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SUBCOMMITTEE HEARING ON MAXIMIZING

THE VALUE OF BROADBAND SERVICES TO

RURAL COMMUNITIES

SUBCOMMITTEE ON URBAN & RURAL 

ENTREPRENEURSHIP 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 9, 2007

Serial Number 110-20

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

WILLIAM JEFFERSON, Louisiana 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

SUBCOMMITTEE ON URBAN & RURAL ENTREPRENEURSHIP

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Shuler, Hon. Heath .................................................................................................. 1

Fortenberry, Hon. Jeff ............................................................................................. 2

WITNESSES 

PANEL I 

Adelstein, Hon. Jonathan, Commissioner, Federal Communications Commission ........................................................................................................................ 3

PANEL II 

Stephens, Brandon, Balsam West FiberNET LLC ................................................ 16

Shields, T. Russell, Ygomi LLC .............................................................................. 17

Kremer, Russ, National Farmers Union ................................................................ 19

Christensen, Brent J., Christensen Communications Company .......................... 21

Mefford, Brian, Connect Kentucky ......................................................................... 23

Deere, William R., United States Telecom Association ........................................ 26

APPENDIX 

Prepared Statements: 

Shuler, Hon. Heath .................................................................................................. 37

Fortenberry, Hon. Jeff ............................................................................................. 38

Adelstein, Hon. Jonathan, Commissioner, Federal Communications Commission ........................................................................................................................ 40

Stephens, Brandon, Balsam West FiberNET LLC ................................................ 47

Shields, T. Russell, Ygomi LLC .............................................................................. 76

Kremer, Russ, National Farmers Union ................................................................ 80

Christensen, Brent J., Christensen Communications Company .......................... 85

Mefford, Brian, Connect Kentucky ......................................................................... 91

Deere, William R., United States Telecom Association ........................................ 104

(III) 

(1)

SUBCOMMITTEE HEARING ON MAXIMIZING 

THE VALUE OF BROADBAND SERVICES 

TO RURAL COMMUNITIES 

WEDNESDAY, MAY 9, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON URBAN & RURAL ENTREPRENEURSHIP

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360 Rayburn House Office Building, Hon. Heath Shuler [Chairman of the subcommittee] presiding. 

Present: Representatives Shuler, Clarke, Fortenberry, Musgrave, 

and Davis. 

OPENING STATEMENT OF MR. SHULER 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

2360 Rayburn House Office Building, Hon. Heath Shuler [chairman 

of the subcommittee] presiding. 

Present: Representatives Shuler, Clarke, Fortenberry, Musgrave, 

and Davis. 

Also Present: Representative Fallin. 

ChairmanSHULER. Good morning, everyone. I am pleased to call 

this hearing to order. This is the Subcommittee on Rural and 

Urban Entrepreneurship, the first hearing of the 110th Congress. 

I would like to welcome the Members of the Subcommittee, the 

distinguished witnesses, and our guests. 

Rural America is the home of many different kinds of small businesses. In Western North Carolina, there are thriving high-tech 

businesses, small manufacturers, and family farms. What all these 

businesses have in common is the need to stay connected with their 

customers, their suppliers, and the information that they need to 

run their businesses. 

Today’s hearing will focus on the challenges for providing reliable, affordable broadband access of the rural small businesses. Experience has shown that broadband can bring economic revitalization to small towns by creating clusters of small businesses. 

Broadband service can also help farmers and farm-related businesses control costs and optimize production. This technology can 

provide real-time access to whether reports, fertilization guidance, 

and livestock tracking. 

Farming communities must maximum the use of high-tech Internet access to ensure further development. I am concerned that 

many of our country’s rural and agricultural-based communities 

2

are not yet fully realizing the potential of value of broadband services to their economies. As more of these communities gain highspeed access to the Internet, the next challenge is to help them use 

the access effectively to help create jobs and sustain growth. 

There are many debates going on right now about broadband policy. We must ensure that the needs of the rural, small businesses 

are taken into account whether local, state, or federal governments 

act to change the broadband marketplace. 

During this hearing, I hope that we will begin a dialogue that 

will help make this happen. 

I am very pleased that we have two expert panels here this 

morning and I look forward to hearing their testimony. 

I would like to recognize the Ranking Member, Mr. Fortenberry, 

for his opening statement. 

OPENING STATEMENT OF MR. FORTENBERRY 

Mr.FORTENBERRY. Thank you, Chairman Shuler, for your remarks and for scheduling this important hearing today and thank 

you all for, especially to our witnesses, for your willingness to appear before us today. 

This Subcommittee is the only Committee tasked with the exciting responsibility of encouraging entrepreneurship. Entrepreneurial small businesses are the creators of most new jobs in our 

country and many Americans are rethinking the old concept of 

work in favor of being their own boss and bringing new products, 

innovations, and services to the marketplace. 

This is also a very decided trend among younger people and I do 

believe that the work of this Subcommittee can help remove some 

of the barriers to creating a more entrepreneurial society. 

As you all are aware, we are here to discuss broadband Internet 

access and its importance to rural America. Broadband provides an 

important gateway to innovation and the tools for adapting to the 

ever-changing marketplace. 

A study last year by the Massachusetts Institute of Technology 

documented that communities which had broadband availability 

enjoyed more rapid growth in employment. Across rural America, 

businesses in health care, retail, and the agriculture sectors are realizing important innovation through the growth of advanced 

broadband services. 

America, however, has been slower than other nations to adopt 

this technology. Currently, 36 percent of households have 

broadband access, but the percentage of broadband usage is actually lower in rural parts of the country. According to a General Accountability Office report, the GAO report, the adoption rate of 

broadband services in rural areas is only 17 percent, much lower 

than the national average. 

In my own State of Nebraska, we’re fortunate that parts of all 

93 counties have some form of broadband Internet access, however, 

nearly 400,000 Nebraskans live outside population centers making 

it more likely that they cannot access this vital service. 

In today’s hearing, we will hear about the potential benefits of 

having more competitive services for broadband in rural America 

and review some of the barriers that stand in the way of such development. In addition, we will review state efforts to pave the way 

3

to an expansion of access and I’m particularly interested in how 

one state, Kentucky, has become a national leader on this issue. 

Their effort demonstrates that there is currently no strong definition of what is an unserved area and illustrates the importance of 

creating a methodology for defining what areas of the nation are 

unserved or under served. 

Improving the climate for entrepreneurs will depend, in part, on 

a more nuanced effort by interested federal agencies to answer 

these questions and find out what areas of the country need the 

most attention. Again, thank you, Mr. Chairman, for calling this 

important hearing and I look forward to the testimony. 

ChairmanSHULER. I ask unanimous consent that the record be 

open for five days for Members to submit their statement. 

Hearing no objection, so ordered. 

Our first panel, this morning, I’d like to introduce, the Commissioner, Mr. Adelstein. He became the Federal Communications 

Commissioner on December 3, 2002 and was sworn in for a near 

five-year term on December 6, 2004. Before joining the FCC, Commissioner Adelstein served for 15 years as a staff member of the 

United States Senate. For the last seven years, he was a senior legislative aide for the United States Senate Majority Leader, Tom 

Daschle, where he advised Senator Daschle on communications, 

telecommunications, financial services, transportation, and other 

key issues. Commissioner Adelstein was born and raised in Rapid 

City, South Dakota and now lives in Washington, D.C. 

Mr. Commissioner, thank you for being here and we look forward 

to your testimony. 

STATEMENT OF THE HONORABLE JONATHAN ADELSTEIN, 

COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION 

Mr.ADELSTEIN. Thank you, Mr. Chairman, and Congressman 

Fortenberry, for inviting me to testify this morning. I’m especially 

honored to be here for your first hearing of the Subcommittee and 

I’m really pleased that the first subject that you’re taking on is deploying affordable high-speed broadband everywhere in this country. I think we need to make broadband the dial tone of the 21st 

century. 

As you mentioned, I grew up in South Dakota and my family 

business out there was building roads and bridges that helped grow 

our state by connecting the physical connections between communities in the state, but broadband networks now are bringing people together in ways that my engineer grandfather never could 

have imagined. As a bridge builder though, I think he would have 

understood the importance of broadband for commerce. 

Broadband is especially critical to economic future of rural America where it can connect businesses to millions of new customers, 

facilitate telecommuting, and increased productivity, and I could go 

on and on and I do at length in my testimony. But what’s really 

at the heart of it is that broadband can restore the sense of opportunity that first inspired Americans to settle the frontier and provide hope to our young people who want to stay in the communities 

where they grew up or return, as we discussed beforehand. They 

want to come back home. They need to know that there’s going to 

be economic opportunities that await them without a kind of 

4

broadband network that would make it just that much harder for 

them to get back home and stay there. 

Especially in an age of global competitiveness which we’ll hear 

about more from the panelists, no matter where people live, we’ve 

got to tap their full potential. There are good lessons to draw on. 

You’ll hear many from the next panel, but I’m extremely concerned 

that as a nation, we’re failing to keep pace with our chief global 

competitors. Citizens of other countries are getting a much better 

broadband deal. More megabits for less money. It’s a productivity 

problem for economy and we’ve got to do better. 

Some argue that we’ve fallen in these international broadband 

rankings precisely because we are such a rural country. Well, if 

that’s true, we should redouble our efforts and address that issue 

head on because we certainly want to maximize rural economic development and our overall economic growth. We need to prevent 

outsourcing of jobs overseas by promoting the insourcing of jobs by 

U.S. companies within our own borders. 

I’m concerned that the lack of a coherent broadband plan is one 

reason that we’re falling behind. It’s an urgent priority to create a 

comprehensive national broadband strategy that targets the needs 

of every part of this country, including rural America. It’s got to incorporate benchmarks, deployment time tables, and measurable 

thresholds to gauge the progress that we’re making. 

We need to set ambitious goals that aim at true high-speed 

broadband. One first important step is to update our current anemic definition of broadband that we have at the FCC of just 200 

kilobits in one direction, something that’s more akin to the kind of 

speeds they’re getting overseas that will really support video and 

data services. 

We should start by gathering more reliable, specific data than 

the FCC currently compiles so we can better ascertain problems 

and develop solutions. I think you’re right, Connect Kentucky 

showed us a great model and there’s no reason that we can’t do it 

on a national level what Kentucky was able to do on a state level. 

We’ve got to increase incentives as well because the market will be 

the primary driver of companies that benefit from a stable, regulatory environment. 

We must also work to promote meaningful competition which is 

the most effective driver of innovation. It keeps prices low. 

Federal universal service continues to play a vital role in maintaining and improving these rural networks. As voice becomes just 

one broadband application along with video and voice and data, we 

need to ensure that universal service evolves to provide a ubiquitous advanced services, a priority the Congress made clear in the 

Communications Act that was updated in 1996. One major growth 

engine for broadband, particularly in rural areas is the potential of 

spectrum-based services, wireless services. We’ve got to get spectrum into the hands of operators ready to serve at the most local 

levels. Previous auctions, I pressed for the use of smaller license 

blocks. I want a balanced facilitating spectrum access for those providers who want to offer service to smaller areas, with giving those 

larger carriers strategic opportunities to expand their footprints as 

they need to. 

5

I think we really have an historic opportunity in this upcoming 

700 megahertz auction. This is the television spectrum that we’re 

going to re-auction coming up early next year or late this year. 

That could really facilitate an emergent third, broadband platform, 

a real national wireless broadband network. To make that happen, 

I think our auction rules should provide a diverse group of licenses, 

giving all bidders the chance to win licenses that best match their 

business plans. 

Unlicensed wireless is also part of the rural solution. Unlicensed 

spectrum is free and in most rural areas, it’s lightly used. It can 

be accessed immediately using widely available technology. We’re 

working to make more unlicensed spectrum available at higher 

power levels and we’re evaluating unlicensed operations in unused 

TV spectrum bands, the so-called white spaces. 

There’s a lot more that Congress can do as well. Just a few ideas: 

providing adequate funding for and properly targeting rural utility 

service broadband loans and grants; providing tax incentives to 

companies that invest in broadband in under-served areas; revising 

better depreciation rules for capital investments and targeted telecommunication services; investing in basic science and research 

and development for further innovation; and improving math and 

science education so human resources can continue to fuel technological growth. 

Just as roads and bridges paved the way for economic success of 

rural America in the last century, broadband networks will be a big 

part of maintaining and restoring the vitality of our rural communities in the future. 

Thank you for your leadership on rural broadband by holding 

your very first hearing on this subject and I appreciate the opportunity to testify and I’m happy to answer any questions you might 

have. 

[The prepared statement of Mr. Adelstein may be found in the 

Appendix on page 40.]

ChairmanSHULER. Thank you, Commissioner. You mentioned 

some incentives. One was tax incentives, others was depreciation 

schedule. How can some of the smaller businesses benefit from that 

with having both a public and private relationship of extending 

broadband services in rural areas? 

Mr.ADELSTEIN. I think public/private partnerships work really 

well. We’ll hear from Connect Kentucky and I believe that one 

thing the government can do to help out is if companies do really 

target these areas that are higher cost, it’s obviously more expensive to provide broadband to rural areas, but the benefits to the 

economy are such that it justifies perhaps in having tax credits 

that can encourage the development of broadband where it might 

not otherwise be economically feasible. 

Similarly, in our U.S. grants and loans have been successful in 

the past, I’m not sure they’ve been as well targeted. The House Agriculture Committee held a hearing where we saw that some of the 

subsidies were going to the wrong places and weren’t going enough 

to the right places. Their own IG found the same of targeting, but 

there’s a place where public and private sectors can work together 

as well to try to give incentives so that the market works better. 

6

Where there’s a failure of the market to operate on its own, use a 

market-based mechanism like a tax credit or a low-cost loan, just 

to give a little edge that these providers need to make that investment in rural America. I think that will pay back in spades to the 

overall economy. 

ChairmanSHULER. How do we help the small businesses? Once 

they have, there’s broadband access to particular rural areas, how 

do we encourage from a community standpoint, how do we encourage a small business, what kind of learning curve, what type of 

progress should we be making to really encourage the small businesses, up-starting businesses to actually come back to the rural 

communities that had been going to the larger cities? 

Mr.ADELSTEIN. You know, it’s something that we haven’t done a 

lot of work on in the FCC, frankly. We probably should be doing 

more thinking about that, but I keep referring to Connect Kentucky because we’ve been reading their testimony, thinking about 

what they did. What an outstanding job of educating small businesses and others about what is possible and the idea has been out 

there for a while about demand aggregation. You get these public/

private partnerships that go out and educate small businesses. 

There’s a lot of small businesses that don’t know now how much 

they can benefit from this kind of activity. 

I think that Lee Terry talked about, Congressman Terry from 

Nebraska, talked about how one business went from three employees, it was a meat business, to 50 when they learned that they 

could sell their products over the Internet and they had a 

broadband connection to do it with. But they hadn’t thought of that 

until somebody came to them and explained it. So these organizations, the local Chamber of Commerce, connecting with local government authorities and state government authorities, there’s no 

reason the federal government can’t help as well, really can make 

an effort to educate these businesses about the possibility, so that 

they can thrive in these smaller communities. 

There’s all kinds of untapped potential and of course, the workers in rural America are second to none anywhere in the world and 

in this country. They’re stable. They’re reliable. Companies are 

finding that, but they can’t use them if they don’t have a 

broadband connection because a lot of the skills, call centers, or 

back office operations require broadband connection. 

So obviously, state economic development authorities can try to 

attract businesses to come out and locate there, but it’s important 

for businesses that exist already to have them educated by these 

kind of public/private partnerships about how broadband can help 

their business and then going to the providers and saying look at 

all these small businesses that want broadband. You’ve got a customer base here. It’s worth it for you to invest. 

ChairmanSHULER. What one thing could we do as a Congress or 

two things could we do as a Congress to truly have a much bigger 

impact in the rural areas? 

Mr.ADELSTEIN. I’ve talked about having a national broadband 

strategy that targets rural America and there’s a lot you can do in 

Congress. We have a big role at the FCC. I talk about universal 

service. I talk about wireless. That’s all been made possible by legislation that Congress has already put on the books, putting more 

7

wireless spectrum out there. Let’s make sure we get it in the hands 

of small providers that will serve local levels. 

Universal service, let’s make sure it evolves to cover broadband 

at the appropriate time. Those are in place, but Congress can help 

us with universal service by providing a stable contribution base. 

We need a broader base because right now it’s pegged to a declining revenue base which is long distance revenues which, as we all 

know, are declining. And we need to have a broader base and Congress could help with that. 

Congress can also help, I think, by making sure that RUS is fully 

funded and that the program, as it’s reauthorized in the Farm Bill, 

is properly targeted. I worked on that bill in the earlier Farm Bill 

when I worked for Senator Daschle who was the senior Member of 

the Ag. Committee and the Majority Leader at the time. We really 

thought we did a pretty good job. I mean we put it together and 

we said target under-served areas. Do grants to unserved areas. 

And I’m really saddened to learn that sometimes those priorities 

weren’t fulfilled in the implementation of the program. So maybe 

Congress needs to go back. I thought we did a pretty good job writing it, but if you need to beat them on the head and say focus on 

real rural America, then you need to do so. 

There are so many other areas that you can do, I think R&D, the 

whole innovation agenda that Speaker Pelosi has put forward, contains a lot of ideas that have been around for a long time, and ones 

that she’s starting to implement. The idea of math and science education is critical so we have the basics that people can become technologically proficient in. R&D, basic R&D funding. We’ve seen R&D 

funding has gone up, but it’s been largely military or health-related 

and you don’t see basic R&D for science. It’s actually fallen behind. 

So we need to redouble our efforts on basic R&D funding. 

There’s a lot that can be done. The tax credits I talked about, depreciation rules. Those are some of the areas that Congress can 

help us, but I think the FCC has a big role with what Congress 

has already given us, making sure that we do more to come up 

with this national broadband strategy, in conjunction with Congress so that we don’t leave rural America behind. 

ChairmanSHULER. The chair will now recognize Ranking Member 

Mr. Fortenberry.

Mr.FORTENBERRY. Thank you, Mr. Chairman, and thank you, 

Chairman Adelstein, for coming today. We appreciate the opportunity to visit with you and appreciate your insights. I also happened to be on the Subcommittee, on the Ag. Committee, that oversees the Rural Utility Service and we had a very exciting and interesting hearing on this very topic several weeks ago. 

It’s fairly clear that there are some, to put it mildly, dilemmas 

there. I appreciate the point you made about us not having a coherent broadband strategy nationally, the Rural Utility Service’s attempt at providing a component of this brings some dilemmas into 

play as you mentioned. Are we unfairly subsidizing markets which 

already had or player competition into marks which have already 

had substantial private sector investment without governmental 

subsidy and prioritizing that over under served or nonexistent service in other rural communities. 

8

One of the key findings that came out of that was there is not 

a clear understanding, as I mentioned in my earlier testimony, 

who’s under served, who is not served, and we at a federal level 

our first response is we need to find out that question. But as you 

mentioned in your testimony, the Kentucky model, might point to 

a different solution to that because it is a smaller scale implementation that apparently begins with some simple concepts in terms 

of just informing the marketplace, particularly small businesses 

about the potential opportunities they have in using broadband to 

expand their services, thereby creating a more natural momentum 

in the private sector. 

But nonetheless, I want you to comment on that. A lack of coherent or unpack your statement a little bit more, a lack of coherent 

broadband strategy or lack of coherent broadband plan would mapping the situation in the country be an aid in that regard or is the 

technology too variable, too fluid, and by the time we would get 

this done potentially at the federal level, having already shifted 

and changed. Would that be a problem or would that be a potential 

solution? 

Mr.ADELSTEIN. I think mapping is an essential solution. I think 

that it’s—we’ve got to do a far better job of broadband data gathering. The first step of any national broadband plan is to map out 

what we’ve got now so we know where the problems are and we 

can better develop solutions. GAO has been very critical of our efforts so far to assess broadband data. We need more granular data. 

We don’t have data on the local level. We need a better definition 

of broadband. We’re looking at 200 kilobits in one direction. That 

might have been good back when we invented it in the ’90s, but 

it’s broadband any more because it doesn’t carry critical services 

like video or telemedicine or on-line learning programs. 

What we’re doing now are FCC data, looks at the zip codes. It 

says if you have one person in a zip code that has broadband, 

you’ve got broadband throughout the state, throughout that zip 

code. But that’s just not the case. One legislative idea that’s been 

floated I’ve heard, is to go to the nine-digit zip code, rather than 

the five-digit zip code and really getting a more localized sense of 

where there is and isn’t broadband. We’ve got to have better data. 

We recently as a Commission all unanimously voted out an improvement. Commissioner Copps and I have been talking for years 

about how we get better data on availability, more localized data. 

We voted out an order asking questions about how we’re going to 

improve our data collection by looking at more demographics of 

subscribers. Even if we need to do surveys to find out rich, poor, 

race, any other, male, female, we need to know more about the demographics, where they are, what they’re doing with the service. 

I think this effort that we’ve launched on the FCC is overdue, 

but it certainly is welcome and I’m glad that we’re doing that. It’s 

going to take a while before that data comes in. And any guidance 

Congress can give us, for example, if they tell us to go out there 

and gather data on a nine-digit zip code and give us some funds 

to go out there and map that, I think it would be a good investment 

because in the end, that will be the first basis of the real national 

broadband strategy, where we go, how we deal with the problems 

in rural America. 

9

Mr.FORTENBERRY. Do you interface with the Rural Utility Service 

on that very question or are you in separate buildings and not in 

communication on the issue? 

Mr.ADELSTEIN. We’re pretty close. We talked about coordinating. 

We did some—I think we could do more. Again, nobody has got the 

data. They look at it when they get an application, they get a loan 

application or a grant application in and they look at the situation 

there, but we don’t provide that much data because we don’t have 

a lot on a local level. It’s not like Kentucky. 

The example of Kentucky, our survey found that 96 percent of 

the people in Kentucky have broadband. They went and looked at 

the more granular level, it turned out it was only 74 percent. So 

we were way off. The situation wasn’t nearly as rosy as it appeared 

from our zip code data. So there’s not a lot we can offer RUS in 

terms of how to target it. I wish we could, but they’re it more on 

a case-by-case basis and I think as they look at the case, they get 

more granular data about that market than we could ever —

Mr.FORTENBERRY. One of the findings was that the loan application itself was the determining factor as to whether or not the area 

had broadband. So I think that some maturity of our process by 

which we come to a better understanding of where services truly 

are needed in order to more precisely target our limited funds as 

a federal government is important and prudent. So I appreciate 

that offer that you just—I’ll take it as an offer and we’ll think 

through that. 

One other quick point, Mr. Chairman, Mr. Adelstein mentioned 

the—we’re talking primarily about the impact on business opportunity in rural America, but the impact on the delivery of health 

care and education, that this new highway, digital highway can 

provide, is extraordinary and I think we’ve got again a magnificent 

opportunity here to continue to measure the impacts that this technology can have in rethinking the delivery, not only of business 

services, but all types of social services as well that are essential 

well being of our country. 

So I appreciate that observation. It’s a very important one, as 

well. Undersecretary Dorr who is in charge of USDA’s Rural Development pointed to this factor as being the most significant in marketplace change that we could impact on behalf of good rural development, advancing the access of broadband throughout the nation. 

So thank you for your input. 

ChairmanSHULER. I’d like to commend the Ranking Member for 

his comments. With education and health care that is a vital part 

of what the access to broadband can help. In our District alone, we 

have 16 hospitals and now all of which are connecting to the major 

regional hospital in our area and it’s an overwhelming amount of 

savings and costs that they can actually cut in the health care industry. It’s going to be tremendous for just once again not having 

to duplicate services alone, to be able to access the information of 

the patients’ medical records in order to better access the information more readily available through the use of the broadband technology. So I comment you for that. 

The chair now recognizes the gentlewoman from New York, Ms. 

Clarke. 

10

Ms.CLARKE. Thank you very much, Chairman Shuler, for holding 

this very important hearing to explore how broadband services can 

revitalize rural economies. Some may be wondering why I’m here 

since my District is not a rural community. I’m from Brooklyn, 

New York. However, the Chairman’s District and my District share 

one common factor, that is inadequate broadband service. I fear 

that my District with its dichotomy of socioeconomic diversity, 

which has an extremely affluent part of the District where 

broadband is really not a challenge, but then has a very underserved end of the District where the socioeconomics have not lent 

to real access to broadband for so many years won’t survive this 

new information age if we do not make available high Internet access. 

There are countless stories from many people who live in low-income neighborhoods about how they do not have or are unable to 

receive access to high-speed broadband services. I personally would 

like to see more aggressive efforts to increase Internet access in 

disadvantaged communities. 

And so my question to you today, Mr. Adelstein, is although 

broadband has become increasingly available for people of modest 

incomes, it has not reached those living at the lower end of the income scale. According to the most recent report by the Pew Internet and American Life Project, only 21 percent of households with 

an income of $30,000 or less had a broadband connection at home 

in the Year 2006, while 68 percent of households that earn over 

$75,000 a year, had a home broadband connection. 

I would like to know have you done an assessment of what can 

be done to get more low-income households to obtain broadband 

connection? 

Mr.ADELSTEIN. Well, the sad answer is we really haven’t done as 

much work on this as we should. There’s a real problem with pricing in some of these areas as well, even if people do have access, 

the prices haven’t come down and we’re talking about what’s available overseas. I was talking to some of my French counterparts and 

throughout France for $40, you can get 100 channels. You can get 

broadband up to 20 megabits and your phone service, for $40 a 

month. What’s happening to our economy here, the money is being 

demanded, $40 just to get a broadband connection. That puts it out 

of reach of a lot of people, even if it is available to them and you 

end up with statistics like that which the Pew data shows. 

We need to do a better job, I think of promoting competition. It’s 

a little easier, frankly, to get competition into a real dense area 

like that than it is to get it out in some of the rural areas and competition should be the driver of lower prices and better quality 

service, but when you see that they go around some of the low income areas and the deployment isn’t nearly as good, it’s a real 

problem. 

Another issue, of course, is lack of computers there. In some 

countries, they’re actually giving computers out to their citizens, 

low-cost computers, and then allowing them to hook up that way 

which makes a lot of sense, because without a computer, you’re left 

behind in this age. So there could be a digital divide not only in 

rural America, but between economic strata, which is another area 

I think we talked earlier with Ranking Member Fortenberry, about 

11

the importance of broadband data. That’s an area that we should 

also get the cuts and figure out on demographics, high income, low 

income, where that penetration is taking place. I think it’s especially important that we level that out because there’s nothing ultimately that will level out our economic life than having access to 

technology. And if people are left behind on that, then they’re going 

to continue to not be able to participate fully in our economic life 

as a country and our overall economic growth will suffer. 

Ms.CLARKE. And so you believe that government has a role in basically promoting competition with regard to that? For instance, in 

New York City, while you may not have as many households that 

have computers in them, we have made sure that many of the public libraries and public facilities within the communities have that 

available. They just don’t have access to broadband because as you 

said, the competition makes it cost prohibitive. Do you see a role 

that we can play in encouraging that competition and what do you 

think can be done in the short term to help these communities to 

really access the information highway? 

Mr.ADELSTEIN. We have to do more about competition. That was 

the real focus of the Communications Act of 1996. It’s critical because it’s the essential input into the economy. I mean it’s a time 

of great change, of course, in these services. You see new services 

emerging. People talk a lot about convergence and new players are 

coming in. The loss of competition after the creation of the Act, is 

being supplemented to some extent by other forms of competition, 

although the pace is unclear. You do have cable fighting it out with 

the telephone companies which is a battle between facilities based 

providers. It should be helping us, but you know, we’re seeing consumers embracing these new technologies. I think the challenge is 

how to function in this new market. 

We need better data collection to start with, better analysis of 

the facts, and we need to promote healthy competition by leveling 

the playing field, but not blinding ourselves to where competition 

isn’t sufficient to safeguard consumers. 

Ms.CLARKE. Thank you very much, Mr. Chairman. I yield back. 

ChairmanSHULER. The chair will not recognize the gentlewoman 

from Colorado, Ms. Musgrave. 

Ms.MUSGRAVE. Thank you, Mr. Chairman, along with Ranking 

Member Fortenberry. I was on the Ag. Committee when we were 

talking about this issue and when the mapping issue came up I 

asked the question about mapping and I was told that it would immediately be obsolete and not have very much use at all. And quite 

frankly, I’m encouraged by your comments. We need better analysis. We didn’t even talk about a nine-digit zip code in that hearing. 

But what about mapping? Could you elaborate on that and could 

you also address the issue of obsolescence that was raised in that 

hearing, please? 

Mr.ADELSTEIN. Well, the marketplace is evolving rapidly, so obviously there’s going to be changes, but right now we don’t have a 

good picture at all. I mean to say you’re trying to navigate a world 

with no map at all versus having an old map. I’d rather have an 

old map than no map. And that’s kind of where we are now. 

12

I think that the situation isn’t changing that fast. One of the concerns about providers is their proprietary data. They don’t want 

that out there. There’s been a lot of hesitation about it and I think 

you can hear from the Connect Kentucky folks, but I understand 

it took some cajoling to get providers to provide this data and it 

may require Congress also to provide us exemptions from the Freedom of Information Act so that their proprietary data can be protected and they feel comfortable giving it to us. Because ultimately, 

it’s in everybody’s interest that this map take place. 

I know that, for example, Verizon has talked about the importance of getting better data. I mean these companies are beginning 

to understand that they need to know where the gaps in the marketplace are as well and to know what’s available and what’s not 

and it would help RUS and it would also help the FCC. I mean I 

think all policy makers would benefit. And that’s sort of the building block, the basic foundation of a broadband strategy is knowing 

where we have a problem and targeting solutions appropriately to 

them. 

Ms.MUSGRAVE. How difficult was that cajoling and how much assurance do they need? 

Mr.ADELSTEIN. The Connect Kentucky folks might know more 

about it than me. I certainly think that I’ve encountered a lot of 

resistance as I’ve talked to providers about whether they’re willing 

to share more data with us and we’ve put out our broadband data 

notice asking companies for their input on what kind of data we 

should ask for. I’ve been very aggressive in saying we want all this 

kind of data, what do you think of that? We haven’t put out the 

actual report yet, but we’ve asked them about what kind of report 

we should put together. And we’ll see what kind of response they 

get. Hopefully, they’re beginning to learn that we have a problem 

in this country and that we need that data in order to solve it. 

Ms.MUSGRAVE. Do you think the Universal Service Fund is doing 

what it needs to do to get affordable broadband to rural America? 

Mr.ADELSTEIN. It certainly is the basis, I think, of getting 

broadband out to rural America. Even though Universal Service 

doesn’t directly support broadband, we have a no barriers policy 

that allows it to subsidize networks that can carry broadband traffic. So I think we wouldn’t see the kind of broadband we are seeing 

in rural areas without Universal Service and going forward, we 

need to keep that on a solid basis if we’re going to continue to have 

rural America connected. 

I think one basic element of a national broadband policy is a 

strong, stable Universal Service Fund that properly targets under 

served areas and ensures that high-cost areas have broadband 

every bit as available to them as other parts of the country. 

Ms.MUSGRAVE. Well, this is very much on my mind. I just 

worked very hard on getting health care for Veterans in rural Colorado and when we met with communities that were very eager to 

have this very progressive communities, the issue that the VA 

brought up was broadband. And so that had to in place before we 

could get this satellite clinic in rural Colorado and again, Ranking 

Member Fortenberry has talked about education and health care. 

And I have communities in the rural part of my District that 

there’s no way you’re going to get a specialist out there. We have 

13

nurse anesthetists that have to fly to various hospitals in Kansas 

and Colorado, but for diagnosis and other things the telemedicine 

works wonderfully. 

It’s what rural communities have to have for health care, for the 

education needs. We have many rural schools in my District and 

some of them have less than one hundred students K through 12. 

So they face challenges, but yet those students deserve a quality 

education and they utilize every means possible to make sure that 

they get it. 

Well thank you, for your testimony. 

Mr.ADELSTEIN. I just might add that part of Universal Service of 

course, is the E-Rate which funds schools, libraries and health 

care, rural health care facilities for this. We recently, it will be of 

interest to a lot of you, that we recently came up with a rural 

health care program that is going to offer $60 million in test 

projects for rural health care and we’re getting applications from 

a lot of your states asking how they can improve the delivery of 

rural health care through telemedicine. It’s really an incredible lifesaving application. 

From my home State of South Dakota, they came in and hit me 

up on it and they were talking about how there was in Parkston, 

South Dakota, there was a woman who gave birth at 26 weeks. It’s 

a very premature baby and it was in the middle of a blizzard. You 

don’t have to worry about that, Congressman Shuler, as much as 

some of us do, Congressman Fortenberry and Musgrave. We’ve got 

to worry about those blizzards. They’re trapped in that. They 

couldn’t get out by helicopter. They couldn’t get out by road. They 

were in this little clinic and there wasn’t a doctor there that knew 

it, but they had a specialist at a Sioux Falls hospital that was in 

connection, because they had a broadband connection in Parkston 

and thank God they did, he was able to guide them to the ventilator and basically save this baby’s life until it could be transferred 

to a bigger hospital. 

These kind of lifesaving applications are critical and I think that 

the FCC needs to continue to make efforts like this to test out how 

we can expand the rural health care program and that’s an area 

that Congress could look at expanding as well. 

Ms.MUSGRAVE. Thank you very much. And Mr. Chairman, I do 

have a written statement that I would like to submit for the record. 

ChairmanSHULER. So ordered. 

Ms.MUSGRAVE. Thank you. 

ChairmanSHULER. The chair now recognizes the gentleman from 

Tennessee, Mr. Davis. 

Mr.DAVIS. No questions. 

ChairmanSHULER. The chair will now recognize the gentlewoman 

from Oklahoma, Ms. Fallin.

Ms.FALLIN. Thank you, Mr. Chair. I don’t know that I have a 

particular question, but as I was listening to the discussion on 

rural health care and education and telemedicine and we even use 

the Internet and broadband for weather delivery service in Oklahoma through a weathernet service that we have, but I had a question about the Universal Service fee and the money that the states 

14

have access to expand broadband. Can you explain how the fee is 

used and how the states can get quicker access to that? 

Mr.ADELSTEIN. The money is collected through long-distance revenues which is sort of a declining base and we’re trying to figure 

out ways of broadening the base. If Congress could help us broaden 

the base, that would be wonderful. In the meantime, we’re trying 

to think within the context of the Act of how we can have a broader 

base in the declining base of numbers. So we take this big collection, it’s a $6 billion program, including the E-Rate, and we—it’s 

granted to companies that are called eligible telecommunications 

providers. They apply for this program and a state PUC in many 

cases will designate whether or not there can be an eligible carrier. 

And if the carrier is eligible, then we come up with a program to 

define how much they’re paid for subscriber. 

One of the concerns recently has been that competitive providers 

are coming in and the money is kind of ballooning because a lot 

of them happen to be wireless companies and they come in and win 

these funds based on the amount that’s being paid to the incumbent. In many cases, there’s a totally different cost basis. The incumbent, it’s a lot more expensive for the LEC to provide in its embedded costs than a new wireless company that comes in and provides services. We’re now debating how do we equalize that? Do we 

give the same amount of support to a new company or do we do 

it on the basis of their actual costs rather than the cost of the incumbent? 

All of these funds can underwrite broadband networks. If you 

didn’t have Universal Service, the high cost of serving these rural 

communities would basically have those systems deteriorating and 

they would be antiquated. They wouldn’t be able to support 

broadband network. Right now, broadband itself isn’t what we call 

a supported service which is a particular service that we pay for 

directly. But we have this policy that allows us to fund networks 

that can carry broadband and so the Universal Service has been 

one of the most critical elements allowing these rural local exchange carriers to upgrade their networks so that they can carry 

broadband traffic and we see that sometimes in some rural parts 

of the country because of Universal Service, they actually have excellent access to broadband that is even better in some more urban 

areas that don’t have access to Universal Service. It’s an interesting kind of a situation. So we’ve got to make sure that remains. 

Other areas of rural America are falling behind though. All the 

studies show that despite some of these really wonderful examples 

we see, there is still a real digital divide that is getting worse. 

And so if everybody is saying the problem with American 

broadband, the reason we’re falling behind is because we’re a rural 

country, we better make sure that we keep Universal Service in 

place and make sure that it continues to underwrite these 

broadband networks so that we can compete in international economy. 

Ms.FALLIN. The reason I was asking that question, at different 

times, I’ve just heard some talk back in my State that sometimes 

we’re slow to expend those funds. We need to be spending it but 

yet we hesitate and delay and I was just trying to figure out why 

15

we would even delay spending the money that’s available to do 

that. 

Mr.ADELSTEIN. There’s sort of a dilemma for us on the federal 

level because a lot of states are really quick. They say well, it’s federal money, it’s easy, let’s just take it. And they don’t think a lot 

about how they award funds to eligible telecommunications carriers. And maybe your state, I’m not sure exactly Oklahoma PUC, 

whether they’re—what they’re doing. It may be out of prudence. 

Sometimes it’s wise to be careful about how those funds are expended and we’ve tried to give states guidance on making sure 

they’re very careful about how they award ETC grants so that they 

don’t just do it willy-nilly thinking it’s federal money, let’s just let 

it go, we have nothing to lose. But they really think about the impact also on the LEC and they think if it’s in the public interest 

for these funds to flow and how companies are going to get ETC 

status are going to expand their networks. 

We get nervous if companies are just taking Universal Service 

and using it for service they’re already providing and getting more 

for what they’re already doing. We want to make sure that whatever Universal Service money they get is used to expand and make 

sure they truly cover everybody in the service area. 

Ms.FALLIN. Thank you, Commissioner. Thank you, Mr. Chairman. 

ChairmanSHULER. Does any other Member have any questions 

for the Commissioner? 

Commissioner, thank you so much for your testimony. An outstanding job. As we all know, and as we look around the Committee, we certainly know that the backbone behind our country is 

our small business, over 95 percent of our business are small businesses and the more access that we will have to broadband and 

any way that we can help and help guide the broadband system, 

we would certainly appreciate your help and your guidance and 

your direction as well. 

So thank you for your testimony. 

Mr.ADELSTEIN. Thank you for your leadership, Mr. Chairman. 

ChairmanSHULER. At this time, we’ll have the second panel come 

forward, please. 

[Pause.] 

ChairmanSHULER. I’d like to welcome the second panel. Thank 

you for your attendance today and your testimony. 

We’ll go ahead and get started. I just want to remind the panel 

that I looked at some of your statements. We’ll try to keep it to five 

minutes, best that we can. I know I’m a rookie at this chairmanship, but I will hold the gavel tight. So we’ll try our best to stay 

within five minutes. 

The Ranking Member says that he gets hungry around 11:30, so 

we’re going to try our best to get as much information as we can. 

Our first panelist, I would like to introduce Mr. Stephens, obviously from my District of Western North Carolina. Mr. Stephens 

serves as chairman of the board of directors of the Balsam West 

FiberNET based in Silver, North Carolina. 

For the past year, he has been a board member since the company has been founded in 2003. Mr. Stephens is also an enrolled 

member of the Eastern Band of Cherokee Indians. Mr. Stephens 

16

works for the Eastern Band of Cherokee Tribal Government as 

planner, economic and community development. 

Mr. Stephens, thank you so much for your attendance today. We 

look forward to your testimony. 

STATEMENT OF BRANDON STEPHENS, CHAIRMAN OF THE 

BOARD, BALSAM WEST FIBERNET LLC, SYLVA, NORTH CAROLINA 

Mr.STEPHENS. Thank you, Mr. Shuler, and Chairman Shuler. 

Chairman Shuler and Congressman Fortenberry and Members of 

the Subcommittee, thank you for the opportunity to share the story 

of Balsam West FiberNET. 

I’m Brandon Stephens, Chairman of Balsam West FiberNET and 

an enrolled member of the Eastern Band of Cherokee Indians. 

I’m here to represent Balsam West FiberNET and partner members of the Eastern Band of Cherokee Indians of Cherokee, Drake 

Software of Franklin, and Community Alliance Partners Southwestern Community College, headquartered in Sylva. Our goal and 

mission is to build economic development and stability by offering 

affordable high-quality fiber optic infrastructure. 

Western North Carolina, Eastern Tennessee and North Georgia 

suffer from a lack of technology and infrastructure. Affording and 

obtaining access to quality and reliability in telecom have been 

great barriers to us. Decades ago, during our area’s development, 

telecommunication carries built a network that satisfied demand 

for the day and not for the future. 

The result was a network that did not have redundancy or 

backup and was susceptible to outages and was of poor quality. 

Had other utilities used this same approach, power companies 

would have built power lines as we purchase electric appliances. 

Home-grown businesses like Drake Enterprises or Drake Software, 

co-founder and co-owner of Balsam West FiberNET rely on 

broadband connectivity. It transmits several billions of dollars in 

electronic funds transactions and data with the IRS and its clients. 

The tribe and local businesses in the region depend on visitors 

and their ability to access funds for commerce. These outages occurred and no business was conducted for the tribe unless it was 

in cash. For Drake, billions of dollars in transactions were potentially jeopardized. 

As a result, founding members of Balsam West FiberNET developed a 300-mile in-ground fiber optic network because wireless in 

our region is not viable. That’s because of the terrain. We also had 

built this network to be at the highest standard, so we could offer 

services to the largest national carriers after developing this network to take care of our own concerns and secure business in our 

respective areas. 

The founding members of Balsam West FiberNET started focusing on the region. We’re an open-access system, meaning we allow 

unrestricted access of services across our network. 

As you consider policy changes, I would urge you to know that 

right now the government is not promoting competition. Forbearance in copper retirement are the exact opposite. 

Open access to all platforms would promote innovation and competition. The policy of closed networks is leading us back to monopVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
17

olies and furthermore, an open network is enabling us to provide 

our customers to purchase content from the provider of choice. 

Options create opportunity to lower prices and increase quality. 

The spirit of mountain people is to survive and overcome challenges. That spirit has brought us this unique collaboration between Drake software and the Eastern Band of Cherokee Indians. 

It is this same spirit that has always been required to overcome 

barriers that hamper development. BalsamWEST is working to develop regional clustering. A prime example of this is the model of 

Drake software. 

Drake is currently expanding into new communities, developing 

call centers connected in real time over fiber optic cable. We also 

recently helped the region’s schools, creating a distributed learning 

network called WNC EdNet. This network connects all the schools 

together with virtually unlimited capacity on fiber. The schools own 

their own networks and their own private fiber optics. 

BalsamWEST and other local infrastructure owners work together to reduce this expense. We save the schools $60 million and 

gave them the opportunity to choose their content provider. 

We also worked on behalf of the rural hospital systems lowering 

their costs 96 percent. We also decreased the transmission time of 

imaging from 30 minutes to 12 seconds. There are some barriers 

to our future development. We have found that federal financial resources are difficult to obtain. Policies in most programs do not 

lend eligibility to our communities as we fall through the cracks. 

Mr. Chairman, another barrier that we hope to overcome soon 

with your assistance is supporting connectivity outside of our existing network, first to neighboring counties, such as Haywood and 

Buncombe Counties in Western North Carolina, then to connect to 

resources in metropolitan areas in Tennessee, Georgia, and South 

Carolina. 

Thank you for the opportunity to share our story of success and 

challenges and we hope that we can depend on your support in the 

future of BalsamWEST Fibernet and our motto is ‘‘access to advance.’’

[The prepared statement of Mr. Stephens may be found in the 

Appendix on page 47.]

ChairmanSHULER. Thank you, Mr. Stephens. The chair would 

now like to introduce Mr. Shields. Mr. Shields is the founder the 

board chair of Ygomi, LLC, and I hope that’s pronounced correctly, 

which develops and operates technology-based companies. Mr. 

Shields has over 35 years of experience. Among the technologies his 

companies have helped to pioneer is technology that is the foundation for the fulfilling billions of on-line direction requests through 

such services as MapQuest, Yahoo Maps, and Google Maps. 

Thank you, Mr. Shields. 

STATEMENT OF T. RUSSELL SHIELDS, CHAIR, YGOMI LLC, OAK 

BROOK, ILLINOIS 

Mr.SHIELDS. Thank you, Chairman Shuler, Ranking Member 

Fortenberry, and Members of the Subcommittee. My name is Russ 

Shields. I am chair of Ygomi LLC. It’s certainly a privilege to be 

here today to speak to you. 

18

Ygomi is an Illinois-based company with a 37-year record of 

building companies that deliver innovative software and services to 

businesses. We’re known for applying technology to improve people’s lives. Our subsidiaries SEI, Verety, Connexis, and 

ArrayComm serve leading corporations. 

We have more than 1200 employees across the U.S., Europe, and 

Asia. We provide solutions in areas such as wireless digital signal 

processing software, vehicle telematics, and technical support for 

multi-location enterprises using distributed, U.S.-based call centers. 

Today’s hearing is particularly relevant to the Ygomi Companies. 

Broadband technology touches them all. For instance, high speed 

Internet availability in rural areas has allowed us to create a new 

business solution for one of our customers. Our subsidiary, Verety, 

now takes drive-through orders remotely in North Dakota for a 

number of McDonald’s restaurants, helping to improve speed of 

service, order accuracy, and customer satisfaction. Verety can deliver this high-quality service because broadband availability gives 

us access to people working from home. We have a workforce that 

includes farmers, stay-at-home mothers, retirees, people with disabilities, and people who care for elderly or disabled family members. 

Our employees like the no-commute savings, and the convenience 

of flexible work shifts. We expect the number of work-at-home employees to increase dramatically in the years to come. We provide 

each work-at-home employee with a computer, a DSL connection, 

paid training, and web and phone base support. Our employees and 

their families can use the computer and Internet connection for 

themselves when they’re not working. 

Two-thirds of Verety’s work-at-home employees did not have 

broadband for their families before they came to work for us. 

Thomas Friedman’s book, The World is Flat, mentions our effort 

for McDonald’s in North Dakota. I believe that Friedman’s vision 

of an efficient, interconnecting flat world is becoming truer every 

day. Broadband services and voice-over IP gives smaller, more isolated communities access to the world. Companies in the Telework 

Coalition, like Verety, are helping to realize the benefits of 

broadband deployment in some rural areas. The same can be done 

in other areas of the U.S. if the proper incentives are provided. But 

it takes more than just broadband. It requires a new way of thinking about the workplace and innovation. 

We encourage the deployment of broadband in rural areas to ensure that the Internet is available to everyone, no matter where 

they live. We work with organizations like the Telecommunications 

Industry Association to promote access to affordable broadband, to 

minimize regulation, and to maximize the power of a competitive 

market. We believe in the value of broadband to improve government services, public safety, education and health care. 

Increased global competition requires a more flexible labor environment. As a privately-held company, Ygomi can take a long-term 

approach to profitability. It lets us think flexibly about technologies 

and applications that will be needed in the future. But we still face 

challenges. To succeed, we must be responsive to new and evolving 

employee needs and attitudes. Companies that work on emerging 

19

technologies can build businesses in rural areas need favorable environments and incentives. Policies should encourage investment in 

new and diverse communications technologies in rural areas. 

I comment you and your staff for holding this hearing and for 

your efforts to extend broadband in rural America. Thank you for 

the opportunity to testify today. 

[The prepared statement of Mr. Shields may be found in the Appendix on page 76.]

ChairmanSHULER. Thank you, Mr. Shields. The chair now recognizes Mr. Russ Kremer. Mr. Kremer is the president of the Missouri Farmers Union. He is a cooperative business developer who 

owns and manages a diverse five-family farm.Mr. Kremer is also 

the president of Missouri’s Farmers Union Services, a partner of 

U.S.A. Broadband LLC, an organization with a mission to provide 

affordable broadband communication services to all rural residents 

of the United States. 

Mr. Kremer, thank you for your testimony. 

STATEMENT OF RUSS KREMER, PRESIDENT, NATIONAL 

FARMERS UNION, JEFFERSON CITY, MISSOURI 

Mr.KREMER. Thank you, Chairman Shuler, and Congressman 

Fortenberry, and Members of the Subcommittee. Thank you for 

this opportunity to testify today. My name is Russ Kremer and I 

am a family farmer and president of the Missouri Farmers Union. 

Today, I am here on behalf of the National Farmers Union, our 

nationwide organization, representing family farmers, ranchers, 

fishermen, and rural residents. I appreciate the opportunity to 

highlight the importance of accessible and reliable broadband service to the farmers and producers in communities in rural America. 

The future of rural America does depend on high-speed access to 

the Internet. In 2005, the National Agricultural Statistical Service 

conducted a study on farm computer usage and ownership. While 

the results showed that 51 percent of U.S. farms had Internet access, further investigation uncovered that dial-up was the most 

common method of accessing the Internet with 69 percent of U.S. 

farms. It is encouraging that more farmers and ranchers gained 

computer accessibility each year, either through ownership or leasing of computers or other community programs, however, it is 

alarming that the vast majority of them must do so at the slowest 

connection speed possible in accessing the most uncommon means 

of telecommunications. 

NFU supports efforts to provide competitively priced high-speed 

broadband Internet access for rural America. We urge collaborative 

efforts and public/private initiatives that leverage Internet-based 

technologies and use the Internet to improve communications, reduce cost, increase access, and grow farm businesses for producers 

and their cooperatives. 

An example, NOW Wireless, the Missouri Farmers Union in response to the demand for affordable modern telecommunications 

access for farmers and rural residents living in remote areas, 

helped established USA Broadband. USAB has partnered with subscriber-based cooperatives and develops successful networks that 

are making this access possible. 

20

Today, USAB is a premiere provider of high-speed wireless 

broadband Internet, voice communication, and video services to 

rural communities. The community maintains its focus on providing a superior broadband product back with exceptional customer care. In fact, about a year ago USAB partnered with the 

Eastern Illinois Electric Co-op, a member-owned cooperative to develop a broadband Internet network that focuses on providing a 

wide range of Internet broadband services to rural residents within 

the cooperative’s 10-county service area. This includes 6,000 square 

miles and 240,000 homes and businesses. We also plan to utilize 

our credit union that we have for rural residents and farmers to 

help finance the services and equipment, especially for our more 

disadvantaged residents. 

Internet is a necessary tool for farmers and ranchers who will be 

at an economic and competitive disadvantage if unable to use the 

same high-speed Internet connections that are available to other 

small businesses around the country and around the world, as far 

as that goes. USDA encourages farmers and ranchers to rely on the 

Internet to check weather, market, crop reports and file applications for federal programs. However, for many rural producers, the 

reliance on the Internet cannot be a reality. 

Given the current economic climate, it is imperative that producers devote as much time as possible to marketing their products, exploring new markets. The ability to conduct financial transactions on-line would save individual producers hours of administrative work and translate its tremendous financial incentives at 

the farm level. 

NFU has a program called e-cooperative.com. It is the world’s 

first innovative portal to directly locate and buy quality food products plus other goods and services on-line from hundreds of U.S. 

agricultural producers and their co-ops in rural America. This basically has allowed us to build authentic relationships between farmers and consumers. In fact, I’m president of a co-operative that producers and processes natural pork and we market it throughout 

the country and the world, in fact. A lot of our pork goes into New 

York. 

And so as we go forth, this is basically the new renaissance in 

agriculture and it’s so dependent upon modern telecommunications. 

By eliminating the digital divide and providing more rural areas 

with high-speed Internet access, we can help these producers and 

these new producers market and sell their quality products and 

educate consumers about the value of family farmers and ranchers. 

There’s real challenges we heard a lot about, some of the challenges about the reluctance of these providers to come into more 

remote and under served areas. It’s been a challenge to secure financing from providers because we’re kind of—we’re often are at 

an awkward size loan fund, too small or too large for some of them. 

We also have challenges that we’re concerned with limited competition in the rural markets. Some of the solutions might include 

that we’ve heard before the possibilities of providing tax credits 

and other incentives to inventors that want to invest into the more 

remote areas, as well as the possibility of allowing a 10 percent 

match on the Rural Utilities Service Loan Program, rather than 

the 20 that’s necessary. It’s also possible and suggested that maybe 

21

the FCC has the ability to reallocate frequencies that will become 

available in television’s transition to digital. We propose that successful applicants to the rural broadband initiative program would 

be granted the license frequency resulting in improved equity for 

rural broadband service providers. 

Better broadband means a better place to live in rural areas and 

we appreciate the interest and we really believe that rural 

broadband is the key to rural revitalization. 

Thank you very much. 

[The prepared statement of Mr. Kremer may be found in the Appendix on page 80.]

ChairmanSHULER. Thank you, Mr. Kremer, and congratulations 

to farmers to get them back into economic structure. They need all 

the help that we possibly can provide for them and I thank you for 

your hard work and dedication to them. 

At this time the chair will recognize Brent Christensen. Mr. 

Christensen is the vice president and general manager of 

Christensen Communications Company, an independent, local, exchange telecommunications carrier in Madelia, Minnesota. Founded 

in 1903, Christensen Communications Company provides local, 

long distance and cellular telephone services in addition to dial-up 

and high-speed Internet services. Mr. Christensen also serves as a 

chairman of the Legislative Policy Committee for the organization 

for promotion and the advancement of small telecommunications 

companies. 

Mr. Christensen, thank you for being here today and we look forward to hearing your testimony. 

STATEMENT OF BRENT J. CHRISTENSEN, VICE PRESIDENT 

AND GENERAL MANAGER, CHRISTENSEN COMMUNICATIONS 

COMPANY, MADELIA, MINNESOTA 

Mr.CHRISTENSEN. As he said, my name is Brent Christensen. I 

work for a telecommunications company in Madelia, Minnesota, 

population of about 2300. It would be easier to tell you that we are 

a telephone company, but quite frankly that’s no longer an accurate 

description. 

I also have the privilege of serving as the chairman of the Legislative Policy Committee for OPASTCO. We are very integrated in 

our community. We employ six people, not counting my parents 

and me, and all but one of our employees reside in the community. 

We encourage our staff to be active in the community. I currently 

serve on the Madelia Public School Board and am vice president 

of the Chamber of Commerce. I also previously served as the Mayor 

of Madelia, and president of the Madelia Development Corporation. 

I’m here today to talk about broadband’s impact on rural communities and Madelia, in particular. We started providing broadband 

service in 2000. We didn’t start by putting a business plan together 

and figuring out how much money we could make. We started offering DSL because it was important to the economic survival of 

our community. We entered into the DSL business because Marv 

Davis needed it. Marv and his son, Will, own Davis Sales and Service, a local Polaris dealer. We had been offering dial-up Internet 

service for a few years, as was the competitor. They told me that 

22

Polaris had changed the way that they sold their snow mobiles, 

watercraft and ATVs. Warranties were now issued over the Internet. When a customer came in to buy a snow mobile, the Davises 

would fill out the customer information on-line and print off a warranty application. Once the customer had signed the document, the 

Davises would scan the document and transmit it back to Polaris 

over the Internet. The problem was that dial-up was too slow for 

this process and their dial-up connection would frequently time out 

and they would have to start over. This was frustrating for the 

Davises and their customers. In the end, if we didn’t solve the 

problem, the Davises would sell fewer Polarises and it would severely impact their business. 

I did some research on different solutions that would work with 

our network. We bought some equipment and we got DSL service 

to the Davises. The entire process took about 20 days. We didn’t 

do a business case first. We didn’t go through any corporate bureaucracy. We just got a new service to a customer that needed it. 

When I was in high school, I worked for the telephone company 

as summer help. My grandfather was president of the company at 

the time and I remember the two of us walking back to the office 

one day and him telling me how important the telephone company 

was to the community and how we had a responsibility to provide 

the best service possible. Back then it meant providing quality, reliable telephone service. Today, it means so much more. Today, we 

have to provide state-of-the-art communications for the survival of 

our small town. 

Madelia is a lot like other towns our size and in many ways like 

the communications industry itself. We are in competition with 

other communities in our area. We are in competition for industry 

and people. As a community, we have to leverage our assets to develop our economy. Communications is one of those assets. Because 

of our communications infrastructure, we can market our town to 

telecommuters, small businesses, and others who do not depend on 

a specific location to conduct their business. A good example of this 

is the House of Print. They’re a local printing company that was 

started in the 1960s by a company that owned two daily newspapers in towns 20 miles from Madelia to the north and south. 

Both papers needed to replace their printing facilities and instead 

of each buying new presses, they built a new printing operation in 

Madelia which is halfway between the two. Today, the House of 

Print prints for over a 100 daily and weekly newspapers. The 

House of Print was our third DSL customer. Our high-speed Internet allowed them to expand their customer base and increased 

their business. They have literally brought in millions of dollars of 

new business because of their high-speed Internet connection. 

The House of Print is no longer geographically limited. Today, 

they can bid on printing jobs on-line, allow the customer to upload 

data, proof the job and mail the finished product directly from their 

facility. The House of Print has expanded significantly as a direct 

result of the Internet, and they have added or upgraded their 

printing presses and expanded their building facilities. 

As a small rural company, we face many challenges providing 

state-of-the-art communications. We have to provide all of the same 

services as larger companies and this gives us a good underVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
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standing of our customers. An example of this is Farmers State 

Bank in Madelia. They are a locally-owned independent bank. They 

compete against the Madelia branch office of a much larger bank. 

Our high-speed Internet connection has allowed Farmers State 

Bank to offer a full line of Internet banking services. These services 

have kept Farmers State Bank competitive with other banks in our 

area. 

Companies like Christensen Communications look to Congress 

for leadership on issues and programs that give us the opportunity 

to thrive and in turn keep our customers and community thriving. 

We ask Congress to continue to support a strong and viable Universal Service Fund. The USF is the most important federal program for our continued success. Congress and the Federal Communications Commission needs to support the reform of the inter-carrier compensation regime by implementing the Missoula Plan 

which was developed by a broad cross-section of the telecommunications industry. And Congress needs to support programs like the 

Agriculture Department’s Rural Utility Service and the Small Business Administration that helps small businesses like mine. 

I thank you for the opportunity to testify today and I would be 

happy to answer any questions you may have. 

[The prepared statement of Mr. Christensen may be found in the 

Appendix on page 85.]

ChairmanSHULER. Thank you, Mr. Christensen. The chair will 

now recognize Ranking Member, Mr. Fortenberry, for the introduction of our next two witnesses. 

Mr.FORTENBERRY. Thank you, Mr. Chairman. I’d like to introduce Mr. Brian Mefford, good morning. Brian Mefford serves as the 

president and CEO of Connect Kentucky, where he is responsible 

for leading the successful implementation of Kentucky’s prescription for innovation, a comprehensive plan to accelerate technology 

availability, literacy, and use. During Mr. Mefford’s tenure at Connect Kentucky, the organization has evolved from a research-focused business with a staff of five, to a technology-implementation 

business with 35 staff members working statewide. Prior to this 

role, Mr. Mefford served as Kentucky Chief of Staff to Kentucky 

Commerce Secretary, Jim Host. 

Welcome, Mr. Mefford, please give us your testimony. 

STATEMENT OF BRIAN MEFFORD, PRESIDENT AND CEO, 

CONNECT KENTUCKY, BOWLING GREEN, KENTUCKY 

Mr.MEFFORD. Thank you, Ranking Member Fortenberry, Chairman Shuler, and Members of the Committee, thank you for the invitation to be here with you today. I appreciate it tremendously 

and I appreciate the opportunity to discuss this important issue. 

I am also the CEO of Connected Nation which functions as the 

parent company of Connect Kentucky which was, in essence, our 

demonstration project. It’s the Kentucky story that I am here to 

discuss with you today. 

I first want to open by briefly talking about a handful of stories 

that illustrate the entrepreneurial environment that exists today in 

Kentucky. First, I’ll mention Cameron Cohlsen, who like a lot of 

Kentucky natives, after graduating from college found opportuniVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
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ties to work outside of Kentucky, found himself in Boston working 

for a creative services firm. And one day he looked around and said 

you know, it’s about time I move back to be with family in Kentucky. And he said there’s no reason I can’t do what I do here in 

Boston from home in Kentucky. And so he went back to his family 

farm. He grew up in a family of farmers and he went back and he 

looked at about a 100-acre lot that had been—where his family had 

raised barley and tobacco for years. And he said I can envision my 

new creative services building right in the middle of this what was 

now a pasture. And so he built that company and indeed did everything that he was doing in Boston, has grown that company. Last 

year, won a competitive bid to produce all the creative paraphernalia and programs for the Academy Awards. And Cameron 

reported that having a broadband connection on that—on his family farm in the middle of Kentucky was just like being right down 

the hall from those folks in California as they were trading photographs and things to prepare for the Academy Awards. 

And there’s Global Data Tech, a company saw an abandoned 

mine in an eastern Kentucky county, Appalachian Regional Commission, a distressed county, and saw an opportunity to create a 

business there doing underground, subterranean data recovery, disaster recovery, and data backup. And so that company is now 

working and creating jobs that are high paying, mostly above 

$60,000, $70,000 jobs in this county and helping that community 

to flourish. 

Then there’s Jared Fugate, an individual who I received a call 

from a couple of years ago and he said you know, I’m having to 

move with my family out into a more rural part of my county, 

again in eastern Kentucky. He said I have a three-year-old business. We do tech support and web development and he said there’s 

not broadband service out where I’m going. I really need it or my 

business is going to fail. Long story short, after I talked to him 

more, I said tell me more about your business and how it started, 

those types of things. He said well, I’m 17 years old. And I’ve been 

building websites for the businesses in the community since I was 

14 and it’s evolved and it’s a company that I plan to run through 

college and come back here and maintain after I graduate. 

Farmers were mentioned earlier. We have poultry farmers who 

are managing temperatures of poultry houses remotely from all 

places, parts of Kentucky. We have folks who are managing farms, 

not just in tracking soil quality and weather, not just in places 

across Kentucky, but now in places around the world where folks—

farmers are able to invest in land and other places in the world, 

they’re able to do that type of monitoring from their homes in Kentucky. 

I wish I could that environment, that type of environment has 

existed always in Kentucky, but it just hasn’t. In fact, four years 

ago, Kentucky faced the same challenges that are all too common 

in rural parts of the country in rural communities everywhere. The 

Commonwealth was struggling to use technology-centered solutions 

to address traditional challenges related to economic development, 

health care, education, and delivering government services. On the 

economic development front, jobs and manufacturing, farming, and 

mining were leaving at an alarming pace. The indicators of KenVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
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tucky’s technology troubles were not hard to identify. Kentucky 

consistently ranked low, in fact, at the bottom of the barrel among 

states in terms of broadband availability, broadband usage, the 

number of high tech companies at work in the Commonwealth, and 

further, college graduates were leaving in droves, creating what we 

all know too well as the brain drain effect. 

So as we surveyed the landscape for answers, the reality of the 

situation was certainly troubling and we realize that the foundation of broadband infrastructure was not adequate for creating solutions that could address the challenges of a new day, not adequate to provide widespread access to telemedicine, distance learning, and e-government, and not adequate for growing and attracting entrepreneurs and industry, not adequate for providing more 

opportunities to our farm families and communities where our children were leaving the rural roots never to return. 

And so Connect Kentucky set out to identify the root cause that 

had resulted in the lackluster technology picture. And it was clear 

that the inadequacy of Kentucky’s broadband infrastructure could 

be traced to much of the state’s inability to compete in so many 

areas important to the knowledge-based economy. And so 

broadband infrastructure had been built into those more populous 

areas as several folks had mentioned before, but it was those rural 

areas, less metropolitan areas that were under served. And so the 

lack of service not only created the well termed digital divide for 

rural residents, but it also made it impossible to create state-wide 

policies and initiatives that can make the entire Commonwealth 

more competitive. 

Further, we discovered that broadband availability was only half 

of the challenge. It was broadband usage that represented the 

other part of this challenge that had to be overcome and we realized that any comprehensive strategy had to address both sides of 

that equation. So next we identified the barriers that were inhibiting broadband availability and use. In terms of availability, there 

were a series of issues that needed to be addressed. First, very little data existed to allow us to identify the true extent of the 

broadband gaps in Kentucky. Providers didn’t know. Policy makers 

didn’t know. And communities themselves didn’t know. 

ChairmanSHULER. We’ll have you finish up more of your testimony during some of the questions, if that’s okay. 

Mr.MEFFORD. Yes, sir. Would you like me to close? 

ChairmanSHULER. Yes. That’s a nice way of saying it. 

Mr.MEFFORD. Well, the results which I can address during questions have been that we developed maps, as was mentioned earlier, 

that identified the broadband gaps. We worked with providers to 

address market intelligence, to provide market intelligence that 

lowered the cost of entry into our rural markets, and we aggregated demand and helped create demand at the local level. And 

bottom line is we used a public/private partnership to lower those 

costs of entry to incent market effects, to make Kentucky a more 

attractive environment for broadband development and use. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Mefford may be found in the Appendix on page 91.]

26

Mr.FORTENBERRY. Now I’d like to introduce Mr. William Deere. 

Mr. Deere serves as vice president of Government Affairs for U.S. 

Telecom, a trade association representing 1200 member companies 

offering a wide range of services including local exchange, long distance, wireless Internet and cable television services. Before joining 

U.S. Telecom, Mr. Deere served as Deputy Assistant Secretary in 

the Bureau of Legislative Affairs at the U.S. Department of State 

where he oversaw the Department’s legislative initiatives. Mr. 

Deere also worked on Capitol Hill as a House Appropriations Committee Staff Member for Representative Jim Lightfoot. 

We welcome your testimony. 

STATEMENT OF WILLIAM R. DEERE, VICE PRESIDENT, UNITED 

STATES TELECOM ASSOCIATION, WASHINGTON, D.C. 

Mr.DEERE. Chairman Shuler, Ranking Member Fortenberry, 

Members of the Subcommittee, thank you for this invitation to be 

here today. U.S. Telecom is the nation’s oldest and largest association representing rural telecom providers. The vast majority of our 

member companies are rural companies. They are small businesses 

serving small communities. 

We were pleased to see affordable broadband access for all Americans as a component of Speaker Pelosi’s innovation agenda. In addition, the Senate Republican High-Tech Task Force is calling for 

policies that promote widespread broadband deployment and use of 

broadband technology. Broadband deployment and adoption should 

be nonpartisan objectives and we believe the Congress, the FCC, 

and the RUS have vital roles to play in advancing these goals for 

rural America. 

U.S. Telecom and our member companies are committed to furthering rural broadband deployment and believe the Congress can 

advance a number of initiatives that promote this goal. First, we 

must ensure a sustainable future for universal service. In the 

House, Representatives Boucher and Terry have recently reintroduced universal service reform legislation they first proposed last 

year. We appreciate the Congressmen’s dedication to finding a sustainable long-term solution and we hope Members of this Committee will encourage consideration of such reform legislation this 

year. 

In addition, Congress can promote broadband deployment by, 

among other things, permanently extending the Internet Tax Moratorium. U.S. Telecom supports H.R. 743, bipartisan legislation to 

extend the Internet Tax Moratorium that was introduced by Representatives Eshoo and Goodlatte. I encourage all Members of the 

Committee to consider co-sponsoring this legislation. I know that 

Ms. Musgrave, and Mr. Fortenberry, you are already co-sponsors of 

this bill, and urge the House to take up this important legislation 

before the moratorium expires in November. 

Finally, in its relatively brief history, the RUS broadband loan 

program has achieved some successes. But we believe with modest 

changes largely based on the successful RUS telephony program, it 

could accomplish even more. We were honored to appear last week 

before your Subcommittee, Ms. Musgrave, of which Mr. 

Fortenberry is a Member, to offer some suggestions for the upcoming Farm Bill. We believe the primary weakness of the current proVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
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gram is that it does too little for areas with no access to broadband. 

And while the current practice of offering cost of money loans 

makes projects financially viable in some areas, other high-cost 

areas will require low-cost loans or a combination of loans and 

grants to make a costly infrastructure bill feasible.We also believe 

steps should be taken to expand the number of companies eligible 

for broadband loans and that steps be taken to improve processing 

of loan applications at USDA. 

Finally, we second Mr. Mefford’s testimony. By the end of 2007, 

Kentucky will go from having one of the lowest broadband subscription rates to having broadband available to 100 percent of its 

households. That’s impressive progress. And we think Congress 

might look to Connect Kentucky as a model for what works. 

Modernization of the nation’s communications infrastructure will 

seed economic growth and expand opportunities. Nowhere in the 

nation do these advances hold more potential than in rural America. We thank you for your invitation to appear today. U.S. Telecom 

and its member companies look forward to working with the Subcommittee and this Congress to achieve our shared objective of 

making broadband as ubiquitous today as electricity, water, and 

telephone service. 

[The prepared statement of Mr. Deere may be found in the Appendix on page 104.]

ChairmanSHULER. Thank you. I’d like to thank all of you for 

your testimony. 

Mr. Mefford, can you describe some of the types of public/private 

partnerships that Connect Kentucky actually really benefited, I 

mean outside of the—and I want to commend the 17-year-old 

young man for his outstanding work in entrepreneurship. 

Mr.MEFFORD. Yes, sir. Mr. Chairman. First, it had to do with the 

mapping initiative that we undertook. We realized that our folks 

in government needed batter data. Our policy makers needed better data. We realized that our providers were willing to some degree to provide, to give that data and they actually wanted more 

data about unserved areas. They wanted to cooperate with one another to figure out where there unserved areas where. 

And so we put together this initiative to map, to create this 

broadband inventory where every single provider in the state provided their data to us of where their served areas were. And so in 

your packets, I believe in front of you, perhaps, there are examples 

of our maps where you can see all across Kentucky, all the different types of service that’s available. 

But more importantly, we can then invert that data, that map, 

and focus on those unserved areas and we can start drilling down 

into the data overlays that then help providers identify low-hanging fruit immediately, providing household density data, for example. And then we can overlay data household survey data where we 

ask households would you adopt, if broadband was available in 

your household? What price points are you comfortable with, that 

type of information. And so we can really provide through that public/private partnership market intelligence that allows providers to 

move more quickly into unserved areas. I’ll mention on the demand 

side too, at the same time we’re working with communities. 

28

We have 120 counties in Kentucky. We have created what we 

call E-community Leadership Teams in every county. Those are 

teams that represent a cross section of the community. We have 

farmers. We have local government officials. We have business and 

industry, educators, health care officials, on and on, who come to 

create a strategic plan for how to use technology as it’s coming into 

the community, how to better use it and plan for. In effect, as Commissioner Adelstein said earlier, we’re creating demand and aggregating demand at the same time. So the two processes work hand 

in hand and allow providers to see more opportunity and have a 

better business model for moving into these unserved areas. 

ChairmanSHULER. Mr. Kremer, can you give some examples or 

some ways that our farmers can actually utilize the access to 

broadband to really strengthen their farming community? Some of 

the farmers in my area, they probably say they don’t know how to 

turn a computer on. So how can we actually incentivize them to 

truly become more computer literate then and obviously extend it 

through, their business through the Internet? 

Mr.KREMER. I have some good examples. I’m also a former agricultural educator that started the Young Farmer Programs and it’s 

interesting that during the early ’80s when farmers were completing scared to death of computers, I actually took the computers, 

put them on the kitchen table and those dual floppy drive Apple 

computers and taught them to get over the fear and use those computers. I think we’ve got to do the same thing with broadband. And 

I truly believe that for small and moderate size farmers, this is 

probably the last hurrah that we have is to build those authentic 

relationships with consumers. And this is how they can do it. 

I mean even people like my colleagues in North Dakota, for instance, say that Missouri is more advanced because we have population centers. Well, the Internet, high-speed Internet makes the 

world smaller in building relationships. We have, for instance, in 

our organization, have developed artisan cheese plants, for instance, made from goats in Southern Missouri, Goats R Us, basically, and have taken this artisan cheese and basically made it 

very special and famous and have sold it throughout the country. 

Have done the same thing with exclusive type of heritage vegetables in Southeast Missouri. We’ve done the same thing with beef 

and pork and dairy products, and even wood products. It’s basically 

being able to have access to that type of technology. 

And what this also does it brings in and encourages and retains 

our young people with the brilliant, vibrant minds and those people 

graduate from college and can come back to the very rural area 

and make that connection. And so it’s extremely important. 

One last thing also and something I want to point out is that for 

instance, even our USDA and the Farm Service Agencies have been 

attempting to close some of the offices down which are very vital 

to our rural communities right now because of lack of computer access. Their point is that farmers should be more Internet savvy and 

access those programs on those farms via the Internet line. Well, 

we can kind of accommodate, but until we have more service in the 

rural areas we will continue to fight a lot of those closings, but this 

would help solve some of those problems and save the government 

and overall consumers some money. 

29

ChairmanSHULER. Mr. Stephens, can you tell me about some of 

the barriers that you are facing in expanding the broadband in 

your area? 

Mr.STEPHENS. Some of the barriers that we are facing basically 

are, as I described, were somewhere terrain and others we need 

just the basic support of placing the infrastructure there. We do not 

exactly have all of the public private support that we need. Because 

if we had, we would have never formed Balsam West FiberNET to 

begin with. It would have been at the hands of the public or the 

private sectors. 

The public sectors with the local government: (1) Does not have 

the expertise nor do they have the funds, or do they have access 

to the funds to build the infrastructure. The low level population 

in the area, the scattered areas, the isolated areas; all of this came 

into be. As you all know of the mountains of western North Carolina and some north Georgia and eastern Tennessee, that’s just to 

name a few things. 

Otherwise, we do have a few things leading into the area, what 

has been placed into some of our rural mountains areas, what the 

government has provided and has placed there has not be effective. 

And to those areas I think sometimes coming at some inappropriate oversight to those resources that have been promised have 

not lived up to the promises to the areas. 

Otherwise, some of the barriers, I think we were describing earlier from some of the other panelists, is that it is basic resources 

for technical assistance to training our residents on how to use 

technology. We have a great highway. We have great resources to 

put those people down that highway of information. But we need 

to have some skilled people to drive the Cadillacs down the highway, too. 

ChairmanSHULER. Are you finding problems or issues actually 

connecting with some of the more of the Federal funded programs? 

Mr.STEPHENS. We are. We did have one resource that came to 

western North Carolina that was known as the ERC, the Educational Research Consortium that was set up in western North 

Carolina that based itself in Asheville. And the problem was to deliver high speed Internet, to deliver broadband data transport to 

the areas to connect up with our school systems, do these things. 

And we are not yet seeing that happen. That has not occurred. So 

those are the things that are happening. 

Otherwise, we are falling through the cracks of eligibility in 

other programs such as RUS. We have too much population. Again, 

as Commissioner Adelstein told you earlier, they look at a map and 

say you have DSL in this area when one person has that. We have 

broadband. And that is just not the case. I think those models of 

problems that you are seeing, that you are hearing from other panelists speaking or Commissioner Adelstein earlier, I think that mirrors what we have in western North Carolina. 

ChairmanSHULER. The Chair will now recognize Ranking Member Mr. Fortenberry for his questions. 

Mr.FORTENBERRY. Well, thank you all again for appearing today, 

and I appreciate your insights for most of you, particularly your innovations in being entrepreneurs and the effective and aggressive 

30

utilization of broadband services in your particular communities. It 

is very impressive what you all have done. 

I noted that your comment, Mr. Shields, about the potential to 

enhance telecommuting, which is essential for the well-being of 

rural communities. We have talked about potential value for small 

business, the potential value for education and health care delivery. But the potential value of allowing a person to telecommute 

is very substantial as well, and it is an important point. 

Now you can go on line and put your order in for a McDonald’s 

hamburger, is that what you meant in North Dakota? 

Mr.SHIELDS. Yes, I was actually at a farm in North Dakota yesterday with one of our employees showing Toyota people how it 

worked. And McDonald’s is working to change the taking of orders. 

When you go to a McDonald’s drive-through, you drive up to a 

speaker post, you talk to somebody. And they want to move about 

10,000 jobs out into the rural communities to be the ones who are 

on the other side of that speaker post instead of having somebody 

doing that in the restaurant. And we have been very pleased with 

the work and the quality. And it is one of many things that will 

be done over the next decade to move what were call center areas 

like in Lincoln, and I actually was a kid in Lincoln, where you have 

got a lot of the IT services; Lincoln, Omaha, Sioux City, Sioux 

Falls, Fargo, Grand Forks where we are going to now move out into 

these communities. Because we do not need the walls anymore. We 

do not need to have people sitting in a big building. We can have 

them work wherever they want. 

And this woman whose farm we were at was able to work for the 

first time in 20 years. When she got married and was out there in 

the farm, there was nothing she could do out there. The family was 

able to add a brand new add-on that she was proud to show us to 

her house because of the earnings that she was able to get from 

that job. 

Mr.FORTENBERRY. Well, it is an outstanding example that 

concretizes the reality of how this potential technology can achieve 

so much social good in addition to advancing the movement of 

products and services. 

Mr. Kremer, you very well point out how the small and mid-size 

farmer is going to increasingly depend on this connection direct to 

the customer. 

One of the most successful farmers I have in my District was a 

struggling commodities farmer who changed his business model 

and relies heavily on the Internet sales of a specialized hay product 

now for pets. So it is a great point. 

Mr. Christensen, I particularly picked up on the fact of your 

leadership. All of this is important. Advancing the technology is important, but having leadership in localized community, I think you 

mentioned your—what did you call it, Mr. Mefford? Your e-leadership council? 

Mr.MEFFORD. E-community leadership. 

Mr.FORTENBERRY. Is a great point as well that I think we can 

all learn from. 

I would like to further unpack some of your efforts in Kentucky. 

I think one of the considerations that may come out of this hearing 

because we have discussed it, Mr. Deere, you have touched on it 

31

as well, is the need for a clearer understanding perhaps through 

mapping or some other mechanism, but I think mapping is the core 

issue here of where there is true broadband availability, where it 

is underserved, where it is lacking in service. Who is Connected 

Nation? Was this founded in Kentucky? Are you the primary principal? What is the main objective of it? And is using a smaller footprint such as a state to provide this mapping or to provide as an 

entity in a state to potential provide the capacity for a more aggressive mapping system could then be duplicated in 50 States, is 

that a better platform than perhaps we mandating it at the Federal level as a joint project, perhaps, of the FCC and the Rural 

Utility Service? I think that is one of the core points that both you 

gentlemen made as a key component to ensuring that limited funds 

are targeted precisely or the private market actually has better information to develop its services. 

So two points. Explain better your mission, how it was conceived, 

what your long term vision is? I am curious. Obviously, you are 

doing tremendous things. And then touch upon the mapping issue 

from a state perspective how that can potentially be used nationwide? 

Mr.MEFFORD. Yes, sir. I appreciate the question and the compliments as well. 

We envision that if we could demonstrate the success of this 

model as it was set up in Kentucky, we envision that it would be 

highly transferrable to other States. I believe it is Commission 

Adelstein that said in the past, and I say it often, there is not anything that is on the level of rocket science about what we have 

done. I mean, it is really a lot of entrepreneurial type ingenuity. 

And I think Commissioner Adelstein said Kentucky elbow grease is 

how it got done. But given that fact, it is highly transferrable. And 

so we had a lot of inbound calls from other states and established 

Connected Nation as the national nonprofit means by which we 

could transfer that model to other States, and also work in cases 

with the Federal Government as well. 

Mr.FORTENBERRY. And how are you funded? What are your funding sources? Is it a consortium of interested private sector parties? 

Do you receive grants from the State? Federal money as well? 

Mr.MEFFORD. Connected Nation is working with States. And so 

we primarily are receiving State funding as Connect Kentucky has. 

Connect Kentucky is both public/private. And so we have some contributions from participants from the private sector, but it has primarily been State monies. 

Public/private is ideal so that you do have that type of engagement from the private sector community as well as from State resources, State and Federal resources. 

Mr.FORTENBERRY. What I hear you saying about the mapping 

process is that it is half science, half art. You are somehow able 

to achieve proprietary data that, as Commissioner Adelstein was 

saying, is a problem on the Federal level. You have been able to 

do that, and I assume that is through relationships? Melding the 

art and science of getting this end task completed? 

Mr.MEFFORD. They are relations that, again, transfer to the national level as well. And so those relationships are in place now to 

32

be able to do similar things that we have done in Kentucky nationally. 

Providers are attracted to an independent third party as a place 

to aggregate this data. They want it protected, to a certain degree. 

And so we are able to sign nondisclosure agreements that protects 

the data down to a certain level of granularity. 

And so on our maps you can see where the service is and what 

is provided, but it does not detail who is providing that service, in 

most case. Or in all cases, rather. 

And so there is that desire from the provider community to have 

that independence, that independent third party. 

Now to your question of do we go at this State-by-State in terms 

of the mapping or do we do it at the Federal level? I do not think 

they are mutually exclusive. In fact, the model in Kentucky bears 

that out that both is likely a better answer. In other words, the 

Congress could empower the FCC and enable the FCC to begin 

such a program, hopefully in partnership with an independent entity where it is a data clearinghouse that is established as an independent entity. And so you have a federal effort. But then as we 

did in Kentucky as we moved community-by-community, it is sort 

of a verification that takes place. And that is a bit of a slower process, but it is going into the States to take the data that has been 

aggregated federally and fact check and say is this right on a very 

granular community level. 

So I believe that it could be both, in answer to your question. 

That it could be a Federal effort and a State-by-State effort. In fact, 

there is a Senate bill that has been filed, 11-90 by Senator Durbin 

that sets up a State-by-State approach. And, again, I do not think 

it is mutually exclusive to have a bill that establishes the Federal 

approach as well. 

Mr.FORTENBERRY. But again in terms of the fundamental platform by which your successful efforts have been achieved, it is that 

set of data? I have heard you say two things. That has been critical 

and, obviously, leadership and desire down to the smallest local entity has been critical. But I do not want to set up a framework here 

where there could be a competing framework by which we can leverage our resources to better provide broadband throughout the 

country. But it seems to me that a lot of this testimony is pointing 

to that pillar of just better understanding of market data that is 

out there that can be used to create momentum synergy, better 

synergy in the market as well as more targeting of our limited Federal funds. Is that a correct assumption? 

Mr.MEFFORD.That is right. Absolutely. I think it has to be the tip 

of the spear. We do not know where we are today. We just do not. 

And that map, that national map really has to be created. 

Mr.FORTENBERRY. And I appreciate your comments about a potential hybrid solution versus an either/or; Federal or more Stateby-State projects. So thank you. 

Would you care to comment on that, sir? 

Mr.DEERE. I would second Mr. Mefford’s comments. And when 

we appeared before you last week to discuss to discuss the RUS 

program, there is not a single magic bullet that solves the problem. 

It is making sure the funds go to underserved areas. It makes the 

loans more creative to go into areas where there is a truly bad 

33

business case to be made for issuing the loan. And it is working 

through programs like Connect Kentucky to make sure that we 

know where we need to go. 

As you heard in the first panel from Commissioner Adelstein, 

there will be issues that have to be worked out at the Federal level 

when we start looking at a national mapping plan. In fact, I believe 

as early as next week the Telecom Subcommittee, Mr. Markey’s 

Subcommittee, could be taking up the issue. But what we were trying to point out today and last week was we have a model that 

works. And this is a bipartisan issues. And this is a Congress that 

wants to get things done. And I think we should move out on something like Connect Kentucky. 

Mr.FORTENBERRY. Okay. Thank you. 

Thank you, Mr. Chair. 

ChairmanSHULER. The Chair will now recognize the Gentlewoman from New York, Ms. Clarke. 

Ms.CLARKE. Thank you very much, Mr. Chairman. 

And I have to tell you gentlemen, this has been very, very, very 

groundbreaking for me hearing and your testimonies just have 

been fascinating. What you have been able to do through ingenuity 

and really just out of necessity in utilizing the technologies that are 

available to us to really make our world a little bit smaller and 

make our communities much more connected is what is needed in 

the 21st Century. And there is no other way for us to go. And you 

are the trailblazers. And I have a feeling that we will be looking 

back at your gentlemen in generations to come as sort of like the 

Henry Fords of what has led our communities and in our nation 

into its strength and really coming into its own as a first world nation. 

Let me direct my questions Mr. Mefford. Because Connect Kentucky is truly fascinating. And, again, groundbreaking. And it has 

demonstrated a willingness to improve the quality of life for low income communities, spurring and cultivating local entrepreneurship. 

Connect Kentucky has made strides using technology to improve 

health care, education and community development. 

Can you just briefly tell me some more about your challenge as 

a CEO, challenges with regard to cost factors? And do you believe 

that you could replicate this model in urban environments that 

have a similar struggle? 

Mr.MEFFORD. Yes, ma’am. Thank you for the question. 

As I mentioned, the model is highly replicable, can be transferred 

to any State. And all States have these challenges, because all 

States have either urban gaps or rural gaps, the broadband digital 

divides. And so we have heard from nearly every State that wants 

to replicate all or part of what we are doing in Kentucky. 

The primary barrier, as you mentioned, is funding. And so that 

is why we started working here on the Hill to discuss the importance of creating some enabling legislation that allows States to develop programs that are empowered at the Federal level but are localized in their design. That is an important element of being able 

to transfer this across the country. 

And to your question of does it apply in urban areas. Absolutely. 

And so in each of our communities where we can identify an urban 

34

digital divide, we have been addressing those just as we do in the 

rural areas. 

We developed a program. In fact, their conventional wisdom had 

said in the past that folks did not adopt broadband because it was 

just too expensive. But we found that the primary reason that folks 

were not adopting broadband, particularly in our urban areas, was 

that they did not own a computer. They did not own a computer 

and it was too expensive or the second was the answer you said, 

it was understanding that it exists or knowing that it was available. 

And so we launched program and knowing that granular kind of 

data, that market intelligence, that we launched a program called 

No Child Left Offline. And so that uses State refurbished computers and adds Microsoft software and CA software, security software and puts those computers in the households of underprivileged children. And so it is through efforts like that where we can 

then start impacting the adopting of broadband. 

We have had 73 percent increase in households actually subscribing to broadband over the last two years 

Ms.CLARKE. I would like to direct a question to Mr. Stephens. I 

recently read an article in the Asheville Citizen-Times, which is 

published in our Chairman’s wonderful State of North Carolina, 

and it is that your company has formed a partnership amongst 

rural school with Drake Enterprises and the Eastern Band of the 

Cherokees to bring high school Internet access to 45 rural schools. 

Many experts see high speed Internet access as one way to help reduce poverty and close the digital divide. 

With the improved access to high speed Internet capabilities children would enjoy enhanced educational opportunities and their 

parents could learn their skills necessary to thrive in an increasingly computer-based economy. 

How successful has this partnership been and do you have any 

plans to pilot this model in urban environments such as New York? 

Mr.STEPHENS. Well, Ms. Clarke, I believe that there is really no 

difference between a green covered mountainside and a skyscraper, 

really. It’s just an obstacle in the way. And, of course, we in western North Carolina take great pride in those mountains that give 

us strength. 

But, yes, this model has been very successful because the high 

cost of services provided to our schools, provided to our businesses, 

to individual was outrageous. We were paying eight to ten, twelve 

times the rate that metro carrier rates would pay in other urban 

areas; Atlanta, Knoxville, Charlotte, those areas. 

One of the things that we had to do was to be able to bring that 

access to the schools. Furthermore, we had to give them the opportunity to choose their provider. To choose the content that suited 

their needs for their curricula, to suit their needs for their culture. 

The Eastern Band of Cherokee Indians is working to build an entire new school system, if you have seen any kind of congressional 

in the past couple of years. We have been working to build an entire new school system. The curricula there is going to be a little 

bit different. 

So for all types of different reasons, yes, this is a successful 

model. It is taking the access to the schools. They own the fiber opVerDate 0ct 09 2002 08:55 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34832.TXT LEANN
35

tics. They own the content. Basically they are in charge of their 

own destinies. And right now the construction is beginning on 

those laterals and on those star networks for the school systems. 

Unfortunately, as some of the other panelists have pointed out, 

funding is a major issue here. In order to: (1) Complete all of the 

connections to all the schools. Because our dream here is to have 

‘‘No Child Left Behind,’’ no school left behind to be able to inspire 

any kind of creativity for the entrepreneurship to breed home 

grown businesses, to be able to allow them to stay in the area. 

There has been a serious out migration of our best and brightest. 

I mean, it is great that they are able to get the education that they 

can, go to the University of North Carolina, go to Harvard or wherever they can go, but they seldom come back because the opportunities do not exist. 

So is it successful? Yes. Because we are putting that access 

there. They are control of that destiny. So for that. We are also cutting down the costs. It is a wonderful model. And, yes, we hope 

that it is something that can be replicated throughout the area. 

We are starting in our State. And we hope that this will embers 

the big brush fire that burns across the State. 

Ms.CLARKE. Mr. Chairman, I just want to make a comment to 

Mr. Kremer, and maybe to all of you. 

One of the things that we are looking at in urban areas with respect to the Ag bill is the use of food stamps to be able to bring 

nutritional foods to communities that do not have access to them. 

You would be surprised at how many urban areas where green groceries are not readily available, where quality or now we are moving into organic kinds of foods that lead to proper nutrition of 

Americans are not available. And just in listening to what you have 

said, one of the things that has been a challenge is how do we get 

or create an avenue for those who are less able financially to shop 

in the markets but have to utilize Government subsidy of some 

sort. To work with the small farmer in terms of co-oping or things 

of that nature and being able to access those types of nutritional 

things. 

Have you had any conversations or have you had any thinking 

around that? Because I think that is one connection. You already 

talked about the pork. I am going to be looking for that. But, you 

know, other items that we can connect to other people in other 

parts of the country to really begin to address those issues in our 

communities? 

Mr.KREMER. Yes, I have thought about it and I share your same 

concerns, and it is something that is part of our vision and our mission. And that is to provide this type of wholesome food that has 

got this story behind it and authenticity and make it affordable 

and accessible to all people. 

And when you talk about, for instance, rural broadband and connecting these smaller entrepreneurs and what I would call collective entrepreneurs, you know we have these little co-ops, for instance, in remote southern Missouri that our prices are not the 

highest. They are kind of like in maybe in the upper one-third 

share of what conventional pricing would be. And so, but it has got 

greater value. 

36

For instance, you may think this is an oxymoron that we have 

a healthy hot dog. That has no additives, that is not filler, no 

chemicals and that school systems want this. And I do believe that 

it is in the public’s interest to somehow subsidize school systems 

or whatever, and the food stamp program as well, to allow disadvantaged people to access this as well. And I think it could be 

a very affordable program that is in the best public’s interest. 

ChairmanSHULER. Mr. Christensen, you had spoken earlier 

about ways you have been able to maintain businesses at home instead of having to go out of your District or maybe into more urban 

areas. Now what are some of the ways you are highlighting in your 

community, ways to actually say here is how broadband has 

worked, here is how it has worked for us, here is how it can work 

for you? 

Mr.CHRISTENSEN. Well one of the ways is coming out here and 

talking about it. A lot of it we are doing through the Chamber of 

Commerce. We are doing through our community education program. 

Some of the other people talking earlier talked about getting people trained on using the Internet. We are a highly agriculture community. So our community ed program puts on classes on Microsoft 

Excel and Outlook and things like that for senior citizens or people 

who do not have a lot of experience with it. 

A good example of one of these programs is as a result of one of 

our community ed programs a guy that retired from the local hardware store started an eBay business. And he sells tractor manuals 

online on eBay and works out of his home four miles from town, 

and has been able to stay on his farm. 

So that kind of word spreads around. And he has now come back 

and he teaches class to his peers. And that is really what we are 

doing. 

ChairmanSHULER. Well, I would like to thank everyone for their 

testimony today. And just extend a special thank you for what you 

are doing with our rural America and in the urban areas to really 

expand our businesses, small businesses in particular, and what 

you have been able to accomplish. Continue your hard work, your 

dedication. And I will look forward to working with my colleagues 

on the issues that have been raised today for us to create the proper legislation that will actually work for the small business in 

America. 

At this time the hearing is adjourned. 

[Whereupon, the Subcommittee was adjourned at 12:01 p.m.]

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