[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
FIELD HEARING IN NEW YORK: EXPANDING BROADBAND ACCESS AND CAPABILITIES
TO SMALL BUSINESSES IN RURAL NEW YORK
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH AND TECHNOLOGY
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MARCH 20, 2014
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 113-061
Available via the GPO Website: www.fdsys.gov
______
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMEYER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Chris Collins............................................... 1
WITNESSES
Mr. Mark Meyerhofer, Director, Government Relations, Northeast-
Western New York, Time Warner, Lancaster, NY................... 3
Ms. Jill Canfield, Director, Legal & Industry and Assistant
General Counsel, NTCA, The Rural Broadband Association,
Arlington, VA.................................................. 5
Mr. Robert Smith, General Manager, Frontier Communications,
Dansville, NY.................................................. 7
Ms. Kendra Lamb, Owner, Lamb Farms Inc., Oakfield, NY, testifying
on behalf of the New York Farm Bureau.......................... 9
APPENDIX
Prepared Statements:
Mr. Mark Meyerhofer, Director, Government Relations,
Northeast-Western New York, Time Warner, Lancaster, NY..... 19
Ms. Jill Canfield, Director, Legal & Industry and Assistant
General Counsel, NTCA, The Rural Broadband Association,
Arlington, VA.............................................. 23
Mr. Robert Smith, General Manager, Frontier Communications,
Dansville, NY.............................................. 32
Ms. Kendra Lamb, Owner, Lamb Farms Inc., Oakfield, NY,
testifying on behalf of the New York Farm Bureau........... 34
Questions for the Record:
Questions and Responses from Hon. Chris Collins to Hon. Tom
Wheeler, Chairman, Federal Communications Commission....... 38
Additional Material for the Record:
None.
EXPANDING BROADBAND ACCESS AND
CAPABILITIES TO SMALL BUSINESSES IN RURAL NEW YORK
----------
THURSDAY, MARCH 20, 2014
House of Representatives,
Committee on Small Business,
Subcommittee on Health and Technology,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., at
Orleans County Legislature, 3 South Main Street, Albion, New
York, Hon. Chris Collins [chairman of the Subcommittee]
presiding.
Present: Representative Collins.
Chairman Collins. The hearing is called to order.
Good morning. First of all, I want to thank David Callard,
the chairman of the legislature here, and all the legislators
from Orleans County, for hosting us on this first day of
spring, or it will be in 2 hours and 57 minutes, according to
the exact position of the sun and the moon.
But really, we are all appreciative of Albion hosting us
for what we think will be a very appropriate topic as we are up
here in a rural area.
You hear the numbers, 97 percent coverage, and you go,
well, that sounds great, until you understand that 3 percent of
700,000 people is 21,000. So the 27th Congressional District is
105 towns. The average town just a little over 6,000 people. It
is rural America. It is agriculture that is our primary
economic driver. And 3 percent of 700,000 people is 21,000.
You don't want to be one of those 21,000 that doesn't have
access to broadband.
So while a statistic like that may sound encouraging, in
the 27th District, it is not as much so as you might otherwise
think. So that is something to keep in perspective.
But again, I want to thank everyone who has joined us
today. We have a full house. That is great. And again, I want
to thank our four witnesses for taking time out of their busy
day to schedule their testimony, which is focused on expanding
broadband access to small business, which is the definition of
all of our farms in rural areas of Western New York.
Access to broadband service has the potential to transform
the way small businesses and organizations fundamentally
operate. Small firms can sell their products to buyers around
the world. Family farmers can utilize precision mapping
equipment to increase their productivity. And entrepreneurs can
launch a Web site or application from their living room.
As a small-business owner, I fully understand the benefits
and the necessity of having access to affordable broadband to
run a successful business. Most importantly, broadband provides
a gateway and opportunity for economic growth and job creation,
especially in rural areas.
Last month, the House Committee on Small Business held a
hearing regarding the innovation and growth around wireless
technology. Thousands of entrepreneurs are developing dynamic
products and services that utilize broadband to improve the way
we live.
According to a McKinsey study, over 1 trillion devices can
be connected through wireless technology by 2025, resulting in
a potential economic impact of $36 trillion.
This means thousands of new jobs created by small,
innovative firms, in a variety of industries, as well as new
tools for small businesses to improve their operations.
While it is easy to understand the limitless benefits of
broadband Internet, those capabilities would not be available
if not for the contributions of providers like those
represented here today.
To keep up with the growing demand, private sector
enterprises have invested billions of dollars to upgrade their
networks to provide faster and more reliable services. It is
because of these investments that we can enjoy broadband at the
workplace or on a wireless device.
Currently, there are a variety of Federal initiatives aimed
at providing broadband to everyone in the United States, 100
percent, not 97 percent. When considering these policies, we
must first ensure that the regulatory changes do not diminish
the incentive for private sector investment in broadband
infrastructure. This is especially important for small Internet
providers who don't have the resources or the time to comply
with the onerous regulations.
Without private sector investment in broadband
infrastructure, many small businesses in rural areas, like
those here in Western New York, will be disconnected from one
of the most powerful tools of our generation. And that would
hamper the success of these small businesses and put them at a
significant disadvantage in our increasingly connected economy.
We have a distinguished panel of witnesses here today, and
I do look forward to hearing your thoughts on the importance of
broadband and how best to provide broadband to small businesses
across New York and the United States.
Now, we have a clock here, a timer, and when we are in
Washington, we have the green light, and the testimony, we
generally try to keep to 5 minutes. And then when the time is
running down, the yellow light turns on. And then at 5 minutes,
the red light. Today, we will have the lights on, but we are
not going to be banging the gavel, if you run over. That is the
luxury of having a field hearing like this. Afterwards, we have
questions from the members. Since I am the only one, we will
let you carry on.
I think, too, it is be probably important for those here,
when we say broadband, what does that mean? It really refers to
the upload and download speed of what you can do on the
Internet. In a broad definition, it is 4 MB on the download and
1 MB of upload, so that you can get things off the Internet at
4 MB per second versus loading back up into it at 1 MB. So that
is the broad definition of broadband. Because there are cases
where people are connected to the Internet, God forbid, I hope
it is not through dial-up, but they may be able to connect but
they are not really able to send data back and forth. So it is
the 4 and the 1, the 4 coming down and the 1 going back up,
that is the general thing we are talking about here today.
So our first witness is Mark Meyerhofer. He is the director
of government relations of Northeast-Western New York for Time
Warner Cable. Time Warner Cable provides a variety of Internet
options for small businesses, including speeds ranging from 2
MB per second up to 100 MB per second. I want to thank you, Mr.
Meyerhofer, for being here. We look forward to your testimony.
STATEMENTS OF MARK MEYERHOFER, DIRECTOR, GOVERNMENT RELATIONS
OF NORTHEAST-WESTERN NEW YORK, TIME WARNER, LANCASTER, NEW
YORK; JILL CANFIELD, DIRECTOR, LEGAL & INDUSTRY AND ASSISTANT
GENERAL COUNSEL, NTCA, THE RURAL BROADBAND ASSOCIATION,
ARLINGTON, VIRGINIA; ROBERT SMITH, GENERAL MANAGER, FRONTIER
COMMUNICATIONS, NEW YORK, DANSVILLE, NEW YORK; AND KENDRA LAMB,
OWNER, LAMB FARMS INC., OAKFIELD, NEW YORK
STATEMENT OF MARK MEYERHOFER
Mr. Meyerhofer. Thank you. Good morning, my name is Mark
Meyerhofer. I am the government relations director in the
Northeast-Western New York region for Time Warner Cable. Thank
you for inviting me to testify today regarding rural broadband.
Time Warner Cable is among the largest providers of video,
high-speed data, and voice services in the United States,
connecting more than 15 million customers to entertainment,
information, and each other in 29 States, employing over 50,000
people across the U.S.
Based on year-end 2013 data, Time Warner Cable has
approximately 11 million residential high-speed data
subscribers and 517,000 business high-speed data services
subscribers. Time Warner Cable is the leading broadband
provider in New York State, offering reliable, affordable,
high-speed broadband to over 2.3 million customers.
We have invested $25 billion to $30 billion of private at-
risk capital since 1996 to deploy broadband across our
footprint, and $2 billion in New York State, in the last 4
years alone. In the 27th Congressional District in 2012 and
2013, we built over 335 miles of new lines, passing over 1,000
businesses and nearly 3,000 homes.
This investment of private at-risk capital has resulted in
our company passing approximately 96 percent of homes and
businesses in our New York State footprint. Access to broadband
for New Yorkers is higher than the national average, with 95
percent generally having access.
These investments were made, and this success achieved, in
a regulatory environment that encourages innovation and
investment. However, it remains extremely challenging to extend
broadband to the most rural areas of the State where geographic
isolation and topographic issues make it economically
infeasible for companies to reach these areas. Investment
simply cannot be recouped before it is time to reinvest.
Time Warner Cable believes government has a role to play in
helping to meet broadband needs in these unserved areas and
that properly structured programs or partnerships can help
achieve rural broadband deployment goals if guided by core
principles.
First, such programs and partnerships must be focused on
unserved areas so taxpayer dollars are not wasted duplicating
existing privately funded networks. When taxpayer funds are
used to overbuild an existing provider, the result is unfair
competition for a limited number of customers.
Government should not pick winners and losers in this
competitive environment, but instead focus limited taxpayer
funds on unserved areas that need it the most.
Second, government programs need to focus on last-mile
services, which is the most difficult and costly part of
deployment.
Third, programs should be technology and provider neutral
so all providers and technologies are eligible to participate.
Fourth, the cost of these programs should be broadly
shared, rather than paid for by a tax or fee on a specific set
of consumers or taxpayers. If rural broadband deployment is the
public policy goal, the cost should be borne as broadly as
possible, and the deployment costs to the individual consumer
should be as low as possible.
Finally, to encourage the broadest possible private
participation in any government-sponsored program, any funding
or incentives should come with no strings attached, so
companies can own and operate the new networks and integrate
them fully into their existing infrastructure and business
plans.
New York State's Connect NY program created by Governor
Cuomo is a good example of an effective and well-structured
public-private partnership program. Time Warner Cable received
the largest Connect NY grant and is now investing $7.1 million
in partnership with New York State to provide rural broadband
for 52 projects in 22 counties and more than 40 towns across
the State. Our Connect NY project will connect more than 4,100
previously unserved homes, businesses, and community
institutions to high-speed broadband.
While the government's role in spurring broadband
deployment and unserved areas remains limited, we believe there
is a broader role for government in broadband adoption. Roughly
one-third of Americans and 30 percent of New Yorkers with
access to a broadband connection choose not to get connected at
home.
Further, adoption is not consistent across groups, where
senior citizens, people with lower incomes, and lower economic
status adopt at much lower rates. Aging populations, lower
socioeconomic status, and lower educational attainment can
often characterize New York's rural areas.
The principal reason cited for not adopting broadband are
digital literacy and relevance. We should all work together to
encourage adoption, and Time Warner Cable has participated in
numerous adoption programs, which I am happy to collaborate on
during Q&A.
A small investment in educating consumers about why
broadband is relevant to them can be highly effective in
increasing adoption rates, especially in low adopting areas.
Thank you for the opportunity to testify today. I am happy
to answer any questions you might have.
Chairman Collins. Thank you. Right to the second. That is
pretty good.
Our next witness is Jill Canfield. She is the assistant
General Counsel for NTCA, which is the Rural Broadband
Association, so she is representing a variety of different
interests here. The Rural Broadband Association represents 900
independent telecommunications companies in rural and small
towns throughout the United States. They provide support for
both wired line and wireless carriers.
Jill is a native of Derby, New York. She earned her B.A.
and J.D. from Syracuse University and is a member of the
Federal Communications and American Bar Association.
Are you watching the March madness now?
Ms. Canfield. I have my brackets.
Chairman Collins. Welcome back to New York, and we look
forward to your testimony.
STATEMENT OF JILL CANFIELD
Ms. Canfield. Thank you. Thank you for the invitation to
participate in today's discussion on expanding broadband access
and capabilities to small businesses in rural New York. My
remarks today are on behalf of NTCA, the Rural Broadband
Association, and the Small Company Coalition.
Small rate of return rural telecom providers, commonly
called RLECs, serve only about 5 percent of the U.S. population
but roughly 40 percent of its land mass. These companies deploy
and upgrade cutting-edge networks in rural and tribal areas,
where no other carrier could find a business case.
As anchors in the communities they serve, rural providers
use their networks to connect rural Americans to the health
care, educational, economic, and public safety benefits of the
broadband economy.
Moreover, these small businesses are at the forefront of
the broadband and Internet protocol, or IP, evolution,
deploying advanced networks that respond to consumer and
business demands for cutting-edge services. Fixed to mobile
broadband, voice, and video are among the numerous telecom
services that rural New Yorkers can access thanks to the rural
telecom industry's commitment.
Nearly all small rural carriers in New York have deployed
broadband to 99 percent or more of the rural service areas and
have a brilliant track record of collaborating to build fiber
networks that benefit wide swaths of rural New York. The
Adirondack-Champlain Telemedicine Information Network, or
ACTION, now delivers up to 1 Gb connections to 49 hospitals and
health care facilities from Massena to Plattsburgh, from Glens
Falls to Hoosick Falls. Subsidiaries of RLECs like Champlain
Telephone Company, Nicholville Telephone Company, and Chazy
Westport Communications. Each provide service to the individual
locations.
The Independent Optical Network, or ION, was founded on
vision of 15 small rural telecom providers. This Albany-based
statewide fiber network connects more than 100 Upstate New York
communities and their surrounding rural areas.
Through a recently completed $50 million project that
included a significant Federal investment supplemented with
State investments, ION can serve more than 300 anchor
institutions and make broadband more readily available to
250,000 households and 38,000 businesses.
Projects are underway in Allegheny, Cortland, and Otsego
Counties to leverage the ION fiber backbone.
Broadband facilitates greater interconnection of the
community's resources and can enable citizens' participation in
the global economy, all key to rural population growth. IP,
wireless, and other technological advances are changing the
marketplace in ways unimagined even a few years ago. But
technology alone will not overcome the high cost of deploying
the networks that enable these technologies.
Though small, rural providers are leaders in broadband
investment, law and policy changes are necessary. Reforms must
be guided by the Communications Act's core principles of
consumer protection, competition, universal service, and public
safety.
Unfortunately, the FCC's 2011 USF reforms appeared to have
missed the mark in serving these principles. And as a result,
millions of investment dollars were sidelined while Congress
pressed the agency to update the USF program the right way and
get rid of opaque, unpredictable USF caps.
Small rural carriers still await a program designed to
promote broadband investment while the legacy fund they
currently use forces customers to take regulated voice service
just to make broadband affordable. All the while, USF is funded
by assessing a shrinking pool of long-distance voice revenue.
This de facto cap on the USF will handicap our Nation's ability
to stay seamlessly interconnected.
Sound reforms will also ensure that USDA's Rural Utilities
Service has sufficient certainty to continue financing rural
telecom projects.
The wireless industry also anxiously awaits an opportunity
to bid on the 600 MHz spectrum, but the spectrum must be
auctioned in a manner that provides a realistic opportunity for
small wireless providers who have the incentive and interest in
serving rural areas.
To that end, NTCA, the Rural Wireless Association, and the
Competitive Carriers Association just announced a consensus
proposal for the use of small geographic licensing areas.
Strict adherence to the spirit of the Regulatory
Flexibility Act is important. It would have produced better USF
reforms and freed more resources for broadband investment.
Numerous, costly, and sometimes redundant reporting
requirements also divert resources away from the network
operation and customer service.
Thankfully, the Regulatory Flexibility Improvement Act of
2013 would help by involving SBA throughout the rulemaking
process.
The Federal Government has played a key role in promoting
delivery of advanced telecom services to all Americans, but
more work is needed to deliver broadband to the unserved and
ensure that networks already built remain in place and are
upgraded to keep pace with the IP evolution.
The House Small Business Committee's commitment to bringing
about an environment conducive to broadband investment and
small-business growth is always appreciated.
It is an honor to join you back home in Western New York,
and I look forward to the discussion and your questions.
Chairman Collins. Thank you very much.
Our next witness is Robert Smith. Robert is general manager
for Frontier Communications located up in Dansville, New York.
Frontier Communication provides both voice and Internet service
for small businesses. They also provide cloud and cybersecurity
options to help small firms protect their network operations.
Thank you for being here. We look forward to your
testimony.
STATEMENT OF ROBERT SMITH
Mr. Smith. Thank you, Mr. Chairman. I appreciate you
inviting Frontier to be here at this important meeting.
My name is Bob Smith, and I am general manager for Frontier
Communications. I oversee Frontiers' service area in Western
New York State. I am honored to be here representing Frontier.
Frontier is the largest communications service provider
focused on rural America, providing broadband voice and video
services to more than 3 million residential and business
customers across 27 States.
The communications business has changed dramatically since
Frontier began as a local exchange carrier, a provider of POTS,
plain old telephone service, in 1935. But our commitment to
providing customers with reliable and affordable products and
services remains constant.
Over the past decade, Frontier has transformed from a 20th-
century phone company to a 21st-century broadband company. We
have made it our mission to deliver the life-changing benefits
of broadband technology to rural communities across our
footprint.
Broadband is a key driver for economic growth in America in
the 21st century. Broadband availability in rural America
offers more than simple entertainment and communications. It
translates into increased economic development, employment and
educational opportunities, and improved health care.
In July 2010, we completed a transformative transaction
acquiring millions of rural and suburban communication lines
from Verizon. As part of this acquisition, we committed to
providing high-speed broadband access to hundreds of thousands
of homes previously unserved.
The wire-line broadband services that we provide ensure
that our customers and your constituents have unlimited
opportunities for the future.
Frontier is relentlessly deploying and upgrading broadband
to the communities that we serve, from midsize cities such as
Rochester, small towns like Dansville, my favorite, and to
rural areas others consider too difficult to serve, like the
hamlet of Wyoming, New York.
Since 2010, we have invested more than $2.2 billion in
company funds to increase broadband access to improve
infrastructure and also an additional $133 million from the
FCC's Connect America Fund that supports broadband deployment
exclusively to unserved high-cost areas.
We have significant operations in New York State, having
acquired the former Rochester Telephone Company in 1995. We now
have 2,300 employees serving more than 275,000 customers of New
York in major cities of Rochester, Gloversville, Johnston, and
Middletown.
In New York State alone, we have invested more than $200
million in network enhancements and capital investments for
operations over the past 2 years. We have been able to accept
just recently $9 million in the Connect America Fund Phase 1
process to provide broadband to more than 15,700 previously
unserved locations in New York State.
It is interesting to note that our costs to deploy that $9
million worth of grant will exceed the $9 million, so we
continue to make that private investment.
Efforts to deploy throughout New York State do not stop
here. We recently worked with local governments and New York
State economic development councils to ensure that areas most
in need of broadband are getting access. We recently assisted
Hamilton County in receiving a $2.2 million New York State
broadband grant to upgrade the data transfer backbone in
Eastern New York from Gloversville to Eagle Bay. Upon
completion, all of Hamilton County, which is in the
Adirondacks, with very challenging geography and sparsely
populated, will have access to broadband speeds of up to 10 MB.
Most recently, we worked with Wyoming County and New York
State Senator Patrick Gallivan on broadband capacity for that
county and also assisted in confirming their agricultural
center will have the broadband capacity required to serve their
needs.
Access to broadband in our rural counties provide farmers
and spinoff agribusiness with access to world markets,
expanding their products and services for markets from local to
global. We are proud to be a provider of services to these
rural communities and working with Senator Gallivan on this
initiative.
We continue to seek out ways to work collaboratively with
State and local governments and organizations to provide
businesses and residents with the broadband services they need.
Like you, we know that high-speed broadband connectivity is
life-changing and absolutely critical to our country's economic
recovery and prosperity.
Communities with access to the Internet are ripe for
economic development and job creation. We are modernizing
facilities and services, because we believe that our time and
treasure, the old cable lines as well, is best used by
extending robust broadband and networks to these communities.
That means giving communities access to high-speed Internet
services.
Broadband technology offers rural America untold economic,
educational, and social opportunities, and we consider it our
job to deliver that access.
Thank you very much for inviting Frontier to this hearing,
and as always, we look forward to answering any questions.
Chairman Collins. Good, thank you very much.
Our final witness today, before the Q&A, is Kendra Lamb.
She is public relations manager of Lamb Farms in Oakfield, New
York.
Lamb Farms is a family dairy operation with three milking
facilities. They rely extensively on broadband Internet to
operate their businesses, including the monitoring of milk
output, managing their equipment, and various social media
activities.
Ms. Lamb is testifying on behalf of the New York Farm
Bureau.
Thank you for being here. We look forward to your
testimony.
STATEMENT OF KENDRA LAMB
Ms. Lamb. Thank you to the Committee on Small Business and
to Subcommittee Chairman Chris Collins for inviting me to
testify before you today on broadband access and its impact on
small businesses here in rural New York.
My name is Kendra Lamb, and my husband and his family own
Lamb Farms, a dairy based in Oakfield with three milking
facilities and a methane digester. We are a third-generation
farm family with a passion for producing quality milk while
providing excellent care to our cows and the land.
I am also speaking on behalf of the New York Farm Bureau,
the largest general farm organization in the State, with 25,000
members representing all commodities, all production methods,
and living in all corners of the State.
It might be hard for some people to imagine, but New York
State has some very rural locations, and we have large gaps
where broadband access is just not available, including here in
Western New York.
In today's age, with access to the Internet, a small
business can operate from anywhere, but it is hard to imagine a
small business surviving and thriving in a rural area if it
cannot be competitive in a world marketplace. The lack of
reliable broadband access is a major barrier to growth in our
rural areas, and we need the Federal Government to help solve
this problem.
According to a 2013 survey conducted by the USDA, 31
percent of farms in New York, or more than 11,000 operations,
do not currently have Internet access. A 2010 study conducted
by the Small Business Administration found that rural
businesses pay significantly higher prices than metro
businesses for the same bandwidth, and small businesses in
metro regions have access to higher bandwidth services than
rural businesses do at higher costs.
These kinds of inequities cannot continue if rural
businesses are expected to compete with their counterparts in
more developed areas.
We are lucky that our main farm location has a broadband
connection through our cable provider, and my home has DSL
through our telephone service provider. Without access to this
kind of reliable Internet service, our farm wouldn't be able to
do many of the key things we do to educate and reach out to the
community.
We have found that, working in animal agriculture, it is
becoming increasingly important to be able to educate the
community on what we are doing on the farm and to answer their
questions in an honest and direct manner.
I am responsible for many of the public relations and
outreach efforts of our farm. We have a Facebook page that I
use to reach the community and educate consumers on our food
supply.
Without high-speed Internet, I wouldn't be able to update
this page with the large picture and video files that help us
tell our story. We also have a farm Web site that we update
ourselves and take requests from those who wish to visit the
farm.
We also use the Internet across many business applications
to take advantage of the latest technologies to collect and
analyze data, and ultimately to make better decisions. We track
the amount and quality of milk that we ship each day through
our milk cooperative's Web site. We use dairy-specific software
to help with recordkeeping, like tracking the milk production
of each of our cows, which we download as large files off the
Internet.
Similarly, we are able to monitor our methane digester,
which uses waste on the farm to create energy, and get remote
assistance from Pennsylvania, all over the Internet.
We grow most of the feed for our animals, and all of our
crop recordkeeping is through Internet-based programs. These
help us keep track of soil types, waterway locations, setbacks,
and nutrient recommendations.
Much of our banking is done online now, and our employee
time clocks and payroll software are Web-based programs linked
directly to our bank. Even our employee benefits are updated
and communicated through Web programs, so our workers have easy
access to comprehensive information.
Businesses like our dairy need high-speed, affordable
Internet to stay on top of the research and innovation that is
available in our industry. As farm managers, we need to
understand changes in trade and world markets, and in consumer
demands, so we can make informed business decisions.
In addition, more and more Federal and State agencies are
relying on electronic reporting by farms in order to comply
with regulations. Efforts are afoot to make environmental and
employee safety and health reporting electronic, completely
getting rid of paper submissions. This places extreme burdens
on farms and other small businesses that don't have reliable
access to the Internet.
It is important that the Small Business Committee push back
on electronic-only reporting requirements until all businesses
have access to reliable broadband that is not cost-prohibitive.
While our farm does not direct market to consumers, many
farms in rural areas do, especially fruit and vegetable growers
through farm stands, farm markets, or CSAs. Web sites, social
media, and online directories are invaluable tools for these
farms to reach their customers.
Farmers looking for new outlets or monitoring a constantly
changing marketplace must use the Internet to learn and explore
new business models that can lead to success.
Rural areas can also feel isolated without broadband.
Combined with fewer education and health care options, these
locations become less attractive places to live for the young
people, families, and innovators who help drive economic
vibrancy. But broadband can bring distance learning,
telemedicine, and the world to anyone's door.
In conclusion, access to broadband is essential for farms
and other rural small businesses to manage efficient and
successful operations, to reach their communities and
customers, to stay on the cutting edge of their industry, and
for our rural communities to be attractive places to live for
our employees, customers, and the next generation to run our
businesses.
We can't do this on dial-up or undependable Internet
connections.
Thank you again for the opportunity to speak with you
today. I would be glad to take any questions you may have.
Chairman Collins. Thank you very much. That was great.
For all of you, I think, as we are here in the 27th
District, and there is no question agriculture is the primary
economic driver of our area, I was especially taken with your
number 31 percent of the farms don't have access. So again,
when we talk about this broad coverage, our rural parts, the
farms, can be quite substantial, and there may not be many
people exactly living on the farm.
But that is actually a number I haven't heard. That is a
pretty staggering number.
To help everyone here understand, I would like to maybe
first talk about the regulatory burden a little bit. We always
hear regulations are stifling the economy in the United States,
an impediment to job creation. In fact, sometimes regulations
result in job losses, and that is very good at the 30,000-foot
level. And I think we heard some of that here today from Mr.
Meyerhofer, Ms. Canfield, and Mr. Smith.
But could you give us an example of perhaps one or two
regulations that, in particular, are a thorn in the side that
you have, and I think we may hear more about the USF here in a
second?
But also, how that may have impacted you, in particular,
with jobs at the businesses you represent or within the
association, where someone would say, ``Because of this
regulation and the costs, I had to lay people off. I have done
this or that,'' to try to bring home for this group a couple of
particulars, especially come down off the 30,000-foot level, if
you have something. That is fine, if not.
Mr. Meyerhofer?
Mr. Meyerhofer. Well, as I stated in the testimony, in
terms of the regulations themselves, the good part is, is it
somewhat of a hands-off approach, in terms of how broadband is
operated in this country and how we have grown, particularly on
the cable side of it.
But what often comes up with these programs, particularly
through Rural Utility Services, is the need to meet the
unserved areas. That is not always at the top of the list.
And as the country has looked more and more to get to that
last mile, if you will, I think there has been a change of
mindset with FCC and RUS to do that, to focus on the unserved
area instead of the ``underserved'' or what we call the
overbuilt, where there is already another company in there, yet
government programs continue to bring in an additional service
to that area.
And as I said in my testimony, our focus as a company is
really to look at those unserved areas.
So I think there is starting to be a change at the Federal
level that we are seeing more and more as these programs go on.
And I think that Connect NY, and maybe Bob can speak to Connect
America, we are looking at that program as well. Maybe they are
heading in the right direction in terms of that.
Chairman Collins. All right, thank you.
Ms. Canfield?
Ms. Canfield. Well, from our perspective, the Universal
Service Fund is really the lifeblood of the independent
telephone providers, telecommunications providers. And what
happened in the last couple of years is the FCC did a major
overhaul of the fund. The fund allows providers who serve the
most rural areas to keep the rates comparable to what they are
in urban areas.
But with this overhaul, they created a lot of uncertainty,
and that uncertainty meant that our members no longer knew that
they would be able to meet their commitments.
So we had members, without going into the specifics of the
changes the FCC made, we had members who canceled broadband
buildout fiber deployment plans. We had members who returned
grants that they had received, that they decided there wasn't
enough certainty for them to go ahead and use the grant to
provide the broadband to the rural communities. We had members
who laid off. We had one member who had to lay off 20 employees
as a result of that uncertainty and the inability to move
forward and not have that sort of guaranteed revenue stream
going forward.
So it had a very dramatic impact on the rural carriers.
Fortunately, we are starting to see a change in the way it
is being approached. Some things have been rolled back a little
bit. They have been given a little bit of breathing room. There
are still changes that we are waiting for.
The independent telephone providers do not have a Connect
America Fund that allows them to have supportive broadband
services to rural areas. In order to get broadband, rural
consumers have to also get the voice service.
So that ensures that the small business cannot be
competitive if there is a cable provider in the area that can
offer a standalone broadband product. Our members are not able
to do that.
And even in areas where there is not a competitor, we have
very progressive consumers who don't want necessarily a
landline telephone anymore. They want to move to an all-mobile
product for their voice service, and to have the broadband
connection to the home, so they no longer see that need. And
our members are not able to meet that need right now.
Chairman Collins. Thank you.
Mr. Smith?
Mr. Smith. Ours is very simple and very old. Frontier
continues to be saddled with an outmoded regulatory structure
designed to govern old-fashioned telephone service.
Regulations for ILECs in this country, particularly with
switched access for telecommunications, it hurts us from a
competitive standpoint, particularly against cable and wireless
providers.
We must be able to compete on a level regulatory field,
particularly in our urban areas, so that we can use that
capital that would be saved from those regulations in order to
expand our footprint in the rural areas.
Chairman Collins. Good.
I will come back maybe in a minute and ask a little bit
more about spectrum, but, Ms. Lamb, because I know it is a
staggering number, how many cows are on your operation?
Ms. Lamb. Between the three farms, we milk about 6,000
cows.
Chairman Collins. Yes, I think it was important to get that
out. We sometimes talk about the definition of a large dairy
farm being over 200. And in fact, in the farm bill that was
just passed, there are some sections of the farm bill that deal
with what we call the small dairy farms with under 200 cows.
Well, 6,000 is not only large but a very, very significant
operation, and we should point out it is a 24/7 operation. You
basically don't go on vacation. And every cow has to be milked
at least twice a day. I don't know, you may have some that are
three times. If you want the most milk production, you go to
three times a day.
That is almost a mind-numbing kind of operation. And the
fact that you are utilizing technology as you do, that is what
I would like to talk about a little bit.
To the 31 percent of farms, as you indicate, and you are
representing the Farm Bureau, that don't have access to
broadband, versus your operation, can you give us even just a
rough idea of what that means to Lamb Farms, bottom line or
otherwise? Or could you even operate today the way you do with
6,000 cows and not have broadband?
Ms. Lamb. I don't think we could operate without having the
broadband for our business. So truly, we still are a family
operation, we just have a lot more family involved.
So in order to really put together all the information for
this, I had to go and ask my husband, in what ways are you
using the Internet for herd management? And to Jim Veazey, who
manages our cropping, how does the Internet play into our
environmental plans? And to his wife, Marlene, Marlene, how are
you using the Internet for our bookkeeping and for our payroll?
And that was when it really all came together. And it is
just incredible the way that it is such an integral part of our
business. We could not do all of this without the Internet.
I should say I grew up on a small 70-cow dairy operation in
the Catskills, and I still have family members in that area who
milk cows, who have small dairy farms, and they do not have
broadband Internet. And when I think about the impact to them,
and the disadvantage they are at, it is significant.
Chairman Collins. I would imagine growth, at some point, if
you don't have Internet, there is a point you just can't grow
because just like any business, the more complex your business
becomes, the more you need the tools of today--computers,
technology, and the like--to be able to manage that growth, or
things get out of control.
Ms. Lamb. Exactly.
Chairman Collins. So now, as you are looking at where you
are going next, where do you think the Internet is going to
help you save money, become more productive, et cetera, et
cetera. Do you have an idea of where you are heading in the
next year or 2 or 3?
Ms. Lamb. That is a good question. It does seem like more
and more is coming available online.
So one of the newer things that we are going to be trying
out for the first time this year is incorporating GPS and some
of the satellite services that can actually, in the field, the
person who is running the planter can give an exact coordinate
to the next guy, so that they can see exactly where--these
tractors can line up perfectly.
So we can, with that same amount of land, be even more
efficient with the crops that we are growing on that land. So
that is a major technology that is just coming out this year.
But the tractors are almost going to be talking to each other,
and it is going to take out some of that possibility for human
error, so that will be really neat to see.
Some of the unique things that I thought of after I did my
testimony, but Mr. Smith was mentioning some of the farms use
Internet now for surveillance. So on our farm, just for
employee management and also for security, we do have
surveillance cameras, and my husband can log on at home. If
they are saying that maybe the parlor stopped running, he can
log on and see what is going on without actually having to go
into the farm. That is something that is unique.
We also have a registered dairy sale every other year, and
we have a live Internet feed so that people can bid from Japan
or from anywhere around the world. They can watch the sale
online and bid from there.
So those are all things that we have an advantage over
someone who doesn't have broadband.
Chairman Collins. Yes, I think you put that in very good
perspective. Thank you for that.
So, Ms. Canfield, back to the spectrum issue again, there
is always the argument of breaking it into small chunks, which
would allow the rural carriers to bid on and be able to be
competitive bidding on a small piece of spectrum. And then
there is the thought of well, let's just package it all up.
For the purpose of this hearing, could you maybe even just
give the pros and cons of what you have heard--small, how small
is too small versus packaging to where your carriers can't bid
because they have no use for it?
Ms. Canfield. Right, the first thing I want to mention is
that it is important to remember that wireless is not a
substitution for wired communications, because communications
don't hop from tower to tower to tower until they make it to
your phone. They rely on that wired network. So I just wanted
to put that out there.
The wireless, though, is incredibly important in rural
areas, partly for a lot of applications that she's talking
about over here, Ms. Lamb is talking about, and also, just to
have mobile service in rural areas. Very often, the large
carriers don't provide mobile service in the most rural
communities, so we rely on small, independent
telecommunications providers to do that.
And when you are talking about a small telecommunications
provider, these companies--very often are family-owned
businesses, very often cooperatively owned businesses--are
serving communities. They are not serving the entire State.
They are not serving the entire Northeast, like someone like
Verizon or AT&T actually serve the whole country.
So they are looking for spectrum licenses that allow them
to serve the community. Now the way that the spectrum licenses
are put out to carriers is that they are auctioned. At an
auction, everyone who is interested signs up and then bids.
One of the difficulties is that when the FCC decides that
they are going to auction the spectrum according to large
geographic areas, you are taking the small companies completely
out of the picture. They have neither the interest nor the
resources to compete against someone like AT&T or Verizon to
obtain the whole State of Wyoming, for example, or New York
State.
So we have advocated as an association very often for
cellular market areas, CMAs. There are 730-some-odd CMAs in the
country, so the country is broken up into 700 areas for
licensing.
The upcoming spectrum auction, which is a 600 MHz spectrum,
is a really, really good spectrum. It has great propagation for
rural areas, in particular. And it also allows the larger
companies to relieve congestion in the urban areas. There is a
tremendous amount of interest in the spectrum.
The FCC originally proposed auctioning that spectrum
according to economic areas. There are 176 in the country.
Again, way too large for any small business to participate in
that auction.
So we have been advocating hard for the CMAs. We were told
by the FCC that this particular auction is way too complicated
for 700 times four auctions. So we have worked with all the
other rural associations and also with AT&T and Verizon,
Sprint, T-Mobile, to come up with an alternate plan that is an
in-between plan. We call them PEAs, Partial Economic Areas.
There is a lot of discussion about what to call them, PEA Pods.
But there are 416 right now, and we just presented that to
the FCC as a compromise proposal that we think will provide a
realistic opportunity for small businesses who are interested
in serving the rural areas to obtain that spectrum and be
competitive in providing not only a mobile product, but also a
fixed wireless product, which is an essential way to get to the
very most rural areas, that very last mile, the way out ranches
and farms. It is an economic way to get broadband to that last
mile.
Chairman Collins. I think, too, for the purpose of the
hearing, we hear about gridlock in Washington, and that we
don't get along, and we get nothing done. I would like to point
out, certainly, on the Small Business Committee, even more so
than most, there is unanimity when it comes to providing the
tools small business needs. It is not a Democrat/Republican
issue. When we talk about regulatory burdens, again, it is not
a Republican/Democratic issue.
The concerns are, how do help small business grow? How do
we get out of the way of small business? And so, again,
hearings like this, there is no partisanship in this. It is
trying to seek ways the Federal Government can assist, can get
out of the way.
Spectrum is a huge issue, because if it is not done
properly, we won't get to those 31 percent of farms that need
it. We won't get to the last mile.
So there is absolute agreement that we need to work
together on this. So it is actually nice to be part of a
Committee and chair a Subcommittee where we don't have the
political infighting that goes on. We are actually looking to
do what is best for America. And I think it is sometimes
important to point some of that out.
We keep hearing last mile, last mile. And I think we all
have a great picture. It is a good visual.
But, Mr. Smith, do you have any numbers on what it costs to
go that last mile, to that last house, either cost per foot or
per mile? And I am assuming, more than not, are we talking
fiber when we are talking about that last mile for cable?
Mr. Smith. Actually, there is this misconception, and Ms.
Canfield's discussion there on the spectrum was very
interesting and very exact. And I think it is a misnomer for
people with the wireless telephone, that it is magically
through the sky and satellites in the sky. But that is totally
untrue. It is a wire-line connection.
Wire-line capabilities exist today. A telephone passes
nearly every home in the country, and the technology that
exists today, it is there that would allow a DSL signal or, for
my worthy competitor, Mr. Meyerhofer, a coaxial signal.
The issue, as you just pointed out, is that cost per last
mile. In some cases, with the CAF funding and the analysis that
we did, each home past, and that is how we measure the cost per
last mile, how many homes are we passing in order to provide
that service, in some cases, those costs exceed $500 per
person, per household, just to get to that last mile. In many
cases, it is even larger than that when you are in a sparsely
populated area.
But it varies. Again, it depends on how many homes are
within the last mile.
But to extend that technology, it exists today. And it
doesn't have to be fiber. I think that is another misconception
that people have. Technology that exists in our world, in our
central offices and in our field remotes, is capable of
providing people the Internet speed they need. The issue is the
cost to deploy that equipment in order to provide that service
to those people.
Chairman Collins. I think that there are so many
misperceptions when we say ``broadband.'' And again, starting
with what is it, and it is the 4 MB down and the 1 MB up. But
we go into much larger chunks as well.
The other point is, for our kids, we talked about small
business, and that is the focus of this committee. But we hear
a lot about Common Core, and we can agree or disagree with
whether that is a good thing or how it is rolling out. But the
fact is, our kids today rely on broadband to do homework
assignments, to get homework assignments. And if someone is on
living on one of the farms, 31 percent of which don't have
access to broadband, we are leaving those kids behind.
And that is why I think, again, it is a national priority
to get 100 percent coverage. It is a disservice when we talk
about 98 1/2 percent, because then you start doing the math
across 300 million Americans, and that is too many being left
behind.
So the purpose is to get it to 100 percent. The Federal
Government does have a role to play in making sure we have a
level playing field, and we are not picking winners and losers,
and that regulations aren't standing in the way. Best efforts
aside, that is, again, what we are looking at in the hearing.
I think we have pretty much covered what we wanted to
cover. And the issues are well-understood. They are not
partisan. These are bipartisan issues looking for solutions
that we can initiate.
It is always nice to hear that the State has their programs
and that some of those are working. The Federal Government,
though, when it comes to spectrum, is the one that is
controlling that.
And, certainly, the Universal Service Fund, that is a
Federal program and it dates back to the days before wireless,
before broadband. And so it has to be tweaked. It is understood
it has to be tweaked. It is in the process of doing that, and
hopefully in a way, again, that doesn't pick winners and
losers, and helps us get to that last mile.
So as we bring the hearing to a close today, I just again
want to thank all the witnesses for coming in. And I,
certainly, have found your testimony--I always say if you learn
something every day, that is a good day.
And, Ms. Lamb, the 31 percent really puts this in
perspective.
And, certainly, I think what we heard about the spectrum is
very useful.
And, Mr. Smith, your comments about wireless isn't magical,
there are wires connecting it. I have to think, when people
talk about cloud computing, I mean, I hate to say it, but there
are people who think there is something in the clouds. They
don't understand that it is the concept that it is not onsite,
the server is not onsite. It is somewhere else, but it is
really not in the clouds.
I am, certainly, today a little disappointed that the FCC,
the Federal Communications Commission, and the Rural Utilities
Service--we talked about the Department of Agriculture and
their role--were not able to provide a witness today. I am sure
if we were in D.C., they probably would have. But it is
disappointing that they are not here.
But what we are going to do is, Andy, who is on the Small
Business Committee--and thank you for your assistance. To the
extent this went smoothly, it has nothing to do with me. It has
everything to do with Andy and has preparation and his binder.
And again, I can't say enough for my staff as well.
But we are going to send them a letter, and we are going to
summarize today's hearing. And as we got some very specific
questions, we are going to ask those questions and look for
answers. And they will be forthcoming with answers. They
generally don't ignore a letter from a congressional hearing.
So we will be able to get those and then share those with those
who are here.
So as I move forward, as the chairman of the Subcommittee
on Health and Technology, which today is technology, it was
delightful to have a field hearing. With budget crunches in
Washington, last year we did not have them. The sequester we
all heard about, and likewise, there was a lot of turmoil in
Congress. We didn't know budgets, what they were going to be,
and so forth. With a two-year budget now, the discretionary
budget in place, we do know with certainty what monies we are
going to have, and we are very careful in how we spend it.
But I think sometimes it is very beneficial to come out
into a district. And as chair of this Subcommittee, I have some
latitude in where we have it. And I am very, very pleased we
are able to hold this in Albion, which represents rural aspects
of this district. And, certainly, the attendance today shows
how concerned we all are, and this is quite an appropriate
issue.
So with that, I want to thank everyone for coming and
officially say this hearing is now adjourned.
[Whereupon, at 10:55 a.m., the Subcommittee was adjourned.]
A P P E N D I X
TESTIMONY OF MARK MEYERHOFER
DIRECTOR, GOVERNMENT RELATIONS, NORTHEAST-WESTERN NEW YORK
TIME WARNER CABLE, INC.
on
Broadband Deployment and Adoption
before the
Committee on Small Business
Subcommittee on Health and Technology
Albion, New York
March 20, 2014
Good Morning. My name is Mark Meyerhofer, Government
Relations Director in the Northeast-Western New York region for
Time Warner Cable. Thank you for inviting me to testify today
regarding rural broadband.
Time Warner Cable was formed in 1989 through the merger of
Time Inc.'s cable television company, American Television and
Communications Corp., and Warner Cable, a division of Warner
Communications. Time Warner Cable offers residential video,
broadband, digital phone and home monitoring and security
services throughout its New York State footprint; as well as
data, video and voice services to businesses of all sizes, cell
tower backhaul services to wireless carriers, information
technology solutions and cloud services. The Company also
provides customers with exclusive, local, all-news TV channels
in New York, North Carolina and Texas that provide viewers with
content targeted to their community interests and concerns.
Time Warner Cable is among the largest providers of video,
high-speed data and voice services in the United States,
connecting more than 15 million customers to entertainment,
information and each other in 29 states, employing over 50,000
people across the U.S. Based on year-end 2013 data, TWC has
approximately 11 million residential high-speed data
subscribers and 517,000 business high-speed data services
subscribers. Time Warner Cable is headquartered in New York
City.
Rural Broadband Deployment in New York
Time Warner Cable is the leading broadband provider in NYS,
offering reliable and affordable high speed broadband to over
2.3 million customers. We also provide video service to 2.6
million customers and voice service to 1.2 million customers,
as well as Intelligent Home security and monitoring. Time
Warner Cable also serves approximately 120,000 businesses
across the state. We are a major employer with roughly ten
thousand employees and a local presence in communities
throughout the state. We pay approximately $450 million
annually in employee wages, and our state and local taxes and
fees exceed $270 million each year.
Investing $25-30 billion of private ``at risk'' capital
since 1996, Time Warner Cable has deployed broadband
infrastructure throughout its footprint. We continue to enhance
our infrastructure to benefit our customers and the communities
we serve, investing $2 billion in New York State in the last
four years alone. In the 27th Congressional District in 2012
and 2013, we built over 335 miles of new lines, passing over
1,000 businesses and nearly 3,000 homes.
Time Warner Cable's substantial and sustained investment of
private, at-risk capital has resulted in our company passing
approximately 96% of the homes and businesses in our New York
State footprint. Access to broadband for New Yorkers is higher
than the national average, with 95% generally having access and
two-thirds of New York residential customers choosing cable
broadband. These investments were made, and this success
achieved, in a regulatory and statutory environment that
encourages innovation and investment. However, it remains
extremely challenging to extend broadband to the most rural
areas of NYS, where geographic isolation and topographic issues
make it economically infeasible for companies to reach these
areas--investment simply cannot be recouped before it is time
to reinvest.
Government's Role in Spurring Deployment in Unserved Areas
Time Warner Cable believes government has a role to play in
helping to meet broadband needs in these unserved areas, and
that properly structured programs or partnerships can help
achieve rural broadband deployment goals.
Any government-sponsored program or partnership should be
guided by core principles. First, such programs and
partnerships must be focused on unserved areas so taxpayer
dollars are not wasted duplicating existing, privately funded
networks. When taxpayer funds are used to overbuild an existing
provider, the result is unfair competition for a limited number
of customers. Government should not pick winners and losers in
this competitive environment but instead focus limited taxpayer
funds on unserved areas that need it the most. Second,
government programs need to focus on last mile services, which
is the most difficult and costly part of deployment. Third,
programs should be technology and provider neutral, so all
providers and technologies are eligible to participate. Fourth,
the costs of these programs should be broadly shared rather
than paid for by a tax or fee on a specific set of consumers or
taxpayers. If rural broadband deployment is the public policy
goal, the cost should be born as broadly as possible and the
deployment cost to the individual consumer should be as low as
possible. Finally, to encourage the broadest possible private
participation in any government-sponsored program, any funding
or incentives should come with no strings attached, so
companies can own and operate the new networks and integrate
them fully into their existing infrastructure and business
plans.
NYS's ConnectNY program created by Governor Cuomo is a good
example of an effective and well-structured public-private
partnership program. Time Warner Cable received the largest
ConnectNY grant and is now investing $7.1M in partnership with
New York State to provide rural broadband for 52 projects in 22
counties and more than 40 towns across the state. Our ConnectNY
project will connect more than 4,100 previously unserved homes,
business and community institutions to high speed broadband. We
expect to complete these projects by the end of 2014. ConnectNY
has a strong focus on unserved areas and a robust review
process to prevent overbuilding; the costs are shared broadly
through state bonds; it is provider and technology neutral; and
there are few if any strings attached to network operations.
Time Warner Cable also supports the NYS Rural Broadband
Deployment Act (S. 5481-A) advanced by state Senator George
Maziarz (NY SD 62, Newfane) because it focuses on unserved
areas, is provider and technology neutral, and the costs are
shared broadly through the state's general fund. This bill
would create a 100% refundable tax credit for rural broadband
deployment available to residents and small businesses.
Deployment expenses are refunded over five years and available
for unserved areas only. The tax credit program would be
technology and provider neutral and the provider contribution
is not eligible for the credit. This bill passed the state
Senate unanimously in June 2013.
Rural Broadband Adoption in New York
While the government's role in spurring broadband
deployment in unserved areas remains limited, we believe there
is a broader role for government in broadband adoption. New
York's adoption rate of 70% is higher than the national average
of 66%. Roughly one-third of Americans (and 30% of New Yorkers)
with access to a broadband connection choose not to get
connected at home. Further, adoption is not consistent across
groups, where senior citizens, people with lower incomes and
those with less education adopt at far lower rates. Aging
populations, lower populations, lower socio-economic status and
lower educational attainment can often characterize NY's rural
areas.
The principle reasons cited for not adopting broadband are
digital literacy and relevance. We should all work together to
encourage adoption and Time Warner Cable has participated in
numerous adoption programs, as noted in the attachment. A small
investment in educating consumers about why broadband is
relevant to them can be highly effective in increasing adoption
rates, especially in low-adopting populations.
Conclusion
Time Warner Cable believes that private investment has
resulted in remarkable deployment success in NYS and in the US.
This investment has fueled innovation and the tremendous growth
of broadband networks and services that we see today. As a
general principle, we believe that government programs designed
to address the needs of unserved areas in rural NYS and America
must contain the guiding principles highlighted above. We also
support government efforts to increase broadband adoption.
Time Warner Cable looks forward to working with this
committee on this issue. Thank you for the opportunity to
testify today. I am happy to answer any questions you might
have.
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TESTIMONY OF ROBERT SMITH
GENERAL MANAGER, FRONTIER COMMUNICATIONS
BEFORE THE
U.S. HOUSE COMMITTEE ON SMALL BUSINESS
SUBCOMMITTEE ON HEALTH AND TECHNOLOGY
FIELD HEARING: EXPANDING BROADBAND ACCESS AND CAPABILITIES
TO SMALL BUSINESSES IN RURAL NEW YORK
*****
MARCH 20, 2014
Good morning Chairman Collins and Members of the
Subcommittee. Thank you for including Frontier Communications
in this important hearing.
My name is Bob Smith. I am the General Manager for Frontier
Communications, overseeing Frontier's service area in western
New York State. I am honored to be here representing Frontier
Communications, the largest communications service provider
focused on rural America, providing broadband, voice and video
services to more than 3 million residential and business
customers in 27 states.
The communications business has changed dramatically since
Frontier began business as a local exchange carrier--a provider
of POTS, plain old telephone service--in 1935, but our
commitment to providing customers with reliable and affordable
products and services remains constant. Over the past decade,
Frontier has transformed from a 20th Century phone company to a
21st Century broadband company, and we have made it our mission
to deliver the life changing benefits of broadband technology
to rural communications across our footprint. Broadband is a
key driver for economic growth in America in the 21st Century.
Broadband availability in rural America offers more than simply
entertainment and communications capabilities. It translates
into increased economic development, employment and educational
opportunities, and improved health care. In July 2010, Frontier
completed a transformative transaction, acquiring millions of
rural and suburban communications lines from Verizon. As part
of this acquisition, we committed to provide high speed
broadband access to hundreds of thousands of homes previously
unserved. The wireline broadband services Frontier provides
ensure that our customers--your constituents--have unlimited
opportunities for the future.
That is why Frontier is relentlessly deploying and
upgrading broadband to the communities we serve; to mid-sized
cities such as Rochester, to small towns like Dansville, and to
rural areas others consider too difficult to serve like
Wyoming, New York. Since 2010, we have invested more than $2.2
billion in company funds to increase broadband access and
improve infrastructure, and an additional $133.2 million from
the FCC's Connect America Fund (CAF) supports broadband
deployment exclusively to unserved high-cost areas.
Frontier has significant operations in New York State,
having acquired the former Rochester Telephone Company in 1995.
Frontier now has 2,300 employees serving more than 275,000
residential customers in New York, and major offices in
Rochester as well as Gloversville, Johnstown and Middletown. In
New York State alone, Frontier has invested more than $200
million in network enhancements and capital investments for
operations over the past two years. Frontier has been able to
accept $9 million in the Connect America Fund's Phase One
process to provide broadband to more than 15,750 previously
unserved households in New York State.
Our efforts to deploy broadband throughout our New York
service area do not stop there. We have worked with local
governments, as well as with the New York State Economic
Development Councils, to ensure that areas most in need of
broadband are getting access. We have assisted Hamilton County
in receiving a $2.2 million New York State Broadband grant to
upgrade the data transport backbone in eastern New York State,
from Gloversville to Eagle Bay. Upon completion, all of
Hamilton County--which includes the Adirondacks, challenging
geography and sparsely populated in some places--will have
access to broadband and speeds of 10 Mbps.
Most recently, we have been working with Wyoming County and
New York State Senator Patrick Gallivan on broadband capacity
in that County and to assist with confirming that their
Agriculture Center will have the broadband capacity required to
serve their needs. Access to broadband in this rural county
provides farmers and spin-off agri-business with access to
world markets, expanding their product and services market from
local to global. Frontier is proud to be the provider working
with Senator Gallivan on this initiative.
We continue to seek out ways to work collaboratively with
State and local governments and organizations to provide
businesses and residences the broadband services they need.
Like you, we know that high-speed broadband connectivity is
life changing and absolutely critical to our country's economic
recovery and prosperity. Communities with access to the
Internet are ripe for economic development and job creation.
Frontier is modernizing facilities and services because we
believe that our ``time and treasure'' is best used by
extending robust broadband networks to these communities.
Today, that means giving customers access to high-speed
Internet service. Broadband technology offers rural America
untold economic, educational and social opportunities and we
consider it our job to deliver that access.
Thank you for giving me and Frontier the opportunity to
participate in this hearing.
[GRAPHIC] [TIFF OMITTED] T7280.010
Thank you to the Committee on Small Business and to
Subcommittee Chairman Chris Collins for inviting me to testify
before you today on broadband access and its impact on small
businesses here in Rural New York. My name is Kendra Lamb and
my husband and his family own Lamb Farms, a dairy based in
Oakfield, N.Y., with three milking facilities and a methane
digester. We are a third generation farm family with a passion
for producing quality milk while providing excellent care to
our cows and the land. I am also speaking on behalf of New York
Farm Bureau, the largest general farm organization in the state
with 25,000 members representing all commodities, all
production methods and living in all corners of the state.
It might be hard for some people to imagine, but New York
State has some very rural locations and we have large gaps
where broadband access is just not available, including here in
Western New York. In today's age, with access to the internet,
a small business can operate from anywhere. But similarly, it's
hard to imagine a small business surviving and thriving in a
rural area if it cannot be competitive in a world marketplace.
The value of businesses in rural areas is recognized by New
York State, which has been focusing on economic development in
our Upstate communities where farms and small businesses are
often the primary drivers of jobs and economic opportunity. But
the lack of reliable broadband access is a major barrier to
continued growth and we need the federal government to help
solve this problem.
According to a 2013 farm computer usage survey conducted by
the U.S. Department of Agriculture, 69 percent of farms in New
York have internet access. This leaves 31 percent of our
farms--or more than 11,000 operations--that do not currently
have internet access.
But access is not the only problem, so is affordability and
bandwidth. A 2010 study conducted by the Small Business
Administration found that ``rural small businesses pay
significantly higher prices than metro small businesses for the
same bandwidth, and small businesses in metro regions have
access to higher bandwidth services than rural businesses do
(at higher costs).'' These kinds of inequities cannot continue
if rural businesses are expected to compete with their
counterparts in more developed areas. Congress must work
through sufficient funding of the Rural Utilities Service and
the Universal Service Fund, combined with any tax incentives,
grants or regulations that are appropriate, to help increase
access and affordability of broadband services in rural areas.
We are lucky that our main farm location has a broadband
connection through our cable provider and my home has DSL
through our telephone service provider. Without access to this
kind of reliable internet service our farm wouldn't be able to
do many of the key things we do to educate and reach out to the
community. We have found that working in animal agriculture, it
has become increasingly important to be able to educate the
community on what we are doing on the farm and answer their
questions in an honest and direct manner and we like to be on
the leading edge of communication.
I am responsible for many of the public relations and
outreach efforts of our farm. We have a Facebook page that I
use to reach the community and educate consumers on our food
supply. Without high-speed internet, I wouldn't be able to
update this page with the large picture and video files that
help us tell our story. We also have a farm website that we
update ourselves and take requests online from those who wish
to visit the farm. Twice a year we publish a farm newsletter
for all our neighbors; moving this file back and forth across
the internet while we perfect it would be impossible with a
slow internet connection.
But we don't just use high-speed internet for our
communication initiatives. Like most other businesses, we use
the internet across many business applications to take
advantage of the latest technologies, to collect and analyze
data, and ultimately, to make better decisions.
Our farm takes advantage of the internet to connect our
multiple locations and provide better management for our herd
and employees. We log on each day to our milk cooperative's
website to check on the amount and quality of milk that we have
shipped so we can monitor any changes. We also use dairy-
specific software to help with record-keeping, like tracking
the milk production of each of our cows, which we download as
large files off the internet. Like any software, sometimes
there are problems, so we can get remote technical support from
the technology company that is located two hours away in
Ithaca, N.Y. If a technician had to visit our farm each time
there is a problem, we would lose valuable hours of work and it
would be expensive to get that on-site assistance. Similarly,
we are able to monitor our methane digester, which uses waste
on the farm to create energy, and get remote assistance from
Pennsylvania--all over the internet.
We grow most of the feed for our animals and all of our
crop record-keeping is through internet-based programs. These
programs help us keep track of soil types, where waterways are
located, setbacks and nutrient recommendations as well, which
helps keep us in compliance with our CAFO permit and better
oversee our environmental stewardship plan.
Much of our banking is done online now and our employee
time clocks and payroll software are web-based programs linked
directly to our bank. Many of our vendors have gone paperless,
so web applications allow us to view invoices online and keep
our payments up to date. Even our employee benefits are updated
and communicated through web programs so our workers have easy
access to comprehensive information.
It would be hard to imagine our business, which has
multiple moving parts from animal care to growing crops to
human resources management, being as successful as we are
without the efficiency and organization we gain from these
internet-based systems.
Businesses like our dairy need high-speed, affordable
internet to stay on top of the research and innovation that is
available in our industry. As farm managers, we need to
understand changes in trade and world markets and in consumer
demands. This helps us make business decisions from how many
cows to milk, to what risk management tools we need to
investigate.
In addition, more and more federal and state agencies are
relying on electronic reporting from farms in order to comply
with regulations. Efforts are afoot to make environmental and
employee safety and health reporting electronic, completely
getting rid of paper submissions. This is an untenable
requirement that places extreme burdens on farms and other
small businesses that don't have reliable access to the
internet. While electronic reporting certainly can help
streamline the work of government agencies, it is important
that the Small Business Committee push back against exclusive
electronic reporting requirements until all businesses have
access to reliable broadband that is not cost-prohibitive.
While our farms does not direct market to consumers, many
farms in rural areas do, especially fruit and vegetable growers
through farm stands, farmers markets or CSAs. Websites, social
media and online directories are invaluable tools for these
farms to reach their customers. Today's local food movement
means that farms are connecting with consumers in completely
new ways and the marketplace is constantly changing as suburban
and rural families evolve in the way that they seek product.
Farmers looking for new outlets are exploring home delivery
programs, buying cooperatives and community-based farmers
markets--the internet is how they learn and explore new
business models that can lead to success.
For many farms and small businesses in rural New York that
are not connected to the world through the internet, they can
face a feeling of rural isolation. This makes our rural areas
less attractive places for people to live, spurring the brain
drain and economic decline some of our formerly thriving small
towns in rural New York have experienced. It is no secret that
rural areas don't have the same access to education and health
care as more densely populated areas. So rural broadband offers
the opportunity for distance learning and telemedicine that can
help make our communities even more attractive and viable
places for young people, families and seniors to live. A large
part of ensuring that our rural areas remain viable and
contribute to economic development is making sure every citizen
has access to broadband service.
In conclusion, access to broadband is essential for farms
and other rural small businesses to manage efficient and
successful operations, to reach their communities and
customers, to stay on the cutting edge of their industry, and
for our rural communities to be attractive places to live for
our employees, customers and the next generation to run our
business. We can't do this on dial-up or undependable internet
connections.
Thank you again for the opportunity to share why reliable
and affordable broadband access is important to rural New York
and our farms and small businesses. I would be glad to take any
questions you may have.
###
[GRAPHIC] [TIFF OMITTED] T7280.011
Expanding Broadband Access and Capabilities to Small Businesses
in Rural New York
Committee on Small Business
Subcommittee on Health and Technology
U.S. House of Representatives
March 20, 2014
Questions for the Record
The Honorable Chris Collins
1. The FCC recently stated their intention to modify the
formula for how the Universal Service Fund (USF) is distributed
to carriers to expand broadband. How do you plan to update the
USF in a way that accounts for the unique challenges of small
carriers operating in diverse rural areas and allows all
consumers the option of purchasing only broadband from their
provider?
Response: In April, the Commission voted to move forward
with Phase II of the Connect America Fund. We also took several
steps to improve the climate for broadband investment in areas
served by incumbent rate-of-return carriers. In a Further
Notice of Proposed Rulemaking, we seek comment on establishing
a Connect America Fund for rate-of-return carriers.
Specifically, the Commission proposes to adopt a standalone
broadband funding mechanism for rate-of-return carriers, and
seeks comment on how to support the deployment of broadband-
capable networks by rate-of-return carriers within the current
budget for the program. We welcome a dialogue regarding how a
standalone broadband mechanism could be structured to provide
support consistent with the $2 billion budget for rate-of-
return territories. The Commission is focused on updating the
universal service program to ensure that we are delivering the
best possible voice and broadband experiences to rural America
within the Connect America budget, while providing increased
certainty and predictability for all carriers and a climate for
increased broadband expansion.
2. Many small wireless carriers have stated they are unable
to participate in spectrum auctions that only make spectrum
available in large geographic sizes/blocks. Can you provide
details on the steps the FCC is taking to ensure that small
wireless carriers have an opportunity to participate and obtain
spectrum from upcoming auctions?
Response: It is a priority of mine to ensure that wireless
providers of all sizes are able to participate in upcoming
auctions. The Commission has historically made spectrum
available in block sizes that vary by both geography and
frequency to meet the needs of providers of all sizes.
On May 15, the Commission adopted service rules for the 600
MHz Band, which will be subject to competitive bidding in the
forward auction component of the broadcast television spectrum
incentive auction. The 600 MHz Band Plan is comprised of paired
5 +5 megahertz building blocks to facilitate the rapid
deployment of networks, including by small carriers and new
entrants. In addition, the Commission adopted Partial Economic
Areas (PEAs) (416 license areas) as the service area for the
600 MHz Band, to permit entry by providers that contemplate
offering wireless broadband services on a localized basis.
Earliers this year, the Commission also adopted service
rules for the AWS-3 Bands, which will be auctioned this Fall.
The 1695-1710 MHz band will be available in 5 and 10 megahertz
unpaired blocks on an economic area basis (176 license areas).
The 1755-1780/2155-2180 MHz band will be made available in a 5
+ 5 megahertz paired block on a cellular market area basis (734
license areas), two 5 + 5 megahertz paired blocks on an
economic area basis, and one 10 + 10 megahertz paired block on
an economic area basis. Making these bands available in
licenses that vary in both frequency and geography will meet
the spectrum needs of providers of all sizes.
In addition, the Commission has historically administered
an effective bidding credit program that promotes auction
participation by designated entities, including small
businesses. For the AWS-3 auction and the forward auction
component of the incentive auction, the Commission adopted
bidding credits of 15 percent for small businesses (entities
with average gross revenues for the preceding the 3 years not
exceeding $40 million), and 25 percent for very small
businesses (entities with average gross revenues for the
preceding 3 years not exceeding $15 million). The Commission
will initiate a proceeding in the coming months to review its
designated entity program to ensure that it continues to ensure
that qualified small businesses can participate meaningfully in
spectrum auctions. We will implement any appropriate changes
prior to the incentive auction.
3. At the hearing, both carriers and users voiced concerns
over the authenticity of the National Broadband Map (NBM). Even
though the NBM showed they have access to broadband, the local
carriers and residents explained how they were no access to
broadband in that area. Considering that the FCC and policy
makers use the NBM to direct funding, including through the
Connect America Fund, what is the FCC doing to ensure that
we're allocating funding to the most appropriate areas? And
what is the FCC doing to ensure that carriers are not being
passed over in funding opportunities because of errors in the
NBM? Finally, how are you working with state and local
communities to collect and analyze the NBM data to ensure it
reflects the most accurate rate of service?
Response: The Commission uses the National Broadband Map as
the starting point for determining which census blocks are
unserved, but it also has adopted a challenge process to allow
all interested stakeholders, including incumbent providers,
competitors, state regulators, and local communities, to
provide evidence on whether a particular census block in fact
is unserved. Commission staff undertakes a thorough review of
all evidence submitted in the challenge process before making
any determination.
4. On the day of the hearing, the FCC announced in a public
notice that the Rate Floor, which requires small rural carriers
to increase their telephone voice service rates to avoid losing
universal service support, could increase from $14 to $20.46 in
a few months. These rate hikes could lead to consumers dropping
voice service which, under current Commission rules, could lead
to a 2 to 3 times rate hike on broadband service. Does the
Commission plan to take action on this issue to avoid these
rate hikes?
Response: In the 2011 USF/ICC Transformation Order, the
Commission unanimously adopted reforms to make universal
service a fairer system for all consumers and businesses. The
Order includes a phase-out of excessive subsidies for basic
phone service, which allowed some phone companies to charge
their customers as little as $5 a month while average urban,
suburban, and even some other rural consumers were paying over
three times that amount. The Commission determined it was
inappropriate to use limited federal high-cost support to
subsidize local rates beyond what is necessary to ensure
reasonable comparability between urban and suburban rates, and
rural rates, as required by Congress. The reforms adopted in
the 2011 Order gradually eliminate these excessive subsidies to
level the playing field for all consumers and contain the cost
of the program, which is funded by universal service fees paid
by consumers.
Importantly, the Commission's rules do not require carriers
to raise their local rates. Nevertheless, the Commission has
recognized concerns over potentially sizable rate increases and
possible difficulties some carriers may experience in making
any rate adjustments at the state level in a short period of
time. To address these concerns, the Commission adopted an
order on April 23, 2014 that delays any potential universal
service support reductions for lines that remain below the rate
floor until January 2015. In addition, the universal service
support reductions that go into effect in January will only be
for those lines with rates below $16, with no further increases
until July 2016, at which time reductions in universal service
support will be limited to an increase of no more than $2
annually.
5. Is it true that FCC rules effectively force some rural
consumers to purchase regulated voice service in order to make
broadband affordable? That is--the customer's broadband rates
go up if they choose to stop buying voice service because the
rules provide USF support for a line only when the customer
actually purchases voice?
Response: Some small carriers have suggested that they
should be able to receive support for delivering standalone
broadband services (i.e., without providing a voice service).
Our current rules don't allow for this. However, as noted
above, in a Further Notice of Proposed Rulemaking adopted last
month, the Commission proposes to adopt a standalone broadband
mechanism to provide support consistent with the $2 billion
budget for rate-of-return territories.
a. Doesn't a policy that increases local voice rates more
or less push people over time to take only broadband--why would
we have a rule that leads broadband rates to increase when that
happens?
Response: Although concerns regarding increased landline
rates because of the increased rate floor are understandable,
we have seen minimal impact on consumers since the Commission
implemented this rule in 2012. The rate floor increased from
$10 in 2012 to $14 in 2013, a 40 percent increase. However,
consistent with our rules, many carriers continue to report
lines with rates well below the $14 rate floor, suggesting that
they may have made a business decision to grandfather the lower
rates for those customers and accept the associated support
reductions. In 2013, carriers in 34 study areas in 16 states
were still reporting a number of lines with residential local
service charges of $5 or less, further reinforcing that
individual carriers may choose not to raise rates in response
to the current rate floor.
As noted above, the Commission has adopted both a delay
until January 2015 and a phase-in of the reductions in
universal service support resulting from not meeting the 2014
rate floor. This will minimize any impact on service providers
and customers.