your
    description of this issue, what harm would result if this
    freeze is not extended, and the importance of its timeliness of
    that extension?
        Mr. Law. Thank you, Senator Moran, for your question.
        Yes, the clock is also ticking rapidly on the increase to
    the local service rate benchmark. To work the calendar
    backwards for you, you're right. It's by July 1 for carriers
    who receive USF, such as Golden West. We have to have it in
    place by June 1 and in South Dakota, we need to provide a
    minimum of 30 days' notice. So that would be May 1, as you
    mentioned in Kansas, a 45-day notice, and so the clock is
    ticking rapidly whether the rate goes from $18 to, I believe,
    $27 and that does not include all of the other fees.
        I am hopeful that the Commission understands the urgency
    for rural consumers in what I would believe to be somewhat of a
    messed-up scenario for local service rates that shouldn't
    overcharge rural consumers who still choose to keep a local
    landline phone. Charging them $27, plus the fees that go with
    it, I think is absurd.
        Senator Moran. Thank you for your comments. I'm hoping that
    I can use this, your testimony, and I'm hoping that the FCC
    will pay attention and act quickly.
        It also has a self-defeating apparatus, which is another
    reason not to have a landline, which is the source for the
    Universal Service Fund revenue to begin with. So we're in a
    circle that could be very damaging.
        Let me ask Dr. Jamison and Mr. Forde a question about over
    what I call overbuilding.
        Last year, I worked with my colleagues in the Senate
    Agriculture Committee to support a Broadband Overbuilding
    Protection. It survived the conference committee and is
    included in the Farm Bill.
        While coordination, as you just talked about, is important
    in preventing overbuilding, how else can we make certain that
    the money goes where it is most necessary? What are guidelines?
    What are regulations?
        Law now requires that 95 percent of that money must be
    spent where there is no service provided, and we've seen
    instances in the past in which it is easier for carriers to
    build over and generate the revenue from those circumstances
    with the hope that then that revenue is used to subsidize even
    more rural, more less-served areas.
        How can you help me address this issue? How can you help me
    make certain the money goes where it's most needed?
        Mr. Law. There are two things that I would consider. One is
    to be very supportive of the people who are working on that
    program in the USDA. I have some friends that are working
    there. They're being very diligent to make sure they don't fund
    overbuilding but providing strategic support for that.
        But then also enforcement, as well. I recall talking with
    people who received grants from the Department of Commerce,
    BTOP Program many years ago. They were very proud of the fact
    that they were overbuilding and they were doing it because
    that's where the customers were. That was their attitude and
    that should not have been allowed. They should not have been
    able to have kept that money.
        Senator Moran. Mr. Forde.
        Mr. Forde. Thank you very much, Senator.
        We appreciate all your work on the Farm Bill and on
    overbuilding. As a company that's been overbuilt several times
    throughout our footprint with our private capital overbuilt, we
    greatly appreciate that, and as I mentioned before, there have
    been some areas where we've even been triple-dipped on from
    companies where they've used universal service fees, Connect
    America funds, and USDA loans to overbuild areas where we
    already provided gig service, and if we're really going to
    reach the last mile, we can't have that type of stuff
    happening.
        Senator Moran. Thank you both.
        Senator Fischer. Thank you, Senator Moran.
        Senator Tester.

                     STATEMENT OF HON. JON TESTER,
                       U.S. SENATOR FROM MONTANA

        Senator Tester. I'm just going to kind of keep going where
    Senator Moran left off.
        So you got to educate me, folks. How big of an issue is the
    overbuilding issue as it applies to using Federal dollars? And
    if there's no broadband that's laid out without using Federal
    dollars, let me know that, too. OK? So how big of an issue are
    we talking about here?
        Dr. Jamison. I could tell you that I don't know the
    quantity of it. I know from the anecdotal evidence, a study I
    cited in my testimony, and then just the people I've talked
    with, that a lot of the specific grants went to overbuilding.
        Senator Tester. OK.
        Dr. Jamison. But I don't know how big that is in general.
        Senator Tester. When these people apply for their grants,
    are they applying with the idea that they're going to overbuild
    or are they selling it that this is going into an area that has
    no service?
        Dr. Jamison. My recollection from the people I've talked
    with is they were not advertising the fact that they were going
    to overbuild and maybe before they got the grant that was their
    intent, but once they understood the economics of the business,
    they went in where the services already were.
        Senator Tester. Which it goes back to what I think Senator
    Moran was saying and you guys were saying, that if we use money
    for overbuild, the money's hard to come by to begin with.
        So and I've heard three programs talked about today,
    Connect America, USDA, USF. Are there any other Federal
    programs out there used to lay broadband down or, as one of you
    said, sustained broadband?
        Mr. Law. Senator, I'll say there are some parts of each of
    those programs, little fingers.
        Senator Tester. Those are the three primary and they don't
    talk to one another?
        Mr. Law. I don't know that it's fair to characterize it as
    don't talk to each other. I would more characterize it perhaps
    they don't talk enough.
        Senator Tester. Let me ask it this way. Because you guys
    are familiar with applications to all three, correct? So when
    you fill out an application, Mr. Law, to any of those, do they
    ask you about the other programs?
        Mr. Law. The specific application perspective from our side
    would be as it relates to RUS and RUS loan funds, and in terms
    of asking us about other Federal funds, not specifically.
    However, they do very clearly ask about, I'll say, what
    broadband is available there today and we have to answer that
    as part of our application.
        Senator Tester. OK. So if we're going to solve this
    problem, is coordination between the programs the key? In other
    words, have them talk to one another, or what is the key? As a
    committee, this committee, what can it do to stop the overbuild
    because it's ridiculous? Go ahead. Just tell me, tell me what
    we should be doing.
        Mr. Law. I would formalize the coordination. It's good for
    the staffs to talk with each other, but there's no formal
    coordination. Then there will be gaps or there will be
    overlaps.
        Senator Tester. OK. Anybody else? Go ahead.
        Dr. Jamison. I would concur with that.
        Senator Tester. OK. So let me go on in a completely
    different direction.
        Generally speaking, it's the smaller providers in my home
    state of Montana, which is where I'm from, it's the smaller
    providers that really provide. They have a stronger obligation
    and interest. That's nothing against the big guys, but the fact
    is we're talking Frontier America here. OK.
        There are some of these rural exchanges, I don't think it's
    a bunch, but there are some, maybe more than I think, that are
    currently owned by large price-capped carriers that, quite
    frankly, don't have the same commitment to service as some of
    the smaller carriers. We'll be kind.
        Is there something we can do to encourage them to do a
    better job or is there something we could do to encourage them
    to sell those exchanges to somebody who really gives a damn
    about them? Talk to me.
        Mr. Law. I'll start, Senator. As a resident of Wahl, South
    Dakota, population 700, those towns----
        Senator Tester. And the home of Wahl Drug.
        Mr. Law. Thank you very much, Senator Tester. I know
    Senator Moran has also commented on his fondness for Wahl Drug.
    So I appreciate that.
        As a resident of a small community who works for a company
    that serves a lot of those small communities, they are also
    very near and dear I'll say not only to my individual heart but
    our organization's heart, and yes, there are instances of, I'll
    say, adjacent exchanges where service is not at a level that
    would be acceptable in our environment.
        Senator Tester. Right.
        Mr. Law. In terms of tools that I believe Congress has to
    effectively do that, quite honestly, Senator, I think the best
    one you have available is the bully pulpit and I'm not sure
    what else there would be.
        Senator Tester. OK. All right. Well, just one other
    question for you, Mr. Law, and you don't have to tell me. You
    can say no, I'm not going to answer this question.
        But what is the average price a railroad charges you per
    mile of the landline?
        Mr. Law. That is all over the board, but we have seen
    application permit fees and other fees that go in excess of
    $10,000 per crossing.
        Senator Tester. Per crossing?
        Mr. Law. Yes.
        Senator Tester. Thank you. Thank you, Mr. Chairman.
        Senator Thune. Thank you, Senator Tester.
        Next up, Senator Scott.

                     STATEMENT OF HON. RICK SCOTT,
                       U.S. SENATOR FROM FLORIDA

        Senator Scott. Thank you all for being here.
        Dr. Jamison, as you brag about, the University of Florida
    being the eighth best public university in the country.
        Dr. Jamison. Well, I do on a regular basis but I have not
    here.
        Senator Scott. So these satellite carriers, are they going
    to be able--like Gear Bus One Web, which is, you know,
    expanding and is going to put up all these satellites out at
    the Space Coast. Is that going to have an impact on broadband
    for rural areas?
        Dr. Jamison. I would think it probably would but that's
    beyond my expertise.
        Senator Scott. OK. Does anybody else----
        Mr. Law. I would say impact perhaps but it depends on what
    applications you're looking to do and what services do you wish
    to provide. At the end of the day with the satellite, you have
    some physics issues. While I am not a physicist, you have
    whether it's 300 miles or 22,000 miles in the sky and some
    latency going back and forth.
        So would I say they won't be able to provide service?
    Absolutely not. However, I think the quality of service will
    depend on what applications you are trying to run, Senator.
        Senator Scott. OK. And I didn't check where they were
    today, but my understanding is they say they're going to be
    able to compete with the same speed as Comcast and all the
    others have, but you haven't seen anything like that, that you
    believe they'll be able to do that?
        Mr. Law. I have not seen that and I have no evidence to say
    they can or cannot. What I can address to that, Senator, is
    that as someone who has provided network and network
    capabilities for in my company's history of over a hundred
    years, I focus more on what I know technologies can do today,
    not what I predict they may be able to do tomorrow.
        Senator Scott. Right. So we have counties that have spent
    the money to put in, you know, fiber lines. When they do that,
    why is it difficult to get providers to come in if a county's
    taken the financial risk to--isn't your biggest expense the
    lines?
        Mr. Law. Certainly that's a large portion of the expense in
    terms of the miles of line and the labor that goes to putting
    that fiber in. Certainly the line is a component of that.
        There are really kind of a couple of things. There are both
    engineering specifications and not that the counties couldn't
    engineer it properly, but what are the rights to use on those
    fibers? Do they stop where I need them to stop to serve a
    particular business versus Mr. Forde's company or another
    company down the road and so those are often challenging
    questions for a provider that is used to, I'll say, either
    engineering or architecting networks in a particular manner to
    now have someone else put in a network and say, well, just go
    ahead and use mine.
        It sounds simple on the face value but the reality is in
    terms of provisioning of that service, it may not be.
        Senator Scott. Right. But for you all, you don't believe
    that the satellite carriers are going to be much of a
    competition for the foreseeable future?
        Mr. Law. I can't say whether they will be the competition
    for the foreseeable future, but when you're talking about, you
    know, Cisco does what they call Visual Networking Index, VNI,
    the Cisco VNI, and when Cisco VNI predicts the busy hour
    traffic in the next 4 years will increase 4.8 times compared to
    where it is today, the demands of what something can
    technologically do today versus technologically accomplish
    tomorrow is a high bar. It's a high hurdle for those who build
    networks.
        Our average customer, Golden West customers uses roughly
    270 gigabytes of data a month. Two years ago, it was a 150. Two
    years from now, it'll be north of 500. Can satellite take that
    possibility? I'll believe it when I see it, but I have no
    evidence to say that they can't.
        Senator Scott. Thank you.
        Senator Thune. Thank you, Senator Scott.
        Senator Sinema.

                   STATEMENT OF HON. KYRSTEN SINEMA,
                       U.S. SENATOR FROM ARIZONA

        Senator Sinema. Thank you, Chairman and Ranking Member, for
    holding this important hearing.
        You know, I share the concerns that have been expressed by
    many of my colleagues about the funding and deployment of rural
    broadband. Rural broadband access in rural communities is of
    great concern for Senators on both sides of the aisle.
        The recent Broadband Deployment Report from the FCC
    indicates that over 520,000 Arizonans, that's a full 66 percent
    of rural Arizona, still lack access to reasonable minimum
    standard of broadband connectivity.
        I've also heard stories from Arizonans who lack reliable
    Internet services in places that aren't particularly rural or
    very far-flung and so the resulting digital divide between
    urban and rural communities makes it more difficult for rural
    Arizona to attract new companies, deliver high-quality health
    care, and offer world-class education for its kids.
        Recently, I met with representatives from the Black Mesa
    Community School. It's a pre-K to eighth grade school located
    in the Navajo Nation in North Arizona. For students at Black
    Mesa, most of their days start with a 3-hour-long bus ride to
    school down a dirt road that's about a 120 miles long, but
    often that bus gets stuck in the mud because it turns those 3
    hours into five or 6 hours because of the weather, however long
    it takes a tow team to come and pull the bus out of the mud.
        And while we certainly have identified a need for improved
    transportation infrastructure in parts of Arizona, one way to
    address this issue is through increased broadband
    infrastructure to ensure that these students have access to
    educational resources if they are at home whenever rain or snow
    or flooding makes it impossible to get to school.
        Beyond education, broadband services can help get access to
    health care, job training, and economic growth, and for our
    rural counties that are well-connected to broadband, we find
    that they have higher incomes and lower unemployment rates than
    the counties in our state with less connectivity.
        So we know that serving rural America, including tribal
    lands, is challenging for broadband providers.
        So my first question today for any of our witnesses is to
    note that each of you in your testimonies talked about the
    importance of coordinating deployment efforts from private
    capital and government subsidies to prevent overlaps in
    funding.
        Obviously we don't want to waste funding on areas that are
    already served when places like Arizona have nearly a million
    people who live with no terrestrial broadband.
        So could you talk about programs that do not work in
    concert and then explain the impact of how we can better
    promote coordination in places like rural Arizona to help
    communities like the Navajo Nation?
        Ms. Mattey. One thing that we haven't talked about
    specifically is the need for better coordination among the
    different programs that are part of the Universal Service Fund.
        We've spent most of our time talking today about the
    Connect America Fund, which is under the USF umbrella, but
    there also is a program called E-Rate and another program
    called the Rural Health Care Program, and for many years, I
    have thought that there needs to be better coordination among
    those three programs because each in its own way may be funding
    infrastructure and those programs today are administered in
    separate silos.
        Senator Sinema. What would it take to get those three
    programs to begin coordinating with each other so that we can
    get rid of those silos and actually fill these gaps?
        Ms. Mattey. I mean, in the first instance, it's fully
    within the FCC's existing authority to make that happen. The
    programs exist in different silos for historical reasons and so
    it just is a question of making a decision to better require
    coordination within the existing framework.
        Senator Sinema. OK. Thank you. Anyone else want to address
    this?
        Dr. Jamison. There's one more thing I would add and this
    has to do with the overbuilding issue.
        One thing I've seen done in other countries is that the
    subsidies aren't provided until the service is provided and
    that is an easy way to detect was there overbuild and you find
    out, OK, you're starting off service but it was already there,
    then the funding is never provided. So you're not in a position
    of having funded it or you're trying to get the money back.
        Senator Sinema. That's helpful. A follow-up question for
    Mr. Law.
        In your testimony, you speak about the FCC's willingness to
    address the USF budget shortfalls, and I just wanted to ask how
    the recent Order could help your company and companies like
    yours better deploy broadband and what this body, if anything,
    can do to be helpful there?
        Mr. Law. Thank you, Senator.
        The first part in terms of the December Order was, I'll
    say, the adequate budget for the foreseeable future as well as
    the time-frame contained within that budget and so when you're
    making the types of investments that companies like Golden West
    make in rural South Dakota, having that level of understanding
    what type of funding may be available for the next five or,
    depending on the program, the next 10 years allows operators,
    such as myself, to invest with more confidence as opposed to
    less confidence, which, you know, none of these investments are
    ones that are ones that, I'll say, bet the farm-type
    investments. So that would be the largest thing from the
    December Order, Senator.
        Senator Sinema. Thank you.
        Senator Thune. Thank you, Senator Sinema.
        We have a couple of members that are trying to make their
    way back here to ask questions and so we'll give them just a
    minute. I know this question has been addressed at some length
    already and I think Senator Schatz asked it, but I would ask
    you, Mr. Law.
        One of the issues that we talked about earlier is the
    shortcomings of the current broadband mapping data, something I
    think that, as Ms. Mattey spoke about, testified about, and
    those shortcomings are widely publicized and acknowledged, and
    so I would ask you what we can do to improve the accuracy of
    the maps and to ensure that reliable information's being
    assembled.
        Mr. Law. Thank you, Mr. Chairman.
        I think a couple of things. In terms of the maps
    themselves, there has been a lot of discussion over the past
    several months, both by members of this committee and
    throughout the industry, as well, about the accuracy of maps
    and certainly the Mobility Fund discussion put a fine
    flashlight on challenges in terms of adequacy or accuracy of
    those maps.
        At the end of the day, I do believe you will always need to
    rely on provider data to establish the baseline for those maps
    and the reason for that is whether it's mobile or whether it is
    fixed, we are the ones who either operate or own the network
    and are able to demonstrate or hopefully demonstrate, if we put
    it on a map, where that network exists and where it does not
    exist.
        What I think the key thing that needs to be included and
    you saw it in the Mobility Fund was the ability of, I'll say in
    this case, entities. In this case, I think I saw a lot of
    states, I saw a Farm Bureau, I believe, in one of the states
    challenge the accuracy of the mobility map and was able to
    clarify that that map was not accurate.
        I think the same is true for fixed broadband, quite
    frankly. Providers will continue to provide that data of where
    that is, but there has to be a second step. It does not need to
    be as lengthy or as full-blown work as the first step of
    providing that data but some type of second step to confirm,
    verify, whatever the phrase may be, that that broadband or that
    service is available at that location, and if it is, I'll say
    check the box. If it's not, revise the map.
        Senator Thune. OK. Anybody else?
        Mr. Forde. As a company, we provide multiple form broadband
    in multiple ways. So there are areas where we are running our
    fixed service and running those lines throughout service areas
    and those areas are services, but oftentimes there might be
    some place, just, say, short a half mile, quarter mile away,
    where, you know, we've seen inaccuracies where those folks will
    have that area as served, but we'll go ahead and using our
    fixed wireless service and you're drawing, say, a six-to-eight-
    mile circle around a town and an elevator or water tower where
    that fixed wireless service is coming out, that makes that
    whole area served. So then you can use that shape as a circle
    and cover that entire region.
        So we've got to make sure that when we're bringing all
    these different maps together and all the different types of
    technologies, those are accurately represented on the maps.
    Just because I'm running a wire, you know, weaving through an
    area doesn't make that whole area served, and we've got to make
    sure that's accurate on a map.
        Senator Thune. Well, we've been making that point with the
    FCC for a long time, that this we've got to have better mapping
    and better capability of figuring out where areas that are
    served, unserved, underserved in order to make sure that the
    resources that are allocated to serving the underserved
    actually head in the right direction. So mapping is critical to
    that.
        We've been joined by Senator Udall. So I'll recognize him.

                     STATEMENT OF HON. TOM UDALL,
                      U.S. SENATOR FROM NEW MEXICO

        Senator Udall. Thank you, Chairman Thune and Ranking Member
    Schatz. Thank you for this hearing.
        Everyone here knows how critical, and I'm sure you've been
    talking about it here for hours, broadband connectivity is for
    the vitality of rural communities. It's rare that I'm home that
    I don't hear about the need for rural broadband and better
    wireless connectivity, regardless of where I am in New Mexico.
        Too often, I hear from communities and members of tribal
    nations that they are being left behind and while I recognize
    there are some companies that are working hard to serve their
    communities with broadband, there are others that shrug their
    shoulders and say it's too hard or too expensive or walk away.
        This problem impacts communities in every single one of our
    states and I look forward to continuing working with each of
    you how to best close the digital divide.
        One part of the divide, one that some people call the
    cruelest, is the homework gap, having broadband connectivity is
    no longer a luxury for our students, and it most certainly
    impacts the economies of our rural communities when we lack
    basic connectivity for our children.
        I've told this story before but I think it's worth
    retelling. In 2016, when Commissioner Rosenworcel was in New
    Mexico, we visited Hatch, New Mexico, a rural community in
    South Central New Mexico. There, we met a young man who was on
    the high school football team. He didn't have Internet at home,
    so he regularly stayed late in the school parking lot after
    coming home from football games to do his homework. That's just
    not right, not to mention risky.
        Now imagine if he could have done that same homework when
    he was going to and from the football game on the bus. That
    young student athlete and the millions across the Nation need
    this advantage.
        To help close the homework gaps, Senator Gardner and I have
    introduced a bill to expand the E-Rate Fund for Wi-Fi Service
    on School Buses.
        The question for every member of the panel, as I've stated,
    is this bill this morning would allow schools to receive E-Rate
    funds for WiFi connectivity for school buses. In your opinion,
    will this bill help close the homework gap our students are
    facing? If any of you disagree, please offer your suggestion on
    how to close the digital divide for our students, and I think
    we can agree that no amount of deregulation can fully meet that
    need.
        Why don't we start with Ms. Mattey? Let me start with you.
        Ms. Mattey. Sure. Well, I think enacting that kind of a
    measure is common sense, and I think it is something that the
    FCC should seriously consider and do.
        Senator Udall. Thank you.
        Dr. Jamison. My response would be I don't know why that
    restriction was ever there in the first place. If the goal is
    to have broadband access for schools and students, why would we
    put boundaries on that to stop good ways of doing it, I don't
    know. So I've not read the legislation, but the concept sounds
    sound to me.
        Senator Udall. Great. Thank you. Please, Mr. Forde.
        Mr. Forde. We have been recipients of the E-Rate funding
    and we would certainly support that. It would be great if we
    had the right spectrum, 2.5 gigahertz, as an educational
    spectrum. If that was freed up, that would be more useful to
    reach some of those areas.
        And then I also added some of our Connect America funds. We
    will be serving some tribal regions and tribal areas in Senator
    Thune's home state of South Dakota, in the Sisseton-Wahpeton
    area, to serve some of those areas with fixed wireless service
    using Connect America funds, as well.
        Senator Udall. Great. Mr. Law.
        Mr. Law. Thank you, Senator.
        In terms of E-Rate and the homework gap, obviously there
    are three primary things that you've identified. First, they
    need connectivity in the school. Secondarily, they would need
    connectivity at home where providers, such as us, play a role,
    as well as at the school, and then the third is that gap in
    between, and you've identified one of those items. So I don't
    see a reason why that would not be supportable.
        Senator Udall. Great. Thank you, Mr. Chairman. Yield back.
        Senator Thune. Thank you, Senator Udall.
        Senator Schatz, anything else for the good of the order?
    OK.
        Well, listen, we want to thank all of you. We really do
    appreciate the perspective that you added to this discussion.
    We all talk about bridging the digital divide in our country
    and a lot of headway has been made, thanks to companies like
    Golden West and Midco and others, but there is a lot more that
    we can do, and we want to make sure that the resources that are
    allocated to that end are used in the most efficient and
    effective way possible, preferably without duplication.
        But this is a goal of this committee, has been, I think,
    for a long time, and that is to extend these types of
    technologies and services to people all across our country and
    that they all might enjoy and share in the benefits of the
    things that even those in more populated areas get to take
    advantage of on a regular basis.
        So you all are on the front lines of doing that and we
    thank you for that.
        So appreciate your testimony today and your responses to
    our questions and we will keep the hearing record open for a
    couple of weeks and Senators will be asked to submit any
    questions for the record and upon receipt, we ask our panelists
    to submit their written answers to the Committee as soon as
    possible.
        I also want to ask for a statement submitted by Senator
    Blunt to be made a part of the hearing record. We'll do that
    without objection.
        [The prepared statement of Senator Blunt follows:]

                     Prepared Statement of Hon. Roy Blunt,
                           U.S. Senator from Missouri
        For Chairman Thune:

        Thank you for convening this hearing to discuss the important issue
    of rural investment in modern broadband networks. This issue is one of
    particular importance to Missouri. Around half of rural Missourians
    don't have access to high-speed broadband internet, making it harder
    for them to compete and succeed. Ensuring rural Missourians have access
    to broadband will improve quality of life and enhance economic
    opportunities, whether it's a farmer utilizing precision agriculture, a
    doctor treating patients through telemedicine, or a student studying
    for final exams.
        During my time in the Senate, I have worked to expand rural access
    to Federal resources for modern broadband deployment, and I think it is
    very appropriate for this Committee to evaluate how those resources can
    not only be expanded upon, but also made more efficient in
    accomplishing the goal of extending broadband service to unserved areas
    of the country. This includes resources allocated from the Universal
    Service Fund.
        The Universal Service Fund recently awarded approximately $254
    Million over 10 years to serve unserved areas of Missouri with modern
    broadband service through the Connect America Fund Phase II Auction.
    This sum was awarded to a wide range of providers like traditional
    wireline operators, wireless Internet service providers, and rural
    electric cooperatives which are connecting many communities with
    broadband for the first time. One of my goals this year is to work with
    the FCC to ensure that these providers are capable of building out the
    appropriate infrastructure in accordance with the Federal
    Communications Commission's requirements. In addition, I want to ensure
    that this funding remains in Missouri. The unserved communities that
    this funding will serve cannot afford to wait for the economic benefits
    that modern broadband connectivity provides. Likewise, this award is a
    promise from the FCC to my rural constituents, and it is a promise that
    I would like to see fulfilled.
        I also agree with the Chairman and this Committee that the
    Universal Service Fund needs to ensure a long-term, predictable stream
    of funding to providers that are building out home-by-home in high-cost
    areas. And, in order to better target this funding, we need more
    accurate and trustworthy maps that depict broadband availability.
        I am grateful that the witnesses in attendance today are willing to
    share their expertise with me and this Committee, and I look forward to
    working with the members on this Committee to help better serve our
    unserved constituents.

        Senator Thune. So thank you all very much.
        This hearing is adjourned.
        [Whereupon, at 4:04 p.m., the hearing was adjourned.]

                                A P P E N D I X

               Prepared Statement of Hon. Shelley Moore Capito,
                        U.S. Senator from West Virginia
        Thank you Chairman Thune and Ranking Member Schatz for holding this
    hearing. This is an issue I am very passionate about and I look forward
    to today's discussion.
        The benefits of broadband access are numerous, but too many parts
    of rural America can't attract the investment they need to get online
    and its hurting our economic potential.
        Despite significant Federal and private funding, West Virginia is
    less connected than nearly every other state in America. We've been
    hamstrung by a lack of competition between service providers and overly
    burdensome regulations on our rural service providers.
        If there is one thing that is for sure on this Committee--in terms
    of broadband access--it is that we ALL agree that we need more
    accurate, more granular to assess who has access and who does not.
        Congress has taken significant steps towards fixing this problem,
    but we have a long way to go. Last year in the Consolidated
    Appropriations Act, we directed the National Telecommunications and
    Information Administration (NTIA) to update the National Broadband Map
    by leveraging previously developed state partnerships. Last month
    (February), NTIA announced the initial eight state partners--my home
    state of West Virginia included--that have active state broadband
    programs that could contribute data in order to improve our
    understanding of broadband availability.
        I look forward to today's hearing on how Congress can help close
    the digital divide and benefit the rural economy.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                   Denny Law
        Question 1. All across Nevada, I hear from business owners, medical
    professionals, educators, farmers, and tribes about the importance of
    high-speed broadband. Telemedicine and distance learning, which both
    require broadband access, are especially vital to residents of rural
    and remote areas, so people don't have to travel 100 miles for
    healthcare or for educational opportunities. That's why last year I led
    a bipartisan letter to House appropriators with Congressman Sean Duffy
    expressing strong support for the USDA Distance Learning and
    Telemedicine grant program, which helps rural communities invest in
    telecom equipment and technologies to assist its residents in accessing
    educational and health care services. This past fall, Valley Health
    System received one of these grants to improve telemedicine for
    patients in Nevada, including communities in Clark, Elko, Lincoln, Nye,
    and White Pine counties. One of the reasons this grant program is so
    successful is that it allows schools and hospitals to make investments
    in infrastructure to overcome barriers these communities face,
    including long travel distances and a shortage of providers.

       Given the important of broadband to rural healthcare, and
            education, how can we ensure that the telecommunications
            industry's focus on the transition to 5G doesn't leave behind
            rural communities who do not yet even have broadband access?
        Answer. The buildout of 5G and access to high-speed broadband in
    rural America are, in many ways, two separate topics. Generally
    speaking, fixed and mobile broadband should be seen as complements,
    rather than substitutes. While mobile broadband offers many great
    benefits for users, limitations in spectrum capability and coverage
    reach make it such that more robust, high-quality fixed broadband
    connections remain essential for rural and urban consumers alike to
    access online services and transact business. Moreover, to handle the
    kinds of data demands increasingly seen from broadband users, even the
    most advanced wireless network will rely heavily upon wired connections
    to handle network loads and avoid congestion.
        More specifically with respect to 5G-enabled services, despite what
    some claim 5G can promise in rural America, the reality is that the new
    mobile technology as defined today is not capable of deploying long-
    range wireless 5G across large swaths of rural land. It is also
    unrealistic to assume that wireless operators will deploy anytime soon
    the multitude of small cells every several hundred feet across rural
    America as needed to deliver on the full promise of 5G in a manner
    analogous to urban areas--and even if and when such small cells are
    deployed in rural areas, they will need robust wired backhaul to ensure
    yet again that data demands will not outpace available spectrum and to
    avoid congestion.
        Therefore, while 5G offers great promise, policymakers should not
    look at 5G as a salvation for rural broadband challenges. Even the most
    advanced wireless 5G-enabled network will rely upon a foundation of
    substantial wireline infrastructure, and consumers will continue to
    need access to both fixed and mobile services to conduct business or
    otherwise make the most effective use of Internet access. It is
    therefore important that policymakers not confuse or conflate 5G policy
    and the separate need to tackle rural broadband challenges.

       What are other barriers for rural broadband deployment and
            how can Congress address these?
        Answer. The biggest barriers to rural broadband deployment are
    distance and density--which in turn make it difficult, if not
    impossible, to make the business case for investment in rural networks.
    Programs such as the Federal high-cost universal service fund are
    critical to overcome these barriers, to help make the business case for
    deployment, and just as importantly, to help keep services affordable
    so that rural consumers can adopt broadband and make effective use of
    it. These programs are key to the sustainability of investments made
    for decades, and the most important thing that Congress can do to
    advance rural broadband is help ensure that universal service
    mechanisms are sufficient and predictable as intended by law.
        But even as the business case for rural broadband is perhaps the
    greatest challenge, as mentioned in my written testimony, expensive
    permitting costs also plague rural broadband providers. From dealing
    with multiple agencies while trying to gain access to Federal lands to
    railroad right-of-way permits that can cost in excess of $10,000 per
    railroad crossing, implementing sensible rules of the road that allow
    carriers like Golden West to work through a reasonable permitting
    process are paramount to swift broadband deployment in new areas.

        Question 2. In the FCC's 2018 Broadband Deployment Report, the
    agency found that over 35 percent of people living on tribal lands lack
    access to high-speed fixed broadband. That is compared to 90 percent of
    Americans overall who have access to high-speed broadband. In Nevada,
    home to nearly two-dozen tribes, our state's Office of Science
    Innovation and Technology is working with several tribes to get fiber
    assets when and where possible, or at least a very good wireless
    solution.

       Mr. Forde and Mr. Law--what are your two companies and
            others doing in your rural communities to include tribes in
            broadband deployment and help develop programs that address
            their unique needs?
        Answer. Golden West Telecommunications Cooperative serves portions
    of five tribal reservations in South Dakota. Golden West serves the
    majority of the landmass of the Pine Ridge Reservation, Rosebud Sioux
    Reservation and the Lower Brule Reservation, as well as smaller
    portions of the Cheyenne River Reservation and the Yankton Sioux
    Reservation.
        Golden West is committed to providing access to advanced
    telecommunications services, including broadband, throughout tribal and
    non-tribal lands in our service area.
        As an example of Golden West's commitment to serving tribal lands,
    our largest fiber project in 2018 brought fiber optic service to every
    home, business and government location in Pine Ridge village, the
    largest community on the Pine Ridge Reservation and the location of the
    tribal headquarters. Golden West has also installed fiber optics to a
    large portion of the rural area within the Pine Ridge Reservation,
    including the rural areas surrounding Oglala and Slim Buttes. Golden
    West's 2019 plans include upgrading portions of the Interior exchange
    within the Pine Ridge Reservation to fiber optic service and Golden
    West's 2020 plans include additional fiber optic upgrades on the Pine
    Ridge Reservation as well as the Lower Brule Reservation.
        On the Cheyenne River Reservation, Golden West upgraded the entire
    portion of its service area to fiber optics in 2010.
        Golden West has also deployed fiber optic service to every K-12
    school and higher education facility located within our service area in
    any tribal lands.
        Telecommunications companies face many challenges when seeking to
    deploy or upgrade telecommunications services in rural areas and
    specifically on tribal lands. The challenges may include:

       Rugged terrain that is sparsely populated resulting in
            higher construction costs

       Lack of major business customers to offset the high cost of
            upgrades/construction

       Economic conditions that make affordability for consumers
            difficult

       Excessively lengthy and expensive processes to acquire
            rights-of-way for facility placement

       Additional cost to comply with THPO (Tribal Historic
            Preservation) and TERO (Tribal Employment Rights) obligations
            on tribal lands

       Assertion of tribal law, which may be in conflict with
            federal/state telecommunications law

       Additional discretionary fees charged per-foot, per-rod or
            per-mile-of-fiber installed that are imposed by tribal
            authorities solely on telecommunications providers attempting
            to install or upgrade broadband service.

        Question 3. E-rate program: The Schools and Libraries Universal
    Service Fund, commonly referred to as ``E-rate,'' is the Nation's
    largest education technology funding program. Over the past 10 years,
    the E-rate program has provided over $3.4 billion to K-12 schools and
    public libraries in Nevada alone--funding that has supported the
    purchase of telecommunications and Internet services. E-rate and
    Universal Service Fund programs in general are great examples of how
    public-private partnerships in the broadband space can be very
    successful.

       In Nevada, our former Governor spearheaded the acquisition
            of state-matching funds for special construction projects. Mr.
            Law, in your testimony you describe the importance of matching
            funds and public-private partnerships. Can you elaborate on
            this?
        Answer. Oftentimes, the most successful stories of rural broadband
    deployment are ones where all relevant stakeholders have ``skin in the
    game.'' Situations where federal, state, and local stakeholders and
    providers are all working collaboratively to deploy new broadband
    infrastructure to a school, hospital, or rural community have shown
    demonstrated success. Regardless of the source of public funds (federal
    or state), with rare exception, we believe that the best, most
    successful projects are those where a private operator brings its own
    resources and expertise to the table and then is able to leverage those
    government resources to build and maintain a network for years to come.
    This mix of public and private capital helps to advance broadband
    deployment projects that might otherwise not proceed, while also making
    sure that all involved have a stake and interest in the long-term
    success of the projects.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                  Justin Forde
        Question 1. All across Nevada, I hear from business owners, medical
    professionals, educators, farmers, and tribes about the importance of
    high-speed broadband. Telemedicine and distance learning, which both
    require broadband access, are especially vital to residents of rural
    and remote areas, so people don't have to travel 100 miles for
    healthcare or for educational opportunities. That's why last year I led
    a bipartisan letter to House appropriators with Congressman Sean Duffy
    expressing strong support for the USDA Distance Learning and
    Telemedicine grant program, which helps rural communities invest in
    telecom equipment and technologies to assist its residents in accessing
    educational and health care services. This past fall, Valley Health
    System received one of these grants to improve telemedicine for
    patients in Nevada, including communities in Clark, Elko, Lincoln, Nye,
    and White Pine counties. One of the reasons this grant program is so
    successful is that it allows schools and hospitals to make investments
    in infrastructure to overcome barriers these communities face,
    including long travel distances and a shortage of providers.

       Given the important of broadband to rural healthcare, and
            education, how can we ensure that the telecommunications
            industry's focus on the transition to 5G doesn't leave behind
            rural communities who do not yet even have broadband access?
        Answer. As your question acknowledges, the transition to 5G,
    especially with the current focus on mobile, small-cell technology,
    threatens to leave rural America even further behind. Current 5G
    technology measures the distance from the small cell to the customer in
    feet. Rural solutions, however, must be measured in miles. Remote rural
    areas lack the heavy infrastructure and the capital needed to support a
    5G small cell deployment. At a time when too many areas such as those
    in rural Nevada or rural South Dakota or North Dakota in our footprint
    are ``0G'' areas lacking any access to broadband, policies,
    regulations, and legislation must promote entry not just by 5G but by
    other technologies that present solutions to close the rural digital
    divide.
        For example, legislation, rules, and regulations for opening and
    repurposing spectrum should be technology neutral. Fixed wireless
    operations can solve the digital divide but need spectrum to do so.
    Precious and finite spectrum should not be allocated to 5G or mobile
    users only and must also include fixed wireless operators. Similarly,
    legislation, rules, and regulations aimed at speeding up small cell or
    5G deployments or reducing permitting costs should include other
    technologies, such as fixed wireless.

       What are other barriers for rural broadband deployment and
            how can Congress address these?
        Answer. Another barrier is inaccurate data about rural broadband
    coverage. Without accurate data on which areas do or do not have access
    to broadband service, it is difficult to ensure that Federal subsidies
    for rural broadband deployment, such as the FCC's Connect America Fund
    or the USDA ReConnect program, are targeted to the areas of greatest
    need. Congress can continue to support rural broadband deployment by
    revising and refining broadband maps to reflect which areas actually
    have service.
        Specifically, the FCC currently considers an area served if one
    household in a census block is served. In western and largely rural
    states like Nevada or my home state of North Dakota, census blocks are
    significantly larger than in more densely populated urban areas and
    reporting on census blocks overstates coverage. NCTA-the Internet and
    Television Association has proposed, and Midco supports as a first step
    in reforming coverage maps, a requirement that broadband providers
    submit ``shapefiles'' of their respective service areas. A
    ``shapefile'' is a digital representation, overlaid on a map, that
    better reflects the actual contours of a provider's Internet service
    area than census blocks. The FCC could compile shapefile data from all
    providers into a national map that would be more granular--and more
    accurate--than the current census block approach. These improved maps
    could be rolled out nationwide by the end of 2020 as an initial step in
    reforming broadband mapping.
        Finally, once government agencies determine areas of greatest need,
    it is important that funding programs are open to all companies that
    can demonstrate an ability to provide service, regardless of their
    underlying technology. As we saw in the FCC's CAF Phase II reverse
    auction, by instilling technology-neutral competition into the program,
    the Commission was able to stretch limited dollars further and ensure
    more locations were served.

        Question 2. In the FCC's 2018 Broadband Deployment Report, the
    agency found that over 35 percent of people living on tribal lands lack
    access to high-speed fixed broadband. That is compared to 90 percent of
    Americans overall who have access to high-speed broadband. In Nevada,
    home to nearly two-dozen tribes, our state's Office of Science
    Innovation and Technology is working with several tribes to get fiber
    assets when and where possible, or at least a very good wireless
    solution.

       Mr. Forde and Mr. Law--what are your two companies and
            others doing in your rural communities to include tribes in
            broadband deployment and help develop programs that address
            their unique needs?
        Answer. As part of our Connect America Fund Phase II buildout, we
    will provide high-speed, low latency fixed wireless services within the
    Lake Traverse Tribal Area in South Dakota. In doing so, we will work
    with the local Tribal regulatory authorities in offering services on
    Tribal lands. Otherwise, Midco is not aware of other companies'
    practices with respect to Tribal lands.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                  Mark Jamison
        All across Nevada, I hear from business owners, medical
    professionals, educators, farmers, and tribes about the importance of
    high-speed broadband. Telemedicine and distance learning, which both
    require broadband access, are especially vital to residents of rural
    and remote areas, so people don't have to travel 100 miles for
    healthcare or for educational opportunities. That's why last year I led
    a bipartisan letter to House appropriators with Congressman Sean Duffy
    expressing strong support for the USDA Distance Learning and
    Telemedicine grant program, which helps rural communities invest in
    telecom equipment and technologies to assist its residents in accessing
    educational and health care services. This past fall, Valley Health
    System received one of these grants to improve telemedicine for
    patients in Nevada, including communities in Clark, Elko, Lincoln, Nye,
    and White Pine counties. One of the reasons this grant program is so
    successful is that it allows schools and hospitals to make investments
    in infrastructure to overcome barriers these communities face,
    including long travel distances and a shortage of providers.

        Question. Given the important of broadband to rural healthcare, and
    education, how can we ensure that the telecommunications industry's
    focus on the transition to 5G doesn't leave behind rural communities
    who do not yet even have broadband access?
        Answer. You are right that people in rural areas value broadband
    for many reasons, including its ability to improve health care and
    education. In my opinion the most important thing you and your
    colleagues can do is reduce waste in the current broadband subsidy
    systems as this would liberate resources for further development. As
    you know, billions of dollars have been delivered to companies to
    provide broadband in rural areas. Unfortunately, the measurable impacts
    have been negligible. I have not seen an estimate of the total amount
    of waste, but the Federal Communications Commission (FCC) experienced
    at least a 70 percent savings in its recent auction. That was $1.2
    billion in savings for the specific program that was subject to the
    auction. If that same savings had been achieved in the entire high-cost
    subsidy program, which cost $42 billion from 2012 through 2016, there
    would have been an additional $29.4 billion available for expanding
    broadband. Just think of the greater service expansion that could be
    made with the money made available by improved efficiency.
        There are two important things that should be done to reduce waste.
    One is to expand the use of reverse auctions. The FCC has used it for
    one aspect of its subsidy program. It should be supported in extending
    the use of auctions in other parts as well.
        The second thing to do to reduce waste is to consolidate Federal
    subsidy programs so there are no conflicting or duplicative efforts. As
    we discussed in the hearing, there are many instances of duplication of
    subsidies and of subsidies being given to build infrastructure where
    service already existed. Consolidation should eliminate such
    possibilities. If consolidation is not feasible at this time, I would
    suggest considering a one-subsidy policy as I outlined in a blog
    following my Senate testimony.\1\ In a nutshell, the one-subsidy policy
    would direct the FCC to ensure that its subsidy program (which is the
    most comprehensive in my estimation) adjusts to remove duplicative
    subsidies elsewhere. That is to say, if the FCC found that a state or
    Federal subsidy program other than its own provides a subsidy that in
    any way duplicates an FCC subsidy, then the FCC would deduct the
    duplicative subsidy amount from its commitment to the recipient
    broadband providers. This would reduce duplication, further saving
    subsidy dollars that could be redeployed to speed broadband adoption
    where it does not exist.
    ---------------------------------------------------------------------------
        \1\ Mark A. Jamison, ``The FCC Is Fixing a Rural Broadband
    Embarrassment, but Work Remains,'' AEIdeas, March 18, 2019, https://
    www.aei.org/publication/the-fcc-is-fixing-a-rural-broadband-
    embarrassment-but-work-remains/.
    ---------------------------------------------------------------------------
        With respect to 5G, I would encourage you and your colleagues to
    focus on broadband in general and not specifically on 5G. 5G will play
    an important role in advanced telecommunications infrastructure for the
    foreseeable future. But it is unlikely to be the best broadband
    solution in all situations. For example, some industry analysts are
    finding evidence that other technologies outperform 5G in some areas
    with low population density.\2\ These conclusions may prove incorrect,
    but they serve as a reminder that public policy should remain
    technology neutral wherever practical.
    ---------------------------------------------------------------------------
        \2\ See, for example, John Hruska, ``Report: Verizon's Fixed 5G
    Broadband Service Economically Flawed, Unsustainable,'' ExtremeTech,
    March 25, 2019, https://www.extremetech.com/mobile/288254-report-
    verizons-fixed-5g-broadband-service-economically-flawed-unsustainable.

        Regarding health care and education, I would encourage you and your
    colleagues to consider whether broadband-specific subsidies are the
    best solution for improved services. In my experience solution-specific
    subsidies are often less efficient than subsidies that allow greater
    local discretion. I recall when I lived in Iowa in the early 1990s that
    the state government built a broadband network for local governments
    and for education. I do not recall the amount of money spent, but
    several cases arose where schools could have improved education more if
    they had been allowed to spend the monies on other learning resources.
    So while the technology was useful, it was not the best use of taxpayer
    ---------------------------------------------------------------------------
    money.

        Question. What are other barriers for rural broadband deployment
    and how can Congress address these?
        Answer. Two key barriers are permitting and access to Federal lands
    and buildings. These issues are being addressed in concert by the White
    House and several Federal agencies, including the Department of
    Commerce, the Department of Interior, and the FCC. To my knowledge, no
    action by Congress is needed, but the working group members could
    provide better insights than can I.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                  Carol Mattey
        Question 1. All across Nevada, I hear from business owners, medical
    professionals, educators, farmers, and tribes about the importance of
    high-speed broadband. Telemedicine and distance learning, which both
    require broadband access, are especially vital to residents of rural
    and remote areas, so people don't have to travel 100 miles for
    healthcare or for educational opportunities. That's why last year I led
    a bipartisan letter to House appropriators with Congressman Sean Duffy
    expressing strong support for the USDA Distance Learning and
    Telemedicine grant program, which helps rural communities invest in
    telecom equipment and technologies to assist its residents in accessing
    educational and health care services. This past fall, Valley Health
    System received one of these grants to improve telemedicine for
    patients in Nevada, including communities in Clark, Elko, Lincoln, Nye,
    and White Pine counties. One of the reasons this grant program is so
    successful is that it allows schools and hospitals to make investments
    in infrastructure to overcome barriers these communities face,
    including long travel distances and a shortage of providers.

       Given the important of broadband to rural healthcare, and
            education, how can we ensure that the telecommunications
            industry's focus on the transition to 5G doesn't leave behind
            rural communities who do not yet even have broadband access?
        Answer. Private sector firms that are focused on 5G are not likely
    to invest in low-return rural areas if they have opportunities to earn
    higher returns in suburban and urban areas. Additional funding is
    critical to bring universal access to broadband in rural areas. The
    reason why certain areas aren't served today is that they are low
    density: the costs to deploy broadband are too high compared to the
    anticipated revenues from the relatively few customers in the area. The
    availability of funding for specialized networks that only serve
    educational or health care institutions can have the perverse effect of
    making the business case more challenging for other providers that
    intend to serve residential and business customers alike. Today, the
    FCC's Connect America Fund, E-rate and Rural Health Care programs are
    administered independently of one another, in separate silos, with
    little effort to fund broadband network expansions on a more holistic
    basis to all users in the community. This is an area deserving of
    greater attention. Congress could make clear that there are no
    statutory impediments to measures that would create incentives for more
    coordinated efforts across these three programs to deploy broadband
    networks in rural America.

       What are other barriers for rural broadband deployment and
            how can Congress address these?
        Answer. Aside from funding to improve the business case for
    broadband in rural areas, it's necessary to have a willing service
    provider. Some states have laws that prohibit certain entities from
    becoming broadband providers. Federal tax laws may create disincentives
    for existing service providers to sell rural exchanges to companies
    that have a deeper local commitment and willingness to build broadband
    in rural areas. These are just a few of the barriers to rural
    deployment that Congress might wish to examine further.

                                      [all]