[Senate Hearing 114-556]
[From the U.S. Government Publishing Office]
S. Hrg. 114-556
ENSURING INTERMODAL USF SUPPORT
FOR 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 FOURTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 4, 2016
__________
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Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
MARCO RUBIO, Florida CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin TOM UDALL, New Mexico
DEAN HELLER, Nevada JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado GARY PETERS, Michigan
STEVE DAINES, Montana
Nick Rossi, Staff Director
Adrian Arnakis Deputy Staff Director
Rebecca Seidel, General Counsel
Jason Van Beek, Deputy General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Clint Odom, Democratic General Counsel and Policy Director
------
SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, INNOVATION,
AND THE INTERNET
ROGER F. WICKER, Mississippi, BRIAN SCHATZ, Hawaii, Ranking
Chairman MARIA CANTWELL, Washington
ROY BLUNT, Missouri CLAIRE McCASKILL, Missouri
MARCO RUBIO, Florida AMY KLOBUCHAR, Minnesota
KELLY AYOTTE, New Hampshire RICHARD BLUMENTHAL, Connecticut
TED CRUZ, Texas EDWARD MARKEY, Massachusetts
DEB FISCHER, Nebraska CORY BOOKER, New Jersey
JERRY MORAN, Kansas TOM UDALL, New Mexico
DAN SULLIVAN, Alaska JOE MANCHIN III, West Virginia
RON JOHNSON, Wisconsin GARY PETERS, Michigan
DEAN HELLER, Nevada
CORY GARDNER, Colorado
STEVE DAINES, Montana
C O N T E N T S
----------
Page
Hearing held on February 4, 2016................................. 1
Statement of Senator Schatz...................................... 1
Prepared statement of Hon. Roger F. Wicker, U.S. Senator from
Mississippi................................................ 1
Statement of Senator Wicker...................................... 17
Statement of Senator Moran....................................... 43
Statement of Senator Heller...................................... 45
Statement of Senator Manchin..................................... 47
Statement of Senator Gardner..................................... 50
Statement of Senator Daines...................................... 53
Statement of Senator Blunt....................................... 55
Statement of Senator Klobuchar................................... 60
Statement of Senator Ayotte...................................... 62
Witnesses
Darrington Seward, Managing Partner, Seward & Son Planting
Company........................................................ 3
Prepared statement........................................... 5
Steven K. Berry, President and Chief Executive Officer,
Competitive Carriers Association............................... 10
Prepared statement........................................... 12
James G. Carr, CEO, All Points Broadband, on behalf of the
Wireless Internet Service Providers Association (WISPA)........ 17
Prepared statement........................................... 19
Michael Rapelyea, Vice President for Government Affairs, ViaSat,
Inc............................................................ 26
Prepared statement........................................... 28
LeRoy T. Carlson, Jr., Chairman, United States Cellular
Corporation.................................................... 34
Prepared statement........................................... 35
Appendix
Response to written questions submitted to Darrington Seward by:
Hon. Roger F. Wicker......................................... 65
Response to written question submitted to Steven K. Berry by:
Hon. Roger F. Wicker......................................... 66
Hon. Dan Sullivan............................................ 67
Response to written question submitted to James G. Carr by:
Hon. Deb Fischer............................................. 67
Hon. Dan Sullivan............................................ 68
Hon. Cory Booker............................................. 69
Response to written question submitted to Michael Rapelyea by:
Hon. Deb Fischer............................................. 69
Response to written question submitted to LeRoy T. Carlson, Jr.
by:
Hon. Deb Fischer............................................. 70
Hon. Dan Sullivan............................................ 72
ENSURING INTERMODAL USF SUPPORT
FOR RURAL AMERICA
----------
THURSDAY, FEBRUARY 4, 2016
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 10:38 a.m. in
room SR-253, Russell Senate Office Building, Hon. Roger Wicker,
Chairman of the Subcommittee, presiding.
Present: Senators Wicker [presiding], Blunt, Ayotte,
Fischer, Moran, Sullivan, Heller, Gardner, Daines, Schatz,
Klobuchar, Blumenthal, Booker, and Manchin.
OPENING STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Good morning. This hearing will come to
order.
Senator Wicker is on his way back from the Prayer
Breakfast, so he asked that I gavel in and get us started.
Senator Wicker's opening statement will appear in the record.
[The prepared statement of Senator Wicker follows:]
Prepared Statement of Hon. Roger F. Wicker, U.S. Senator from
Mississippi
Alongside my good friend and colleague Ranking Member Schatz, I am
glad to convene the first hearing of 2016 in the Subcommittee on
Communications, Technology, Innovation and the Internet.
As we all know, consumer demand for broadband, across many
different technological platforms, continues to grow. While positive
strides have certainly been made across the country, deployment to
rural and hard-to-reach areas still lags behind.
Applications such as precision agriculture, which we will hear
about today, are revolutionizing crop production. Without wireless
connectivity however, farmers aren't able to take advantage of new
technologies in the field that not only speed up production, but can
also reduce environmental impact.
I'm glad to have Mr. Darrington Seward, a 4th generation farmer
from Louise, MS, with us here today to talk about the impact of
wireless expansion in the Mississippi Delta. Mr. Seward was kind enough
to meet with me yesterday to discuss all of the innovative work he and
his team are doing in the Delta.
Ensuring rural America has the same access to technology as its
urban counterparts has long been a priority of mine. While the state of
Mississippi provides fertile ground for innovation in areas like
telehealth and precision agriculture, without the connective services
required to run such technology, Americans living in areas without
advanced services continue to be left behind.
We are here today to talk about ways to close this gap. The goal in
creating the Universal Service Fund (USF) as part of the 1996 Act was
to ensure ubiquitous, reliable communications services for all
Americans. A lot has changed in the past 20 years. We witnessed
unparalleled advancements in technology and a new competitive
landscape.
The era we live in today raises new questions about how the
original goal of universal service is achieved. In recent years, the
FCC has made a number of reforms to the USF aimed at transitioning the
Fund to support broadband, but more needs to be done to reach rural
areas.
The FCC's 2011 USF Transformation Order set up a two-phase process
for both the Mobility Fund and Connect America Fund (CAF), but delays
in implementing the plan set forth by the Commission stand in the way
of continued deployment to areas that are uneconomical to serve.
Today, we want to hear from our witnesses about what they are doing
to help close the digital divide and how best to target high-cost USF
support to achieve Congress and the Commission's goal of universal
service, regardless of the technology used.
I would like to welcome all of our witnesses and thank them for
testifying this morning. Our panel today represents a number of
technologies serving rural and urban areas alike and also those who
rely on this technology every day.
I look forward to the testimony from our distinguished panel. I
will now turn it over to my colleague, Mr. Schatz.
Senator Schatz. We will start with my opening statement and
then the testimony.
On behalf of Senator Wicker, I want to thank Senator
Manchin for drawing the Subcommittee's attention to these
important issues.
The Universal Service program was created to make sure that
all Americans have the security and the opportunities that come
with being connected. Just like that landline phone was
necessary in the past, everyone needs a broadband connection to
fully participate in today's society to perform the most common
tasks like applying for a job, doing homework, or accessing
government services. It is no longer enough to ensure that
every American has access to quality voice service. Being a
citizen today means being connected to the Internet.
The Connect America Fund is the biggest program in the
Universal Service system, investing nearly $4 billion across
the country to support the build-out of broadband connectivity
and voice service to high-cost areas. This fund makes up almost
half of the USF program funding. It is, therefore, critical
that we use it wisely to reach the most people possible. Like
any USF program, we must ensure that we remain vigilant against
waste, fraud, and abuse. The FCC must continue reforms that
stress transparency and accountability.
Second, all stakeholders must work with the FCC to ensure
that we have effective distribution mechanisms and that support
only goes where no unsupported service is offered to ensure
that money is being spent wisely. The Connect America Fund is
especially important to enable rural connectivity where
building out a network, especially last-mile connections, has
always been a unique challenge. Rural areas often have low
population density which makes it difficult for carriers to
make a business case to invest the necessary capital. This,
coupled with mountainous or difficult terrain, can make it
challenging to provide voice or broadband services without
government support. This high-cost CAF support is essential to
ensure access to all Americans regardless of geography.
Unfortunately, the FCC's most recent broadband progress
report finds that rural areas and especially tribal lands are
being left behind. In fact, millions of Americans in rural
areas lack access to high-speed mobile and fixed broadband
services.
Considering these disparities, the FCC should be nimble in
its approach in disbursing these funds. It is essential that
Connect America consider all options to close the gap in our
rural and native communities. That is why today's hearing is so
important to hear from stakeholders and to discuss the
advantages and disadvantages of potential solutions and
technologies.
As the FCC moves forward with the CAF II reverse auction,
it needs to weigh the costs and benefits of using different
technologies, including fiber, mobile wireless, fixed wireless,
and satellite services to reach everyone. And the Mobility Fund
must remain a top priority as well to ensure dedicated funding
for wireless-specific connectivity.
Finally, recognizing that some of the areas connected by
CAF investments may never be financially viable enough purely
through private means, we need to ensure that funds are
available to build out new users but also to maintain the
infrastructure once it is built. CAF must provide certainty.
Without it, service providers will not invest in the most
remote areas and those consumers living in those areas will
lose out. Everyone must have reliable and robust voice and
broadband services. However, our country is diverse and our
policies must accommodate that diversity. If done well, the
Universal Service program can continue to empower every
American with the broadband access that they need to
participate economically, socially, and politically in the 21st
century.
And with that, we will introduce the testifiers and move on
with the testimony. First, we have Darrington Seward, Managing
Partner of Seward & Son Planting Company; Steven K. Berry,
President and CEO of Competitive Carriers Association; Jimmy
Carr, CEO, All Points Broadband testifying on behalf of
Wireless Internet Service Providers Association, WISPA; Michael
Rapelyea, Vice President of Government Affairs for ViaSat,
Incorporated; and Ted Carlson, President and CEO of U.S.
Cellular Corporation. And we will start with Mr. Seward.
STATEMENT OF DARRINGTON SEWARD, MANAGING PARTNER, SEWARD & SON
PLANTING COMPANY
Mr. Seward. Ranking Member Schatz and members of the
Subcommittee, my name is Darrington Seward. With my father
Byron, I manage Seward & Son Planting Company and Seward &
Harris Planting Company, our family farming business in and
around Louise, Mississippi. We manage about 22,000 acres of
cotton, corn, soybeans, and rice at the southern end of the
Mississippi Delta. We could not do this productively or
profitably without the extensive use of precision agricultural
technologies.
Our main goal in precision agriculture is to farm as many
acres as we can while minimizing inputs and increasing our
yields in an environmentally sustainable way. We depend on
reliable and speedy broadband connections. Without reliable
broadband, our production practices would be completely
compromised. We would suffer yield losses, decreased
productivity, and reduced profitability in an industry with
ever tighter profit margins.
As you know, farming operations in the U.S. today are
substantial businesses that drive significant economic
activity. If high-speed broadband services are not extended out
to where agricultural activity takes place on croplands and
ranchlands, the full economic potential of precision
agriculture will be missed.
We are an example of some of the progress that has been
made, but the job is by no means finished. I would like to
share some of the examples of what broadband can do when
deployed in farming operations.
Managing the fertility of the soil is critical to any
farming operation, and each soil type in the field may require
a different amount of nutrients. A fixed rate application of
fertilizer could lead to over-application and wasted nutrients.
Precision Ag steps in with variable rate nutrient application
to deliver in each part of the field the exact amount of
nutrients called for. This process depends on high-speed
broadband connections to upload fertilizer data, to transfer
tailored prescriptions to the machine, and to build application
maps from the machine.
Another example of the value of precision agriculture is in
planting. The process of planting has changed dramatically in
recent years. To maximize yields, planter technologies can vary
the amount and spacing of planted seeds within a field based on
prescriptions that recognize the different soil types within
that field. Wireless broadband allows seeding prescriptions to
be transferred to the planter and also allows real-time
monitoring of each individual row on the planter to make sure
it is planting correctly. This is critical for quality control,
especially with new technologies that have dramatically
increased our planting speeds.
Come harvest time, these same monitoring applications give
us the ability to check a combine's performance in real time.
We can analyze data while harvesting the crop and make
decisions about grain drying and storage operations. We can get
a real-time look at crop yields, which helps us determine the
exact amount of grain we will have available to market and
evaluate the current crop varieties planted on our farm. Since
next year's seed has to be booked soon after this year's
harvest, this data allows us to plan early and take advantage
of seed pricing discounts.
The telematics information we receive wirelessly from our
fleet of tractors, sprayers, combines, cotton pickers, and fuel
trucks is essential to our day-to-day operations. With the
amount of equipment and acreage that we farm, our efficiencies
would be completely undermined if I could not track the
location and performance of each machine at any time from
anywhere on the farm.
Our machines also feature equipment diagnostics that detect
problems and provide warnings, typically well before a
breakdown occurs. With over $15 million of investment in
farming equipment, these communications reduce machine down
time and avoid costly delays in field activity.
These are all examples of what broadband can deliver to
agriculture and to rural development. But they also show where
opportunities will be lost if reliable broadband is not made
available to all producers in Mississippi and across the
country.
We do, in fact, have disruption in continuous monitoring of
tractors, sprayers, irrigation pivots, and wells based on
spotty service. For our equipment, I would estimate a minimum
of 10 to 15 percent loss of operating efficiency when
connections are disrupted. Lost coverage means the machines
cannot send or receive data, seeding prescriptions cannot be
downloaded, quality control is lost, or planting has to be
delayed. Our losses are measured in reduced crop yields. Any of
these events could amount to a 5-bushel loss per acre, or
$20,000 per day, of lost revenue to our business based on
current prices.
Without wireless monitoring, we are unable to receive
alerts of malfunctioning irrigation units. For a single pivot
that irrigates 450 acres, one lost day in the growing season
would cost our operation 30 bushels per acre in lost yield.
That amounts to a $50,000 loss at current crop prices from a
mere 2 percent of our total acreage. The failure of multiple
irrigation pivots, if not detected quickly through wireless
monitoring, would be catastrophic.
Loss of connections also impacts the amount of nutrients,
herbicides, and pesticides we use. As noted, inputs are placed
exactly where grid soil samples call for them to be in the
field. This is for two good reasons. It leads to increased
yield and uses less nutrients, pesticides, and herbicides.
Chemical applications on the farm are tailored to optimize
their effectiveness and minimize environmental impacts.
As a farmer and businessman, I can assure you that I am no
expert on telecommunications policy, but in my view anything
you can do to promote more rural investment in broadband
infrastructure should be pursued. This should include keeping
and improving programs like the Connect America Fund and the
Mobility Fund to address the needs of agriculture. There are
several steps you could take that would make a difference.
First, programs should be updated to directly support
specifically to where farming occurs in areas of cropland and
ranchland. These are areas of intense economic activity with
growing demand for broadband services. Program eligibility,
data collection, and other rules should be revised to account
for underserved and unserved cropland and ranchland areas.
Senator Schatz. Mr. Seward, if you could begin to summarize
your testimony so we can move along, that would be----
Mr. Seward. OK.
Senator Schatz. Thank you.
Mr. Seward. Well, pretty much everything is on file, and if
you have any questions, I would be happy to answer them. Sorry
I ran over.
Senator Schatz. Not at all. That was a quicker summary than
I needed.
[Laughter.]
Mr. Seward. I appreciate the opportunity to speak as a man
of few words.
[The prepared statement of Mr. Seward follows:]
Prepared Statement of Darrington Seward, Managing Partner,
Seward & Son Planting Company
Chairman Wicker, Ranking Member Schatz and members of the
Subcommittee:
Thank you for the opportunity to speak with you today. My name is
Darrington Seward. With my father Byron, I manage Seward & Son Planting
Company and Seward & Harris Planting Company, our family farming
business in and around Louise, Mississippi. Currently, we manage about
22,000 acres, mostly within a 10 mile radius of Louise in Humphreys,
Yazoo, Sharkey, and Holmes counties at the southern end of the
Mississippi Delta. We farm cotton, corn, soybeans, and rice. We could
not do this productively or profitably without extensive use of
precision agricultural technologies.
Each year, we rotate the 12,000 sandier acres that are devoted to
cotton and corn in a 50 percent cotton/50 percent corn rotation. Of the
other 10,000 acres of heavier ground, which are dedicated to growing
soybeans and rice, we rotate 1,000 acres of rice annually among the
other 9,000 acres of soybeans production.
Our family began planting its roots in agriculture during the Great
Depression, when land acquisition was very affordable. Early on, the
land was farmed by sharecroppers, with two commissaries in the
neighboring towns of Louise and Midnight providing the supplies needed
for tenants to live on and farm the Seward family's land. As farming
became more mechanized in the years following World War I, our family
took over farming the land itself. Originally, Seward & Son was
comprised of 2,000 acres and Seward & Harris encompassed 4,000 acres.
It was about 25 years ago that we began expanding. Expansion came in
waves as older farmers began to retire, and as absentee landowners
sought to cash out by selling their farms.
With the expansion of our operation came growing pains. But as more
precision ag technology became available, farming this larger acreage
became more manageable. Our main goal in precision agriculture is to
farm as many acres as we can, minimizing resources and inputs, while
simultaneously increasing our yields. Much of the technology has
evolved to depend on reliable and speedy rural broadband. Without the
availability of reliable and fast broadband, our production practices
and efficiencies in large-scale production agriculture would be
completely compromised. We would suffer yield losses and decreased
productivity that would greatly affect our profitability, in an
industry that continues to see tighter and tighter profit margins.
As Chairman Wicker knows, agriculture is the major driving factor
behind the State of Mississippi's economy. This is no doubt true for
many rural states represented on this Subcommittee. It is certainly the
driving factor for the economies of the counties where we farm. Without
agriculture, these rural counties would dry up completely, and send
already high poverty levels through the roof.
Our business has invested heavily in precision and data-enabled
technologies to make our operations more productive, efficient, and
profitable. They come into play in almost everything we do. But for
these technologies to actually deliver, we have to be connected. We
depend on reliable, high-speed broadband connections out in the field--
where our machines and employees operate. We have been recognized for
our embracement of precision agriculture technologies and the
conservation of resources they allow on several occasions. We received
the 2013 Precision Ag Award of Excellence from the Precision Ag
Institute. We were recognized as the Precision Agriculture Farmers of
2011 by the National Conservation Systems Cotton & Rice Conference.
And, my father, Byron Seward, was recognized by the Delta Council of
Mississippi as The Conservation Farmer of the Year for 2009-10.
As you know, significant economic activity occurs every day on
America's farm and ranchlands. Agriculture represents almost 5 percent
of the Nation's annual GDP, much more than that in rural communities.
Farming operations today are substantial businesses that drive
significant commercial activity and rural prosperity. Broadband
services that are provided to commercial businesses in urban and
suburban areas must also be provided to support production agriculture
in rural areas. If high-speed, wireless broadband services are not
extended out to where agricultural activity takes place--on croplands
and ranchlands--the full economic and commercial potential of precision
agriculture will be missed. I'd like to share some real examples of how
broadband can help meet this enormous potential.
Soil Management and Health
Managing the fertility of soil is critical to any farming
operation. We may have upwards of 15 different soil types in any given
field; each requires differing amounts of nutrients. If a blanket,
fixed-rate application of fertilizer is programmed into a machine,
nutrients will be wasted by over-application where they are not needed.
Precision ag steps in with variable-rate application of nutrients that
ensure each spot in the field receives exactly the proper amount of
nutrients called for.
Our fields are sampled on a 3-year cycle by a local soil lab,
Pettiet Agricultural Services, Inc. out of Leland, Mississippi. Samples
are taken from every field in a referenced 2.5 acre grid--a very
thorough and precise soil sampling by today's standards. Dr. Clinton
Pettiet and his lab team then analyze these samples and provide all
data on nutrient concentrations in the soil, and the recommended amount
of nutrients to be added in order to produce a varying array of crops.
We upload this data into the web-based software product of our seed and
chemical retailer Sanders, Inc. This software tool, OptiGro, already
contains the boundaries of all of our farms and fields. So the new,
geo-referenced soil sample data is simply spatially sorted into our
farms and field data in OptiGro. Mind you, this data transfer is all
taking place in either our office in Louise, Mississippi, or in our
pick-up trucks in the field where our equipment and crops are
continuously monitored. This cannot happen without reliable, mobile
wireless broadband connections.
With the OptiGro tool, I can chose the farm and fields I want to
fertilize, for any particular crop we want to plant there in that
particular year. I then choose my macronutrients, phosphorus and
potassium, that I need to apply. I also choose my micronutrients,
sulfur and zinc, that might be called for. I write this tailored
prescription, which can then be applied to the field through a host of
machines that all have access to controller files from a simple drop
down menu.
To apply these prescriptions, we utilize a GVM 4 bin ground
machine, or an Air Tractor 802 airplane during rainy spells. The
controller files are transferred directly to the GVM machine's
controller via wireless broadband. Wireless broadband also provides the
means to e-mail the controller files to my pilot who can quickly load
them in his plane for application. Since all the data are geospatially
referenced, the fertilizer application (whether by ground or air) is
completely automated by the machine's mechanical controllers. It knows
exactly where the machine is in the field, and exactly which products
are called for and in what amounts. This process also generates
application maps, which are key to understanding the effectiveness of a
specific prescription on improving yields, and provides a check for
quality control.
The same methods are employed for our application of nitrogen in
the production of corn and cotton. Nitrogen is a crucial nutrient in
the production of those crops. We apply nitrogen in a split-season
application. This means we apply the first half of our soil sampling
recommendation right at planting, and the second application, the
variable rate portion, early in the growing season. We can also apply
nitrogen either by ground machine or airplane variable rate.
I want to emphasize again that each of these critical steps, from
uploading the fertilizer data, writing the fertilizer file,
transferring it to the machine wirelessly, and collecting application
maps from the machine, are dependent upon high speed rural broadband.
Only with wireless connectivity are the benefits of reduced input
costs, better land stewardship, and improved yields fully realized.
Planting
Another example of the value of precision agriculture is in
planting. The process of planting has changed dramatically in recent
years. Planters now include hydraulic drives and rate controllers that
govern the amount and spacing of planted seeds in a field. The rate
controller can be told exactly how much seed should be planted and
where, based on a prescription that can be wirelessly transferred into
an onboard computer in the machine. This allows, for example, more seed
to be planted underneath a pivot circle where irrigation can maximize
yield, and less in the field's corners where the pivot cannot not
reach. Also, different seeding rates can be assigned to, and planted
on, different soil types within a field to maximize yield. High speed
broadband allows the transfer of these seeding prescriptions to the
machine, and allows real-time monitoring of each individual row on the
planter to make sure it is planting correctly. From the office or pick-
up truck, we can see the exact seed monitor that our operator in the
tractor sees, along with more comprehensive data--all in real time.
This is imperative for quality control, especially with new
technologies that have dramatically increased our planting speed.
Today, we are easily planting 1,000 acres a day, and spending upwards
of $50,000 an hour on planting and tillage applications.
Crop Harvesting
Come harvest time, these same monitoring applications hold true for
our ability to check a combine's performance in real time through high-
speed broadband. We are able to analyze the data in real time and make
critical decisions about the speed and temperature at which we operate
our Zimmerman corn tower dryer. We can make decisions about which bins
to load into during the day, and which bins we may need to switch to in
order to have capacity to store the entire night's supply of dried
grain. In addition, we get a real time look at crop yields, which helps
in determining the exact amount of grain we will have available to
market--something that's always difficult to forecast going into a
harvest. Real time yield data also allows us to evaluate the current
crop varieties that planted on our farm. Since, next year's seed has to
be booked soon after this year's harvest, this data allows us to plan
early and take advantage of seed pricing discounts.
In our operations, none of these management decisions can be made
without reliable, continuous access to high speed broadband. Otherwise,
it would not be physically possible for me to drive out to each combine
in the field, climb up on the machine, and ride each machine for 15
minutes or so to gather this data. With wireless connectivity, I can
receive data at the corn dryer as I am operating it and use the
information received to maximize the efficiency of the dryer's
operation. Access to high speed broadband in the field allows us to
farm more acres more efficiently with larger machines, while lowering
costs and increasing yields.
Broadband optimizes our operations in several other, important
ways. Our management of grain storage capacity depends on transmission
of real-time bin use and availability data. The bins have a plumb bob
sensor system that drops a cable from the roof of the bin until it
touches the grain. In this way, the system transmits how many bushels
are currently in the bin, and how much storage capacity remains. Our
corn dryer operates at 100,000 bushels dried per 24-hour period, which
fills the bins to fill quickly. The sensor system allows one man to run
the dryer from a central point, without having to step out to climb
each bin, peer in, and guess how much grain is in it. Instead, he
simply logs in to the web-based logistics platform that contains each
numbered bin, prompts the desired bin to conduct a measurement, and
uses the results to determine where to divert the grain coming out of
the drier. Our bins also have sensors that measure the relative
humidity outside versus inside the grain bin. Algorithms then calculate
the relative moisture of the corn or soybeans in the bin and turn the
exterior fans on or off, either to dry or rehydrate the grain to the
optimal moisture for storage and sale. The bins that store our rice use
exterior fans (equipped with heaters), combined with interior moisture
cables, to dry the rice to a moisture level acceptable for sale and
milling. All parameters and settings can be monitored and changed
remotely. This data is all transferred via broadband, without which
these systems would be useless. Broadband enables these systems to
operate and maximize the efficiency of our operation.
Machine Communications
The telematics information we receive from our fleet of tractors,
sprayers, combines, cotton pickers, and fuel truck is essential to the
daily operation of our farm. With the amount of equipment and the broad
acreage that we farm, our efficiencies would be completely undermined
if I didn't know--at any given time, from anywhere on the farm--where
each piece of machinery is and how it's performing at that moment.
Operations would grind to a halt.
On our farm, we use almost all John Deere equipment because of its
advanced precision ag systems and capabilities. None of the telematics
systems on board our 22 tractors, 5 combines, 4 cotton pickers, 3
sprayers, and 1 fuel truck would provide anywhere close to the degree
of operational value that they do without reliable broadband
connections. Any one of the innumerable settings on any one of these
machines can be monitored remotely, through online platforms such as
JDLink and MyJohnDeere.com.
Continuous monitoring of machine performance is extremely
important. Improperly set machines or machines experiencing technical
issues could result in any number of costly operational problems: an
improperly planted crop; improperly applied fertilizer, herbicides, or
pesticides; lost efficiencies in tillage operations; lost efficiencies
in the general equipment operation; or even yield loss during harvest
(imagine grain being blown out of the back of the combine due to
incorrect settings). All John Deere machines feature equipment
diagnostics that trigger real-time warnings, typically well before an
operational problem occurs. With over $15 million of capital investment
in farming equipment, it is imperative we maximize these assets and
generate the highest returns on this investment. Machine
communications--telemetry--drive significant reductions in machine
downtime and avoid costly delays in field activity. Without reliable
broadband connections in the field, the benefits of machine telemetry
in our operation would be lost.
Irrigation
Our irrigation systems today include 25 pivots, all of which are
monitored telemetrically. Each irrigation unit is able to report its
position and the amount of water being applied in real time. These
pivots can be sped up or slowed down remotely, allowing adjustments in
the total volume of applied water from anywhere across our operation.
They also can be shut off remotely, and will send out an alert if they
shut down for any unexpected reason.
In addition, the majority of our irrigation wells are powered by
units with telematics monitoring systems, which can record the exact
amounts of water being applied using flow meters. Each monitoring unit
has its own modem that transmits the data to a web based management
platform, which helps us to fulfill USDA/NRCS and local water
management district requirements. Alerts will also be issued if wells
shut down for unexpected reasons. All these capabilities on both pivots
and irrigation wells allow us to efficiently manage large acreages with
fewer men. Productivity is greatly improved through more rapid alert,
diagnosis, and repair of irrigation unit problems.
Problems with Connectivity
Given our reliance on precision ag technologies, our farming
operations are susceptible to broadband coverage disruptions and
connectivity problems. In areas where we have experienced poor
broadband coverage, we have experienced costly disruptions in
continuous monitoring of tractors, sprayers, irrigation pivots, and
wells. This translates directly to less efficient operations and lost
productivity.
For our machines alone, I would estimate a minimum 10-15 percent
loss of operating efficiency when connections are disrupted. Lost
coverage means the machines cannot send or receive data during
operations. Our inability to download seeding prescriptions in a timely
manner results in a suboptimal crop. Or planting could be delayed,
causing us to miss the optimum planting window. Or the quality control
from continuous monitoring is lost, which could result in erratic seed
placement and depth. Our losses are measured in reduced crop yields.
For our operation alone, any of these events could amount to 5 bushels
lost per acre, or $20,000 per day of lost revenue, based on current
prices.
Poor coverage has also meant temporary loss of connections to
irrigation pivots and wells. In these instances, we have been unable to
receive alerts of malfunctioning irrigation systems. Because of the
size of our farmed acreage, we cannot monitor these systems by simply
riding from pivot to pivot and well to well each day during irrigation
season. For a single pivot that irrigates 450 acres, one lost day at a
crucial time in the growing season would cost our operation 30 bushels
per acre in yield loss. That amounts to a $50,000 loss at current crop
prices, from a mere 2 percent of our total acreage. The failure of
multiple irrigation pivots, if not detected quickly through wireless
monitoring, would be catastrophic.
The same is true with the inability to detect malfunctions of rice
irrigation wells. An irrigation well typically irrigates 150 acres. At
a rate of 30 rice bushels per acre lost, the loss would be roughly
$22,500 at current prices.
Loss of connections also impacts the amounts of nutrients,
herbicides and pesticides we use. Instead of broadcasting nutrients,
technologies allow us to place them exactly where grid soil sampling
calls for them to be in the field. This is good for two reasons: it
leads to increased yields and decreased use of nutrients. The same is
true for pesticide and herbicide applications, which can be tailored to
optimal effect and minimal environmental impact. Technology allows us
to write and use prescriptions for the exact amount of herbicide to
use, based on the clay content of the soil. With aerial imaging, we
also can create zones for pesticide applications to target those areas
with greatest insect populations.
From these examples, I hope that you can see just how important
reliable broadband connections are to our operations, and how even a
temporary loss of coverage can hurt crop yields, increase operating
costs, and undermine environmental improvements.
Policies to Support Broadband for Agriculture
From my perspective as a business consumer, any policies that will
promote more rural investment in broadband infrastructure--including
where farming takes place--should be pursued. Without this support, our
ability to keep up with and take advantage of coming technological
advancements will be limited, especially as the competition for
resources to expand broadband deployment is likely to increase. This
makes the rural broadband funding programs managed by the Federal
Communications Commission, such as the Connect America Fund and the
Mobility Fund, all the more important to the future of production
agriculture. I would encourage you take a fresh look at these support
programs and consider changes that will directly foster, and eliminate
barriers to, expanded high speed broadband deployment that agricultural
needs today and into the future. To that end, there are several steps
to improve these programs that would make a difference:
First, as I have mentioned, support programs should be updated
to direct support specifically to where most farming operations
occur--areas of cropland and ranchland. These are areas of
intense economic activity with growing demand for broadband
services. Yet, they are largely overlooked in today's funding
programs that look only at residential population and community
centers to determine whether an area is ``unserved'' or
``underserved'' and thus worthy of broadband funding support.
Program eligibility, data collection, and other rules should be
revised to account for underserved and unserved cropland and
ranchland areas--areas with low population density but with
highly intense economic activities vital to rural communities.
Second, support programs should not favor, either directly or
inadvertently, one broadband delivery technology over another.
Ag producers need access to all technology options to address
potential uses that may vary depending on ag equipment used,
crops, livestock, terrain, climate, proximity to broadband
interconnection points and population centers, and barriers to
local land acquisition and access. Wireline broadband, fixed
wireless, or mobile--all these technologies will be needed for
individual carriers to design appropriate solutions to meet the
needs of particular agricultural operations. To this end, it
makes sense to continue and even expand the Mobility Fund to
provide specific and predictable funding for mobile broadband
operations. And the equal opportunity that carriers currently
have to bid on Connect America Funds should be maintained,
regardless of whether they are proposing wireline, fixed
wireless or mobile broadband coverage.
Third, these support programs should also make funds available
for ``stand-alone'' broadband. Precision Agriculture technology
is data-intensive by nature. Many farming enterprises place a
higher priority on obtaining broadband services rather than
conventional voice services. My understanding of the rules is
that carriers that might otherwise be able to provide broadband
in rural communities cannot access these programs unless they
also provide voice services. This either forces inflexible
service packages onto rural consumers, including ag producers,
or it unnecessarily limits broadband deployment.
Finally, the so-called ``middle mile'' facilities are just as
critical to expanding rural broadband deployment as last mile
connections. The wireless connections needed across croplands
rely on these ``middle mile'' facilities to tie into the wired
networks and the Internet. To be sure that all the needed rural
infrastructure can be deployed, support programs should allow
the smaller providers to obtain support for middle such
facilities. And support for middle mile facilities should be
allowed for connecting to facilities that link to wireless
broadband, not only to the last wired mile connections.
Conclusion
I want to thank the Subcommittee again for allowing me to appear
this morning. My message is simple: precision agriculture is fully
integrated with our operations in Mississippi, and with agricultural
operations across the U.S. and globally. The benefits from these
technologies are well-known and will grow significantly in the years
ahead. To fully capture the value these technologies can deliver,
policies and programs that will drive investments in rural
infrastructure must be a priority for policy makers.
Senator Schatz. Thank you. I appreciate it. Thank you.
Mr. Berry?
STATEMENT OF STEVEN K. BERRY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COMPETITIVE CARRIERS ASSOCIATION
Mr. Berry. Thank you, Acting Chairman Schatz and members of
the Subcommittee. Thank you for the opportunity and inviting me
to testify about supporting mobile broadband in rural America.
The job is not done. I am here today on behalf of the
Competitive carriers Association representing almost 100
wireless carriers and nearly 200 vendors and suppliers that
support the competitive wireless ecosystem. My membership
includes innovative, competitive carriers of all sizes, with
CCA members in every state you represent.
Most CCA members serve rural areas and have invested
private capital, along with Universal Service support, to
deploy mobile wireless services in some of the most difficult-
to-serve parts of our Nation.
Congress mandated that the FCC administer the Universal
Service Fund to provide, and I quote, ``sufficient and
predictable support for reasonably comparable services in urban
and rural areas.'' And to meet this statutory charge,
``reasonably comparable'' services must include mobile
broadband.
The Committee, the FCC, and Chairman Wheeler himself have
all recognized the importance of mobile broadband services. The
most recent Mobile Competition Report, submitted to Congress
just a few weeks ago, begins by noting ``mobile wireless
services are an essential part of Americans' daily lives.'' We
totally agree.
Access to wireless services has evolved well beyond making
and receiving voice calls. And failure to support mobile
broadband coverage will leave rural America behind, behind in
the dust of a new generation of innovation. Mobile broadband
coverage impacts public safety, education, telehealth, economic
opportunity, accessibilities, social inclusion, and yes,
farming and agriculture.
But we also can be jeopardized in other ways. By being
behind this mobile digital divide, you will jeopardize the
economic investment, productivity, jobs, and yes, even endanger
those who live in and travel through rural America.
While access to mobile broadband is critically important
today, it is absolutely vital to participate in growing the
economy of tomorrow. The Internet of Things, the all-connected
world is just around the corner. It is time to ensure that the
Universal Service Fund reflects this reality. Congress should
make it clear to every commissioner at the FCC that this means
providing adequate support to both preserve existing services
in rural areas while incentivizing deployment of the latest
mobile broadband services in areas that remain unserved or
underserved. Support is needed for both preservation and
expansion. Anything less will result in an economic loss for
rural America.
There are three things the FCC can do right now to support
mobile broadband in rural America.
First, disburse immediately the Mobility Fund Phase I
support to winning bidders that have built networks and met the
requirements in their bids. I have members that have, in good
faith, spent their funds, built the networks, and have not been
reimbursed. We cannot undo mistakes of the past, but we should
prevent new mistakes.
Second, do not reduce existing support until an adequate
replacement mechanism is operational. And while the FCC stated
in its USF Transformation Order that subsequent FCC proposals
would be created, some of those have raised great uncertainty
and great concern. So I commend Congress for reaffirming the
ongoing need for support in the Consolidated Appropriations Act
in December--thank you--directing the FCC to preserve legacy
support as prescribed. We do not need more examples of entire
communities losing wireless service due to the lack of USF
support.
Third and finally, implement the ongoing Mobility Fund
Phase II that preserves existing services in rural areas and
supports continued expansion of 4G and ultimately 5G mobile
broadband. CCA has advanced a proposal that meets the FCC's
overarching goals. It ensures universal availability of high-
speed mobile broadband where it is otherwise uneconomical. It
puts the program on a budget, and it bases funding decisions on
real data. I hope we can further explore ways to successfully
implement Mobility Fund Phase II during this hearing.
And as I said at the beginning, the job is not done. I know
that you are acutely aware of communities in your areas in your
states that lack sufficient coverage. Every carrier wants to
provide a robust service to the customers. However, inadequate
support for legacy investments will lead to reduced coverage
and rusty towers.
Now, I know there is strong bipartisan support in this
committee for rural America. I look forward to working with you
and the FCC on a bipartisan solution to preserve and expand
mobile broadband in rural America. And I look forward to your
questions. Thank you.
Welcome, Chairman Wicker.
[The prepared statement of Mr. Berry follows:]
Prepared Statement of Steven K. Berry, President and Chief Executive
Officer, Competitive Carriers Association
Chairman Wicker, Ranking Member Schatz, and members of the
Subcommittee, thank you for inviting me to testify about supporting
mobile broadband in rural America. I appreciate the opportunity to
speak on an issue so critical to life in rural America, and welcome the
Committee's continued focus on ensuring ubiquitous mobile broadband and
the Universal Service Fund (USF). I am here today on behalf of
Competitive Carriers Association (CCA), the Nation's leading
association for competitive wireless providers and stakeholders. CCA
membership comprises about 100 carrier members including small, rural
providers serving fewer than 5,000 customers as well as regional and
national providers serving millions of Americans. CCA also represents
nearly 200 Associate Members--small businesses, vendors, and suppliers
that serve carriers of all sizes. Most CCA members serve areas that are
primarily rural in nature, and have invested significant amounts of
private capital, along with USF support, to deploy mobile wireless
services in some of the hardest to serve parts of our Nation. Whether
directly or through partnerships and other strategic alliances, all CCA
members have an interest in ensuring that Americans have access to the
latest mobile broadband services, including those in rural and high
cost areas.
Congress created the USF high-cost program to provide Americans in
rural areas with ``reasonably comparable'' services as those in urban
areas with the help of sufficient and predictable support. In today's
world, ``reasonably comparable'' services must include fast, affordable
mobile broadband services. It is clear that the Federal Communications
Commission (FCC) agrees. Just last week, as per Congressional mandate,
the FCC released its 2016 Broadband Progress Report (Broadband Progress
Report), which assesses the deployment of advanced telecommunications
services in the United States. In its Broadband Progress Report, the
Commission found that ``Americans increasingly rely on mobile devices
as indispensable tools of daily life'' and therefore, ``the
availability of advanced telecommunications capability requires access
to both fixed and mobile services.'' FCC Chairman Tom Wheeler summed it
up: ``consumers need access to both fixed and mobile broadband in
today's world.'' Indeed, the opening paragraph of the FCC's most recent
Mobile Competition Report, released late last year, begins by stating
that ``[m]obile wireless services are an essential part of Americans'
daily lives'' and notes that the mobile wireless ecosystem is ``one of
the most important sectors in the national economy.'' The FCC's
Universal Service policies, particularly as they relate to High-Cost
Program funds, must reflect this reality.
Background
Wireless service has evolved well beyond making and receiving voice
calls. In 2016, Americans use mobile broadband services in almost every
aspect of their daily lives. Americans rely on their mobile network to
quickly access information on healthcare, education, and public safety,
to manage their finances, to connect with their personal and
professional communities through social media, and to download the
latest season of House of Cards. All are necessary and desirable uses
of the powerful technology enabled by modern mobile broadband access.
Failure to support mobile broadband services in rural America will
perpetuate the continuing digital divide between those who can use the
latest technology to improve their lives and economic welfare, and
those who are left behind.
Leaving rural America on the wrong side of the digital divide can
jeopardize economic investment, productivity, jobs, and even put lives
in danger. The FCC has acknowledged that, ``[i]n emergency situations,
Americans often use mobile devices to contact first-responders when a
fixed connection is not readily available, whether at home, at work, or
when traveling.'' Access to mobile broadband has spurred innovation in
some of the most important economies in rural America, like precision
agriculture advances that make farming more efficient and effective. In
a pilot project with 2,000 farmers who have employed precision
agricultural technology into their work, Accenture found a 56 percent
year-over-year increase in sales and an average increase in crop
productivity of 15 percent, including an increase of up to 30 percent
for some cash crops.
Mobile broadband is required for access to distance medicine and
telehealth, which IHS, a market analyst firm, has projected to grow
from $240 million in 2013 to $1.9 billion in 2018. This is a 56 percent
increase in just five years. Mobile service also powers wearable
devices. Cisco estimates this burgeoning market will grow from 109
million in 2014, to 578 million in 2019.
While access to mobile broadband is critically important today, it
is absolutely vital to growing the economy through next generation, or
5G, services and the Internet of Things (IoT). In fact, Gartner, an IT
market research firm, projects this market will grow 30 percent over
the next year alone, and to 21 billion devices by 2020, compared to 6.4
billion in 2016. Rural communities should not be left out of this
coming tide of innovation. Qualcomm estimates that there will be 5
billion non-handset connected devices by 2018. IDC, another IT market
research firm, says the IoT market will nearly triple worldwide from
$655 billion in 2014 to $1.7 trillion in 2020. Additionally, Chetan
Sharma, a technology and strategy consultant, estimated in his ``First
Quarter 2015 Report'' that United States consumers used an average of
2.5 GB of cellular data per month. Following this trend, Ericsson
predicts that smartphones in the United States and Canada will average
25 GB of mobile data traffic per month by 2021--a ten-fold increase
just five years from now.
According to the Pew Research Center, 88 percent of rural Americans
have a cell phone and over 42 percent of rural adults live in a
wireless-only household. Over half of all rural Americans now own
smartphones, and of this group, 15 percent report their only form of
home broadband Internet access is with a smartphone. It's clear that
all consumers, including rural consumers, are cutting the cord.
It is time for USF policies to reflect this reality. Rural America
should not be excluded from meaningfully participating in a world
increasingly powered by affordable access to rapid mobile broadband.
This means providing adequate support to both preserve existing service
in rural areas while incentivizing expansion of latest mobile broadband
deployment in places that remain unserved and underserved. USF support
is needed for both preservation and expansion--anything less will
impede investment and keep rural Americans on the wrong side of the
digital divide. The FCC has reported that 97 percent of rural Americans
have LTE service. Anyone who has driven outside the city and urban
centers knows that coverage estimate is exaggerated. If lack of
coverage is not addressed, and support is not provided to preserve
service available today, rural America will not have the mobile
broadband infrastructure that it needs to support indispensable tools
of daily life.
Since establishment of the FCC by the Communications Act of 1934,
Universal Service has been a core policy. In 1996, Congress codified
specific principles for USF in the Telecommunications Act. Under FCC
rules allowing competitive eligible telecommunications carriers
(CETCs)--including wireless carriers and competitive local exchange
(LECs)--to receive USF support, carriers including many CCA members,
leveraged that support with their own investment to deploy and expand
mobile wireless services in rural America. As the industry grew, the
total number of cell sites nationwide nearly tripled, from 127,000 to
nearly 300,000 over a ten-year period.
In 2008, the FCC adopted the ``CETC Interim Cap Order,'' freezing
support for wireless carriers in each state at the level that wireless
carriers were eligible to receive as of March 2008. This blunt
instrument capped overall wireless support at approximately $1.2
billion nationwide. Despite the cap, the wireless industry continued to
grow as a result of an increasing consumer demand for wireless service.
Total support for wireless services through the High-Cost fund peaked
in 2008 long before the mobile data explosion we are experiencing
today. Despite massive growth of wireless use since 2008 and increasing
consumer demand, support to mobile networks through the High-Cost fund
has only decreased.
In 2011, the FCC adopted the ``USF/ICC Transformation Order,''
(Transformation Order) which created the Connect America Fund (CAF)
within the High-Cost Program, and the Mobility Fund, which is
specifically dedicated to support mobile service in unserved and
underserved areas. With this step, the FCC recognized that while mobile
networks might be able to provide coverage to fixed locations under
limited circumstances, a fixed network cannot provide true mobile
service with the functional benefits mobility provides consumers. While
the FCC's goals for the Mobility Fund were laudable--to support and
close gaps in mobile coverage and broadband capacity--the total amount
budgeted for wireless carriers through CAF and the Mobility Fund was
significantly smaller than the amount wireless carriers received under
previous capped High-Cost Program support.
Under the Transformation Order, Mobility Fund support was to be
distributed in two phases: Phase I provided $300 million in one-time
support to expand mobile networks; and, Phase II was designed to
provide $500 million in ongoing support to sustain and expand mobile
voice and broadband. In the Transformation Order, the FCC explicitly
recognized that there are areas in this country in which mobile service
cannot be maintained or upgraded without ongoing universal service
support. Despite the Commission's efforts to support mobility in rural
America, the allocated funding under the Mobility Fund Phase I was not
sufficient to accomplish the FCC's goals. By way of comparison, the
National Broadband Plan estimated requiring at least $6.3 billion, if
leveraging incentive-based partnerships, to $15.7 billion to buildout a
nationwide mobile broadband network for public safety users. Demand far
exceeded the resources made available under Mobility Fund Phase I, with
bids exceeding the $300 million available. Further, the $500 million
budget dedicated for ongoing support in the originally proposed
Mobility Fund Phase II represents less than half of the approximately
$1.2 billion wireless carriers received prior to the Transformation
Order and one-eighth of the approximately $4 billion that wireless
carriers contribute annually to the fund.
The Transformation Order also began phasing down legacy support for
wireless carriers, reducing support over five years through annual 20
percent reductions. Fortunately, the FCC ordered that the phase down
would be suspended if Mobility Fund Phase II, including Tribal Mobility
Fund Phase II, was not operational by June 30, 2014. With no Mobility
Fund Phase II in place, the legacy High-Cost Program fund continues to
provide approximately $600 million per year for wireless services--60
percent of previous levels. In this regard, it is very important that
the Congress made clear that the FCC cannot, for the balance of this
appropriations year, resume the phase down of legacy support to without
an operational Phase II Mobility Fund. Thank you for taking this step,
which we urge you to continue beyond September 30, 2016.
While it is important that there are no further reductions in
support until adequate replacement mechanisms are operational, there
are steps that the FCC can take immediately to support mobile broadband
in rural America through USF.
Complete Disbursements for Mobility Fund Phase I
The FCC announced winning bidders for the Mobility Fund reverse
auction in October 2012, with bids and proposed builds surpassing the
amount of resources available. While CCA urged the FCC to make greater
resources available through the auction, the awarded funding represents
an important part of the overall investment made by winning bidders.
Unfortunately, there are CCA members today that have built out and
certified completion of projects, yet have not received the USF funding
they were promised. As a result, precious capital is tied up in
projects that may not otherwise have been economical, and carriers are
discouraged from improving and expanding services. This is not what the
FCC intended. I strongly encourage the FCC to release these funds to
carriers who in good faith invested and spent their resources in
accordance with Mobility Fund Phase I awards, but have not yet been
reimbursed. To date, only $66.08 million has been disbursed.
Additionally, over $70 million of Mobility Fund I awards have been
returned to the Commission as a result of consolidation and/or
defaults. These resources should be reinvested in expanding mobile
access in rural areas.
No Further Reductions in Support until a Replacement Mechanism is
Operational
Next, it is important for carriers to have the certainty that even
reduced amounts of support will be predictable. Despite the
Transformation Order's requirements to stop the phase down of legacy
support absent an operational Mobility Fund Phase II, subsequent
questions in the FCC's 2014 Further Notice of Proposed Rulemaking have
caused significant concern in the industry that additional cuts may be
made without providing for new support. This has a chilling effect on
investment in upgrading existing and deploying new service, as carriers
cannot confidently rely on FCC funds as they budget for maintenance and
deployment plans.
While not sufficient, the reduced amount of support available at
today's 60 percent paused phase-down amount provides important
resources to maintain services built with USF investment.
Unfortunately, there are CCA members that have sold part or all of
their network operations, or simply exited the market, as a result of
already reduced support and uncertainty on what support may be
available in the future. For example, in Ruby Valley, Montana,
reductions in USF contributed to Cellular One exiting the market. As a
direct result, on July 31, 2014, almost 2,000 customers in Ruby Valley
lost all wireless service despite promises to the contrary. This
impacts not only Cellular One customers, but all residents of Ruby
Valley and any others that might be passing through, as customers using
other service providers would need to roam onto Cellular One's network.
Not only does this impact rural Montanans' quality of life but also
safety and security--local Sheriff Dave Schenk has noted his ``major
concerns about this in terms of public safety.''
I commend Congress for providing some degree of certainty on this
issue through a rider in the Consolidated Appropriations Act late last
year. While carriers must plan network investment on longer time frames
than a budget year, reaffirming that there will be no further
reductions in support absent an operational replacement mechanism helps
to provide certainty while also encouraging the FCC to focus on
creating a sufficient Mobility Fund Phase II.
Mobility Fund Phase II Must Provide Sufficient and Predictable Support
for Mobile Broadband
Looking forward, the ongoing Mobility Fund Phase II must adequately
support both preserving existing service and expanding service to areas
currently unserved by 4G LTE service. CCA has advanced a proposal that
meets the FCC's overarching goals of ensuring universal high speed
mobile broadband availability where it is otherwise uneconomical to
continue or expand service, and supports putting the program on a
budget, basing funding decisions on real world data. This proposal has
two components: providing support to preserve existing mobile services,
and supporting further upgrades and expansion of services.
It is critical to recognize that the job of building out mobile
broadband service in rural America is not yet done. The FCC itself
acknowledges in its latest Mobile Competition Report that the way it
calculates mobile service coverage overstates actual coverage.
Describing the FCC's methodology, when the so-called ``centroid'' of a
census block has a particular level of service, the FCC counts each and
every person in the census block as having that service, even when
coverage is inconsistent or weakens over distance. In rural areas,
where census blocks are geographically much larger than in urban areas,
it is much more frequently the case that people are counted as having a
high level of service, when in fact they are unserved or underserved.
Focusing on all wireless coverage (not just LTE), Dr. Raul L. Katz,
Director of Business Strategy Research at the Columbia Institute for
Tele-Information, Adjunct Professor in the Division of Economics and
Finance at Columbia Business School, and President of Telecom Advisory
Services, LLC, declared that wireless coverage in rural counties can
range as low as 76.7 percent of the population in West Virginia, or
86.3 percent in New Hampshire.
And, of course, one of the great benefits of mobile service is that
you can use it in places other than where you live or work--whether on
or off road, or away from population centers. By the FCC's own data in
the latest Mobile Competition Report, only 78 percent of the U.S. land
mass is covered by any mobile wireless provider. As this Committee is
keenly aware, 42 percent of U.S. land can contain only 1 percent of the
population. The job is not finished, and claiming otherwise leaves
rural Americans on the wrong side of the digital divide and outside of
all the innovations and economic opportunities provided by mobile
broadband coverage. And simply because an area is served today does not
mean that it will remain served in the future without sufficient USF
support--look no further than Ruby Valley for an unfortunate real world
example.
I commend several Members of this Committee and FCC Commissioners
that have supported increased support for wireless carriers through the
Mobility Fund. To protect scarce USF resources already invested in
mobile broadband, the FCC should provide sufficient support so that
towers constructed with both private and public investments remain
operational. Congress and the FCC must preserve network diversity that
exists in rural America, and to ensure that competitive carriers have
access to a variety of roaming partners, regardless of the technology
used. Anything less will leave behind rusty towers and unused
infrastructure, reducing consumer choice and carrier innovation.
Further, relying on a single network alone will not preserve widespread
roaming, and will not protect against potentially high, anticompetitive
monthly fees. This does not mean providing carriers with blank checks.
Carriers must prove need for USF support. To appropriately guard USF
investment, preservation funding should be based on the facts of real
and projected expenses and revenue.
The FCC also should provide funding for expanding mobile broadband
services to unserved and underserved areas of the country.
Understanding that there will not be enough resources to build mobile
broadband services where needed all at one time, the FCC should offer
several rounds of expansion support, disbursing resources in
conjunction with the overall Mobility Fund Phase II budget every two to
four years.
Other Factors Can Also Support Mobile Broadband in Rural Areas
In addition to USF support, there are additional operational inputs
that are critical to providing mobile broadband in rural America.
Spectrum, for instance, is the lifeblood of the wireless industry and
the invisible infrastructure on which networks are built. All carriers
need access to spectrum to meet their customers' growing demands. Low
band spectrum, with excellent propagation characteristics, is
particularly important for expanding coverage in rural areas. Spectrum
must be available in ways that carriers seeking to serve rural America
can utilize this finite resource, such as through small geographic
license sizes and with interoperable devices. I am pleased that the
upcoming 600 MHz incentive auction will utilize Partial Economic Areas
and require interoperability, and I thank the Committee for their
support of these issues. And CCA will continue to urge use of smaller
geographic license sizes, even with higher band spectrum now being
contemplated.
The 600 MHz auction is just the beginning of unleashing access to
additional spectrum. As mobile broadband use continues to grow,
additional spectrum will be required to maintain existing coverage and
advance new technologies that promise faster, more efficient access.
For example, deploying LTE-Advanced and LTE-U will require maximized
use of licensed and unlicensed frequencies. We also must consider new
ways to make unused spectrum in rural areas available for carriers
willing to provide coverage. This is why CCA supports bills like the
Rural Spectrum Accessibility Act, championed by Senators Fischer and
Klobuchar, and appreciate the bipartisan support for the bill from
other members of the Committee, including Senators Wicker, Sullivan,
and Manchin.
Additionally, carriers must be able to deploy physical
infrastructure--the towers, base stations, and wires that transmit and
carry wireless service in a timely manner to keep pace with consumer
and network demands. Service in underserved and unserved rural areas is
often dependent on the ability to site on Federal lands and facilities,
yet unfortunately carriers face delays and other obstacles while
working through the siting process. Meaningful shot clocks, established
points-of-contact, and inventories are critical. CCA supports the
concepts in the MOBILE NOW Act that will help carriers of all sizes
maintain and expand mobile broadband services, through both access to
spectrum and easing barriers to deployment, and thanks Chairman Thune
and several members of the Committee for their leadership on these
issues.
All carriers must be able to provide both the devices consumers
demand and nationwide services, regardless of their local footprint.
For competitive carriers, that means access to the latest devices and
reasonable roaming for voice and data services. On both fronts, CCA
members are working hard to help themselves, and we appreciate
Congress's and the FCC's support for these important policies where
intervention is necessary to ensure competition in the industry.
Finally, carriers must be able to cost effectively serve their
customers as well as connect with each other. Like roaming, this means
Congress and the FCC should implement policies that support reasonable
interconnection, and ensure carriers have access to backhaul and
special access at competitive terms and conditions. CCA is hopeful that
the FCC will finally conclude, during Chairman Wheeler's tenure, the
decade-long special access proceeding, providing regulatory certainty
to carriers over these critical network components and direct benefits
to consumers.
Conclusion
CCA members work hard to maintain and expand mobile broadband
service throughout the country while providing important competition
and innovation within the industry. Despite significant efforts to
deploy mobile broadband in rural areas, including through significant
private investment paired with USF support, Congress and the FCC have a
long way to go before the goal of ubiquitous mobile broadband service
is realized. It is essential for all Americans to participate in the
latest technological innovations and compete in the modern mobile
economy. Universal Service policies must match this goal to fulfill
Congress's mandate to provide reasonably comparable services in urban
and rural areas, and USF support must be available to preserve and
sustain service where available today and to expand networks
nationwide.
Thank you for your interest in these issues and holding today's
important hearing. I look forward to continuing to work with you and
the FCC to make these policies a reality, and welcome any questions you
may have.
STATEMENT OF HON. ROGER F. WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker [presiding]. Thank you very much.
And I want to express my appreciation to Senator Schatz for
beginning the hearing in my absence. The National Prayer
Breakfast ran long, and I probably needed every bit of it, but
it did run long and I just got back. So thank you very much, my
colleague and teammate, for getting us started.
We will now hear the testimony from Mr. Carr. Thank you.
STATEMENT OF JAMES G. CARR, CEO, ALL POINTS
BROADBAND, ON BEHALF OF THE WIRELESS INTERNET
SERVICE PROVIDERS ASSOCIATION (WISPA)
Mr. Carr. Good morning. Thank you, Chairman Wicker, Ranking
Member Schatz, and members of the Committee. My name is Jimmy
Carr, and I am the State Outreach Chairman for WISPA, the trade
association that represents wireless Internet service
providers, or the so-called WISPs. We represent more than 800
providers in all 50 States. I am also the CEO of All Points
Broadband, a hybrid-fiber-wireless Internet service provider
that serves customers in Virginia, Maryland, and West Virginia.
I am honored to be here today to present WISPA's thoughts on
the future of the Connect America Fund.
The WISP industry provides fixed Internet service to
approximately 3 million Americans. The vast majority of WISPs
operate in rural communities that wireline providers have
chosen not to serve. Where there is no access, a WISP can
provide it, and where there is no competition, a WISP can
create it.
Our industry is one that the members of this committee and
policymakers more generally need to know more about. In a
nutshell, we are small businesses investing private capital
deploying innovative technology to solve what just about
everyone agrees is one of the most important issues facing our
Nation, which is connecting rural America.
Over the past few years, there have been exponential
improvements in the fixed wireless equipment we deploy, and the
global equipment ecosystem has never been more robust. Fixed
wireless can, should, and with a smart regulatory framework
will be an extremely important component of any strategy to
connect rural America in a cost-effective way. Indeed, the vast
majority of WISPs have built their network without the benefit
of any Federal subsidies primarily because of the structure of
the Communications Act. WISP networks are typically designed so
that the so-called last mile between a customer's home and the
global Internet is made wirelessly over transmitters at fixed
locations. WISPs provide this connectivity primarily over
unlicensed and lightly licensed spectrum. Taking advantage of
available unlicensed spectrum, substantially reduces our costs
of deployment and the timeline on which we can deploy.
Unlike mobile wireless networks, the fixed wireless
networks that WISPs build can offer our customers virtually
unlimited data, enabling rural Americans to enjoy data-
intensive services such as telemedicine, teleworking, online
education, and streaming video.
Last year, the FCC implemented the Rural Broadband
Experiment Program to gather real-world data on how to deploy
next generation networks in rural areas. WISPs successfully
competed for funding through this program, and WISPA believes
there are several conclusions from the program that should be
taken into account as the CAF Phase II framework is finalized.
The most important conclusion from this process is that fixed
wireless broadband delivered over unlicensed spectrum is a
cost-effective way of providing universal service in rural
America.
Another important conclusion is that by working with
industry, the FCC can develop reasonable gating and financial
eligibility requirements that will promote greater competition
in the auction from small providers without increasing the risk
to the taxpayer. Our specific recommendations on gating
requirements are described in my written testimony.
WISPA believes that the principal objective of the Connect
America Fund should be connecting as many rural Americans as
possible in the most cost-effective way possible. To achieve
this goal, the program should not prioritize fiber to the home
over other technologies and it should not regulate bidders
using unlicensed or lightly licensed spectrum to the last
funding category. Rather, the FCC should adopt uniform speed,
latency, and data requirements and award support to bidders who
can meet those requirements in the most cost-effective way.
Fiber is an excellent technology. It is also relatively
expensive, especially in rural America, and in an environment
where support funds are limited, the objectives of serving as
many Americans as possible and doing as much fiber-to-the-home
build as possible are simply mutually exclusive. That is a
matter of plain arithmetic.
With regard to unlicensed and lightly licensed spectrum,
WISPs have been successfully deploying in this spectrum to
provide service to millions of Americans for many years. It is
a public resource that is already available to connect rural
America and should not be excluded from the CAF toolkit.
For the auction itself, the areas available for bid should
be determined by the most recent information available to
prevent subsidies from being used to overbuild privately funded
networks. To this end, the FCC should also commence a
proceeding to consider whether CAF support provided to price
cap carriers should be scaled back based on post-election
service by an unsubsidized competitor.
Finally, WISPA urges Congress to rewrite the Communications
Act so that functionally equivalent services are treated in the
same way. Consider that almost half of American households
choose not to subscribe to a fixed voice service, and yet we
are allocating billions of dollars of subsidies on the basis of
whether or not fixed voice and broadband are available on the
same bill from the same provider in a particular Census block.
This makes no sense.
In the short term, WISPA asks this committee and the
Congress to establish a standalone broadband fund that allows
all providers and all technologies to compete on an equal
footing.
Thank you and I look forward to your questions.
[The prepared statement of Mr. Carr follows:]
Prepared Statement of James G. Carr, CEO, All Points Broadband, on
behalf of the Wireless Internet Service Providers Association (WISPA)
Chairman Wicker, Ranking Member Schatz, and Members of the
Committee: My name is Jimmy Carr, and I am the State Outreach Chair of
WISPA, the Wireless Internet Service Providers Association. WISPA is
the trade association for wireless Internet service providers, or
``WISPs.'' WISPA represents more than 800 providers of fixed wireless
Internet service operating in every state in the Nation. I am also the
Chief Executive Officer of All Points Broadband, a hybrid-fiber-
wireless ISP based in Ashburn, Virginia, serving customers in Virginia,
Maryland and West Virginia. I am honored to be here today to share with
you WISPA's views on the future of the Connect America Fund (CAF).\1\
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\1\ My testimony does not address the Federal Communications
Commission's Mobility Fund, which subsidizes mobile wireless service.
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Background
Some 2,500 WISPs provide fixed Internet access to approximately
3,000,000 Americans. The vast majority of WISPs operate in rural
communities and other sparsely populated areas that wireline providers
have declined to serve. In many rural areas, WISPs provide the only
source of terrestrial Internet access. Of the 48 percent of rural
Americans that have only one option for fixed ``advanced
telecommunications capability,'' the local WISP may well be that sole
provider.\2\ Where there is no Internet connectivity, a WISP can
provide it, and where there is no competition, a WISP can create it. We
compete with Fortune 100 companies and other subsidized incumbents on
the basis of customer service and price. Unlike the vast majority of
large ISPs that bundle Internet access with video and entertainment
services, most WISPs provide standalone Internet service. We provide
the connectivity that enables rural customers to take advantage of
teleworking, telemedicine, online education, and services like Netflix
that are having a disruptive and consumer-friendly impact in the
content marketplace. The principal value proposition WISPs offer
customers is virtually unlimited data. For example, the median user on
my company's most popular residential package downloads more than 100
GB of data each month. This volume of data is unavailable on satellite
services and would cost in excess of $700 per month on a mobile hotspot
offered by a large wireless carrier.
---------------------------------------------------------------------------
\2\ See 2016 Broadband Progress Report, FCC 16-6, GN Docket No. 15-
191 (rel. Jan. 29, 2016) at 38. The 2016 Broadband Progress Report also
found that 13 percent of rural Americans have multiple options for
fixed ``advanced telecommunications capability.''
---------------------------------------------------------------------------
WISP networks are typically designed with a hub-and-spoke
architecture, in which the spoke, or ``last-mile'' connection between a
customer's home and a fiber-optic connection to a major data center is
made wirelessly between transmitters at fixed locations. Though a
number of WISPs are now deploying in licensed spectrum where it is
available, necessary to provide quality service, and cost-efficient for
their business, WISPs transmit primarily over unlicensed spectrum in
various bands, including 900 MHz, 2.4 GHz, and 5 GHz, as well as the
``lightly-licensed'' 3.65 GHz band. Using unlicensed and lightly-
licensed spectrum substantially reduces our costs of deployment and
enables us to expand rapidly to meet consumer demand. Significantly,
WISPs are able to provide affordable broadband service to rural and
remote areas that cannot be cost-effectively served by wired
technologies because the relatively low population density does not
support the capital expense of fiber-to-the-home, cable, and other
wireline platforms.
Over the past few years, manufacturers of fixed wireless technology
have dramatically increased the speed and capacity of equipment, while
improving unit economics. The global equipment ecosystem is stronger
and more dynamic than it has ever been. Companies like Cambium,
Ubiquiti, Mimosa, and Adaptrum are revolutionizing the space. They are
targeting a huge market--the 2/3rds or so of the global population who
have never been served by a wire, and never will. Fixed wireless
operators in America are the beneficiaries of massive global R&D
spending on improved fixed wireless capabilities.
Under any definition, nearly all of WISPA's members--including my
company--are small businesses. Our smallest members are individual
owner/operators that are providing connectivity to their friends and
neighbors in a previously unserved rural area. America's largest WISP
is Rise Broadband, with 800 employees serving approximately 200,000
customers in sixteen states. My company, All Points Broadband, is
somewhere in the middle, with twenty employees serving approximately
3,500 customers.
In many ways, my company is also an example of the evolution that
is taking place in the fixed wireless industry. As a result of the
continuous and exponential improvements in the capability of fixed
wireless equipment over the past few years, operators can now realize
significant economies of scale, which in turn enables us to expand our
coverage areas and continuously reinvest in our networks. More than
ever before, WISPs of all sizes are attracting private capital to
address what policymakers at every level and across the political
spectrum agree is a critical need for our nation--closing the digital
divide.
All Points Broadband commenced operations in the mid-Atlantic in
November of 2014, and has invested more than $6.5 million to upgrade
and expand our network in our first 14 months of operations. We have
built our subscriber base through acquisitions, organic growth and
better service, such as faster speeds that support our customers'
desire to stream video through over-the-top services such as Netflix
and Hulu. We serve fixed wireless customers from several hundred access
points that are located on large commercial towers, municipal water
tanks, commercial buildings, grain silos, and other vertical
infrastructure. While fixed wireless is our primary access technology,
before we make any major capital investment, All Points Broadband
considers whether another technology, such as fiber-to-the-home will be
cost-effective over the deployment lifetime, and we are beginning to
install fiber in more suburban areas where our existing customer base
and market projections justify the investment The same trend is
occurring throughout our industry. The number of WISPs that are
investing to convert wireless customers to fiber is growing every day.
The vast majority of WISPs, including All Points Broadband and the
companies we acquired, have built their networks without the benefit of
any Federal subsidies--no Universal Service Fund (USF) support from the
FCC, no broadband stimulus funding from NTIA or USDA, no Rural
Utilities Service support. The primary reasons for this are three-fold.
First, with respect to USF, the FCC has interpreted the Communications
Act to limit eligibility to providers of ``telecommunications''--in
other words, providers of voice service that met certain Federal and
state requirements. Second, until recently, the FCC has made the policy
choice to favor incumbent carriers for billions of dollars in funding.
Third, the reporting obligations and administrative burdens associated
with government programs have a disproportionate impact on smaller,
entrepreneurial companies, many of which simply do not have the
resources to participate in, and comply with, regulatory and subsidy
schemes with origins in a bygone era when the only service was voice,
which was only provided by wireline monopolies.
In November 2011, the FCC transformed its USF rules. In the four
years since those rules became effective, the FCC has pledged and
provided billions of dollars of support to a single class of
``telecommunications'' providers--the price cap carriers, the largest
of the large telephone companies. The FCC's stated rationale for this
decision was that ``[m]ore than 83 percent of the approximately 18
million Americans that lack access to residential fixed broadband at or
above the Commission's broadband speed benchmark [of 4 Mbps down/1 Mbps
up] live in areas served by price cap carriers.'' \3\
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\3\ Connect America Fund, 26 FCC Rcd 17663, 17673 (2011) (``USF/ICC
Transformation Order''). In the 2016 Broadband Progress Report, the FCC
found that 34 million Americans lack access to fixed broadband speeds
of at least 25 Mbps down/3 Mbps up. See 2016 Broadband Progress Report
at 33.
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At first glance, there is logic to directing support to areas where
upgrades were most needed; but consider the signal this sends to
decision-makers and to the capital markets. In effect, the program is
rewarding those multi-billion dollar, legacy monopolies for their
unwillingness or inability to deploy fixed broadband in the very areas
where they already have plant and customers, giving them a huge
advantage over potential competitors. Meanwhile, smaller telephone
companies, cooperatives, WISPs and others were left on the sidelines
and at an even greater competitive disadvantage. The program is
subsidizing and entrenching incumbent monopolies at the expense of
innovation and competition.
The Rural Broadband Experiment Program
Last year, the FCC implemented the Rural Broadband Experiment
program that made up to $100 million in support available to broadband
providers pledging to provide voice and broadband services to unserved
areas of the country.\4\ The support was awarded to those companies
that pledged to meet prescribed voice and broadband speed, latency,
usage and pricing criteria, in the most cost-effective manner, and
without regard to the specific access technology to be used. Of the
nine companies that have been authorized to receive support through
this one-time program, two were WISPs that will be deploying networks
that use unlicensed or lightly-licensed spectrum to serve customers.
One of these, a company called Skybeam that is part of Rise Broadband,
has been designated to receive almost $17 million to support 10
projects in rural, unserved areas of Illinois, Iowa, Kansas, Nebraska
and Texas. Skybeam committed to offer voice and broadband at speeds of
25 Mbps down/5 Mbps up over a network capable of 100 Mbps down/25 Mbps
up. The other WISP is First Step Internet, which was awarded more than
$400,000 to provide 10 Mbps down/1 Mbps up service in portions of rural
Washington state and Idaho. WISPs account for more than half of the
funds that have thus far been allocated to program recipients.\5\ Other
recipients include small telephone companies, cooperatives and electric
utilities.
---------------------------------------------------------------------------
\4\ See Connect America Fund, 29 FCC Rcd 8769 (2014) (``Rural
Broadband Experiment Order'').
\5\ See 2016 Broadband Progress Report at 55 (noting that as of
December 11, 2015, the FCC had authorized approximately $34 million in
Rural Broadband Experiment support).
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In addition to having their technical proposals fully vetted by the
FCC's engineers, winning bidders also had to submit letters of credit
from an insured, investment-grade top-100 bank for the full amount of
the support level received to date. A number of bidders were unable to
obtain letters of credit and the FCC did not approve waivers seeking
additional time to provide the letter of credit or to relax the
requirements. Winning bidders also were required to apply for and be
designated as eligible telecommunications carriers (ETCs) through a
state approval process. By requiring only winning bidders to become
ETCs--and thus ``telecommunications'' providers eligible for Rural
Broadband Experiment support--unsuccessful bidders were rightly spared
from having to spend time and money to become ETCs, and state public
utility commissions did not have to waste administrative resources
processing applications from unsuccessful bidders.
The FCC intended the Rural Broadband Experiment program to provide
real-world data that would inform future policy decisions,\6\ and
despite some problems with eligibility requirements, the program has so
far been a success. There are indeed several lessons from the program
that WISPA believes should be taken into account as the FCC finalizes
the Connect America Fund Phase II competitive bidding process. The most
important conclusion is that fixed wireless broadband delivered over
unlicensed and lightly licensed spectrum is a cost-effective way to
provide universal broadband service at the FCC's thresholds. Another
important conclusion is that by working with industry, the FCC can
develop reasonable gating and financial eligibility requirements that
will promote greater competition in the auction without increasing the
risk to the American taxpayer.
---------------------------------------------------------------------------
\6\ See Rural Broadband Experiment Order at 8770 (``We will use
these rural broadband experiments to explore how to structure the Phase
II competitive bidding process in price cap areas and to gather
valuable information about interest in deploying next generation
networks in high-cost areas'').
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The CAF Program--Recommendations
Before explaining our specific recommendations, I first want to
acknowledge the FCC's Wireline Competition Bureau for their
transparency in briefing stakeholders about their suggestions for the
CAF auction and their willingness to work with WISPA in considering
changes to the framework that will benefit small businesses and
encourage greater competition. We also appreciate the engagement WISPA
has had with the FCC Commissioners and their staff.\7\
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\7\ See, e.g., Letter from Stephen E. Coran, Counsel to WISPA, to
Marlene H. Dortch, FCC Secretary, WC Docket No. 10-90 (filed Nov. 23,
2015) (``WISPA Ex Parte Letter''). A copy of this letter is included
with my testimony.
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The CAF competitive bidding process will award up to $175 million
per year to eligible bidders to support broadband deployment in areas
where price cap carriers have declined support, and WISPA's members
have expressed interest in participating. We understand the FCC is
working on an order that will establish the framework for the auction
and will, later this year, open a proceeding to establish auction rules
and procedures. WISPA has been engaged in the process and will continue
to do so on behalf of our members. In considering our recommendations,
we hope the FCC will honor the promise it made in the 2011 USF/ICC
Transformation Order: ``If the incumbent [price cap carrier] declines
that opportunity in a particular state, support to serve the unserved
areas located within the incumbent's service area will be awarded by
competitive bidding, and all providers will have an equal opportunity
to seek USF support.'' \8\
---------------------------------------------------------------------------
\8\ USF/ICC Transformation Order at 17731 (emphasis added).
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Cost-Effective and Technology-Agnostic
The principal objective of the Connect America Fund should be
connecting as many unserved Americans as possible in the most cost-
effective way possible. That is, the limited resources available to the
FCC should be allocated in a way that will provide a threshold level of
broadband service to as many end users as possible that currently do
not have access. According to the 2016 Broadband Progress Report that
the FCC released less than a week ago, ``[t]here is also a significant
disparity between rural and urban areas, with more than 39 percent of
Americans living in rural areas lacking access to 25 Mbps/3 Mbps
advanced telecommunications capability, as compared to 4 percent of
Americans living in urban areas.'' \9\ Further, ``25 percent of rural
Americans lack access to 10 Mbps/1 Mbps fixed terrestrial broadband
services compared to 2 percent of urban Americans, and 19 percent of
rural Americans lack access to 4 Mbps/1 Mbps fixed terrestrial
broadband service compared to 2 percent of urban Americans.'' \10\ With
a well-conceived framework for CAF Phase II, WISPs and other
competitive providers can do more to help bridge this urban-rural
divide.
---------------------------------------------------------------------------
\9\ 2016 Broadband Progress Report at 33-34.
\10\ Id. at 34 n.242.
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WISPA's primary concern is that the FCC's framework must not favor
one technology over another, but rather encourage maximum competition
among all bidders that can meet uniform thresholds for broadband speed,
latency, usage and pricing, without regard to the specific technology
that the bidder plans to deploy. Anything less would be inconsistent
with the FCC's promise that all bidders will have an ``equal
opportunity.''
Based on information that the Wireline Competition Bureau has
shared with WISPA and other stakeholders, we understand that FCC staff
has recommended that CAF Phase II support be divided into three
categories. Category 1 would be reserved exclusively for bidders
proposing to deploy fiber-to-the-home. Category 2 would be for bidders
whose deployments will meet, in general terms, each of the following
three criteria: speeds of at least 25 Mbps down and 3 Mbps up, round-
trip latency of 100 milliseconds or better and high data caps, and
whose deployments will use licensed spectrum. In the unlikely event
there is any funding remaining from the first two categories, Category
3 would be for bidders who use unlicensed spectrum, or who meet only
two of three requirements for speed, latency and data set out in
Category 2.
WISPA has two significant concerns regarding the proposed structure
of the reverse auction, which will be shared by anyone who believes
that limited resources should be allocated as efficiently as possible.
First, the proposed requirement that Category 2 bidders use
licensed spectrum will exclude the vast majority of fixed wireless
providers from competing in the auction and will foreclose
participation by those who can deploy in the most cost-effective
manner, meaning that the limited number of other bidders will receive
more support to serve fewer unserved locations. For many years, WISPs
have successfully used unlicensed and lightly licensed spectrum to
provide service to millions of Americans. Most operate in rural areas
where there is sufficient and uncongested unlicensed spectrum that can
be used to connect Americans to the Internet. What better use of this
public resource is there than connecting rural and unserved Americans
in a cost-effective manner? Unlicensed spectrum is a public resource
that is already available, and is already being used to achieve this
public purpose. What sense does it make to exclude from the toolkit for
the CAF auction? The funding provided by the FCC to Skybeam and First
Step Internet in the Rural Broadband Experiment program is an excellent
case in point. Both of these companies' technology platforms were
vetted by FCC technical staff who concluded that unlicensed spectrum
could be used to meet the requirement of providing 100 percent coverage
in the relevant service areas. In fact, price cap carriers that have
accepted CAF funds are not bound to any particular technology--they can
deploy cost-effective unlicensed fixed wireless technology if they
want, so long as they provide 10 Mbps down/1 Mbps up and meet other
technology-agnostic performance criteria.\11\
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\11\ See Connect America Fund, 29 FCC Rcd 15644, 15649 (2014).
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WISPA's second concern is the possibility that the FCC will adopt a
``waterfall'' funding structure, in which all Category 1 bids are
awarded before any funds are made available to Category 2 bidders, and
then all Category 2 bids are awarded before any funds are made
available to Category 3 bidders.
The purpose of the CAF auction should not be promoting one access
technology over another, but rather advancing the objective of ensuring
that all Americans have access to adequate service. Fiber is indeed an
excellent access technology--All Points Broadband and many other WISPs
rely on fiber to serve their customers, and are accelerating their
fiber-to-the-home deployments. However, relatively speaking, fiber is a
very expensive technology, and in an environment where resources are
finite, the goal of providing service that meets the FCC's definition
of ``advanced telecommunications capability'' to as many Americans as
possible, on the one hand, and of providing fiber-to-the-home to as
many locations as possible, on the other, are mutually exclusive--this
is an undeniable economic reality. Further, a structure that
prioritizes fiber-to-the-home may disadvantage the most rural locations
and communities, where the economics of this technology are frequently
the most challenging. Where ``advanced telecommunications'' as
interpreted by the FCC can be delivered via fixed wireless or another
technology at a lower cost than fiber, the auction structure should not
stack the deck before bidding has even begun. Rather, the auction
should provide support for the group of bidders that can meet the FCC's
performance criteria and serve the most Americans in the most cost-
effective manner. The FCC successfully used this approach in the Rural
Broadband Experiment program, and there is no reason to deviate from
that practice.
Auction Eligibility
Another key aspect of the competitive bidding framework is the pre-
auction eligibility criteria. The FCC staff explained that it would be
recommending that bidders must submit audited financial statements as a
pre-condition to participating in the auction. But, as WISPA has
pointed out, many small businesses do not have audited financial
statements, and should not be required to spend $25,000 or more for an
audit on a speculative basis before the auction, just to participate.
To address this problem, WISPA and others believe the FCC should
establish a means by which small providers with fewer than 25,000
broadband connections will be permitted to certify before the auction
that they will provide audited financial statements within a certain
period if and after being selected for support. This is similar to the
approach that the FCC took with regard to ETC designation in the Rural
Broadband Experiment program. WISPA agrees that winning bidders that
are unable to provide the audited financials within a reasonable period
of time after being selected for support should be subject to
reasonable monetary forfeitures.
Post-Auction Financial Requirements
The FCC required Rural Broadband Experiment recipients to submit a
letter of credit from a federally insured top-100 bank with a BBB-
credit rating. If a bidder defaults on a build-out or other program
requirements, the FCC can suspend support and draw on the letter of
credit to cover the amount of disbursed support. As a threshold matter,
the requirement to maintain a letter of credit to protect the taxpayer
is certainly reasonable. However, applying lessons from the Rural
Broadband Experiment, WISPA is urging the FCC to modify the specifics
of the letter of credit requirement for the CAF II reverse auctions.
Letters of credit have annual carrying costs (around four percent)
and appear as liabilities on a company's balance sheet--essentially,
they are viewed as a loan that limits a support recipient's borrowing
capacity on a dollar-for-dollar basis, although the winning bidder
never receives the letter of credit proceeds. In the Rural Broadband
Experiment program, a recipient is required to maintain a letter of
credit for the entire amount of support it received and for the entire
term of the support, regardless of progress towards build-out. This
structure increases the recipient's expenses and reduces its debt
capacity for the entire life of the funded project--despite the fact
that the risk to the taxpayer decreases as the recipient draws support
and satisfies its build-out requirements. Once build-out is complete,
there is no benefit to the taxpayer by continuing to increase expenses
and limit the borrowing capacity of a support recipient that has
satisfied its obligations to the fund. We believe the letter-of-credit
requirements for the CAF process should be modified to address this
unnecessary constraint on support recipients.
Here are WISPA's specific proposals with respect to the letter of
credit requirement:
First, the FCC should expand the list of eligible banks to
enable greater participation by smaller broadband providers in
a manner that does not compromise the integrity of the CAF
program. WISPA and the American Cable Association have
developed a detailed proposal and look forward to discussing it
with the FCC in the very near future.
Second, the FCC should give winning bidders at least six months
to obtain and submit the letter of credit.
Third, the amount required to be covered by the letter of
credit should decline over time as the amount of remaining
support declines. This will reduce the recipient's liabilities
and increase its borrowing power to invest in network expansion
and upgrades.
Fourth, the letter of credit should not be required to be
maintained beyond the date on which build-out requirements have
been met.
Adopting these recommendations will assure the FCC's interest in
recovering support funds in the unlikely event of a default and will
increase participation in the auction, especially among small
providers.
Auction Design
WISPA's detailed views on the design of the auction are not yet
fully formed, but there are a few high-level principles that should
apply. First, the selection criteria should prioritize cost-
effectiveness--which bidder can serve the greatest number of unserved
locations in the geographic area at the lowest cost. Second, the areas
available for bid should be determined by information reported on the
FCC Form 477 that is as close to the beginning of the auction as
possible. This will mitigate the problem that arises when old
information is used and support is provided to areas that are already
served by unsubsidized providers. If there is one thing that
policymakers, taxpayers, and investors of private capital should agree
on, it is that Federal subsidies should not be awarded to fund
overbuilding of privately funded networks that are already providing
service. Third, the bidding process should be simple and short. A
complicated process requiring an army of economists, lawyers and game
theorists to navigate will not promote participation by entrepreneurial
providers, and will expose bidders to a long anti-collusion period that
will chill transactional activity. And fourth, geographic areas should
be right-sized--no smaller than a census block, no larger than a
county.
WISPA looks forward to providing its further and more specific
input to the FCC when staff engages stakeholders to share and discuss
their ideas and suggestions for a successful reverse auction.
Ongoing Support for Price Cap Carriers
In August 2015, the price cap carriers made their elections to
accept $1.5 billion annually in CAF Phase II support over the next six
years--$9 billion in total. The areas where that support is available
are mostly set, and the FCC generally will not alter the support over
the six-year term even if unsubsidized carriers subsequently serve the
areas identified for funding. This acts as a disincentive to private
investment, network expansion and competition in the broadband market.
Unsubsidized providers will be reluctant to expand service into areas
designated for support, even though the subsidized incumbent may not
intend to build out to the area for several years. And in cases where
the unsubsidized provider does expand into funded areas, they will be
competing with a large carrier that has the benefit of Federal support.
The CAF program has created enough perverse incentives--it should not
continue to perpetuate monopolies and discourage competition.
To address these anti-competitive market effects, WISPA suggests
that the FCC commence a proceeding to consider whether CAF support
provided to price cap carriers should be scaled back based on post-
election service by an unsubsidized competitor. The FCC could rely on
FCC Form 477 and re-visit its initial support determination at regular
intervals. In lieu of funding served areas, the FCC would reclaim the
allocated support and restore those funds to the universal service fund
for later distribution through the Remote Areas Fund or another
program.\12\
---------------------------------------------------------------------------
\12\ In 2014, the FCC acknowledged that there may be variances
between the number of unserved locations its model predicted and the
actual number of unserved locations in a given area. See Connect
America Fund, 29 FCC Rcd 15644, 15659 n.88 (2014). The FCC asked price
cap carriers to inform FCC staff if it discovered any differences.
WISPA notes and appreciates Frontier's recent letter to the FCC
identifying supported areas where there are fewer unserved locations
than the FCC's model, which will result in adjustment of Frontier's
service targets and a pro rata reduction in funding. See Letter from
Michael Golob, Frontier Senior Vice President, Network and Engineering
Integration, to Marlene H. Dortch, FCC Secretary, WC Docket No. 10-90
(filed Dec. 30, 2015).
---------------------------------------------------------------------------
Remote Areas Fund
Regarding the Remote Areas Fund, in November 2011 the FCC allocated
up to $100 million for fixed broadband deployment to ``extremely high
cost'' areas. The FCC has taken no action to implement rules for this
fund, which would support broadband deployment to those areas that are
deemed to be the most expensive to serve. Through fixed wireless
technology, WISPs are well-equipped to deploy to these areas. We urge
the FCC to propose rules for the Remote Areas Fund at the earliest
opportunity.
Bringing the Communications Act into the 21st Century
Finally, the most important and effective step that could be taken
to improve availability and competition in the broadband market, and to
foster greater innovation, is within Congress' power. The
Communications Act is long overdue for an overhaul. The current
framework draws distinctions on the basis of which access technology is
used to provide the service. In an all-IP world, these distinctions
make no sense and create ripples in the regulatory environment that
have unintended and illogical results, many of which are playing out in
the Connect America Fund process.
For example, almost half of American households choose not to
subscribe to a landline phone service, and yet, as a society we are
using a requirement that voice and broadband service be available on
the same bill from the same provider to determine where to allocate
billions of dollars of subsidies, and who will receive them. This makes
no sense. As everyone knows, if you have an Internet connection, you
can have phone service. What's more, if you don't like the phone
service your ISP offers, you can use Vonage, Magic Jack, or dozens of
other providers who are competing with one another to earn your
business every day.
It is time to re-write the Communications Act to eliminate these
accidents of history and treat functionally equivalent services in the
same way. And if rewriting the Communications Act is too much to
achieve in the near term, WISPA asks this Committee and the Congress to
eliminate the voice requirement or to establish a standalone broadband
fund that does not have a voice requirement and allows all providers
and technologies to participate on an equal footing. We stand ready to
work with you to craft appropriate legislation.
Thank you, and I look forward to your questions.
______
Lerman Senter PLLC
Washington, DC, November 23, 2015
Marlene H. Dortch, Secretary
Federal Communications Commission
Washington, DC.
Re: Notice of Oral Ex Parte Presentation WC Docket No. 10-
90
Dear Ms. Dortch:
On November 20, 2015, Alex Phillips, President of the Wireless
Internet Service Providers Association (``WISPA'') and CEO of
Highspeedlink, Jeff Kohler, Co-Founder and Chief Development Officer of
JAB Wireless, Inc. dba Rise Broadband, Jimmy Carr, CEO of All Points
Broadband, Jonathan Allen of Rini O'Neil, PC and undersigned counsel to
WISPA, met with Carol Mattey, Deputy Chief of the Wireline Competition
Bureau, and Claude Aiken, Associate General Counsel. The purpose of the
meeting was to present WISPA's views and concerns about the proposed
order on circulation that would establish the framework for competitive
bidding in Phase II of the Connect America Fund (``CAF'') program.
The WISPA representatives explained that there is significant
interest among fixed wireless Internet service providers (``WISPs'') in
participating in the competitive bidding process. Mr. Kohler of JAB
Wireless, the parent of Skybeam, LLC (``Skybeam''), noted that Skybeam
had been selected to receive $16.9 million for 10 rural broadband
experiment projects, all of which would use unlicensed spectrum to meet
the coverage requirements. Mr. Kohler stated that Skybeam relies on
competitive and upgradable technology and unlicensed spectrum that can
be quickly deployed, which had been thoroughly vetted by Commission
staff prior to Skybeam's selection. Messrs. Carr and Phillips, who
operate smaller companies, indicated their strong interest in bidding
for CAF support.
The WISPA representatives identified several specific concerns with
the proposed framework. If not properly addressed, these issues would
effectively preclude WISPs from competing in the competitive bidding
process, a result that would limit participation, limit the areas
subject to support and result in an inefficient allocation of limited
resources to deployments of access technologies that are far less cost-
effective than unlicensed fixed wireless technology. These concerns are
as follows:
First, the WISPA representatives opposed any technology-specific
funding categories and strongly objected to a requirement for Category
2 that bidders use only licensed spectrum for their deployments. WISPs
have a track record of successfully building fixed broadband networks
with unlicensed spectrum in a cost-effective way--roughly one-fifth the
cost of wireline technologies, as Mr. Kohler explained. The WISPA
representatives explained that it would be inconsistent for the
framework to relegate to Category 3 those service providers that deploy
networks using unlicensed spectrum when those providers can meet all of
Category 2's speed, usage allowance and latency criteria. Mr. Kohler
noted that interference would be much less of an issue in rural areas
where there is little to no contention for spectrum, and that a variety
of technology solutions, including small cells, could be deployed to
meet the coverage requirement, as Skybeam's rural broadband experiment
projects demonstrated.
Second, the WISPA representatives object to a ``waterfall''
competitive bidding process that would award funds first to all
Category 1 (fiber-to-the-premises) proposals, then would award any
remaining funds to Category 2 proposals, then would award any remaining
funds to Category 3 proposals. Instead, the WISPA representatives
support a technology-neutral approach that is based on cost-
effectiveness--priority should be given to the proposals that provide
broadband meeting the speed, usage allowance and latency requirements
to the most locations using the least Federal support.
Third, the WISPA representatives asked the Commission to expand
eligibility for banks issuing letters of credit to those that are
outside the top-100 banks.\1\ Mr. Phillips explained that small WISPs
have strong relationships with smaller, community banks that understand
the WISP business and are familiar with their business and financial
models. Mr. Kohler noted that some top-100 banks did not want to
participate in the rural broadband experiment program. The WISPA
representatives pointed out that requiring a top-100 bank to provide
letters of support would foreclose participation from smaller
companies.
---------------------------------------------------------------------------
\1\ See Letter from Thomas Cohen, Counsel to the American Cable
Association (``ACA''), to Marlene H. Dortch, FCC Secretary, WC Docket
No. 10-90 (filed Nov. 13, 2015) (``ACA Letter'').
---------------------------------------------------------------------------
Fourth, consistent with a proposal advanced in the ACA Letter,
WISPA suggested that the framework include a third alternative for pre-
auction financial qualification that would allow bidders with three-
year broadband track record to post a reasonable upfront amount of
money in lieu of audited financial statements. The upfront amount would
be refunded if the bidder was unsuccessful; for successful bidders
using this option, the money would be refunded and applied to funding a
post-auction audit. Mr. Phillips explained that small broadband
providers do not typically have audited financial statements. Mr. Carr
explained that the cost to prepare an audit can be in the $50,000 range
and that smaller ISPs with a three-year track record should not be
required to pay for audits on a speculative basis as a precondition for
competing in the auction.
Fifth, the WISPA representatives urged the Commission to rely on
the most current FCC Form 477 information available at the time
competitive bidding begins to establish the final list of available
census blocks. Doing so would encourage continued build-out by
``unsubsidized competitors'' and obviate the need for a time-intensive
challenge process.
In conclusion, the WISPA representatives emphasized that the
proposed framework would preclude participation by small broadband
providers. In particular, any one of the first four concerns would be
extremely problematic; collectively, the impact would be far worse for
both WISPs that want to participate and the American public that would
benefit from greater auction participation and cost-effective broadband
service.
Pursuant to Section 1.1206 of the Commission's Rules, this letter
is being filed electronically via the Electronic Comment Filing System
in the above-captioned proceeding.
Respectfully submitted,
Stephen E. Coran,
Counsel to WISPA.
cc: Carol Mattey
Claude Aiken
Senator Wicker. Thank you very, very much.
Mr. Rapelyea?
STATEMENT OF MICHAEL RAPELYEA, VICE PRESIDENT FOR GOVERNMENT
AFFAIRS, ViaSat, INC.
Mr. Rapelyea. Chairman Wicker, Ranking Member Schatz, and
the other members of the Subcommittee, I am Michael Rapelyea,
Vice President of Government Affairs at ViaSat. I am pleased to
testify about how competition can help extend broadband service
to the 500,000 rural Americans left behind by the FCC's Connect
America Fund. A ``fiber everywhere'' approach is not realistic
or affordable. I am focusing here on the highlights of written
testimony in the record.
ViaSat is an American success story. We started in a garage
30 years ago. We now employ over 3,000. We invested billions in
broadband technology. We believe in disruption. We believe in
better before cheaper. We believe in competition. Our satellite
broadband technology has disrupted the broadband industry by
driving down the cost per bit and driving up service quality to
customers. We deliver bandwidth speeds to anyone anywhere. Here
are three examples.
First, in the airline WiFi sector, our service is on board
hundreds of JetBlue, Virgin, and United jets. JetBlue
passengers live stream Amazon Prime video for free. Virgin
passengers live stream Netflix for free. With ViaSat service,
100 passengers connect simultaneously. Before ViaSat, five
passengers connected.
Second, ViaSat has 700,000 home broadband subscribers. One-
third came from terrestrial solutions. These folks had choices.
They joined us because we were better, not because we were the
only option. We deliver high definition video streaming speeds
of up to 25 megabits per second in some areas of the country
today, and we will do it across the country by next year.
Third, we deliver broadband satellite to government and
military users. Our special operations forces rely on ViaSat.
During Hurricane Sandy, we provided connectivity to the
National Guard and the American Red Cross. When everything was
down, we were up. Like most communications companies, ViaSat
home subscribers follow U.S. population distribution. Most of
our customer are exurbs or in heavily populated areas. Some are
rural. In other words, we serve a blend.
Economies of scale apply to us well. In Mississippi, for
example, our customers cluster around Jackson, Tupelo, Oxford,
and Hattiesburg versus rural parts of the state.
We currently use four spacecraft and are launching more to
keep up with demand. ViaSat's first generation of satellites
compete well against DSL and legacy cable. Our second
generation design competes against cable offering speeds of 25
to 100 megabits per second. Our third generation features
speeds approaching fiber with highly flexible bandwidth that we
can allocate to customer demand.
America's largest airlines, the Department of Defense, and
almost a million Americans have given ViaSat a shot. Today we
are asking regulators to give multiple technologies, including
those on this panel, a shot at competing for the 500,000 homes
simply left behind by current CAF policies. It is hard to see
how we get there from here. It is a real head-scratcher. There
does not seem to be enough money, and the budget shortfall
could be as much as $750 million.
Satellite broadband can solve this problem for three main
reasons. Today we are competing directly with terrestrial
technologies, and we are winning. Today we are delivering what
customers want: speed. Today we are far more cost-effective
than fiber.
On top of this, we have submitted a proposal to the FCC
that features 50 megabits per second speeds. That is double the
25 megabit per second speeds of the FCC's benchmark.
Despite all of this, we may not have a chance to compete
for most of those households. The current proposals limit us to
the costliest and hardest-to-reach households. It is really
hard to make a business case out of that. We would like to
compete to solve all of the problem, not just part of it. Like
other communications companies, if we do not get critical mass
of customers or a blend of customers, we cannot make the long-
term capital commitments needed to address all of the problem.
Our ask is simple. Promote competition. Avoid picking
winners and losers. Allow all broadband providers the chance to
compete for all of those left-behind households.
Thank you.
[The prepared statement of Mr. Rapelyea follows:]
Prepared Statement of Michael Rapelyea, Vice President for Government
Affairs, ViaSat, Inc.
Chairman Wicker, Ranking Member Schatz, and other Members of the
Subcommittee, I am Michael Rapelyea, Vice President for Government
Affairs of ViaSat, Inc. (``ViaSat''). I am pleased to have the
opportunity to testify before you today on ViaSat's views about how
policymakers can harness competition among service providers and
communications technologies to ensure that limited universal service
support is used efficiently and effectively to extend the benefits of
broadband to rural America.
ViaSat is a U.S.-based company started by its three founders in a
garage in San Diego nearly 30 years ago. From those humble beginnings,
ViaSat has grown into a global broadband services and technology
company with over 3,000 employees. ViaSat also is a leading provider of
communications solutions to U.S. consumers, the U.S. government, and
the U.S. military. Simply stated, we invent, design, and build
telecommunications networks and systems--with a particular focus on
satellite technologies.
We use a fleet of spacecraft to provide our Exede broadband service
to fixed and mobile terminals. Our advanced technology has
revolutionized the industry by reducing the ``cost per bit'' of
delivering broadband service, providing a high-quality service to end
users, and affording millions of Americans an effective competitive
alternative to wired and wireless terrestrial services. We turn
electrons into bandwidth and bandwidth into quality broadband service.
Our satellite broadband customers include individual consumers,
small and large businesses, government and military users, and major
airlines such as United, JetBlue and Virgin America. ViaSat serves
nearly 700,000 customers in their homes and offices, and provides in-
flight broadband on approximately 419 commercial, 300 business, and 400
government aircraft.\1\ Nearly one million personal electronic devices
connect each month to the Wi-Fi service provided through these
broadband connections to aircraft. For example, today ViaSat technology
can power my 10 year old son Teddy's iPad on a JetBlue flight heading
to Disney and Netflix on my iPad on a Virgin America flight heading to
ViaSat's California headquarters.
---------------------------------------------------------------------------
\1\ See Press Release: ViaSat Announces Second Quarter Fiscal Year
2016 Results (Nov. 9, 2015), available at http://investors.viasat.com/
releasedetail.cfm?ReleaseID=941679.
---------------------------------------------------------------------------
ViaSat also provides satellite broadband service to government and
military users for their essential missions and communications needs.
Among other things, we provide the Department of Defense with critical
communications capabilities providing situational awareness to
America's warfighters on the ground, at sea and in the air. For
example, in connection with Project Liberty we delivered secure
communications channels to U.S. Special Forces in Afghanistan. We also
provide critical public safety connectivity, including to the National
Guard and the American Red Cross during Hurricane Sandy, and to law
enforcement apprehending the Arizona sniper.
It may surprise some, but ViaSat's customers are distributed across
the United States in a manner that roughly follows the U.S. population
distribution, as depicted below. So our strongest markets are more
heavily populated areas, not just rural.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
We currently use four spacecraft to provide service, and are
launching more to keep up with growing customer demand, expand
capacity, and provide even better service. ViaSat-1, launched in 2011,
supports speeds to individual users of up to 25/3 Mbps and has a total
capacity of approximately 150 Gbps. When it was launched, ViaSat-1 had
more than 10 times the throughput of the other Ka-band satellites in
orbit.\2\ ViaSat's second-generation high-capacity satellite, to be
launched within the next year, will double this throughput to over 300
Gbps, and will support speeds well over 100 Mbps.\3\ The third-
generation ViaSat high-capacity satellites under development each will
provide over 1 Terabit per second (1,000 Gbps) of throughput and even
higher speeds.\4\ Our newest and most advanced satellite designs are
highly flexible, allowing us to allocate bandwidth where it is most
needed.\5\
---------------------------------------------------------------------------
\2\ See ViaSat-1 FAQ, available at https://www.viasat.com/sites/
default/files/legacy/web/ViaSat-1_FAQ_3_09_V3.pdf (last visited Jan.
27, 2016).
\3\ See ViaSat Q2 2016 ViaSat Earnings Conference Call (Nov. 9,
2015), available at http://investors.viasat.com/events.cfm.
\4\ Id.
\5\ Id.
---------------------------------------------------------------------------
Today, in addressing the current state of the universal service
fund (``USF''), efforts to implement the Connect America Fund
(``CAF''), and other ongoing reform efforts, I would like to emphasize
four key points:
1. Satellite technologies today are providing high-quality broadband
services to American consumers--and those same technologies are
fully available for use in connection with the CAF;
2. Satellite broadband technologies provide a superior end-user
experience that is optimized for the vast majority of Internet
traffic;
3. Satellite broadband technologies offer an extremely cost-
effective means of serving rural and remote areas of the
country; and
4. ViaSat's network expansion plans will be influenced by CAF and
other USF policies.
But current policy proposals do not provide an environment
conducive to ViaSat making long-term commitments to step into the shoes
of the wireline incumbents that have declined to continue to serve the
costliest and hardest to reach parts of the Nation that are the focus
of the final stages of the CAF.
I. Satellite Technologies Provide High-Quality Broadband Services to
Consumers Today
By investing billions of dollars to develop cutting-edge
technologies, ViaSat has fundamentally changed the broadband game. By
significantly increasing the level of throughput (i.e., bandwidth or
``speed'') achievable over satellite networks, and dramatically
lowering the ``cost per bit,'' we are now attracting customers from our
terrestrial competitors, such as 3G and 4G wireless, cable, and DSL.
Indeed, roughly one-third of ViaSat's approximately 700,000 satellite
broadband subscribers have switched over from terrestrial broadband
alternatives. There is no better indication of widespread market
acceptance of satellite broadband solutions.
Furthermore, as shown in the following graph, ViaSat's satellite
broadband service has an overall user satisfaction rating that is on
par with that of leading cable and DSL-based broadband service
providers. Notably, the reported level of satisfaction has been rising,
and is considerably higher, since ViaSat-1 was launched in 2011.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
FTTH: FiOS, FTTN: U-Verse, Cable: average score of CableOne,
Charter, Comcast, Cox, MediaCom, Time Warner, DSL: average score of
AT&T, Century Link, FairPoint, Frontier, Verizon, Windstream. ViaSat
not ranked in 2013, data point is interpolated.
Source: Consumer Reports issues published February 2010, May 2011,
June 2012, May 2013, May 2014, and May 2015, available at
www.consumerreports.org.
Things have changed dramatically for the better in the past five
years. With due respect to Chrysler, ``We are not your father's
satellite broadband service.''
II. Satellite Broadband is Optimized for the Vast Majority of Internet
Traffic
ViaSat's broadband performance has been made possible by dramatic
improvements in the throughput--i.e., bandwidth or ``speed''--
achievable over satellite and improvements with network equipment on
the ground. As I described above, the satellites and network
architecture that ViaSat plans to deploy in the coming years will
support even higher levels of throughput and speed, translating into
even higher-quality broadband service for consumers--service that will
more than keep pace with the improvements implemented over time by our
competitors.
The quality of any broadband service depends on a combination of
service characteristics,\6\ but bandwidth is the central value
proposition of a broadband service and speed is the most significant
driver of consumer satisfaction. Even a cursory examination of the
marketing materials of leading broadband providers reflects that speed
is one of the two most critical elements used to market service to the
consumer (along with price).\7\ And ViaSat has found that the speed of
an offered service has a greater impact on consumer adoption than any
other factor.
---------------------------------------------------------------------------
\6\ See generally Mark D. Dankberg, Thomas E. Moore, and Girish
Chandran, Toward a National Broadband Plan: Ensuring a Meaningful
Understanding of Broadband Capabilities and Facilitating Competitive
Choices (Aug. 31, 2009), attached to Letter from John P. Janka, Counsel
to ViaSat to FCC, GN Docket No. 09-51 (Aug. 31, 2009) (discussing the
multiple dimensions of ``broadband'' service and cautioning against the
adoption of overly restrictive performance standards that could
artificially constrain the evolution of broadband service).
\7\ See, e.g., http://www.verizon.com/home/fios-fastest-internet/
#plans (last visited Jan. 12, 2016) (listing Verizon FIOS plans and
emphasizing, in bold type, speeds and prices associated with each
offering).
---------------------------------------------------------------------------
The reason for this is simple: The amount of bandwidth available to
a customer has a significant and direct impact on the quality of the
end-user experience for the most popular broadband applications, which
account for the vast majority of Internet traffic. The following chart,
based on data from Cisco's Visual Networking Index, shows a breakdown
of consumer Internet traffic by application type last year:
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Notably, Internet video streaming and downloads alone accounted for
over 60 percent of Internet traffic.\8\ These applications are expected
to account for more than 80 percent of all Internet traffic by 2019.\9\
---------------------------------------------------------------------------
\8\ See 2015 Measuring Broadband America Fixed Broadband Report at
7 n.3 (citing Cisco Visual Networking Index: Forecast and Methodology,
2014-2019 White Paper (May 27, 2015), available at http://
www.cisco.com/c/en/us/solutions/collateral/service-provider/ip-ngn-ip-
next-generation-network/white_paper_c11-481360.html (``Cisco VNI
Paper'').
\9\ Id.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Higher levels of bandwidth permit the transmission of higher-
quality data streams. Consequently, the quality of the end-user
experience when using these applications is directly tied to the speeds
available to that user.
At the same time, higher speeds allow multiple users and devices in
a given household to access the Internet simultaneously. Notably,
Gartner, Inc., forecasts that over 13.5 billion consumer devices--and
over approximately 20.8 billion total devices--will be connected to the
Internet by 2020.\10\ This would mean roughly three devices for every
person on the face of the Earth--and significantly more devices per
person in America's hi-tech society.\11\ It is no surprise that Cisco
predicts that these demands will cause average broadband speeds to
double to 43 Mbps by 2019.\12\
---------------------------------------------------------------------------
\10\ See Press Release: Gartner Says 6.4 Billion Connected
``Things'' Will Be in Use in 2016, Up 30 Percent from 2015 (Nov. 10,
2015), available at http://www.gartner.com/newsroom/id/3165317.
\11\ The U.S. Census projects that worldwide population will exceed
7.5 billion by 2020. See International Data Base: World Population:
1950-2050 (last visited Jan. 28, 2016), available at ttps://
www.census.gov/population/international/data/idb/worldpopgraph.php.
\12\ Id.
---------------------------------------------------------------------------
ViaSat's satellite broadband network currently provides service of
up to 25/3 Mbps in certain areas and at 12/3 Mbps everywhere else. With
the launch of ViaSat-2 within the next year, we plan to introduce
packages with even higher speeds. These evolving speeds ensure that our
700,000-plus customers have access to service capable of supporting HD
video and other in-demand applications. In contrast, many of these
areas remain entirely unserved by incumbent providers, which might be
able to offer 10/1 Mbps service years from now, and only with
significant government subsidies.
III. Satellite Broadband Technologies Offer an Extremely Cost-Effective
Means of Serving Rural and Remote Areas
As noted above, the advanced satellite broadband technologies
developed by ViaSat have resulted in a ``cost per bit'' for ViaSat's
network that is dramatically lower than legacy satellite networks. As a
result, today's satellite broadband networks offer performance that
meets or exceeds that of its competitors. But ViaSat also offers
pricing for that performance that is competitive with the alternatives.
Indeed, ViaSat's network is incredibly cost-effective compared not
only to last-generation satellite networks, but also compared to
existing incumbent networks (including cable and DSL)--largely due to
the enormous capital efficiency inherent in satellite infrastructure
(although, even for us, it still costs more to serve users in remote
areas, due to the increased costs associated with installation and
service calls).
Indeed, a report commissioned by ViaSat in 2011 estimated that
nearly half of the housing units identified as ``unserved'' by the FCC
could be served at lower cost with satellite technologies than with
terrestrial alternatives.\13\ And even where satellite is not the
lowest-cost option, its participation in the CAF would spur competition
and compel other providers to provide more cost-effective service. In
both cases, allowing satellite broadband providers to participate fully
and directly in the CAF would result in significant costs savings and
better program outcomes. Conversely, excluding or limiting the
participation of satellite broadband providers would unnecessarily
inflate costs while undermining the universal service policies
objectives of the CAF.
---------------------------------------------------------------------------
\13\ See Dr. Charles L. Jackson, Satellite Service Can Help to
Effectively Close the Broadband Gap (Apr. 18, 2011), attached as
Exhibit A to Comments of ViaSat, Inc., WC Docket No. 10-90 (Apr. 18,
2011). Although the data used in that report need to be refreshed to
reflect the passage of time (e.g., cost information), we believe the
report's basic conclusions with respect to the relative cost-
effectiveness of satellite technologies remain sound.
---------------------------------------------------------------------------
IV. ViaSat's Business Plans Will Be Influenced by Connect America Fund
Policies
CAF support undoubtedly would facilitate ViaSat's ability to make
its high-quality broadband services available to millions of additional
consumers in locations that have been deemed ``unserved'' by the FCC.
ViaSat is well-positioned to make long-term commitments to serve those
consumers located in areas supported by the CAF through service plans
offering high-quality broadband service at attractive price points, but
ViaSat cannot do so without a fair shot at the same support its
competitors are seeking.
Consistent with the FCC's longstanding commitment to competitive
and technological neutrality, ViaSat has advocated the adoption of CAF
eligibility criteria that enable broad program participation by
wireline, wireless, satellite, and all other service providers on the
same terms and conditions. Stated differently, we believe that policy
makers should give the best players a chance to compete. As ViaSat has
explained, this approach would offer the best chance of truly bridging
the Digital Divide and would facilitate the use of extremely limited
CAF funding by the most efficient service providers--regardless of the
technologies they use. This approach would minimize the contribution
burden placed on average Americans who fund the CAF through surcharges
on their telephone bills.
Unfortunately, recent years have seen the adoption of CAF decisions
and policies that favor incumbents over new entrants and certain
``traditional'' technologies over newer, more advanced technologies--
and therefore depart from a longstanding commitment to competitive and
technological neutrality. In effect, this approach picks winners and
losers before the game even starts.
First, the lion's share of available funding was earmarked for
terrestrial incumbents. Now, competitive providers are able to seek
only a small fraction of total available funds that those incumbents
declined, as well as limited (and not nearly sufficient) funds
allocated to extremely costly and hard-to-serve areas.
Second, we have seen and continue to see restrictive technical
eligibility thresholds that have little bearing on the quality of the
end-user experience. For example, we're still seeing requirements that
CAF recipients offer service with 100 milliseconds of latency or less,
even though: (i) the vast majority of Internet traffic is not latency-
sensitive; (ii) service providers can design their networks to mitigate
the impact of latency (e.g., through higher speeds, by using hybrid
networks) for the narrow slice of Internet traffic that is latency-
sensitive; and (iii) it would be more neutral, efficient, and direct to
simply require recipients to meet standards with respect to overall
service quality. In short, these restrictions do not ensure the quality
of service received by consumers, but do limit the participation of
entire classes of service providers--including satellite broadband
providers--and consequently drive up the costs of the CAF program.
By way of example, in connection with the Rural Broadband
Experiments auction held in late 2014, we submitted bids requesting
support that was far less than the support levels estimated by the FCC
wireline cost model. We also offered to use hybrid networks to carry
latency-sensitive traffic in a way that would satisfy the 100
milliseconds requirement, and committed to meet the FCC's voice quality
standard. Even though we were identified as the provisionally winning
bidder in a number of areas, all of our bids were rejected because our
entire network would not meet the latency requirement--even though the
vast majority of Internet traffic (over 60 percent today and over 80
percent by 2019) is not latency sensitive, and even though we had a
viable solution for handling latency-sensitive traffic in a way that
would meet the Commission's standard. More than a year later, we're
still trying to compete on a level playing field with all technologies,
even though some of the preferred technologies would be extremely
expensive and not even have a shot at covering all the remain CAF II
households, once again leaving vast areas without broadband. Indeed,
the current proposal for the CAF reverse auctions effectively would put
us at the end of the line, and would relegate us to the most costly-to-
serve areas that terrestrial providers apparently are not interested in
or capable of serving.
At times, it seems that the folks crafting CAF policy are not
taking in the complete picture, including how service providers
actually make their business decisions. It would be a mistake to
assume, as some apparently do, that satellite broadband providers would
participate in the CAF on the extremely constrained basis that has been
proposed. Participating in the CAF comes with a number of long-term
obligations, including becoming an eligible telecommunications carrier
(``ETC'') and taking on carrier of last resort obligations. It could
make sense for a provider to assume those burdens if it otherwise had a
critical mass of customers within a state, but that would not be the
case for satellite broadband providers under the current approach.
Stated another way, given the choice between committing capacity to
high-volume/high-demand areas or a handful of dispersed, low-volume
areas, a business is likely to make the same choice as the wireline
incumbents that declined many CAF areas last year. Notably, those
wireline companies were unwilling to participate in the CAF in those
areas even though they would have been able to receive significant
support on a state-wide basis and more than achieve ``critical mass.''
Moreover, the vast majority of capacity available on the new
satellites that ViaSat will launch in the next few years is already
allocated to beams serving urban areas of the country, in which the
vast majority of ViaSat's existing customers are located. We'd likely
have to change our plans or build more spacecraft to participate fully
in the CAF, which we're willing to do if the playing field is level.
But the way things are going with the CAF, it would not make business
sense to redirect capacity away from densely populated areas or away
from service to airplanes--and foregoing associated revenue
opportunities--or deploy new spacecraft simply to serve a limited
number of ``extremely high cost'' areas in return for a relatively
small subsidy.
In short, participating in the CAF likely would make sense only if
satellite broadband providers could do so fully and on the same terms
as everyone else, so that they have the chance to obtain the critical
mass necessary to support the business case for participating. For this
reason, among others, ViaSat renews its support for the adoption of CAF
eligibility criteria that enable broad program participation by
wireline, wireless, satellite, and other service providers on the same
terms and conditions. This approach would facilitate the use of limited
CAF support by the most efficient service providers--regardless of the
technologies they use. This approach therefore would minimize the
contribution burden placed on average Americans who fund the CAF.
To be clear, ViaSat does not support eligibility criteria that
would compel some consumers to accept inferior services from certain
types of supported providers. Rather, ViaSat supports eligibility
criteria that can accommodate differences across technology platforms
and facilitate service to geographic areas supported through the CAF at
the lowest cost to contributing end users, while still ensuring that
consumers receive high-quality broadband services.
Thank you for the opportunity to appear before you today to discuss
these important issues. I would be pleased to answer any questions you
might have.
Senator Wicker. And thank you very much.
Mr. Carlson?
STATEMENT OF LeRoy T. CARLSON, JR., CHAIRMAN,
UNITED STATES CELLULAR CORPORATION
Mr. Carlson. Chairman Wicker, Ranking Member Schatz, and
members of the Subcommittee, thank you for the opportunity to
speak with you about the need to renew the commitment to
Federal Universal Service policies that will provide rural
Americans with leading-edge mobile broadband and the economic,
educational, and life-improving opportunities mobile broadband
provides.
You may have heard some say that the job of providing
mobile broadband to rural America is largely done. I must tell
you otherwise. Even under the rosiest of scenarios, there is
much still to be done. Mobile broadband is the under-
appreciated portion of the Federal Universal Service program.
It is allocated only 13 percent of the high-cost fund, despite
mobility's preeminent role today in Americans' lives. No amount
of wishful thinking that current coverage meets the needs of
rural Americans will make it so. The hard work of completing
that mobile broadband job starts today with this hearing, and
your recognition that the congressional directive that mobile
services in rural America be reasonably comparable to urban
areas is not being met.
If we continue down the current regulatory path, the mobile
services your rural constituents have today may be the best
that they will ever experience. Many will never see good
coverage beyond towns and major roads, and many may never see
5G services that are just around the corner.
I am encouraged by this committee's interest in mobile
broadband and am really hopeful that your bipartisan leadership
will help provide rural Americans the economic opportunities
and public safety benefits from mobile that they need and
deserve.
Today there are countless mobile devices with far more
computing power than ever imagined. Our rural mobile networks
enable these devices to place calls, access the Internet, and
run millions of vital applications, but only in areas where
there are strong signals.
Let me cite three examples of the power of mobile coverage.
One, 70 percent today of 911 calls are placed from wireless
phones.
Two, mobile applications that diagnose, monitor, and treat
disease are already saving and improving the quality of
people's lives.
And three, the Internet of Things, which depends on
wireless, will transform numerous industries in this country
and, indeed, may create $15 trillion of annual global GDP by
2030.
Now, none of what I just described will benefit rural
Americans unless high-quality mobile broadband coverage is
available everywhere rural Americans live, work, and travel. It
is therefore vital for our Nation to have accurate data from
the FCC about the quality of mobile broadband coverage in rural
America.
Just last week, the FCC reported that 87 percent of rural
Americans lack access to mobile broadband at a standard of 10
megabits per second downstream and 1 megabit per second
upstream. 87 percent. Without knowing where rural coverage is
deficient, Congress and the FCC cannot know how much support is
needed to fix it. Without knowing how much it will cost to fix,
how can Congress and the FCC know if the Mobility Fund is
sufficient?
The FCC has allocated only a percentage of its Universal
Service budget to mobile broadband. This is not good
policymaking, and the FCC needs to do better.
The FCC should be required, first, to determine the
coverage quality facts and then size the fund.
Also, the FCC should solicit new ideas for how to leverage
Federal funds, along with State funds and private investment,
to provide incentives to invest and improve service in rural
areas. Several states such as Nebraska, Colorado, and New
Mexico are developing State broadband Universal Service
mechanisms, any of which could be trialed in a joint Federal-
State pilot program, something the FCC has recently done with
fixed service.
In summary, compared with the standard enacted by Congress,
rural Americans today do not have access to 4G mobile broadband
networks that are reasonably comparable to those in urban
areas. Congress and the FCC must move quickly to address this
inequity.
Thank you.
[The prepared statement of Mr. Carlson follows:]
Prepared Statement of LeRoy T. Carlson, Jr., Chairman,
United States Cellular Corporation
Chairman Wicker, Ranking Member Schatz, and members of the
Subcommittee, my name is LeRoy T. Carlson, Jr., and I am Chairman of
United States Cellular Corporation. Thank you for the opportunity to
discuss the need for mobile broadband in our Nation's rural areas and
the important role that the Federal Universal Service Fund can play to
address this need.
Introduction
U.S. Cellular provides wireless service in nearly 200 markets
across 24 states located in regional clusters across the country,
including many of the states represented on this Committee such as
Missouri, New Hampshire, Nebraska, Kansas, West Virginia, Wisconsin,
and Washington. The overwhelming majority of the geography we serve is
rural in character. We have participated in the FCC's universal service
program for many years, using support to construct and operate network
facilities in small towns and on rural roads that would not otherwise
receive service, because they would never prove to be economically
feasible without assistance.
In each of our company's previous appearances before this Committee
to discuss universal service, we have made the point that Congress
directed the FCC to ensure that rural citizens have access to modern
telecommunications and information services that are reasonably
comparable to those available in urban areas.\1\
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\1\ See, 47 C.F.R. Sec. 254(b)(3).
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Based on our deep experience in rural America, we have concluded
that the current and proposed Mobility Fund mechanism lacks the
necessary size and focus to ensure that rural communities have timely
access to high-quality mobile broadband services needed to compete,
here in the United States and around the world, for jobs and economic
opportunities. We fear that policy makers have grossly underestimated
the amount of work that remains to be done in rural America before
mobile broadband can be deemed comparable to what exists in our
Nation's urban areas.
As explained below, we urge the Committee to direct the FCC to
develop a more accurate picture of mobile coverage and mobile broadband
availability in rural America, and to estimate how much it will cost to
bring mobile broadband networks in rural America up to the reasonably
comparable standard that Congress set. Once these tasks are done,
Congress can make the policy choice as to how best to complete the
task.
Today, my testimony touches upon three things: (1) the critical
role that mobile broadband plays in enabling public safety, education,
and our rapidly expanding information economy; (2) the insufficiency of
mobile broadband deployment in rural America today to meet stated
goals; and (3) the need to make smart and creative policy choices to
allocate and target scarce Federal universal service funds to rural and
high-cost areas to maximize the value of such investments in extending
the reach of mobile broadband service.
1. The Rise of Mobile Broadband as an Enabler of Public Safety
Education and
Economic Development
In the 1980s, experts projected that there could be 800,000 mobile
phones in use by 2000. They came up short by 10,000,000. Today there
are over 350 million mobile wireless subscriptions in the U.S. In 1984,
the first commercial cell phone sold for $3,995.00. Today, there are
more types of mobile wireless devices than I can list, capable of
performing thousands upon thousands of tasks, at a small fraction of
the 1984 price, with many having far more computing power than Apollo
11. However, looking back at how we have benefited from mobile services
dramatically undersells the future that consumers will enjoy, because
we're just getting started.
At a time when consumer preferences are rapidly shifting to mobile
broadband, policymakers must refocus universal service mechanisms to
ensure that citizens in rural areas have access to high-quality
service. For example, the Pew Research Center reports that adults
living in households with a cellphone but no landline, and the number
of households that rely solely on a smartphone for broadband have
increased dramatically:\2\
---------------------------------------------------------------------------
\2\ See, http://www.pewresearch.org/fact-tank/2015/01/07/pew-
research-will-call-more-cell
phones-in-2015/; and http://www.pewinternet.org/2015/12/21/home-
broadband-2015/. Another barometer of consumer preference is mobile ad
revenue, as evidenced in Facebook's most recent quarterly report:
``Mobile ad revenue reached $4.5 billion, up 81 percent year-over-year,
and is now 80 percent of total ad revenue.'' See also, http://
files.shareholder.com/downloads/AMDA-NJ5DZ/1421180082x0x872005/
02B28FAD-354C-4CA0-8CDE-3ADB6F8A4734/Q415_
and_FY_2015_Earnings_Call_Transcript.pdf.
These compelling statistics gain further meaning when you consider
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just a few of the many benefits that mobile services provide:
Public Safety. The ability to use 911/E-911/Text-to-911
depends 100 percent on high quality coverage, to fully enable
location-based services.\3\ When disaster strikes, first
responders depend on mobile wireless and broadband networks,
which are the first to return to service. The value and utility
of FirstNet, our Nation's mobile broadband public safety
network, increase every time a new cell tower is constructed,
as it provides a place to locate critical public safety
communications equipment.
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\3\ As of November, 2015, the FCC estimates that 70 percent of 911
calls are placed from wireless phones, and that percentage is growing.
See, https://www.fcc.gov/consumers/guides/911-wireless-services.
Health Care. Mobile devices and applications capable of
diagnosing, monitoring and treating various conditions are
exploding into the marketplace and revolutionizing health
care.\4\ These advances improve patient outcomes, and increase
efficient delivery of services. It is now possible for a
diabetic patient to continuously monitor, store, and transmit
glucose levels to health care providers through a mobile
device.\5\ Mobile video conferencing is increasingly important
to emergency medical services and in delivering health care to
remote areas where facilities are not easily accessible. These
applications are but a small fraction of the incredible health
care tools enabled by mobile broadband.
---------------------------------------------------------------------------
\4\ A list of mobile medical applications can be found at: http://
www.fda.gov/MedicalDevices/DigitalHealth/MobileMedicalApplications/
ucm368743.htm
\5\ http://www.dexcom.com/g5-mobile-cgm. Someday soon, patients may
wear a contact lens that constantly measures glucose level through
tears, transmitting the data to attending physicians. See, https://
verily.com/.
The Internet of Things. Soon, almost any object will be
capable of connecting to the Internet. Gartner expects 21
billion devices to be deployed by 2020.\6\ According to General
Electric, the Industrial Internet, defined as the combination
of Big Data and the Internet of Things, may be responsible for
$15 trillion (not a typo) of worldwide GDP by 2030.\7\ Most of
these connected devices, numbering in the tens of billions,
will need the flexibility that mobile wireless provides. The
amount of data flowing through mobile broadband networks will
dwarf what we see today. Cisco predicts that, between 2014-
2019, U.S. mobile data traffic will rise seven-fold, driven by
four billion new mobile connections, a 2.5X increase in
throughput speeds, and mobile video traffic reaching 72 percent
of all traffic.\8\
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\6\ See, http://www.gartner.com/newsroom/id/3165317.
\7\ See, http://www.ge.com/digital/sites/default/files/industrial-
internet-insights-report.pdf
\8\ See, Cisco VNI Global Mobile Data Traffic Forecast, 2014-2019,
accessed at: http://www
.cisco.com/c/en/us/solutions/collateral/service-provider/visual-
networking-index-vni/white_
paper_c11-520862.pdf.
Education. Students are increasingly using mobile devices to
access learning materials, do homework, create presentations,
and communicate with teachers. Students with connectivity
throughout the community are more likely to meet educational
goals, especially in an age where learning through the Internet
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is essential.
Agriculture. Connected tractors, irrigation systems,
livestock management, commodity tracking, and many more
applications depend upon mobile wireless connectivity.
Low-income households. For households that cannot afford to
purchase a desktop computer and subscribe to both mobile and
fixed networks, a single mobile device is capable of meeting
voice communications and Internet needs.
If the Committee takes nothing else away from these examples of how
mobile wireless is enriching our lives, it should be this: none of the
benefits described above will adequately benefit rural Americans unless
high-quality mobile broadband coverage is available everywhere they
live, work, and travel.
In areas where emergency calls cannot connect, or where medical
devices cannot transmit data, lives will be lost. In areas where
tablets and laptops don't work, educational opportunities will be
foreclosed. The enormous power of the Internet of Things cannot be
fully realized without ubiquitous mobile broadband. As Deere & Company
has previously noted to the FCC, a lack of connectivity on our Nation's
farmlands costs productivity and wastes water and fertilizer.\9\ The
lack of mobile broadband denies low-income households the opportunity
to fully participate in our Nation's economy. Mobile broadband, which
didn't exist thirty years ago, and was considered a luxury item just
ten years ago, is now an essential part of our lives.
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\9\ See, http://apps.fcc.gov/ecfs/document/view?id=7521752479.
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I cannot emphasize enough how important it is for Congress and the
FCC to foster development of robust mobile broadband networks in rural
areas. We are in just the second inning of a huge revolution in how
Americans live their lives, a revolution that may never come to rural
Americans who live in areas where it is too expensive to make a
business case to build and upgrade networks. We at U.S. Cellular
provide our customers with access to the applications they use, because
we enable all of them. If coverage is weak or throughput is slow,
devices will not work as designed.
We note that new investments in mobile broadband infrastructure
each year will have multiplier effects, creating jobs and stimulating
economic growth.\10\ One wireless industry job supports over six
additional jobs in the economy, almost one and one half times higher
than that of the U.S. manufacturing sector.\11\ Each dollar of
investment in wireless results in $2.32 of economic activity.\12\ In
our experience, rural areas continue to support a tremendous amount of
manufacturing, as well as a growing distributed service economy (for
example, call centers and medical clinics). We hear directly from our
employees and customers that managers and educated professionals no
longer consider rural areas that lack high-quality mobile wireless
services to be attractive to locate to, or to stay in. I'm sure members
of this subcommittee have heard the same thing from their rural
constituents.
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\10\ See, http://www2.deloitte.com/content/dam/Deloitte/us/
Documents/technology-media-telecommunications/us-tmt-impactof-4g-
060612.pdf.
\11\ See, Coleman Bazelon and Giulia McHenry, Mobile Broadband
Spectrum, A Vital Resource for the U.S. Economy, at pp. 19-20 (May 11,
2015), available at: http://www.brattle.com/sys
tem/publications/pdfs/000/005/168/original/Mobile_Broadband_Spectrum_-
_A_Valuable
_Resource_for_the_American_Economy_Bazelon_McHenry_051115.pdf?1431372403
\12\ Id.
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This is not just anecdotal evidence. Rural areas have large gaps
with urban areas, which gaps need to be closed. Data from the
Department of Agriculture reveals that ``2010-2014 is the first period
of overall population decline on record for rural America as a whole.''
\13\ The same report shows employment growth since the 2008 recession
heavily skewing in favor of our Nation's urban areas and a persistent
rural/urban educational attainment gap:
---------------------------------------------------------------------------
\13\ See, USDA, Rural America at a Glance, 2015 Edition, accessed
at: http://www.ers
usda.gov/media/1952235/eib145.pdf (revised Jan. 2016).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
One of the best ways to stimulate economic activity, attract
talented people to areas needing an employment boost, and to increase
educational opportunities, is to build mobile broadband infrastructure.
It is therefore vital for policymakers to have accurate data about the
state of mobile deployment in rural America. As a Committee that is
forward-looking, I urge you to consider the essential role that mobile
broadband services will play in the future, and to ensure that the
universal service program provides sufficient resources to realize that
future in rural areas.
2. Mobile Broadband Deployment in Rural America is Insufficient
Let me continue by acknowledging that we are well aware of the
misleading claim that the job of providing mobile broadband to rural
America is largely finished.\14\ When the FCC proposed Phase II of its
Mobility Fund in 2014, it stated, ``According to some sources, nearly
99.5 percent of the U.S. population today (and the road miles
associated with that population) is covered by some form of mobile
broadband technology.'' \15\
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\14\ See, http://www.theverge.com/2015/3/23/8273759/obama-
administration-passes-goal-lte-for-98-percent-of-americans.
\15\ See, Connect America Fund, Report and Order, Declaratory
Ruling, Order, Memorandum Opinion and Order, Seventh Order on
Reconsideration, and Further Notice of Proposed Rulemaking, FCC 14-54,
29 FCC Rcd 7051, 7127 (2014) (``Further Notice'').
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That statistic cannot be right. Based on our experience, the state
of mobile broadband is nowhere near developed enough to conclude that
rural Americans have access to a strong 4G LTE signal throughout the
area where they live, work, and travel. In a recent letter to the FCC,
Senator Manchin astutely called out problems with available mapping
resources, stating ``the reality in my state is far different than what
the maps indicate.'' \16\
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\16\ See, Letter from Hon. Joe Manchin, III to Hon. Thomas Wheeler,
September 22, 2015, at http://www.manchin.senate.gov/public/
index.cfm?a=files.serve&File_id=D660F970-2859-46B3-8145-CFE461A47719.
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Senator Manchin's experience is far from an isolated case and I'm
sure each of you know from personal experience in your own states that
mobile broadband coverage with a strong signal is far from complete and
dead zones remain to be covered. In testing our networks, and those of
our competition, we can confirm that the National Broadband Map and
other publicly available mapping resources significantly overstate
where rural citizens can actually use their devices to access rapid
mobile broadband service, especially on rural secondary roads and in
agricultural areas.\17\
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\17\ For example, we've heard directly from Senator Tester that he
can't get any signal on and around his working farm in Montana, and
from Senator Brown that southeastern Ohio lacks coverage.
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In its recently released Eighteenth Mobile Competition Report, the
FCC states that 25 percent of road miles and 50 percent of square miles
in the U.S. do not have coverage by two or more carriers, and concedes
that its data sources likely overstate coverage.\18\ This is
significant because there continue to be two incompatible wireless
network technologies in use today--the GSM standard and its 3G
successors, used by AT&T, T-Mobile, and a number of other carriers, and
the CDMA standard, used by Verizon, Sprint, U.S. Cellular, and a number
of other carriers.
---------------------------------------------------------------------------
\18\ See, Implementation of Section 6002(b) of the Omnibus Budget
Reconciliation Act of 1993, Eighteenth Report, FCC 15-1487 (Dec. 23,
2015) at p. 28, Chart III.A.3 (``Eighteenth Mobile Competition
Report'').
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A person with a CDMA-only phone cannot complete a call when they
are in an area served only by GSM, and vice-versa. As a result, the
current reality in rural areas is a patchwork quilt of coverage by
incompatible technologies, frustrating the goal of seamless access.
Accordingly, for public safety, it is critical that rural Americans
have access to wireless networks capable of connecting both kinds of
devices, just as those who live in cities do.
In the run up to the FCC's 2011 Connect America Fund reforms, we
warned of universal service mechanisms that pick a single winner in the
auction room rather than allowing consumers to pick winners in the
market. By limiting support to a single carrier, the current mechanism
is promoting service by one carrier and one technology, thus limiting
consumer choice in many areas that would otherwise support competition,
and requiring additional regulation. We urge the Committee to encourage
the FCC to adopt universal service mechanisms that direct support to
high-cost rural areas without picking a winner in advance.
Last year, we inaugurated new coverage and mobile broadband service
in Paw Paw, West Virginia, a town of 500, a project that would not have
been possible without the Federal universal service program.\19\ There
are many more towns similar to Paw Paw that we would like to serve or
upgrade, if support mechanisms provide us with a reasonable opportunity
to succeed. It is low population density and traffic levels that make
new construction infeasible and make necessary an effective universal
service mechanism.
---------------------------------------------------------------------------
\19\ See, http://www.morganmessenger.com/news/2015-11-18/
Front_Page/Paw_Paw_wel
comes_arrival_of_cell_service.html.
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Today mobile broadband coverage and throughput speeds in rural
America must receive a grade of ``Incomplete.'' Using the ``reasonably
comparable'' standard set by Congress in 1996, anyone telling you that
rural Americans have access to mobile broadband networks that are
reasonably comparable to those in urban areas has not taken a drive
across this great nation. And that's not a surprise--no carrier can be
expected to invest unless there's at least the possibility of earning a
return. If it could be done, we wouldn't need a universal service
mechanism because it would have happened already.
In sum, we cannot base critical policy choices on conflicting data
and maps that the government admits overstate coverage. We must have
accurate data in order to target funds where they are needed.
3. Allocating Scarce Federal Universal Service Funds Effectively
Requires Smart
Policy Choices
Over the years, we have consistently advocated for a robust Federal
universal service fund that provides rural consumers with access to
both mobile and fixed networks. We believe the FCC's historical
allocation of support to wireless networks has been insufficient to
close up coverage gaps and deliver mobile broadband to many areas. As
shown in the chart below, between 1999 and 2014 the FCC allocated over
$50 billion in support to fixed networks and less than $12 billion to
mobile networks.\20\ Over the next five years, fixed networks are
projected to receive $22.5 billion in Federal funding, while mobile
networks are projected to receive $2.5 billion, a disparity in the
universal service mechanism going forward of nearly 90/10.\21\
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\20\ Source: Federal-State Joint Board Monitoring Reports, at
https://www.fcc.gov/general/federal-state-joint-board-monitoring-
reports.
\21\ The fixed network allocation is estimated by summing Connect
America Fund support with projected support for rate of return
carriers. The mobile network allocation derives from the FCC's Further
Notice, supra.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
With wireless consumers nationwide now contributing nearly half of
the total Federal Universal Service Fund of $9 billion (which includes
E-Rate, Lifeline, Connect America Fund, Mobility Fund, and Rural Health
Care)\22\ the proposed funding for mobile broadband does not accurately
reflect consumer usage, preferences, and infrastructure needs in rural
areas. Given rapidly expanding demand for high-quality coverage and
fast broadband connections, the current level of funding shortchanges
rural Americans who increasingly rely on mobile services.
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\22\ The most recently available FCC report from 2011 containing
assessable carrier revenues for universal service can be accessed at:
https://transition.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-
State_Link/IAD/quarterly_roll-upsasof050112.pdf.
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Nor does the FCC's proposed budget account for investments that
mobile wireless carriers have made over the years. Many carriers,
including U.S. Cellular, have used support to build towers in areas so
remote that revenues are insufficient to meet ongoing operating
expenses and to earn a reasonable return. These investments were made
with the understanding that support for ongoing operations would be
made available, either in the original fund, or in Mobility Fund Phase
II.
Although the FCC proposed to use at least some of Mobility Fund
Phase II support to cover operating expenses on towers, it recently
proposed to change course based on ``substantial marketplace
developments,'' nothing more than fallacious claims by some carriers
that the job of covering rural America is largely done.\23\ This course
change may prove to be catastrophic for rural citizens in small
communities, which often do not generate enough revenue to meet a
tower's operating expenses.
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\23\ See, Further Notice, supra, FCC Rcd at 7126-29.
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In addition to our experience and the weight of data, I am troubled
by these FCC claims of substantial marketplace developments leading
toward a conclusion that a Mobility Fund of less than $400 million
annually may be appropriate. When it comes to broadband, I agree that
we as a nation should be setting big and audacious goals and working
toward them.\24\ In last week's 2016 Broadband Progress Report, the FCC
reported that 87 percent of rural Americans lack access to mobile
broadband at 10 Mbps/1 Mbps:
---------------------------------------------------------------------------
\24\ See, Separate Statement of Commissioner Jessica Rosenworcel,
at: http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/
db0129/FCC-16-6A5.pdf.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Because the above data for LTE technology is based largely on
advertised coverage at a single point within a census block, I don't
agree that the job of populating rural areas with LTE technology is
largely done. That said, if the data on 10/1 availability is even in
the ballpark, it is beyond dispute that the job of getting to an
adequate level in rural America is only beginning.
Because the big carriers continue to provide their customers with
access to many rural areas by using the networks of rural carriers, it
is fair to conclude that the future of 10/1 Mbps service depends on a
universal service policy that encourages rural carriers to invest, as
well as an FCC spectrum policy that ensures rural carriers have access
to sufficient bandwidth to deliver speeds of the future. The critical
role of universal service is to ensure that broadband technologies
being deployed and commonly used in urban areas are made available to
our rural communities in a timely manner. This is no different than any
other infrastructure, whether it be roads, electricity, or water.
My takeaway from the past several years of uncertainty is that the
FCC has not devoted sufficient attention to determining how best to
maintain the investments that have already been made, how much it will
cost to fill in slow broadband zones and dead zones, and what it will
cost to deliver 5G services, and more, to rural citizens in the coming
years. The Mobility Fund Phase I auction left many areas still without
coverage, and bidders forfeited back to the FCC nearly 25 percent of
the $300 million in original funding, for a variety of reasons. The
Commission has yet to act on our petition to distribute forfeited
support to ``next in line'' bidders who could move quickly to build
towers in many states that need investment. Moreover, the amount
projected for Mobility Fund Phase II is insufficient to do the job on a
reasonable schedule. In sum, the Mobility Fund program has not
fulfilled the goal of fostering ``an environment in which the widest
possible variety of new technologies can grow and flourish.'' \25\
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\25\ See, https://www.fcc.gov/news-events/blog/2015/08/03/leading-
towards-next-generation-5g-mobile-services.
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We also believe that the reverse auction approach for distributing
mobile broadband support did not produce equitable results across the
Nation. Because reverse auctions allocate funds first to areas that
cost less to serve, mountainous parts of the country are served last,
or not served at all if funding runs out. I predict that with a reverse
auction mechanism, many of you on this committee representing
mountainous regions will never see your states receive meaningful
assistance, even though the rhetoric of the program gives you false
hope. And, we can assure members of the Committee representing flatter
states that, based on our experience, the program is insufficient in
those areas as well.
In recognition of the fact that the fund is finite and consumer
willingness to fund programs is an important factor, we suggest that
the FCC solicit new ideas for how to leverage existing Federal funds,
in combination with state universal service mechanisms, and private
investment, to provide an incentive for competitors to invest and
improve service. Several states, such as for example, Nebraska,
Colorado, and New Mexico, have begun developing their own broadband
universal service mechanisms, any of which could be trialed in a pilot
program, something the FCC has recently done in the fixed service
arena.
We suggest that the FCC consider a grant program in which the
combined Federal and state support funds could be used in a targeted
way to address those areas most in need of mobile broadband coverage.
States may be in the best position of all to know what is adequately
covered and what is not. States that have been shortchanged by the
legacy program (paying into the fund far more than they have drawn out
for mobile voice, let alone mobile broadband coverage) and are willing
to contribute state funds to the mechanism, should be given an
opportunity to access some level of support, especially where the need
for expanded coverage has been established. Equitable distribution of
funding will likely not occur if the fund is administered at the
Federal level in an auction format, which disfavors the highest cost
rural areas.
Separately, Congress can make all universal service fund support go
farther by passing legislation to exclude universal service support
from taxable income, similar to funds provided under the American
Recovery and Reinvestment Act. By excluding support from taxation, we
will be able to use 100 percent of the support received for investments
in rural areas and not just the net amount after taxes.
Concluding Remarks
Just last month, Verizon announced an intent to begin limited
deployments of 5G technology as early as 2017, technology that will
provide speeds perhaps 50 times faster than 4G.\26\ National carriers
will continue to focus on urban areas, and they will invest billions
upgrading networks to 5G. But make no mistake, these investments will
take priority over building new coverage and upgrading rural areas that
make less economic sense. In sum, if we fail to foster robust mobile
broadband networks in rural areas, they will likely never have access
to the amazing things described above.
---------------------------------------------------------------------------
\26\ See, http://www.pcworld.com/article/3025461/mobile/verizon-
vows-to-build-the-first-5g-net
work-in-the-us.html.
---------------------------------------------------------------------------
Having studied this industry for many years, I'm humble enough to
know that this task is easier said than done, in part because in a
nation of entrepreneurs and risk takers and innovation, if there were a
business plan to cover all of rural America, the free market would have
done it long ago. Making rural infrastructure reasonably comparable is
a big and multi-faceted task, as evidenced by the enormous efforts the
FCC has made in over twenty years since the 1996 Act.
This year, we celebrate the sixtieth anniversary of Eisenhower
administration's enduring achievement, the Federal interstate highway
system. My sense is that broadband networks will be as important to our
Nation's success in the next sixty years as our interstate highway
system has been over the past sixty. Just as our highway needs have
expanded, so too will our broadband needs, and it will be up to this
Committee to give the FCC proper direction to ensure that rural
Americans fully participate in modern life and remain comparable with
their urban counterparts.
Senator Wicker. Thank you very much, and thank you all.
We have a lot of interest in this hearing today, and 11
Senators have checked in. What we are going to do, with the
consent of Ranking Member Schatz, is this. He and I will save
our questions for later, if there is time. The order of
questions with 5-minute rounds each will be this: Moran,
Booker, Heller, Manchin, Gardner, Daines, Fischer, Klobuchar,
and Sullivan. So, Senator Moran, you are recognized.
STATEMENT OF HON. JERRY MORAN,
U.S. SENATOR FROM KANSAS
Senator Moran. Mr. Chairman, thank you very much.
Obviously, you learned generosity and grace at breakfast this
morning. Thank you for deferring to me.
Let me start with Mr. Carlson. Thank you very much for your
testimony. One of the things that you said that caught my
attention is the map the FCC shows us about coverage. And my
impression is, based upon my own experience in my own state,
that map does not accurately reflect actual service. And so I
would ask you how do we get--in a sense I think what you are
asking for--how do we get there? How do we get the FCC to give
us the information that shows where there is coverage and where
there is not coverage so we can actually see what needs to be
accomplished?
I also would ask you to comment. Is there such a thing as
coverage that really is not very good coverage, and therefore,
it could show up on a map or a diagram or a list of places that
are covered, but we ought to recognize that is not really the
truth?
Mr. Carlson. Yes, thank you. Thank you for that question.
Yes, I believe those maps do not show what good coverage
represents, and that is from our experience with our own view
of measuring coverage by doing drive tests of our own service
areas. The maps that the FCC produces do not represent good
coverage. So we need to ask the FCC--not me, but you, sir--to
produce maps that show a quality standard of coverage level and
produce that map rapidly so that we can get on with the job.
Senator Moran. I think your point being that in the absence
of that information, it is hard for us to make policy
decisions.
Mr. Carlson. Exactly. You cannot know what you are doing if
you do not have a map of the road to get there.
Senator Moran. Thank you very much for that reminder, and
we will ask once again for accurate mapping.
Let me turn to maybe Mr. Carr or Mr. Berry or both. One of
the things that I have tried to pay a lot of attention to in
the role of the Universal Service Fund is its ability to--let
me say it this way. There seems to be a lack of coordination
between various departments and agencies within the Federal
Government related to reimbursement to providers from the
Universal Service Fund. So my point being that the Federal
Communications Commission, the FCC, makes decisions about
reimbursements that may be contrary to the ability for that
telephone company to repay a loan they have with rural utility
services.
So during the deployment of lots of dollars, stimulus
money, the rural utility services programs to provide loans to
those who will provide services to rural America, certain
assumptions were made. And that would be that the Universal
Service Fund will be there for us to repay those loans. Changes
in the formula by which those companies are now reimbursed has
a consequence, and there does not seem to me that there is any
coordination, in other words, the challenge that rural utility
services may have in getting their loans repaid.
Do either of you have a comment on that from your member
companies?
Mr. Berry. Well, I can address on the wireless side, the
mobility side. There are several different issues that I think
you refer to.
One is the fact that we do not have many loans on the
mobility side from the RUS program or some of the utility type
programs. But we have monies that were given and awarded under
Mobility Fund I, and carriers built the network, spent their
time, effort, and energy and money in providing service, and
they are not reimbursed.
We were talking about the maps. In that process, the FCC,
the USAC, asked for drive-testing to ensure that you actually
built out your network to where you say you were going to build
it out. Our companies did that and spent the money, and then we
turned back around and the FCC then required, USAC required,
that you drive-test them again to make sure that you got the
numbers right. Absolutely no reason whatsoever that you should
do that twice. So there are impediments there.
There are also impediments in actually locating and siting
the facilities. I would say that we have carriers that received
funds, i.e., made plans to build out, and in the middle of
that, they get another Federal agency that says, oh, we are not
going to give you a permit to site that facility on that
particular piece of land, whether it is some Federal land
manager. And the FCC has a deadline and said if you do not
build out to a certain percentage, say, 73 percent, by a
certain time, you will not get reimbursed.
We have several instances where we have letters from the
agency that did not give the permit on time telling the
carrier, I am sorry, we messed up. And we presented it at the
FCC, and the FCC would look at it and say, well, I am sorry.
You are not built out. And he said but the reason why I am not
built out is because the Federal agency just said that they
messed up, they did not process our application.
There needs to be some common sense come to the forefront
on this. If you built out the network or you are trying to
build out the network and you only lack a permit that another
Federal agency has sole responsibility to give, why are you
penalized? And that is what is happening. You are getting fines
and penalties, and in some instances we have small carriers
actually returning the money because they cannot afford the
fines and penalties. Not a good situation.
Senator Moran. Thank you.
Mr. Carr. Senator, briefly I would say that from our
industry's perspective, we have been effectively shut out from
a lot of the programs that you have mentioned in particular
because those programs----
Senator Moran. You have or have not.
Mr. Carr.--have been shut out particularly because those
programs are not technology agnostic. And we think one of the
things that I believe everyone on this panel agrees is that we
should channel the support to the access technologies that are
going to be most effective for connecting rural America.
Senator Moran. I am pleased to give you the opportunity to
say that one more time. Thank you very much.
Senator Wicker. Mr. Heller, followed by Mr. Manchin.
STATEMENT OF HON. DEAN HELLER,
U.S. SENATOR FROM NEVADA
Senator. Heller. Mr. Chairman, thank you for holding this
hearing, and I want to thank our witnesses for being here also.
This is a fascinating discussion that sometimes gets too far
into the weeds, and yet, these are discussions that need to be
had.
I was recently at a small town in Nevada that is on the
Utah-Nevada border. It is a small town called Ely. And I will
be in a few more small towns this weekend, and I am going to
hear about how poor their Internet service is. But it is
serious business for them out there. This is about quality of
life. This is a way that they want to improve their ability to
move forward. But it is the basic needs that they have.
For example, some of the residents either do or do not have
Internet service, and if they do, it is very slow. Their
businesses complain about a lack of service, and schools, their
high school and middle school, are piggybacking on hospitals in
other counties in order to get some sort of Internet service.
Now, this is a small town, but there are 5,000 people in it.
5,000 people. I mean, you would think in the 21st century we
could get Internet out to 5,000 people.
And one other. There is a medical facility in that same
town. This local hospital had difficulty sending out X-rays.
They have difficult with lab tests due to the need of more
fiber.
Again, the businesses are complaining that their Internet
service is so weak that half the time you cannot slide a debit
card in any of the businesses in this town.
These are stories you have heard. And I think everybody
here in this audience has heard the same story.
Like Mr. Seward, I live in a small town and we grow a
little bit of hay ourselves. But I have children that live in
Los Angeles and they are very used to a very fast Internet
service. They come home for the holidays and they said, hey, we
are not coming back if you do not speed up your Internet
service. And I want my children to come home for the holidays.
He was trying to download something. We called our
satellite service and upgraded, upgraded, upgraded. And they
were watching somehow the service that was being used in the
home. They said someone else is using it. He ran around the
house and said nobody else is using it. Why is the service not
working? And he ended up finding that his wife had downloaded
Netflix and her iPad was sitting on the bed, and that is why he
could not get through. It just fascinating.
In fact, he has a platform now that people watch him play
video games. Now, this is a generation I do not understand
completely. I said who wants to watch you play Internet games.
I do not think anybody in this room would pay somebody $5 to
watch him. And this is what he is doing. He is on the Internet
and they pay $5 to watch him play. I said who is paying that.
He says, well, people watch sports. So it is a different
thought process. But this just goes to show you the next
generation coming up and what their needs and concerns are.
So I am concerned about small towns like Ely, as all of you
are, and making sure that they get the quality service that
they need in these Internet services.
So I guess my question, I guess for you, Mr. Carr,
specifically is how do we make sure that these programs like
Connect America Fund and Mobility Fund get to these small
communities. And frankly, is the best option for a rural town
like that to be fiber, or is there another option out there
that would be better for them?
Mr. Carr. Well, Senator, thank you for the question.
I think all access technologies, fiber, wireless,
satellite, have their pros and cons. And the reality is that
modern networks are built using a combination of those
technologies. And so rather than having a framework in
particular for the next phase of CAF that favors one technology
over another, we will get better results as a society if we let
providers compete to meet a uniform set of threshold
requirements, then figure out who can deploy which combination
of technologies to serve a particular area in the most cost-
effective way. And that is fundamentally by applying
competition and market forces. That is how we are going to get
the most efficient bang for the buck.
Senator Heller. What is the next round of CAF?
Mr. Carr. The Phase III reverse auction?
Senator Heller. Yes. OK. Is there a time certain on that?
Mr. Carr. As I understand, the FCC has talked about putting
out--starting a proceeding to determine the rules of the
auction as early as this spring, and the target was by the end
of this year to begin rolling it out. But I am not sure if they
are on track to meet that schedule.
Senator Heller. How will it take, once the funds are
distributed, to get it out?
Mr. Carr. You know, that really depends on the speed, how
quickly the provider can deploy.
Senator Heller. We need help today. Are we talking a couple
years from now?
Mr. Carr. Certainly. You know, CAF I--the build-out
requirements were 6 years. So in some areas it could take an
extremely long time, again depending on the access technology
and how long it takes to deploy that particular technology.
Senator Heller. Anybody else have any comments?
Mr. Berry. Senator, thank you for the question.
I think that he is exactly right. It takes a mix of
technologies, but in rural America the Mobility Fund II was
originally designed so it would be a follow-on to Mobility Fund
I and we would have an opportunity to immediately begin this
process, which is a long process of many years, in order to
fill out those gaps in coverage.
I think that the Mobility Fund II, should we get it
correct--Congress got it correct when they said let us make
sure let us have comparable service--we could immediately begin
that process. And it is very disturbing that we have been 3-4
years now with a legacy program that has consistently been
reduced, and we do not have a replacement program in place. And
that is why Congress I think most astutely suggested to the FCC
that you do not further reduce existing support until you get a
new replacement program operational.
Senator Heller. Mr. Chairman, you know I am going to end
with this question, though. You are talking 3 or 4 years. Is
the technology up to date? I mean, 4 or 5 years in this world
is an eternity as the change in technology occurs. Are we still
up to date if this program started in 2011?
Mr. Berry. I think the technology is available now. It is
the funds that it requires to build it out. And I think Mr.
Carlson knows that better than anyone. But if we get a Mobility
Fund II that actually starts deploying resources, like I said
Mobility Fund I--they have only released like $66 million in
the entire fund. And we have got carriers, small carriers, out
there that are sustaining that economic investment with no
reimbursement. They cannot do it for very long. They are very
small.
Senator Heller. Steve, thank you. My time has run out.
Mr. Chairman, thank you very much for holding this hearing.
Senator Wicker. Thank you, Senator Heller.
Senator Manchin and then Senator Gardner.
STATEMENT OF HON. JOE MANCHIN,
U.S. SENATOR FROM WEST VIRGINIA
Senator Manchin. Thank you, Chairman Wicker. And to Ranking
Member Senator Schatz, I want to thank both of you for
answering the request I had made for this hearing. I really
appreciate it, and I think it is much needed. And thank all of
you for being here.
In the 2016 broadband progress report, the FCC determined
that fixed and mobile broadband are not functional substitutes
for one another. They are both essential components of our
lives today.
We have heard a lot of discussion today about the Connect
America Fund and the importance of allowing different
technologies to compete for building out fixed broadband to
homes and businesses throughout the Nation. While this is an
important goal that I fully support, our primary responsibility
here is ensuring that all Americans pick up their phone, call
for help in an emergency, and the only technology that allows
me to do that wherever I am is my cell phone.
The concept of Universal Service, the idea that all people
should have access to a telephone, be able to call for help in
an emergency, has been the guiding principle in Federal
communications regulations since they first began in 1934.
Wireless companies contributed more than $4 billion to the
Universal Service Fund last year. Yet, there is no dedicated
source of funding for those companies that want to expand
services in these high-cost areas. And they have no idea what,
if any, long-term support they will get to maintain these
networks once they build them.
In June 2014, the Federal Communications Commission
declared that over 99 percent--I cannot believe this. They
declared that over 99 percent of the U.S. population was
covered by some form of mobile broadband technology. And I am
beginning to believe that some people over there believe the
job is done. They think that they have got it done, completed.
Unfortunately, the reality in my home state of West Virginia
and many other places throughout this country simply does not
fit into the FCC's narrative.
I understand that your organization, Mr. Berry, hired Dr.
Raul Katz to reevaluate the FCC data, and he found that
wireless coverage in rural communities is as low as 77 percent
in my state of West Virginia and only 81 percent in North
Carolina.
For those of you who have ever visited my beautiful state,
it is beautiful but it is challenging. And we have some of the
highest unemployment now with the dispersion of the jobs we
have had in the energy market. So we are having a tough time.
And if people cannot connect, I will guarantee you they will
not stay. And you might be in Iowa and have a cell tower or
whatever to reach certain people and you might have a 50-mile
line of sight. In West Virginia, you are lucky to have a 50-
foot line of sight sometimes in the terrain we are in. So it is
much different.
And Senator Wicker and Senator Schatz, on this in some of
our areas, it just depends. I mean, their life depends on and
these communities depend on whether they have this service.
If this money is disproportionately not going to the
companies that are willing to do the job--and there is not
going to be return on investment. I am the first to tell you
that. I know it. But I am asking all of you. Is there any--
probably Mr. Berry--other information you can share with this
committee about Dr. Katz's work?
Mr. Berry. Yes, Senator, and thank you for recognizing his
work. He has done several studies for us. The most recent--
obviously, we focused on coverage because we too believe that
the FCC numbers are just not correct.
Senator Manchin. Did he find other areas of discrepancies
in his work? They made a broad statement of 99 percent.
Mr. Berry. Actually, if you like, I also have a statement
of declaration----
Senator Manchin. If you would for the record----
Mr. Berry.--the doctor made to the FCC.
Senator Manchin. May he provide that for the record, sir?
Senator Wicker. Without objection.
[The information referred to follows:]
Exhibit A
I, Dr. Raul L. Katz, provide the following declaration pursuant to
47 C.F.R. Sec. 1.16:
1. My name is Dr. Raul L. Katz. I am President of Telecom Advisory
Services, LLC, an international consulting firm specializing in
providing advisory services in business, policy and financial
strategies to telecommunications and technology companies,
governments and international organizations. Before founding
Telecom Advisory Services, I was a Lead Partner at Booz Allen
Hamilton and CEO of Adventis, a telecommunications consulting
company. I am a Director of Business Strategy Research at
Columbia University's Center for Tele-Information, an Adjunct
Professor in Columbia Business School's Division of Finance and
Economics, and a Visiting Professor at the Universidad de San
Andres in Argentina. I have written three books on the
telecommunications industry, and have published articles in
journals including Telecommunications Policy, Telephony,
Strategy and Business, Communications and Strategies,
Intereconomics, America's Network and The Information Society.
I hold a Ph.D. in Management Science and Political Science and
an M.S. in Communications Technology and Policy from the
Massachusetts Institute of Technology (MIT).
2. I have been retained by Competitive Carriers Association (CCA) to
assemble a collection of data for a number of states to analyze
mobile broadband coverage at a county level for these states,
the quality of mobile broadband service experienced in these
areas, and the rigor of competitive offerings of mobile
broadband services in the selected sample area. This
examination is undertaken in response to assumptions underlying
the Federal Communications Commission's (Commission) recent
Further Notice of Proposed Rulemaking (FNPRM) with respect to
funding mechanisms for Phase II of the Connect America Fund and
Mobility Fund.\1\ I am currently researching for and drafting a
comprehensive report for later release, but provide some
preliminary data herein.
---------------------------------------------------------------------------
\1\ Connect America Fund, Universal Service Reform--Mobility Fund,
et al., WC Docket Nos. 10-90, 10-208 et al., Report and Order,
Declaratory Ruling, Order, Memorandum Opinion and Order, Seventh Order
on Reconsideration, and Further Notice of Proposed Rulemaking, FCC 14-
54 (rel. June 10, 2014) (``FNPRM'').
3. In the FNPRM, the Commission claims that ``according to some
sources, nearly 99.5 percent of the U.S. population today (and
the road miles associated with that population) is covered by
some form of mobile broadband technology,'' though the
Commission admits that this is likely an overstatement.\2\ My
initial review of available data, including the National
Broadband Map, Connected Nation and other crowdsourcing
databases, however, shows that rural wireless broadband
coverage, and service offerings at download speeds above 3 Mbps
in the states sampled often fall below 90 percent. Indeed,
wireless coverage in rural counties ranges as low as 76.7
percent of the population in West Virginia and 81.1 percent in
North Carolina. Furthermore service coverage at download speeds
at or above 3 Mbps ranges as low as 78.6 percent in Kentucky
and 86.3 percent in New Hampshire.
---------------------------------------------------------------------------
\2\ FNPRM 238, n.436.
I declare under penalty of perjury under the laws of the United
States of America that the foregoing is true and correct. Executed on
August 8, 2014 in Stanfordville, New York.
Dr. Raul L. Katz,
President,
Telecom Advisory Services, LLC.
Mr. Berry. Thank you.
But you are absolutely correct. The map itself--it is
unfortunate we are using a methodology that does not accurately
reflect the coverage. If you have a signal in a centroid of a
Census block, then they count that area as covered. And we just
heard in the exchange with Mr. Carlson and Senator Moran that
just because there is a signal there does not mean it is a
quality signal, does not mean you have coverage. But if you are
saying anytime there is a signal there that meets that centroid
in a population area, Census area, it is covered, then that is
part of the problem.
Senator Manchin. Let me segue into that to Mr. Carlson, if
you do not mind, because my time runs pretty short very quickly
here.
Mr. Carlson, do you think the FCC could seek comment on
other ways to measure the coverage? Because we do not think it
is accurate right now. They must have missed my state
completely.
Mr. Carlson. Absolutely. I think there are innovative ways
to----
Senator Manchin. Are they asking for that from you all who
are on the front lines?
Mr. Carlson. They have not asked for that from us at this
point in time.
Senator Manchin. Anybody at this table--has FCC engaged you
all?
Mr. Berry. You know, I would say that we should look at
every innovation. I mean, if we can put an advanced recon
controller in the middle of Afghanistan----
Senator Manchin. I am saying is the FCC engaging you all in
your comments since you all are delivering the service to the
people who need it.
Mr. Berry. They have not asked for methodology.
Mr. Rapelyea. No, sir.
Mr. Carr. No, sir.
Senator Manchin. You do not talk to them at all. Do you?
Mr. Seward. No.
Senator Manchin. I do not blame you.
[Laughter.]
Senator Manchin. Let me just say, Mr. Carlson, basically I
know that companies such as yourself are willing to go into
these areas. You cannot do it just based on economics. Is that
correct?
Mr. Carlson. That is correct. We need support to meet the
needs of these small towns and rural areas and to bring them a
high-quality signal.
Senator Manchin. Well, the difference between you two
sitting right here--he is coming at us from the sky. You are
coming at us from the ground.
Mr. Carlson. Well, he is providing a fixed location focus.
We are providing mobility, and mobility is the future for
Americans. I counted up the number of people in a row back here
that were on their mobile smart phones. Four out of five.
Senator Manchin. Well, let me ask you this. Why has the FCC
not seen fit for the money to go where the need is? I mean, why
are you all not participating in this?
Mr. Rapelyea. There seems to be a preconceived notion that
is a wireline solution. And as a matter of fact, this program
is administered and run out of the Wireline Bureau of the
Federal Communications Commission. So therefore, the tilt or
the bias is that way, not for this panel here.
Senator Manchin. So you are saying disproportionately that
mindset is still getting a disproportionate share of the funds.
Mr. Rapelyea. If you look at the tally of the distribution
of the funds thus far, absolutely.
Senator Manchin. And that is what we are trying to correct
right here with the hearing. That is why I appreciate so much.
Mr. Chairman, if you will allow----
Senator Wicker. That is helpful information, Senator
Manchin.
Senator Manchin. Thank you.
Senator Wicker. Senator Gardner, followed by Senator
Daines.
STATEMENT OF HON. CORY GARDNER,
U.S. SENATOR FROM COLORADO
Senator Gardner. Thank you, Mr. Chairman, and thank you to
the witnesses for joining us today.
You know, there is a lot of talk out in the countryside, so
to speak, about red versus blue, red and blue in campaigns and
elections. This committee has worked very hard to make sure
that we do not focus on red versus blue. But, Mr. Seward, I
have a hard time focusing on something in your statement. You
talk about green in your statement and green tractors. I sell
red tractors. So today we may focus a little bit on red versus
green. But I will leave that out for now. Thank you.
Mr. Seward. You have my sympathies.
[Laughter.]
Senator Gardner. Over the last year, we have gone around
the state of Colorado. We have probably done--I do not know--
20-25 different roundtables focused on rural economic
development. And we bring in business owners and county
commissioners and city council members and small business
owners and schools and community colleges and talk about how
can we make rural opportunities grow to stay competitive. And
usually before you can even start the meeting, the first
comment you hear is, well, we need to talk about broadband. We
need to talk about Internet, and we need to talk about
connectivity. And then you start the meeting and that is where
you spend most of the time talking about it.
And so at some point, we have to realize that we have got
to quit talking about it. We have got to start doing it so that
the next economic roundtable that we have is not just focused
on this one issue that every person here knows has to be the
focus of our work.
In Colorado, we have this great state, mountains on the
west and flatland on the east, and it creates significant
challenges to businesses, to companies, to funding efforts that
we can go out to the eastern plains with the great coops that
we have and Century Link that is working on the CAF II funds
that they have received, 50,000 homes that they will be working
on. We have got wireless Internet service providers, satellite
companies that are doing great work, including the work that
you are doing with about 350 employees out of Englewood. And
you know, it is incredible what we have. But we have some
significant challenges because of the mountains, some of the
hardest places in the country to make sure that we are
providing Internet.
Yet, if you go to southwestern Colorado, in Durango,
Colorado, Durango, according to some analysis, has the highest
connectivity rates and some of the best abilities to work from
home of anywhere in the country. And so we have been able to do
some of these things.
But obviously, when you go to meetings and you continue to
hear from towns that are struggling to put it together, we have
got to figure out a better solution.
I am struck by the testimony today because we talk about
all these Phase I's and Phase II's and round 1's and round 2's
and CAF and Mobility. And then you read the statement from
Chairman Wheeler who talked about the Connect America. This is
a quote from him. The Connect America Fund Phase II competitive
bidding process will be implemented in a technologically
neutral manner to allow the participation of as many entities
as possible. I think that statement sounds great. That is a
great statement.
And so then we get the testimony here, technologically
neutral.
Mr. Rapelyea, are we achieving that goal with the proposals
we have seen?
Mr. Rapelyea. No, simply put. There has been an adoption of
the opposite where there is a thumb on the scale in a reverse
auction, in the auction concept that has been put forth, for
fiber solutions versus any of the other solutions on this panel
such that if I were going to come with a bid, even though it
met certain quality standards and performance standards, my bid
would be scored lower.
Senator Gardner. And so if you were laying fiber on the
western slope of Colorado, you know, Red Mountain Pass, to try
to get from Ouray, Colorado, over to Silverton, Colorado--and
if you have not been there, it would be a great place to go
spend some money. So I encourage you to be there. But that is
going to be cost prohibitive. So how can satellite or another
kind of technology address that challenge?
Mr. Rapelyea. In your state to a great extent we do that
today and in the state of Mississippi and many of the states
around the country.
The way that it will make business sense for a company like
ViaSat or any other company to do that is to have an adjustable
market that is balanced. It is a blend between populated areas
and areas that are not so populated. If there is a preconceived
notion that some of our technologies are solely rural and only
allowed to compete for funds in ultra-rural places, I am afraid
that you will not have a very effective bidding process. And
those people frankly have already been left behind once. They
will be left behind again.
Senator Gardner. Mr. Berry, you talked about the $300
million for expanding mobile networks, Mobility Fund Phase I.
$300 million--just over $66 million has been allocated. Talk a
little bit more about why the delay, how slow that has been
released, and what impact it is having on other efforts.
Mr. Berry. Yes. Thank you, Senator.
We did have $300 million. We actually advocated that $300
million was not enough. We had more bids to acquire those funds
than they had funds budgeted. So there is a huge interest out
there.
What has happened, though, is because some small carriers
actually went out of business, others could not see putting up
the funds to build out the network when the legacy fund
continues to drop, i.e., 60 percent of its original funding
source.
So there are two pressures. One, not enough funds. Two,
those people that have actually built out the networks have not
been reimbursed. And that is--I do not want to say a
bureaucratic shortfall, but it is a slowdown in the process
that really should not occur and it could be corrected, I
think, very quickly. Some of the bureaucratic responsibilities
of the USAC to, I think, over-indulge in the fact-checking has
made it very difficult to build.
But we are also talking about two funds, the CAF, which has
really been focused on fixed solutions, and Mobility, which is
MF II, Mobility Fund II, which is essentially what the FCC gave
wireless when they decided that they were not going to have a
technology-neutral CAF program. And that is why I think we are
talking about two different things. We have a Mobility Fund II
that we think we can utilize right now with a little tweak of
existing tools. We can solve a new problem in the high-speed
mobile broadband world.
Remember, the high-speed mobile broadband can deliver fixed
and mobile solutions. Fixed solutions cannot deliver mobile. I
am glad we at least have an opportunity to make our case under
Mobility II, but you are going to have to have more funds than
what is currently being contemplated by the FCC. And we are
going to have to have a lot more rapid response.
Senator Blunt [presiding]. Senator Daines?
I am going to wait until Senator Wicker gets back from
voting. So I believe that we are fine on voting. So go ahead.
STATEMENT OF HON. STEVE DAINES,
U.S. SENATOR FROM MONTANA
Senator Daines. Thanks, Senator Blunt.
Let us think about my home state of Montana and the
importance of connectivity. Believe me, it keeps us connected.
You can have a fly rod in one hand and still be doing your
business with your other.
I was part of a cloud computing company for 12 years. We
started up in Bozeman, Montana, grew it. It has 17 offices
around the world, products set in 33 languages. Oracle acquired
the company. They thought they were acquiring us for our
software. They found out we had incredible cloud computing
expertise.
Today, as Oracle is putting together their global cloud
command strategy, 24 by 7 by 365, Singapore is covering Asia.
They hand off to London. It covers Europe, Middle East, Africa.
And they hand off to Bozeman, Montana, for the Americas. That
is what is going on in terms of revolution in this global
economy.
So I am very proud of what we have built there, but it also
shows how world-class operations now exist in places outside of
Silicon Valley. They have places like the Gallatin Valley.
So thank you, Mr. Berry, also for mentioning the Ruby
Valley there in Montana. I remember that well. I am happy to
say that today new wireless towers have been constructed, and
the residents of the Ruby Valley do have service again. So
thank you.
Mr. Berry, you also mentioned in your testimony that the
Mobility Fund should expand services to areas currently
underserved by 4G LTE service. I am concerned this means
spending money upgrading customers who already have service at
the expense of consumers who may not have any service. So
should we not be focusing on some of these unserved communities
and not even underserved but in some cases unserved communities
like we have in Montana before we worry about upgrading to 4G
LTE?
Mr. Berry. Thank you, Senator.
Yes, but we have to do both. A tower that has been built by
USF support should conceivably be continued to provide service
and supported by the Mobility II Fund if necessary. So the idea
is if you are going to get to 4G advanced and 5G, which gets
you to the Internet of Things and provides all of the benefits
that they are using down here in Mississippi in the fields, you
are going to have to do both.
I am very fearful that you are at sort of a precipice of
two real difficult challenges. If you do not continue to
support existing capability, you will never get to the 4G/5G
status. 4G and 5G provide huge increases in capabilities and
speeds. They also are much more efficient in technologies and
networks to run. So I think we are at that point where you have
to do both. And expanding service--the proposal we provided to
the FCC says support those that are necessary to continue to be
supported and we would use that on a data-driven basis. Do you
need support to ensure that that tower can op-ex, the
operational cost of that tower can be maintained? And how can
we encourage you to build out services and expand and enhance
services as we go forward? That I think is the new challenge in
the 4G/5G world. I do not think you just want 3G for your
constituents. As soon as they get 3G, they are going to want
4G.
Senator Daines. We want 4G, 5. We want G just to start with
as well.
Mr. Berry. But it starts with coverage. If you do not have
coverage, you do not even have an opportunity.
Senator Daines. Yes.
So I want to pivot over here and talk about WISPs. I am
actually a WISP customer personally. Thank you. My children--
when you have children, all they care about is this anymore I
think in terms of, Dad, is it fast or not. And so we are
thankful that we have WISP delivering excellent service to my
home in a rural area in Montana.
Mr. Carr, there are certainly technical and operational
differences between wireline service and wireless service. Some
have questioned whether wireless providers can offer the same
level of service in terms of quality and reliability as the
price cap carriers. Could you address those concerns?
Mr. Carr. Sure. Thank you for the question, Senator.
We compete with Fortune 100 and otherwise subsidized
carriers all day long. We compete on price, service, and
quality. A principal value of fixed wireless is that we can get
to areas much more cost effectively than other technologies,
and we offer unlimited data. So in my network in Virginia, West
Virginia, and Maryland, the average user on our networks--
excuse me--the median user consumes more than 100 gigabytes of
data every month. And if you were going to buy that on a mobile
hotspot, it would be $700 a month. You cannot get it on
satellite, but you can get it in a very congested area for
unlicensed spectrum on my network for $79 a month.
So the advancements in fixed wireless technology over the
last 5 or 6 years have been absolutely breathtaking. Billions
of dollars of global R&D is going into improved wireless
coverage. And fixed wireless, like all wireless--we benefit
from that. Our manufacturers are designing products not for
rural America. They are designing it for the two-thirds of the
world's populations who have never been served by a wire and
never will. And so American consumers and our companies--we
benefit from all that innovation.
Senator Daines. I lived in China for 5 years. I remember
when one of my colleagues was getting--a Chinese colleague was
getting service and her mother had to wait 6 months for the
wireline, and she went downtown and got her cell phone up and
running in 24 hours. It is a classic example of how technology
is leapfrogging, what is going on in the world.
I want to talk a little bit about satellite possibilities.
This is for Mr. Rapelyea. Part of what makes our state great
and why people want to come there is the mountains, the
valleys. We have got a lot of topography challenges certainly,
and that presents technological challenges.
Is satellite service a viable solution for customers who
live in mountainous areas like where Gardner is from or where I
am from?
Mr. Rapelyea. So we do have customers in your state. They
are around the more populated areas. And then to serve less
populated areas, we need a blend of both. A business case of
the ultra-remote on a standalone basis is hard to close for us.
Now, from a technological perspective, we operate today
with four redundant satellites over the United States and more
to come. So we will also employ hybrid networks that involve
multiple wireless as well as satellite networks. So, yes, there
is absolutely a technological way to do that. The business case
is a different story.
Senator Daines. I am excited to be elk hunting some day
there, a long ways away, and have service there on my phone.
Anyway, thanks much.
STATEMENT OF HON. ROY BLUNT,
U.S. SENATOR FROM MISSOURI
Senator Blunt. Thank you, Senator.
Mr. Seward, I grew up on red and green tractors both. So I
would want to specify that in case Senator Gardner is looking
at the record here. I will admit that I have only owned green
tractors for the last 5 or 8 years.
And my dad, I am sure, would have preferred precision
agriculture to some of the things I did on the tractor, driving
the tractor from the time I was about 10 years old.
But what about precision agriculture--clearly world food
demand is going to double in the next 35 years. A lot of things
have to happen. We have to be better than we have ever been.
What is your sense of the spotty service component of what you
are doing out there in agriculture when you have service and
then you do not have service? Give me just a little view of
that.
Mr. Seward. It makes management of our farm a lot more
difficult. We are not able to remotely monitor our machines,
the efficiencies, you know, any data that we need to push to
those machines to put out nutrients or to put out a seeding
prescription. Overall, it will decrease our yield. You talk
about feeding the world. It makes us less efficient. We are
able to produce less crop. So it is a major issue for us.
Senator Blunt. Can you rely on the precision agricultural
concept if you are in a 40-acre field and you are only
connected 90 percent of the time? What kind of problem does
that create?
Mr. Seward. Yes, you can. I would have to go out there with
a thumb drive myself and introduce this data to the machine. It
would be kind of like if I told Congress they could not use e-
mail for a day, everything had to be handwritten, hand-
delivered. It really just reduces our efficiencies. So
precision ag still could be performed, but I do not know if it
could be performed on a large-scale production like we are
doing.
Senator Blunt. Mr. Chairman, I have one more question. Let
me thank you for letting everybody else ask their questions
first and putting yourself at the end of the line. Most
chairmen do not do that.
Mr. Carlson, almost a year and a half ago, Senator Wicker
and I and several other members sent a letter to the FCC urging
them to finalize its rules for Phase II of the Mobility Fund.
To the best of my knowledge, they have not done that yet.
Actually to the best of my knowledge, they have not responded
even to our letter yet. We do not have very good success
encouraging the FCC to do anything or even to get a response.
But what is your view of where we are now on Phase II?
Mr. Carlson. To my knowledge, the FCC has not introduced
any rules yet. We would encourage all the members of this
committee to make sure that those rules do not reduce the fund
and that the FCC actually not take any significant action with
the current fund until they produce maps about the quality of
coverage in rural America so they can know what they are doing
because today they are blind.
Senator Blunt. Thank you.
Senator Wicker [presiding]. Well, thank you, Senator Blunt.
We are currently the first in a series of two votes. Other
Senators may actually come back and ask questions. At the last
moment on the second vote, I think we have to adjourn this
hearing. But you all have been great.
Let me just ask you, Mr. Carlson. What is the best way to
get accurate numbers for us, which you are advocating?
Mr. Carlson. What I would advocate today, because I know it
works for us when we measure ourselves against our competitors,
is drive tests, and that means chartering an external
engineering firm, other than ourselves, to drive the territory
and to see what the actual quality of the signal strength is at
each point along the territory, driving the State roads and the
interstate highways. That is the way to get the job done. Now,
you could do that on a national basis. I do not know what the
cost is. But the cost is modest compared to the contribution
that mobile broadband makes to the American economy. If we can
afford to do a Census every 10 years and base our decisions on
what we do economically as a Nation based on the Census, we
should be able to do a census of our coverage across this
country for mobile broadband.
Senator Wicker. For Mr. Seward's purposes, you might want
to include county roads. Might you not?
Mr. Carlson. Absolutely.
Senator Wicker. Now, who else would like to take a stab at
that? Yes, Mr. Berry.
Mr. Berry. If I may, sir. As I was starting to suggest to
Senator Manchin, we ought to use all the available technology
to do that.
Senator Wicker. The drive-testing and what else?
Mr. Berry. Well, you can drive-test.
If we can put a team of recon officers in the middle of
Afghanistan and they can determine where there is a radio
signal, where it is from, and what channel it is on and the
strength, we ought to be able to figure out how to figure out
where that signal is coming in rural America. We have drone
technology now. You could put a spectrum analyzer on the bottom
of a drone and computerize the transit of non-populated areas
so we could literally map the entire United States out. We have
done drive-testing and we know it works. We have been doing
that since analog days. There are a lot of different ways that
we can analyze the quality of signals all over the United
States. We ought to be looking at new ways.
Senator Wicker. So drones and drive-testing.
Mr. Rapelyea. Just to build on the drones comment and the
troops on the ground, both of those applications are powered by
satellite. So I just offer that as an aside.
Senator Wicker. There you go, Mr. Rapelyea.
Now, Mr. Rapelyea, Mr. Seward is not in these population
areas that you mentioned. Do you anticipate your technology
getting to the point where you are competing with companies
like C Spire for his precision agricultural business over these
far-flung areas of the Mississippi Delta?
Mr. Rapelyea. Yes. I wanted to comment specifically about
Mississippi.
Senator Wicker. Well, I am all ears.
Mr. Rapelyea. Great, great.
We have talked a lot about the Mobility Fund. There is also
the Connect America Fund, which is the focus here from our
perspective. There are about 500,000--as far as we can tell,
there are about 500,000 households that are not covered under
the current Connect America Fund that were basically left
behind in the first two rounds of the Connect America Fund, 1
and 2. It looks like----
Senator Wicker. Why was that?
Mr. Rapelyea. Because there were telecommunications
companies that were given the right of first refusal as to
where they were going to serve, what households they were going
to serve. They decided that the cost of serving these
households was just too high. So they said we will pass. So
that is what is left. So what we are talking about is what is
left.
Again, as far as we can tell, sir, out of those 500,000
households, 92,000 are in your state.
Senator Wicker. Well, thank you for that. So roughly a
sixth of all the unserved households?
Mr. Rapelyea. Yes, sir.
And then on top of that, if you look at our business----
Senator Wicker. That includes the mountainous West Virginia
that you can hardly hear 50 feet, according to Senator Manchin?
Mr. Rapelyea. Yes. Now, again, this is what is left behind
uncovered, 92,000 households.
Then if you look at where our customers are in your state,
they are focused around the more populated areas of your state.
Senator Wicker. Right.
Mr. Rapelyea. The more rural areas are not where we are not
because we cannot get there. Of course, we can get there. We
are a satellite company. But we just need a balance to have
because it costs us to acquire a customer in a rural area. It
is much more expensive than in a more populated area. So,
therefore, we think that the policies today--well, we know the
current proposals at the Commission today and like we have
mentioned several times are not technology-neutral. They are
not technology-neutral, such that we probably would not go
without support to cover those uncovered households in your
state.
Senator Wicker. And that is the principal thing, that is
the principal change that you are advocating today. Would that
be fair to say?
Mr. Rapelyea. Let everybody compete. Let everybody compete.
That is all.
Senator Wicker. Now, Mr. Seward, you were kind enough to
come by my office yesterday afternoon, which is a good thing
because your testimony is the only testimony I missed coming in
late because of the Prayer Breakfast.
Did you have a chance to explain to this audience an
example of how you get better yield and use less fertilizer and
other product by getting data about these relatively small
parcels of land?
Mr. Seward. Yes. You know, in paring the statement down, I
did not cover that.
Senator Wicker. Go into that if you will because it is just
fascinating to me.
Mr. Seward. Just say we have a 40-acre field where we are.
We are in the alluvial flood plain of the Mississippi Delta. We
have a lot of different soil types. So this field might have 15
different soil types in it. Say like I am growing a corn crop.
It is going to grow differently on each different soil type.
Each different soil type calls for a different amount of
nutrients to produce a certain yield.
So we do grid sampling, two and a half acre grids.
Senator Wicker. And there is a company that does that.
Right?
Mr. Seward. Yes. Pretty much any agricultural lab would do
it, but we use Clinton Pettiet out of Leland, Mississippi,
Pettiet Agricultural Services. Clinton is a pretty neat guy.
But anyway, that data is uploaded into the cloud.
Senator Wicker. His name is in the permanent record of this
hearing.
Mr. Seward. It is. I will have to go back and tell Clinton.
He will like that.
But anyway, so it goes up in the cloud. You know, we are a
big Sanders customer. They are a seed and chemical retailer
there. So I can use their Web-based software----
Senator Wicker. Another commercial.
Mr. Seward. Another commercial. Hey, they get a free trip
or something.
Senator Wicker. But I digress.
Mr. Seward. But anyway, I can write a controller file to
put out the nutrients that each two and a half acre grid calls
for. And then you take that controller file, which I can
wirelessly send to a John Deere application machine, and it
knows exactly where it is in the field via GPS and it can put
out the exact amount of potassium that I need to grow 240
bushels of corn in that 40-acre field, you know, every two and
a half acres.
Senator Wicker. So as that giant John Deere implement moves
across this tract of land, it dispenses different amounts based
on what it is being told wirelessly.
Mr. Seward. Correct. It has a rate controller that controls
the rate, yes. And it dispenses different amounts of fertilizer
based on what it is being told wirelessly.
Senator Wicker. Giving America better yields----
Mr. Seward. Better yields.
Senator Wicker.--and allowing us to put only the amount of
fertilizer that is necessary and saving the rest of it from
washing out into the Mississippi and Yazoo Rivers.
Mr. Seward. You are exactly right.
Senator Wicker. Now, Senator Klobuchar is going to be
recognized in a couple of minutes.
Let me just ask you all this. We are all for pro-USF
support. We are kind of--all five of you--on the same page. But
what differences are there among you that you would like to
highlight based on all the questions and testimony. Is there
anything that you would like to speak up about and clarify and
perhaps take issue with something someone else has advocated?
Or are we totally 100 percent on the same page? Mr. Rapelyea
and then Mr. Berry.
Mr. Rapelyea. Sure. Again, I think that there is room for
everyone to compete, but I just want to make the very keen
difference with satellite. Sir, we deliver high definition
video streaming speeds to someone's home. We will deliver that
same experience to someone in a plane, on a train. So this is
where this is going today. We are competing against wireless
and legacy cable and DSL and winning. About a third of our
customers come from those solutions, people who have choices.
Our next generation satellites will compete against cable. Our
third generation satellites will be, with respect to fiber,
just below fiber speeds. So we see ourselves as an extremely
viable alternative within the Connect America Fund framework
for those folks left behind.
Senator Wicker. Mr. Berry?
Mr. Berry. Well, I guess I would say two big differences.
One, I guess the thing that unites is that we want to
deliver high-speed broadband to consumers that currently do not
have access.
On the wireless side, it is a mobility product that we are
providing under Mobility Fund II. That is where we would like
to see a little more attention from the FCC and a few more
dollars to deliver that mobility experience that you do not get
any other way.
We all are united by the same common challenge, which is
how do you deliver a service in an area that is otherwise
uneconomical to service. When you are down to three or four
people per square mile or on the average--you know, 42 percent
of the United States has less than 1 percent of the population.
When you are talking about those areas, it is hard to pay for
the network unless you have Universal Service funds, the
Universal Service Fund, CAF II for the fixed service, whether
it is fixed wireless or fixed wireline, and Mobility II for the
wireless solution because it is pure mobility.
And those are the two differences that the FCC essentially
did in their transformation order, and we are trying to get
them to focus on the fact that you just cannot say the job is
done and that you think there is 99 percent coverage for the
mobility side. That is part of the difference.
And I feel for those other technologies that also appear to
feel like they have been biased--the program somehow or another
has been biased against them because, quite frankly, Mr.
Rapelyea is right. Most of the funds go to a wireline solution
that is predicated on a fiber solution. We are totally
different. We want to demonstrate that and provide that service
to rural America.
Senator Wicker. Very good.
Mr. Carr. Senator, I would just say about--I think a
principal difference from the WISPs and the fixed wireless
industry from my colleagues here on the panel is that the
overwhelming majority of our companies are small businesses. We
are located in the communities that we serve. The folks that we
are serving are our friends and neighbors.
And solving the digital divide in rural America, if there
was a quick, one-size-fits-all solution that we could just
blanket and drop in and have be successful, that would have
already been done. And solving this challenge is going to
require custom-tailored solutions for local communities based
on a local understanding and an understanding of the needs of
the community. And that is something that WISPs are uniquely
positioned to provide.
Senator Wicker. But in terms of policy coming from this
committee, do you advocate something different from what the
previous two witnesses have recommended?
Mr. Carr. No. I think we all agree that we should compete
on a technology-neutral basis to provide a standard threshold
level of service.
Senator Wicker. Ms. Klobuchar, the second vote has not even
begun. So we will be in good shape. So, Ms. Klobuchar, you are
recognized and then Senator Ayotte.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Very good. Thank you very much. Thank
you, Mr. Chair.
I have been working on this issue for a while. As you know,
Mr. Berry, our state has a lot of rural areas and some of them
extremely rural. We compete against Canada for our resort areas
up in northern Minnesota. They tend to have better broadband I
would say. We have got tribal areas where literally we have
kids that go to one kid's yard to do their homework because
they can get some WiFi off of that yard. We have farmers that
are going to McDonald's parking lots--I have talked to them
personally. I have seen it--to do their business as things get
more complex with the kind of technology. Oftentimes they, of
course, have access. They just have such slow-speed access that
they are not able to do business in a way that is acceptable.
And I guess I would start with you, Mr. Berry. Part of the
problem in getting broadband to rural America is the continuing
difficulty of deploying the physical network. And I recently
introduced the Streamlining and Investing in Broadband
Infrastructure Act, bipartisan, which will simplify the process
for siting infrastructure on Federal lands.
Mr. Berry, you mentioned that deploying infrastructure on
Federal lands can be a time-consuming and difficult process.
How would reducing these challenges increase the number of
subscribers you could reach with the given level of support
from the Universal Service Fund?
Mr. Berry. Thank you, Senator. And yes, we are very
strongly supportive of your efforts in that regard. Siting is
always a difficulty, especially on Federal lands. And the shot
clock concept and some of the initiatives that you are
proposing will allow us to hopefully site facilities faster.
And if you can do that at lower cost, you can provide a service
that is economical to provide and hopefully you can get there
so you can provide that connectivity to that tower sooner,
faster, for more people. I think it will reduce costs. I think
it will increase availability of services.
And also another bill that you have also sponsored is the
Rural Spectrum Accessibility Act and we very much appreciate
that you and Senator Fischer have supported because we do need
access to spectrum in rural areas so that you can ride that
infrastructure over. And I think your bill gives us an
opportunity to more efficiently and effectively use spectrum
that is currently not available to the small carriers.
Senator Klobuchar. Thank you. I appreciate Senator
Fischer's work with me on that, and Senators Gardner and Daines
I think were the cosponsors, as well as some other people on
the other bill.
You gave an example of a carrier in rural Montana, Mr.
Berry, who was forced to exit the market because of uncertainty
in funding. Do you think that this uncertainty in funding has
had a disproportionate impact on rural residents?
Mr. Berry. Yes, I do. As Senator Daines now tells me, Ruby
Valley, Montana, now has coverage. But the small carrier that
was servicing that area--and they put it in writing at the FCC
why they were pulling out is because USF funding started to be
reduced. It was down to 60 percent. And at that rate, under the
plans that they had to roll out and sustain that service, they
could no longer do it on their budget. They are a very small
company that could not sustain the loss leader for a very long
period of time. So they pulled out. I think that has happened
in numerous areas throughout the United States, especially on
those smallest of the small carriers, the small businesses that
you referred to serving rural America.
Senator Klobuchar. And what do you think the FCC could do
to increase certainty as it moves toward the Connect America
Fund Phase II auction, the Mobility Fund, the Remote Areas
Fund?
Mr. Berry. Well, we have suggested that--OK, let us try to
address your highest priorities, which is to keep--our highest
priorities, which is maintain and keep existing services, but
expand services in a rational way. And we know there is not
unlimited funds. But our suggestion is let us keep what we
have, allow it to be enhanced, also encourage expansion in
those areas. And I think they can do that very economically and
with a lot of sensitivity to the need that is out there. And we
talked and Mr. Carlson talked about the need to have better
data and better information on the decisions they are making.
Senator Klobuchar. One last question. Mr. Carlson, I head
up the 911 Caucus. Do you worry that if we do not improve rural
coverage, there could actually be a public safety divide
between rural and urban areas? We know that more and more first
responders, whether it is fire departments, or law enforcement,
are getting their calls in and they are doing things by text
and e-mail, and we are all updating how 911 works, how the data
is worked before they go into a building, all kinds of things.
Mr. Carlson. Yes, Senator. I believe there is a public
safety divide today. And as new technology makes available
video conferencing back to that ambulance or back to that
police car, the technology divide will increase even farther.
So to close that divide, we need accurate data on where
services actually exist in rural America that are high-quality
broadband mobility services, and then the FCC should be
required by this committee to address that problem.
Senator Klobuchar. Thank you very much.
Senator Wicker. Thank you, Senator Klobuchar.
Senator Ayotte?
STATEMENT OF HON. KELLY AYOTTE,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Ayotte. Thank you, Chairman.
Since I have been serving in the Senate and serving on this
committee, I have been a strong voice for advocating a more
equitable distribution from the Universal Service Fund. In
fact, New Hampshire is 50th this year. We are a net donor by
$21 million, but as I have said in the past, drive around my
state with me a little bit and we will go up into Coos,
Grafton, places in Cheshire, Carroll, and I can guarantee that
you do not have service. So to me, this is something that we
need to make sure that we address. And I would like to see more
contribution reform.
New Hampshire residents have paid into USF. We have paid
in, but it is disproportionate to what we are getting back.
Yet, I know that we need assistance and we need to have more
mobile broadband coverage. So I would ask you, Mr. Carlson, if
you could tell me--or anyone on the panel--what ideas do you
have and how can you explain how mobile broadband carriers can
help correct the coverage gaps and ensure those who reside in a
rural state like New Hampshire have access to this innovation,
which is so important especially in rural areas, whether you
having your own business, communicating, being able to live in
that area and have a good job. So whoever is best to answer it,
I would appreciate it. And how do you think we could reform
this fund to make it work more effectively for us in places
like New Hampshire?
Mr. Carlson. Well, let me make a couple comments, and I am
sure my colleagues here will chip in.
First, we need accurate maps at the FCC of the degree of
your state that is not covered. The current maps that the FCC
sent out appear to show that you are 98 percent covered, but
that is not true.
Senator Ayotte. Well, that is not true. I mean, I wish they
would come around and drive around with me in the state. I can
assure you we are not----
Mr. Carlson. Right. So we need drive tests or we need
drones to survey your state or we need items put on postal
trucks to survey your state. We need a method to get the
accurate data so that the FCC can hold themselves accountable,
but so that this committee can hold them accountable. So that
is a start because it will show that your state is not covered
and it needs help. So that is the first thing.
Another thing that we have recommended is that the Federal
Government explore joint programs with states so that if your
state were to start even a modest Universal Service mechanism
itself, then it could apply to have matching grants from the
Federal Universal Service Fund. So that would be a combination
funding, and if your state were putting up more dollars, then
you would get more dollars from the FCC Universal Service Fund.
So that is another way to do it.
And of course, another way to do it is to have a map of the
whole United States so we can determine which states have the
greatest problems. And I would not be surprised if your state
did not have the greatest problems, along with West Virginia
and some of the other mountain states. But the way the FCC
constructed the Mobility Fund I is that they gave an incentive
to serve the easiest areas to serve that were unserved, which
meant flat states, and your state did not get anything. So we
need reform and that kind of thinking.
Senator Ayotte. It is really hard for me to tell my
constituents how they are getting value out of this.
Mr. Carlson. Right. I agree.
Senator Ayotte. We are not. I mean, that is the problem.
Mr. Berry. Senator, thank you for the question.
I totally understand that by reforming the program more, we
can actually send assistance to areas that need it more. We did
a study and submitted information to the FCC that designated
New Hampshire--our economists indicated it was 86.3 percent
coverage when the FCC was saying 98, 99 percent.
Senator Ayotte. Yes, a difference----
Mr. Berry. Last year, your state got $131,000 out of the
USF high-cost fund for mobility.
Senator Ayotte. Unbelievable.
Mr. Berry. We should direct the funds to those areas that
actually need support and need coverage. And it is going to be
a long process. It is not going to be done overnight. But we
have to get it on the right track and moving forward as we
reform USF Mobility II.
Senator Ayotte. And what do you think exactly--as we look
at the Mobility Fund Phase II, what is this going to have
impact on rural America?
Mr. Berry. Well, I hope that if we can get the rules right
and get the structure right at the FCC, that we will be able to
provide existing support for towers so that we do not lose our
current coverage. So you do not want it to go backwards and
also a mechanism that says those that are in need and those
areas that do not have served or are highly unserved should
actually be able to apply and receive additional funds.
On the mobility side, I think some tweaking of the program
could do a lot and we could do a lot better job with the funds
that we have. On the wireline side, your state also got some
wireline money, but again some of the most efficient and
effective technologies that you might be able to deploy in a
mountainous area are somewhat restricted in their ability to
take it.
Mr. Carr. And, Senator, I would just add on the fixed side,
the fastest, most immediate reform to the USF program for fixed
would be to eliminate the voice requirement. Most Americans
choose not to have a fixed voice service, and really we should
transform these funds into broadband funds because broadband
enables voice if you want it. It enables telemedicine,
telehealth, anything else you want.
Senator Ayotte. You are absolutely right about that. I
mean, so many of my constituents, including my own household--
we do not have a landline anymore. We are all using cell
phones.
Mr. Carr. And you raise a good point, and that is one of
the reasons that you can actually direct that CAF to a fixed
wireless broadband solution that is not dedicated to voice is
they have an alternative. In many areas, they have an
alternative, i.e., a cell phone. So I think they are
complementary in many respects, and we should just get on with
trying to accomplish the goal.
Senator Ayotte. I think what we are talking about is making
sure that we are updating this to what the current technology
is and what most people need to maximize the resources we have
here. And, of course, for my state, I am going to continue to
fight for the fact that, you know, $21 million going out the
door from my constituents. I cannot tell you what we could do
with $21 million for these gaps in our State.
Mr. Rapelyea. Senator, just to build on it to the mapping
point. Under CAF II, I think the presumption is that your state
is fine.
Senator Ayotte. Well, that is the problem.
Mr. Rapelyea. Right, and we all know that is not true.
And then from an overall perspective, it looks like there
is about $250 million on an annual basis, some of which your
state is paying into, that is left to cover the balance, the
tail end of CAF II. And then when you look at the cost model
from the FCC of the per household cost and you add that up, it
looks like you have got a billion dollar problem. You have got
a budget of $250 million to cover a billion dollar problem.
Yet, despite that discrepancy, you are not inviting all of
us to compete. It is hard to close and kind of scratch your
head on that one. So I just wanted to offer that as well.
Senator Ayotte. Great. Thank you. And I think my time has
expired.
Senator Wicker. Senator Ayotte and I have to scurry over
for a vote. You have all been excellent witnesses. This has
been a most informative 1 hour and 50 minutes, most of which I
have been able to listen to.
I am going to, without objection, stick my opening
statement in the record at the place where the clerk feels it
would be appropriate.
And thank you all. And we will continue to consider these
matters. Thank you, and this hearing is adjourned.
[Whereupon, at 12:20 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. Roger F. Wicker to
Darrington Seward
Question 1. If you could, how would you direct the FCC to ensure
that sufficient Universal Service Fund support remains available to
both (1) fund the existing operations of rural wireless networks and
(2) encourage further deployment in America's rural areas?
Answer. Thank you for asking specifically about support for
wireless broadband. Ag producers need access to all broadband
technology options--wireline broadband, fixed wireless, or mobile--to
reap the full benefits that new precision agriculture offers. We need
the flexibility to adopt the appropriate technology solutions depending
on ag equipment used, crops, livestock, terrain, climate, proximity to
broadband interconnection points and population centers, and barriers
to local land acquisition and access. Wireless services are also
important to sustain the developing Internet of Things innovations that
have emerged to address machine and data communication needs in the
agricultural context.
However, the reality is that broadband, particularly high-speed
wireless broadband, still is not readily available in many rural areas
including agricultural croplands and ranchlands. To ensure that
sufficient funds are available for existing wireless operations, the
Commission must reevaluate its programs and rules to provide ongoing
support for wireless broadband networks that could not be maintained
absent support. The absence of an unsubsidized competitor in a
particular locale could be a threshold test to determine whether
ongoing support is necessary to maintain wireless broadband. In many
rural areas, there may not be enough subscribers to cover the ongoing
costs of operating existing wireless networks while keeping rates
reasonably comparable to those in urban areas. The Commission needs to
develop a means to identify markets in need of ongoing support and
adopt rules to calculate such ongoing support.
Existing wireless facilities will also benefit if the FCC takes
steps to promote middle-mile facilities to support mobile broadband,
not just wired last mile connections. In particular, the FCC should
amend its USF Connect America Fund rules so that smaller, rural
providers may also receive and use CAF funds for upgrading middle-mile
facilities.
Further deployment of wireless networks must also be a priority
that is reflected in the Commission's programs and rules. One important
step toward achieving this goal is for the Commission to give special
attention to preserving and updating the Mobility Fund. In 2011, for
the first time, the FCC created a support fund dedicated exclusively to
mobile services. The Mobility Fund was established to ensure the
availability of mobile broadband networks in areas where a private-
sector business case was not supporting needed wireless services. The
FCC's early plans contemplated a Mobility Fund Phase II but today, more
than 5 years later, that fund is yet to become a reality. The
Commission has since revised the program to retarget funds to support
4G LTE mobile broadband and voice service and in 2014, the FCC asked
for further input on how best to distribute Mobility Fund Phase II
support. Now, after two and a half years, the FCC has not adopted rules
to implement Mobility Fund Phase II. Instead, despite the growing
demand for and importance of mobile services in rural areas, the
Commission's current commitment to the Mobility Fund is in real
question and the Commission has even suggested that it may not continue
the fund. The Commission should confirm that expanded broadband in
rural areas is a current priority by issuing a decision that preserves
and even expands the Mobility Fund Phase II. Although I believe, and
many other Ag producers would agree, that there is a need to update
these support programs to better ensure coverage of agricultural areas,
the Commission can and should act promptly to confirm the status the
Mobility Fund Phase II while considering further updates.
Another important action the Commission should take to encourage
further deployment in rural areas is to revisit how best to distribute
CAF support. The method by which CAF funds are distributed will
determine whether rural families and businesses in agriculture will
have the flexibility they require to apply the technology solution--
whether fixed or wireless or some combination of both--that best meets
their particular needs. The ``tiered'' approach that the Commission has
proposed would enable only wireline providers to bid in the first round
and thereby would create significant barriers to wireless funding. That
approach would limit the flexibility of users to employ the most
appropriate technology solutions to meet a wide variety of
circumstances. If a licensed or unlicensed wireless service is a
superior option for particular areas based on the cost and other
efficiencies that apply to the equipment, terrain, distance and other
specific attributes of a locale to be served, then wireless providers
should not be precluded from bidding in the first round to meet these
needs.
Question 2. What is the best way for the FCC to give rural
businesses like yours and rural consumers like you and your neighbors
in the Delta some certainty that there will be no reduction in access
to the multiple wireless service providers your community needs to
access healthcare, educational tools, or run your farms and businesses?
Answer. I agree that rural consumers do need certainty about their
continuing access to wireless services. The prospects for continuing
access to technology is an increasingly important factor for consumers
making decisions about where to live, go to school, and operate
businesses. The Commission could bring more certainty to this area by
making its commitment to expanded rural broadband services, including
wireless services, explicit and by taking prompt, meaningful action to
update its programs, broadband measurement mechanisms, and rules to
make this a reality.
There is a difference of opinion between commercial providers who
quote very high coverage statistics and rural users whose demand for
high speed broadband is still unsatisfied. Even Chairman Wheeler
recently acknowledged the gap between the FCC's broadband coverage
statistics which show nearly 99 percent coverage and the much different
real-world experience in many rural areas where broadband is available
to a much lower percentage of users. The rural broadband challenge is
far from over and the mission cannot only be to avoid reduction in
services--we must continue to actively support the expanded deployment
of rural broadband. The Commission should consider seeking an update of
the public record on the status of mobile broadband in rural areas and
the specific measures that can be adopted to obtain better data on the
coverage, quality and performance characteristics of mobile broadband.
In addition, both the CAF and Mobility Fund should be re-evaluated to
identify what changes are necessary to address the soaring growth in
device-to-device communications in the Internet of Things, including in
machine-to-machine (M2M) communications used in agricultural
production.
As a part of this effort, the Commission should expressly include
broadband coverage of agricultural areas--croplands and ranchlands--in
its Mobility Fund and CAF policy goals. However, despite some marketing
statements declaring broadband coverage in rural America to be near
complete, croplands and ranchlands have lagged behind in adequate
mobile coverage. These locations are important centers of economic
activity for many rural communities but today's support program rules
do not adequately account for the need for broadband services in these
areas. The FCC's rules for Mobility Fund support, as well as CAF
support, should direct funding not just to facilities serving
residential and business user population centers identified with
conventional measures of population, but also to agricultural farming
(cropland) and ranching operations that are integral to many local
economies in rural areas. The Commission should also direct support
from the Mobility Fund to coverage of rural roads. The evolution of the
Mobility Fund priorities and rules would be consistent with the long
recognized aim of the support programs to bring services to where
``people live, work and travel.''
Finally, to implement this step, the Commission should adopt a
metric of broadband access in active croplands and ranchlands (and farm
and ranch buildings) to identify areas of greatest need. ``Cropland''
coverage can be assessed in a variety of ways and the FCC could take
advantage of USDA data for crop operations, the U.S. Geological
Survey's Land Use classification, or other databases. In support of
this plan, the FCC's program to collect broadband data also should be
updated to ensure that broadband service to agricultural machinery is
counted.
______
Response to Written Question Submitted by Hon. Roger F. Wicker to
Steven K. Berry
Question. Late last year Commissioner Clyburn and members of your
staff visited my home state to look at some of the amazing things
Mississippi is doing to lead the way on telemedicine. They visited
Ruleville in Sunflower County--in the middle of the Mississippi Delta,
not too far from Mr. Seward's farm. There in rural Mississippi a
groundbreaking telemedicine program is treating and defeating Type II
diabetes. The program depends upon USF supported, robust mobile
broadband connections to allow patients to interact with medical
professionals around the clock from their home or work.
Do you believe the FCC has done enough to ensure that sufficient
USF support remains available to keep existing rural wireless networks
up and running--enabling access to these critical life-saving and cost-
saving advances in medicine--especially in rural states like mine? How
could the FCC do better?
Answer. When the FCC adopted the 2011 USF Transformation Order, it
included a transition mechanism from legacy identical support for
wireless carriers to a new Mobility Fund. This fund was to be employed
in two phases to ensure that sufficient support is available to
preserve existing rural wireless service, like the service you mention
in Mississippi, as well expand new mobile technologies and services.
Importantly, the FCC added a protection mechanism to this transition.
The FCC planned to phase down legacy support over a five-year period at
20 percent per year. However, if the second phase of the Mobility Fund
(Mobility Fund Phase II) was not operational by the time the phase down
reached 60 percent by June 30, 2014, the FCC agreed to pause the phase
down to protect rural consumers benefitting from legacy universal
service support and to prevent a reduction or loss of wireless service.
That pause remains in place today, providing carriers serving rural
areas with support and consumers with ongoing wireless service.
Going forward, it is important for the FCC to recognize and affirm
that USF support will be made available at sufficient and predictable
levels for wireless carriers to preserve existing rural wireless
networks as well as expand the latest mobile broadband services in
areas that are unserved or underserved. Support for both preservation
and expansion of mobile broadband is necessary to meet Congress's
mandate to provide reasonably comparable services in urban and rural
areas alike.
Response to Written Question Submitted by Hon. Dan Sullivan to
Steven K. Berry
Question. In your testimony, you mention carriers that have had to
sell part or all of their operations due to uncertainty in funding. As
you may know, some of our carriers in Alaska are nearing this point. I
am sure you are aware of the proposal set forth by the Alaska Telephone
Association targeted specifically to Alaska rate of return carriers.
Can you please discuss the challenges for these carriers posed by
uncertain funding mechanisms? Can you also discuss how CCA addresses
the needs of Alaskan consumers?
Answer. As CCA has told the FCC, CCA supports the adoption of the
Alaska Telephone Association plan. The Alaska Telephone Association
includes several CCA members that provide life-saving mobile wireless
services in these hard-to-serve areas, and the plan is tailored to
Alaska's unique needs and situation. Stable funding mechanisms are
critical for all carriers to preserve, expand and upgrade voice and
broadband services. All carriers deserve certainty regarding what
funding mechanisms will be available so they can maintain, upgrade, and
expand their networks, and all consumers demand certainty that services
they rely on will be available. The Alaska Telephone Association's
proposal would provide a fixed amount of support for 10 years to mobile
and rate-of-return carriers in Alaska, and require them to make
specific commitments to upgrade and maintain advanced mobile networks.
The proposal strikes the right balance for carriers and consumers
alike, and the FCC should adopt the proposal for the benefit of all
Alaska carriers and consumers.
______
Response to Written Question Submitted by Hon. Deb Fischer to
James G. Carr
Question. Mr. Carr, as you may know, in March the Senate passed a
bipartisan resolution that I introduced, along with Senators Ayotte,
Booker, and Schatz, which stressed the importance of developing a
national strategy to encourage the Internet of Things, and this is an
issue that we continue to follow closely. We hear frequently about how
mobile wireless will enable the growth of the Internet of Things, and I
believe that is true, but I also think it is important to keep an
expansive view of the technologies that will play a role in this
evolution. What do you see as the role of fixed wireless service in
growing the Internet of Things?
Answer. Fixed wireless already plays an extremely critical role in
the Internet of Things (``IoT''), and will play an even greater role in
growing the IoT in the future.
As a threshold matter, Americans who lack access to Internet
connectivity cannot benefit from the IoT and related advancements.
Thus, extending high-quality, high-data Internet service to rural
America is a precondition for extending the benefits of the IoT to
rural Americans. Fixed wireless is an extremely cost effective access
technology that can be rapidly deployed and should be an important
component of a national strategy to bridge the digital divide. This is
particularly the case in rural America, where market conditions
frequently will not support private investment in wired alternatives.
Thus, the first role of fixed wireless in growing the IoT will be
providing basic connectivity to communities that are presently unserved
or underserved. This is one of the many reasons why it is so critical
that the FCC adopt technology-neutral rules that prioritize cost
effectiveness for the Connect America Fund (``CAF'') Phase II reverse
auction. WISPA has recently submitted a proposal to the FCC outlining a
technology-neutral framework for the CAF Phase II reverse auction which
we believe would foster greater competition and a more efficient
allocation of limited public resources.\1\
---------------------------------------------------------------------------
\1\ This proposal is set forth in the Letter from Stephen E. Coran,
WISPA Counsel, to Marlene H. Dortch, FCC Secretary, WC Docket No. 10-90
(filed March 4, 2016), a copy of which is attached to this response.
---------------------------------------------------------------------------
Fixed wireless will also reduce the cost of IoT applications. This
is because the cost per unit of data transmitted over a fixed wireless
network typically is substantially lower than the cost per unit of data
transmitted over a mobile wireless network. For example, in Loudoun
County, Virginia, All Points Broadband's customers can transmit 100GB
of data over a fixed wireless network for $79 per month. On the mobile
wireless network of a national carrier, the monthly cost of this same
amount of data would be $710. While All Points Broadband's unlimited
data plans begin at $99 per month, data plans that are truly unlimited
are not available from national mobile carriers.
The impact of fixed wireless' relative cost efficiency will
continue to grow as end-user data demands continue to increase. For
example, America's largest fixed-wireless Internet service provider,
Rise Broadband, indicates that its average user presently transmits
94GB of data per month, and that data usage is rising by more than 40
percent each year.
A large proportion of the ``things'' that will be connected to the
IoT are stationary devices such as smart meters, irrigation controls,
and surveillance cameras. For example, many water and sanitation
authorities are already using fixed wireless networks to conduct water
and flow metering, and real-time video surveillance, telemetry and
alarming at remote locations. Fixed wireless enables a large proportion
of modern precision agriculture techniques, and fixed wireless networks
also support electric utilities' ``smart grid'' metering programs,
railroads' remote monitoring of at-grade crossings, and operators'
monitoring of tank levels and operating temperatures at remote oil
wells. Given the relative cost efficiency of fixed wireless networks,
fixed wireless will be the preferred access technology for many IoT
devices. The reduced cost access made available by fixed wireless
networks will spur innovation and benefit the entire IoT ecosystem.
Fixed wireless networks can also provide service where there is no
mobile coverage. In many areas of rural America, mobile wireless
networks are unavailable or unreliable. Using fixed wireless
technology, operators can efficiently expand coverage to specific
remote locations where connectivity is required to support IoT
applications.
______
Response to Written Question Submitted by Hon. Dan Sullivan to
James G. Carr
Question. In your testimony, you discuss the Remote Areas Fund,
which is intended for ``extremely high-cost areas''. Most, if not all,
of Alaska would fit this profile. Can you tell me what you would like
to see from the FCC regarding rules for the Remote Areas Fund?
Answer. WISPA will urge the FCC to adopt rules for the Remote Areas
Fund (``RAF'') that are technology neutral. That is, the rules should
set minimum requirements for the characteristics of the end-user
experience (i.e., speed, latency, data limits and time to complete
build-out), and require bidders to compete on cost--awarding support to
the bidder offering the most cost effective solution. Rules that
encourage bidders to use any combination of access technologies (such
as terrestrial fixed wireless, wired fiber-optic technologies, and
others) would maximize participation in the competitive process. This
competition would ensure that limited public resources are allocated as
efficiently as possible, and thus maximize the number of Americans who
can be connected with the limited funding that is available.
WISPA has recently submitted a proposal to the FCC outlining a
recommended, technology-neutral framework for the CAF Phase II Reverse
Auction (the ``WISPA CAF II Framework'').\2\ The concepts underlying
the WISPA CAF II Framework will form the basis of WISPA's approach to
the RAF rules.
---------------------------------------------------------------------------
\2\ This proposal is set forth in the Letter from Stephen E. Coran,
WISPA Counsel, to Marlene H. Dortch, FCC Secretary, WC Docket No. 10-90
(filed March 4, 2016), a copy of which is attached to this response.
---------------------------------------------------------------------------
It is also critical that the RAF rules not preclude bidders
proposing to use unlicensed spectrum to deploy wireless networks to
provide Internet connectivity. Unlicensed spectrum is a public resource
that is already available to connect rural Americans, and wireless
Internet service providers have been deploying over unlicensed spectrum
to successfully connect millions of rural Americans and businesses for
many years. The remote and sparsely populated areas where RAF funding
will be available are the same areas where unlicensed spectrum is most
available and least congested. RAF rules that preclude or disadvantage
wireless Internet access deployments over unlicensed spectrum will
increase the cost of connecting rural America in an amount that
dramatically exceeds the corresponding public benefit of this
additional cost. By increasing the per-connection cost of providing
connectivity, such rules would limit the number of Americans who can
benefit from the RAF.
WISPA is in ongoing discussions with other industry associations to
seek a consensus approach for allocation of the funding, if any,
remaining after the CAF competitive bidding process ends. In order to
achieve consensus, WISPA's position may evolve.
______
Response to Written Question Submitted by Hon. Cory Booker to
James G. Carr
Question. Mr. Carr, you state in your written testimony that access
to more licensed and unlicensed spectrum is critical to meeting the
growing demand for broadband service that we see across the country. I
agree that finding and freeing more spectrum is absolutely critical to
continued growth and innovation in the telecommunications industry, and
I have worked with Senator Rubio on legislation that would help us meet
this goal. How important is it that any new spectrum legislation from
Congress take a balanced approach in freeing up both licensed and
unlicensed spectrum to meet today's connectivity needs?
Answer. It is critically important that Congress take a balanced
approach to spectrum policy. In particular, Congress needs to find and
free more spectrum for use on an unlicensed basis.
When there is adequate unlicensed spectrum in multiple frequency
bands, wireless Internet service providers can rapidly and cost
effectively deploy last-mile networks. These networks provide
connectivity where none is available and create choice and competition
in areas where competition is limited. Deploying on unlicensed spectrum
enables operators to provide service and competition in areas where
additional networks using licensed spectrum are uneconomical, including
low-income urban areas and much of rural America.
The public benefit of allocating significant spectrum for
unlicensed use dramatically outweighs the potential one-time proceeds
that would be obtained through sale of spectrum to a licensee.
For example, a 2014 report found that technologies operating in
unlicensed bands in the United States generated a total annual economic
value of $222 billion and contributed $6.7 billion to the Nation's
GDP.\1\
---------------------------------------------------------------------------
\1\ Telecom Advisory Services, LLC, ``Assessment of the Economic
Value of Unlicensed Spectrum in the United States'', February 2014,
page 8.
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. Deb Fischer to
Michael Rapelyea
Question. Mr. Rapelyea, as you state in your testimony (page 9), it
is estimated that by 2020, there will be over 20 billion connected
devices worldwide. As you may know, in March the Senate passed a
bipartisan resolution that I introduced, along with Senators Ayotte,
Booker, and Schatz, which stressed the importance of developing a
national strategy to encourage the Internet of Things, and this is an
issue that we continue to follow closely. We hear frequently about how
mobile wireless will enable the growth of the Internet of Things, and I
believe that is true, but I also think it is important to keep an
expansive view of the technologies that will play a role in this
evolution. What do you see as the role of satellite in facilitating the
growth of the Internet of Things?
Answer. The Internet of Things (IoT) brings together advancements
in computing, networking and communications technologies. Among the
many things IoT promises are economic growth, increased productivity
and new market opportunities. Growth estimates for the 20 developed and
emerging economies that generate over 75 percent of the world's
economic output is $10.6T added to their cumulative GDP over the next
15 years. Increased productivity results from closer tracking of high
valued assets and improved visibility into supply chains that when
combined with data analytics provide greater operating efficiencies and
higher return on invested capital.
Engine telemetry transmitted from an aircraft, locomotive,
or oil rig predicts engine failure, isolates the part and
alerts service personnel to reduce engine downtime.
Power line sensor data transmitted to a control center
detects changes that signal a power demand by a community.
Truck or delivery vehicle sensor data and camera snapshots
ensure driver safety and proper vehicle operation. Data
security is a key component of the machine-to-machine (M2M)
communications inherent in IoT. Security requirements vary for
wired and wireless connections. A bank ATM machine uses a
dedicated wired connection to the bank network. An ATM in a
mobile vehicle in remote areas uses wireless connection. In
order to ensure transmissions cannot be intercepted, data link
encryption is employed.
Satellite delivers secure, wireless M2M communications. Satellites
provide coverage to serve areas that are not cost effective to build
out terrestrial wired (e.g., fiber) or wireless (e.g., WiFi or
cellular) networks. For in-flight aircraft and locomotives traveling in
remote areas satellite can be the only option since most terrestrial
systems elect to direct antennas toward the greatest number of existing
subscribers. When terrestrial service is available, satellite increases
reliability by providing a redundant communications link. This is
especially important when terrestrial systems become damaged or
inoperable due to a natural or man-made disaster.
ViaSat Mobile Satellite Services (MSS) leverages Internet Protocol
(IP)-based satellite technologies developed for the U.S. DOD's Blue
Force Tracking network to improve battlespace communications to reduce
casualties due to friendly fire. MSS features and benefits include:
Data link encryption superior to wireless networks
Real-time position tracking
Low user service cost
Rapid deployment
Open standards-based IP applies to multiple market verticals
In service since 2013, the DOD network has an installed base of
over 70,000 users. ViaSat launched MSS as a separate, commercial
variant of the DOD network. This response to the satellite technology
for communications mirrors the potential growth of IoT.
______
Response to Written Question Submitted by Hon. Deb Fischer to
LeRoy T. Carlson, Jr.
Question. Mr. Carlson, in your written testimony, you mention that
states, including Nebraska, have their own state universal service
funds. You propose that those states could participate in a pilot
program to see how to leverage state funding, along with the Federal
universal service program and private investment, to support mobile
broadband. The state of Nebraska is doing great work with their
universal service program, to make sure that all Nebraskans have access
to vital communications services. Can you provide more detail on how
you see a pilot program being carried out, and what the role of states
like Nebraska would be?
Answer. Senator Fischer, thank you for the question and the
opportunity to talk a little more about an idea we recently presented
to the FCC for consideration. In our view, and the view of many
participants that we have spoken to, the FCC's Mobility Phase I reverse
auction process has failed to deliver mobile broadband as widely as
everyone had hoped. Moreover, the Federal universal service fund, which
is now committed to annually providing approximately $2 billion to
small landline carriers, $2 billion to large landline carriers, $2
billion for schools and libraries, $1.5 billion for Lifeline, and $275
million for rural health care, is a finite resource. The FCC originally
committed only $500 million for its Mobility Fund Phase II, and has
subsequently proposed reducing that amount, despite overwhelming
evidence that citizens living in rural America want and need high-
quality modern mobile voice and broadband services. With these
limitations, creating a mobility fund of $1 billion annually, which we
believe to be the absolute minimum needed to ``move the needle'' in
rural America, requires some creativity.
Our idea flows from the Congressional declaration in the 1996 Act
that universal service is a responsibility to be shared between the
Federal and state governments. That shared responsibility has taken the
form of Federal universal service funds being generated from interstate
telecommunications service revenues, while state universal service
funds have been generated from intrastate telecommunications service
revenues. Over the years, the Federal Government has assumed an
increasing share of the overall funding, as well as assuming greater
control of the program. In the mobility arena, we believe that states
are better positioned to know where mobile coverage and broadband
availability is lacking, and to monitor investments to ensure that
rural citizens get the benefits that program funds were intended to
deliver.
Furthermore, we believe that state contributions through matching
funds will increase program leverage. And, having states administer and
monitor fund usage will increase accountability and the likelihood of
success, as state commissioners are closer to the ground, they
understand better where investments are needed, and they are more
directly accountable to constituents. In addition, a grant program will
force carriers to submit applications that are targeted to the right
areas and make the most efficient use of program dollars, otherwise
they will not qualify for a grant.
Under a pilot, the FCC would select one or more states willing to
participate in a one-year trial of a program that would provide grants
to carriers willing to construct mobile broadband infrastructure in
unserved and underserved areas. As described in more detail below, key
principles of such a program would include a state's agreement to
contribute matching funds to those provided by the Federal Government,
adoption of a simple Federal grant program rule, and a state's
willingness to decide where funds should be invested and monitor
program participants so that funds are invested as proposed.
For purposes of a pilot, the FCC would allocate an amount of
Federal universal service support to participating states. To obtain
valid and fulsome data, we would recommend a total Federal commitment
of $25-50 million, divided among as many as five states willing to
participate. Funds would be allocated based on any number of available
metrics, such as unserved/underserved road miles or census blocks.
States would be required to provide matching funds of up to 50
percent of Federal funding. So for example, if the FCC allocates $1.00
and a state contributes $0.50, the FCC will increase the Federal
funding amount to $1.50, making $2.00 available for the state mobility
fund. This mechanism will provide program leverage to accelerate
investment and promote the sharing of universal service burdens.
There would be a simple rule to be implemented, which limits the
``unfunded mandate'' problem. State investment in the process would be
limited to selecting participants, administering the program, and
oversight, not developing new program rules.
Eligible carriers would submit applications for funding that meet
the rule requirements, explaining to the state PUC where new services
are needed. We believe carriers are best positioned to know where their
networks require investments that would not otherwise be made, and PUC
commissioners are in a better position than the FCC to know where
services in their respective states are lacking. Carriers would be
encouraged to submit statements from local communities as to the need
for mobile broadband services, which are easily verified by state
commissions.
The application for funding must be self-scoring, to simplify
review.
PUCs would review applications, verify compliance, and ensure that
services are provided as promised.
Funds must be used for capital expenditures to build or upgrade
facilities, or to fund ongoing operations in remote areas.
Carriers must deliver mobile broadband service consistent with
then-existing FCC requirements (e.g., throughput and coverage).
In a pilot setting, states would do one year of funding, with both
the state and participating carriers required to submit a report to the
FCC at year-end, describing what worked, and what did not work, so the
program could be refined when it is rolled out on a larger scale.
We have drafted a proposed rule that could be refined for use with
a pilot program, and a summary providing a brief overview, both of
which are attached for your reference.
We must mention the substantial work done by Nebraska, which has
informed our thinking. Our entire proposal was based in large part on
the successful Nebraska state broadband fund, which we participate in
each year. We believe a large part of Nebraska's success flows from the
fact that the commissioners are engaged and share a common belief that
a high-quality mobile broadband infrastructure are critical to the
state's long-term success at providing public safety, education, health
care, and economic opportunity. U.S. Cellular is one of several mobile
carrier participants that has constructed substantial infrastructure in
the state that would not have been built otherwise, to our company's
benefit, but more important to the benefit of rural Nebraskans.
With respect to your last question, the role of Nebraska in a
federal-state broadband grant program, we offer this thought. If the
FCC were to adopt a federal-state grant program along the lines of what
we have proposed, we would advocate giving Nebraska the option to
continue on with its current and fully formed grant program, but
expanded with the addition of new Federal funding. Alternatively,
Nebraska could opt to use the Federal rule for future grants to
eligible carriers.
In closing, we are committed to each community we serve, and fully
understand that the robust infrastructure we have in the U.S.,
including electricity, water, gas, and telephony, could only be built
in remote areas with the assistance of public funding. We believe that
a grant program, which requires carriers to identify areas of need, for
local communities to support it, for state public utility commissions
to oversee and manage it, and for the Federal Government to provide
funding and an efficient program for awarding funds and overseeing
their use, is the best way to accelerate broadband infrastructure
investment in rural areas.
Accordingly, we believe that a pilot program along the lines
described above, would be the best way to learn how best to build a
successful mobility fund. We would be happy to come in to discuss this
with you further, or assist in any way in efforts you may undertake to
convince the FCC to adopt such a pilot program.
______
Response to Written Question Submitted by Hon. Dan Sullivan to
LeRoy T. Carlson, Jr.
Question. In your testimony, you discuss how the current mobility
fund lacks the size and focus to ensure rural communities have timely
access. One idea you propose is a grant program combining state and
Federal support funds. Can you elaborate on this further? Are there any
programs in existence that resemble your proposal?
Answer. Senator Sullivan, thank you for the opportunity to talk
about a federal-state broadband grant program, which we believe holds
great promise for improving mobile broadband service in America's rural
areas. While we would like to see the FCC embrace this idea
immediately, we have also suggested a brief pilot project that would
validate the concept and permit participants and regulators to figure
out what works, and what does not, to improve it before implementing it
throughout the Nation.
Let me respond to your last question first. Several states have
mobile broadband universal service funds, including Nebraska, Colorado,
and now New Mexico (although the latter is the subject of a court
challenge to the state statute). Perhaps Nebraska's grant program has
had the most success, as it has been in place for a number of years and
has had multiple carriers, including our company, apply for and draw
funds and construct mobile broadband infrastructure in remote parts of
the state.
As you probably know, it is our view and the view of many
participants that we have spoken to, that the FCC's Mobility Phase I
reverse auction process has failed to deliver mobile broadband as
widely as everyone had hoped. Moreover, the Federal universal service
fund, which is now committed to annually providing approximately $2
billion to small landline carriers, $2 billion to large landline
carriers, $2 billion for schools and libraries, $1.5 billion for
Lifeline, and $275 million for rural health care, is a finite resource.
The FCC originally committed only $500 million for its Mobility Fund
Phase II, and has subsequently proposed reducing that amount, despite
overwhelming evidence that citizens living in rural America want and
need high-quality modern mobile voice and broadband services.
With these limitations, creating a mobility fund of $1 billion
annually, which we believe to be the absolute minimum needed to ``move
the needle'' in rural America, requires some creativity. To date, we
have advocated to the FCC that it would be a mistake to create a fund
of any size without first developing an estimate of how big the task
is. For example, if the job of providing high-quality coverage and
mobile broadband to rural America will cost $20 billion in universal
service funding, then one can look to available resources to determine
how much can be devoted each year, and how long it will take to
complete the task.
At this point, nobody knows with any real accuracy where specific
areas of the Nation lack high-quality coverage and 4G LTE service, how
much it might cost to provide it, and what is a reasonable time frame
to complete the task. Nor is any planning underway to support 5G
development in rural areas. Until the FCC undertakes these fundamental
steps, the size of its Mobility Fund cannot be said to be properly tied
to measurable goals or a budget for completing the task.
What we do know is that in Mobility Fund Phase I, where the FCC
allocated $300 million, the areas amount of geography that saw new
coverage was very small, and the reverse auction methodology has proven
to be so challenging that nearly one-third of the funding has been
forfeited back to the FCC by carriers. We participated in that process
and, even for a relatively large rural carrier, have found it to be
daunting, despite our relative level of success in building out.
What we can safely conclude is that since it takes over $4 billion
per year to maintain and upgrade our Nation's existing rural wireline
networks, providing about 12 percent of that amount to rural wireless
networks, where new coverage must often be established, is not enough.
And that is why we are working on creative ideas to leverage Federal
program dollars to expand the amount that can be invested in America's
rural areas.
Our idea flows from the Congressional declaration in the 1996 Act
that universal service is a responsibility to be shared between Federal
and state governments. That shared responsibility has taken the form of
Federal universal service funds being generated from interstate
telecommunications service revenues, while state universal service
funds have been generated from intrastate telecommunications service
revenues. Over the years, the Federal Government has assumed an
increasing share of the overall funding, as well as increasing control
of the program. In the mobility arena, we believe that states are
better positioned to know where mobile coverage and broadband
availability is lacking, and to monitor investments to ensure that
rural citizens get the benefits that program funds were intended to
deliver.
Accordingly, we believe that states contributing matching funds
will increase program leverage. Having states administer and monitor
fund usage will increase accountability and the likelihood of success,
as state commissioners are closer to the ground, they understand better
where investments are needed, and they are more directly accountable to
constituents. In addition, a grant program will force carriers to
submit applications that are targeted to the right areas and are the
most efficient use of program dollars, otherwise they will not qualify
for a grant.
The FCC could conduct a pilot, to allow several states to
participate for one year and file a report that would inform the FCC
and states on what a nationwide program would look like. Our proposal,
as described in more detail below, would include a state's agreement to
contribute matching funds to those provided by the Federal Government,
adoption of a simple Federal grant program rule, and a state's
willingness to decide where funds should be invested and monitor
program participants so that funds are invested as proposed. Federal
funds would be allocated among the states based on any number of
available metrics, such as unserved/underserved road miles or census
blocks. It is possible that a separate fund would be created to address
Alaska's unique needs, but that is beyond the scope of our initial
thinking.
States would be required to provide matching funds of up to 50
percent of Federal funding. So for example, if the FCC allocates $1.00
and a state contributes $0.50, the FCC will increase the Federal
funding amount to $1.50, making $2.00 available for the state mobility
fund. This mechanism will provide program leverage to accelerate
investment and promote the sharing of universal service burdens.
There would be a simple rule to be implemented, which limits the
``unfunded mandate'' problem. State investment in the process would be
limited to selecting participants, administering the program, and
oversight, not developing new program rules or engaging in litigation
that often follows.
Eligible carriers would submit applications for funding that meet
the rule requirements, explaining to the state PUC where new services
are needed. We believe carriers are best positioned to know where their
networks require investments that would not otherwise be made, and PUC
commissioners are in a better position than the FCC to know where
services in their respective states are lacking. Carriers would be
encouraged to submit statements from local communities as to the need
for mobile broadband services, which are easily verified by state
commissions.
The application for funding must be self-scoring, to simplify
review.
PUCs would review applications, verify compliance, and ensure that
services are provided as promised.
Funds must be used for capital expenditures to build or upgrade
facilities, or to fund ongoing operations in remote areas.
Carriers must deliver mobile broadband service consistent with
then-existing FCC requirements (e.g., throughput and coverage).
In a pilot setting, states would provide one year of funding, with
both the state and participating carriers required to submit a report
to the FCC at year-end, describing what worked, and what did not work,
so the program could be refined when it is rolled out on a larger
scale.
We have drafted a proposed rule that could be refined for use with
a pilot program, and a summary providing a brief overview, both of
which are attached for your reference.
Our proposal is based on the work of state commissions that have
created mobile broadband funds, in large part on the successful
Nebraska program, which we participate in each year. We believe a large
part of Nebraska's success flows from the fact that the commissioners
are engaged and share a common belief that a high-quality mobile
broadband infrastructure are critical to the state's long-term success
at providing public safety, education, health care, and economic
opportunity. We are one of several mobile carrier participants that
have constructed substantial infrastructure in the state that would not
have been built otherwise, to our company's benefit, but more important
to the benefit of rural Nebraskans. We think such a model can work
throughout the Nation.
In closing, we are committed to each community we serve, and fully
understand that the robust infrastructure we have in the U.S.,
including electricity, water, gas, and telephony, could only be built
in remote areas with the assistance of public funding. We believe that
a grant program, which requires carriers to identify areas of need, for
local communities to support it, for state public utility commissions
to oversee and manage it, and for the Federal Government to provide
funding and an efficient program for awarding funds and overseeing
their use, is the best way to accelerate broadband infrastructure
investment in rural areas.
Accordingly, we believe that a program along the lines described
above, would be the best way to build a successful mobility fund. We
would be happy to come in to discuss this with you further, or assist
in any way in efforts you may undertake to convince the FCC to adopt
such a pilot program.
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