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          1                     OPENING STATEMENTS

          2  Opening statement by Chairman Kennard ................ 6
             Opening statement by Commissioner Ness .............. 12
          3  Opening statement by Commissioner Furchtgott-Roth ... 15
             Written statement of Commissioner Tristani .......... 17
          4
             Statement by Christopher McLean
          5       Rural Utilities Service ........................ 19

          6
                                     PANEL I
          7
             Statement by Governor Mary Thomas
          8       Gila River Indian Community .................... 27

          9  Statement by J.D. Williams
                  Cheyenne River Sioux Telephone Authority ....... 32
         10
             Statement by Nora Helton
         11       Fort Mojave Indian Tribe ....................... 40

         12  Statement by Charles Wiese
                  Tohono O'odham Utility Authority ............... 47
         13
             Statement by President Ivan Makil
         14       Salt River Pima-Maricopa Community ............. 52

         15  Statement by Vernon James
                  San Carlos Apache Tribe ........................ 59
         16

         17                         PANEL II

         18  Statement of Jeff Olson
                  GTE ............................................ 82
         19
             Statement by Aloa Stevens
         20       Citizens Communications ........................ 88

         21  Statement by Carl Artman
                  Airadigm Communications, Inc. .................. 98
         22
             Statement by Richard Watkins
         23       Smith Bagley, Inc. (Cellular One) ............. 106

         24  Statement of Rhonda McKenzie
                  MTG, Inc. and Aircom Consultants .............. 116
         25


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          1                         PANEL II (Cont'd.)

          2  Statement by David Siddall
                  Verner Liipfert Bernhard McPherson and Hand ... 123
          3
             Statement of Walter Purnell
          4       American Mobile Satellite Corporation ......... 131

          5
                                    PANEL III
          6
             Statement by Jim Irvin
          7       Arizona Corporation Commission ................ 143

          8  Statement by Madonna Yawakie
                  Minnesota American Indian
          9       Science & Engineering Society ................. 151

         10  Statement by Alison Hughes
                  Arizona Telemedicine Program .................. 160
         11

         12                       PUBLIC COMMENT

         13  Statement by David Redick .......................... 166

         14  Statement by Edward Groenhout
                  Northern Arizona University ................... 168
         15
             Statement by Herman Laffoon, Jr.
         16       Colorado River Indian Tribes .................. 169

         17  Statement by Laura Lo Bianco
                  Iridium North America ......................... 171
         18

         19                     CLOSING STATEMENTS

         20  Statement by Commissioner Ness ..................... 172

         21  Statement by Commissioner Furchtgott-Roth .......... 172

         22  Statement by Chairman Kennard ...................... 173

         23

         24

         25


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          1         BE IT REMEMBERED that a public hearing in the

          2  matter of "Overcoming Obstacles to Telephone Service to

          3  Indians on Reservations" was convened before the Federal

          4  Communications Commission at 5550 West Wildhorse Pass,

          5  Chandler, Arizona, commencing at 8:25 a.m. on the

          6  23rd day of March, 1999.

          7

          8  COMMISSIONERS:

          9         Mr. William E. Kennard, Chairman
                    Ms. Susan Ness
         10         Mr. Harold Furchtgott-Roth

         11
             RURAL UTILITIES SERVICE:
         12
                    Mr. Chris McLean, Deputy Administrator
         13

         14  PANEL I:

         15         Governor Mary Thomas, Gila River Indian
                       Community, Gila River Telecommunications,
         16            Inc.;

         17         Mr. J.D. Williams, General Manager,
                       Cheyenne River Sioux Telephone Authority;
         18
                    Ms. Nora Helton, Chairperson, Fort Mojave
         19            Indian Tribe, Fort Mojave Telecommunications,
                       Inc.;
         20
                    Mr. Charles Wiese, General Manager,
         21            Tohono O'odham Utility Authority;

         22         President Ivan Makil, Salt River Pima-Maricopa
                       Community;
         23
                    Mr. Vernon James, San Carlos Apache Tribe.
         24

         25


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          1  PANEL II:

          2         Mr. Jeff Olson, Director, Regulatory Planning &
                       Policy for Issues Integration/Planning &
          3            Strategy, GTE;

          4         Ms. Aloa Stevens, Director, External
                       Affairs-West, Citizens Communications;
          5
                    Mr. Carl Artman, Executive Vice President and
          6            General Counsel, Airadigm Communications,
                       Inc.;
          7
                    Mr. Richard Watkins, General Manager,
          8            Smith Bagley, Inc., Cellular One of
                       Northeast Arizona;
          9
                    Ms. Rhonda McKenzie, Managing Partner, MTG, Inc.,
         10            and AirCom Consultants, Inc.;

         11         Mr. David Siddall, Attorney at Law,
                       Verner Liipfert Bernhard McPherson and Hand;
         12
                    Mr. Walter Purnell, President and CEO,
         13            American Mobile Satellite Corporation.

         14
             PANEL III:
         15
                    Mr. Jim Irvin, Chairman, Arizona Corporation
         16            Commission;

         17         Ms. Madonna Yawakie, Minnesota American Indian
                       Science & Engineering Society;
         18
                    Ms. Alison Hughes, Associate Director, Arizona
         19            Telemedicine Program.

         20

         21

         22                                     JULIE HEDELSON, RPR
                                                Court Reporter
         23

         24

         25


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          1               CHAIRMAN KENNARD:  Good morning, and

          2  welcome to the second Federal Communications Commission

          3  hearing to examine the lack of telephone service on

          4  Indian reservations in our country.  My name is Bill

          5  Kennard.  I'm Chairman of the Federal Communications

          6  Commission.  I am joined today by my two colleagues from

          7  the FCC, Commissioner Susan Ness and Commissioner Harold

          8  Furchtgott-Roth.

          9               I see some familiar faces from Washington

         10  as well, and I'm glad to see that we have a good turnout

         11  this morning.  We're going to start today with some

         12  opening comments from our visitors from Washington, and

         13  then we're going to hear from the people we really came

         14  to hear from most, and that is the people who are here

         15  in Arizona who are addressing the problem, the serious

         16  problem in our country, of underserved areas on Indian

         17  reservations.

         18               I want to especially thank the Gila River

         19  Tribal Authority and its very impressive leader,

         20  Governor Thomas, who we'll hear from a little bit later

         21  today, for hosting us.  We had the privilege yesterday

         22  of visiting Gila River and also the Salt River

         23  Pima-Maricopa communities, and I was awed not only by

         24  the beauty of this country but also by a lot of the

         25  progress that is being made, particularly by Gila River


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          1  Telecommunications and also by Saddleback

          2  Communications.  Both of those companies are doing some

          3  very impressive things to bring service to Indian

          4  communities here, and we want to hear from them today,

          5  and we're pleased that we'll have that opportunity.

          6               The success of Gila River and Saddleback

          7  Communications shows that, with determination and

          8  intelligence, we can succeed in bringing telephone

          9  service to reservation residents.  And that's why

         10  today's hearing is called "Overcoming Obstacles To

         11  Telephone Service for Indians on Reservations."  We're

         12  not here to just examine.  We're not here to monitor.

         13  We are here to overcome.  We want real solutions to real

         14  problems, because I and my colleagues on the Commission

         15  are determined to find a way to bring basic phone

         16  service and all of the advanced services that Americans

         17  are beginning to enjoy in this country to all Americans,

         18  including not only Americans in our cities and our more

         19  affluent suburbs but also to our rural areas, Indian

         20  reservations, inner-city communities.

         21               In our country today, 95 percent of

         22  Americans have telephones.  That's the national average.

         23  That's an impressive number.  It's an impressive number

         24  because people in industry and government have worked

         25  together to create a universal service system that has


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          1  worked for most Americans in this country.  We have a

          2  telecommunications system in America that's literally

          3  the envy of the rest of the world, and that's a

          4  wonderful thing.  But it is shameful that as we enter

          5  the 21st Century there are communities in our country

          6  that don't enjoy those high numbers of penetration.  And

          7  as we looked around to determine where those people are,

          8  what populations are still waiting for a basic dial-tone

          9  phone, we found that our Indian peoples are the most

         10  distressed population in America.  That's why we're

         11  here.  That's why we went to New Mexico last month,

         12  myself and Commissioner Gloria Tristani.  That's why

         13  myself, Commissioner Ness, and Commissioner

         14  Furchtgott-Roth are here today.  We're here to find

         15  solutions.

         16               In our hearing last month in New Mexico, in

         17  Albuquerque, we heard firsthand how this digital divide,

         18  the divide between people who have technology and those

         19  who don't, has affected peoples' lives.  We heard from

         20  families who paid basic rates between $20 and $35 per

         21  month for basic phone service but had typical bills in

         22  excess of $100 because most calls were toll calls.

         23  People were living in remote areas, and they'd get a

         24  phone for a few months, but then their toll rates would

         25  go up so high that they couldn't afford to maintain


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          1  service.

          2               Well, yesterday when we talked to the

          3  people who were leading the Gila River

          4  Telecommunications Company, we found that on that

          5  reservation people can call anywhere on the reservation,

          6  and it's a local call.  And so we didn't see here the

          7  same problems that we saw in New Mexico, with people not

          8  being able to manage their long-distance phone bills.

          9  And that's a model that we think should be replicated in

         10  other reservations around the country.

         11               In New Mexico we met with people who didn't

         12  have phones, a lot of people who didn't have phones, and

         13  people who were -- and they talked to us about the

         14  challenge of not having a phone at home and how they

         15  couldn't call the doctor or get in touch with their

         16  children's schoolteachers.  We learned how this divide

         17  particularly affects Indian children in New Mexico.

         18  They told us about the Pinon Public School District

         19  Number 4 on the Navajo reservation, which is here in

         20  Arizona, where 1500 school children actually have

         21  computers.  The problem is not getting computers in that

         22  school district; it's getting them hooked up to the

         23  Internet.

         24               And already our visit to New Mexico last

         25  month has helped people there.  Shortly after we had


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          1  that meeting in New Mexico, I met with the Chairman and

          2  CEO of US West, which serves a lot of the pueblos in

          3  New Mexico, and I talked to him about what I'd seen in

          4  New Mexico.  And I asked him why people in his service

          5  area in New Mexico were not getting service on Indian

          6  reservations, and we talked about that.  And we talked

          7  about the Picuris Pueblo, which we visited in

          8  New Mexico, which has been almost completely bypassed by

          9  US West in that community.  And I'm pleased to report

         10  today that tomorrow US West is going to that pueblo, the

         11  Picuris Pueblo, and they're going to spend several hours

         12  tomorrow afternoon signing up subscribers for telephone

         13  service in that pueblo.

         14               And we're going to continue to work with

         15  US West and other carriers to help highlight some of the

         16  problems that we are seeing, to work with them to get

         17  service to those communities, and we're going to work

         18  with all of the carriers.  I notice that there are some

         19  wireless carriers here today.  I'm very interested to

         20  hear how some of the wireless solutions are bringing

         21  telephone service where it wouldn't exist with the

         22  wireline solution.

         23               As we travel around the country, we're also

         24  highlighting some of the programs that are already in

         25  place that we're finding people don't know about.  We at


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          1  the FCC administer what we call the Lifeline program and

          2  the Link-up program, which are ways to make sure that

          3  our lowest-income Americans have access to telephone

          4  service.  Well, when we went to New Mexico last month, a

          5  lot of people had never heard of these programs.  And so

          6  we are here to tell you about those and hope that,

          7  working with you, the tribal leaders, and the local

          8  state regulators, that these programs can get better

          9  known.

         10               But this is only a start.  We are here to

         11  find solutions, real solutions, to make sure that as we

         12  enter the information age, we enter it together as a

         13  nation and no one is left behind.  And hopefully we'll

         14  hear not only what people see as barriers today but

         15  also, most importantly, what they see the solutions to

         16  be.  I want to hear today from the six tribes that have

         17  taken control of their telecommunications destiny and

         18  formed partnerships with non-Indians to better serve

         19  their reservations and understand how we can help them

         20  succeed and replicate that success around the country.

         21               So, again, I want to thank Governor Thomas

         22  for hosting us, having us here today, and for that

         23  wonderful tour of Gila River yesterday.  It was really a

         24  wonderful time.  And I want to thank my colleagues for

         25  being here with me today, including our colleague from


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          1  the RUS, who we'll hear from in a minute.

          2               Commissioner Ness, opening statement?

          3               COMMISSIONER NESS:  Thank you, Chairman

          4  Kennard.  It is a pleasure to be here with you today.

          5  It is so necessary that we get outside of the

          6  Washington, D.C., environment and talk with and see what

          7  is really going on in the rest of this great land.  We

          8  had an opportunity to do it yesterday, and it was an

          9  extremely meaningful experience.

         10               First, I too want to thank Governor Mary

         11  Thomas.  I want to thank her for her graciousness, her

         12  leadership, and for the opportunity to visit a number of

         13  different areas within the community yesterday.  She

         14  sets a wonderful example of someone who is committed to

         15  bringing the newest technology, the best services to her

         16  people.  She knows how to lead and knows how to do it in

         17  a manner that creates enthusiasm within the communities.

         18               And it was delightful to visit the Gila

         19  River telco and to see all of the ideas that they have

         20  for developing new services and, earlier, to visit

         21  Saddleback Communications and, once again, to see the

         22  ideas they have for developing new services to be able

         23  to speed up service to the population, to try out

         24  wireless services, in the case of Saddleback, where

         25  wired service is such an expensive undertaking.  All of


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          1  these ideas and the enthusiasm and the pride that we saw

          2  in being able to advance telecommunications services to

          3  people who have tried and tried and tried to get service

          4  before, unsuccessfully.  This was very encouraging.

          5               There's a lot yet to be done.  The

          6  opportunity to see the reservations tells us a lot about

          7  not just the fact that these are rural areas that are

          8  extremely difficult and expensive to serve.  These are

          9  problems that we face in many areas of the United

         10  States.  And some of the solutions that are being tried

         11  here or that could be tried here or that we'll be

         12  talking about today are applicable not just to this area

         13  but also to other high-cost areas of the United States.

         14               But what makes this visit so special is the

         15  opportunity to better understand and, therefore, for us

         16  to better address the unique problems involved in

         17  providing deployment of affordable telephone service for

         18  the Indian populations.  And why?  Because there are

         19  some unique questions here.  The tribes are sovereign

         20  nations.  They don't always fit neatly into the

         21  federal-state structures that have evolved over time.

         22  And we need to take that into account as we develop our

         23  universal service programs, in particular, as the

         24  Chairman mentioned, our Lifeline and Link-up programs.

         25               So I think highlighting on some of these


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          1  issues is very useful.  These are things that we may

          2  very well be able to address.  And I think that this has

          3  been an extremely helpful opportunity for us to have

          4  these conversations on these kinds of issues.

          5               It is frustrating when you can't get basic

          6  telephone service, especially in a world that is moving

          7  towards broadband communications which will provide a

          8  wealth of new opportunities, including the opportunity

          9  to start businesses at home, using Internet technology

         10  to expand one's horizons, and the like.  I look forward

         11  to this hearing to determine or to see or to hear some

         12  creative ideas as to how we can leapfrog technology.

         13  Yes, we need to provide basic telephone service, but

         14  let's not have blinders on and stop there.  Let's think

         15  about how we can leapfrog technology and provide new and

         16  innovative services that will be able to provide a great

         17  deal of economic growth for this area and for the local

         18  populations.

         19               So I'm delighted to be here.  I want to

         20  thank you again, Governor, for your kindness in hosting

         21  this hearing.  I look forward to hearing from our

         22  speakers today.

         23               CHAIRMAN KENNARD:  Thank you, Commissioner

         24  Ness.

         25               Commissioner Furchtgott-Roth.


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          1               COMMISSIONER FURCHTGOTT-ROTH:  Thank you.

          2  Mr. Chairman, Commissioner Ness, I'd like to echo your

          3  comments to Governor Thomas, to the governors of the

          4  other tribes, to the chairmen and presidents of the

          5  other tribes who are present.  I'm deeply honored to be

          6  here today, deeply humbled to be here at this meeting.

          7  As a federal official, we often have difficult problems

          8  before us.  One of the most important things the

          9  government can do is not just to decide but to listen.

         10  And we have come here today to learn, to understand

         11  better issues that we do not understand well in

         12  Washington.

         13               I grew up in east Tennessee in a city

         14  called Knoxville.  My mother grew up in the hills of

         15  western North Carolina in a place called Jackson County.

         16  Her father, my grandfather, was a doctor there, the only

         17  doctor in the county.  At the edge of the county was a

         18  Native American Indian reservation.  We went to visit my

         19  grandfather once a month when I was growing up.  We

         20  crossed the Smoky Mountains, and we'd drive through

         21  Cherokee.  And Cherokee was a town that at the time made

         22  a lot of its money through tourism.  Everything was

         23  gaily painted.  From the outside it looked very pretty,

         24  very compelling, very attractive.  I always had a very

         25  distinct memory, though, when we drove through Cherokee,


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          1  that my parents did not smile.  They would see someone,

          2  and they would say, "That's a very poor man."  My

          3  parents knew a lot of difficulties growing up.  They

          4  always sided with the underdog, and they had a great

          5  deal of empathy for the people of Cherokee.  My

          6  grandfather was a doctor at the BIA clinic at Cherokee

          7  for many years.

          8               When I was growing up, the poverty that I

          9  knew was not an urban poverty.  Knoxville, I thought,

         10  was the center of all wealth in the world.  The poverty

         11  that I saw was the poverty in the rural areas when you

         12  drove from Knoxville to western North Carolina, to this

         13  sort of forgotten valley.  And the area around Cherokee

         14  was perhaps as poor as any that I'd ever seen.

         15               So I'm very humbled to be here today.  I

         16  know the federal government has done many good things in

         17  the past 200 years, but I'm not sure that listening to

         18  the problems of Native Americans has been a strong suit

         19  of the federal government, and I'm sure that all of us

         20  here today would like to do a better job of that.

         21               Thank you, Mr. Chairman.

         22               CHAIRMAN KENNARD:  Thank you very much,

         23  Commissioner.

         24               Now I would like to read a statement from

         25  Commissioner Gloria Tristani, who would very much like


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          1  to be here today, was with us in New Mexico, but

          2  unfortunately, because of a pressing family matter, was

          3  not able to join us today.  But she did ask me to convey

          4  her greetings to you, and also I wanted to read the

          5  statement that she has asked to be put in the record

          6  today.

          7               Commissioner Tristani writes:

          8               "I regret that I cannot join you this

          9  morning for this important field hearing on access to

         10  telecommunications by Indians on reservations.  As you

         11  may know, I joined the Chairman in New Mexico a few

         12  weeks ago for a field hearing on this issue.  I was

         13  moved by the stories we heard about life without basic

         14  telephone service, and I was greatly impressed by the

         15  creative ideas proposed by those testifying as to how we

         16  can get at this problem.

         17               "I hope this morning's hearing will be just

         18  as fruitful.  I know that with the participation of the

         19  Chairman, Commissioner Ness, and Commissioner

         20  Furchtgott-Roth, the FCC is well represented.

         21               "When I looked over the list of people

         22  giving testimony this morning, I was struck by the

         23  quality and diversity of views that are represented.  I

         24  have no doubt that today's hearings will build upon the

         25  first hearing we held and will produce additional


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          1  insights and potential solutions.

          2               "The New Mexico hearing energized me to

          3  find ways to improve access to telecommunications on

          4  Indian lands.  I hope today's hearing will have the same

          5  effect on my colleagues, and I very much look forward to

          6  working with them on this issue when they return.

          7               "Best wishes for a successful hearing."

          8               I would note that Karen Gulick, an advisor

          9  to Commissioner Tristani, is here today, and I'm sure

         10  that she will get a full and complete and comprehensive

         11  briefing from Karen about what happened today.

         12               Next I'd like to introduce someone who has

         13  been a very good friend of the FCC and a friend of all

         14  people in the country who are working to bring

         15  telecommunications access to rural Americans.  His name

         16  is Chris McLean.  Chris is the Deputy Administrator of

         17  the Rural Utilities Service and Deputy Governor of the

         18  Rural Telephone Bank.

         19               I didn't know you had that title as well,

         20  Deputy Governor.

         21               MR. McLEAN:  It's wonderful.  Whenever the

         22  governor, who is the administrator of the Rural

         23  Telephone Bank, is gone, I get to be acting governor.

         24  So I call mom and tell her that her son is the acting

         25  governor on those two days.


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          1               CHAIRMAN KENNARD:  That's pretty cool.  We

          2  have two governors here today.

          3               Prior to joining RUS, Chris worked on

          4  Capitol Hill for 15 and a half years.  He was a founding

          5  member of the Senate staffers known as the Farm Team who

          6  helped craft the universal service and rural provisions

          7  of the Telecommunications Act of 1996.  The RUS helps

          8  finance rural electric, telecommunications, and water

          9  projects and administers a distance learning and

         10  telemedicine loan and grant program.

         11               Just as an aside, when we visited the

         12  telecommunications facility yesterday at Gila River,

         13  Darrell Gerlaugh, who we'll hear from later -- he's here

         14  somewhere -- was talking about all of the various

         15  agencies that supported him in pulling together a very

         16  successful telecommunications company, and RUS was on

         17  that list.

         18               So we're happy to have you here, Chris.

         19               MR. McLEAN:  Thank you very much.

         20  Mr. Chairman, Commissioners, Governor, distinguished

         21  panelists, it is a great pleasure to be here today.  And

         22  in visiting Gila River you get to see what is so

         23  wonderful about my job.  I am perhaps the luckiest

         24  person at this panel because I get to see, day after

         25  day, how rural Americans and Native Americans are able


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          1  to pull their resources together and conquer some very

          2  difficult problems.

          3               This year in 1999 is the 50th anniversary

          4  of President Truman signing the Rural Telephone Act, and

          5  I can think of no better way of celebrating that

          6  anniversary than celebrating the accomplishments of the

          7  RUS Native American borrowers.

          8               Improving the quality of life for Native

          9  Americans is a priority for President Clinton,

         10  Vice President Gore, Secretary Glickman, and the Rural

         11  Utilities Service.  In telecommunications the Rural

         12  Utilities Service is making very significant investments

         13  in tribal communities.  While my remarks will focus on

         14  the key issues involved in establishing and operating

         15  successful tribally-owned telecommunications companies,

         16  I do not want to underemphasize the work of the 60

         17  nontribal RUS borrowers who serve Native American

         18  communities.  They too are heroes in the RUS success

         19  story.

         20               I also encourage the Commission to remember

         21  that the problems we see in tribal areas are, in many

         22  cases, extreme magnifications of problems with high-cost

         23  rural service throughout the nation.  These problems

         24  cannot be solved without a predictable and sufficient

         25  universal service support system.


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          1               The RUS has made loans to five tribal

          2  entities, most of whom are represented on the panel

          3  today, and they speak volumes of the success.  I mean,

          4  they're our best example of the success of the Rural

          5  Utilities Service program.  Those five borrowers provide

          6  service to about 8,000 Native American subscribers, and

          7  the 60 nontribal borrowers also provide service to about

          8  27,000 Native Americans.  In addition, this year we

          9  anticipate two new loans to tribal entities new to the

         10  RUS program.  And we're having very detailed discussions

         11  with tribal entities in California, Arizona, New Mexico,

         12  Colorado, and North Dakota.

         13               In addition, we administer a distance

         14  learning and telemedicine loan and grant program and

         15  have provided financial assistance totaling $5.8 million

         16  in grants and $247,000 in loans for improved educational

         17  and medical services on reservations.

         18               RUS has also enhanced its tribal outreach

         19  efforts in recent years, and I'm very pleased to

         20  announce today that the Rural Utilities Service has just

         21  agreed to participate in a summer intern program with

         22  students from Native American tribal colleges.

         23               We are particularly proud that RUS

         24  involvement with tribal borrowers has resulted in

         25  substantial improvements in telecommunications services


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          1  on reservations.  At the five tribal entities in the RUS

          2  family, initial penetration rates for telephone service

          3  before RUS involvement averaged about 28 percent.  Those

          4  rates have risen to 78 percent today, and we anticipate

          5  even higher penetration rates as several borrowers are

          6  still completing construction of facilities.

          7               But one fact is critically important.

          8  Forming a new telecommunications company in today's

          9  environment is a very formidable task.  The Rural

         10  Utilities Service provides advice and assistance in

         11  formulating plans for designing and constructing plant

         12  and financial requirements for obtaining RUS loans.  I

         13  am pleased to share with the Commission the advice that

         14  we give to tribal entities interested in establishing

         15  their own telecommunications companies.  Based on our

         16  experience in rural telephony with 850 borrowers across

         17  this great nation, we recommend three distinct areas

         18  that should be carefully considered.

         19               First, the quality of existing service.  Is

         20  there a carrier in your community that may be able to

         21  extend service to unserved areas?  Is there existing

         22  infrastructure in your community that you can take

         23  advantage of?

         24               Secondly, the type of service that you wish

         25  to provide.  Are you going to be providing just basic


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          1  telephone service, or are you going to look forward to

          2  providing broadband services that include data, voice,

          3  and video?

          4               And also, third, the availability of

          5  utility expertise, qualified management, and human and

          6  financial resources.  And perhaps that third element is

          7  one of the most important factors in success for any

          8  telecommunications company.  It is essential that a new

          9  company have management with telecommunications

         10  experience.  In today's environment, almost every

         11  decision can have far-reaching consequences on revenues

         12  and expenses.

         13               A tribal authority may also wish to

         14  consider partnership of private-sector nontribal

         15  telecommunications companies.  Two of our five RUS

         16  tribal borrowers did this.  The tribe was, therefore,

         17  able to gain broad management experience and financial

         18  resources very quickly.  And in one of these examples,

         19  which you'll hear today, one of our borrowers has

         20  negotiated for full ownership of the company for the

         21  tribal authority.

         22               Other key elements that we think are very

         23  important to success of tribal entities is, one, that

         24  the operation of the telephone company be independent

         25  from the tribe's financial accounting.  It's important


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          1  that the telephone company not have their resources

          2  swept into the tribe's general resources and vice versa.

          3               The tribe also needs to consider that

          4  start-up problems should not be underestimated.  It is

          5  not an easy thing to start a tribal telephone company,

          6  as our witnesses will tell you.

          7               And tribal communities also have to

          8  consider all of their financing options, including RUS

          9  and lenders that are often closely linked with RUS, like

         10  the Rural Telephone Finance Corporation and CoBank.

         11               And the tribe must have access to

         12  experienced consultants.  In many ways the availability

         13  of consultants and the reliability of consultants are

         14  the places where you can make your decisions that have

         15  far-reaching consequences.  It's a source where if you

         16  make the wrong decision, you could spend a lot of money

         17  and get nowhere fast.  So you have to have a high degree

         18  of confidence.

         19               My time is up here.  I just want to point

         20  to the couple of recommendations that we have from the

         21  RUS to the Commission to look at on how to solve tribal

         22  problems.  There are no easy solutions, but first the

         23  Commission could look to simplifying and clarifying its

         24  rules as to tribal authority.

         25               Secondly, we find that there are


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          1  significant problems with rights of way.  The Commission

          2  could help coordinate rights of way between federal and

          3  state authorities, because we have seen delays in rights

          4  of way, due to arguments between Bureau of Indian

          5  Affairs, Bureau of Land Management, and even our own

          6  Forest Service at times within the Department of

          7  Agriculture.

          8               The carrier of last resort provisions of

          9  the Telecommunications Act should be implemented in a

         10  way that works for tribal jurisdictions.

         11               And the universal service support

         12  mechanisms are absolutely essential to success to have

         13  affordable rates here, particularly when you're looking

         14  at taking over existing exchanges from current

         15  telecommunications providers.  The support mechanisms

         16  should not penalize you from acquiring an exchange from

         17  one of the larger telecommunications companies.

         18               Lifeline should be enhanced for tribal

         19  areas.  We strongly support Gila River's petition to

         20  waive state match for Lifeline.

         21               And spectrum should be made available to

         22  provide workable broadband services in rural and remote

         23  areas.

         24               And then, finally, we encourage the

         25  Commission to experiment with solutions for communities


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          1  without service, such as perhaps allowing "in kind"

          2  universal service contributions, providing for buydowns

          3  of high-cost infrastructure and support for connection

          4  charges.

          5               Thank you, Mr. Chairman.

          6               CHAIRMAN KENNARD:  Thank you very much,

          7  Chris.

          8               Since we have a lot of witnesses today, and

          9  we are on kind of a tight schedule, I'm going to ask

         10  Eric Jensen to get the witnesses' attention and sit in

         11  the front row there and give the high sign or hold up a

         12  sign or something when time is up.  There's Eric.  He's

         13  always moving.

         14               All right.  Thank you.  Our next witness

         15  will be Governor Mary Thomas.  As Commissioner Ness

         16  mentioned earlier, we had the opportunity to spend a few

         17  hours with Governor Thomas yesterday, and we learned a

         18  little about -- we learned a lot about the tribe, and we

         19  learned a little about her life and how she came to lead

         20  the tribe.  And I must say that listening to her really

         21  exemplified, in my mind, the very best about public

         22  service and why we are in government to serve the

         23  people.

         24               So, Governor Thomas, thank you again for

         25  being here.


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          1               GOVERNOR THOMAS:  Thank you.  Thank you,

          2  Mr. Chairman.  I want to say that it was a delight to

          3  have you come visit Gila River, and we are glad to be

          4  your host.  It was so easy because you were there with

          5  no preconceived notions about Gila River itself.  And

          6  when you saw firsthand what we are facing here on Gila

          7  River, it was just so easy to relate to you, and you

          8  understood, and you made a commitment to helping us do

          9  something about these issues.

         10               The Gila River Telecommunications Company

         11  was set up because we were facing some challenges at the

         12  time, and that was the cost of installing basic

         13  telephone services to the community residents.  They

         14  were getting so out of hand and requiring us to come up

         15  with a large sum of money in order to get hooked up,

         16  even though the telephone poles were really close by.

         17  And one of these was one of the original founders of the

         18  Gila River Telecommunications Company, and that was

         19  former Governor Thomas White.  He was the one who

         20  started this whole process about inquiring why US West

         21  was not serving our community in the way it should have

         22  done.  So we decided to undertake this challenge and set

         23  up our own telecommunications service, with the help of

         24  another company in Oklahoma called NATELCO.

         25               After we took over the services, we were


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          1  appalled as to the condition that the telephone lines

          2  were in.  And we were amazed at how our

          3  telecommunications services were handled through

          4  antiquated lines, through brittle lines, and how they

          5  barely met the standards.  So we took that under our

          6  control as a self-determined nation.  And we have made

          7  great strides, but we are still below the average.  As

          8  Commissioner Kennard mentioned, over 90 percent of this

          9  country is hooked up to some sort of telephone service.

         10  On most reservations, and particularly mine, it's down

         11  to 34 percent.  So we are making great strides in that,

         12  in offering low-cost telephone hookup lines to the

         13  residences who do need them.

         14               It is ironic that this country has treated

         15  the American Indians so differently and put us on

         16  reservations, and our earliest form of communications

         17  was to have relay runners crisscross the reservations to

         18  bring us the news, to bring us emergency situations, and

         19  just things in general, even the death of family

         20  members.  And these were done through runners that

         21  crisscrossed the reservation.  Now we are in a high-tech

         22  age.  We are looking at improving the most modern

         23  technologies or using modern technologies in order to

         24  network and to communicate.  And I also want to mention

         25  the communication efforts during the wars when the


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          1  Navajo code talkers were used, using their own native

          2  language to relay information.  I think that's so

          3  significant and what contributions the American Indians

          4  do make in regards to telecommunications.

          5               One of the problems that we face here is

          6  the universal service funding.  There is a threat now

          7  for redistribution of those funding efforts.  And I

          8  believe 75 percent is targeted for state funding, and

          9  that will reduce our funding which we now enjoy at

         10  100 percent down to 25 percent.  We hope that the FCC

         11  will give full consideration of any proposal that may

         12  adversely impact the current funding mechanism.

         13               One of our other barriers is public safety

         14  frequencies as utilized by our law enforcement, fire,

         15  and other emergency operations.  It is critical to our

         16  community because of the tremendous growth in our law

         17  enforcement and fire departments.

         18               And we have faced many difficult issues

         19  regarding emergency situations.  As you know, we have a

         20  dry riverbed now running through here.  Once it was

         21  running annually, but when there is a potential for

         22  flooding because of the heavy rains that occur in the

         23  mountainous areas, most of the water will flow down by

         24  gravity through this reservation.  We have been

         25  predicted to have hundred-year floods on this


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          1  reservation, and within the past 10 years we have

          2  received two hundred-year floods.  And so that created a

          3  new and unusual effort to try to communicate to our

          4  residents how hazardous it was for them and that they

          5  need to evacuate certain areas.  We found that our

          6  frequencies were not adequate enough.

          7               We only have two frequencies here on Gila

          8  River, and we have been working with the State

          9  representatives to try to get us onto more frequencies.

         10  Sometimes our frequencies become so loaded, because

         11  other reservations are using them, that they get tied up

         12  and bogged down because of the response that is needed.

         13  And so we face that, and we would ask that you strongly

         14  consider allocating frequencies directly to Indian

         15  communities.

         16               Basic services, advanced services, and new

         17  technologies.  It's our goal to provide our community

         18  members with basic telephone service.  We also have

         19  goals to broaden our services, including expanded

         20  wireless service.  I believe the mountains surrounding

         21  our reservation create a great potential in order for us

         22  to do this, and with your help we may be able to

         23  accomplish this in the next few years.  We ask that the

         24  digital microwave broadcast solution be approved for use

         25  as soon as possible.


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          1               And in our goals to provide the

          2  best-quality services to our community members, it will

          3  greatly help us if the FCC would approve or adopt a

          4  policy statement recognizing the sovereign status of

          5  federally-recognized Indian tribes.  It is in line with

          6  the memorandum sent out by the President in the past

          7  three years for a government-to-government relationship

          8  with Indian tribes and recognize them as sovereign

          9  governments so that we can form policies together in

         10  order that we can help each other out.  So we need to

         11  conduct necessary discussions and negotiations with

         12  tribes on that basis.

         13               Mr. Chairman and the Commissioners, I

         14  believe we have made great progress in having you come

         15  visit us and becoming our friends, because it was stated

         16  by the Dalai Lama at one time that when you make a

         17  friend once, you have a friend for life.  And I hope

         18  this is the case.

         19               We have come a long way, but we still have

         20  a long way to go.  And with the situations in the Indian

         21  communities across this country, the relay of messages,

         22  as I once mentioned earlier in my statement, is still

         23  ongoing in some of the remotest areas across Indian

         24  country.  And sometimes it is preferable on a

         25  face-to-face contact, but with the technology coming up


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          1  we just want to be a part of that.  We want to become

          2  part of mainstream America and enjoy those quality

          3  services and, I guess, just assure you that we are

          4  looking out for each other, as a self-determined nation,

          5  and we want to also expand out to the communities

          6  surrounding our nations and become true partners in what

          7  America is all about.  Thank you.

          8               CHAIRMAN KENNARD:  Thank you very much,

          9  Governor.  That is not too much to ask.

         10               Our next witness is Chairman Siyuja, Thomas

         11  Siyuja, Jr., who is Chairman of the Havasupai tribe.

         12               He's not here.  Oh, I'm sorry.  We will

         13  call his name later and hope that he appears.

         14               Then next we'll go to J.D. Williams,

         15  general manager of the Cheyenne River Telephone

         16  Authority.

         17               MR. WILLIAMS:  Thank you, sir.  On behalf

         18  of the Cheyenne River Sioux Tribe and its tribal

         19  Chairman, Greg Bourland, I am happy to be here to

         20  represent them and also to thank Governor Thomas for the

         21  hospitality, and GRTI and Darrell Gerlaugh, that we are

         22  always treated as family down here, and it's a great

         23  feeling to be here.  Today we bring our comments to this

         24  meeting in hopes that it helps some way that Native

         25  Americans can benefit in the world of technology.


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          1               Our tribe is located in north central South

          2  Dakota.  We have a population of just over 11,000 people

          3  in a 4600-square-mile area about the approximate size of

          4  Connecticut.  Our reservation comprises 2.8 million

          5  acres, very rural.

          6               Our business began in 1958 and enjoys the

          7  distinction of probably being the oldest

          8  Native American-owned telco in the United States, and so

          9  we have a deep history in being involved in technology.

         10  It is one of the major employers in our local economy.

         11  And with that long history, our penetration rate is now

         12  only at 75 percent.  We don't believe that's acceptable

         13  when the rest of the United States is 90-plus percent.

         14  We've got a lot of people out there that do not have

         15  connectivity, and we hope that solutions from today's

         16  meeting will increase that penetration rate.

         17               Our reservation residents enjoy a lot of

         18  things that come from the telco operation that's owned

         19  by the Cheyenne River Sioux Tribe.  We are a RUS

         20  borrower.  That relationship began in 1974 and has grown

         21  into a diversified business operation since that time.

         22  Today we offer digital switching, a fiber backbone that

         23  carries our toll transmission, digital carrier service

         24  that goes out to most of our residents across the

         25  reservation.  It's underground one-party service that's


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          1  very important in our area because of the blizzards and

          2  the severe conditions that we face in rural South

          3  Dakota.  We also offer paging.  We just started up

          4  Lakota Networks, which is a reservationwide Internet

          5  service provider.  And along with those diversified

          6  operations on the telecommunications side, we also have

          7  a subsidiary that has an office supply retail business.

          8  We also offer cable television and direct broadcast

          9  satellite to the entire reservation.  And we also

         10  operate a retail propane company across the reservation.

         11               In relation to that, also, we've just

         12  recently formed a subsidiary called Lakota Technologies,

         13  Inc., which in December was approved by the Small

         14  Business Administration as an 8(a) firm, and it is a

         15  data processing company.  We hope to build that into a

         16  high-technology job creation business.

         17               And, as a matter of fact, as we got on the

         18  plane yesterday, the USDA department called and said,

         19  "How would you like to become a hot site for USDA?"  And

         20  they envision creating five to ten jobs in Eagle Butte,

         21  South Dakota, basically emulating their data processing

         22  center out of Kansas City, but it looks like a 3 to

         23  5 million dollar potential project over a five-year span

         24  and the creation of five to ten jobs.  And we're totally

         25  excited about what that future may involve, but the


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          1  reason that happens is because we're doing it ourselves

          2  and we have technology that's available.  And so it's

          3  just great news, and the enthusiasm is high in our area.

          4               What we think that has to come from this

          5  meeting and our solutions that need to be offered I

          6  think are many, and it comes from the experience that

          7  we've had to live and deal with.

          8               We believe that, first of all, the drive to

          9  excel and to promote this has to come from within the

         10  tribe.  That's where it needs to start.  And we, as

         11  Indian telephone companies and Indian tribes that have

         12  been in this business, need to educate.  Tribal

         13  governments must recognize the responsibilities of

         14  sovereigns in this area.  And tribes must examine the

         15  issues and really educate themselves about the problems

         16  and potential solutions.

         17               The FCC has offered its hand in the spirit

         18  of a government-to-government relationship, and tribes

         19  must now meet this challenge by working with the FCC to

         20  ensure that Indian communities will have access to the

         21  mere basics and, perhaps later, advanced technology in

         22  the telecommunication area.  The FCC must establish a

         23  government-to-government relations policy concerning

         24  Indian tribes.  That is not there today.  This policy

         25  should be implemented in the FCC's rules so that any


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          1  action by a carrier, a state government, or by the FCC

          2  that potentially affects an Indian nation, the action

          3  will be addressed in a manner that's consistent with the

          4  Federal Trust responsibility by individuals versed in

          5  tribal issues and federal Indian law.  The FCC now is

          6  just learning about what us Indians are about, and we

          7  are happy about that, but it's a very detailed process

          8  that this must go through.

          9               The following are a few specific examples

         10  that CRST Telephone and the tribe believe that the

         11  application would fit within such a policy.

         12               Number one is that the federal portion

         13  universal service should be 100 percent.  Companies are

         14  staying away from Indian country because it's a

         15  high-cost area and the ruralness of many of these Indian

         16  reservations.  Universal service in the future we

         17  believe will be a key element that will stimulate

         18  telecommunication companies to consider investing in the

         19  infrastructure in these areas.  Without it, it's going

         20  to be even a bigger struggle for folks to even look at

         21  and folks to stay in the business.

         22               We believe a consideration is the

         23  continuance of the hardship funds under the Rural

         24  Utilities Service and perhaps even designed for the

         25  specific needs of Indian country.  All telecommunication


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          1  companies serving these areas would have access to these

          2  funds, and these low-cost interest funds under this

          3  program would remain as an incentive for investment in

          4  these high-cost areas.

          5               We believe that there should be

          6  consideration by the FCC to provide for a specific

          7  allocation of spectrum that will benefit Indian country.

          8  As a general rule, Indian tribes have not been involved

          9  in any part of this concerning the spectrum auctions.

         10  And there are specific cases that wireless technology

         11  will work to provide basic and advanced service to

         12  Indian country.  Saddleback Communications right here in

         13  the Salt River reservation is a great example of what

         14  new technology will do for Indian country.  In addition,

         15  the FCC could consider a specific waiver process that

         16  would eliminate -- that would allow for specific

         17  allocation or specific applications of the wireless

         18  technology to certain situations in Indian country.

         19               We, as CRST Telephone, promote service

         20  affordability within Indian country.  Affordability

         21  comes into jeopardy with the FCC reviewing access charge

         22  reform and its proposal to shift the common carrier line

         23  element to the local rate portion.  Many reservations

         24  are considered to be some of the poorest sections in

         25  America.  Our reservation has a constant 60 percent


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          1  unemployment rate, and this fits many of our

          2  reservations.  Significant local rate increases will

          3  mean that Indians will not be able to afford a telephone

          4  even if it's right there in their house.  Right now we

          5  have -- of the 2900 access lines, the Link-up program,

          6  we have 240 people that qualify under that program.

          7  That's going to nearly come to a 10 percent level of our

          8  total access lines.  And so that gives a significant

          9  review of how poor our country is.  I mean, that

         10  10 percent is an awful lot.

         11               The Telecommunications Act of 1996 needs to

         12  apply across the board to all telecommunications

         13  companies in America.  The FCC recently addressed the

         14  Consolidated Telephone Cooperative versus Western

         15  Wireless, Inc., issue -- that is located 160 miles to

         16  the north of our company -- with the statement that it

         17  would be on a "rocket docket" to guarantee competition.

         18  Indian telecommunication issues before the FCC need to

         19  be dealt with in the same expeditious manner.

         20               The FCC in this federal policy needs a

         21  recognition of tribes, tribal lands, and tribal laws.

         22  That must be included in future involvement with the FCC

         23  and possible development of those Indian policies.

         24  Carriers should be required to clarify any modification,

         25  reduction of services, or discontinuance of common


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          1  carrier telecommunications services.  Any and all

          2  transfers of control of telephone exchanges that are

          3  located on tribal lands should require prior notice to

          4  and approval of the local tribal government.  Today many

          5  tribes wake up and an exchange will be sold, and it will

          6  be a couple years before they even realize that perhaps

          7  something has changed.  They never had one notice or one

          8  opportunity to participate in those bidding processes.

          9               The FCC should explicitly notify tribal

         10  governments of actions to be taken with respect to

         11  services provided on tribal lands by all carriers.

         12  Sufficient advance notice should be provided to permit

         13  meaningful consultation with those tribes.

         14               We believe that this is just a mere

         15  sampling of what issues and concerns that, at least from

         16  the Cheyenne River Sioux Tribe, we believe are on the

         17  table and that we must start communicating with the FCC.

         18  We also believe that connectivity to the super

         19  information highway needs to happen in Indian country

         20  because there is going to be developing disparity

         21  between the have's and the have not's.  And we, as

         22  Native Americans, sure do not want to see us as the have

         23  not's and to continue on as the forgotten Americans.

         24               So with that, I appreciate the opportunity

         25  to address you.  Thank you.


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          1               CHAIRMAN KENNARD:  Thank you very much.

          2               Next we will hear from Nora Helton.

          3  Chairman Helton is the chairperson of the Fort Mojave

          4  Tribe.

          5               CHAIRPERSON HELTON:  Good morning.  Before

          6  we get started, I just want to thank our Creator for

          7  giving us this day and allowing us to come together as

          8  tribal governments and nations to represent the

          9  interests of our people regarding telecommunication.

         10               Mr. Chairman and Commissioners, I'm very

         11  honored and pleased to be here before you today to

         12  present testimony on behalf of the Fort Mojave Indian

         13  Tribe and also Fort Mojave Telecommunications,

         14  Incorporated.  My name is Nora Helton.  I am the

         15  chairperson for the Fort Mojave Indian Tribe.

         16               The Fort Mojave Telecommunications Company

         17  was formed back in 1988, and the basic reason for

         18  establishing telephone and cable service on the

         19  reservation was to provide comprehensive service to our

         20  people.  Before our telephone service, we paid a high

         21  rate just to connect to service in general.  We have two

         22  reservations -- actually three reservations in

         23  California, Arizona, and Nevada.  Two of those villages

         24  where we provide living space for our people are in

         25  Arizona and California.  The Fort Mojave Tribe is


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          1  composed of 1,040 tribal members.  So already you see

          2  dealing with three different states, counties, and

          3  different representatives, commissioners, within the

          4  reservation already makes it a difficult task to try to

          5  accomplish any type of governmental cooperative

          6  agreement with those entities that have had the monopoly

          7  for over 35 years.

          8               When the Fort Mojave Tribe decided to

          9  undertake and follow in line with our brothers and

         10  sisters from Gila River, we also entered into an

         11  agreement with the Dobson Communication telco company,

         12  who is a communication service out of Oklahoma City who

         13  had over 50 years of telecommunications experience.  And

         14  with the tribe's small population and also not having

         15  that type of expertise, we thought it was in the best

         16  interests of our tribe to go ahead and follow and go

         17  along with someone that did have the experience.

         18               The Fort Mojave Tribe currently has a

         19  network which is switched by a Nortel DMS-10 and three

         20  remote Nortel offices.  The network is connected with

         21  26 miles of fiberoptic cable and terminal equipment.

         22  The Fort Mojave Tribe is proud of its network

         23  flexibility.  By means of add/drop optic equipment and

         24  digital line carrier, total digital service can be

         25  established efficiently and quickly to anywhere on the


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          1  reservation.

          2               I want to note that the area on the Arizona

          3  portion of our reservation is checkerboarded, so every

          4  other mile is tribal/nontribal.  So we've had the

          5  difficulty of rights of way and dealing with the powers

          6  that be that don't want to allow you to have access to

          7  provide that service on portions of the reservation that

          8  are remote and don't have service.  Prior to that, in

          9  1972 the reservation itself was not totally developed,

         10  and those nontribal interests developed on those other

         11  areas in portions of the reservation.  Where currently

         12  now the tribe has become more of the developer in

         13  developing its resources.  We have a number of

         14  businesses and other projects that we've undertaken and

         15  provided service to.  And so that was one of the other

         16  reasons why we wanted to establish service on the

         17  reservation was to control growth of the reservation and

         18  provide service to our people.  Fort Mojave

         19  Telecommunications returns to the more customer-service

         20  oriented manner of doing business and provides 24-hour,

         21  7 days a week emergency service.

         22               The Fort Mojave Telecommunications Company

         23  is staffed with qualified personnel, nine, and a

         24  majority of those are tribal members.  We currently

         25  serve four exchanges:  two in Arizona, one in Nevada,


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          1  and the other in California, which we just recently took

          2  over, in California, in September.  Fort Mojave

          3  Telecommunications currently serves 680 active service

          4  lines.

          5               We are looking to try to attempt to receive

          6  interconnect services.  We do have to go through another

          7  company to provide that service.  I think the other

          8  thing about it is locally we can have that service

          9  provided on our own exchange, but when we make calls off

         10  like into Laughlin, Nevada, which is only five or seven

         11  miles up the road, it's a long-distance call for us.

         12  And we have that same problem when we try to call into

         13  Arizona or into California off reservation.  We get

         14  charged a toll fee for that.  But if it's on

         15  reservation, we don't have that charge.

         16               We are governed by a seven-member board.

         17  Five are from the tribe itself, and two are from

         18  NATELCO.

         19               I don't want to go over and reiterate some

         20  of the other items that were brought up by the members

         21  that were here, but we do echo those same concerns and

         22  comments on the reservation that we provide service to.

         23  We also have a number of people on the reservation

         24  that are nontribal members.  We have two projects:  one

         25  in Arizona; the other in Nevada.  And so that service to


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          1  them is something that they also look forward to the

          2  tribe to providing good service to them.  Internet is

          3  something that they all want to tie into, but currently

          4  we're unable to do that only because we can't find a

          5  provider without paying a high price to provide that

          6  service to the reservation.

          7               Just some general comments I'd like to make

          8  in reference to overcoming some obstacles that we've

          9  noted during our experience in working in this industry

         10  for such a short time, but yet it's an experience that I

         11  think will help other people understand the struggles

         12  that we've gone through to provide service to our

         13  reservation.

         14               First of all, we want to encourage RUS and

         15  other funding mechanisms that must continue to be made

         16  available to Indian tribes who choose to become their

         17  own providers of service on reservation.

         18               Each tribal reservation has the exclusive

         19  right to provide telephone service to their sovereign

         20  nation.  The nation's legal system should not hinder

         21  this.

         22               Initial construction charges should not

         23  have to be borne entirely by the customer wanting

         24  service.

         25               Along these same lines, alternative methods


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          1  of services, i.e., wireless, should be given serious

          2  consideration.

          3               To combat the high cost of toll, there

          4  should be a concerted effort to provide lower-cost

          5  calling throughout each reservation.

          6               Federal universal service programs must

          7  allow the unconnected to get connected.  Tribal areas

          8  have by far the most unconnected potential customers in

          9  the country.

         10               Indian reservations should have first

         11  choice at receiving the wireless spectrum rights for

         12  their areas.  The FCC has auctioned off the reservation

         13  areas without prior approval of the tribes.

         14               State commissions must give reservations

         15  the ability to use their tribal councils as their state

         16  governing body for most issues, like we've already set

         17  up on our reservation.

         18               Reservations should be allowed to tap into

         19  state high-cost funds if they abide by the state's

         20  high-cost fund rules or a more relaxed set of rules for

         21  the reservations, addressing the concerns of the

         22  reservation itself.

         23               Technology is not the problem.  It is the

         24  cost of providing service that is the problem.  We can

         25  get service to these customers if we want, but the


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          1  challenge has been either recovery of costs, or for the

          2  larger providers it has sometimes been neglect.  They

          3  have other areas that are more lucrative, so they

          4  concentrate their efforts there.

          5               Emergency services and education will be

          6  enhanced with higher penetration rates.

          7               Some current providers have been receiving

          8  tens of thousands of dollars of USF monies for

          9  reservation areas, yet the service in these areas

         10  continues to suffer.

         11               Installation times are high.

         12               With those comments that I've made, I think

         13  taking on the responsibility of providing that service

         14  on reservation, not only in the area of

         15  telecommunication and cable service, has really

         16  strengthened the tribe's self-determination and tribal

         17  sovereignty on reservation by exercising its inherent

         18  right to provide service to the reservation.  I know we

         19  hear oftentimes of people or companies who look at

         20  competition, and they look at the win-win situation when

         21  they go out and do business, on a reservation it's a

         22  little bit difficult when you're having to pay these

         23  high prices and having to deal with people who don't

         24  understand the setup of the tribes, the sovereign

         25  rights.  We have to provide for our people in the best


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          1  way that we know how based on our culture, our heritage,

          2  and the way that we believe our people should be

          3  treated.

          4               With those comments, I just would like to

          5  thank you for providing us this time this morning to be

          6  here to echo our concerns and contributing to hopefully

          7  some meaningful consultation with your Commission.

          8               In dealing with RUS, we've had a very good

          9  relationship with them.  Since we started, most of our

         10  funding has come from them to establish our service in

         11  Arizona and in Nevada.  We're currently looking at

         12  California right now and finding ways to cross the river

         13  to pick up those areas as well.  And it's just a small

         14  portion, but yet it's something that has contributed to

         15  the success of our tribe, and it's allowed us to

         16  continue to provide the best service that we can to the

         17  reservation.  Thank you.

         18               CHAIRMAN KENNARD:  Thank you,

         19  Chairperson Helton.

         20               Our next witness is Chuck Wiese, who is the

         21  general manager of the Tohono O'odham Telecommunications

         22  Company.

         23               MR. WIESE:  Thank you, Mr. Chairman,

         24  Commissioners.  We appreciate this opportunity to give

         25  our perspective on this issue.  We think the TOUA has


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          1  enjoyed some measure of success in accomplishing this

          2  goal in part due to the existence of federal programs

          3  which advance universal service objectives.

          4               TOUA is the utility authority for the

          5  Tohono O'odham Nation, a federally recognized tribe.  In

          6  addition to telecommunications service, we also provide

          7  electric, water/wastewater, and propane service to the

          8  Nation.  The reservation consists of four separate

          9  reservation lands in the Sonoran Desert and covers a

         10  total area about the same size as the state of

         11  Connecticut.  The largest, known as the Tohono O'odham

         12  reservation, stretches 90 miles across Pima County and

         13  extends to the Mexican border.  We have three smaller

         14  reservations:  the Gila Bend reservation, the San Xavier

         15  reservation near Tucson, and Florence Village.

         16               TOUA is the oldest tribal telephone company

         17  in Arizona.  Following the August 1987 purchase from

         18  US West of old facilities serving 390 subscribers across

         19  more than 4,000 square miles of Tohono O'odham

         20  reservation, TOUA established and implemented a plan to

         21  provide initial and improved service for all the

         22  residents of the reservation.  Today TOUA serves nearly

         23  eight times the number of subscribers served by US West

         24  in 1987.  It translates into an increase in the

         25  residential penetration rate from less than 20 percent


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          1  to over 70 percent today.  This progress I think is a

          2  testament to the commitment of the tribal authorities to

          3  ensure that tribal residents are afforded access to

          4  basic services.

          5               TOUA was the recipient of a community block

          6  grant, the proceeds of which were used to finance the

          7  purchase of the facilities from US West and to provide

          8  start-up operating funds.  TOUA is a Rural Utilities

          9  Service borrower and has utilized these funds to

         10  construct the facilities required to provide service

         11  throughout the reservation.  Through the years of

         12  operation, we have also been the recipient of federal

         13  universal service funds which have assisted in the

         14  defrayal of capital costs of improvements and also

         15  assisted in maintaining affordable access rates.

         16  Currently TOUA subscribers pay a monthly residential

         17  rate of $10.36 per month.  Our business rates are $21.80

         18  per month.  The community has experienced economic

         19  growth over the past decade largely because of the

         20  existence of a service infrastructure that supports the

         21  development.

         22               We have also assisted the community by

         23  contributing to the provision of safety, health, and

         24  educational services.  The Nation, assisted by TOUA, is

         25  the recipient of a RUS grant for distance learning, and


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          1  we have assisted the schools in our service territory in

          2  applying for telecommunications discounts.  We have

          3  assisted the police department in establishing the

          4  enhanced 911 system and assisted in the establishment of

          5  the telecommunications infrastructure to support their

          6  emergency services.  Two years ago we launched an

          7  Internet service for the residents of the reservation.

          8               Encouraged by this progress so far, we are

          9  now embarking on the next steps, ensuring that the types

         10  and quality of service available to the reservation is

         11  equivalent to that enjoyed by citizens in other areas of

         12  this country.  TOUA is in the process of accepting bids

         13  for a new switch which will provide for equal access

         14  capability and CLASS functionality.  Upon deployment,

         15  subscribers will be able to enjoy the ability to reach

         16  an interexchange carrier of their choice on a 1+ dialing

         17  basis, and they will have access to Caller ID, automatic

         18  callback, and other CLASS features.

         19               In addition, the population of the tribal

         20  lands is increasing rapidly, requiring constant

         21  augmentation and upgrading of facilities.  We have

         22  budgeted $5 million over the next 36 months to meet the

         23  needs of this community.  We take all of our proceeds

         24  from operations and our margins and plow them back into

         25  upgrading existing service, extending service where it's


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          1  requested, and providing advanced services where

          2  economically feasible.  We don't enjoy a lot of

          3  economics of scale.  We only have 4.4 customers per

          4  route mile.  That's -- we have less than one access line

          5  per square mile.  Our progress thus far is directly

          6  related to the availability of predictable sources of

          7  funding.  The maintenance and enhancement of these

          8  funding sources is critical to our success.

          9               It's a fact that the reservations do not

         10  present commercially attractive service areas.  The

         11  sparse population and low penetration rates are reasons

         12  that larger companies have all but abandoned tribal

         13  lands.  The service is expensive, and the rate of return

         14  per subscriber is lower.  Accordingly, continued

         15  investment in operations must be encouraged by

         16  demonstrating commitment to the Congressional

         17  requirement that the universal service support be

         18  predictable and sufficient.  Given that the majority of

         19  the Authority's revenues are comprised of access charges

         20  and universal service funds, it's clear that substantial

         21  changes to the mechanisms could jeopardize our

         22  accomplishments and impede any further progress in

         23  achieving universal service.  Accordingly, our major

         24  obstacle is the uncertainty regarding funding sources.

         25               And I thank the Commission for allowing us


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          1  to testify.

          2               CHAIRMAN KENNARD:  Thank you very much.

          3               Our next witness will be Ivan Makil, who is

          4  president of the Salt River Pima-Maricopa Community.

          5               PRESIDENT MAKIL:  Thank you, Commissioners

          6  and Chairman Kennard.  And I guess I'd like to start

          7  off by first thanking you for this hearing and the

          8  opportunity to speak with all of you today, but also I

          9  would like to commend you, Mr. Chairman, and your

         10  staff on what I consider this very historic and

         11  significant event in Indian country, because I think

         12  it's a first step in establishing the kind of

         13  government-to-government relationship that is critical

         14  for tribes to have with the FCC.  It's been something

         15  that, I think you've heard already, has been, I think,

         16  long overdue for many reasons.  The benefits I think no

         17  one can speak enough about, but I think one thing that

         18  is important to say here is that one of the benefits is

         19  particularly in this day and age where

         20  telecommunications has become an integral part, a very

         21  basic fundamental part of infrastructure that is

         22  necessary for developing communities.

         23               You know, whenever we see and we talk about

         24  our communities, Indian communities, and developing and

         25  how they will develop, we have to look at the various


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          1  components that are necessary for development.  Salt

          2  River is located in an area that's surrounded by the

          3  Phoenix metropolitan area.  We're surrounded on our

          4  western and northern boundaries by the city of

          5  Scottsdale.  We're surrounded on the southwest by the

          6  city of Tempe, on the southern border and a portion of

          7  our eastern border by the city of Mesa, and even the

          8  community of Fountain Hills to our northeast.  So we're

          9  right here in the middle of a metropolitan area.

         10               We have about 6200 people, enrolled

         11  members, in the tribe, and like many other tribes

         12  approximately half or 50 percent of our population is

         13  under the age of 19.  That means that we have a very

         14  young population.  And with this young population, as we

         15  all know, particularly in this day and age, you have a

         16  very video-oriented generation.  You know, technology

         17  for this younger generation is really important.  And so

         18  the process of learning and when we talk about

         19  developing communities, we're talking about producing

         20  young people or people that can be productive citizens.

         21  And so that's all a part of this whole developing

         22  community concept.  Producing productive citizens is

         23  giving them the tools that they need to be able to be

         24  productive citizens, to learn, to grow.  And so access

         25  to things like basic telephone service are not enough.


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          1  They must be able to have access to Internet services.

          2  You know, this generation is e-mailing each other all

          3  across the country, and that's how our young people are

          4  learning.  So if we are going to produce productive

          5  citizens, then we have to have that as a basic

          6  fundamental infrastructure in anything that we do for

          7  our communities.  So this relationship and the

          8  understanding of how it impacts Indian communities I

          9  consider a very positive step.

         10               You know, historically our people were

         11  farmers.  And while we still maintain agricultural lands

         12  in Salt River, we've made every attempt to diversify

         13  because we know that in developing communities we must

         14  create economies.  And so we've invested in a number of

         15  different enterprises, everything from cement to golf

         16  courses to frozen yogurt.  You know, Salt River just

         17  happens to own and produce Miss Karen's frozen yogurt,

         18  which is, although they've been on a losing streak, the

         19  official yogurt of the Phoenix Suns.  I wasn't sure if

         20  we had any Suns fans here today, but they haven't been

         21  doing as well as we would like for them to do, but we're

         22  still selling yogurt anyway.

         23               Some of the problems that we've had are not

         24  only just, as I said, not having service but what that

         25  service means in terms of, particularly, elderly folks.


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          1  And, as you know, in Indian country healthcare has not

          2  been the best, and so, you know, 911 accessibility not

          3  only for emergencies like police emergencies but for

          4  health emergencies.  Many people are, particularly in

          5  our community, are diabetic, and so they need access to

          6  phone service for health purposes so that when things

          7  don't go well for them that they have the ability to get

          8  that assistance that's needed.  Right now, even though

          9  we're right in the middle of the Phoenix metropolitan

         10  area, there are some -- a number of areas that still

         11  aren't served by what used to be the current service.

         12  So, you know, people have to go distances to get

         13  service.

         14               It's hampered, also, our ability to grow

         15  economically.  While we're right in the center, we have

         16  the potential for economic development projects, but, of

         17  course, you know, business does not want to locate where

         18  there isn't basic infrastructure.  And basic

         19  infrastructure, again, is not just telephone service or

         20  providing, you know, a dial tone.  It's service that

         21  provides, you know, fiberoptic cabling, that type of

         22  thing.  That's what's necessary to attract business that

         23  will be quality business, that will really produce

         24  revenue, that can be a stable source of revenue for

         25  tribes.  Because, again, in developing communities I


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          1  think what the federal government has learned in its

          2  experience with even dealing with Third World countries

          3  is that if you can create a stable economy, that in turn

          4  is what produces and stabilizes government.  And so that

          5  becomes critical as well.

          6               In 1997 we moved to charter and license

          7  Saddleback Communications, which is our company.  We

          8  invested at least what we considered significant dollars

          9  in a state-of-the-art system.  And today it's proven to

         10  be very successful.  There is a lot of happy people in

         11  Salt River because of what has happened.  But, again,

         12  understanding that we had limitations as a tribe because

         13  tribes don't have all the expertise that we need to be

         14  able to accomplish many of these things, that we

         15  partnered with Mountain Telecommunications.  And in that

         16  partnership what we found was the expertise that was

         17  necessary to not only get our system going and off the

         18  ground but to make it a viable economic tool for the

         19  future.  Now we are in a position to be able to provide

         20  service to any business, as well as our residents, that

         21  will be located within the boundaries of our community.

         22               This partnership, I think it can really

         23  serve as a model for the future.  And I would encourage

         24  that because, you know, those types of arrangements are

         25  the kinds of things that the FCC can really be helpful


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          1  in encouraging other companies to partner with tribes on

          2  these types of efforts.  The example is here.

          3               And I do appreciate and I apologize for not

          4  being able to greet you when you did come to Salt River.

          5  We hope you enjoyed the visit.  And we feel like we've

          6  done a good job there, and we've worked hard at it.  And

          7  we've got some good people working there, and we've got

          8  a number of our tribal members employed there, too, that

          9  are learning there.  A lot of young people there, and

         10  that's exciting because now they're -- the word travels

         11  very fast, you know.  They used to call it the moccasin

         12  telegraph, you know, but now it's Saddleback

         13  Communications, I guess.

         14               It's still important that you all will

         15  continue to provide the regulatory incentives that will

         16  encourage incumbent local exchange companies and

         17  competitive local exchange companies to work directly

         18  with tribes.  That is critical.  We hope that you will

         19  continue to review the regulatory barriers to tribal

         20  entry into the telecommunications market.  For example,

         21  the competitive local exchange carriers should not be

         22  limited to the universal service support that an

         23  incumbent local exchange carrier receives for providing

         24  service within tribal lands.  This is especially true if

         25  the tribe's CLEC services are provided to formerly


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          1  unserved residents.

          2               It's also important that there is support

          3  for new advanced technologies that address the last-mile

          4  problem in rural areas, because, you know, so many times

          5  examples that are good examples and models that can be

          6  used in Indian country are representatives of examples

          7  that can benefit rural communities as well.  One thing

          8  that we've learned in Salt River is that, you know, just

          9  like the dollar, communications and crime knows no

         10  boundaries, that telecommunications doesn't have

         11  boundaries either.  So that usually when there is

         12  something that benefits an Indian community, it usually

         13  benefits the surrounding communities as well.  And there

         14  is growth from that, and we encourage that.

         15               Saddleback and Mountain Telecom have

         16  petitioned the Commission to adopt fixed wireless access

         17  as one possible solution.  Although we cannot go into

         18  the merits of that petition, Salt River wishes to stress

         19  that the petition should receive serious consideration

         20  in the near future.  And we'd also like to clarify that

         21  the Commission will support modifications or waivers of

         22  technical rules that limit the ability of a given

         23  technology to serve areas with low population density.

         24               I guess, in closing, I again would like to

         25  thank you all for being here, for giving us this


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          1  opportunity to express some of the issues that are of

          2  concern to us as tribes, and appreciate the

          3  government-to-government relationship that you are

          4  establishing.  It is critical to our growth.

          5               And I would also ask that you not be

          6  distracted by the kinds of stopgap measures that

          7  sometimes people will offer.  Access, as I said earlier,

          8  to basic dial tone is not sufficient.  If we're not

          9  given access to the advanced telecommunications and data

         10  services that are enjoyed by others, we will not be in a

         11  position to produce the productive citizens that are

         12  important to not only the future of our tribes but to

         13  the future of this country, because a productive citizen

         14  in Salt River or in Gila River or in Cheyenne River or

         15  anywhere else ends up being a productive citizen to the

         16  county, to the state, and to this country.

         17               And I thank you very much for this

         18  opportunity.

         19               CHAIRMAN KENNARD:  Thank you very much.

         20               Our next witness is President Vernon James,

         21  who is president of the San Carlos Apache

         22  Telecommunications Utility Company.

         23               MR. JAMES:  Good morning.  My name is

         24  Vernon James, and I'm with the San Carlos Apache Tribe.

         25  I am an enrolled member of the tribe, and I bring you


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          1  greetings from the tribe.  I want to thank the

          2  Commissioners who are here, the Chairman, and the tribal

          3  representatives and the audience.  I am honored to be

          4  here to present testimony on behalf of the San Carlos

          5  Apache Tribe regarding the need for telecommunications

          6  not only within our tribe but for other tribes.

          7               The San Carlos Apache Tribe has a

          8  membership of over 10,000 enrolled members.  The

          9  reservation is roughly 28,000 square miles.  The

         10  reservation is located east of here about 200 miles.

         11  It's located 20 miles east of Globe, a mining town,

         12  between Globe and San Carlos, which is, oh, I guess

         13  about 20 miles -- I take that back -- 30 miles -- I take

         14  that back again -- 50 miles from the community of Bylas.

         15  Bylas and San Carlos are separated by 30 miles.  They

         16  are two major population centers.  We have a third one

         17  which is about 15 miles east of Globe that's rapidly

         18  developing.  Because of infrastructure development, such

         19  as water, electricity, and now telecommunications,

         20  people are just moving in.  And it's an area of growth

         21  that is really good to see because it's predominantly

         22  young people who are buying homes and moving into the

         23  area, who are building homes and moving to the area,

         24  indicative of growth in our human potential.

         25               The telecommunication industry came to


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          1  San Carlos with the development of its board in March of

          2  1995.  The board consists of five members.  The tribe

          3  has a consulting firm that it was working with or it

          4  still continues to work with, Hicks & Ragland, very well

          5  renowned in the telecommunications industry.  At the

          6  recommendation of the consulting firm, San Carlos went

          7  on a nationwide search for members of its board.  It

          8  selected three members from the country, countrywide.

          9  One of the members is from Mesa.  He's a retired vice

         10  president in finance for telecommunications.  Another

         11  member is from Texas, who was a vice president for field

         12  operations of Southwestern Bell.  The other member is a

         13  retired general manager for a private communications

         14  company in the panhandle area of Oklahoma.  The fourth

         15  member is a tribal member, who serves as the

         16  secretary/treasurer.  He's also a tribal planner for the

         17  tribe.  Given the expertise of the individuals from the

         18  telecommunications industry, we have been guided to

         19  develop what we feel is something that we're very proud

         20  of.

         21               For San Carlos, telecommunications

         22  represents development.  It represents a leap into the

         23  21st Century, as you've heard many speakers say.  It

         24  brings promise of communications with the outside world.

         25  It also brings promise of economic development, as


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          1  you've heard spoken about.  It also brings promise of

          2  improved health and safety aspects of the reservation as

          3  it relates to 911 and EMS and law enforcement.

          4               And, also, it brings a promise of

          5  telemedicine to the communities of San Carlos and Bylas.

          6  And with that, that could represent hours of discomfort

          7  in coming down by vans to referral centers in

          8  metropolitan Phoenix and Tucson.  It takes a whole day

          9  for perhaps a confirmation on surgery to be made for a

         10  person from San Carlos.  It's even longer if that person

         11  is from Bylas.  So telecommunications brings that

         12  promise.

         13               Human development.  Telecommunications

         14  brings human development, the promise and the

         15  opportunities for human development.  Our schools, for

         16  example, can now be networked to the world through

         17  Internet.  And for employees, our employees, it means

         18  personal growth and development.  It means it will allow

         19  employees who lack maybe a few hours to receive their

         20  degree, but who are working, they can now accomplish

         21  that through distance learning.  It's amazing the

         22  opportunities telecommunications can bring.

         23               Government development.  For San Carlos

         24  government, it means development of infrastructure not

         25  only throughout its programs but also for the boss to


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          1  check with his staff through networking.  And with

          2  further development in the area of video, we can even

          3  have video conferencing one day.  You know, I just

          4  shudder at the idea.  I mean, there's already so many

          5  meetings.  Just think, e-mail and video conferencing.

          6  My goodness, you know, there's going to have to be more

          7  of me.

          8               Right now San Carlos has taken that step

          9  into the 21st Century.  It has bought US West's

         10  facilities and has just gutted those facilities.  The

         11  facilities that US West had were archaic to say the

         12  least.  It was a Western Electric 355-A electromagnetic

         13  step-by-step switch.  State of the art back in 1960 when

         14  it was installed, but a dinosaur by today's standards.

         15  That switch is being replaced by a state-of-the-art

         16  digital Siemens switch.  It has capacities that we can't

         17  even tap with our existing requirements.  That Siemens

         18  switch will be turned on tonight at 11 p.m.

         19               For us it's a step into the 21st Century,

         20  and we want to thank RUS for bringing this about.

         21  Without RUS, the monies wouldn't be there.  Without the

         22  hardship loan, we wouldn't have this opportunity.  So I

         23  encourage RUS to continue that aspect of its program for

         24  tribes so that they can tap into that resource and also

         25  into the 21st Century.


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          1               And I encourage the FCC to listen to all

          2  the statements made by tribal representatives in the

          3  development of that government-to-government

          4  relationship, which this is a representation of, but FCC

          5  needs to go further.  It needs to go into a formal

          6  consultation process, as Governor Thomas said.  That

          7  formal government-to-government process and consultation

          8  process will allow tribes to voice their concerns and be

          9  heard, and it will also allow FCC to learn of the

         10  problems as it is now learning about problems in Indian

         11  country.  As the FCC has heard, the socioeconomic

         12  condition on reservations is appalling by our country's

         13  standards today.

         14               For San Carlos, our present system,

         15  existing telephone lines, there are 770 lines in the

         16  San Carlos community.  400 are residential.  We have

         17  1500 held orders.  In the community of Bylas, there are

         18  12 lines.  Four are residential.  There are 425 held

         19  orders.

         20               On May 25th Bylas will also come into the

         21  21st Century.  The community will have a link to the

         22  outside world.  The community of Bylas -- let me just

         23  give you an example of the excitement that's going on

         24  there.  While we were laying lines in the community and

         25  giving out numbers, people were exchanging their


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          1  telephone numbers, "Call me in May."  They have their

          2  telephone numbers posted on their refrigerator doors.

          3  They have those numbers memorized.  They're already

          4  carrying an address book with telephone numbers in it.

          5  It's really amazing.  And, you know, it was really sad

          6  because our representatives had to teach people about

          7  the telephone, what the telephone could do.  Not only

          8  did they have to learn about what the telephone can do,

          9  but the features that they never heard of or couldn't

         10  imagine, such as call forwarding, call waiting, voice

         11  mail, these are terms they've never heard.  And it's

         12  just an exciting feeling, the feeling of the children,

         13  especially the adolescents.  I mean, you know, they're

         14  going to tie up that whole system, I'm sure.

         15               San Carlos will have its turn on June 15th.

         16  On that day the entire reservation will be linked, and

         17  the San Carlos Apaches will have entered the

         18  21st Century.  The San Carlos Apaches will have taken

         19  that first step.  What an exciting moment this is for

         20  us.

         21               I want to encourage tribes who are thinking

         22  about developing their telecommunications system to go

         23  for it.  Even though there are what seems to be

         24  insurmountable problems, they can be worked out.  Find a

         25  consultant who will give you your money's worth, one who


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          1  has the concerns of maybe having met rural needs.  They

          2  can bring their expertise, and they can bring tribes

          3  into the 21st Century as well.

          4               I also want to encourage those tribes, even

          5  though they may not have the telecommunications system

          6  as far as ownership goes, to support those tribes who

          7  are trying to encourage government legislation to be in

          8  favor of tribes.

          9               I guess with this I'll conclude my

         10  statements.  I want to thank, again, the FCC and the

         11  federal government for the opportunity to voice these

         12  comments.  And if you need help in developing that

         13  consultation process, I'm available, as well as anybody

         14  else here.  I mean, we're willing to help.  Thank you.

         15               CHAIRMAN KENNARD:  Thank you very much,

         16  Mr. James.  When you picked up the microphone and your

         17  booming voice filled the room, it reminded me of when I

         18  first got into communications.  I started on a pathway

         19  to this job by getting into college radio, as I know

         20  Commissioner Ness did as well, and you have what they

         21  used to call in that business a radio voice.  Very nice.

         22  And congratulations on your switch.

         23               And congratulations to you, Chris, for

         24  helping to make that possible.

         25               Well, we have a few minutes, before we


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          1  break, for questions.  And I wanted to take the time we

          2  have to focus on solutions, what we can take away from

          3  this day, take back to Washington, and implement to help

          4  solve some of the problems we've heard about today.

          5               When we first started educating ourselves

          6  about this issue, we looked around and tried to find

          7  people who were really on the cutting edge, the leaders

          8  in thinking about particularly some of the legal and

          9  policy issues.  And so last year we had a very wonderful

         10  discussion in Washington about how we could better

         11  understand the relationship we should have between

         12  tribal governments and the FCC, and we invited

         13  Ambassador Blackwell.  Charles Blackwell was there, who

         14  is also here today.  And Jim Casey was one of our tutors

         15  in that session.  And one thing that came out of that

         16  session and what we heard in New Mexico and what we

         17  heard today is a call for the FCC to establish a

         18  government-to-government relationship with tribal

         19  governments.  And I'd like to ask this question.

         20               If we were to do that, what are the single

         21  one or two or three most important things that could

         22  come out of that consultation that the FCC could

         23  implement to advance the cause of bringing

         24  telecommunications and advanced telecommunications

         25  services to Native American populations?  Anyone who


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          1  wants to answer that question?

          2               GOVERNOR THOMAS:  As you know, there are

          3  several regulations and ordinances and even acts passed

          4  by Congress regarding dealing with the problems of

          5  Indian reservations that have escalated throughout the

          6  years, and I think the barriers we face are with the

          7  bureaucratic system itself.  They have given the

          8  opportunities for states to have more control over

          9  their -- the areas that they serve, and that has not

         10  been afforded the Indian tribes themselves.  We still

         11  have to go forward and beg for this leeway for us to

         12  govern ourselves.  That's how we were set up, and that's

         13  the status of the sovereignty that we so desperately all

         14  try to bring out all the time.  It was a word given to

         15  us by the English colonists who settled this area.  And

         16  so we exercise the sovereignty by providing ourselves a

         17  true destiny for Indian tribes to follow and to have

         18  that self-determination to utilize what has been given

         19  to us in the past by the federal government itself.

         20               So it's the bureaucracy system that we face

         21  all the time.  And I think if we dialogue with the FCC

         22  and bring you these issues, you will get a better

         23  understanding.  But there are new avenues now being

         24  opened up, and I am very pleased that this is just one.

         25  You've taken that major step, and I think that's what


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          1  we're trying to do with all the government agencies.

          2  There are now policies coming out from the Army, from

          3  the different agencies that we deal with, the Energy

          4  Commission.  So they are turning around.  They are

          5  making those efforts, and we are so pleased that you are

          6  here making that attempt.  And the more you hear, the

          7  more you will understand.

          8               CHAIRMAN KENNARD:  That's very encouraging.

          9               Any other comments?  Mr. Makil?

         10               PRESIDENT MAKIL:  Sure.  I think that, as

         11  Governor Thomas has said, you know, the barriers to

         12  tribal entry to the telecommunication market are

         13  important, but also, you know, to reduce or remove the

         14  limitations of any particular technologies that allow

         15  for that.  Because, you know, while there are some

         16  proven solutions, as we're now discovering, that, you

         17  know, that kind of encouragement with incumbent local

         18  exchange carriers as well as the competitive local

         19  exchange carriers, that we work together too.  And there

         20  are incentives provided so that we can partner.

         21  Because, you know, the costs of these systems, you know,

         22  it gets to be major, a major cost for tribes, which

         23  we're not able to really handle in a lot of cases.  And

         24  in some cases where there are, as Mr. James mentioned

         25  from San Carlos, where there are outdated systems that


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          1  need to be replaced, and sometimes it's a whole grid

          2  system, you know, all of a sudden that becomes very

          3  expensive, and it becomes prohibitive for a tribe to be

          4  able to get involved in any type of situation.

          5               So, you know, those kinds of partnerships

          6  and removing those limitations for other advanced

          7  technologies I think will really go a long ways,

          8  particularly on reservations where distances are major

          9  issues, and there are many.

         10               CHAIRMAN KENNARD:  Thank you.

         11               MR. JAMES:  I'd like to expand on what

         12  Governor Thomas said about the process itself.  One

         13  aspect of that consultation process will allow tribes to

         14  be given the opportunity to review proposed changes in

         15  existing laws and existing regulations.  For many years,

         16  historically, tribes have never had the opportunity to

         17  have input as to those changes.  As a result, those

         18  changes came about, and tribes were at a loss as to how

         19  to implement them or at a disadvantage because of the

         20  implementation.  So the executive orders that charge

         21  federal agencies to deal on that

         22  government-to-government basis with tribes specifically

         23  identifies that particular need, and it's that need that

         24  tribes require in order to keep in step with those

         25  changes.


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          1               CHAIRMAN KENNARD:  Thank you.

          2               Commissioner Ness, did you have questions?

          3               COMMISSIONER NESS:  I was struck by some

          4  statistics that were mentioned, by I think Mr. Williams.

          5  If I'm correct, did you say that you had about

          6  60 percent unemployment?

          7               MR. WILLIAMS:  Correct.

          8               COMMISSIONER NESS:  Okay.  And did you also

          9  say that only 10 percent of your subscribers qualified

         10  for the Link-up program, or did someone else say that?

         11               MR. WILLIAMS:  We have 10 percent currently

         12  under the Link-up program of the 2900 access lines

         13  that --

         14               COMMISSIONER NESS:  But more could qualify?

         15               MR. WILLIAMS:  It is growing as -- we

         16  implemented that January 1st of this year, and it's

         17  amazing how it's caught on like wildfire.  So I don't

         18  know where that will stop, but as I came down here it

         19  was right at 237 customers hooked up already.

         20               COMMISSIONER NESS:  Okay.  So it wasn't

         21  that there's a problem specifically with the structure

         22  of the Link-up program or the qualifications for the

         23  Link-up program.  It's now being used as people learn

         24  about it?  So it's more an education process?

         25               MR. WILLIAMS:  Correct.  And the problem


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          1  with that, though, and it's a real positive, but what

          2  we're finding out so quickly is that when you originally

          3  go into these, the engineering process with RUS, which

          4  is predominantly structured about rural nonIndian

          5  communities, is that when we move out to the Indian

          6  country with these type of applications -- our

          7  engineering process originally sets for the established

          8  amount of customers plus a growth rate of approximately

          9  10 percent.  When we implement these type of programs,

         10  the growth, combined with growth of young populations on

         11  rural Indian reservations, as in our case, we outgrow

         12  the facilities.  I have three areas right now that

         13  because of this growth factor that's been promoted by

         14  the Link-up program, we're full.  So now I have to go

         15  and rebuild or implement fiber construction to

         16  accommodate for growth out in these rural areas.

         17               So, on the positive side, we're building

         18  for the growth that allows connectivity, but we also

         19  have the problem of full facilities in at least three

         20  areas that we're in.

         21               COMMISSIONER NESS:  If anyone wants to

         22  answer the question focusing, again, on the Lifeline and

         23  Link-up programs specifically, I understood from

         24  Governor Thomas and some others that we do have a

         25  problem in that with Lifeline the full benefits cannot


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          1  be realized because the existing structure assumes some

          2  distribution from the state to get the full amount.  And

          3  that's something I certainly want to look at as we go

          4  along.  I think that's a very important point that was

          5  mentioned.

          6               I think someone else mentioned the question

          7  as to whether or not there is an ability to get some

          8  state universal service funds, to qualify for those.

          9  Can anyone comment on the specific Lifeline and Link-up

         10  programs and state universal service, what specifically

         11  we could do to ensure that you have the resources needed

         12  for those programs?

         13               Chris.

         14               MR. McLEAN:  I'll be glad to take a stab at

         15  that.  First, the petition that Gila River and other

         16  tribal telephone companies have filed has to do with

         17  waiving the state match.  I think in the intent of

         18  Congress, particularly when you look at Senator McCain's

         19  amendment to the Telecom Act giving the FCC the

         20  authority to designate eligible telecommunications

         21  carriers in jurisdictions that are not subject to state

         22  authority, that the Commission has the power to do that.

         23  And the bottom line is Lifeline, Link-up, high-cost

         24  support, universal service support, they are all sources

         25  of revenue that make the services affordable.


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          1               And the Commission might even want to

          2  consider the unique federal responsibility that we have

          3  to tribal communities to even further enhance the

          4  Lifeline program.  Because the biggest impediment to

          5  service, we find, is poverty.  And it's a chicken and

          6  egg kind of thing.  When you have modern infrastructure,

          7  you can have economic development.  But if you have poor

          8  communities, it's hard to build the feasibility into

          9  building that infrastructure that fosters the economic

         10  development.  So if we can fulfill the promise of the

         11  Telecom Act both in Lifeline, Link-up, and predictable

         12  sufficient support for unserved communities, I think we

         13  can accomplish the goal of bringing tribal

         14  subscribership up to the national average.

         15               Another area that is of critical importance

         16  is as the large telephone companies put their exchanges

         17  up for sale, many of them are in tribal communities,

         18  universal service rules shouldn't penalize the acquiring

         19  company of those exchanges through the operations of the

         20  national cap and the per subscriber line cap that are in

         21  the current transition rules.  The people that should be

         22  held harmless are those consumers.  And it should be of

         23  no difference to the federal universal service system

         24  whether a subscriber is a former customer of one of the

         25  large telecommunications companies that did not receive


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          1  either significant universal service support or any

          2  universal service support.

          3               COMMISSIONER NESS:  Those are very good

          4  observations.  On universal service, there is a

          5  disparity as to the numbers or the percentage of

          6  subscribers that are receiving universal service support

          7  in the different communities.  Is that a function of

          8  information?  Perhaps we need to do a better job of

          9  getting the information out.  I'm delighted to see that

         10  you've increased the subscribership so much, as you've

         11  formed your own tribal-owned telephone systems.  Perhaps

         12  this is partly as a result of getting the information

         13  out about Lifeline and Link-up.  Can anyone comment on

         14  that?

         15               MR. WIESE:  Well, I'd like to comment.

         16  Primarily by universal service when we did our

         17  feasibility study, the sources of revenue were very,

         18  very well defined and very predictable, and thus we can

         19  make a business case for going into the business.  As a

         20  matter of fact, our financial consultants did a six-year

         21  forecast, and after six years we looked down at our

         22  operating revenues versus the forecast, and they were

         23  less than a thousand dollars off.  Just amazing.  Having

         24  that predictability allows us to go ahead and invest in

         25  the infrastructure.


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          1               COMMISSIONER NESS:  You're absolutely right

          2  on that.

          3               Wireless technologies.  Most of the tribes

          4  represented here have very sparse populations and some

          5  mountainous populations or folks living in mountainous

          6  terrain.  To what extent have you tried to use

          7  wireless -- fixed wireless systems -- as a less costly

          8  means to be able to deploy telephone service?  Anyone

          9  want to comment on that?

         10               MR. WIESE:  Well, we have a very sparse

         11  population, and we are using BETRs radios for some of

         12  our very remote areas.  Most of the BETRs are actually

         13  going to people that don't even have power extended to

         14  them.  One of our small communities is 20 miles from the

         15  nearest power line, and so we've been able to use BETRs

         16  successfully.  We're also partnering with Cellular One

         17  to provide cellular service out there, and we've been

         18  able to enhance the coverage.

         19               GOVERNOR THOMAS:  I want to bring to your

         20  attention that the FCC established a Public Safety

         21  National Plan in 1987, and the plan established 55

         22  planning regions in 1988, and Arizona was established in

         23  Region 3.  During the planning, they conducted public

         24  hearings for the state of Arizona public safety

         25  representatives, and there were only two Native American


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          1  community representatives involved.  And this is what we

          2  mean by consultation.  During our discussions there was

          3  never any allocation made for Native American

          4  communities in this region.  It's a little -- I guess

          5  you can't understand it when the Arizona tribes in

          6  Arizona own 23 percent of the state land here in the

          7  state of Arizona.

          8               We started looking into improving our

          9  existing 450 megahertz UHI frequency back in '97.  We

         10  now hold two licenses to two frequencies, but other

         11  Native Americans, as I mentioned, in this area are using

         12  that.  The community then turned on to the 800 megahertz

         13  band of public safety spectrum.  So when we did our

         14  research, we became aware of the limited amount of

         15  800 megahertz frequency that was available.  And we have

         16  never been allocated any other frequencies during the

         17  regional planning, as I mentioned.

         18               Right now we did a survey, and we need

         19  1,000 subscriber units.  These are the mobile units that

         20  we now use in order to communicate across this

         21  reservation.  We identified an additional need for 700

         22  subscriber units in three to five years based on the

         23  growth of our community.  And the design criteria

         24  indicated that the community will need 15 of the

         25  800 megahertz frequencies to handle the radio traffic


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          1  and air time for the community.  We were advised there

          2  were 122 of the 800 megahertz public safety frequencies

          3  that were unlicensed.  So we had our representatives

          4  still take part in the ARRC, and the information that

          5  came down was that there were only seven available

          6  frequencies that were available to Gila River to apply

          7  for.

          8               So we are pursuing that avenue, but, as we

          9  indicated earlier, this need is so great because of our

         10  potential for hazards on this reservation regarding

         11  materials that are dumped on the reservation or other

         12  disasters that occur, and we have to get in touch with

         13  the Red Cross as soon as possible, our roads department,

         14  our public works, as well as the fire and police.  So

         15  these are some of the blocks that we are facing in

         16  trying to meet the situation of our emergency operations

         17  center.  We had to set that up because of the ongoing

         18  emergency situations on the Gila River.

         19               COMMISSIONER NESS:  Thank you.

         20               PRESIDENT MAKIL:  Mr. Chairman,

         21  Commissioner Ness, if we could, I would like to ask

         22  Mr. Casey to respond on behalf of Salt River.

         23               CHAIRMAN KENNARD:  Mr. Casey.

         24               MR. CASEY:  I know you guys are probably

         25  getting tired of hearing from me, but President Makil


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          1  just wanted me to respond on that technical issue

          2  regarding the use of wireless.  Many of the wireless

          3  systems are proving -- without further development,

          4  without further exploration into what they can do,

          5  they're not proving useful or effective for the kind of

          6  services that we've been stressing here.  You may in

          7  many cases get a dial tone out there -- BETRs can

          8  provide a dial tone -- and that may be a sufficient

          9  stopgap kind of measure, but it doesn't provide the kind

         10  of future-looking services that tribes are going to

         11  need.  And so you look to BETRs, you look to these

         12  other -- you look to licensed, unlicensed frequencies.

         13  What about unlicensed spectrum?  When it only goes a

         14  mile or so, in a highly disbursed area that's not going

         15  to work.

         16               So there need to be solutions developed and

         17  explored perhaps through technical waivers of power

         18  limitations at cell sites, other possibilities that can

         19  be used to allow new technologies, such as the proximity

         20  that Salt River is now using through the auspices of

         21  your experimental license that's been granted.  These

         22  are all things that need to be explored.  And wireless

         23  may very well be a solution, but it's not, under most of

         24  the services, it's not currently a solution to the kinds

         25  of needs that tribes have to look for to make sure that


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          1  their children now and future generations have access to

          2  the kinds of technologies that they have to have to

          3  survive in this world.

          4               CHAIRMAN KENNARD:  Thank you, Jim.

          5  Appreciate that.

          6               Commissioner Furchtgott-Roth.

          7               COMMISSIONER FURCHTGOTT-ROTH:  Thank you,

          8  Mr. Chairman.  I came today very honored and humbled to

          9  be here, and after the presentations I'm even more

         10  honored and more humbled than when I came.  I came

         11  painfully aware of my ignorance of a lot of these

         12  issues, and I've learned a lot today, but I must say I'm

         13  even more painfully aware of my ignorance of a lot of

         14  the issues before us.  We have a lot more learning to

         15  do, and I look forward to that.  I have no questions at

         16  this time, Mr. Chairman.

         17               CHAIRMAN KENNARD:  Thank you, Commissioner.

         18               With that, we're going to take about a

         19  10-minute --

         20               MR. JAMES:  Mr. Chairman?

         21               CHAIRMAN KENNARD:  Oh, yes.

         22               MR. JAMES:  I'd like to speak to the

         23  question that Commissioner Ness asked a couple -- maybe

         24  three questions ago about the State.

         25               CHAIRMAN KENNARD:  Okay.


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          1               MR. JAMES:  Going back to the request for

          2  the development of a consultation process between FCC

          3  and tribes, this particular consultation process could

          4  facilitate the State's understanding of tribal problems

          5  and how tribes can better interact with the State

          6  Commission.  One of the reasons for this would be

          7  because of the tribe's trust relationship it has with

          8  the federal government.  And based on that relationship,

          9  the FCC could have the role of reaching to the states

         10  and bringing the states to the table.  They would have

         11  perhaps a better opportunity to accomplish this.  When

         12  states go to -- when tribes go to states and ask for

         13  some type of meeting, it is with great difficulty that

         14  that meeting gets established, but this consultation

         15  process could facilitate that process.

         16               CHAIRMAN KENNARD:  Thank you very much.

         17               COMMISSIONER NESS:  Thank you.

         18               CHAIRMAN KENNARD:  We'll take a five-minute

         19  break, and then we're going to come back and hear from a

         20  panel of industry representatives to talk about this

         21  topic.

         22               (A recess ensued from 10:22 a.m. to

         23  10:31 a.m.)

         24               CHAIRMAN KENNARD:  Could everyone take

         25  their seats, please, so we can get started.


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          1               Our second panel of the day includes

          2  representatives from telecommunications companies and

          3  some experts, people who have been working out there in

          4  the field who know a lot about how to deliver

          5  telecommunications services particularly to people in

          6  remote areas of the country.

          7               So we're pleased to begin our second panel

          8  with our first witness, Jeff Olson, who is director of

          9  regulatory planning and policy issues for integration

         10  planning and strategy for GTE.

         11               Mr. Olson.

         12               MR. OLSON:  Good morning, Chairman Kennard,

         13  Commissioner Ness, Commissioner Furchtgott-Roth, and all

         14  of our distinguished guests here today.  It's a pleasure

         15  to be in Arizona this morning.  Thank you for the

         16  opportunity to be here.

         17               My name is Jeff Olson.  I'm director of

         18  regulatory planning and policy for GTE.  My written

         19  statement will address a number of topics.  I'd like to

         20  touch on two of them with you here today.  But first, as

         21  background, GTE provides service to about 8,000

         22  customers in Arizona, including the Colorado River

         23  Indian Tribe in western Arizona and the neighboring

         24  California area.  We also provide service to several

         25  other tribal nations outside of Arizona.  We believe we


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          1  have a very good relationship with the people of the

          2  CRIT reservation, and I'm glad to be here with you

          3  today.

          4               Let me give you just some short specifics.

          5  The Poston Arizona exchange is one of the GTE exchanges

          6  that serves the Colorado River Indian Tribe.  That

          7  exchange covers about 289 square miles and serves

          8  approximately 140 business lines and about 470

          9  residential customers, a total of about 610 lines.  That

         10  equates to a density of telephone lines of roughly two

         11  lines per square mile.  By contrast, a GTE exchange in

         12  Los Angeles has a density of about 24,000 lines per

         13  square mile.  The comparison is a density ratio of about

         14  12,000 to 1.

         15               This points out a well-known fact, that

         16  there are financial and operational challenges in

         17  providing affordable telecommunications services to

         18  sparsely populated areas.  Using wireline technology,

         19  these areas have the higher costs caused by much longer

         20  loops and feeder and distribution plant.

         21               In unserved areas, the challenge is

         22  similar, to develop an infrastructure that can

         23  efficiently serve distant or rough terrains in locations

         24  where there only may be a single customer per square

         25  mile or fewer.  Technologies that have the potential to


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          1  serve these areas are starting to become commercially

          2  available.  These include wireless local loops, PCS, and

          3  the low-orbiting satellites of providers such as Iridium

          4  and Teledesic, but we're not entirely there yet.

          5               How can these and other potentials be

          6  harnessed to deliver services to underserved or unserved

          7  areas?  GTE believes that we should rely, in part at

          8  least, on auction mechanisms to bring services to

          9  sparsely populated areas.  A purely market-based price

         10  for the delivery of telecommunications services to rural

         11  and insular areas may not be within the financial reach

         12  of the customers in these areas.  As a result, there are

         13  policy issues, like affordability and the specification

         14  of certain service obligations, that enter the picture.

         15  Thus, the solutions are apt to be a mixture of policy

         16  decisions and market-based mechanisms.

         17               Our proposed solution is a combination of

         18  policy decisions regarding affordability and universal

         19  service support and a market-based auction.  GTE

         20  proposes that any interested carrier which, by its bid,

         21  indicates that it needs the lowest amount of financial

         22  support be given the authority to serve the area.  And

         23  that can include a tribal telephone company.

         24               In the interest of time, I won't try to

         25  explain auctions in detail.  There are a few important


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          1  points, however, about such an auction.

          2               First, the auction would rely on

          3  competitive bidding, not on detailed cost study debates,

          4  which have proven to be highly contentious and resource

          5  intensive.  Second, the auction would be technology

          6  neutral.  It would not prejudge the technology and, as a

          7  result, would encourage innovation.  And we've heard

          8  some wonderful discussions of innovation already this

          9  morning.  Third, it would not advantage any one group of

         10  carriers or companies over another.  Instead it would

         11  leave the selection process to the market.

         12               An auction can be used to address issues

         13  regarding underservice.  Many factors can contribute to

         14  underservice, including low income levels, the relative

         15  affordability of customers' total bills, the inability

         16  of customers to control long distance costs, and the

         17  inability of the provider to obtain right of way

         18  permission to improve service quality and capabilities,

         19  and other factors.

         20               Policymakers must determine the causes for

         21  underservice in order to design a required service

         22  package and carrier obligations that correctly address

         23  these causes.  And that's no small task, given the

         24  complexity of these problems.

         25               As an example, policymakers might determine


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          1  that the inability of customers to control long distance

          2  bills is a primary reason that customers drop off the

          3  network.  In that case, the authorities could define a

          4  package of telephone services to be supported by a fund

          5  that includes some forms of toll restriction services

          6  and possibly customer education on how to use these

          7  capabilities.

          8               These requirements come at a cost.

          9  Increasing the items included in a service package

         10  necessarily increases the support amounts that bidders

         11  would require to provide these required services.  This

         12  increases funds needed and raises the burdens on payers

         13  into the fund.

         14               An auction proposal can also be used for

         15  unserved areas.  There are mechanics associated with

         16  nominating an area for an auction that will be discussed

         17  in my written statement.

         18               The key to success of an auction is the

         19  ability to attract bids from firms that are ready,

         20  willing, and able to provide service, the same services

         21  that authorities designate as eligible for support.

         22  Presumably, the auction must allow the support amount to

         23  rise to a sufficient level to attract a bidder.

         24  Importantly, with affordability levels already

         25  determined, a higher bid by a carrier does not increase


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          1  the costs to customers served in an area.  Prior to

          2  announcing an auction for an area, the authorities could

          3  make a judgment about what the maximum fund that society

          4  is willing to have for the carrier to provide these

          5  defined services.  This requires a balancing between the

          6  public interest benefits from having a carrier of last

          7  resort in the area and the costs of the fund necessary

          8  to attract a firm willing to undertake these defined

          9  responsibilities.

         10               Once these policy determinations have been

         11  made, the authorities could open the area for bidding.

         12  If no bids are received, it may be desirable to repeat

         13  the process with a higher maximum support amount,

         14  attempting to elicit a bid.

         15               There may be a point at which policymakers

         16  conclude that the public interests of having a carrier

         17  of last resort serve an area are outweighed by the high

         18  costs that would have to be paid to attract a bidder,

         19  but I presume that would rarely be the case.

         20               Thus, GTE believes that a properly

         21  structured auction is an ideal mechanism to attract

         22  qualified bidders to provide telecommunications service

         23  in underserved and unserved areas, including certain

         24  tribal reservations.

         25               Now I'd like to share a brief related


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          1  suggestion.  The FCC could consider using the spectrum

          2  in the 3650 to 3700 megahertz band for providing service

          3  to rural Americans.  If used for rural service, these

          4  auctions most probably should be for geographic regions

          5  that are smaller than a basic trading area or BTA.  This

          6  is because the BTA geography coverage is larger than

          7  what is needed to address most rural concerns.  Also,

          8  we'd need to work with equipment manufacturers.

          9  However, this could be a cost-effective wireless

         10  solution for rural telephone service and deserves

         11  further examination.

         12               GTE stands ready to help the FCC and tribal

         13  authorities with our expertise in any of these and other

         14  areas.  Thank you.

         15               CHAIRMAN KENNARD:  Thank you very much,

         16  Mr. Olson.

         17               Now we'll hear from Aloa Stevens, who is

         18  director of external affairs west for Citizens

         19  Communications.

         20               MS. STEVENS:  Thank you, Chairman Kennard,

         21  and Commissioners, for being here and for the

         22  opportunity that we have to present our statements.

         23  Citizens feels fortunate to be able to participate in

         24  the New Mexico hearings.  Participating in that hearing

         25  and now this one, I've learned a tremendous amount, and


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          1  I know I'll learn a lot more before this day is through.

          2               Citizens Communications serves customers in

          3  13 states.  We serve the Navajo reservation, the

          4  Hualapai Indian reservation, and the White Mountain

          5  Apache Tribe reservation here in Arizona.

          6               In most settings in this country, telephone

          7  service penetration is at very high levels.  Only in

          8  sparsely populated rural areas do we find significant

          9  pockets of unserved potential customers.  The low

         10  density of households in these areas and their distance

         11  from the telephone company switching offices tend to

         12  complicate the extension of reasonably priced service.

         13  It is simply uneconomical to invest in the extension of

         14  plant facilities into remote areas without formal

         15  customer commitment to subscribe to services at the

         16  levels necessary to pay for the needed construction.

         17  One simply cannot assume that every remote household

         18  represents a potential demand for our services.  Nor can

         19  we assume that if service were brought to every door

         20  there would be financial means to support the universal

         21  service deployment.

         22               Great strides have been made toward the

         23  achievement of universal service.  There are numerous

         24  programs, supported by both state and interstate

         25  funding, to foster wide availability of reasonably


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          1  priced communications capability.  We must acknowledge

          2  that the Lifeline and Link-up programs and other USF

          3  funding have been a major factor in the achievement of

          4  today's penetration levels, particularly in the rural

          5  areas of our country.  However, the last remaining

          6  unserved areas, such as those found on many of the

          7  Indian reservations, represent a real challenge to the

          8  serving companies.

          9               At a time when access reform is shrinking

         10  and the support that telephone companies receive for

         11  their common line investment, and being faced with

         12  unknown future USF treatment for rural companies, it's

         13  difficult to contemplate large new expenditures to drive

         14  service capability out into the areas with low customer

         15  density and unknown demand.  I think you visited such an

         16  area on the Navajo reservation last month and probably

         17  felt firsthand the distances that we're looking at when

         18  it comes to putting facilities in place.

         19               These circumstances seem to suggest that

         20  some extension of the existing support programs should

         21  be created to explicitly address high-risk low-density

         22  line extension projects.  Lifeline supports the monthly

         23  exchange rates for those in need.  Link-up pays the

         24  tariffed nonrecurring charges for ordering and service

         25  initiation.  But except for the endangered and somewhat


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          1  arguable implicit support buried within the interstate

          2  USF, there's no specific support for the extraordinary

          3  risk associated with rural line extension projects to

          4  unserved areas.

          5               We believe there are worthwhile social

          6  benefits to be gained by addressing most unserved areas.

          7  Citizens will be happy to meet with tribal

          8  representatives to discuss their desires for plant

          9  extensions.  However, there are real risks of higher

         10  costs for all telephone users unless some form of

         11  explicit subsidy can be created to support deployment of

         12  plant into areas with unknown potential demand.

         13               The number of access lines served by

         14  Citizens Communications and NCC, or Navajo

         15  Communications, as of December 31st is as follows.  On

         16  the Navajo Nation, we serve 22,727 subscribers, with a

         17  penetration rate of only about 22.5 percent.  In the

         18  White Mountain Apache Tribe area we serve 2,421

         19  customers, with a penetration of about 17.9 percent.  On

         20  the Hualapai Indian reservation we serve 441 customers,

         21  which is an approximate penetration of 24.5.

         22               Citizens Communications' and NCC's central

         23  office switches are now 100 percent digital.  Customers

         24  are offered a myriad of services, including call

         25  forwarding, call waiting, message center, better known


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          1  as voice mail, and conference calling.  Customers have

          2  access to both intraLATA and interLATA exchange

          3  carriers.  Local Internet access is available within

          4  several exchanges serving the Navajo Nation and the

          5  White Mountain Apache Tribe.  Internet access is also

          6  available to the Hualapai Indian reservation via their

          7  long distance carrier.  NCC has installed a frame relay

          8  switch at St. Michael's, and we're on schedule to

          9  provide frame relay service in the near future.  When

         10  this project is complete, this service will be available

         11  to about 40 of the 45 BIA schools on the reservation.

         12  And this morning you spoke about the Pinon School.

         13               CHAIRMAN KENNARD:  Pinon School, yes.

         14               MS. STEVENS:  That school will also be

         15  served by frame relay once it's installed.

         16               CHAIRMAN KENNARD:  That's wonderful.

         17               MS. STEVENS:  Frame relay service is also

         18  now available in the White Mountains and on the Hualapai

         19  Indian reservation.

         20               Enhanced E 911 service has also been

         21  deployed in the exchanges serving the White Mountains

         22  Apache Tribe and the Hualapai Indian reservation.  NCC

         23  is unable to deploy E 911 service due to a rural

         24  addressing system not being in place for the

         25  reservation.


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          1               Since 1996 Citizens Communications and NCC

          2  have committed to investing over $32.1 million in

          3  capital expenditures to upgrade the networks on all

          4  three of these reservations with digital technology,

          5  deployed advanced calling services, and we've also

          6  expanded our services and facilities to new customers.

          7               In my presentation, Attachment A depicts

          8  the recurring and nonrecurring rates that Citizens

          9  Communications and NCC charge for single-party basic

         10  exchange service.  Citizens Communications and NCC are

         11  not licensed to provide cellular service within its

         12  service territories.  However, we've identified the

         13  following wireless providers operating in our serving

         14  areas.  On the Navajo Nation we have identified Cellular

         15  One, Alltel, Commnet Cellular, and Triadd Cellular as

         16  being providers.  And in the White Mountains we have

         17  Cellular One.  We have not been able to identify any

         18  provider, as of today anyway, on the Hualapai

         19  reservation.  There may be somebody that we're not aware

         20  of.

         21               Impediments to telephone line extension on

         22  tribal reservations are -- there are several that I'm

         23  going to cover and then offer some solutions.

         24               Securing right of ways within the Navajo

         25  reservation has become a complicated and time-consuming


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          1  process.  Both the federal government and the Navajo

          2  Nation have imposed stringent requirements that must be

          3  met before any right of way is granted.  A right of way

          4  acquisition for small line extension or cable

          5  reinforcement may take anywhere from 60 days to

          6  12 months to obtain.  Right of way acquisitions to

          7  provide service in an unserved area can take two to

          8  three years to obtain and may cost several hundred

          9  thousand dollars just to secure the right of way.  I

         10  have provided an Attachment B in my written statement

         11  that gives you a flow chart describing the process is

         12  for right of way on the Navajo reservation.

         13               In the Navajo and White Mountains areas the

         14  applicant for service is given an allowance of a half a

         15  mile free line extension footage from our existing

         16  facilities.  In the case of Citizens Rural Company,

         17  which serves the Hualapai reservation, Citizens extends

         18  its lines to reach the applicant without charge,

         19  provided the cost of constructing the line extension

         20  does not exceed seven times the estimated annual revenue

         21  from that applicant.  If the line extension requirements

         22  of the applicant exceed the above, a construction charge

         23  will be made for facilities in excess of the allowances

         24  specified and have to be paid in advance.  Special

         25  construction charges can range anywhere from 1500 to


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          1  $157,000, depending upon the length of the extension.

          2               In Arizona it's estimated there are

          3  approximately 177,000 low-income customers that qualify

          4  for Lifeline and Link-up programs available in Arizona,

          5  and many of these customers are located on reservations

          6  or in reservation service areas.  Because many of these

          7  low-income customers are unable to pay the construction

          8  charges, they are unable to take advantage of Lifeline

          9  and Link-up programs.

         10               Another impediment to providing

         11  telecommunications service is the rugged and remote

         12  terrain.  Regardless of the technology deployed, the

         13  very nature of the terrain in these unserved areas makes

         14  construction and maintenance of facilities costly and

         15  difficult to maintain.  Theft and vandalism at remote

         16  equipment sites is common and dramatically increases the

         17  cost of service.  In fact, I was informed this morning

         18  that one of our very remote sites has been vandalized

         19  again, making the total amount of repair for these sites

         20  just this year, about half a million dollars.

         21               The federal access reforms have reduced our

         22  funding for carrier common line investments.  And with

         23  unknown universal service fund treatment for rural

         24  companies in the future, it's difficult to contemplate

         25  large expenditures to increase service capability into


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          1  our areas.

          2               We have some suggestions.  These

          3  suggestions need to be a combination of cooperation

          4  between the FCC, the state, the serving companies, and

          5  the reservations.

          6               One of them would be to reduce the BIA and

          7  tribal right of way requirements within the Navajo

          8  Nation and the Hualapai Indian reservation to allow

          9  blanket right of ways on all publicly traveled roads

         10  through a local road permit.  Citizens has been very

         11  successful in working with the White Mountain

         12  reservation's tribe to make right of way issues less

         13  onerous.

         14               Second one would be to allow the Historic

         15  Preservation Department to issue blanket clearances on

         16  all previously disturbed public roadways.  In the event

         17  of a discovery, all construction activities would cease,

         18  and the Historic Preservation Department would be

         19  notified.

         20               Third, support the Arizona Corporation

         21  Commission's proposal of setting aside a fixed amount of

         22  federal USF funds to particularly offset the special

         23  construction charges required to serve customers living

         24  in remote unserved areas.

         25               Fourth, expand existing or create an


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          1  additional federal and/or state fund to explicitly

          2  address high-risk low-density line extension projects.

          3               Encourage the Arizona Corporation

          4  Commission to consider expanding the existing Arizona

          5  universal service fund to partially offset special

          6  construction charges for customers residing in unserved

          7  areas.

          8               Encourage the Arizona Corporation

          9  Commission to facilitate workshops for improving access

         10  to right of ways on federal, Navajo Nation, and Hualapai

         11  Indian reservation lands.

         12               Encourage the federal agencies and tribal

         13  members to participate in workshops and public forums

         14  such as this to make everyone aware of the problems and

         15  participate in the solutions.

         16               And, finally, to encourage the Navajo

         17  Nation to approve and establish the necessary funding

         18  mechanism to implement a rural addressing system and

         19  enhanced 911 services there.

         20               In conclusion, I'd like to thank you for

         21  taking the time to try to understand the complexities of

         22  providing telecommunications service to unserved areas,

         23  and I look forward to working with the appropriate

         24  federal, state, and local representatives in finding

         25  solutions to these very, very important issues.


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          1               CHAIRMAN KENNARD:  Thank you very much,

          2  Ms. Stevens.

          3               The next witness will be Carl Artman, who

          4  is with Airadigm PCS, an investor in Airadigm PCS.

          5               MR. ARTMAN:  Mr. Chairman, Commissioners

          6  Ness and Furchtgott-Roth, thank you for holding this

          7  hearing on this very important but often understated

          8  problem in our nation.  My name is Carl Artman.  I am

          9  the executive vice president and general counsel of

         10  Airadigm Communications, and I am also a member of the

         11  Oneida Nation.

         12               Every time we pick up a newspaper or

         13  magazine, an article extols the virtue of the

         14  information age.  We are one of the most connected

         15  nations in the world.  In fact, our telecommunications

         16  industry stumbles over itself to offer new ways to

         17  connect people to voice and/or data communications, DSL,

         18  ADSL, PCS, cellular, LMDS, satellites, miles and miles

         19  of new fiberoptic plant.  One must wonder why, with all

         20  this occurring, we're holding this hearing today to

         21  discuss the problems of telecommunications access to our

         22  nation's reservations.

         23               There is a long and sometimes bitter

         24  history which has led to the current dismal state of

         25  services afforded to Indian reservations.  And it's


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          1  refreshing to see that the FCC has taken an interest in

          2  ensuring that history will not rewrite itself as we

          3  continue forth into the information age.  However, it

          4  will take more than the research and policy directives

          5  to ensure that substantive steps forward towards the

          6  goal of delivering basic and next-generation services to

          7  Indian reservations occur.

          8               As you are intimately aware, the

          9  telecommunications industry is driven by capital.  It's

         10  needed to deploy the services, to market and deliver the

         11  services, and it must be assured that it will be

         12  multiplied at a date certain.  And unless the federal

         13  and state governments are willing to afford relief or

         14  benefits to those who supply the equipment or service,

         15  then we may be back here in 10 to 15 years pondering the

         16  same questions.  I doubt the federal government will

         17  want to fully fund the deployment of numerous networks,

         18  nor do I believe anyone is asking for that.

         19               The Oneida Tribe realized this and decided

         20  to embark upon a path which would allow them to be in

         21  control of their own destiny.  Oneida is a gaming tribe

         22  that invested its revenue back into community projects

         23  which would benefit the community as a whole instead of

         24  paying out per capita payments.  Airadigm was one of

         25  those projects.


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          1               The Oneida reservation is located adjacent

          2  to Green Bay, the third largest city in Wisconsin.

          3  Nevertheless, it found that it was underserved by the

          4  two cellular companies and the three wireline companies

          5  whose markets intersected the reservation.  Oneida had

          6  investigated buying its own wireline phone company.  It

          7  investigated creating its own wireline phone company.

          8  Finally, it settled on wireless communications because

          9  of its lower cost of deployment and maintenance.

         10               It decided to participate in the C-block

         11  auctions in 1995.  To the surprise of Oneida, it had to

         12  find a partner to be the controlling entity since it

         13  could not own more than 49 percent of a company which

         14  qualified as a designated entity in the auctions.  The

         15  FCC had prohibited gaming tribes from having a

         16  controlling interest in a designated entity.  Therefore,

         17  it became the minority partner in a partnership which

         18  later became Airadigm Communications.  It successfully

         19  won the right to build out 15 BTAs in the C and F Block

         20  auctions, which encompass all of the state of Wisconsin

         21  and part of Iowa, well beyond its own reservation

         22  boundaries.  Airadigm has deployed service to the

         23  majority of its population.  It serves individual

         24  customers in a manner similar to other wireless

         25  operators, in a retail environment.  However, it's gone


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          1  a step further.  It also focuses on serving the business

          2  customer with a large-scale wireline system replacement

          3  offering, essentially a wireless centrex.  As this same

          4  service is offered to communities, it's more akin to a

          5  wireless local loop.

          6               Airadigm Communications has replaced the

          7  wireline services of numerous companies in its service

          8  area.  The companies range from five lines to over 1,000

          9  lines, and the industries range from insurance to

         10  morticians to lumber and paper mills.  It has begun to

         11  replace the wireline systems within the Oneida Nation

         12  and for many other Wisconsin residents.

         13               After little more than a year, 500 phones

         14  have been activated on the reservation.  This is just

         15  under a 10 percent penetration level.  One of our most

         16  enterprising efforts to date has been supplying the

         17  Oneida Nation Police Department with these phones.

         18  Prior to this, the police department did not have

         19  two-way communications.  In the near future, entire

         20  departments within the tribal organization, such as the

         21  Department of Public Works, will convert to wireless.

         22  As new buildings are built, such as the health clinic or

         23  the elderly home, wireless will be the primary source

         24  for communications.  This will exponentially increase

         25  the penetration level.  Many of the current individual


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          1  users on the reservation use only the Airadigm service

          2  for their home and business phone.

          3               The Oneida Nation was also concerned about

          4  access to data.  It wanted to combine reliable data

          5  access with mobility in order to create efficiency in

          6  people's lives.  The digital wireless capabilities allow

          7  users to access both internet and intranet databases.

          8  The reservation will also serve as the beta site for

          9  future cellemetry applications for monitoring specific

         10  utilities throughout the reservation.

         11               These activities have resulted in increased

         12  awareness of the residents' needs by the competitors to

         13  Airadigm, the people who were underserving.  Their

         14  prices have fallen.  Their services have improved.

         15  Airadigm Communications currently charges below them by

         16  charging the Oneida member slightly less than 10 cents a

         17  minute for usage, as part of a bundled package.  This

         18  rate decreases as we look forward to corporate bundles.

         19               Oneida's investment in a wireless

         20  infrastructure to serve itself and to generate revenue

         21  from users throughout the region could be held up as a

         22  model for other tribes to follow, except that not all

         23  tribes have the ability to divert their own capital into

         24  a multimillion dollar business venture.  Not even all

         25  gaming tribes have this ability, for not all gaming


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          1  tribes are successful, contrary to the expert opinion of

          2  Andy Rooney from 60 Minutes.

          3               We must always come back to the base issue

          4  of financing the deployment.  Even if the tribes were

          5  given the spectrum, they would still need to buy the

          6  equipment and hire the expertise to harness the

          7  spectrum.  They would still need to educate, market to,

          8  and bill their customers, even if they are their fellow

          9  tribal members.  The tribes and the state and federal

         10  governments cannot by themselves solve the problems we

         11  discuss here today.  Any solution must include two other

         12  entities, the infrastructure vendors and the finance

         13  community.  And the latter may include tribes which have

         14  benefited from gaming to date.

         15               One solution that I envision is a

         16  cooperative made up of all tribes, state and federal

         17  governments, infrastructure vendors, and the finance

         18  community.  The tribes would be the end-users and the

         19  partial owners of the cooperative.  The vendors and the

         20  financiers would also become partial owners until their

         21  shares could be purchased from the revenues generated by

         22  the end-users.  The state and federal governments would

         23  clear obstacles that the entity would encounter, such as

         24  acquiring spectrum or influencing potential

         25  participants.  The cooperative would create a national


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          1  phone network with a mission based on serving Indian

          2  communities.

          3               While this may seem broad in its scope, it

          4  actually helps to tackle another problem associated with

          5  financing, that is, lowering the capital expenditures

          6  and taking advantage of the economies of scale

          7  associated with a phone network.  If we believe that the

          8  best solution for Indian tribes is one in which they

          9  participate so they can control their own destiny, then

         10  we have to believe that they must control their own

         11  network in order to guarantee service where and how they

         12  need it.  But it's impossible for every tribe to have

         13  its own billing system and its own network operations

         14  center.  It would be pointless for each to negotiate for

         15  its infrastructure equipment, handsets, interconnection

         16  and long-distance rates.  The economies of scale just do

         17  not exist for the small communities which make up a

         18  reservation.  By pooling their numbers, resources, and

         19  potential pops, and by centralizing their operations,

         20  Indian tribes have a better opportunity to create a cost

         21  efficient network which serves their needs.  By creating

         22  a cooperative entity, each tribe would have a vote in

         23  the construction and service priorities.  And each tribe

         24  would share in the benefits of a shorter break-even time

         25  and, thus, the benefits of a positive cash flow.


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          1  However, this is only one potential idea of the many

          2  which we've heard so far and which I'm sure will

          3  continue to result from these hearings.

          4               In closing, Mr. Chairman and Commissioners,

          5  many people talk about the problems which need to be

          6  addressed in Indian country.  However, there have been

          7  relatively few improvements.  Reservations have been

          8  immune to the benefits of the telecommunications

          9  revolutions in the large part.  This will prevent them

         10  from experiencing the benefits of the information

         11  revolution.  In a world which will define its have and

         12  have not's not by material wealth but by intellectual

         13  wealth, a tremendous delta is growing between Indian

         14  country and the rest of our nation.  Third World nations

         15  have surpassed our own Native Americans, who live in the

         16  richest nation in the world.  It will take a concerted

         17  effort by all parties in order to correct this problem.

         18  Any solution which dictates will atrophy.  Only the

         19  solutions which solicit and encourage participation from

         20  all facets will succeed.

         21               Thank you for your time.

         22               CHAIRMAN KENNARD:  Thank you very much,

         23  Carl.  Well done.

         24               A few weeks ago, after we had held a field

         25  hearing in New Mexico, Commissioner Ness called me up


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          1  one day and said she had talked to some folks who had

          2  some solutions for us, some ways that we can create more

          3  phone penetration for Indians in Arizona.  And out of

          4  that conversation evolved a meeting that we had with

          5  Smith Bagley and its partner Richard Watkins, who is

          6  working here in Arizona to deliver wireless service in

          7  northeast Arizona.  So we're delighted that you took us

          8  up on our challenge to help us, and we're glad that you

          9  are here, Mr. Watkins.

         10               MR. WATKINS:  I'm also glad to be here.  I

         11  think I have a very good story to tell.  And after

         12  listening to Carl's presentation, while that's certainly

         13  a revolutionary idea, he's going to be excited to hear

         14  what we're doing, and it's on its way.

         15               I'm Richard Watkins, the general manager of

         16  Smith Bagley, Inc., and we hold A-band cellular

         17  telephone licenses in northeast Arizona and northwest

         18  New Mexico, operating as Cellular One.  It's certainly a

         19  privilege to present testimony at this hearing on behalf

         20  of our company.  I'm hoping that this hearing will be a

         21  productive step toward increasing telephone

         22  subscribership among Native Americans, which, as we have

         23  already heard in about 14 different terms, is the

         24  nation's lowest.

         25               The purpose of my testimony is twofold.


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          1  First, because I'm sure most of you have never heard of

          2  us, I want to highlight for you who we are, what we do,

          3  and describe how and why we are ready, willing, and able

          4  to assist the FCC and the public utilities commissions

          5  in meeting the communications needs of every person

          6  within our authorized service area, which is about

          7  60 percent Native Americans.  Second, I want to suggest

          8  that we think about the universal service problems

          9  facing Native Americans in different and unique ways and

         10  innovative ways and offer a few ideas in this area.

         11               Let me briefly describe our company.  We

         12  operate facilities in a number of small markets in

         13  northeast Arizona and northwest New Mexico, as I said,

         14  as well as vast rural areas in the region.  Our coverage

         15  in Arizona alone is over 21,000 square miles.  Our

         16  reliable service area on the Navajo Nation alone is

         17  roughly as large as the State of West Virginia.  That's

         18  just our coverage area on their nation today.  The

         19  largest town in Arizona we serve is Show Low, with a

         20  population of approximately 7480 people.  So we're truly

         21  rural in every sense of the word.  An average of six

         22  persons live in each square mile that we cover.  Over

         23  the past eight years, we have aggressively grown our

         24  subscriber and revenue base to permit us to expand

         25  beyond the highways and to the point where we now cover


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          1  over 90 percent of the service area originally licensed

          2  by the FCC or our CGSA.

          3               We provide usable signal to four Native

          4  American reservations today.  One is the Navajo Nation,

          5  as Citizens talked about earlier, the Hopi Nation, the

          6  White Mountain Tribe, and the Pueblo of Zuni.  The

          7  collective service area of these four reservations right

          8  now is 15,577 square miles.  Our best guess is that,

          9  geographically, we serve approximately 85 percent of the

         10  Navajo Nation, 75 percent of the Hopi nation, 95 percent

         11  of the White Mountain Apache Tribe, and 95 percent of

         12  the Pueblo of Zuni.  We provide all of our customers

         13  with free calls to emergency numbers, including 911, as

         14  well as all the public health and safety agencies, and

         15  we offer toll-free calling throughout our entire

         16  footprint.

         17               We have recently made a decision to replace

         18  our current switch and all transmission sites, which is

         19  the precursor for us to adding channels at each cell

         20  site and eventually upgrading the network with digital

         21  capacity.  As you know, with the evolution of 3-G and IP

         22  protocol, this switch will be able to handle high-speed

         23  Internet access, data transfer, and eliminate the

         24  stopgap we heard about today about just delivering basic

         25  dial tone.  We believe delivering basic dial tone to be


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          1  very important.  However, we think delivering those

          2  integrated data and Internet services is just as

          3  important in the future, and that's why we're taking

          4  that step.  We're not taking that step in two years from

          5  now.  We start in about 30 to 45 days to replace our

          6  switch in all our transmission sites in all these

          7  reservations.  Given the vast size of our authorized

          8  service area, the relatively low income demographics,

          9  and extremely low population density, we are very proud

         10  of the speed within which we have built and expanded our

         11  network.

         12               We market our services to all four of the

         13  Native American reservations.  We believe our

         14  relationship with the tribes to be excellent.  We have

         15  worked very hard to honor the procedures that are in

         16  place on each reservation for locating transmission

         17  facilities on Native American property and to work with

         18  each tribe to develop methods for increasing telephone

         19  subscribership.  For example, we have developed rate

         20  structures and prepaid plans that enable many people to

         21  obtain their first telephone.  Additionally, the size of

         22  our home footprint enables our Native American customers

         23  to move throughout our service area without incurring

         24  any roaming charges or any toll charges.  We also offer

         25  different rate plans, some of which include no roaming


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          1  charges throughout the State of Arizona and within those

          2  areas we serve now in New Mexico.  So you can see

          3  already how progressive our product is on the

          4  reservations.

          5               Since most of our Native American customers

          6  are prepaid, we must track replenishments, calling

          7  patterns, and date of activations in order to estimate

          8  usage.  We believe the average customer now spends

          9  approximately $40 per month.  Our Native American

         10  customers generate very few roaming minutes.  It is

         11  apparent to us that the vast majority of phone usage is

         12  at or near home.

         13               As we have expanded our footprint into

         14  remote areas within our market, the need for universal

         15  service support has now come into focus.  Here are the

         16  hard facts about one of the tribes that we serve.  And

         17  it's already been mentioned, but I think it's worth

         18  repeating.  While landline phone penetration nationwide

         19  is approximately 95 percent, I agree with Citizens, it's

         20  about 23 to 22 percent on the Navajo reservation.

         21  That's right.  77 percent of the people have no

         22  telephone.  The per capita income of the Navajo Nation

         23  is approximately $4,100 per year.  The 1990 census

         24  showed 57.4 percent of the Navajo families live below

         25  the poverty line.


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          1               And the obvious question that's begged is,

          2  "What are you guys thinking, trying to make a business

          3  up there?"  And I'm going to try to answer that for you.

          4               For many areas of the country, the

          5  universal service problem is one of access.  That is,

          6  people currently live in or move to remote areas where

          7  it costs literally thousands of dollars to string a hard

          8  wire.  In our area, the access problem has been largely

          9  solved.  We do not need financial assistance to

         10  construct facilities.  In many of these remote areas the

         11  signal quality for a home user is comparable to a

         12  wireline facility and, believe it or not, more reliable

         13  in these areas.  The problem is simple.  The vast

         14  majority of Native Americans who do not have a phone

         15  simply cannot afford one.  They cannot afford a phone,

         16  and the basic cost of any carrier providing that

         17  customer with basic service is well above what they can

         18  afford.  Unless universal service support is made

         19  available to wireless carriers, our company has no hope

         20  of ever serving the vast majority of the Native American

         21  population in our service area.

         22               Rather than spend my few minutes talking

         23  about the nuances of costs and rate structures and

         24  wireless cost structure models and telephone accounting,

         25  I believe it's much more productive to touch on our


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          1  company's vision for universal service on Native

          2  American lands.  We see Native American lands as unique.

          3  The levels of telephone subscribership and income

          4  require bold solutions.  The good news in our particular

          5  situation is that experimenting with a bold solution

          6  does not require any significant capital outlay for new

          7  infrastructure.  We believe that the system we have in

          8  place is the perfect platform to build a model universal

          9  service system for Native Americans, which can be

         10  studied, improved, and eventually exported across the

         11  country.

         12               Let me give you one way to think about

         13  this.  The problem for nearly 100,000 Native American

         14  people in our service area is phonelessness.

         15  Phonelessness is different from unserved, because an

         16  unserved customer could not use a phone even if it was

         17  available.  A phoneless person has access to service; it

         18  is simply not affordable.  Our company has the front end

         19  of the equation, the access part, we have that under

         20  control.  It is the affordability problem we want to

         21  attack, and we want to attack it today.

         22               We recognize that the current regulatory

         23  structure for universal service requires us to become an

         24  Eligible Telecommunications Carrier or ETC.  Although we

         25  have some hope that Section 214 of the Communications


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          1  Act may allow the FCC to make that designation, we have

          2  prepared applications to become an ETC in Arizona and

          3  New Mexico.  However, the process is expensive,

          4  time-consuming, and often adversarial.  We have delayed

          5  filing these applications for a short time, as these

          6  hearings have developed quickly, in the hope of finding

          7  some way to shortcut the process.  We believe that an

          8  experimental program focused on Native Americans is in

          9  order.

         10               We propose for your consideration a new

         11  program for first-time users, and this would allow

         12  persons living on Native American lands to obtain their

         13  first telephone.  Under such a program, a carrier -- and

         14  that would include all carriers of telephone service,

         15  wireless carriers, wireline carriers, anybody who wants

         16  to provide the service and wants to put the

         17  infrastructure in place to do that.  Under that program,

         18  a carrier would offer local service at a fixed price.

         19  Given what we know about demographic and usage patterns

         20  in these areas, as discussed before, we believe that a

         21  relatively wide local calling area would provide users

         22  with virtually all of their basic telecommunications

         23  needs.

         24               An experimental program such as "First-Time

         25  User" can be developed and quickly rolled out on a


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          1  limited scale, enabling both the carriers and regulators

          2  to learn about calling patterns and usage.  From our

          3  perspective, phonelessness is so widespread on Native

          4  American lands, it's nearly impossible to predict which

          5  of many possible programs will best serve people without

          6  exploding the universal service fund.  An experimental

          7  program, as we propose, which develops and adjusts

          8  proposed solutions over time based on real data will

          9  best serve the public while enabling the government to

         10  assess its costs and contain them before the program is

         11  ruled on nationwide.

         12               Our company finds itself in a unique

         13  position to be able to support an experimental program.

         14  The capital investment is in place, and we seek no

         15  reimbursement for our embedded network.  We have

         16  successfully worked through the initial phases of

         17  operating on Native American lands with all four tribes

         18  that we serve.  The importance of that factor alone

         19  should not be discounted, because each tribe has its own

         20  culture, its own governmental regulations and practical

         21  problems, such as site acquisition procedures.

         22  Everybody in this room in the telecommunications

         23  business who has gone to a tribe or reservation in order

         24  to secure transmission site facilities, they know the

         25  process sometimes can be arduous and long.  We have


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          1  battled and won that battle.  We have our sites located

          2  on all the reservations at this time.

          3               In closing, as I expressed earlier and

          4  reemphasize now, the problem for over 100,000 Native

          5  Americans in our area is not one of unserved area.  The

          6  system is already built.  The problem is a lack of

          7  income to afford telephone service.  What is needed is

          8  an imaginative program to support first-time users of

          9  telephones.  We would be happy to participate in a

         10  program pursuant to which wireline and wireless carriers

         11  compete for these new customers, and we stand ready to

         12  work with the FCC and the state utility commissions to

         13  design a model innovative new program for universal

         14  service that will guarantee every Native American in our

         15  service area telephone access.

         16               The timing of our systems development

         17  coinciding with the current push to overcome these

         18  obstacles is fortuitous.  The Native American people

         19  have waited a long time to receive telecommunications

         20  service, and we believe a pilot program could be

         21  developed and rolled out within months, not years.  It

         22  is my hope that all of the regulatory bodies represented

         23  here recognize this unique opportunity which has

         24  surfaced due in large part to Chairman Kennard,

         25  Commissioner Ness, and the other Commissioners and the


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          1  task force.

          2               On behalf of Smith Bagley, Inc., I want to

          3  offer my sincere thanks for the opportunity to tell my

          4  story.  Thank you.

          5               CHAIRMAN KENNARD:  Thank you for your

          6  story.  Excellent.

          7               Our next witness is Rhonda McKenzie, who is

          8  managing partner of Aircom Consultants, Inc., and she's

          9  going to tell us about LMDS, among other things.

         10               MS. McKENZIE:  I'm sorry?

         11               CHAIRMAN KENNARD:  Among other things.

         12               MS. McKENZIE:  Among other things.

         13               Thank you, Chairman and Commissioners, and

         14  thank you, Governor Mary Thomas and the community, for

         15  so graciously hosting this event.

         16               I'm going to try to approach my

         17  presentation a little differently than directly off of

         18  my testimony.  I've been in this industry for 25 years.

         19  I began in 1974, right out of college, when there was

         20  only one phone company.  I've been involved with

         21  delivering telecommunications services to tribal

         22  communities since 1974.  I've also been involved in

         23  wireless as a director of network engineering on the

         24  wireless side for many wireless companies.  I've owned

         25  my own companies as a PCS carrier and an LMDS carrier


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          1  and a turnkey developer and consulting firm.

          2               The reason I'm telling you this is because

          3  it's very important.  Over the last 25 years I have

          4  focused on really becoming quite acquainted with many

          5  tribal members, and I have the greatest respect for

          6  these people.  I have also consulted overseas, and some

          7  of the Third World conditions in Ecuador and Sri Lanka

          8  are not unlike what I've seen on some of our tribal

          9  lands.  There is one tribe, I won't disclose the name,

         10  for obvious reasons, but there is one tribe that has

         11  only one phone line.  They are begging us to assist them

         12  to try to get federal grants for telemedicine and

         13  distance learning, and we're going to try to get them

         14  some help.

         15               We're currently involved with 23 LMDS

         16  licenses with our strategic partners.  We cover

         17  El Centro to Brownsville, Texas, all of Arizona and

         18  New Mexico, portions of Oregon and Washington, and we're

         19  negotiating other strategic alliances as we go along.

         20  Our intent is to create a hybrid system, cooperating

         21  with RBOCs or whoever the regional Bell operating

         22  company is within each of those areas, or the

         23  alternatives, CLECs, the wireless carriers, whether

         24  they're cellular or PCS, to provide basic voice service.

         25  We will augment the basic voice services with our LMDS


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          1  licenses, providing an emphasized focus on telemedicine

          2  and distance learning.  We currently have six tribes

          3  identified for a test bed.  I cannot identify these

          4  tribes at this point, for obvious proprietary reasons.

          5               There are two other elements that I'd like

          6  to add to Carl's suggested consortium of a cooperative

          7  consulting group, and that would be to add the medical

          8  communities and the educational communities.  We have

          9  done this.  We're in the process of applying for a

         10  federal grant or, actually, six federal grants to

         11  provide these tribes with basic telecommunications

         12  service.  That would be one-half of the activity.  The

         13  second half would be split between the medical

         14  communities and the educational communities.  We're

         15  currently working in Arizona with Arizona State

         16  University, the Mayo Clinic, St. Joseph's Hospital,

         17  Samaritan Hospitals, Northern Arizona University, and

         18  the University of New Mexico.

         19               Our intent is to carry high-speed Internet

         20  and video conferencing into the reservations for two

         21  purposes.  First of all, realtime telemedicine.  I get

         22  really excited about this.  You can get LMDS to the

         23  remote locations bypassing the sacred burial grounds.

         24  From my experience, it is very disrespectful to even ask

         25  to try to tear across a sacred burial ground or a


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          1  ceremonial ground.

          2               The other thing is you should be very

          3  conscious of the individual cultures of each of the

          4  tribes.  Each of these people have very sacred beliefs,

          5  just as we do.  They do not, in most cases that I've

          6  found, do business quite at the pace as we in the

          7  traditional American setting.  One should also be

          8  conscious of the prayer ceremonies that are frequently

          9  involved during business meetings.  One should be

         10  conscious of the rituals and the cultures and beliefs,

         11  as well as the value of the land.

         12               So, what our LMDS system is going to do is

         13  to apply for a federal grant so that we can tie in

         14  higher-level educational institutes, higher-level

         15  technology institutes to bring direct education into the

         16  tribes with basic phone.  We would use legacy plant

         17  infrastructure as much as we can.  This would be like

         18  aligning with a PCS carrier who overlaps with our BTAs

         19  or an AMPS carrier.  PCS is personal digital

         20  communications service, and AMPS is the cellular

         21  service.  Or if there is fiber in the ground because of

         22  the soil being conducive to easy trenching, and there

         23  are no sacred burial grounds or the terrain is not

         24  rugged, then we would try to go with a fiber line.  But,

         25  as Governor Thomas indicated, we don't want to use old


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          1  antiquated systems.  We don't want to use old degraded

          2  copper lines.  We want these people to have the same

          3  level of standards that we have in the United States

          4  metropolitan areas.

          5               As an outside plant engineer in my past

          6  life, we used to size, in 1974, for the residential

          7  communities, three lines per residential home.  Three

          8  lines:  one for basic telephone, one for a backup or

          9  spare in case it went bad, and then the third for a

         10  secondary line.  Our long-range planning had already

         11  projected there was going to be this type of demand.

         12  Now we are sizing five lines per residential home in

         13  metropolitan areas.  We are designing for modems, teen

         14  lines, dedicated fax, and a primary line, and in many

         15  cases a secondary line.  But here, we are talking about

         16  one line per residence on the tribal lands.

         17               LMDS, in conjunction with the CLECs, RBOCs,

         18  PCS, and AMPS companies, we will be able to offer these

         19  people the same high-speed Internet capabilities,

         20  distance learning, and telemedicine as metropolitan

         21  areas.  One thing I want to emphasize.  I know for a

         22  fact that today PCS cannot provide the high-speed

         23  Internet that these people need.  You cannot do it.  You

         24  need to use high band widths like LMDS to provide the

         25  high-speed Internet.  Today PCS can only go to 28,800 at


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          1  best, and that's expected to be by the end of this year.

          2  LMDS can go the equivalent of an ISDN line or a SONET

          3  ring.  We want these people to have the same level of

          4  high-speed Internet, high-speed telemedicine, and

          5  high-speed distance learning that we have in our

          6  communities in the metropolitan area.

          7               This can be provided at very reasonable

          8  rates to the tribal communities through RUS funding and

          9  federal money reserves through the Department of

         10  Agriculture.  We have applied for these federal grants.

         11  The main thing that I want to emphasize is the LMDS

         12  A-band can be used for the video conferencing, and the

         13  technology is here now, very economically priced.  And

         14  we can actually transmit, from a remote clinic, a

         15  laparoscopic view of an eye or inside an ear from a

         16  remote clinic through a wireless application into

         17  Phoenix Barrow's Neurological Institute, realtime, the

         18  doctor can advise a specialist at that remote clinic or

         19  nurse or doctor at the clinic what the diagnosis is just

         20  by looking at the eye, the throat, ear, x-rays.  This

         21  technology is here now.  It's very inexpensive, and it

         22  can be provided right away.

         23               What the FCC can do to help us is help us

         24  understand how we can process the federal grants and the

         25  RUS funding more expeditiously.


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          1               You wanted solutions.  I'll offer two for

          2  you, as a licensee.  I know for a fact that there are

          3  many C Block licensees that are still alive and also

          4  many, many LMDS licensees that are more than willing to

          5  partition their spectrum to these tribes if you would

          6  give some compensation for that portion that would be

          7  partitioned off.  Something like tax credits or the

          8  like.  That's one solution.  Allow the tribes to own

          9  their systems.

         10               And I will admit to you, I feel for these

         11  people.  And I'll quote J.D. Williams.  I received his

         12  permission to quote this.  I want to repeat this because

         13  I think it's really important for you to know what

         14  really is happening out here.  Last year in Albuquerque

         15  the wireless bureau came out and provided a very fancy

         16  presentation on how everyone could participate in the

         17  auction through the Internet.  J.D very graciously said,

         18  "That was a very nice presentation, but most of us don't

         19  even have a basic telephone line, much less access to

         20  the Internet."  Their spectrum over their lands was

         21  auctioned off in most cases.  So this partitioning would

         22  also make right for that wrong, allowing the existing

         23  licensees to partition off with some tax credits.

         24               The second solution I would offer you is:

         25  Do not allocate another spectrum.  I will tell you, it


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          1  requires the original equipment manufacturers to spend

          2  millions on R&D to provide equipment that will be

          3  interoperable with the other equipment.  These people

          4  need to be able to interface just like the metropolitan

          5  areas with public service telephone networks.  They need

          6  to be able to hand off to a PCS operator that's got

          7  proven Motorola or Ericsson equipment.  All of these

          8  carriers have equipment manufacturers with equipment

          9  that operates on PCS and AMPS spectrum.  You don't need

         10  to have another spectrum that is not inter-operable with

         11  the others.  Native American Indian communities should

         12  be able to do switch sharing so they can cut the costs

         13  of their systems.

         14               Time is up.  Thank you.

         15               CHAIRMAN KENNARD:  Thank you very much.

         16               I'm very pleased to see our next witness

         17  here, David Siddall, who is very familiar with the way

         18  the FCC operates because, until recently, he was an

         19  advisor to Commissioner Ness and a very fine advisor at

         20  that.

         21               So, David, I'm delighted that you are here,

         22  and we're looking to you for some real specific

         23  solutions.  Specific rule changes we want to hear from

         24  you.

         25               MR. SIDDALL:  I'll try not to let you down,


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          1  Mr. Chairman.

          2               Mr. Chairman, Commissioner Ness,

          3  Commissioner Furchtgott-Roth, thank you very much for

          4  having me back before you for the first time not as one

          5  of your staff.  These field hearings are a remarkable

          6  opportunity for policymakers to assess whether the

          7  theories and regulations that we rely upon back in

          8  Washington are working or not working.

          9               The Commission has done much to ensure the

         10  availability of communications services to all, but as

         11  other witnesses have said, substantial and important

         12  work remains to be done.  Prominently inscribed above

         13  the main entrance to the United States Supreme Court is

         14  the phrase "Equal Justice Under Law."  If you have the

         15  opportunity, Mr. Chairman, to place an inscription above

         16  the main entrance to the new FCC headquarters at the

         17  Portals, there would be no more worthy a phrase than

         18  "Communications Available to All."  Then all passing

         19  through your doors would be reminded daily of why the

         20  FCC exists.

         21               The Chairman has called for solutions, so I

         22  will take him up on that.  I would like to use my time

         23  this morning to try to synthesize some of the issues we

         24  have heard about and to address some of the

         25  considerations of the technology providing these


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          1  solutions.

          2               I'll try not to get too abstract in doing

          3  so, but I need to note that there truly have been

          4  enormous achievements in the last 30 years.  One of

          5  these achievements is coverage.  Literally anywhere I go

          6  I can be reached today.  Most wireline networks

          7  interconnect worldwide with little delay, and I can be

          8  reached by pager or by cell phone -- I have turned it

          9  off for the moment.  I can even take a satellite phone

         10  into remote areas.  This is a very different world than

         11  when I was a high school exchange student in Argentina

         12  over 30 years ago.  I had to schedule calls to my family

         13  in the States two to three weeks in advance.  And

         14  sometimes they went through, and sometimes they didn't

         15  go through, which is why I became an even more avid ham

         16  radio operator, because I used ham radio often to talk

         17  to my parents.

         18               I want to note in particular that in

         19  addition to the worldwide coverage that exists today,

         20  technological advancements call into question certain

         21  traditional assumptions.  One of these is that capacity

         22  is limited and that cost and capacity are inextricably

         23  linked.  Cost and capacity in the future or even now may

         24  not be linked.  This is due to the confluence of

         25  breakthroughs in digital technology, fiberoptics,


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          1  wireless transmission, and satellite transmission.  It

          2  costs no more to lay a fiberoptic cable than it does to

          3  put down a copper cable, if you are doing so as an

          4  initial matter.

          5               The result of this new paradigm, if you

          6  will, to use albeit a hackneyed phrase, is that insofar

          7  as basic services such as voice are concerned, in the

          8  near future the major cost will be to establish the

          9  connection in the first instance, almost without regard

         10  to the capacity.  The Internet and other planned uses

         11  demand so much more capacity than voice that the day

         12  probably isn't too far away when voice service is a free

         13  add-on to the high-capacity two-way data service that

         14  people will be purchasing.

         15               These breakthroughs are what some theorists

         16  refer to as disruptive developments, because progress

         17  happens suddenly rather than as a natural linear

         18  progression.  They provide the means to leapfrog

         19  technologies and provide advanced services, as

         20  Commissioner Ness and Chairman Kennard both suggested in

         21  their opening statements.

         22               For policymakers, the important aspect of

         23  these technological developments is that assumptions of

         24  past years may no longer be accurate predictors of

         25  future developments.  Understanding them as such will


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          1  help when crafting effective incentives and policies to

          2  encourage connecting unserved areas such as Indian

          3  reservations.  For example, it may be less important

          4  today to define which grade of voice service that must

          5  be provided.  What is important today is to get the

          6  connection made in the first place.

          7               Technology today provides a number of

          8  alternatives for such connections.  Wireline can be

          9  combinations of fiber, copper, and microwave links.  If

         10  new infrastructure is being installed, laying fiberoptic

         11  cable costs no more than laying copper cable.

         12               As others have noted this morning, wireless

         13  can save a lot of cost and is a viable alternative when

         14  there are suitable tower sites within range of the areas

         15  to be served.  And within three to five years

         16  third-generation PCS will provide e-mail and Internet

         17  access to cell phones as well as voice, and it's planned

         18  at 384 kilobits per second as the initial rollout

         19  expected around the year 2000.

         20               I also note that in a number of other

         21  countries, as was noted by Jeff earlier, wireless local

         22  loop access has a specific allocation in the

         23  3.6 gigahertz range, and wireless local access is

         24  growing rapidly in those countries.  The equipment is

         25  already available, but we do not have a comparable


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          1  spectrum allocation here in the United States.  Perhaps

          2  in addressing the Salt River petition -- there was an

          3  earlier one by DSC in the same area -- and also in

          4  addressing the open proceeding on 3650 to 3700

          5  megahertz, the Commission will address wireless local

          6  loop spectrum needs.

          7               Finally, a new generation of satellites in

          8  low earth orbit is just coming on line and beginning to

          9  deliver paging and telephone handset service literally

         10  anywhere in the world.

         11               Iridium has rolled out such service.  And I

         12  think it's appropriate to note that the North American

         13  gateway to Iridium is just a couple miles up Interstate

         14  10 from this location in Tempe, Arizona; and much of the

         15  electronics were developed by Motorola right here in

         16  Chandler, Arizona.  This possibility means that there

         17  are people in this local community who understand

         18  communications, who hopefully can join in the effort to

         19  help those people who don't have service, because

         20  obviously the expertise has to be here with such a

         21  presence.  I was also told this morning that Intel has a

         22  significant presence here as well.  All of these options

         23  provide a variety of technological options that can be

         24  put to use to bring out service to sparsely populated

         25  areas.


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          1               Cost is obviously the biggest

          2  consideration, but government policies also play

          3  important roles, and I'd like to address a couple in

          4  particular very briefly.  These concern access to

          5  spectrum for wireless services, which we've heard quite

          6  a bit about this morning and which a number of witnesses

          7  have addressed.  It is notable, for example, that

          8  despite the unmatched rollout of spectrum licenses over

          9  the last four years that cover all geographic areas,

         10  many sparsely populated areas remain unserved, including

         11  Indian reservations but not exclusively Indian

         12  reservations.  This is not atypical.  The most pertinent

         13  question to ask is whether someone would provide service

         14  if they could access that spectrum.  If the answer is

         15  no, the inquiry is over.  If the answer is yes, then a

         16  way should be found to get spectrum into the hands of

         17  those who will provide the service.

         18               The Commission's rules do have various

         19  construction requirements, and licensees also are

         20  permitted to disaggregate spectrum and partition service

         21  areas.  And I want to note that many of these licensees

         22  are new within the last five years, so there are also

         23  timing considerations and perhaps tower siting issues.

         24               But, of course, one would not expect all or

         25  even most of these licensees to build out sparsely


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          1  populated areas.  When all is said and done, it is

          2  important in the final analysis to find a way so that at

          3  least one licensee takes on this task.  Therefore, given

          4  the lack of service you have seen both here and in

          5  Albuquerque, it might be appropriate for the Commission

          6  to review its construction requirements and its

          7  disaggregation and partitioning rules to assess their

          8  success or lack thereof, and to consider further action

          9  if service is not getting out to rural areas despite

         10  there being entities who would provide service if they

         11  had spectrum.  And I would note that there is a record

         12  at the FCC in various proceedings, including the 3650 to

         13  3700 megahertz proceeding, that address this very issue.

         14               Finally, I want to note that last Thursday

         15  the Commission requested comment on the role of mobile

         16  satellites.  The responses should be very helpful in

         17  evaluating the potential for those to also help to serve

         18  the underserved areas.

         19               I want to thank you for addressing these

         20  issues here today.  Success in bringing service to these

         21  areas will greatly improve the quality of all lives, but

         22  especially of those of our children.  Thank you.

         23               CHAIRMAN KENNARD:  Thank you very much,

         24  David.  Thank you for being here.

         25               The final witness on this panel is


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          1  Mr. Walter Purnell, who is president and CEO of American

          2  Mobile Satellite Corporation.  And I think the end of

          3  your remarks, David, were a great segue to Mr. Purnell's

          4  remarks about satellite access.

          5               MR. PURNELL:  I think he changed his just

          6  at the end when he saw I was sitting next to him.

          7               Mr. Chairman, thank you for allowing

          8  American Mobile the opportunity to address these

          9  problems.  Every time I'm last in a speaking engagement

         10  I remember something one of my graduate professors said.

         11  He said, "There is no greater success in life than

         12  getting the microphone last."  Knowing no one gets to

         13  rebut you, I guess.

         14               I found, as I was sitting here this

         15  morning, that I was sort of edgy in my seat, and I

         16  wanted to jump up and say, "I know the answer to that

         17  problem," because I think we do have some answers, not

         18  some problems.  Like all complex problems, the solutions

         19  are typically complex as well.  And in solving this

         20  communication problem in rural America, the Native

         21  Americans have an opportunity to do something that a

         22  number of countries around the world have done, and that

         23  is specifically leapfrog a generation or two of

         24  technology.  A number of countries around the world have

         25  chosen not to put a lot of landline down but to go right


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          1  to wireless.  And there are a number of elements of

          2  wireless cellular, we've heard some of that this

          3  morning, and satellite.  Like all technically complex

          4  solutions, one technology doesn't necessarily solve all

          5  of the problems.  While cellular certainly is a good

          6  solution in areas that have some level of population

          7  density, in the very remote areas that may not be

          8  economical either.  So a mix is perhaps more

          9  appropriate.

         10               Imagine, if you will, a solution that has

         11  the following characteristics:

         12               For the carrier, that's me, no investment.

         13  The investment is done to serve every spot in the United

         14  States.  I have no additional investment.  It's

         15  available everywhere.  The satellite is a geosynchronous

         16  satellite.  It sits up 23,000 miles above the earth and

         17  has tons of capacity.

         18               No messing up the environment.  We talked

         19  about sacred lands, beautiful lands.  You don't have to

         20  run wires.  You don't have to put up poles.  The beams

         21  are invisible, and they're there.

         22               We talked some this morning about some of

         23  the other satellite providers, Iridium, Teledesic.  Some

         24  of them have announced rate plans.  Our rate plan that

         25  would be available is a tiny fraction of the rate per


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          1  minute of those stated rates.  Affordability is an

          2  important issue.

          3               Expandable beyond voice.  We talked about

          4  getting into the 21st Century.  While we provide

          5  satellite voice, we also provide the capability of

          6  satellite data.  And moving to high-speed data and a lot

          7  of the advanced features that I know are desired are or

          8  will be available soon.  No obstacles.

          9               It's rare that I have a chance to speak to

         10  a group of potential customers or business partners

         11  where my solution is such a close fit for the problem.

         12  American Mobile, as you may know, is a satellite

         13  communication company.  We also have a terrestrial

         14  wireless data network that is the most expansive data

         15  network in the country.  It's called Ardis.  But the

         16  company was quite literally created by the FCC in order

         17  to address just this type of problem that we're

         18  discussing today.  After the FCC granted us a license to

         19  provide this kind of service, we fulfilled our promise

         20  by spending more than half a billion dollars in putting

         21  all the infrastructure in place, and we have the

         22  capacity to serve anybody in the country with satellite

         23  voice telephony.  The partnership with the FCC continues

         24  as we continue our constant fight to continue to get our

         25  spectrum allocation, to continue to grow and provide


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          1  service.  And that's been a good partnership with the

          2  FCC.

          3               I am pleased to say that we are today

          4  working with the Navajo Nation and currently provide

          5  services to their law enforcement agencies to enable

          6  communications in some of the very remote areas

          7  throughout the nation.  I am hopeful that the service we

          8  provide is accomplishing its objective of assisting law

          9  enforcement, easing emergency situations, and in fact

         10  saving lives.  And we've put some good folks on it, and

         11  one of our account execs who was here this morning was

         12  telling me about how they forced her to run the trial.

         13  They put her in an emergency vehicle with the lights

         14  blaring and the sirens soaring, and they went through

         15  two hours of dirt road, and the guy said, "And now make

         16  it work here."  And, of course, it did.  It works

         17  everywhere.

         18               I'm not surprised at some of the earlier

         19  testimony from earlier hearings that I read about the

         20  substantial cost of putting landline into some of these

         21  areas.  I know it's enormous, and I know the population

         22  is relatively sparse.  Satellite technology, on the

         23  other hand, allows for immediate cost-effective

         24  solutions to these challenges.  For my service, the

         25  tribal lands are not a high-cost service area.  They're


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          1  just a service area.

          2               The inherent nature of the satellite

          3  telephone is to stand alone and to communicate through

          4  our one base station, our one antenna site that's 23,000

          5  miles above the earth.  We have the technology and the

          6  resources today to, at the very least, place a satellite

          7  telephone in every remote pueblo in order that every

          8  community will at least have the ability to call for

          9  help.  We have solutions for a variety of additional

         10  communication needs, but the need for immediate

         11  emergency communication to prevent loss of life can be

         12  solved immediately.  Our infrastructure is in place and

         13  operational even in the most remote communities.  And a

         14  broad-based solution across the nation can be

         15  implemented in weeks or months, certainly not in years,

         16  and at a relatively low price.

         17               Mr. Chairman, there are numerous ways in

         18  which satellite service can solve the immediate

         19  emergency communication requirements on the reservations

         20  today.  American Mobile has supplied -- has studied many

         21  ways and configurations of satellite equipment, some not

         22  much larger than laptop PCs, including power supplies to

         23  ensure their usability in very remote areas where there

         24  might not even be electricity.  I offer the assistance

         25  of American Mobile in working with you and


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          1  representatives of the Native American community to

          2  implement solutions to both short- and long-term

          3  communication needs.  As we participate together, I want

          4  to promise you several things.

          5               First, you have my personal promise that

          6  American Mobile will give you the best that we've got.

          7               Second, you have my personal promise that

          8  we will bring you the most cost-competitive offering

          9  that we can provide.  Certainly by comparison with some

         10  of the other satellite alternatives, I think you'll find

         11  our price is extremely aggressive.

         12               But I do understand some of the economics

         13  within the Native American population, and that might

         14  not be enough.  So should any universal service funds

         15  become available to support this project, you again have

         16  my personal promise that they will be fully and

         17  completely used to reduce the price of service to the

         18  end user, because I don't need any of it for

         19  infrastructure.

         20               I also believe in long-term partnerships.

         21  That's the way I work with my commercial customers, and

         22  that's the way I like to work with my consumer

         23  customers.  I believe in communication.  Obviously,

         24  that's my business.  And I believe in education.  And I

         25  think all three of those things go together.  If we're


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          1  able to go forward, I will -- and I hope I get this

          2  reference right; if it's not, please correct me -- but

          3  if we're able to go forward, I will donate 5 percent of

          4  all ongoing service revenue that American Mobile derives

          5  from doing business with the Navajo Nations to the

          6  American Indian College Fund and Dine College.  As I

          7  say, I think that reference is correct, but if it's not,

          8  my promise is good, because I think these things all go

          9  together.

         10               It has been my pleasure to appear before

         11  you today and offer my testimony.  I am confident that

         12  together we can find ways to offer this much needed

         13  service in a very cost-effective way in the very near

         14  future.  Thank you.

         15               CHAIRMAN KENNARD:  Thank you, Mr. Purnell.

         16  I'm still writing down these promises you have given

         17  here, because I want to get them right.

         18               MR. PURNELL:  Well, someone asked for a

         19  copy, so she will have it in writing.

         20               CHAIRMAN KENNARD:  Okay.  Good.  Thank you

         21  again.

         22               I had a couple of questions to follow up on

         23  this panel, which I thought was very, very interesting

         24  and useful for us here.

         25               Mr. Olson, your proposal for a competitive


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          1  bidding process for universal service is an intriguing

          2  one.  I've been learning about it for quite some time

          3  now, and I guess my question to you is whether you could

          4  envision having a competitive bidding process for

          5  universal service on maybe an experimental basis.  I

          6  mean, there are a lot of difficult legal and policy and

          7  practical questions.

          8               MR. OLSON:  Sure.

          9               CHAIRMAN KENNARD:  And, from our

         10  perspective, we're undertaking some fairly significant

         11  changes in universal service for the nation.  And sort

         12  of making sure that those changes work out well is a

         13  monumental task in itself, and to kind of put an overlay

         14  of competitive bidding on that is, you know, asking the

         15  nation to sort of bite off quite a big chunk at one

         16  time.

         17               And I might note, in that regard, that

         18  Commissioner Ness chaired the Joint Federal-State

         19  Universal Service Board, and Commissioner

         20  Furchtgott-Roth was a member.  And I was delighted to

         21  watch that process from afar because I know how

         22  difficult it was grappling with those questions.

         23               So I guess my question is:  How would you

         24  envision us implementing a competitive bidding system

         25  that we could do sort of on an incremental basis so that


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          1  the nation could get some confidence that this is going

          2  to work since it's never been done before?

          3               MR. OLSON:  I think your idea of doing it

          4  on a trial basis makes ultimate sense.  And we don't

          5  pretend to know all of the mechanisms that it would take

          6  to effectively bid the lowest support level to serve a

          7  rural area in a competitive bidding process.  We have

          8  certainly worked through a significant number of the

          9  mechanics as we've examined it in the context of the

         10  universal service proceedings, but I would be the first

         11  to admit to you that we do not have all of the details

         12  lined out on exactly how an auction proposal would work.

         13  We do have recommendations and suggestions on many

         14  aspects of the major mechanics of how it would work,

         15  but, as I'm sure you are aware, there are a number of

         16  issues regarding actually rolling it out that we have

         17  still not addressed.  So the idea of a limited

         18  experiment in that regard makes ultimate sense.

         19               CHAIRMAN KENNARD:  Now, have you had the

         20  opportunity to share your plan with any state regulatory

         21  commissions to see if there might be some who are more

         22  receptive than others to your plan?

         23               MR. OLSON:  I personally am not aware of

         24  the specific preferences of the state commissions for

         25  it.  There are other folks at GTE who have been working


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          1  this issue in the state jurisdictions who I'm sure we

          2  could put in touch with you and have that discussion

          3  further.  But we have been suggesting and working on an

          4  auctions proposal both in the federal proceedings and in

          5  the state proceedings for a good number of years now, so

          6  I know we've verbalized it extensively in the state

          7  jurisdictions.  I just can't suggest here to you today

          8  where would be the most appropriate test bed.

          9               CHAIRMAN KENNARD:  Okay.  Thank you.

         10               Commissioner Ness, did you have questions?

         11               COMMISSIONER NESS:  Thank you.  One

         12  question for Citizens.  You receive universal service

         13  high-cost support at this point, do you not?

         14               MS. STEVENS:  Yes, we do.

         15               COMMISSIONER NESS:  Do you take those funds

         16  and reinvest them back in the communities for which the

         17  high-cost fund was supporting additional lines or

         18  additional subscribers?

         19               MS. STEVENS:  As I said, we've invested a

         20  tremendous amount of money in the last three years in

         21  these communities, a little over $31 million so far, and

         22  that naturally does not -- I can't give you a balance to

         23  that to the universal service draw, but I'm sure that

         24  it's very near.

         25               COMMISSIONER NESS:  Thank you.


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          1               On the wireless questions and the ability

          2  to allocate some additional spectrum, some of you are

          3  providing wireless services.  What have been the

          4  impediments that you have seen to the ability to get new

          5  subscribers?  For example, Mr. Watkins.

          6               MR. WATKINS:  You mean impediments from a

          7  capacity standpoint or just --

          8               COMMISSIONER NESS:  You don't have a

          9  capacity problem at this point in time?

         10               MR. WATKINS:  No.

         11               COMMISSIONER NESS:  You're just having a

         12  problem getting folks to subscribe?

         13               MR. WATKINS:  It's an affordability

         14  problem.  We would love to have a capacity problem on

         15  the Navajo Nation or the Apache Nation, but the biggest

         16  impediment we face today is affordability.  The emphasis

         17  we are putting on is we would like the consumer to be

         18  economically empowered in the sense that -- it was

         19  interesting to hear Walter talk about, I mean, American

         20  Mobile Satellite, those types of companies.  They can

         21  provide this service.  And if we can put the economic

         22  power in the hands of the consumers, let them choose.

         23  And I think his product is probably better for some

         24  customers than mine, but with an array of products out

         25  there, if we can get the economic power in the hands of


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          1  the consumer, let them choose the telephonic product

          2  that best serves their needs.

          3               COMMISSIONER NESS:  Thank you.

          4               CHAIRMAN KENNARD:  Thank you.

          5               Commissioner Furchtgott-Roth, did you have

          6  questions?

          7               COMMISSIONER FURCHTGOTT-ROTH:

          8  Mr. Chairman, we've had a lot of very interesting ideas

          9  this morning.  In the interest of time, I will hold my

         10  questions, if I can have some certainty at being able to

         11  get back to these good folks at a future date, based on

         12  their written testimony, as we work through these

         13  various issues with dealing with the services.

         14               CHAIRMAN KENNARD:  Thank you very much.

         15               My thanks to this panel, and we will

         16  proceed with the next panel.  Then I'd like to have a

         17  little time at the end, if we have time, for questioning

         18  from the audience.  You've been patient, and I'm sure

         19  you've been mulling over these issues as well.

         20               Thank you again.

         21               (A recess ensued from 12:03 p.m. to

         22  12:07 p.m.)

         23               CHAIRMAN KENNARD:  I'll invite everyone to

         24  please take their seats so that we can move into our

         25  third and final panel.


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          1               We're pleased now to have a very

          2  distinguished panel of state regulatory commission

          3  representatives, at least one, and consumer

          4  representatives.  And we'll begin with our counterpart

          5  in the State of Arizona, Jim Irvin, who is Chairman of

          6  the Arizona Corporation Commission.  Jim.

          7               MR. IRVIN:  Thank you, Mr. Chairman.  First

          8  of all, I want to thank Governor Mary Thomas for the

          9  facility and help putting this program together and the

         10  breakfast that was hosted by the Gila Indian Community

         11  here.  It was very nice.  And it's a pleasure to be here

         12  and see all you people, as well as it was nice to

         13  provide the nice weather for you folks from Washington.

         14  Commissioner Ness, and Harold over there, you have to

         15  enjoy this because you're going to go back to freezing

         16  weather when you head back east.  Enjoy it while you're

         17  here.

         18               I'll move quickly.  A lot of the comments I

         19  have, have been mentioned.  I have a prepared statement

         20  that's in the back there, as many of the panelists here

         21  have done, and you can read in depth what we have,

         22  because I know the Chairman and other Commissioners do

         23  need to catch an airplane and head back to D.C.

         24               The areas that I want to cover most

         25  importantly -- in fact, let me also make mention that I


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          1  had the privilege of being at the Salt River Indian Pima

          2  Community when we made the very first telephone call

          3  after Mountain Telecom installed the systems there, with

          4  Senator McCain.  And that was really a truly exciting

          5  moment to make that first call, especially since we got

          6  a busy signal.  No, that's not true.  The call did go

          7  through, and, believe me, and the people were very

          8  happy, especially us.

          9               But let me start by talking about the

         10  climates as we've seen.  We've talked about how our

         11  communities we can see are growing up here and, living

         12  in the community, in the Phoenix metropolitan area, how

         13  we're encroaching on the Indian communities.  You know,

         14  scarcely a hundred years ago this was considered a vast

         15  wasteland, and there was nobody out here.  And today

         16  it's a thriving metropolis, the sixth largest city in

         17  the United States, one of the 27th, I think, 25th or

         18  27th largest metropolitan communities in the United

         19  States.

         20               And as the Indian communities come together

         21  with the nonIndian communities, we have to start to

         22  understand and learn from each other something that is

         23  new.  And we also, just as we've done in the state and

         24  the federal and in our jurisdictions between state and

         25  federal, we have to learn sometimes to work together,


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          1  and we can't see everybody as the enemy.  Regulators

          2  have to recognize that American Indian communities are

          3  very diverse.  Private corporations have to recognize

          4  this same point, that communities are very diverse.  And

          5  they have to recognize the differences amongst the

          6  people there.  And I think if we're going to promote

          7  this type of atmosphere and this type of program and

          8  this type of building that we have seen on the Salt

          9  River Indian Community, then we will certainly be very

         10  successful here in this endeavor and what the FCC is

         11  endeavoring, trying to do there.

         12               One of the questions that was asked to me

         13  is what jurisdiction does the Arizona Corporation

         14  Commission pose over Native American tribal lands and

         15  tribal corporations and companies.  Basically, none.

         16  Our jurisdiction is only over those nontribal companies

         17  that serve on tribal lands, and we have no jurisdiction.

         18  However, let me encourage our Native American neighbors

         19  that we are a resource and we should be used as a

         20  resource to help bridge the gap between the Federal

         21  Communications Commission, between the state

         22  legislature, and other federal agencies.  And I have

         23  four members of our staff here that are in the back.  We

         24  have our assistant director of the utilities division,

         25  David Motycka; one of his associates, Mark DiNunzia; one


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          1  of our legal representatives, Maureen Scott; and my

          2  chief of staff, Patrick Black, he is here.  And if you

          3  people get the opportunity to meet them, I think you'll

          4  find them also to be a resource that our Commission can

          5  be for you as well.

          6               Interestingly enough, we did some surveys,

          7  and we were looking at this problem, and I want to use

          8  just one example that I think accents the problem on

          9  Native American lands.  And that is the largest

         10  reservation in the nation here and one of the largest

         11  companies that serves them is Navajo Communications,

         12  Inc., Citizens Utility.  We heard from them earlier.

         13  I'll call them Navajo.  From the numbers I get, they

         14  presently serve about 10,800 residential customers, and

         15  what our staff show us additionally is another 12,544

         16  households on these lands that are in their service

         17  territories have electricity but do not have telephones.

         18  In addition to that, there's another group of people

         19  that lives on the native lands up in the Navajo Nation

         20  and the Hopi Nation up there that don't have electricity

         21  and do not have telephones.  And there was a U.S. News &

         22  World Report that only showed about 5,000 Arizonans are

         23  in unserved or underserved territories, and this simply

         24  is just not true.

         25               But I want to also stress to the FCC and to


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          1  all the people here that the problems serving rural

          2  areas is not just a problem that we face on our Native

          3  American lands.  It is also a problem that we face

          4  throughout the state of Arizona on nontribal lands.  And

          5  that is a problem of infrastructure.  Another point that

          6  we want to accent is Citizens Utility gave our

          7  Commission numbers which I found staggering, and I

          8  think, Commissioners, you will find these numbers

          9  staggering as well, that facilities in 1997, the cost of

         10  bringing line extensions to residents on the Navajo

         11  Nation, ranged from $1,560 to $157,000 to provide those

         12  extensions.  And you can see how it's scarcely

         13  cost-effective.  And I think Governor Thomas mentioned

         14  that even here it was $7,000 for a line extension

         15  earlier.

         16               So these costs are tremendous.  Not to

         17  mention we'll hear from, also on this panel, from Alison

         18  Hughes.  I had the privilege of addressing her group

         19  earlier when they met on telemedicine and the

         20  opportunities there, and we've heard some of the things

         21  about that.  And I'll be interested to hear her report,

         22  because there's just a lot of good positive things and

         23  another reason for advancing infrastructure on our

         24  Native American lands as well as throughout rural

         25  America.


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          1               The problems that I see that we need to

          2  do -- and I'm trying to skip through and get my remarks

          3  in here as quickly as possible so everybody has the

          4  opportunity to ask questions -- we can offset these

          5  construction costs.  I believe that these costs can be

          6  offset.  We can use block grants that focus on tribal

          7  lands or areas, or we can use designated contributions

          8  for line extensions through federal and state universal

          9  funds in setting aside specific funds for construction

         10  and not using all these funds, as I have stated

         11  previously to your Commission, Mr. Chairman, for just

         12  merely reducing recurring monthly revenue is not enough.

         13  I think we have to take that in consideration, but it

         14  does us no good if we reduce recurring monthly revenue

         15  if nobody has a phone to get that help.  We have to get

         16  them that telecommunications service.

         17               Another area that I think is very

         18  important, we heard earlier from the wireless providers.

         19  And one of the biggest problems we had with the wireless

         20  providers, and it was mentioned today, is cost.  One of

         21  the things that we need to do there is bring those costs

         22  down so they're in a competitive mode with traditional

         23  wire or the hard wire and the fixed wire levels.  Again,

         24  we can do this through grants.  We can do this through

         25  universal funding and set-asides.  And in exchange for


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          1  that, they would have to bring those costs down to make

          2  phones affordable to all people concerned.

          3               Another way that I have talked about or

          4  I've mentioned, and one of the focuses I'd like to talk

          5  about today, and we've heard about it in our first panel

          6  from many of our Native American friends, and that is an

          7  effective way and one of the more effective ways is that

          8  of joint ventures or partnerships, partnerships through

          9  government, private partnerships, partnerships between

         10  our Native American sisters and brothers, and those of

         11  private companies.  We heard about one very successful

         12  partnership, and that was -- and unfortunately Jack

         13  Pleiter is not here so I can recognize him -- and that

         14  was a very successful partnership between Saddleback

         15  Communications and Mountain Telecommunications.  They

         16  are a new entity, a wholly-owned subsidiary of the Salt

         17  River Pima Indian Community, that was developed and

         18  formed a partnership with a privately-held for-profit

         19  organization to form this communications system.  And

         20  now we have telecommunications throughout the Salt River

         21  Indian Community.  And we all know that's located right

         22  next to Scottsdale.  To me it's amazing that we didn't

         23  have phone service sooner than that.

         24               Things that we have to point out, though,

         25  in developing these programs is that the Indian nations


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          1  must -- we must remember that the nations have a will to

          2  do this, have a will for phone services.  And by joining

          3  the partnership, it does several things.  One, I believe

          4  it develops economic development, and, number two, it

          5  gives pride of ownership.  It gives pride of

          6  accomplishment.  It gives pride of giving opportunity on

          7  our Native lands.  And that's a goal that I think is

          8  sometimes overlooked is economic development as well as

          9  the opportunities.

         10               We've heard about the barriers.  I briefly

         11  touched on those.  I am not going to go back on the

         12  barriers again.  I think the barriers have to be broken

         13  down.  The private companies that want to form these

         14  joint ventures must basically learn the customs and the

         15  ways of the Native people in the nations they want to

         16  serve if they are going to be effective in serving those

         17  lands and serving those peoples, because they have their

         18  special ways of doing things.  And we must adapt, just

         19  as we've seen our Native Americans adapt to the way

         20  we've done it.

         21               In closing, I would truly again echo and

         22  thank the Commission for their time, the effort that

         23  they've given, for listening to Arizona on these issues,

         24  for taking the time to come out, looking at these

         25  proposals.  And I believe, Mr. Chairman and


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          1  Commissioners, for the first time I think the FCC is

          2  truly stepping up to the plate to address these

          3  problems.  I only ask, because I work for all Americans

          4  and particularly all Arizonans, that we take everybody

          5  in consideration both on tribal lands and nontribal

          6  lands, because this is a problem that stretches across

          7  America.  And I think together, as a country, as a

          8  community, we can solve it.  Mr. Chairman,

          9  Commissioners Ness and Furchtgott-Roth, thank you very

         10  much.

         11               CHAIRMAN KENNARD:  Thank you, Mr. Chairman.

         12  Thank you for those remarks.

         13               Before we go to our next witness, I did

         14  want to announce that the Gila River Community has very

         15  generously agreed to host a luncheon for all of the

         16  participants here and all of our members of the

         17  audience, which will commence right after the hearing at

         18  the side room over here.  So I hope that you will be

         19  able to join us.

         20               Our next witness is Madonna Yawakie, who is

         21  with the Minnesota American Indian Science & Engineering

         22  Society.

         23               MS. YAWAKIE:  Thank you, Chairman.  Thank

         24  you, Commissioners.  And thank you to all of the good

         25  people that worked so hard to bring the FCC out to


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          1  experience Indian country firsthand.

          2               My background in telecommunications

          3  includes working as a market manager for US West and

          4  focusing on tribal nations, and I worked as a project

          5  manager for an engineering firm that specialized in

          6  rural telecommunication utilities.  And over the years

          7  what I've grown to understand is the solutions that

          8  exist are the same as those solutions that have existed

          9  for all rural telephone development.  And I will begin

         10  my testimony.

         11               Great disparity exists for Indian country

         12  when comparing telephone penetration rates to the rest

         13  of America.  Current statistics on telephone penetration

         14  rates, or number of homes with telephones, in Indian

         15  country range from 25 to 95 percent.  Tribes with higher

         16  rates correlate with those five tribes that own,

         17  operate, and provide communications services to their

         18  respective communities.  Telephone penetration rates for

         19  the rest of the nation are approximately 94 percent.

         20  The sentiment that tribal communities face the same

         21  issues and concerns as the rest of rural America falls

         22  short in the area of telecommunication usage.  In most

         23  cases, tribal nations are located in the most rural of

         24  rural America, and the need for basic telephone service

         25  can provide a lifeline to services that otherwise may


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          1  not be available in a time of need.

          2               There are a number of reasons that

          3  contribute to low telephone penetration rates in Indian

          4  country.  High unemployment and concentrated poverty are

          5  major contributors to these statistics.  Other major

          6  contributors include the perceptions of the service

          7  providers that Native Americans don't use telephones.

          8  Another perception is that Native Americans are communal

          9  in the use of telephones.  The rationale behind this is

         10  that families live in close proximity to each other and

         11  tend to share the use of a single telephone.  A more

         12  obvious reason may be the high cost for phone service

         13  for many people living in Indian country.  The cost for

         14  telephone hookups can range by as much as $200 to $3,000

         15  or more for basic telephone service, depending upon what

         16  type of service provider your community has.

         17  Affordability issues arise that lead to Indian people

         18  viewing telephone service as a luxury rather than a

         19  basic necessity.

         20               A number of factors impact the need for

         21  tribal nations to begin to develop telecommunication

         22  strategic plans that address the issues of low telephone

         23  penetration rates.  These include the economic

         24  development that is occurring throughout Indian country.

         25  At the base of this development is the need for


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          1  telephone utility improvements.  Private sector and

          2  federal agencies that invest in Indian country tend to

          3  view each of their objectives from a single perspective.

          4  In the area of telecommunications, this can mean that

          5  improved services will be provided but only to those

          6  facilities that are currently being constructed or

          7  expanded.  Telecom service providers tend to cherry pick

          8  tribal economic expansion areas without considering the

          9  total tribal land area, including trust land.

         10               As the information age begins to play a

         11  greater role in tribal communities, the need for

         12  improved and affordable communication services is

         13  becoming more important.  Tribal telecom ownership has

         14  enabled long-term infrastructure investment, creation of

         15  jobs for tribal members, and provides the opportunity to

         16  build a base for economic and business development

         17  through the use of a sound telecommunication

         18  infrastructure.

         19               The role of the USDA/Rural Utilities

         20  Service in rural telecommunication development.  With

         21  over $11 billion in approved telephone loan program

         22  financing for the improvement and expansion of

         23  telecommunication services across the United States and

         24  its territories, RUS has been building the foundation

         25  for the information superhighway for nearly 50 years.


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          1  When the RUS telecommunication loan program began in

          2  1949, only about 30 percent of the farm and rural

          3  residents were receiving telephone service of any kind.

          4  Since 1993 RUS's distance learning and medical link

          5  grant program has provided $52 million in funding 192

          6  projects in 41 states and one U.S. territory.  RUS uses

          7  the National School Lunch Program as an indicator of

          8  financial distress and to categorize applications into

          9  one of their three financing options.  This is the same

         10  criterion used by the Federal Communications Commission

         11  for discounts to schools and libraries for

         12  telecommunications service.

         13               RUS loan administrators know that the

         14  telephone penetration rates for Indian tribes are below

         15  national standards.  According to an acting assistant

         16  administrator of the RUS telephone loan program, "The

         17  service rates in American Indian communities are a

         18  disgrace to the national telecommunications system, and

         19  it is our job to do something about that."  To date the

         20  USDA/RUS telephone loan program has five American Indian

         21  tribe borrowers out of a total of 900 small phone

         22  companies that they have worked with.

         23               The statistics provided to the RUS as a

         24  basis for lending to each of their five tribal borrowers

         25  are as follows:


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          1               Tohono O'odham:  13 percent was their

          2  pre-loan service rate.  Post-loan, 95 percent.

          3               Gila River:  44 percent.  Post-loan,

          4  54 percent.  That's according to RUS, but I know that

          5  that's probably incorrect, and Gila River would be able

          6  to correct that.

          7               San Carlos was at 25 percent.  And it

          8  hasn't been determined, because that is a new loan, what

          9  their post-loan rate will be.

         10               Fort Mojave:  30 percent.  Post-loan,

         11  65 percent.

         12               And Cheyenne River, because it's the

         13  oldest, didn't have a pre-loan service rate that was

         14  identified by RUS, but its post-loan service rate is

         15  75 percent.

         16               The number of customers served by these

         17  tribally-owned communication companies has grown since

         18  they acquired ownership.  The number of access lines

         19  that each of these companies has ranges from

         20  approximately 600 to 3,000, and their growth is

         21  continuing.  The benefits that these companies have

         22  provided to their communities have extended beyond

         23  tribal ownership.  They offer a long-term sustainable

         24  business, employment opportunities for tribal members,

         25  improved telephone service, increased business


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          1  opportunities, and the creation of a skilled

          2  telecommunication work force.

          3               As of December of 1994, 73 RUS borrowers

          4  provided telephone service to 42,961 American Indian

          5  subscribers.  One of the most important elements to the

          6  RUS loan process is the Area Coverage Survey, or ACS,

          7  requirement that must be completed by RUS borrowers.

          8  This process requires a comprehensive assessment of the

          9  proposed service area that includes housing, businesses,

         10  healthcare, education, and governmental institutions.

         11  Once this assessment is completed, the cost to design

         12  and construct the network is included in the loan for

         13  the proposed service area.  Thus, the RUS process

         14  enables the initial cost of network construction to be

         15  borne by the service provider rather than the customer.

         16               As a result of the Telecommunication Act of

         17  1996, universal service support programs were authorized

         18  by Congress and designed by the Federal Communications

         19  Commission.  New programs include the Schools and

         20  Libraries Corporation and the Rural Healthcare

         21  Corporation, which provide financial support for

         22  telecommunications service access to rural and high-cost

         23  service areas.

         24               CHAIRMAN KENNARD:  Excuse me, Madonna.  I'm

         25  going to have to ask you to wrap up.


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          1               MS. YAWAKIE:  Okay.  All of our schools,

          2  bureau schools, tribal schools, and the public schools,

          3  fall under the criteria of the Schools and Libraries

          4  Corporation.  All of the entities that reside in a

          5  tribal community are all in line with all of the

          6  universal service program's eligibility criteria that

          7  are supported by the FCC and administered by NECA.

          8               What I'd like to say is that the

          9  "Telecommunications Technology and Native Americans,"

         10  OTA report, identified eight key findings:  Four of the

         11  findings include integrating infrastructure development;

         12  two develop Native American entrepreneurial activity;

         13  three, develop interagency strategy and funding; four,

         14  develop telecommunications policy that recognizes

         15  sovereignty and self-determination that enables tribes

         16  to access universal service funds and that provides for

         17  and supports strategic partnerships.

         18               And I'll wrap up as quickly as I can.  The

         19  issues of right of way and easements policies definitely

         20  impact the penetration rates that have been identified

         21  over and over again today.  And, also, the FCC should

         22  consider that individual tribal nations and any

         23  adjoining trust land be considered a cost study area to

         24  assure that tribal nations begin to access universal

         25  service supports.


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          1               The answers to improved service levels for

          2  Indian country are found in existing public and private

          3  telephone loan programs and by accessing universal

          4  service support mechanisms.  These programs must provide

          5  assurances that all Americans benefit, including

          6  American Indians residing in Indian country.

          7  Policymakers must assure that tribal service improvement

          8  plans comply with industry standards, are technically

          9  interoperable, and meet requirements to connect to the

         10  public switched telephone network.  Tribal government

         11  leadership and long-term commitment to improving

         12  telephone service levels are critical to assured

         13  success.

         14               And while we're having the meeting in the

         15  State of Arizona and with a lot of southwestern tribes

         16  participating, we have to remember that this issue is

         17  with all of Indian country, which includes American

         18  Indians and Alaska Natives; and Native Hawaiians face

         19  similar issues.  Whatever the changes are that are going

         20  to impact or create opportunity for Indian country must

         21  include Native Hawaiians in whatever is being planned

         22  today.  Basic telephone service as well as the

         23  opportunities that telehealth, distance learning,

         24  electronic commerce, and 911 capability have for Indian

         25  country may enhance quality-of-life issues in ways that


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          1  were never before possible for Indian country.

          2               What I have attached to the document, that

          3  I provided to Eric this morning, was a final report from

          4  a workshop that we had in February 1999 in San Diego,

          5  from the National Tribal Telecommunication Workshop.

          6  And we did a similar workshop last July, and I have

          7  attached the edited transcripts from that as well.

          8  Thank you.

          9               CHAIRMAN KENNARD:  Thank you very much.

         10               Our final witness, last but not least, is

         11  Alison Hughes, associate director of the Arizona

         12  Telemedicine Program.

         13               MS. HUGHES:  There is nothing like being

         14  last in an event such as this.  I wish I could read as

         15  rapidly as the people in the state legislature whose job

         16  it is to read bills on the floor.  Thank you,

         17  Commissioner Kennard, Commissioner Ness,

         18  Commissioner Furchtgott-Roth, for allowing the Arizona

         19  Telemedicine Program to be represented.  I wouldn't be

         20  here if it wasn't for our own Commissioner Irvin, who

         21  told me about this event back in February.  Thank you,

         22  Commissioner.  I want to recognize Governor Thomas and

         23  members of the Gila River Indian Community who are

         24  hosting this event today.

         25               The testimony that I'm going to present


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          1  concerns the delivery of healthcare to remote areas of

          2  Arizona for the purpose of providing medical

          3  consultations using telemedicine technologies.  I will

          4  limit these remarks to our experience to date in

          5  providing services affecting Native American nations and

          6  tribes involved in our system.

          7               The Arizona Telemedicine Program was

          8  established in 1996 by the Arizona State Legislature.

          9  The mission of the program is to deliver telemedicine

         10  consultations to remote sites in the state where the

         11  population must travel long distances to receive

         12  specialty care.

         13               Our program has five components:

         14  establishing and maintaining a statewide telemedicine

         15  infrastructure; providing direct delivery of medical

         16  care through telemedicine; doing telemedicine research,

         17  assessment, and evaluation; and disseminating research

         18  results; and, finally, educating and training

         19  telemedicine personnel.

         20               We have created the statewide telemedicine

         21  infrastructure with service points in Nogales,

         22  Patagonia, Douglas, Phoenix, Yuma, Payson, Whiteriver,

         23  Springerville, Flagstaff, Cottonwood, Kingman, Tuba

         24  City, and Ganado.  The hub site is located in the

         25  College of Medicine in Tucson, the home of the Arizona


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          1  Telemedicine Program.  At one point our telemedicine

          2  team investigated the possibility of using satellite

          3  transmission but concluded that the expense and lack of

          4  universal service discount eligibility would not make

          5  this technology feasible for our purposes.  Our network

          6  is based on dedicated T-1 circuits to provide capability

          7  for a 24 by 7 connectivity.

          8               The program sites which serve Native

          9  American communities are in Tuba City, Ganado, Payson,

         10  and Whiteriver.  We have been meeting with leaders of

         11  the Hopi Tribe who have asked us to extend services to

         12  the tribe's new health center currently being built in

         13  Polacca, and we have agreed to work with them to submit

         14  a grant application to the Rural Utilities Service

         15  program to purchase telemedicine equipment for this

         16  site.  The RUS has already funded us for two sites at

         17  Whiteriver and Nogales.  Thank you so much, Diane

         18  Jennings and Alan Stevens of Arizona's RUS, for your

         19  support of these programs.

         20               According to Dr. Jim Galloway, Indian

         21  Health Service physician who is working at our College

         22  of Medicine, diabetes is the number one problem facing

         23  Native Americans, with the Gila River Indian Community

         24  having the highest incidence of this disease in the

         25  nation.  Over 70 percent of adults over 45 suffer from


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          1  diabetes right here in the Gila River Indian Community.

          2               Telemedicine can be an ideal solution to

          3  making subspecialty care available to remote sites in

          4  Native American communities.  Telemedicine care is

          5  possible in subspecialty areas such as endocrinology,

          6  cardiology, dermatology, and podiatry.

          7               We recently started to use the telemedicine

          8  system to provide continuing medical education programs

          9  which update healthcare providers on cardiology and

         10  public health issues.  These programs are transmitted to

         11  sites serving Native Americans at Whiteriver, Tuba City,

         12  Ganado, and Payson.

         13               Another telehealth-related program

         14  functioning in our state is administered by the Northern

         15  Arizona Behavioral Health Authority.  NARBHA has

         16  connected 13 rural sites in the northern part of the

         17  state and is using their telecommunications system to

         18  provide psychiatry, counseling services, case

         19  management, administrative and staff training meetings.

         20  This architecture was developed based on whatever type

         21  of facilities the local carriers had in place at the

         22  time.

         23               The Arizona Telemedicine Program and NARBHA

         24  have both applied for subsidies under the universal

         25  services discount program.  To date we have not received


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          1  the discount.  We have found the application process

          2  burdensome and the local telephone carriers, especially

          3  the smaller ones, often unable to answer our questions.

          4               A major problem identified is this:  In

          5  northern Arizona, especially on the Navajo and Hopi

          6  reservations, we must obtain services from interexchange

          7  carriers.  These carriers have to work with three

          8  different local exchange carriers to provide a circuit.

          9  Each interconnection between local exchange carriers

         10  generates channel termination fees and interconnection

         11  fees.  These fees are not discounted under the universal

         12  service program, since it is primarily discounting

         13  mileage-based fees.  Therefore, the reduction in cost,

         14  even if they were eligible, is not as significant as it

         15  could be.

         16               Your attention is now directed to the

         17  problems that our program has faced in making this

         18  connectivity possible.  There are limited facilities in

         19  place in the northwest corner of the state, which

         20  include the Navajo and Hopi reservations.  Lack of

         21  existing cable and switches results in slow

         22  implementation of services.  We waited a year to get T-1

         23  service between Flagstaff and Tuba City and between

         24  Flagstaff and Ganado.

         25               There is no real competition in the


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          1  provision of services to these remote areas.  In the

          2  case of the Arizona Telemedicine Program, only one

          3  interexchange carrier responded to our bid for basic T-1

          4  services to Ganado and Tuba City.  This carrier is not

          5  eligible for the universal services discount.  Thus, the

          6  sustainability of telemedicine services to these

          7  hospitals in these cities is precarious.

          8               There is little business incentive for

          9  carriers to establish new facilities in these areas as

         10  the revenues generated for service provision do not

         11  justify the cost of delivery.  It may not be feasible

         12  for carriers to expand services to such remote locations

         13  without subsidies.  The future of telemedicine services

         14  to remote areas is deeply affected by these policies.

         15               In summary, we are extremely committed to

         16  providing telemedicine services to remote areas of

         17  Arizona, and lives have already been saved utilizing the

         18  services of many specialists and subspecialists now

         19  available to rural areas from the College of Medicine.

         20  However, we remain frustrated by the current

         21  telecommunications system, as it impedes our capacity to

         22  fulfill our goal of delivering specialty care to

         23  Arizona's rural areas.

         24               To that end, we recommend that you consider

         25  the following possible solutions:  Subsidize carriers to


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          1  expand the telecommunications infrastructure into

          2  hard-to-reach rural communities.  Subsidize a

          3  demonstration project to install new digital microwave

          4  systems dedicated to telemedicine applications, and

          5  evaluate its efficacy.  Allow interexchange carriers to

          6  receive universal service discounts.  Simplify the

          7  application process for the universal services discount

          8  program.  And, finally, expand the coverage of the

          9  universal services discount to include interconnection

         10  fees for circuits that involve multiple local exchange

         11  carriers.

         12               Thank you so much.

         13               CHAIRMAN KENNARD:  Thank you very much,

         14  Ms. Hughes.

         15               With your indulgence, I'd like to forego

         16  questioning from the Commissioners at this point so that

         17  we can invite members of the audience who might have

         18  some questions to come forward.  We have very little

         19  time, but I think we have about five minutes left for

         20  questioning from the audience.  If anyone would like to

         21  ask a question to the Commissioners or the panelists,

         22  please come forward.  There is a microphone at the front

         23  here.

         24               MR. REDICK:  David Redick from

         25  San Francisco, speaking as an individual.


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          1               Are any of you familiar with the background

          2  on the allocation of spectrum over Indian reservations,

          3  as to either auctions or other allocations, and the

          4  extent to which this either has legal or other

          5  implications?  I've heard about the sovereignty of the

          6  Indian reservation.  I have not researched this, but it

          7  came up today, so I've asked it.  Has the federal

          8  government ignored the sovereignty of the reservations

          9  in the sale or allocation of spectrum?  Can anyone

         10  comment on that?

         11               CHAIRMAN KENNARD:  Certainly.  Well, as we

         12  heard earlier, there was one recommendation that the FCC

         13  take these sovereignty issues into account in spectrum

         14  licensing.  As a general matter, though, Congress gave

         15  to the FCC pretty much exclusive authority over the use

         16  of commercial spectrum, and the FCC has used that

         17  authority to try to maximize the ability of spectrum to

         18  serve as many people as possible, and we do that through

         19  a number of our licensing policies.  If you have any

         20  more detailed questions about this, I'm going to direct

         21  you to Dale Hatfield, who is head of our Office of

         22  Engineering and Technology and truly one of the nation's

         23  premier specialists on spectrum policy, and he can

         24  answer many more questions about this than I could.

         25               Any other questions?


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          1               MR. GROENHOUT:  Thank you very much for the

          2  opportunity.  My name is Ed Groenhout.  I'm from

          3  Northern Arizona University.  Alison indicated that

          4  interexchange carriage is not authorizable for E-rate

          5  purposes relative to places like the Navajo reservation.

          6  It's pretty clear to some of us that have quite a bit of

          7  experience trying to deliver educational services, that

          8  the only way to certain services are through

          9  interexchange carriers.  And so I would plead with the

         10  FCC to give new consideration to the possibility of

         11  opening up that potential so that services can, in fact,

         12  be acquired that are simply not available on the

         13  reservation, especially on the Navajo reservation.  And

         14  we think that's a very important thing.  What Alison did

         15  not tell you is she paid $67,000 a year for the circuit

         16  between Ganado and Flagstaff and $67,000 a year for the

         17  circuit between Tuba City and Flagstaff.  That same

         18  circuit, when I asked for an estimate in 1995, was

         19  $15,000 a year.  I found it remarkable that it went to

         20  67,000 with the passage of the 1996 Telecom Act.

         21               Thank you.

         22               CHAIRMAN KENNARD:  Thank you for your

         23  comment.  It's very useful.

         24               We'll take one more question from the

         25  floor.


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          1               MR. LAFFOON:  Thank you, Chairman Kennard

          2  and Commissioners.  My name is Herman Laffoon, Jr.  I'm

          3  the commercial manager for the Colorado River Tribes in

          4  Parker, Arizona.  I have a statement, Mr. Chairman, for

          5  the record, concerning GTE.

          6               CHAIRMAN KENNARD:  Please be brief, sir,

          7  because we're running very short on time.

          8               MR. LAFFOON:  The Colorado River Indian

          9  Tribes would like to provide a brief statement on the

         10  subject of telecommunications.  We are newcomers to the

         11  arena of providing telephone service to our reservation.

         12  Various testimonies have been provided here as to the

         13  conditions of inflated claims by the various telephone

         14  providers on the Indian reservations.  As landowners, we

         15  should have exclusive rights to serve our reservation if

         16  we choose to do so.  We have attempted to exercise our

         17  rights but turned away because we did not meet the

         18  requirement date, and which continues on today, of the

         19  bidding process.  By a couple of days we missed that

         20  deadline date.  This, Mr. Chairman, will cause an

         21  additional impact on the tribes as negotiating with the

         22  other entities as the high bidder.  So this will be

         23  additional cost to us, Mr. Chairman.

         24               So we are looking forward to maybe

         25  reconsider us as a tribe providing service to our


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          1  community within the reservation as sovereignty.  We

          2  have never had this opportunity, which would be a great

          3  honor for us to be proud of, telecommunications.  Other

          4  tribes have ventured into this, telecommunications.  We

          5  would like that opportunity to go back and rebid and be

          6  reconsidered as a reservation telecommunications.  We

          7  are 90 percent of that bidding process that is taking

          8  place with the GTE exchange.  So, Mr. Chairman, I would

          9  like to share that with you and ask you to reconsider

         10  this.

         11               CHAIRMAN KENNARD:  Thank you for your

         12  comment.  It looks like you had a written statement.  If

         13  you would, we'd love to have that as a formal part of

         14  the record.

         15               MR. IRVIN:  Mr. Chairman, if I could, if

         16  you would like to, you could certainly use the services

         17  of the Arizona Corporation Commission.  We would

         18  certainly work with you to see that you meet all

         19  requirements of federal or state, if required there, to

         20  meet and expedite your application as well.

         21               MR. LAFFOON:  Yes, Mr. Chairman, that was

         22  also a consideration we had, being new bidders in the

         23  process.

         24               MR. IRVIN:  If you will see the staff, we

         25  are more than happy to help you.  That's what we're here


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          1  for, as a resource and a help.

          2               MR. LAFFOON:  Thank you.

          3               MR. IRVIN:  Thank you, Mr. Chairman.

          4               CHAIRMAN KENNARD:  Thank you.

          5               We'll take one more brief question.  I'm

          6  sorry I'm rushing along, but --

          7               MS. LO BIANCO:  Just a brief comment,

          8  Mr. Chairman.  I am Laura Lo Bianco with Iridium North

          9  America, the North American gateway for the Iridium

         10  satellite system.  I just wanted you to know that we are

         11  aware of the challenges that the tribal communities are

         12  facing, and we will be presenting you with written

         13  comments and possible solutions that Iridium can

         14  provide.  Thank you.

         15               CHAIRMAN KENNARD:  You know, I'm really

         16  glad you came forward, because when we were driving

         17  around yesterday, I saw two huge Motorola facilities

         18  here in Arizona, and I was thinking, as we started,

         19  where is Motorola today, since we're in their backyard.

         20  So thank you for your support.

         21               MS. LO BIANCO:  We are here, and we are

         22  listening to the concerns.

         23               CHAIRMAN KENNARD:  Thank you.

         24               Do you have a closing statement,

         25  Commissioner Ness?


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          1               COMMISSIONER NESS:  I just want to thank

          2  all of the witnesses for their very helpful comments.

          3  Some of the ideas, the problems, the promises, and the

          4  solutions that were presented today have given us a lot

          5  to think about.  A lot of the solutions are useful for

          6  rural areas throughout the country, and a lot of the

          7  ideas are very useful for the very special and unique

          8  issues and circumstances surrounding the Indian nations.

          9  And I plan to take all of that into account as we look

         10  at what very concrete ideas we can have to improve

         11  telephone service on the Indian reservations.  But I

         12  also hope, as we focus on getting basic service out

         13  here -- much needed, much delayed -- that we also

         14  continue to think further about leapfrogging technology

         15  and allowing some of the new services to flourish such

         16  that we can jumpstart the economy, create jobs,

         17  encourage young people to return home to productive

         18  opportunities here, and improve the opportunity for

         19  healthcare, which is a vital issue certainly, as we've

         20  heard today.

         21               So thank you all very much, and it's been a

         22  great pleasure and opportunity for us to be here today.

         23               CHAIRMAN KENNARD:  Thank you.

         24               Commissioner Furchtgott-Roth.

         25               COMMISSIONER FURCHTGOTT-ROTH:  Thank you,


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          1  Mr. Chairman.  I would like to thank all of the

          2  witnesses today, and I'd particularly like to thank the

          3  Gila River Indian Nation for welcoming us to their land.

          4               Mr. Chairman, I would also like to

          5  particularly thank you and the staff and Eric Jensen and

          6  everyone who's helped put this on.  You and I agree on

          7  most issues, but not on all, but I must commend you and

          8  Commissioner Ness.  I think that this is an issue that

          9  needs greater attention at the FCC.  Much of this is

         10  within our statutory authority, and I look forward to

         11  working with you both on this issue.  Thank you.

         12               CHAIRMAN KENNARD:  Thank you very much,

         13  Commissioner.  I appreciate those comments.

         14               We will leave here today with many good

         15  memories of the time that we've spent here with you, but

         16  one will always stick out in my mind, and that is the

         17  visit that we made yesterday to the Mission School on

         18  the Gila River reservation.  We visited a wonderful

         19  little school on the reservation, and we were taken on a

         20  tour of the school.  And most of the children had left,

         21  it was pretty late in the day, but we did get to see

         22  some basketball practice, and there were some young kids

         23  playing basketball.  It was a beautiful day yesterday

         24  here.  And as I was watching those kids practice

         25  basketball, it occurred to me that what Governor Thomas


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          1  said today is so true:  "We've come a long way, but we

          2  have a long way to go."

          3               Those kids were benefited by a lot of

          4  people in the community and around the nation who have

          5  stepped forward to help them.  As we walked around the

          6  school, we saw the computer lab there.  The computer lab

          7  was made possible by donations from private corporations

          8  and private individuals.  The Air Force had a role in

          9  helping expand the school so they could have a computer

         10  lab.  The FCC had a role because we made E-rate funding

         11  available for those computers.

         12               It occurs to me that what I saw at that

         13  school we're doing here today.  We're bringing together

         14  all these groups of people, federal government, leaders

         15  at the state government level, representatives of

         16  industry, lots of industry representatives, people who

         17  are working in nonprofit organizations, all coming

         18  together to try to make life better for those kids on

         19  that basketball court at that school.  So as I leave

         20  here today, I will take back a lot of what we've learned

         21  today, but as we go forward we should always remember

         22  those kids, because all of us are in this room today to

         23  make their lives better and to make sure that as we move

         24  into the information age we all move together.

         25               It's been an honor to be here with you.


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          1  Thank you so much for helping us pull this together.

          2  I'd like to thank the FCC staff.  It is a lot of work

          3  putting one of these hearings together, and they work

          4  very, very hard.  In fact, I have some notes here that

          5  were given to me by the staff, and it says, "3:30 a.m.

          6  Draft," so you know how hard people worked to make this

          7  happen.

          8               So thank you very much, and don't forget

          9  the luncheon that's being hosted for everyone here.

         10               (The hearing was concluded at 12:50 p.m.)

         11

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