> UNITED STATES DEPARTMENT OF AGRICULTURE
>
> AND
>
> FEDERAL COMMUNICATIONS COMMISSION
>
> KICKOFF FOR THE
>
> FEDERAL RURAL WIRELESS OUTREACH INITIATIVE
>
> Wednesday, July 2, 2003
>
> \- - -
>
> MR. THIEMAN: Take your seats. We\'d like to get started in a few
> moments.
>
> Hello, good morning, and welcome. Welcome to the U.S. Department of
> Agriculture, the kickoff for the Federal Rural Wireless Outreach
> Initiative and the new partnership between USDA and the FCC. Just a
> few announcements really quick. What we\'ll do is we\'ll start out
> with the welcome remarks from our Administrator, Hilda Legg, and the
> Chairman of the FCC, Michael K. Powell. Then we\'ll go into the FCC in
> Rural America breakout discussion session, followed by the Wireless
> Finance in Rural America by USDA Telecommunications Program, and then
> we\'ll go into the closing remarks.
>
> Two other special items. They are due to the security here, if anyone
> would care to have lunch in our cafeteria, we would gather in the back
> and lead the groups down. So, again, if you\'d like to stay for lunch
> and enjoy our cafeteria, meet in the back in groups and we\'ll have
> you escorted down. And secondly, those that have appointments with our
> telecommunications program and with FCC, please meet in the back, and
> if Deana is around, meet with Deana and Michelle, two of our
> volunteers on the back table, and they will take care of pointing you
> in the direction that you need to go.
>
> So, with that, my name is Michael Thieman. I\'m the USDA Rural
> Utilities Service Special Assistant to Hilda Legg, and we\'d like to
> get rolling here, so I\'d like to introduce Hilda Gay Legg, our USDA
> Rural Development/Rural Utilities Service Administrator. Please give
> her a warm welcome.
>
> (Applause.)
>
> MS. LEGG: Good morning and welcome to the auditorium here at the U.S.
> Department of Agriculture. It is a delight to sit here and to look at
> these joint fields with the FCC and with USDA and to see our names
> together on this. This is truly a terrific day for us here at the
> Rural Utility Service and Rural Development USDA because it means that
> we understand that in order to meet our mission, we must indeed have
> partners, partners both are out there in the field and our state
> offices, but partners here within Washington, D.C. And I am just
> absolutely delighted to be a part of this opening ceremony and to
> welcome you to this first and what I hope maybe, Kris, will be a
> number of these events where we can gather and talk about truly the
> end result of what we do every day within the Federal Government and
> that end result is how we improve, how do we improve the quality of
> life for the residents of rural America.
>
> You know, there are about 65 million residents in rural America, and
> about 60 million of them are true residents that aren\'t involved in
> production agriculture. It\'s a huge population that we serve, and
> it\'s one that I think needs every opportunity to have voices as
> advocates on their behalf to come together and together we make a
> louder noise, if you will, and send a louder message that the folks in
> rural America deserve the same opportunities as anyone else in this
> great country of ours.
>
> That means you must have access to high speed information networks. We
> are not talking, ladies and gentlemen, about technology for the
> future, although if you hear me talk, I\'ll talk a lot about future
> generations and think about my son\'s future in rural America, and
> he\'s three, so we\'ve all been out there a while. But what I\'m
> telling you is that today, in today\'s rural America, you cannot
> survive as a small business, as an aspiring entrepreneur, creating
> sustainable wealth in your community. Even in health care facilities
> and education, every one of those individuals in rural communities,
> whether\'s it\'s in the Delta region, the Appalachian Mountains, the
> reservations of our Native Americans, whatever it is, those folks
> deserve that same opportunity, and today we\'re coming together to say
> how can we, as the FCC and the Rural Utilities Service, better
> communicate our message, our resources? How can we look at our
> operations internally and look at ways that we can better collaborate
> and share information and share resources?
>
> So, my hat is very much off to the leadership at FCC and I guess I
> need to say a special thanks to Nancy Plonn (ph), because she and Mike
> Thieman were sort of the folks who I kept hearing about were putting
> these things together, so it takes a real team effort, and I\'d like
> to say thank you to them\--and to you for coming today because we ask
> you to take this message, to stay in touch with us, to let us know
> what makes sense that you hear today or how we can improve on this
> beginning. But I am delighted to have the opportunity to be here and
> to share this welcome with actually the Chairman of the Federal
> Communications Commission, and that is Mr. Michael Powell, and so at
> this time, if you would join me, we will hear from Chairman Powell.
> Thank you very much for being with us today.
>
> (Applause.)
>
> MR. POWELL: Good morning. It\'s with great pleasure that I welcome
> each of you and thank you for participating in the kickoff of the
> Federal Rural Wireless Outreach Initiative. This is the first in a
> series of events to promote the exchange of information regarding
> rural development and telecommunications access and encouraging the
> services. The expertise that each of you can bring makes this
> initiative a success story of how agencies, industry, and our rural
> communities can work together to enhance the rate of economic
> development and growth throughout rural America.
>
> I\'d like to first acknowledge the work of the key participants and
> staff who put this program together. From the U.S. Department of
> Agriculture I want to thank Hilda Gay Legg, Administrator of the Rural
> Development/Rural Utilities Service; and Roberta Purcell, Assistant
> Administrator of the Rural Development Telecommunications Program.
>
> We are pleased to announce the partnership between the Federal
> Communications Commission and the U.S. Department of Agriculture and
> to anticipate that it will be the first of many partnerships between
> our agencies. It is through this initiative that the USDA Rural
> Utilities Services and the FCC are able to jointly review their
> respective programs and regulatory structures so that they might
> coordinate activities and therefore expedite the build-out of wireless
> communications throughout the nation.
>
> We look forward to your participation in this Federal Rural Wireless
> Outreach Initiative, which is focused on the following four goals:
> First, exchange information about products and services each agency
> offers both the expansion of telecommunications services in rural
> America. Second, to harmonize our rules, regulations, and practices
> whenever possible to maximize the benefits for rural America. Three,
> educate our partners and other agencies about our offerings. We have
> already begun this effort by launching a joint Federal Rural Wireless
> Outreach web site that specifically provides information addressing
> rural needs. And finally, four, expand our partnership to the extent
> that is mutually beneficial to other agencies and partners.
>
> This even provides an open forum in which to discuss programs and
> opinions. We look forward to developing our partnership with the U.S.
> Department of Agriculture and making this initiative a success.
> Expanding the partnership to include other agencies, coordinating with
> industry, and providing information and programs to rural communities.
> Your participation and contributions to this initiative can make a
> major difference in the economic development of this nation. By
> becoming familiar with our respective programs each of us will be able
> to more successfully achieve our goals. I wish you success as you take
> this opportunity to synchronize the way agencies, industry, and rural
> communities work together to provide information to local and regional
> audiences with the purpose of encouraging a greater deployment of
> wireless services and thus enhancing the rate of economic development
> throughout rural America.
>
> (Applause.)
>
> MR. THIEMAN: Thank you, Chairman Powell and Administrator Legg, for
> getting this thing rolling. So, now with the kickoff officially out of
> the gate, let\'s go ahead and start with the session and get into the
> nitty-gritty of this. We\'ll start off with Kris Monteith. She\'s the
> Deputy Chief, Consumer and Governmental Affairs Bureau, CGB\'s rural
> programs from the FCC. Kris, please.
>
> (Applause.)
>
> MS. MONTEITH: Good morning. Thank you very much for this opportunity
> of being with you today to share some of the activities and the events
> that the Consumer and Governmental Affairs Bureau of the FCC is
> involved in to promote rural services across this country. I want to
> begin by thanking our partners here at the USDA and thanking all the
> staff persons at the FCC for their hard work in putting together this
> program. I know events like today\'s program don\'t just happen. They
> take a lot of hard work, and so I want to acknowledge those that were
> involved in putting together what I\'m sure will be a very successful
> program.
>
> What I\'d like to briefly touch upon is the mission of the Consumer
> and Governmental Affairs Bureau overall and then just briefly talk
> about some of the key initiatives that we have undertaken that are
> aimed at rural America.
>
> The Consumer and Governmental Affairs Bureau was restructured under
> the leadership of Chairman Powell in March of 2001; and with that
> restructuring we took on some new and some added responsibilities.
> Broadly speaking, we have three key goals or objectives. First, to
> educate consumers. We work to educate and inform consumers about
> telecommunications goods and services and to increase consumer
> awareness of the FCC\'s rules, regulations, and policies.
>
> Secondly, we coordinate consumer telecommunications policy efforts
> both internally at the FCC and externally to the outside world.
> Internally, through our Consumer Policy Division, we have primary
> responsibility for a group of core policy initiatives that have a
> particular consumer orientation. And then within the FCC overall we
> coordinate with other bureaus and offices on other Commission
> policymaking activities to ensure that the consumer perspective is
> brought to the table. Externally, through our Intergovernmental
> Affairs Group, we work with other governmental agencies such as your
> own and work with states, localities, communities across America,
> tribes, very importantly, to ensure an understanding of the FCC\'s
> rules, regulations, and policies and coordinate our policies in areas
> of overlapping jurisdiction.
>
> Lastly, we work to resolve consumer inquiries and complaints. In large
> measure, we are in some sense the voice of the FCC. The Consumer and
> Governmental Affairs Bureau mans the National Call Center for the FCC,
> so we are in daily contact with consumers and hear from them what
> their issues are, what their questions are, and take their complaints
> and try and mediate and resolve those complaints.
>
> So, let me just speak or touch upon each of those sort of core
> functions of the Consumer and Governmental Affairs Bureau and provide
> you some examples of how we go about fulfilling those responsibilities
> and those functions.
>
> On the educational front, the Consumer and Governmental Affairs Bureau
> promulgates or puts together and produces consumer-related fact sheets
> and alerts. For example, we\'ve produced a get connected promoting
> telephone subscribership, an Indian Affairs\--an Indian country fact
> sheet. We\'ve produced fact sheets on our universal service programs
> for low income consumers and for rural health care providers, and
> we\'ve produced fact sheets on wireless issues, such as the 911 issue.
>
> We also perform targeted outreach, either direct mailings to specific
> targeted audiences or constituencies. We have a rural web page aimed
> at getting information out to individuals in rural America and that
> kind of initiative. We also do events, forums, and workshops, and we
> oversee a consumer advisory committee, a Federal advisory committee
> that has rural representation and brings rural issues directly to the
> Commission so we can look at and address those issues.
>
> On the policy front, as I mentioned, we have direct responsibility for
> a number of key areas such as slamming, telephone consumer protection
> such as the Do-Not-Call List that was just recently\--those rules that
> were just recently adopted by the Commission, truth in billing, and
> access for individuals with disabilities. Issues that are specifically
> directed to rural America and rural Americans, such as broadband,
> wireless services in rural area, the notice of inquiry that was
> recently done by the Wireless Telecommunications Bureau, those kinds
> of issues we coordinate with the other bureaus and work with them to
> ensure, as I mentioned, that consumer perspectives are taken into
> consideration.
>
> On our intergovernmental coordination front we do governments,
> government consultation with federally recognized tribes on historic
> preservation issues, environmental issues, and other issues that are
> of key concern to the tribes. We oversee and staff the Local and
> Government Advisory Committee, which has rural representation. We
> oversee the Federal and State Joint Conference on Advanced Services,
> which is aimed at deploying broadband services and, of course, those
> services are key to rural America, and we coordinate the FCC\'s
> participation in interagency work groups.
>
> Resolution of rural-related inquiries and complaints is, of course,
> another key area. As I mentioned, we have direct contact with
> consumers on a daily basis. We\'ve been involved in wireless service
> quality issues facilitating discussions between the National
> Association of Regulatory Utility Commissioners and the wireless
> industries. We\'ve also helped try to identify wireless services
> providers that serve their areas so they can contact those service
> providers and try and bring services to the reservation, and we handle
> consumer complaints and try and mediate those to the satisfaction of
> the consumer. Billing coverage and contract terms in the wireless area
> have been of key concern.
>
> Just to sum it up, our role, like that of the Commission overall, is
> to ensure that quality affordable telecommunications services are
> brought to all areas of the country, and particularly rural America.
> CGB is endeavoring to develop rural outreach initiatives that promote
> access to basic and advanced services and to establish beneficial
> relationships across the board with governmental agencies at all
> levels.
>
> We are delighted to be working with USDA. I look forward to hearing
> from your other speakers and to learning from them and to individual
> discussion. So, thank you very much for your time and attention.
>
> (Applause.)
>
> MR. THIEMAN: Thank you, Kris Monteith.
>
> Next up we have Bill Maher, the Chief FCC Wireline Competition Bureau,
> Wireline Programs and Universal Service. Bill, come on up and we\'ll
> take care of your program here.
>
> MR. MAHER: Okay, Mike, thank you very much. This is a wireless
> initiative kickoff, and I\'m a wireline regulator. The reason I\'m
> here is because the Wireline Bureau of the FCC oversees the Universal
> Service Programs that the FCC and Congress have initiated for rural
> America. So, in discussing universal service, what I want to start off
> with is just saying what is universal service? Well, it\'s an evolving
> level of telecom service that is provided to the American public,
> rural and urban alike, at affordable rates. The FCC, with assistance
> and advice from the states, defines it, and that affordable service is
> supported in part by the Federal Universal Service Fund.
>
> As far as universal service and its history, this has been a major
> goal of telecommunications policy in the United States since 1934. And
> that 1934 Act stated this goal in very general terms, and the FCC and
> the state regulators implemented the goal along with RUS through the
> period up through 1996, when the Telecommunications Act really took
> this universal service concept and added some teeth to it. Not only
> did it codify the notion of providing universal service support, but
> it also expanded the FCC\'s historic commitment. And it did that by
> not just focusing on keeping rates low in rural areas, but also in
> defining universal service programs to help schools and libraries and
> rural health care providers receive telecommunications services.
>
> At the same time universal service moved from a system of implicit
> support by rates, regulated rates supporting various aspects of rural
> service, to a more explicit support mechanism. And, indeed, the \'96
> Act, as the slide shows, has several guiding principles: explicit
> support being one of them, affordable rates being codified, the need
> for that specific predictable and sufficient support again being made
> the law of the land as well as addressing a very difficult issue and
> one that\'s of great concern to wireless and wireline providers alike,
> which is, you know, how do you contribute to universal service?
>
> The FCC in implementing the \'96 Act had a couple of more guiding
> principles, competitive neutrality, and also the need for portable
> support among competitors. You know, a buzzword, a buzz phrase, I
> guess, that you often hear about universal service is that it has to
> be promoted, and the FCC spends a lot of time promoting universal
> service, but really it\'s a team effort, and the teams are kicking off
> in part today. You know, carriers and carriers\' customers contribute
> to the Universal Service Fund. The recipients of universal service
> support, which could be wirelines and wireless companies in rural
> areas, they could be schools, libraries, rural health care providers,
> they implement that goal of getting service out there at affordable
> rates. Federal and state regulators develop the policies that are
> implemented, and finally there\'s a third party administrator, the
> Universal Service Administrative Company that administers the Fund
> under the FCC\'s rules.
>
> The Universal Service Fund has four major components with slightly
> different goals. The High Cost Fund is one that attempts to ensure
> that service in rural, high cost areas are at rates that are
> comparable to service at urban rates. The Low Income Program that Kris
> mentioned providing information, that provides support to low income
> customers and Universal Service reimburses those telephone wireline
> and wireless carriers who provide that support. And as I mentioned,
> there\'s both rural health care and schools and libraries programs
> that provide for service discounts for those particular groups.
>
> Now, who contributes to universal service? Well, as I mentioned
> before, interstate telecommunications carriers contribute. That\'s
> mandatory under the Communications Act. Other providers of interstate
> telecommunications\--and that\'s a term of art\--telecommunications in
> the Act is different from telecommunications service, and it has
> different consequences, but other providers of telecommunications, if
> the FCC finds it to be in the public interest also may provide\--may
> contribute, and there\'s a de minimis exception which applies to most
> rural carriers, and that would be if their contributions to universal
> service on a yearly basis are less than \$10,000.
>
> As far as contributions to universal service, just a snapshot of who
> contributes from 2002. If you can see the interexchange carriers, the
> long-distance carriers are responsible for most of the contributions,
> followed by the local exchange carriers and the rural wireless\--the
> wireless industry overall coming in at 15 percent of contributions.
> That was 2002. There have been some rule changes at the FCC. Wireless
> contributions as a percentage of the total are increasing.
>
> How much support are we talking about here? Well, overall for 2002, it
> was close to \$6 billion, and I mentioned the four components of
> universal service funding. You can see the breakout here. The largest
> component was the high cost support at 2.9 billion. You\'ll notice
> that the smallest component here, rural health care, is at 27 million.
> As I\'ll mention later on, the FCC is looking at how to simplify the
> rules so that available monies can be used more easily by rural health
> care providers.
>
> Now, when we talk generally about what is supported service, what
> received universal service funding, especially this high cost and this
> low income support, well, you know what it is? It\'s what I think most
> Americans would consider plain old telephone service in the sense that
> it\'s single party, no party lines. It\'s voice grade, it\'s
> touchtone, it has access to 911, it has access to interexchange
> services, and I will say that even though right now it\'s a plain
> vanilla definition, there\'s an ongoing proceeding at the FCC looking
> at whether changes are necessary to this definition of supported
> service, and we expect FCC action in early July on that.
>
> Now, I mentioned these four different components of universal service
> and what goes into the fund. Well, we have components upon components.
> For example, in the high cost support mechanism there are six defined
> kind of\--it says components on the slide, and they\'re really
> subcomponents, they\'re different types of support with different
> specific purposes, and I will leave it to the regulatory counsel\--I
> see a few in the room\--to advise their clients on what all of these
> are. But the goal, of course, is to make sure that rates are
> affordable comparatively between rural and urban areas.
>
> The schools and libraries program, again, is in essence a discount
> program. Eligible schools and libraries get the discounts for three
> types of offerings: telecom services, Internet access, and internal
> connections; that is, the wiring of the schools. And this discount is
> based on the percentage of students who are eligible for the School
> Lunch Program, and it occurs on a sliding scale. There\'s a
> reimbursement for service providers, and this could include wireless
> as well as wireline providers. The schools and libraries are the ones
> who apply, and they engage the service providers, and they have to
> competitively bid out their for services every year, and this is a
> program that\'s capped at \$2.25 billion. We\'ve been working very
> hard to make sure that that money gets out to American schoolchildren
> and library users and that it does so without waste, fraud, and abuse.
>
> I\'ve also mentioned the low income program. This, too, that\'s a
> component of universal service with subcomponents, and there\'s two
> major subcomponents. One is Linkup, and that provides a discount
> for\--basically for poor people to get telephone service installed,
> and that can be a very significant discount. Lifeline is a monthly
> discount, and there\'s a needs-based test for telecom customers to
> qualify.
>
> Rural health care I\'ve touched on. Rural health care institutions,
> it\'s a pretty broad array of institutions that conceivably could
> qualify for the rural health care discounts. Again, any
> telecommunications service provider, wireless, wireline,
> long-distance, local can provide support under this program to the
> health care providers. And this is just some more details on rural
> health care. Again, the notion is discounts for telecommunications
> service and somewhat more limited discounts for access to the
> Internet. As you can see, this program is capped. There\'s a limit of
> \$400 million per year. We\'re looking to jumpstart this program.
> There\'s an ongoing FCC proceeding on it because, for example, in
> 2002, the Rural Health Care Program only disbursed \$27 million. Maybe
> that\'s handling the needs of rural America. We want to be sure it\'s
> handling the needs.
>
> An important issue that the FCC has been facing between wireless and
> wireline carriers and incumbents and competitive entrants has been the
> issue of what is the role of universal service support when there are
> competing carriers. As the slide says, in general the wireline and the
> wireless competitors can qualify to receive universal service support.
> There\'s a classification, the so-called ETC designation that has to
> be done by either the state commission or the FCC.
>
> The interesting thing about universal service funding among
> competitors is that the competitive ETCs currently receive the same
> per line amount of high cost support that an incumbent would receive.
> So, a wireless competitor would on a per-line basis receive the same
> per line amount of high cost support that the wired, perhaps the wired
> incumbent receives. There are questions that the FCC and the states
> are addressing in yet another pending proceeding at the FCC as to
> whether that rule needs some adjustment. That\'s being considered in
> the Federal State Joint Board. Similarly, competitive ETCs, which
> could be wireless or wireline competitors, receive low income support
> based on the same criteria as the incumbents do.
>
> That\'s my overview of universal service in just about ten minutes,
> maybe a little bit more. My contact information is up there. I laud
> the Department of Agriculture, as well as my colleagues in the
> Wireless Bureau for kicking this initiative off, and I look forward to
> working with them and with you as it proceeds. Thanks.
>
> (Applause.)
>
> MR. THIEMAN: Thank you, Bill. Thanks for telling us about how the
> universal funds are used. Having come from the telecom industry, it\'s
> really good to know where all those charges go and see all the good
> that\'s being done there.
>
> Next up I\'d like to introduce John Muleta, who\'s the Chief of the
> FCC Wireless Telecommunications Bureau. John.
>
> (Applause.)
>
> MR. MULETA: Thank you, everybody, for coming to this event. I\'m
> terribly excited to kicking off this initiative, and I hope to have a
> series of meetings with my partners at USDA and RUS as well as other
> Federal partners as we sort of develop new thinking for wireless
> services in rural America.
>
> The main reason that we are here today is to educate our Federal
> partners in the sort of Washington constituency about the
> opportunities for wireless access in rural communities and how FCC can
> help with the digital migration of rural communities. You know, for
> those\--all of us in Washington are aware that we\'re on a digital
> migration. We\'re becoming a very sophisticated industry with sort of
> touching every person in America. That\'s wireless services. And what
> we want to do is we want to get the word out about how we can work in
> a coordinated fashion to deploy these services to rural America.
>
> The second point for us is to sort of prime the pump in terms of
> greater focus from the Wireless Bureau on new initiatives regarding
> wireless services for rural communities. So, that\'s why we\'re here.
> What I\'ll do is I\'ll give you sort of an overview of the wireless
> market from our perspective, talk a little bit about our authority,
> the FCC\'s authority when it comes to wireless services, and then show
> you the sort of unparalleled success that the FCC has had in the
> deployment of wireless services in America and sort of see what the
> next set of challenges are.
>
> The second set of topics will be sort of how do we access spectrum in
> rural markets, and the third focus will be sort of what\'s happening
> in public safety and how that\'s affected by wireless services, and
> finally a talk about some initiatives both ongoing and upcoming
> initiatives that the Wireless Bureau is planning.
>
> Before I move on to that, I do sincerely want to thank Administrator
> Legg for her support and as well as Bobbie Purcell for her support of
> this. This started out of a conversation a few months ago trying to
> talk about how do we get\--as a result of the ruling NOI that the FCC
> had done, one of the things we talked about is sort of what do we do
> about capital formation and things like that. So we decided to meet
> with the RUS program and decided that we needed coordination. So, I
> really want to thank these folks for their support, as well as the
> individuals who put it together, Nancy Plonn, Mike Thieman, Dave
> Safford (ph), Cindy Schreiber (ph) from the Wireless Bureau. So, I
> thank all of you for your support.
>
> What has happened in wireless? First of all, wireless is one of those
> markets that the FCC sort of has a great deal of authority over. The
> Congress in its wisdom has made wireless services a focus of due
> regulatory market approaches, which fits well with sort of the
> technological imperatives that underlie wireless. The FCC sort of
> declined from any sort of rate regulation in this approach, and it\'s
> also removed as many entry barriers. The result has been there is 142
> million people at the end of the year\--that\'s close to over 50
> percent of the population on a per capita basis that has access to
> wireless services. To think about that this industry, the commercial
> mobile industry, the cell phone industry did not exist 20 years ago,
> this year is the 20th anniversary of cell phones, it\'s just
> outstanding to go from zero to 140 million people in this time is just
> a phenomenal success and something that we should all be proud of.
> 200,000 jobs in the industry, in the telecommunications industry, are
> directly attributable to wireless. \$127 billion have been invested as
> of 2002, and then the minutes, the usage rate has gone up dramatically
> by 200 percent, and the price has gone down by 74 percent. So, this is
> a fantastic success story, something that speaks about the sort
> of\--both Congress\' wisdom and the FCC\'s approach to the regulating
> wireless industry has been the right call.
>
> One of the things that we have to do, though, is that although there
> is effective competition in the wireless industry, and we look at
> effective competition through a variety of factors, there is a
> difference in terms of the number of service providers in the
> marketplace between rural and urban markets. We just took one
> statistic in terms of measuring, you know, rural versus urban looking
> at counties with population densities of greater or less than 100
> people per square mile, and this proxy shows that there\'s sort of
> twice the number of providers in urban markets than there are in rural
> markets.
>
> So, the challenge here for us is, you know, this might lead to
> effective competition in voice services, which is what we found. It\'s
> not clear that this model, this sort of discrepancy should stay going
> forward. So, one of the challenges for us is to figure out a way of
> increasing levels of competition and satisfaction in both markets, and
> therefore, that\'s why we\'re here today.
>
> One of the things that\'s driving us as well is that technology sort
> of is breaking down the traditional limitations of wireless. Wireless
> used to be, you know, the sort of nature of radio propagation, had
> limitations in how broadly applicable it could be and what sort of
> services could be provided over it. Last year under the leadership of
> Chairman Powell there is a spectrum policy task force that was put
> together, and the policy task force really looked at sort of how do we
> revamp our policies for providing for managing spectrum from the
> FCC\'s authority.
>
> Clearly\--I mean, one of the fundamental findings of that policy task
> force is that spectrum access as opposed to spectrum scarcity was the
> problem, meaning that there\'s a lot of spectrum available when you
> include all of the various vectors that you need to look at for
> wireless services. So, that\'s geography, time, and space, and then
> you understand that there is a tremendous amount of spectrum
> available. It\'s not necessarily scarce, it\'s just that the ways
> we\'ve been looking at it limit its access.
>
> What that leads you to think is that when you\'re focusing on policy
> reforms, flexibility is sort of key. And flexibility would be one of
> those things that would add value to the rural communities and bring
> in new service providers and new services to rural communities.
> Specifically the task force looked at a few things: flexibility and
> regulation of power levels, which is a technology issue, secondary
> markets for enabling sort of the sharing of the resources, wireless
> resources, rethinking the sort of geographic definition of rural areas
> and the licensing associated with that, and then, you know, bringing
> in new sort of legal constructs into play such as easements that might
> facilitate greater access to spectrum in the markets, and then, you
> know, thinking through about using of unlicensed band. For those of
> you that are not familiar with the telecom industry, unlicensed is,
> you know, sort of a quick definition of that would be sort of the
> Wi-Fi, hot spot type of technologies essentially sort of, you know, a
> different construct than sort of the licensed approach that has been
> the norm for wireless services.
>
> The benefit of the spectrum policy task force is it\'s sort of given
> us a road map on how we should approach regulation both for urban and
> rural markets. But clearly we think that the greatest impact of some
> of these thinkings would be in the rural area.
>
> What\'s our strategic plan from the Wireless Bureau? I think it\'s
> always important to understand now that we\'ve given you an overview
> of where we are, one thing that we\'re trying to do in the Wireless
> Bureau is we want to bring in innovative policies, innovative
> technologies, and innovative rules and regulations to the marketplace
> to provide spectrum access so that that sort of transport mechanism is
> widely available and then to increase the number of wireless enabled
> services that can come in, sort of applications. So, broadband is sort
> of an easy term, but really what we\'re talking about is increasing
> the number of services that can be provided over the wireless medium,
> moving it from tethered services to untethered services and adding
> value to people. So, you know, increasing the sort of personal nature
> of telecommunications services is one of our very broad goals.
>
> The other things that we\'re focusing on as part of our strategic plan
> is to increase the level of customer service that we provide to the
> American public including the rural communities. These are things,
> sort of public goods that affect all of us, you know; the sort of
> commercial intent might not on an individual basis make sense, but
> from a public policy perspective adds to the overall value of our
> country. So, E 911, local number portability, interference management,
> the sort of auctions technology in our licensing database which tells
> you who\'s operating where are all parts of our customer service
> function. This initiative in our outreach program is also part of this
> customer service focus that we\'ve engaged in or we\'re beginning to
> engage in.
>
> In terms of spectrum access, I think again focusing on the transport
> mechanism and then the types of services and for those of you who
> can\'t see from the back, this will all be available, so I won\'t go
> into greater detail about what things we\'re talking about there.
>
> One of the things that people talk about is, you know, what is
> wireless capable of doing in the rural markets. As this chart shows,
> we have sort of four different kinds of services we can talk about,
> sort of mobility telephone services, the fixed wireless services, the
> paging narrowband types of services and sort of the public safety
> spectrum. These are the things on the column on the right-hand
> side\--on the left-hand side. Well, I guess it\'s your right-hand
> side. I can\'t quite figure it out.
>
> The capabilities as you can see on that chart is they\'re pretty much
> filled up, so we can provide public safety services both in the
> commercial and noncommercial context, basic access services, you know,
> just sort of being able to get dial tone, voice, long-distance
> services, Internet access, Telemedicine, Distance Learning, E Learning
> technologies are all available in wireless services and across all of
> the spectrum of technologies that we have.
>
> One of the key methodologies for us getting spectrum out for those of
> you that are not familiar with the FCC has been our auctions program.
> Out auctions program was initiated in 1994 by Congress, and the sort
> of historical process for getting spectrum had been somewhat of a luck
> of the draw. It\'s either comparative hearings in which you sort of
> have a beauty contest and you have some, you know, relatively random
> person at the FCC make a decision as to who\'s better qualified to
> provide these services, and then we moved away from that and went to
> lotteries, which turned out to be even more random and sort of\--there
> were some issues with that, sort of insiders knowing how to play that
> game.
>
> So, I think what happened was Congress basically decided that the best
> way to do it was to use auctions. So, these are the things that people
> from the Commission for many years had been advocating. It\'s a
> competitively neutral way of designating licenses. Since 1994 when the
> program began, 1993 was when the authority was provided. 45 auctions
> have taken place, 50,000 licenses have been auctioned. The U.S.
> Treasury has gained \$14.4 billion, and 2,600 qualified bidders have
> participated.
>
> The sort of statutory intent again was a way of providing licenses for
> operators where there is mutual exclusivity, where no two people could
> own the same license. This was sort of a way of achieving this goal in
> a way that could not be gamed. And the Congress thought if you sort of
> removed the constraints on that, the development in new services and
> new players could come in to benefit the public.
>
> Another key intent in that which kind of brings us back to today was
> to sort of provide access for those in the rural communities. Again,
> Congress understood that commercial carriers, you know, the very
> nature of wireless made it difficult for providing\--you know, you
> tend to focus on denser markets as opposed to less dense markets, and
> so Congress made it a specific intent that we focus on rural areas.
>
> Exemptions were made. I think they\'ll make sense to you, so public
> safety, radio services are exempt from auctions. The digital
> television license are exempt. Noncommercial educational and public
> broadcast stations are exempt from auctions, and international and
> global satellite communications are exempt. All of them have their own
> individual reasons, and you know, if you have any questions about
> that, we can talk at a later time.
>
> What are the results? 78 percent of the winners claim to be either
> small, very small or entrepreneur businesses and won 54 percent of the
> licenses. 184\--I mean 11 percent of the winners were rural telcos who
> won four percent of the licenses; 11 percent were women bidders with
> four percent of the licenses, and 11 percent were minority bidders.
> So, this has been an unqualified success in terms of getting a lot
> more people to participate in the wireless business.
>
> There are going to be future allocations; that\'s one of the reasons
> that we\'re sort of trying to prime the pump. There is a 700
> megahertz, which is a UHF TV band. Once sort of the broadcasters leave
> that spectrum in the 2006 time frame, the idea would be to auction
> that and for us to develop new rules for permitting, you know, greater
> service to rural markets potentially using that spectrum. DBS and
> MVDDS are sort of kissing cousins of technology, and they also provide
> service into rural America, so those auctions are potentially
> upcoming. Advanced wireless services in the parlance of wireless
> technologies, it\'s called a 3G plus, so these are advanced wireless
> services. Their spectrum set aside coming largely from Federal DOD
> users, and we\'re in the process of working the service rules there.
> So, there\'s greater opportunities of rural markets using this variety
> of spectrum that\'s in the pipeline.
>
> Talking about auctions, one of the intents in that has been to provide
> small businesses based on sort of individualized qualifications at the
> time of each auction, provided them with bidding credits. For the
> future for the upcoming auctions, the rules would need to be
> developed, but one thing I wanted to show you was an example of how
> the bidding credits work. In auction 44, if your annual gross revenues
> as a small business was under \$3 million, the bidding credit was 35
> percent for\--and \$3 million to \$20 million was 25 percent, and \$20
> million to \$40 million, that was 15 percent. Essentially this is sort
> of a plus factor in terms of your cost of capital or your cost\--your
> cap X plan. This is a benefit for the small business players to come
> in and potentially fill the gaps that exist that are not provided by
> the bigger carriers.
>
> Another area that we focus on is sort of the tribal land bidding
> credits. In 2000 the Commission came out with rules and started
> applying them for this particular program. The credit amount is
> \$300,000 for the first 200 square miles of qualifying tribal lands
> and then \$1,500 each for each additional square mile that\'s covered.
> In order to qualify for this and get the benefit of it, the carrier
> has to promise to provide 75 percent coverage of the area within three
> years. Essentially you have build out within a specified time to cover
> a specified part of the population. This has been seven out of the
> last 12 auctions have resulted in 34 bidders expressing interest in
> the bidding credits. These include the broadband, PCS, CNF blocks,
> paging, narrowband, PCS, the 1,670, 1,675 nationwide license that just
> took place earlier this spring lower 700 megahertz, the public coast
> licensees. So, this is covering a wide area, a wide number of
> services, and a lot of people have been interested in it.
>
> One of the things that we\'re thinking about changing is we have
> issued a notice of proposed rulemaking seeking comment on how to
> expand the coverage area of applicability of adjacent nontribal areas.
> So, again, this is bringing a focus on rural communities that are
> adjacent to each other, and we\'re trying to figure out ways of sort
> of becoming more inclusive as opposed to being less.
>
> One of the other things that we\'ve done, I think, which is a very
> important proceeding that we recently completed is a secondary markets
> proceeding, which has been around for a while, and the Wireless Bureau
> was able to get it out a couple of months ago. It authorized spectrum
> leasing as a policy matter, and it also adopts a streamlined process
> for allowing leases into the marketplace.
>
> The benefit in the rural context is this allows sort of for better
> capital allocation decisions. It allows for better buildout strategies
> and a sort of sharing of resources on buildout. So, for example, in
> rural markets you sort of have the sort of roadways and the towns, and
> it might not make a lot of sense to be able to operate in both parts
> because they have different buildout characteristics, so you might
> want to leave the highways to somebody else who leases a spectrum and
> then concentrate your efforts on the urban or on the town aspects of
> the buildout. So, this is the kind of allocation decisions that are
> allowed under the secondary markets proceeding.
>
> It also sort of separates the sort of traditional tie that the FCC has
> made between licenses and facilities, which we\'ve departed from in
> other contexts, including international submarine cables, again driven
> largely by, I think, capital considerations in the marketplace, in the
> financial marketplace. And what this does is that, you know, there are
> people who are better at acquiring licenses, and there are people
> better at operating businesses, and it allows, sort of, people to pick
> and choose in terms of what they want to do.
>
> Moving on, I think one of the key personal aspects of wireless
> services is it acts for the general public good by making the personal
> safety a high priority. It also allows for our nation\'s first
> responders and others to focus, to communicate with each other and
> with other people that are affected, such as critical infrastructure
> industries, such as power companies, nuclear plants, you know, private
> health care facility providers, and so on and so forth. I think
> traditionally we\'ve allocated 47 megahertz for voice communications
> for public safety. An additional 24 megahertz has been allocated in
> the 700 megahertz band, and that will become available as the
> broadcasters leave that band as part of the digital TV migration, and
> in 2002 and 2003 we allocated an additional 50 megahertz in the 4.9
> gigahertz band.
>
> I\'ll focus a little bit on the 4.9 gigahertz band because it shows
> some of the evolution in our thinking of how we can get people to work
> together. So, one of the most important things in the 4.9 gigahertz is
> allowing public safety agencies to designate certain commercial
> entities, non-public safety entities, to work with them in providing
> services in that band. This goes to the reduction of capital required
> to deploy services. It also starts integrating our public safety
> systems, which now after 911 transverse a wide number of industries,
> not just including public safety.
>
> E 911 is a major initiative that we\'ve been engaged in. This is
> crucial information that allows the emergency first responder
> community to figure out where the call is coming from when they get a
> 911 call. There are two phases of E 911. Phase 1 tells you generally
> where the call is coming from within sort of the next available cell
> site. Phase 2 is when, through a variety of means, different
> technologies you can identify the exact location of where the caller
> is coming from and the number that\'s associated with it. Phase 2, we
> had a kickoff coordination about in April, end of April beginning of
> May, and we\'re trying to get all the parties involved in E 911 to
> play together. We focused a great deal on the carriers. The carriers
> have made great strides. There are issues in the rural context, and
> we\'re hoping to address those in the future, and we\'re hoping this
> kind of initiative will help us understand both the consumer as well
> as carrier interest in rural E 911 services.
>
> In December of 2002 we released a notice of inquiry that sort of went
> in to figuring out how we can harmonize certain issues such as what
> are rural areas and do we have a consistent definition within the FCC
> as well as with other Federal and state programs, and we also reviewed
> the effectiveness of current rural programs. Right now the Bureau is
> also investigating ways of changing our technical rules to facilitate
> greater rural access in two areas there: reform of our current
> performance requirements such as the type of service area, the type of
> coverage that we require for the licensees, the technical and
> operational rules ranging from power to facilities sharing. Those
> kinds of things for rural service providers are under consideration,
> and we hope to have some thoughts solidify over the next few months.
>
> As part of this initiative what I\'d like to do is let you know that
> we have a web site that we\'ve been working with the RUS, USDRUS, to
> sort of share and link information and allow outside parties and our
> other federal partners and consumers to get an idea what we\'re up to
> and how they can contact us. We\'ll talk about upcoming events, our
> respective releases, and links and related sites.
>
> What I\'d like to do is I\'d like to close by, you know, pointing out
> to our partners in USDRUS as well as our other Federal partners, sort
> of a joint action plan. We\'ve had a great turnout here, we\'ve got a
> lot of people interested in the subject, so what I\'d like to do is to
> just sort of offer our thoughts on what a joint action plan going
> forward would be. Remember, today is just the kickoff. What we hope to
> do is have a series of things that take place so we can talk about and
> show results from.
>
> I think one of the key things that we need to do is to harmonize our
> outreach. You know, we have different constituencies, both in the
> consumer as well as the service provider side, and I think we need to
> sort of harmonize our approach to them. The message we should be
> telling them from a federal program perspective should be similar
> because I think it is. It\'s just sort of we use different language,
> we use different acronyms, and, you know, we just sort of need to
> focus on harmonizing our outreach. I invite both our USDA, SBA, HHS,
> DOT, all of these folks have different programs that affect rural
> folks, and we should be talking and coming up with sort of a lexicon
> that makes sense to our communities.
>
> The second thing that I propose that we do is sort of harmonize our
> rules and regulations. For example, you know, our definition of
> broadband at the FCC and within potentially the Wireless Bureau is
> different than that of the USDRUS. Our long-term goals and the
> policies that we put into effect might also be different. The intent
> is the same, which is to build rural communities. It\'s just the way
> we approach it is different. And so I think what we need to do is to
> come up with a way of working together to harmonize our rules and
> regulation and our interpretation of our policy outcomes.
>
> The last thing, what I hope to propose and hope to work on is
> to\--nothing makes all of this a reality other than a specific
> example. If we can sort of find a community that we can sort of put
> our energies into and make them a shining example of how all of us,
> all of our Federal partners including USDRUS, FCC can work together to
> bring wireless broadband to that community, I think that would be a
> great outcome, and that would be an example for other communities to
> follow the lead because this simply can\'t happen with us. We need the
> involvement of the community, the community\'s leaders, the
> community\'s businesses, and the community\'s residents. So, sort of
> figuring out a way on how we can identify a model project in working
> to put the other two things that we\'re doing, the outreach
> harmonization and harmonization of our rules and regulation into play
> would be fantastic next step.
>
> So, with that, I want to thank everybody for coming here and again, I
> want to thank our partners at USDRUS and Administrator Legg for the
> great support and also thank all the Commissioners and Chairman Powell
> for the support that they\'ve given us as we\'ve undertaken this
> initiative. Thank you very much.
>
> (Applause.)
>
> MR. THIEMAN: Thank you, John Muleta.
>
> I\'d like to introduce Roberta Purcell from USDA Rural Development.
> She is the RUS Assistant Administrator for the Telecommunications
> Programs.
>
> (Applause.)
>
> MS. PURCELL: Good morning. I\'d like to welcome everyone for coming
> today. Thank you for coming. It\'s great to see so many people here
> for this first of what I hope are going to be many outreach initiative
> meetings that we hold together jointly with the FCC. This is truly
> exciting for us.
>
> This morning both Administrator Legg and Chairman Powell in their
> opening comments indicated what our mission is here today, not only
> for our initial kickoff meeting and outreach, but the greater mission
> of ensuring that our rural citizens have access to modern, advanced
> telecommunications services in the same form and manner that our urban
> and suburban citizens in this country have, and that to me is so
> exciting.
>
> What I am so thrilled about being here today is the fact that this
> gives us the opportunity to hopefully get that word out to more
> people, and I must say as a career government bureaucrat any time two
> government agencies can come together in a collaborative effort to try
> to make policies that complement each other, that try to have
> initiatives to work with the public in a way that\'s more effective
> and efficient, I think that is a wonderful approach to take, and we
> look at our Federal partners in the FCC and thank them for that and
> this ability, and we hope that it will further our joint mission.
>
> Now that we know why we\'re here today, for those of you who may not
> know who we are, I\'m going to take a few minutes with my colleague,
> Ken Chandler, to discuss who we are, what we do, the products and
> services that we have to offer, and how those of you in the audience
> that are interested may apply for those products and services.
>
> For the last 53 years the Rural Utilities Service Telecommunication
> Program has been financing small, local exchange carriers in rural
> America to bring modern advanced telecommunications services to those
> rural citizens. While we do it on a technology-neutral basis, we
> finance those wireline and wireless technologies, within the last
> couple of years we have made revisions to our regulations that make
> financing wireless service much easier, and that is our focus here
> today and one of the options that we want to pursue.
>
> Most recently we, in the last three years, have begun a new broadband
> initiative to bring broadband service, high-speed Internet broadband
> service to rural America. In our traditional Infrastructure Program I
> will cover this morning, we are limited to communities of 5,000 people
> or less. In our new Broadband Program we\'re allowed to finance
> communities of up to 20,000 rural citizens, which enables us to reach
> a lot more people in rural America, and we\'re real excited about
> that.
>
> As I said earlier, we\'re going to focus this morning on our two big
> lending programs, our traditional Infrastructure Program and our new
> Broadband Program, but I did want to let you know that we have a lot
> of other products and services that are available, most noticeably our
> Distance Learning and Telemedicine Loan and Grant Program. Once that
> broadband infrastructure is in place, the Distance Learning and
> Telemedicine Program is an incredible adjunct to any community that
> has broadband capability because it absolutely brings those
> educational opportunities and those lifesaving medical opportunities
> to small rural communities that otherwise might not be available.
>
> So, if you are working in community development and if you have a
> community where broadband is available, or if you work with us in the
> FCC to bring broadband service to that community, then I would ask you
> to take a look at our Distance Learning and Telemedicine Loan Grant
> Program so that you can use that broadband service to a tremendous end
> to that community in both an educational and health care initiative.
>
> We also have a Weather Radio Grant Program to bring weather radio
> alert systems to rural areas, a Local TV Loan Guarantee Program which
> we administer with three other government agencies to ensure that
> satellite providers, the subscribers, and others in rural areas have
> access to their local TV channels, and most recently we have been
> given a \$15 million grant to provide grants for digital translators
> to convert over to digital capacity public television stations in
> rural areas. So, as you can see, we have quite an extensive portfolio.
>
> Again this morning I\'m going to highlight that in two areas, our
> Infrastructure Program which does require broadband-capable facilities
> and our new Broadband Program. We are a facilities financier. We do
> the hard costs, the infrastructure, the buildings, the equipment. We
> do not lend for operating costs. So, everything that we\'re going to
> talk about this morning is facilities-oriented.
>
> Who is eligible? I\'m going to talk first about our Infrastructure
> Program. This is a program that we have run for the last 53 years. As
> I said earlier, we have been lending for 53 years to bring service to
> rural America. It can be to any local exchange carrier whether it is
> an investor-owned, a small mom-and-pop company, a cooperative entity,
> a municipality, an LLC, anyone that is attempting to serve rural
> areas.
>
> As I indicated earlier also, we\'re facilities-based, so we finance
> primarily new construction and improvements. We will also finance
> expansions into new and unserved areas. We will finance acquisitions
> and refinancing. Our refinancing is limited to 40 percent of the total
> loan package. Our acquisition costs are limited to 50 percent of the
> total loan package, or just under 49 percent.
>
> Within our Infrastructure Program we have several types of financing
> available. First and foremost, our hardship loans. Generally speaking
> in any other economy but the one we\'re in right now, this is probably
> our best product because it has a five percent fixed interest rate for
> the life of the loan. Because it normally is such a wonderful interest
> rate, we sort of limit who is eligible for it, so it has to be an area
> with the density of four subscribers or less, and a TIER of one to
> three. We have \$75 million available in that program for this year.
>
> Now, with interest rates where they are right now, you might say well,
> that maybe is not the program that I want to apply for. The one thing
> I will tell you is, we lend for, number one, the life of the
> facilities; but, number two, the interest rate is set at the time of
> the event. So, if you get a loan from us today and the interest rates
> are maybe three and a half to four percent, you don\'t draw the money
> down maybe to complete the project for another year or two and
> interest rates are seven or eight percent, when you draw down money,
> that\'s when the interest rate is set. So, this program still at five
> percent is a fixed rate regardless of when you draw the money down.
>
> Cost of money loans, that\'s what I was just talking about. This year
> alone we have \$300 million available. This is our typical type of
> loan. Monies are advanced for the life of the assets that were
> financed at the cost of money to the treasury. We complement that
> money with our Rural Telephone Bank money. So, when you come in to us
> for a regular what we will say concurrent loan, you\'ll get
> approximately 75 percent from the cost of money program, 25 percent
> from the Rural Telephone Bank.
>
> I could talk to you about the Rural Telephone Bank for hours. I
> won\'t. But needless to say right now it is a governmental entity that
> is undergoing privatization so that hopefully one day that will be a
> private source of capital for financing rural telecommunications, and
> this year we have \$175 million available there.
>
> The final program within our Infrastructure Program\--and remember,
> all of these that I\'ve talked about up to this point are limited to
> serve communities of 5,000 people or less\--is our Federal Financing
> Bank loans which we guarantee. They\'re actually made by the Federal
> Financing Bank in the Department of Treasury. We provide a hundred
> percent guarantee. Again, we make loans at the cost of money plus 1/8
> of a percent to the FFB.
>
> Well, you might say why would I come in and get an FFB loan and pay
> that extra 1/8 of a percent when I can get a cost of money loan. The
> reason you might want to do it is in this program and this program
> alone you can borrow short term up to three months\--as low as, I\'m
> sorry, three months. So, if you have someone that can track your
> interest rates, look what happens. You can come in for a 90-day loan
> under FFB right now at 1 percent, as low as 1 percent on a seven-year
> loan. So, if you have someone who could track that financing and watch
> it as it rolls over every 90 days, what an incredible offer. Even on
> our other cost of money loans you\'re probably looking at right now
> somewhere between three and a half to four percent for the life of the
> facilities.
>
> I also want to talk on our new Broadband Program. This is something
> that we\'ve had in a pilot form for the last two years, and in 2002,
> under the USDA Farm Bill we got a permanent six-year program to bring
> broadband service and, as I said earlier, to communities of 20,000
> people or less. Once again, it must be technology-neutral, but I will
> tell you we are seeing a lot of wireless applications to our new
> Broadband Program.
>
> First and foremost, it must provide high-speed data transmission, and
> we have developed the FCC\'s definition of broadband, 200 kilobits
> upstream and downstream, for this program. As I said earlier, it has
> to be a community of 20,000 or less. It cannot be located in a
> standard metropolitan statistical area. And obviously the entity that
> comes in to us for financing has to be able to find a mortgage and a
> contract with us and be able to deliver the service.
>
> Why now? The SMSA requirement does, in fact, exclude quite a number of
> rural communities of 20,000 inhabitants or less. We have had numerous
> discussions with our congressional representatives and their staffs,
> and we have indications to believe that in the very near future this
> requirement may be eliminated or significantly changed. But right now
> that is a requirement, it is in the legislation, and it is something
> that we do need to deal with.
>
> For public bodies, for municipalities, they were required to wait 90
> days from the beginning of this program, which was January 30th of
> this. That 90 days has passed. So, now a municipality is eligible to
> come in and borrow from us as long as no one is offering broadband
> service or has committed to offer broadband service in that area. We
> do not lend to individuals. We do not lend to partnerships, and by
> law, we cannot lend to any company that is serving more than two
> percent of the telephone subscriber lines in the United States.
>
> Once again, we\'re facilities-based. Funds can be used for new
> construction, for acquisition. It can be used for leasing up to two
> years. We can also finance facilities that are located in a non-rural
> area as long as the intent of those facilities is to serve the rural
> area, and oftentimes that\'s very important with the location of
> towers, particularly in a wireless operation as to where you can serve
> because of geographical and topographical restrictions. We can also
> lend for acquisition and refinancing with the same caveats that we had
> in our earlier Infrastructure Program.
>
> We cannot lend to acquire the stock facilities or equipment of an
> affiliate, to finance customer terminal equipment or inside wiring, or
> vehicles not primarily used in construction. Also, we cannot use funds
> to finance broadband facilities that are leased under an offering
> lease. It has to be a capital lease to finance systems that are not
> designed to our technical specifications for mergers and
> consolidations or, as I indicated earlier, operating costs.
>
> How much money do we have? That\'s really what you want to know,
> isn\'t it? That\'s kind of the bottom line. In the Farm Bill they gave
> us mandatory funding of \$20 million a year for 2002 through 2005.
> Well, you may say \$20 million a year doesn\'t sound like much, and
> then only \$10 million in year six and seven. That is subsidy money.
> That actually equates to a lending level of \$728 million per year for
> the first four years, and clearly half of that \$364 million for the
> last two years. So, for this year we had money in \'02, and it is no
> year money, so when we open the doors to this program on January 30th
> of \'03, of this year, we had two years of funding available. We had
> the \'02 money and the \'03 money. More than \$1.4 billion of funding
> available.
>
> There are three programs within broadband, three lending programs: a 4
> percent program, a cost of money program, and a guaranteed program.
> So, we broke out the money \$80 million for the 4 percent, \$80 to the
> guarantee, and almost \$1.3 billion available in broadband funding for
> this year. We have about \$300 million worth of applications in-house.
> So, even if we fund every one of those, we still have over a billion
> dollars available. Three funding streams as I indicated, 4 percent.
> Pretty obvious what the interest rate on that is. 4 percent.
>
> We have private lender guarantees of up to 80 percent in direct
> treasury rate loans. Because of a guaranteed 4 percent interest rate
> regardless of how interest rates go in the future, we have put some
> limitations on this. We\'re trying to target this money to our most
> rural, most economically challenged communities. Therefore, it has to
> go to serve a community of 2,500 people or less. It has to be located
> in a county where the per capita income is 55 percent of the national
> average. There can be no more than 10 people per square mile, and we
> make those loans for no more than \$5 million. They are capped.
>
> However, if you want to go into a community and the project is going
> to be seven or eight million dollars, we can make you a \$5 million
> loan at 4 percent, and we can balance the rest with cost of money.
> Again, this guide is a little old, but we lend for the cost of money
> up to the life of the facilities and right now, as I said earlier,
> you\'re looking at three and a half to 4 percent.
>
> Our guarantee program is an 80 percent guarantee. So, an entity
> actually has to go out, find private financing, come to us, and we
> will guarantee that loan up to 80 percent. Again, the terms are set by
> the private lender in that particular case. As I said many times
> before, in all of our programs we lend for the life of the facilities.
> In this Broadband Program interest is due and payable as it accrues.
> We do defer principal for the very first year. Minimum amount of any
> loan is \$100,000. Our maximum \$5 million cap applies only to our 4
> percent loans, and generally speaking, we do take a first lien on the
> assets to provide the security for our loans.
>
> In closing, I would just like to thank John Muleta, Nancy Plonn for
> having the vision at the FCC to come to us with this idea and with
> this initiative and our very own Mike Thieman and Dave Safford for all
> of their efforts today. We look forward to meeting with you after
> this. At this point, I\'ll turn it right back over to Mike. Thank you
> very much.
>
> (Applause.)
>
> MR. THIEMAN: Thank you very much, Bobbie, for showing us the money.
> Now, let\'s see what we can do to spend it.
>
> All right, I\'d like to introduce at this time Ken Chandler. He\'s the
> Director of the USDA RUS Telecommunications Program. Ken, please come
> on up.
>
> (Applause.)
>
> MR. CHANDLER: Thanks, Mike. Well, hopefully they saved the best for
> last. We\'re going to run through this pretty quickly here.
>
> This slide here gives the details on who I am. Notice at the bottom
> there\'s our web site. If you go there, you can find out all the
> information about all of our programs. You can also find contact
> information. If you\'re interested in a particular program or services
> or whatever, you can find out who to contact there.
>
> Just a little bit about how we\'re structured. For all of our programs
> in the Telecom Program except for the Broadband Loan Program, they
> reside in three areas or regions. I\'m in the southwest area. We have
> a northwest area and an eastern area. For the broadband, that\'s going
> to be a separate division, and those will be handled separately. So,
> like I say, if you go to the web site, you can find out contact
> information on everybody.
>
> I\'m going to sort of zero in now on three areas and talk, expand a
> little bit on what Bobbie said as far as our programs are concerned.
> I\'m going to talk about how some of the things we look at when we\'re
> reviewing an application for financial assistance and some of the
> ratios and things that we look at. I\'ll spend a little bit of time
> talking about the technical side, services and equipment and things
> that we can and cannot finance and maybe some of the things that are
> going on right now in the industry that\'s changing how they do
> things. And then lastly, since\--I mean, every year we will have a
> couple of infrastructure loans to new entities. It may be in a salvage
> company that\'s never borrowed from us. It may be some new
> telecommunications entity that was formed.
>
> In the wireless arena I\'ll talk about we\'re seeing lots of new
> start-ups or new companies, et cetera, so I\'m going to\--I\'ll spend
> a little bit of time talking about if you were a business wanting to
> get into that area and look to financing from us, what are some of the
> things you ought to look at or consider before you jump in.
>
> Now, as far as the review of applications, we generally will look at
> three areas. We\'ll look at eligibility, which as Bobbie said, a lot
> of times that goes back to statute, the way Congress established the
> program, who\'s eligible to apply to it, and so sometimes that will
> determine whether we can make a loan or a grant or whatever to you
> based on eligibility. And then once that\'s satisfied and we know
> which program that we\'d be dealing with, we\'ll review the
> application basically from two\--look at it two ways. One is on the
> engineering and technical side, what does the applicant want to do,
> and can they do what they want to do in the way that they want to do
> it, and are their costs reasonable. And then the biggest one for us is
> feasibility. We look at the financial side of it and when we make
> loans, we expect to be paid back, and that\'s the only way we\'re
> going to make a loan, so we\'ll look at the feasibility. Will the
> applicant be able to pay us back.
>
> Now, as far as financial requirements, when we do a feasibility study,
> what we generally do is we will look out either in a range of two to
> five years. The applicant can tell us; sometimes it\'s shorter,
> sometimes it\'s longer. What we will do is we will look at the
> projected revenues and expenses of that applicant for that year,
> let\'s just say the fifth year, and that\'s what we\'ll predicate our
> loan feasibility on because usually for most of these systems there\'s
> going to be a buildout period. You\'re going to start construction and
> it will take generally years to get everything constructed and be
> providing the services that you want to provide, and so we\'re going
> to look at, okay, once it\'s all built and you got your revenues, how
> do things look going forward as far as their ability to pay us back.
> We\'ll look at both historical financial data if it\'s an existing
> entity that has a track record. If it\'s a new start-up, there is no
> history, so we\'ll look at pro forma financial projections provided by
> the applicant.
>
> Our main criteria\--and this goes back to our statute\--for most of
> our programs the main determining factor on whether it\'s feasible is
> TIER, Times Interest Earned Ratio, and I\'ll talk a little bit about
> that in this next slide. That calculation is the ratio of net income
> after taxes plus interest divided by interest expense, and by law we
> can\'t make a loan unless that ratio is at least 1. So basically what
> that means is you have some net income. If you don\'t have net income,
> then the TIER is going to be less than 1, and the loan in infeasible.
>
> Some other ratios I\'ll talk about that may not be required but they
> may qualify you for a program or something we look at. Another one we
> look at is the net plan to debt ratio. We would like that to be
> greater than 1.2. We have one program\--well, it\'s a sub program. We
> call it the Accelerated Loan Program, which is a way of speeding up
> the process of making a loan by considering if the applicant is one of
> our most financially healthy borrowers, maybe we don\'t need to look
> to give it the scrutiny we do some of the others because they\'re
> already demonstrating by these ratios that they\'re very healthy and
> they\'re able to get a loan and pay it back. This is a qualifier, if
> that ratio is at least 1.2.
>
> Equity. We\'re a little bit different than maybe some of the other
> lenders in the Rural Telecom Program. We don\'t have a statutory or a
> defined equity or net worth level as far as qualifying for one of our
> loans. We\'ll usually\--we\'ll look at it on a case-by-case basis. It
> depends on whether it\'s an operating company that a long track record
> or it\'s a new start-up. Suffice it to say that we\'re going to expect
> some equity to be there, but whether that\'s 20 percent, 5 percent, or
> what it is or whether it\'s cash or just other forms of equity, we\'ll
> sort of do on a case-by-case basis. And here again, this is another
> indicator that\'s used for that Accelerated Loan Program, the
> borrowers/applicants with a higher net worth or more qualified for
> that.
>
> I did want to talk about operating funds, particularly for start-up
> companies or new businesses. This can be a problem because as I said,
> for a lot of the telecommunications-type plants, it\'s going to take a
> period of time to construct it. You\'re going to have to, if you\'re
> getting a loan, you\'ve borrowed the money now, and you\'re starting
> to pay interest expense on the loan, and you\'ve got all kinds of
> contracts, construction contracts and consultants\' work, and et
> cetera, so you have a lot of expenses but you can\'t generate any
> revenues until you get the plant built, and so for new entities, this
> is very important is to have some way to finance your operating
> expenses until those revenues ramp up and that can be covered. And if
> you overlook this, you\'re going to have real problems. You may not be
> able to get there from here. You\'re going to be okay in maybe two or
> three or four years, but you got to get to that point.
>
> We recommend that for new entities that you look at having about two
> years\' worth of operating funds from the start, have those there to
> be available.
>
> For our Broadband Program we have a special requirement that we
> actually\--it\'s not a recommendation. We actually, depending on the
> applicant, we require one year\'s worth of operating expense, and I
> would say that we\'ve been looking at in our other program where we
> don\'t have formal requirements, we\'re looking at this one year maybe
> across the board, especially, like I say, for new entities and even in
> our other programs to make sure that they can stay solvent and
> operating until they generate their revenues.
>
> On the technical side now, as Bobbie said, we primarily finance
> plants. We can do things like refinancing and acquisitions
> under\--with certain restrictions, but all of our programs are
> basically financing plant.
>
> We\'re end user-oriented. In other words, our constituents are the
> rural people, but we don\'t deliver our program directly to them
> ourselves. We work through some other company that borrows the money
> from us or we grant the money to them and they provide the services.
> And we\'re technology-neutral. In other words, we\'ll finance any kind
> of technology if it will provide the services and meet the
> requirements that that program requires. So, we run the broad gamut of
> different way of wireline, wireless, radio, even satellite. The best
> way to do it you do it that way, and we\'ll finance it.
>
> Just a couple of things about what we\'re seeing as far as the way
> systems are being designed today and the services they\'re providing
> for our LEC-type program, what Bobbie called the infrastructure loans,
> the telecommunications loans that are targeted toward local exchange
> carriers. For about the last ten years the most common design that we
> see in there is I\'ll call it a fiber in the loop design where you
> have electronic serving areas
>
> you group subscribers in the areas, you feed fiber out to that
> electronic site. Right now we\'re using buried copper cables to extend
> service from that site to the subscriber\'s house, but by doing that
> way you have fiber at least out that far. So, if you ever want to go,
> say, fiber to the home, you only have to put the piece in that goes
> from that electronic site out. And like I say, for the last ten years,
> this has been\--we\'ve done a lot of this, so we have a lot of\--our
> borrowers have a lot of fiber in the loop already.
>
> We are starting to see now some fiber to the home systems, and this a
> result, I think, of the cost coming down, one, it\'s cheaper to do it,
> and the other thing that\'s influencing that is the desire to have
> broadband-type services where you need something more than just, say,
> a copper cable to be able to do it. And then wireless, and I\'ll talk
> a little bit about this since that\'s sort of the thrust of here
> today.
>
> One area that we have seen more interest in wireless systems is the
> broadband, providing broadband service, and we\'ve seen this. We\'ve
> had some pilot projects, both loans and grants to finance broadband
> service, and wireless is very popular there because they can use
> unlicensed spectrum. You can get it up and running fairly quickly
> because you don\'t have to go plow in cables or bury them. You find
> tower sites like water towers or grain elevators, and you can get
> service up quickly and it can provide, you know, very good broadband
> service.
>
> We also have seen wireless applications\--not to a large extent, but
> they can be an overlay. In other words, you could have a local
> exchange carrier that uses a conventional buried system to serve most
> of their subscribers, but they may have pockets of scrubbers that,
> say, are way out where providing a broadband service to them might be
> difficult through the conventional ways. They may overlay a wireless
> system in that area and maybe feed fiber out to it and then go from
> there with the wireless system to provide both plain old telephone
> service and wireless.
>
> And then the other area, as Bobbie said, that we\'ve seen some
> increased demand from us is for mobile wireless. What we would like to
> do is, you know, we\'d like to see mobile wireless go beyond just the
> roads. I mean, in most rural areas you have it while you\'re driving
> down the highway, but if you get off the highway the signal goes away,
> and so we\'d like to encourage more coverage there so the farmer out
> on his tractor could use his cellular phone if he had a problem, you
> know, to call for help or whatever.
>
> Lastly, the cover\--this is called operational sophistication, but
> what this means is if you\'re a start-up or you\'re getting into new
> business, what are some kind of things to take into account or to look
> at as far as, you know, going down that road. One of them is, you
> know, know what you\'re getting into. In other words, are you just
> going to be a niche provider, you\'re going to look at one particular
> kind of service and that\'s all you\'re going to do, or are you going
> to do a broad spectrum of services, you know. If it\'s local telephone
> service, you know, there are some expectations there. It\'s got to
> work all the time. If you\'re providing mobile wireless service, well
> people don\'t get upset if they can\'t make a call this second, they
> have to wait a few minutes. But if you\'re a local exchange carrier,
> it\'s different. So, know what you\'re getting into and what your
> expectations are of making money off it because, of course, you want
> to make money, but maybe you won\'t make a ton of money, depending on
> the market that you get into.
>
> You\'re going to want to do a market survey or something so that you
> can see what are the people in the area that I\'m going to be
> providing. What do they want, what are they expecting, and then tailor
> your business to that. Is there competition? If you\'re going to be
> competing with somebody, maybe the pie\'s big enough that you both can
> have a slice and make money. But it may be it\'s win/lose situation.
> One of you is going to win and one of you is going to lose, so you\'re
> going to want to develop your business plan based on what that market
> looks like and who you\'re going to compete with. If you\'re competing
> with somebody and it\'s for the same type services, what they do and
> what they charge is going to influence what you do because you can\'t
> do less or you won\'t get any of the market. You\'re probably going to
> have to do more to get some of their market.
>
> The regulatory environment has a bearing on it also. I mean, who\'s
> going to regulate your service, if anybody? Is it going to be at the
> Federal level, the local level, et cetera. Many states have public
> utilities commissions that regulate some of the utilities things. For
> Native Americans on reservations, they have sovereignty issues, but
> someone will want to regulate that utility service on the reservation.
> It might be the tribal authority does it themselves or in a case with
> one of our Native American borrowers, they elected to have the public
> utilities commission to regulate their service because someone needs
> to look at the service, is it meeting the demands, are the rates
> reasonable, you know, et cetera. So, know the regulatory environment.
>
> Experience. If you\'re just starting out you\'re going to need
> somebody that knows the market that you\'re getting into. If you
> don\'t have those kind of people on your staff or locally, you\'re
> going to have to get it, you know. Hire them. You\'re going to need
> consultants, unfortunately. This is great for the consultants, but
> it\'s a lot of money. You\'re going to need probably someone to design
> your system and oversee the construction, some kind of cost consultant
> that\'s going to help you project your revenue flows, et cetera, a CPA
> to make sure you stay legal, and then some kind of legal advice or
> attorney.
>
> One thing I want to point out here on the experience, we have had some
> applicants that will partner. Maybe they don\'t have experience in the
> area, so they\'ll partner with another business that has done that
> before, and if they\'re a stock company, they\'ll, you know, issue
> stock. The majority of stock will be owned by the applicant, but maybe
> some by that other applicant\--by that other experienced company, and
> thereby they gain their experience to help them get started and then
> at some point you buy them out and they\'re out of the picture,but
> they\'ve helped you get started.
>
> And then the last thing that I wanted to point out was develop a good
> long-range plan. I mean, planning is everything in this. You have to
> know where you\'re going and how you\'re going to get there. It\'s so
> complicated. There\'s so much regulations and things that can happen.
> You need to plan for that and know. It\'s just like those operating
> funds. If you don\'t plan for that and you run out, you\'re kind of
> high and dry at that point, so you want to try to anticipate things,
> know where you\'re going, make that plan, and then stick with it. So,
> hopefully companies that do these kinds of things, we\'d love to
> participate with you and finance your service, particularly in rural
> areas because that\'s our goal is to try to improve that service out
> there in rural areas. So, thank you very much for your time today.
>
> (Applause.)
>
> MR. THIEMAN: Thank you very much, Ken, for showing us the road map on
> how to navigate the telecom programs.
>
> With that, I\'d like to\--well, it\'s my honor and privilege to
> introduce to you the closing remarks of Kevin Martin, FCC
> Commissioner. Commissioner.
>
> (Applause.)
>
> MR. MARTIN: Good morning, everybody, and thank you for inviting me to
> be with you this morning. Thanks, Hilda.
>
> The issues confronting rural America today are extremely important and
> timely for al of us to try to address, and they\'re particularly
> important for me. I grew up in a rural area of North Carolina, and I
> understand how important it is for folks that live in rural areas to
> have access to telecommunications and advanced services and what a
> difference it can make to the folks that are living in those areas.
>
> Telecommunications in general has been responsible for much of the
> growth, economic growth of the country over the last few years, and I
> continue to be hopeful that continued deployment of telecommunications
> and broadband will lead to a new period of such growth. But in order
> for us in the United States to be able to fully recognize and take
> advantage of this growth, we must make certain that all Americans,
> those living in rural and in urban areas, are given the opportunity to
> participate in that growth. And specifically we have to continue to
> encourage the deployment of telecommunications and broadband to rural
> areas.
>
> And I\'m particular excited about wireless deployment because it can
> be critical because of the nature of wireless technologies and the
> potential they have to reach people living in rural areas in a much
> more efficient way, and so I\'m particularly excited and pleased to be
> here to talk about this initiative this morning. This event marks,
> hopefully, the beginning of our focus on rural America, which is long
> overdue, but it also marks the beginning of a new relationship between
> our two agencies. On behalf of the Commission I\'m particularly
> pleased and excited to be a partner in this kickoff. We at the
> Commission look forward to developing these activities, not only with
> RUS, but also with all the agencies, industries, and the local rural
> communities and particularly those who have received the recent
> broadband awards and grants that we were talking about just a few
> minutes ago.
>
> As many of you have already heard this morning, this program\'s
> mission is to exchange information between agencies, governments, and
> rural communities and potential wireless industry entities regarding
> the development and telecommunications access programs. As Chairman
> Powell indicated this morning, the project has four specific goals:
> First, the exchange of information about products and services each
> agency offers to promote the expansion of telecommunications services
> in rural America. Second, to harmonize our rules, regulations, and
> processes whenever possible to maximize those benefits for rural
> America. Three, to educate our partners and our other agencies about
> these offerings, and finally, to expand our partnership to the extent
> that it adds mutually beneficial to each other, to the agencies, and
> particularly to those who are trying to serve rural areas.
>
> This event, as I mentioned a few minutes ago, will hopefully be the
> first in a series of events to come and we\'ll continue to look
> forward to participate in all of those, but we also look forward to
> the input that you all might provide after this first session. So,
> please don\'t be shy about giving us any feedback you might have.
> We\'ll also be launching a web site and look forward to your
> correspondence and encourage you to really fully participate in that.
>
> And so finally, on behalf of the Commission, let me take just a moment
> to thank not only John Muleta and Nancy Plonn for their work on our
> staff, but also particularly Administrator Legg for her dedication and
> leadership and also Assistant Administrator Purcell for her obvious
> enthusiasm for these programs. And so, on behalf of the Commission we
> have a presentation for each of you that we\'d like to end up making.
>
> Clocks to try to demonstrate our ability to synchronize our efforts
> going forward.
>
> (Applause.)
>
> MS. LEGG: It\'s beautiful and I will put it in my office and it will
> be a daily reminder that he\'s watching the clock at the same time.
> So, the pressure will be on. What a clever way to do that,
> Commissioner. Thank you so much.
>
> MR. MARTIN: Thank you so much, and we\'ll continue to look forward to
> working with you on all these efforts going forward. Thank you.
>
> (Applause.)
>
> MR. THIEMAN: And now I\'d like to introduce Hilda Legg, our
> Administrator of USDA RUS for her closing remarks.
>
> MS. LEGG: Thank you. Again, Commissioner Martin, it\'s a pleasure to
> have you with us today here at USDA, and all of your presentations
> were just terrific, each and every one of them.
>
> You notice I skipped out on Bobbie Purcell\'s and Ken Chandler\'s.
> I\'ve heard those before, so I went to get a phone call. I don\'t
> think I really can add very much in my closing remarks to what the
> Commissioner has said, certainly what Chairman Powell and all of the
> experts that you\'ve heard from today.
>
> What I can say is that on behalf of the Rural Utility Service, again,
> we are committed to more and more of these sessions, to more of
> strengthening our partnership and working together on behalf of what I
> call the people at the end of the line, the families at the end of the
> line. And in my business at RUS, that may be a water line or an
> electric line. In this case, it\'s at the end of the telephone line,
> or for wireless, it\'s at least at the end of the signal. So, that is
> the ultimate goal, as I mentioned in the beginning, to provide this
> service for the now-residents of rural America, and we strengthen our
> ability to do so through the partnership.
>
> I know that Bobbie would have mentioned that we have \$1.45 billion in
> our Broadband Program plus our regular program. Ladies and gentlemen,
> my position is that this President and the Congress did not put that
> money in RUS\'s budget to sit here in Washington, D.C. in the office
> of the U.S. Treasury. That money is meant to deploy telecommunications
> to the residents in rural America. With your help we can disseminate
> this information, a major goal that John mentioned, that you can us to
> identify those potential borrowers and recipients and that we will be
> glad to work with them, both with our headquarters staff and with our
> field staff, which we\'re fortunate to have at RUS. So, we can really
> be on the ground as well as with our rural development state offices
> working with the folks. So, please help us spread the word that we
> have some resources and that together we are working to make those
> resources more viable and more accessible for the residents of rural
> America.
>
> Again, to all of the folks who put effort forth today, I want to thank
> you. This doesn\'t happen\--the Commissioner and I and the Chairman
> and I get to come, and I think it always doesn\'t have the fun part,
> but all the work behind the scenes goes to the staff and the
> leadership within both the FCC and within Rural Utilities Service and
> Rural Development. So, thank you again.
>
> I know that you\'re going to have an open forum time and a little
> socialization time, so I want to encourage you to participate in that.
> And again as the Commissioner said, please give us your feedback. You
> know, we get really caught up here in Washington. We\'re focused on
> what\'s on our desk and the next E-mail, and the phone calls. And
> it\'s so important to hear from you folks who are out there in the
> areas, in the communities, and have another point of view and another
> approach to this. So, your ideas and your suggestions are always
> welcome at RUS and I think the Commissioner would say at FCC as well.
>
> Thank you for your commitment. You know, I can\'t help but close\--and
> I do this all the time, so forgive me, but let me just give you my
> famous Burke quote, Commissioner, and it is: \"The only way for evil
> to survive,\"\--and ladies and gentlemen, I define evil as not just
> the terror and stuff, September 11th or the sniper that we all
> experienced in this area, but evil is also poverty, it\'s also the
> lack of education, the lack of opportunity, and he said, \"The only
> way for evil to survive is for good men,\"\--and I add women\--\"for
> good men and women to do nothing.\" And I know that evil will never
> survive in this country because you in this room both in headquarters
> staff at FCC, at USDA, and those of you who are across the country are
> out there every day trying to make your communities stronger in rural
> America and provide services to the folks in those communities. And so
> I close by thanking you for your commitment to rural America, and
> we\'re delighted to be a partner in that endeavor. Thank you very
> much.
>
> (Applause.)
>
> MR. THIEMAN: Thank you very much, Administrator Legg. At this time
> we\'re going to have the open forum. Our microphones are here
> available for any questions. We\'d also like to mention to you that
> the appointments, the scheduled appointments to be held, we\'ve got
> Ken Chandler, Ken Cuchino (ph) and Jerry Brent. If you could make your
> way forward somewhere during the end of this open forum. So, if there
> are any questions, please feel free to go ahead and ask.
>
> MR. ROBBINS: Okay. My name is Ken Robbins. I\'m President of the
> National Center for American Indian Enterprise Development. I just
> really wanted to thank the leadership of the two agencies, the
> Department of Agriculture and the FCC, and I agree with Hilda Legg
> that it\'s wonderful to see the two agencies working together. It\'s a
> very positive agency partnership and in Indian country the Internet is
> kind of a double-edged sword as it is to many of the communities out
> there. But either it will overcome the barriers or it will enhance the
> barriers that we face.
>
> Not too long ago the Government Accounting Office came out with a
> report, and that report said that of all the monies that were made
> available to Indian communities, more than half went unspent. And we
> see that as relating to the barriers of access to the Internet to the
> Indian communities, but also in the agency coordination. So, we are
> real happy to hear comments such as Mr. Muleta\'s earlier this
> morning.
>
> And another comment. At the National Center is a business organization
> that we are concerned about the prioritization the use of the
> Internet. That\'s wonderful in government contracting, but what it\'s
> doing to some of our communities and our businesses is those that
> don\'t have access, even telephone access, are being omitted from the
> market, so it\'s kind of like a monopoly shutting out Indian
> businesses. And it\'s hard for a lot of folks out in the East to, I
> guess, comprehend, you know, an Indian community, but if you think
> about where the railroad tracks end, that\'s where a lot of our people
> are located. So, it is a difficult situation.
>
> But on behalf of our leadership we really support this initiative and
> your outreach efforts, and we look forward to working with you in
> Indian country. Thank you.
>
> (Applause.)
>
> MR. THIEMAN: Thank you very much, Ken.
>
> Yes, ma\'am.
>
> MS. KING: My name is Karen King, and I\'m with Venable here in
> Washington, D.C., and I also had a question about Indian country. I
> wanted to know if any of the funding opportunities have any different
> stipulations for tribes or tribal consortiums.
>
> MR. THIEMAN: Go ahead, Bobbie.
>
> MS. PURCELL: Actually, all of our programs are open to any entity that
> one comes in. We had a good, long history of lending Internet of
> American Tribal Utilities. I think we had, what, seven or eight\--six
> of our borrowers are actual tribal utilities who have come in to us,
> borrowed money under our Infrastructure Program, and set up what are
> very modern, advanced telecommunications companies.
>
> We also just ended our first round of funding on what we call our
> Community Connect Grants, which I really didn\'t have a chance to talk
> about this morning, but very quickly that was a grant program that was
> intended to go into communities that because of their remote location
> and because of maybe income levels that were lower than the national
> average couldn\'t just naturally cash flow alone. We made \$20 million
> available in those grants for the first round this year and we\'re
> very pleased to say that of the ten of the 40 recipients of those
> grants are Native American entities which will bring a fully
> operational broadband system to those Native American reservations.
> So, while we don\'t have any differing regulations or provisions for
> the Native Americans, we try to make sure that the programs that we
> have in place are very accessible to the Native Americans, and we have
> I think a good, long history, particularly with our general field
> representatives who are out in the field of working with Native
> American to come in to us and get the financing that brings so much of
> the needed access to these communities. Thank you.
>
> MR. THIEMAN: Today sort of the challenge that we\'ve thrown open to
> this community is there\'s a tremendous amount of resources available.
> The real key is figuring out how to put the package together that
> actually ends up serving the rural community. So, it\'s not a lack of
> programs. It\'s not a lack of funding. I think it\'s a lack of people
> focusing on how we can work in an integrated fashion just within the
> FCC, Bill Maher, Kris Monteith, myself all have different things that
> we can do to put it together, and I think we\'re throwing open a
> challenge. Communicate with us, tell us what needs to happen, and
> we\'ll see if we can make it happen. So, you know, the challenge is
> not just among ourselves, but also to the community at large.
>
> Yes, ma\'am.
>
> MS. CAMPBELL: My name is Darlene Campbell, and I represent opie.net
> (ph). We\'re one of the recipients of the broadband community
> connectivity grant. We\'re from New Mexico, and we\'re very proud that
> you\'ve awarded four of them to our New Mexican people. Two of them I
> know are to Indian tribes, and we all have the same problem out there.
> We are so rural and our territory is so hilly, and a large portion of
> our people don\'t even have telephones, 25 percent in the area that I
> represent.
>
> An additional problem is many of them do not even have power. They
> have generators, they have solar power, even wind power. So, it
> present quite a challenge whenever we\'re working out there.
>
> With that in mind, I want to thank you at the USDA for presenting us
> with this grant. And I want to know when we\'re going to get some
> money because I have a whole town. They\'re celebrating their 100th
> centennial\--it\'s a centennial celebration, and we\'re having a big
> parade on the 4th of July, and everybody walks up and down the town,
> it\'s about 1,150 people, and they say, hey, when are we going to get
> our Internet access? We want to get started before the fall session
> for school. We have the University of New Mexico, which has said that
> they will hold classes there. The Family Literacy Program will hold
> classes there. The GED program and a couple of other programs have
> offered to hold classes there. So, we really are anxious to get going.
>
> My husband also\--he and I are the proprietors of our small business,
> which is an LLC, and we have come out here because he asked me to send
> some questions out to you in regard to a couple of issues. I would
> imagine that the FCC can probably answer some of these questions a
> little better. So, let me just put them out, and you can get back to
> me.
>
> We were talking about an expansion of the 2.4 gigahertz to add
> Channels 12, 13 and 14. Currently we do not have that in the United
> States, and that would put us on par with Japan. Is that going to be
> in the offing in the near future?
>
> Secondly, will we be getting more spectrum on the 5.8 gigahertz band?
>
> And thirdly, he wants to see a higher effective radiated power, ERP,
> output to be allowed in both the 2.4 and the 5.8 gigahertz bands
> because the ranges that we have to cover in a rural area are very
> extended distances. Currently we\'re allowed about four watts on a
> point-to-point link with a directional antenna, and on an omni we\'re
> allowed one watt. He gave me a couple of examples to use, but I\'m not
> going to bore you with all that. So, he would like to see at least 20
> watts, but 50 would be better, and this would be in a rural area, and
> it would not face the same type of interference issues that we would
> face in a metropolitan area. So, if we can\'t do this with everyone,
> could we possibly allow the rural areas to exempt out of that
> limitation so that we can cover those areas that we have to cover?
>
> Our broadband reaches from a little town called Avo to Moriarity,
> which is about 60 miles. In that area we have approximately 17,000
> people. In order for us to get to those people, we not only have to
> have a major repeater, we have to have many repeaters because we have
> to shoot down-canyon and over little hills, and all of this, of
> course, as you can understand, is very expensive, and it would require
> more power than what we\'re allowed to do. So, we would like you to
> take those into consideration.
>
> I thank you very much for your attention.
>
> (Applause.)
>
> MS. PURCELL: Well, first of all, I\'d like to say congratulations on
> being a grant recipient and way our processes work, we make the
> announcement, we make the grant award. We are in the final stages with
> our Office of General Counsel of developing a grant agreement which as
> soon as that is complete, we will send that out to you. As soon as you
> sign that, you will be eligible to draw down funds. So, we\'re going
> to make that process as quick as we possibly can to get that check in
> the mail out to you as quick as possible because we do understand that
> it is critically important, not only to get the service out, but
> particularly it\'s good to have it during the summer months when you
> can do your construction and particularly to have some of your
> Distance Learning capabilities up and running for the school year. So,
> as soon as we get out here today, I\'ll check and see where that grant
> agreement is and see if we can\'t speed that process along.
>
> MR. MULETA: With regard to the FCC questions that you presented, in my
> presentation I pointed out that exactly those very same issues are
> being teed up in a variety of ways. So, the power limit issues we have
> are not only notices of inquiry for unused TV spectrum that was put
> out earlier in the year, but also we\'re considering changes in
> granting more flexibility in power, also to buildout requirements, you
> know, enabling sharing of infrastructure to get at reducing the costs.
> So, all of these things are teed up. One of my hopes is that joint
> action plan will be to sort of figure out\--there\'s a community there
> that we can sort of focus in and use as a template and resolve some of
> these issues. I understand. We\'ll see if we can work that out. But I
> think what we need to do is sort of have a test bed where we can try
> some of these ideas to put forward.
>
> I think the focus on the applications is exactly the right concept,
> the right sets of applications, so I\'m glad to hear that there are
> people out there that are thinking of these issues. And maybe after we
> finish here, we can get some of the information and be in direct
> contact with your engineers. Thank you.
>
> MR. THIEMAN: Any other questions for our open forum?
>
> Okay, with that I\'d like to just wrap up with just who will meet with
> whom in our RUS programs and joined by the FCC staff if they are
> available. For meeting with Ken Chandler, Ken would you please stand.
> We\'ve got Andrea Dayes (ph) and Ken Robbins. So, after this the two
> of you can meet with Ken. And with Ken Cuchino, please stand. Ken\'s
> all the way in the back there. We\'ve got Jael Trigg (ph) and Darlene
> Campbell. And Jay Brent. Jay, please stand. All right, for Jay we have
> Laird Paxton (ph) and Charlene Winger (ph). After this please see the
> appropriate folks.
>
> And with that, I\'d like wrap it. Thank you very much for your time
> and for those who\'d like to have lunch, please meet in the back, and
> we will escort you as a group to the cafeteria. Thanks again, and
> thanks for the welcome.
>
> (Applause.)
>
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