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67-872 PDF 2011

H.R. 1343, A BILL TO CLARIFY NTIA AND RUS 

AUTHORITY TO RETURN RECLAIMED STIMULUS 

FUNDS TO THE U.S. TREASURY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMUNICATIONS AND 

TECHNOLOGY 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

APRIL 1, 2011 

Serial No. 112–30 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

MICHAEL F. DOYLE, Pennsylvania 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

GREG WALDEN, Oregon 

Chairman 

LEE TERRY, Nebraska 

Vice Chairman 

CLIFF STEARNS, Florida 

JOHN SHIMKUS, Illinois 

MARY BONO MACK, California 

MIKE ROGERS, Michigan 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

BRETT GUTHRIE, Kentucky 

ADAM KINZINGER, Illinois 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

ANNA G. ESHOO, California 

Ranking Member 

EDWARD J. MARKEY, Massachusetts 

MICHAEL F. DOYLE, Pennsylvania 

DORIS O. MATSUI, California 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 2 

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, prepared statement .................................................................................. 5 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 10 

Hon. Fred Upton a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 47 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 49 

WITNESSES

Lawrence E. Strickling, Assistant Secretary for Communications and Information, National Telecommunications and Information Administration, Department of Commerce ........................................................................................ 11 

Prepared statement .......................................................................................... 15 

Answers to submitted questions ...................................................................... 51 

Jonathan Adelstein, Administrator, Rural Utilities Service ................................ 29 

Prepared statement .......................................................................................... 32 

Answers to submitted questions ...................................................................... 54 

SUBMITTED MATERIAL

Letter, dated March 31, 2011, from Steve Traylor, Executive Director/General 

Counsel, National Association of Telecommunications Officers and Advisors, 

to subcommittee leadership ................................................................................. 8 

(1) 

H.R. 1343, A BILL TO CLARIFY NTIA AND RUS 

AUTHORITY TO RETURN RECLAIMED STIMULUS FUNDS TO THE U.S. TREASURY 

FRIDAY, APRIL 1, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:32 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Greg Walden 

(chairman of the subcommittee) presiding. 

Members present: Representatives Walden, Terry, Blackburn, 

Bass, Latta, Guthrie, Eshoo, Doyle, Matsui, Christensen, Barrow, 

Towns and Waxman (ex officio). 

Staff present: Neil Fried, Chief Counsel, Communications and 

Technology; Brian McCullough, Senior Professional Staff Member, 

Commerce, Manufacturing, and Trade; Ray Baum, Senior Policy 

Advisor/Director of Coalitions; Paul Cancienne, Policy Coordinator, 

Commerce, Manufacturing, and Trade; Peter Kielty, Senior Legislative Analyst; Debbee Keller, Press Secretary; Katie Novaria, Legislative Clerk; David Redl, Counsel, Communications and Technology; Jim Barnette, General Counsel; Mike Bloomquist, Deputy 

General Counsel; Phil Barnett, Democrat Staff Director; Shawn 

Chang, Democratic Counsel; Jeff Cohen, FCC Detailee; Sarah Fisher, Democratic Policy Analyst; and Roger Sherman, Democratic 

Chief Counsel, Communications and Technology. 

Mr. WALDEN. Good morning. The Subcommittee on Communications and Technology will come to order. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Welcome. Today is the subcommittee’s second hearing concerning 

the broadband stimulus programs administered by NTIA and the 

Rural Utilities Service. We will be discussing oversight of the programs and legislation to address risks and ambiguities highlighted 

by the Inspectors General at our last hearing. We are pleased to 

have Assistant Secretary Strickling here and Administrator 

Adelstein, and I want to thank both of you and your staffs for 

working with us on this legislation, and we appreciate your testimony, your comments and your counsel. 

The NTIA and RUS have awarded $7 billion covering 553 awards 

in a very short period of time as required by the law. The dust is 

still settling, but as we heard during the February hearing, it is 

2 

logical to expect that issues of fraud, waste and abuse will start 

popping up now that the money is beginning to flow. 

So far, award recipients have spent nearly 5 percent of the funds. 

Approximately a dozen recipients have decided not to pursue their 

projects and returned their awards worth $70 million. Some have 

cited the economy and their inability to fulfill their obligations if 

they moved forward. With 95 percent of the funding yet to be disbursed, the question is how many programs will run into hiccups 

down the road. 

As stewards of the taxpayers’ money, I know we all want to prevent misspent funds and fraud. So when the Inspectors General, 

Comptroller General or Administrators identify issues, it is important they are able to quickly determine whether there is a problem 

and take appropriate action. It is also important that Congress be 

apprised of such developments in a timely fashion and be made 

aware of the decisions the Administrators make. 

While we are not seeking to change the programs, we will continue to ask the important questions, including what criteria are 

used to determine when it is time to terminate an award. Out of 

fairness to the applicants who were denied stimulus money, the 

successful applicants that are abiding by the terms of their awards, 

and most importantly, the American taxpayers, if an award recipient does not comply with the terms of the award, it should be terminated. 

I believe the legislation we are considering accomplishes these 

goals. Working with the minority and stakeholders, we have improved the language and addressed a number of concerns. I am 

sure if it needs further refinement, and we are aware of some of 

those suggestions, we plan to work with the minority and all of you 

to get it right and fix those things as we get up to the full committee. 

The legislation clarifies the Administrators’ responsibility to 

deobligate funds when there is cause to terminate the award. Additionally, it institutes a new reporting requirement that will keep 

Congress apprised of relevant developments regarding awards. 

I thank Mr. Bass for taking leadership on this effort, of this modest but necessary legislation. I know this is not earth shattering, 

OK? We are going to move on to earth shattering in the future. 

This is a housekeeping effort we are trying to get done. 

And on that note, I would also like to suggest that given the 

schedule today and a number of votes that are going to occur on 

the floor, we probably only have about 40, 45 minutes to work 

through this. My goal would be, with the support of the subcommittee, is to move through the testimony as rapidly as possible, 

and if we can get into the markup on the subcommittee, recognizing I think there are only a few minor things we need to work 

out between here and full committee, which we could do, so that 

we pass this on to the full committee. 

[The prepared statement of Mr. Walden follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

Welcome. Today is the Subcommittee’s second hearing concerning the broadband 

stimulus programs administered by NTIA and the Rural Utility Service. We will be 

discussing oversight of the programs and legislation to address risks and ambiguVerDate Nov 24 2008 15:40 Aug 19, 2011 Jkt 037690 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\112-030 HR 1343 STIMULUS FUNDS-PDF MADE\112-30 HR 1343 STIMULUS FUNDS-P
3 

ities highlighted by the Inspectors General at our last hearing. We are pleased to 

have Assistant Secretary Stickling and Administrator Adelstein with us here today, 

and I want to thank them and their staffs for their help with the bill. 

The NTIA and RUS have awarded $7 billion covering 533 awards in a very short 

time. The dust is still settling, but as we heard during the February hearing, it is 

logical to expect that issues of fraud, waste and abuse will start popping up now 

that the money is beginning to flow. 

So far, award recipients have spent approximately 5 percent of the funds. Approximately a dozen recipients have decided not to pursue their projects and returned their awards worth approximately $70 million. Some have cited the economy 

and their inability to fulfill their obligations if they moved forward. With 95 percent 

of the funding yet to be disbursed, the question is how many programs will run into 

hiccups down the road. 

As stewards of the taxpayers’ money, I know we all want to prevent misspent 

funds and fraud. So when the Inspectors General, Comptroller General, or Administrators identify issues, it is important they are able to quickly determine whether 

there is a problem and take appropriate action. It is also important Congress be apprised of such developments in a timely fashion and be made aware of the decisions 

the Administrators make. 

While we are not seeking to change the programs, we will continue to ask the 

important questions, including what criteria is used to determine when it’s time to 

terminate an award. Out of fairness to the applicants who were denied stimulus 

money, the successful applicants that are abiding by the terms of their awards, and 

most importantly the taxpayer, if an award recipient doesn’t comply with the terms 

of the award, it should be terminated. 

I believe the legislation we are considering accomplishes these goals. Working 

with the minority and all stakeholders, we have improved the language and addressed a number of concerns. I am sure if it needs further refinement we can address any remaining concerns before Full Committee consideration. 

The legislation clarifies the Administrators’ responsibility to deobligate funds 

when there is cause to terminate the award. Additionally, it institutes a new reporting requirement that will keep Congress apprised of relevant developments regarding awards. 

I thank Mr. Bass for taking leadership of this modest but necessary legislation. 

I hope we can work expeditiously in a bipartisan manner to move this out of Committee and turn to a number of legislative issues that will consume more of our time 

and resources. 

Mr. WALDEN. With that, I would recognize my friend, the ranking member from California, Ms. Eshoo. 

Ms. ESHOO. Thank you, Mr. Chairman, and good morning to you, 

to all the members of the committee and to our guests. I want to 

extend a warm welcome to Assistant Secretary Strickling and to 

Administrator Adelstein, whom we have the pleasure of working together for a number of years where he served with distinction at 

the FCC. 

I am going to ask that my—— 

Mr. WALDEN. Without objection. 

Ms. ESHOO (continuing). Magnificent opening statement be—— 

Mr. WALDEN. Extraordinary. 

Ms. ESHOO (continuing). Inserted into the record in the interest 

of time, and we want to work with you, Mr. Chairman, because I 

think that what I raised earlier about tweaking the legislation because there is a sensitivity about the OIG and DOJ. We do not 

want to pour cold water over cases that have the potential for 

being prosecuted relative to fraud or abuse. 

I just want to say that this will be the second time that I am 

voting on the same thing, and so you are right, this is not earthshattering. In fact, I really do with all due respect think it is a 

waste of time. Effective oversight is very important in terms of the 

program and I welcome that. 

4 

So with that, I am going to place my comments in the record, 

and also ask that the letter from the NATOA, the National Association of Telecommunications Officers and Advisors, be placed in the 

record. Thank you. 

[The prepared statement of Ms. Eshoo follows:] 

5 

6 

7 

Mr. WALDEN. Without objection. 

[The information follows:] 

8 

9 

10 

Mr. WALDEN. Thank you. Does anyone else want to make opening comments? Mr. Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, for holding this hearing. It 

is an important area for us to look at, and I want to welcome Assistant Secretary Strickling and Administrator Adelstein back to 

the committee. We appreciate the extraordinary efforts that you 

and your colleagues have put into establishing these programs and 

I look forward to your testimony. 

When Congress passed the landmark Recovery Act, we built 

oversight into the very structure of these programs. We knew it 

was imperative to provide the Departments of Commerce and Agriculture with the tools necessary to conduct vigorous oversight of 

approximately $7 billion in broadband spending, and the Commerce Department Inspector General was allocated $16 million and 

the Agriculture Department Inspector General $22.5 million to 

oversee and audit it. With billions of dollars invested in hundreds 

of broadband projects throughout the nation, Congress must not 

skimp on oversight funding. 

The agencies tell us that they have adequate resources to conduct effective oversight. However, Congress still needs to be vigilant, and if unanticipated oversight challenges emerge, we have to 

be ready to ensure that agencies and their independent IGs have 

adequate resources to oversee these projects. 

It is inevitable in a program of this size and scope that some of 

the projects funded will not work out as anticipated. In fact, a 

handful of grant recipients have already withdrawn from the programs. This money was promptly deposited in the U.S. Treasury, 

as it should be. 

Today we will consider a legislative proposal that directs NTIA 

and RUS to do what they are already doing: returning these 

deobligated funds to the Treasury. I don’t understand why we are 

enacting this duplicative legislation, but I am not opposed to the 

legislation. What I like most about the legislation before us today 

is not the substance, which I think is probably unnecessary, but 

the process. Chairman Walden has reached out to the Democrats 

to reach a bipartisan consensus on the bill. Republican staff has included Democratic staff in discussions about this measure and has 

sought our input and suggestions, and I appreciate this effort and 

hope it is a harbinger of how we will approach future proposals. 

As we consider this bill, we must be careful not to adopt legislation that inadvertently complicates the ability of the agencies to 

oversee these programs effectively and make sure we do not encourage defunding projects without good cause, especially now that 

obligated money has been translated into real projects with real 

jobs in every State. 

I want to yield the balance of my time to Mr. Doyle from Pennsylvania, and I am looking forward to the testimony. 

Mr. DOYLE. Good morning. Thank you, Mr. Chairman, for holding this hearing, and thank you, Mr. Waxman for yielding. Happy 

April Fool’s Day to you both. 

11 

I agree with the need for today’s hearing, and I believe we should 

continue our oversight of the parts of the Recovery Act that will 

help countless people throughout the country get online. But that 

being said, remember the TV show ‘‘Seinfeld’’? If ‘‘Seinfeld’’ was a 

show about nothing, today’s markup is about very little. 

While the Senate is about to mark up spectrum legislation, we 

are marking up a bill that is already law. I don’t oppose the bill, 

but it seems to me that it is the legislative version of the J. 

Peterman catalog. It is pages of language about things we don’t 

really need. After all, the Administration is already returning canceled grants to the Treasury for deficit reduction. So we really don’t 

need this bill, but as Jerry would say, not that there is anything 

wrong with that. 

I yield back. 

Mr. WAXMAN. Thank you, Mr. Doyle, and Mr. Chairman, we look 

forward to working with you even though we hear some criticism, 

but I think that is important that we continue to see where we can 

be together. 

Mr. WALDEN. The gentleman returns the balance of his time, and 

we love you too. 

Ms. ESHOO. Let us not get carried away. 

Mr. WALDEN. All right. I withdraw that statement. 

Now we would like to turn to Mr. Strickling. Before I do that, 

though, for our members who just came in, just so you kind of 

know the lay of the land here, we probably only have until about 

11:15 and then we are going to have a series of votes. I would prefer to go ahead and see if we can’t get in and out of the markup 

before we have to go vote. Otherwise we may have to come back 

after the votes, which could be in the afternoon. So with that, Mr. 

Strickling, thank you for being here, thanks for your testimony. 

STATEMENTS OF LAWRENCE E. STRICKLING, ASSISTANT SECRETARY FOR COMMUNICATIONS AND INFORMATION, NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION, DEPARTMENT OF COMMERCE; AND JONATHAN 

ADELSTEIN, ADMINISTRATOR, RURAL UTILITIES SERVICE 

STATEMENT OF LAWRENCE E. STRICKLING 

Mr. STRICKLING. Thank you, Chairman Walden, and Ranking 

Member Eshoo, Vice Chairman Terry, members of the subcommittee, thanks to all of you for the opportunity to testify today 

on behalf of NTIA concerning the administration of our grant programs. 

I also would like to take this opportunity to acknowledge and 

commend our Secretary, Secretary Locke who, as you know, hopefully will be moving on to China but he has played a very important role in the oversight of this program, and I want to recognize 

my colleague, Administrator Adelstein. I guess this starts our 2011 

broadband tour. It was quite a successful tour back in 2010 as we 

went to I think seven different committees to testify about this program. 

I welcome the opportunity to comment on the draft legislation 

that is the topic of today’s hearing. Before I speak to the draft bill, 

12 

I would like to provide a quick update on the status of our programs. 

Since we completed our grant awards on time last September, 

NTIA has been focused on providing vigorous oversight and highquality technical assistance to grantees to ensure that they complete their projects on schedule, on budget and that they deliver 

the promised benefits to the communities that they serve, and I am 

pleased to report that our projects have already made significant 

progress in achieving those goals. In the last quarter of 2010, our 

grant recipients reporting funding approximately 1,000 jobs. To 

date, they have installed more than 4,000 computers for public use. 

They have provided over 150,000 hours of broadband training to 

date to over 65,000 people. In Michigan, North Carolina, Maine 

and elsewhere, our infrastructure projects have broken ground and 

have begun building fiber and wireless facilities. 

Consistent with our philosophy to focus on middle-middle 

projects to prime the pump for private investment to serve homes 

and businesses, I am also quite pleased to report that our grantees 

have already entered into about 90 interconnection agreements 

which will allow the existing incumbents and new entrants to serve 

last-mile customers. 

I would also like to let you know that on February 17th of this 

year, we in collaboration with the FCC unveiled the National 

Broadband Map. This is the first public searchable nationwide map 

of consumer broadband Internet availability in the United States. 

The map is the most granular and transparent data set of 

broadband availability that has ever been published, and while we 

can draw many conclusions from the map, there are two I want to 

emphasize this morning. 

First, that our data shows that 5 to 10 percent of Americans do 

not have access to a level of broadband service necessary to perform a basic set of Internet applications as defined by the FCC, 

and second, the map proves what we knew during our grant review 

process, which is that anchor institutions are greatly underserved 

across our country. Two-thirds of the schools that were surveyed 

subscribe to services slower than 25 megabits per second and 96 

percent of libraries that were surveyed subscribe at speeds slower 

than 25 megabits per second. 

Now, protecting the federal funds we are spending is of paramount importance to us. As the members of the subcommittee are 

well aware, achieving these objectives is challenging and requires 

us to perform diligent oversight and provide technical assistance to 

our awardees. Our large and complex grant program continues to 

raise novel issues, some of which have potential to impact the 

progress of our projects, and let me just give you one example. Before our infrastructure grantees can begin construction, most of 

them have to complete and submit an environmental and historic 

preservation study in compliance with the National Environmental 

Policy Act, the National Historic Preservation Act and the Endangered Species Act. These processes can take significant time and 

resources, and we have worked very hard to find win-win solutions 

to enable our projects to move forward in full compliance with 

these important laws, and we are committed to working with our 

13 

grantees to complete these environmental requirements as rapidly 

and as thoroughly as possible. 

To solve these and other issues yet maintain the rigorous implementation schedule demanded of these projects, we have put into 

action a program-wide oversight strategy to mitigate waste, fraud 

and abuse, to ensure compliance with award conditions and to 

monitor the progress of each project toward its timely completion. 

The technical assistance that we have conducted to date includes 

holding multi-day grantee conferences on key implementation topics. We have hosted over 40 webinars and drop-in conference calls 

to provide guidance on key topics, and by the end of June we will 

have performed site inspections for 72 of our projects, representing 

about half of the total grant pool. The goal of our program is to 

identify issues early in the process and to resolve them as promptly 

as we can. 

Earlier this week, I notified Congress that we have had two 

grantees terminate their awards recently, and while I am disappointed that these two projects, one in Indiana, the other in Wisconsin, will not be built, I do believe that our diligent oversight led 

to the termination of these projects early on with only a minimal 

expenditure of federal taxpayer dollars. As required by law, we 

have already returned the full $14 million of the Indiana grant to 

the Treasury, and we will promptly nearly all of the $23 million 

Wisconsin grant upon completion of an accounting with the State. 

So given that experience, let me turn to the draft legislation. We 

support the ultimate goals of the bill, which are to protect against 

waste, fraud and abuse and to ensure that unused or reclaimed 

funds are promptly returned to the Treasury, and while we do not 

believe that the additional steps are needed to ensure adequate 

protection of taxpayer funds, and I think our action in response to 

the Wisconsin and Indiana terminations prove that, we have no objection if Congress believes that the reporting requirements contained in the bill, in addition to the other mechanisms already in 

place, would further protect taxpayers. We do have some concerns, 

however, about the specific wording of the requirement to 

deobligate and return funds to the Treasury, and we look forward 

to working with the subcommittee to clarify this language. 

And allow me to close with some comments about our relationship with the Inspector General. I am extremely grateful for the 

ongoing efforts of the IG in helping to oversee our grant programs. 

Throughout the life of the program, the IG has identified additional 

steps we can take to oversee our programs more effectively, and we 

have worked hard to implement their recommendations as thoroughly as possible. Now that we are in the oversight phase of our 

program, we have had discussions with our IG as to how we should 

handle complaints we receive about our projects. We haven’t received many, and in many respects the complaints simply reflect 

policy disagreements and do not raise serious allegations of waste, 

fraud and abuse, but nonetheless, the Inspector General has told 

me we can do better, particularly in developing a more structured 

process to review these complaints, and to that end, we will be 

working with the IG to improve our performance in this area just 

as we have with every other recommendation the IG has made to 

us over the course of the program. 

14 

Thank you again for the opportunity to testify, and I will be 

happy to answer your questions. 

[The prepared statement of Mr. Strickling follows:] 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

Mr. WALDEN. Thank you, Mr. Strickling, and if you can keep the 

committee in the loop, I am sure we all have interest in that part 

of the process too as this rolls out, so your suggestions to the IG 

and back and forth, if you can keep us in that loop, that would be 

helpful as well. 

Mr. STRICKLING. Absolutely. 

Mr. WALDEN. Mr. Adelstein, thank you for being here. We are delighted to have you here and we look forward to the summary of 

your testimony as well, sir. 

STATEMENT OF JONATHAN ADELSTEIN 

Mr. ADELSTEIN. Thank you, Chairman Walden, Ranking Member 

Eshoo and members of the subcommittee. It is an honor to be here 

in front of you to talk about the Broadband Initiatives Program we 

call BIP and legislation to amend the Recovery Act. I am delighted 

to be here again with my friend, Larry Strickling, which we have 

done many times before including before this subcommittee. Our 

agencies worked very closely together to fulfill the President’s vision of getting broadband out to every corner of this Nation, and 

the Assistant Secretary has been an invaluable partner throughout 

the process. 

Our Secretary Tom Vilsack has made broadband a pillar of his 

strategy to revitalize rural economies, and the direct benefits of 

broadband to rural economies are immense. USDA’s Economy Research Service has studied the effects of broadband in rural communities and concluded based on their statistical analysis that employment growth was higher and non-farm private earnings greater 

in counties with a longer history of broadband availability. 

The Recovery Act provided RUS with the unique opportunity to 

jumpstart the rural economy, investing more than $3.5 billion in 

loans and grants to expand broadband networks in the hardest to 

serve rural parts of the United States. Demand for broadband financing under the Recovery Act was really tremendous. RUS received over 2,000 applications totaling $28 billion. We were able to 

make only 320 awards for that $3.5 billion, only 16 percent of the 

applications received. This amazing response and of course the 

NTIA’s map that the Assistant Secretary referred to I think demonstrate the huge demand that remains in rural America for improved broadband service. 

In September 2010, the RUS completed the awards phase of this 

program. Our selection process was extremely rigorous. Of the $3.5 

billion in loans and grants, $3.25 billion went to 285 last-mile 

projects, $173 million was for middle-mile projects. We did $3.4 

million for 19 regional technical assistance projects, and finally, 

$100 million went to satellite service to premises that were otherwise unserved by any of the other grants under this program. 

Now, these investments are going to make a big difference. They 

connect nearly 7 million Americans, 360,000 businesses and more 

than 30,000 critical community institutions to new or improved 

broadband service. They span over 300,000 square miles, touch 31 

tribal lands, serve 125 persistent poverty counties, about a third of 

the persistent poverty counties in the United States, and will create more than 25,000 immediate and direct jobs for workers. Once 

built, though, these networks will provide the platform for ecoVerDate Nov 24 2008 15:40 Aug 19, 2011 Jkt 037690 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 F:\112-030 HR 1343 STIMULUS FUNDS-PDF MADE\112-30 HR 1343 STIMULUS FUNDS-P
30 

nomic growth and job creation for years to come. These projects are 

really extraordinary. I know in the interests of time, I had a lot of 

great examples here. I will just one example that is particularly 

important because it is in an important district in Oregon, the Confederated Tribes of Warm Springs Reservation in Oregon scheduled 

to break ground this month just in a couple of weeks. It will bring 

broadband to the entire 1,000-square-mile reservation, connecting 

223 community institutions including government agencies, emergency facilities, 775 households and 22 businesses. It will be transformative for the Warm Springs Reservation. Our excitement for 

these projects is matched by our commitment to execute our duties 

very prudently and to be very careful with taxpayer dollars. 

RUS shares the goals of your legislation, Mr. Chairman, to return unused or reclaimed funds to the U.S. Treasury and to aggressively combat waste, fraud and abuse. The bill’s purpose is entirely 

consistent with the standard procedures already in place for RUS 

programs including BIP. The RUS has some concerns with the 

draft and we look forward to working with the subcommittee to address them, and we would be happy to provide any drafting assistance as needed if you should request it. 

To ensure our continued success and prudent portfolio of management with regard to the Recovery Act, RUS has done a lot of 

work. We have held compliance workshops. We visited every award 

recipient and we have required quarterly reports and annual CPA 

audits. We have our own field accountants and we have sent our 

field accountants to each and every one of these recipients before 

any money is spent to ensure that their accounting system complies with all of our requirements and that it is set up as something we can really audit and be on top of. 

Now, the USDA Inspector General, we work closely with them 

and we appreciate their good work. I understand that in the last 

month they were here before this committee raising concerns about 

the broadband loan program administered under a previous Administration, under a previous statute and under previous regulations, and I share these concerns. To be clear, none of the issues 

raised by the IG pertain to the Recovery Act broadband program 

or the Obama Administration’s conduct of the RUS broadband loan 

program. The broadband loan program was actually suspended 

during the Recovery Act to allow the agency to address all of the 

concerns that were raised by the IG and to implement statutory 

changes that were made in 2008 and to integrate the lessons of the 

Recovery Act into these new rules. 

On March 14th, just last month, the RUS issued new broadband 

regulations that open the program for applications for the first 

time under this Administration. The new regulation and other actions taken by the RUS have satisfactorily addressed all of the 

issues raised by the IG, so I am thrilled to report to the subcommittee that last week the Inspector General concluded and 

closed completely the RUS broadband loan audits, so the book is 

shut on that audit. 

The new broadband loan program increases efficiencies, targets 

limited resources and builds on the momentum created by the Recovery Act BIP program to fill the gaps in rural broadband access 

that were identified in NTIA’s map. 

31 

So it is an honor to work with you, with our Inspector General 

and with our federal partners including NTIA to make affordable 

broadband service widely available throughout rural America. Your 

continued support and guidance is deeply appreciated. I appreciate 

the opportunity to testify and look forward to any questions you 

may have. 

[The prepared statement of Mr. Adelstein follows:] 

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Mr. WALDEN. I appreciate the testimony of both the gentlemen, 

and I want to congratulate you on fulfilling the recommendations 

of that audit. I don’t care who is in charge where, I am glad you 

got it done because that one goes back to 2005, I think, so thank 

you for doing that. 

Again, for our committee members, given the schedule we face, 

I am going to try to limit my questions. I think I am just going to 

go with one if we could get into the markup but I don’t want to 

rush anybody. If we could get into the markup before they call 

votes on the floor, that would solve having to come back after the 

votes, say, at 2:00 or something, 2:30. 

So Mr. Strickling, doesn’t section 6001(i)(4) of the ARRA state 

you may deobligate funds? I can tell you it does. 

Mr. STRICKLING. You are correct. 

Mr. WALDEN. Yes, ‘‘may,’’ not ‘‘shall,’’ and that is really the issue. 

It isn’t whether you deposit in the Treasury, and not you personally. It could be somebody down the road different has the flexibility whether you will or won’t deobligate. This legislation says 

you shall, and while you have said and I trust that you will 

deobligate funds in such cases as fraud, waste and insufficient performance, doesn’t this change provide you with that added legal 

protection in that it reduces the ability of a failing awardee to quibble over what would otherwise be your discretionary decision? 

Mr. STRICKLING. I can’t debate the change in the words. What I 

can tell you is, under Department of Commerce guidance, it is less 

discretionary in the sense that we are directed under DOC provisions that we will take these actions. In any case, again, we don’t 

have any issues with your legislating in this area but I don’t expect 

it to change our day-to-day to practice. 

Mr. WALDEN. But this does put certainty in the statute because 

the guidance out of the department could change in another Administration or even in this one, could it not? 

Mr. STRICKLING. I would agree with that. 

Mr. WALDEN. So we are just trying to get some certainty there. 

I will yield now to anyone else on our side that may want to ask 

a question. Mr. Bass? 

Mr. BASS. Mr. Chairman, I just have two very quick questions. 

Secretary Strickling, what is the current requirement to report 

to Congress regarding awards that show material noncompliance, 

and do you think that the passage of this legislation would increase 

the transparency of the Recovery Act? 

Mr. STRICKLING. I can’t speak to there being a—I can’t identify 

a particular legislative directive to us to do that, but I think as reflected in the letter I sent earlier this week, it is certainly our practice to do so. 

Mr. BASS. Both of you mentioned the number of awards that you 

have made, amount of money spent to date. I think you identified 

three that have been discontinued. Have you learned anything 

from these returned awards that would be beneficial to you in your 

oversight on the existing projects? 

Mr. STRICKLING. We have actually had two projects that went to 

award and we actually went through the process, started the process with the applicant and then they have since terminated. There 

is a third award that the applicant never actually accepted the 

42 

award, a small award up in Minnesota to Leach Lake for about 

$1.7 million. But of the two projects, I think each of them presented a unique set of circumstances. In Indiana, quite frankly, it 

was a situation where other things were going on economically in 

the State. It was a project designed to serve schools. Indiana is 

going through a school consolidation, and our grantee along with 

our folks at NTIA realized that their business case was deteriorating as a result of this other set of governmental actions and the 

project just didn’t seem viable any longer and so the applicant decided to withdraw because they couldn’t see that they would have 

an ongoing project after the completion of the grant period. 

We have been very focused on giving awards to projects that we 

think are sustainable and will continue on even after the grant period. In the Indiana case, I think again through our oversight and 

discussions with the applicant, we learned early on that the project 

really wasn’t viable in the way we thought it was when we had reviewed it during the review process. Wisconsin again, totally separate set of facts there that I would be happy to discuss with you 

separately. 

Mr. BASS. Administrator Adelstein, do you have any comments 

on that? 

Mr. ADELSTEIN. If there is anything we draw from that, it is that 

we need to very aggressively work with and oversee every aspect 

of each one of our awardees’ programs and the progress they are 

making on the projects. With each of those 10 that we decided mutually not to move forward on, there were a lot of issues that we 

worked hand in hand with them. We sent our field accountants to 

visit them. We sent our general field representatives to visit them. 

I personally worked with a number of them. We met with them. 

We determined whether or not changes they were proposing were 

consistent with their original application. In some cases, they 

weren’t and we weren’t able to work it out and so we went our separate ways. Not one dime of taxpayer money was spent in any of 

those projects so we were able to save the taxpayer by up front 

making sure that they understood what we expected and that they 

were meeting all of the concerns that we had, and if they weren’t, 

we didn’t hesitate to rescind the projects. 

Mr. BASS. Thank you very much, Mr. Chairman. 

Mr. WALDEN. Do any other members on our side have questions 

they feel compelled to ask? If not, I will yield 5 minutes to the gentlewoman from California. 

Ms. ESHOO. Thank you, Mr. Chairman. And again, thank you to 

both of you for not only being here today but for the work that you 

have done, which really speaks for itself. 

I am going to go as quickly as possible because we are under 

time constraints here. My question is, how does the bill that is 

going to be marked up that you have obviously reviewed, how does 

it differ in any way from your existing mandate or practice to terminate grant or loan awards for cause? Is the legislative language 

different from current practices relative to the deobligations of 

funds? When an award is deobligated, how does your agency work 

with the awardee to account for the funds? I think that you have 

touched on that. And how long does it take on average for a 

deobligated fund to be returned to the U.S. Treasury, which you alVerDate Nov 24 2008 15:40 Aug 19, 2011 Jkt 037690 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 F:\112-030 HR 1343 STIMULUS FUNDS-PDF MADE\112-30 HR 1343 STIMULUS FUNDS-P
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ready have a responsibility to do. And the last thing I want to 

touch on, which is what both the majority and the minority need 

to work through is this issue of the IG, the OIG and where they 

may identify potential fraud and the language of the bill—I mean, 

we don’t want to throw ice water on a case that has real potential 

to it. That is not the intent of any member on the committee. So 

if you want to comment on that, it is something that we need to 

work out, and I think that is the intention from both sides of the 

aisle. 

Mr. STRICKLING. Yes. 

Ms. ESHOO. In other words, what we are taking up today, how 

different is it from what we have already passed? 

Mr. STRICKLING. I think on the first part of your question related 

to our practices with respect to deobligating dollars and what happens to the dollars and that, I don’t think it really changes the existing law. In terms of how long that takes, in the case of the Indiana project, since there had been no expenditures of federal dollars, 

we were able to very quickly return that full amount. In the case 

of Wisconsin, we will do an accounting with the State because we 

think they have spent a nominal amount of dollars. We think it is 

less than $100,000 of allowable costs, which would they be allowed 

to recover, and then the remainder will go to the Treasury, but we 

do have to carry out that accounting. 

Ms. ESHOO. But the legislation doesn’t change any of that? 

Mr. STRICKLING. Fundamentally, no. On the issue of—I mean, 

the second part of the legislation does impose some time limits on 

us in terms of taking actions and reporting to Congress, and I 

think Administrator Adelstein—— 

Ms. ESHOO. From what to what? 

Mr. STRICKLING (continuing). May have had a little more experience with the implications of that. 

Ms. ESHOO. From what to what? What is the time frame on it? 

Mr. ADELSTEIN. The time frame is, as the chairman knows, 30 

days we have after we are given any information that pertains to 

potential misuse of funds to make a determination as to whether 

to terminate the project or not, and then we are given 3 days subsequent to report to Congress what our determination was, which 

is a new requirement. As the Secretary said, all the other requirements are basically consistent with existing law. 

Ms. ESHOO. And what is the nexus between that and this issue 

of a possible fraud and the effect that it would have on that potential case? Is there a nexus between the two? 

Mr. ADELSTEIN. There could be in some cases. In the case of serious fraud, which of course this legislation is designed to combat, 

RUS is generally given an indication by OIG. We get a confidential 

little folder that says confidential, do not report, and generally the 

OIG requests us not to take action to rescind a loan or grant if they 

refer it to the Department of Justice for criminal prosecution. So 

we are asked basically to stay out of the way of a criminal prosecution. Under this requirement, however, we would be required—we 

would be at a loss, because on the one hand, we are being told not 

to do it, and there is potential obstruction of justice—— 

Ms. ESHOO. Mr. Chairman, I think this is the area we need to 

work on. 

44 

Mr. WALDEN. That is the part we are going to work on. Would 

the gentlewoman yield to me? 

Ms. ESHOO. I would be glad to. 

Mr. WALDEN. Because I want to just clarify something Mr. 

Adelstein said. You said if you got any information you would have 

to notify us, and actually I think if you look at the language in the 

bill, such information that pertains to material noncompliance. 

That is different than just saying any information. We tried to set 

a fairly high standard. 

Mr. ADELSTEIN. I did say information pertaining to misuse of 

funds, but you are exactly right. That is what the legislation says, 

and it would have to be significant information. 

Mr. WALDEN. Yes, it is not just information. 

Mr. ADELSTEIN. So to your question, I mean, if there was a serious one, these are the most serious cases where they actually 

would be referred to DOJ for prosecution. We would be sort of in 

a conflict between the requirement of this law—— 

Ms. ESHOO. Well, we need to repair that. 

Mr. WALDEN. We will work that out. 

Ms. ESHOO. We are going to work that out, but I appreciate this 

being raised because I think it is important, and I think that my 

time is up, Mr. Chairman. 

Thank you again, gentlemen. I think that you have confirmed 

what we already know and have voted on. But thank you. I do 

think that the oversight of the committee is what is really key 

here. Thank you. 

Mr. WALDEN. I thank the gentlewoman, and I would just say 

that is why we are doing the hearing today is to flesh out these 

sorts of issues and get it right. 

Mr. Doyle. 

Mr. DOYLE. Thank you, Mr. Chairman. 

Mr. Strickling, Mr. Adelstein, welcome. Thanks for your good 

work. 

As our last hearing, many of my Republican colleagues expressed 

a belief that overbuilding is a persistent and ongoing problem with 

these BTOP and BIP awards, and now that you are finally both 

here to represent your respective agencies, would you once and for 

all dispel these concerns? 

Mr. STRICKLING. Sure. I do think it is a misconception with our 

program in particular since we focused on middle-mile projects, 

which are open network projects and available to anybody to take 

advantage of, including the incumbents as well as new entrants, 

and as I pointed out in my opening remarks, we have already seen 

90 interconnection agreements that have been executed between 

our infrastructure grant recipients and carriers who want to take 

advantage of these facilities to improve the level of service that 

they are offering to their end-user customers. So in that light, what 

we see our role is doing is priming the pump. We are putting these 

middle-mile facilities out there through these organizations like 

Merit in Michigan and MCNC in North Carolina that are going to 

be able to provide much middle-mile capacity throughout their 

States of Michigan and North Carolina, just to give two examples, 

and then other parties including incumbents like AT&T in Michigan and North Carolina can actually lease capacity on those sysVerDate Nov 24 2008 15:40 Aug 19, 2011 Jkt 037690 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 F:\112-030 HR 1343 STIMULUS FUNDS-PDF MADE\112-30 HR 1343 STIMULUS FUNDS-P
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tems to improve the service that they offer to their end-user customers. 

So what we did in evaluating our projects was to ensure that we 

would be bringing substantial benefits to the area in which the 

projects would be built, and we think our projects pass that test. 

Mr. DOYLE. Thank you. 

Mr. Adelstein? 

Mr. ADELSTEIN. Yes, we made a major effort in both rounds of 

funding to prioritize the most remote rural areas. In fact, we gave 

extra points priority for going to rural areas. We gave extra points 

for the number of customers that were totally unserved, extra 

points for being the most remote in eligibility standards and trying 

to get people 50 miles away from an urban area, which was actually too extreme for some, so we ended up really making every effort I think we could to avoid overlap, to make sure that there was 

service to those who didn’t have it, and in fact we did get service 

out to the most rural areas, and we are going to serve many, many 

millions of customers that don’t have access to broadband today. 

Mr. DOYLE. Thank you. Mr. Chairman, I will yield back. 

Mr. WALDEN. I recognize the gentlewoman from California. Just 

know we have about 5 minutes before we go vote. Otherwise we 

will have to come back after votes. 

Ms. MATSUI. I will keep that in mind. 

I want to thank both of you for being here, and I applaud your 

efforts in administering the BTOP and the process. I believe Americans will have greater access to broadband because of these programs, particularly in my home State of California. 

With that said, the GAO report noted that the uncertainty of 

continued funding for oversight presents a risk that both NTIA and 

RUS will have insufficient staff and resources to actively monitor 

BTOP and BIP projects. I have a question for both of you. Do both 

of you believe you have sufficient funding to devote the resources 

necessary to oversee compliance? 

Mr. STRICKLING. As of now, yes, and I want to thank the leadership of this committee for its help on a bipartisan basis to ensuring 

that we got the resources we needed in this fiscal year to provide 

appropriate oversight, but at the level we are currently funded at 

in the existing C.R., assuming that continues through the rest of 

this fiscal year, we are in fine shape, and again, it is through the 

efforts of the leadership of this committee that we got to that point, 

and I want to thank everyone for that. 

Mr. ADELSTEIN. RUS requested no additional funds in order to 

oversee this program so we are basically dealing with it out of our 

existing budget, which was already very tight. So the President’s 

full budget really is required in order for us to do, I think, the level 

of oversight that we need to do. 

Ms. MATSUI. So what you are saying is that the budget currently 

is fine with you if you don’t anticipate any cuts in the budget moving forward? 

Mr. STRICKLING. That is right. 

Ms. MATSUI. OK. Fine. And that is all my questions. Thank you. 

Mr. WALDEN. Thank you. I recognize the gentlewoman from Tennessee. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

46 

I have a question for Mr. Adelstein, and I will be happy to submit it, but I want to refer to the letter that you wrote the chairman 

regarding the recipients of RUS loans using USF money to make 

payments on those loans. And Mr. Chairman, I would love for us 

to have a copy of that letter for the record, the letter you sent to 

the FCC chairman. 

And then my question to you specifically about this, some of 

these loans are for 30 years, and does that mean that we shouldn’t 

reform USF until that point in time and are we really advocating 

the use of a ratepayer subsidy to pay off a government subsidy? 

And in light of your letter and your conversation in that letter, 

those would be the two questions. We will submit these, and then 

I would ask for it to be included in the record. Yield back. 

Mr. WALDEN. Without objection. 

Anyone else seeking recognition? If not—if you want to, yes. 

Mrs. CHRISTENSEN. I will just ask one. 

Mr. WALDEN. The gentlelady from the Virgin Islands is recognized. 

Mrs. CHRISTENSEN. Thank you. 

The bill calls for termination for insufficient performance, and 

while I am sure some fall in that category may need termination, 

we are trying to expand to places that are rural and don’t have a 

lot of experience, and don’t you think that maybe some of those 

should get technical assistance and support rather than just be terminated? That is my question. And I just wanted to say I have evidence of really tight oversight in a letter to my government that 

I received a copy of. Thanks. 

Mr. STRICKLING. Just very, very briefly, I think in terms of insufficient performance from our perspective, we do intend to provide 

technical assistance where we can to work with our grantees to 

help them over the bumps that they may run to. I think an example of insufficient performance could be where the entire project 

management staff resigns and leave a program and there doesn’t 

seem to be a plan in place to bring leadership to the project. In 

that kind of situation, we take a hard look at it and wonder whether it is worth continuing on. 

Mr. ADELSTEIN. And we perform similarly. We make every effort 

to work with our rural awardees because some of them are really 

struggling sometimes, and each one of the 10, we tried to work to 

save the ones we could. Sometimes they couldn’t be done. But we 

will give them every opportunity to comply and to make it work. 

Mr. TOWNS. I recognize time constraints, so I have some questions and I would like to place in the record. 

Mr. WALDEN. Absolutely. Yes, all members have that privilege to 

submit questions for the record. Thank you, and I appreciate your 

courtesy in trying to help us move this along. 

With that, the hearing is adjourned. 

[Whereupon, at 11:12 a.m., the subcommittee proceeded to other 

business.] 

[Material submitted for inclusion in the record follows:] 

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