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FULL COMMITTEE HEARING ON 

THE RECOVERY ACT AND BROADBAND: 

EVALUATION OF BROADBAND INVESTMENTS 

ON SMALL BUSINESS AND JOB CREATION 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

OCTOBER 28, 2009 

Small Business Committee Document Number 111-053 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

PARKER GRIFFITH, Alabama 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

W. TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

W. TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

PARKER GRIFFITH, Alabama 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

PARKER GRIFFITH, Alabama 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, North Carolina, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1 

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Strickling, Hon. Lawrence E., Assistant Secretary for Communications and 

Information, National Telecommunications and Information Administration 

(NTIA), U.S. Department of Commerce ............................................................. 3 

Adelstein, Hon. Jonathan, Administrator, Rural Utilities Service, (RUS), U.S. 

Department of Agriculture .................................................................................. 7 

Gleason, Mr. James, President and CEO, NewWave Communications, on 

behalf of the American Cable Association .......................................................... 21 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 28 

Graves, Hon. Sam .................................................................................................... 30 

Strickling, Hon. Lawrence E., Assistant Secretary for Communications and 

Information, National Telecommunications and Information Administration 

(NTIA), U.S. Department of Commerce ............................................................. 32 

Adelstein, Hon. Jonathan, Administrator, Rural Utilities Service, (RUS), U.S. 

Department of Agriculture .................................................................................. 46 

Gleason, Mr. James, President and CEO, New wave Communications, on 

behalf of the American Cable Association .......................................................... 60 

Statements for the Record: 

Clarke, Hon. Yvette ................................................................................................. 70 

Wilson, Mr. Delbert, Hill Country Telephone Cooperative, Ingram, TX ............. 71 

Computing Industry Technology Association (CompTIA) .................................... 76 

(V) 

(1) 

FULL COMMITTEE HEARING ON 

THE RECOVERY ACT AND BROADBAND: 

EVALUATION OF BROADBAND INVESTMENTS 

ON SMALL BUSINESS AND JOB CREATION 

Wednesday, October 28, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:49 a.m., in Room 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[Chair of the Committee] presiding. 

Present: Representatives Vela ́zquez, Dahlkemper, Michaud, 

Altmire, Clarke, Bright, Halvorson, Graves, Bartlet, Luetkemeyer, 

and Thompson. 

Chairwoman VELA ́ ZQUEZ. This hearing is now called to order. 

The American Recovery and Reinvestment Act was a blueprint for 

renewed job growth. As part of a larger effort to put Americans 

back to work, that legislation included important investments in 

broadband deployment. And in fact, every $10 billion in broadband 

investment creates or saves 498,000 jobs annually. Of those positions, more than half are supported by firms with fewer than 500 

employees. In other words, this is an opportunity for small businesses to really shine. And with efforts to expand the technology 

now underway, small firms are already vying for that chance. 

By next month, the first round of broadband awards will have 

been announced, and because telecom giants like Verizon and 

Comcast decided not to compete, small firms should win a sizeable 

chunk of available grants and loans. In fact, NTIA and RUS are 

required to give special considerations to disadvantaged small 

firms. 

But, unfortunately, that process has been less than seamless. 

Many small businesses have complained of challenges ranging from 

excessive paperwork to restrictive capital requirements. 

In today’s hearing we are going to discuss those obstacles. We 

will also look for ways to ensure small firms can enjoy the benefits 

of broadband deployment both as the beneficiaries of an enhanced 

IT infrastructure and as its engineers. 

Expanded access to broadband presents an enormous opportunity. Since the mid-1990s, the Internet has played a key role in 

our economy. With a high-speed Internet connection, any entrepreneur, regardless of location, can tap that growing marketplace. 

2 

While overall growth in broadband has been steep, progress has 

varied by region. Today, only 46 percent of rural households use 

technology, compared to 67 percent in nonrural areas. Many lowincome urban communities have also fallen behind. Given the role 

that the Internet plays in our economy, this disparity marks more 

than a simple digital divide. It means missed opportunities for 

small businesses. New investments in broadband can help recapture those opportunities, but so far, efforts are off to a rough start. 

There are a number of challenges working against entrepreneurs. 

For example, an overly complex application process, one that requires nearly 200 pages of paperwork. More often than not, small 

businesses cannot afford in-house lawyers, accountants, or support 

staff. A streamlined application process will mean less red tape and 

more productivity and is worth considering. 

For small firms struggling to access capital, a decreased matching requirement could also go a long way. Asking small businesses 

to match 20 percent of total project costs is a tall order, especially 

at a time when capital is increasingly hard to come by. Nine times 

out of ten, small businesses offer the best value for the taxpayer 

dollars. Our policies should reflect that fact. But when it comes to 

broadband projects, it seems we are not there yet. 

Small firms deserve a level playing field. I know that both RUS 

and NTIA are committed to creating a more efficient process, and 

look forward to working with both agencies in the coming weeks 

and months. 

Technology is often called the great equalizer of the business 

world. If done properly, increasing access to broadband will allow 

small firms to compete with big companies. It would also create 

new opportunities for small businesses, all while connecting our 

country with the fastest means of communication. We have come 

a long way since the days of dialogue. New investments in 

broadband can take that progress one step further and allow America’s small businesses to help rebuild our economy. 

I would like to thank the witnesses in advance for their testimony. I know this is an exceptionally busy time for them, and I am 

grateful that they could be here to discuss this important issue. 

[The information is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. With that, I will yield to the Ranking 

Member for his opening statement. 

Mr. GRAVES. Thanks, Madam Chair. And good morning, everyone, and thank you for participating in today’s Committee hearing 

reviewing the broadband provisions in the stimulus package. And 

thank you, Madam Chair, for holding this timely hearing. 

It is no secret that I voted against the American Recovery and 

Reinvestment Act, or the stimulus bill. I felt that the amount of 

spending contained in the measure was unprecedented and, I believe, fiscally irresponsible. However, that vote has come and gone, 

and I think we need to move forward to ensure that the $787 billion worth of taxpayers’ dollars is used wisely and not abused. The stimulus bill provided $7.2 billion primarily for broadband 

grant and loan programs to expand broadband access to those who 

do not have it, a very worthy goal and one with significant economic consequences. The advantages of broadband service in communities both urban and rural are substantial. Access to these 

3 

services puts information at the fingertips of our students. Job 

seekers can search and apply for job opportunities at many of today’s leading businesses. Small businesses can improve market access and compete with larger counterparts on a more level playing 

field. Health information technology can help doctors share patient 

information that leads to quicker diagnosis. Consumers can shop 

better, smarter, and more efficiently, and the economic opportunities are absolutely endless. 

However, the lack of sufficient access and speeds has put a growing number of people at a disadvantage. Students can’t access the 

level of information as their connected peers. Job searches are more 

difficult. Communities are unable to attract new investment. And 

opportunities for small businesses are limited. 

The advantages of broadband service are clear. Now we must review the various programs that are designed to bring broadband to 

everyone, and ensure that dollars are being spent efficiently, effectively, and without abuse. If an application is too complicated or 

costly to complete, then we need to reinvent or reevaluate the process. If definitions are defined by government officials, if they are 

having unintended consequences, then they should be revised. Bureaucratic red tape should not be prohibiting businesses from providing high-speed broadband service to everyone. Moreover, the 

government should not be subsidizing areas with adequate 

broadband coverage. It is important to make sure that steps are 

being taken to prevent government-subsidized competition. 

As the first round of broadband funding concludes, it is imperative that the government make changes to address these concerns 

and ensure that future rounds operate in a way that improves the 

economy, helps small businesses and providers, and expands 

broadband coverage to everyone. 

We have a distinguished panel of witnesses here today, and I 

look forward to hearing all their thoughts on the broadband issue 

and programs, including the stimulus bill and how they have been 

working again. 

Thank you, Madam Chair, for coming. Thank you to the witnesses for coming in today, too. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

[The statement of Mr. Graves is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. And it is my pleasure to welcome the 

Honorable Lawrence E. Strickling. He is the Assistant Secretary 

for Communications and Information at the Department of Commerce. Mr. Strickling serves as Administrator of the National Telecommunications and Information Administration, the agency with 

responsibility for advising the President on communications and information policies. Mr. Strickling was confirmed on June 25 of this 

year, and has more than two decades of experience in technology 

policy. Welcome, sir. 

STATEMENT OF LAWRENCE E. STRICKLING 

Mr. STRICKLING. Thank you, Madam Chair, and Ranking Member Graves and members of the Committee. Thank you for your invitation to testify on behalf of the NTIA on the implementation of 

the broadband initiative set out in the Recovery Act. I welcome the 

opportunity to testify this morning, and I bring you the message 

4 

that these broadband initiatives have the potential to have a profoundly positive impact on the growth and development of small 

businesses. 

I am very pleased to appear here today with Jonathan Adelstein, 

who oversees the Broadband Initiatives Program at the U.S. Department of Agriculture. Our two agencies have worked hand in 

hand to implement the broadband provisions of the Recovery Act, 

and the result has been a highly coordinated and well thought-out 

approach that has taken advantage of the individual expertise of 

each agency. 

The President’s innovation plan announced in September makes 

clear that the foundation for durable, sustainable economic growth 

must be innovation and investment. The Recovery Act, by providing over $7 billion for broadband grants and loans, directly supports building that foundation. With these funds, I am confident 

that America will take a significant step forward in achieving 

President Obama’s vision of bringing the benefits of broadband to 

all Americans. 

Small businesses are the backbone of the American economy, and 

broadband connectivity is essential for small business. They stand 

to gain significantly from the broadband stimulus in the Recovery 

Act either by applying for funds directly or by benefiting from the 

improved infrastructure that will result from projects built in their 

communities. 

The economic impact of broadband access is real and measurable. 

Studies by experts at MIT and Carnegie-Mellon have demonstrated 

how communities with broadband see more rapid growth in employment, more rapid growth in business activity, relative to comparable communities without broadband. With access to modern infrastructure, small businesses can reach consumers worldwide in a 

manner they could have only dreamed of years ago, and they can 

now cost effectively compete against the largest corporations if they 

have a product the world wants. And these benefits reach small 

business wherever they are located, including rural areas. 

A recent report from the Department of Agriculture concluded 

that rural communities with high-speed broadband facilities experienced greater economic growth, specifically job growth and higher 

revenues, than their counterparts that lack the infrastructure. 

There are a myriad of other benefits to small businesses and 

communities from increased broadband availability. For example, 

the increased use of telehealth assists rural hospitals and remote 

health care systems in improving their capacity for treating patients. Telehealth can help cut health care costs for all firms, but 

especially for small businesses which consistently cite the rising 

cost of health care as a major concern. 

Our agencies have received an extraordinary response to our initial round of funding, and we look forward to the challenge of rewarding grants to a diverse set of recipients. 

Between our two agencies, we received over 2,200 applications 

requesting nearly $28 billion in funding, seven times the funding 

we had made available in the first round. At least one application 

was filed for each State, territory, and the District of Columbia. 

The applicant pool is diverse, includes States, tribal nations, 

local governments, nonprofit organizations, telephone, cable, and 

5 

wireless companies, and anchor institutions such as libraries, 

schools, and hospitals. We are particularly pleased to see strong 

participation from the small business community in the first round, 

particularly socially and economic disadvantaged businesses. 

Out of the total pool of applications submitted to us, around 15 

percent were made by socially disadvantaged businesses or from 

applicants who were partnering with SDBs. These applications account for just under $2 billion of the total $28 billion requested in 

the first round. 

This occurred because we made special efforts to encourage SDBs 

to apply to our programs. During our educational campaign last 

summer to informed interested parties about the grant program, 

we conducted three workshops that focused exclusively on providing guidance to small businesses, including small and economically disadvantaged businesses, as to how they could apply for 

grants. The Minority Development Business Agency and the Department of Commerce also helped publicize the opportunities of 

the grant programs to minority firms. 

Overall, I believe the significant number of applications filed by 

SDBs demonstrates the success of our outreach campaign to this 

business community, and we look forward to strengthening the program in our next funding round. 

We are currently in the midst of reviewing our applications, and 

as I noted yesterday at the Senate Commerce Committee oversight 

hearing, we are now targeting mid-December for the announcement 

of the first grant awards. 

But even in the middle of all this activity to review the current 

applications, we are constantly thinking about ways to improve the 

program. We are working with the Department of Agriculture to finalize a request for information to collect input from the public as 

to how to improve the program in the second round. In this RFI, 

we will ask for suggestions as to how we can streamline the application process and for comments on some of the key program definitions. 

As has been previously reported, RUS and NTIA are evaluating 

whether to combine the original rounds 2 and 3 into a single funding round. If we do so, we would expect to initiate the new application round after the first of the year. The key for us in setting that 

start date will be to make sure that we are able to apply the lessons learned from the first round in designing the second funding 

round. But, as required by the Recovery Act, we will award all of 

the broadband stimulus dollars by September 30, 2010. 

In my remaining time I would like to spend just a minute on our 

progress in developing the national broadband map. Under our 

State Broadband Development Data and Development Grant Program, for which Congress appropriated $350 million, our plan is to 

award a broadband mapping grant to every State and territory for 

the purpose of collecting and verifying broadband data in accordance with the standards we have set. We have now awarded eight 

grants totaling over $14 million under this program to Indiana, 

North Carolina, West Virginia, Arkansas, Vermont, as well as California, New York, and the District of Columbia. In addition, we are 

in the final stages of awarding additional grants next week, and we 

will continue to announce these awards on a rolling basis. Our statVerDate Aug 31 2005 15:27 Dec 14, 2009 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52893.TXT DARIEN
6 

utory deadline to publish a comprehensive interactive national 

broadband map is February 2011. 

In closing, we are working extremely hard to ensure that the 

broadband projects funded by the Recovery Act and the broadband 

mapping information developed from our Mapping Grant Program 

serve as valuable inputs to the Nation’s long-term broadband strategy. 

Thank you again for the opportunity to testify, and I look forward to your questions. 

Chairwoman VELA ́ ZQUEZ. Thank you, Honorable Strickling. 

[The statement of Mr. Strickling is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Our next witness is the Honorable Jonathan Adelstein, the Administrator of the Rural Utilities Service in 

the U.S. Department of Agriculture. The Rural Utilities Service is 

charged with enhancing public utilities to rural areas in the United 

States via public-private partnerships. Prior to his appointment, 

Mr. Adelstein served as the Commissioner of the Federal Communications Commission from 2002 to 2009. Welcome, sir. 

STATEMENT OF HON. JONATHAN ADELSTEIN 

Mr. ADELSTEIN. Thank you, Madam Chairwoman, Ranking Member Graves, and members of the Committee. We are certainly appreciative of the opportunity to testify here today, and it is a special honor to appear with my good friend, Assistant Secretary 

Larry Strickling, who has done such an outstanding job of leading 

the NTIA. And it is a real tribute to his leadership and our good 

working relationship that we have worked so seamlessly together, 

as he noted, in making sure these programs are coordinated from 

top to bottom. 

RUS has a long and highly successful experience since its beginnings as the Rural Electrification Administration back in 1935 in 

deployment of electric, telephone, and water service to rural areas. 

I think it is especially fitting that we are having this hearing here 

today, because today, actually this very day, marks the 60th anniversary of the telecommunications programs at RUS. 

We first began the telephone program trying to serve areas of the 

country. One third of the country of people in rural areas did not 

have a phone in 1949. And thanks to the RUS’ programs, today it 

is virtually universal. 

We are now applying this expertise that we developed beginning 

60 years ago to this newer technology, to broadband. And, as indicated by the major resources that Congress provided in the Recovery Act, improved access to affordable broadband is a high priority 

for the Obama administration and Congress, and I know it is for 

this Committee as well. It is certainly critical for the small business community, as you noted. Broadband levels the playing field, 

gives rural businesses access to national and international markets, enables very small and home-based businesses to succeed. It 

is one of the key foundations of the 21st century economy that 

rural businesses need to survive and remain competitive. 

We have done extensive outreach to small businesses, Assistant 

Secretary Strickling has noted. We have to put the benefits to 

small businesses front and center, as you are doing here through 

this hearing today. This summer, the USDA’s own Economic ReVerDate Aug 31 2005 15:27 Dec 14, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52893.TXT DARIEN
7 

search Service examined the economic effects of having broadband 

in rural communities. This report concluded that employment 

growth was higher and nonfarm private earnings greater in counties with a longer history of broadband availability. Benefits include access to online course offerings, telemedicine, telehealth 

services living in those remote areas. Agricultural producers and 

farm-based businesses are also more reliant on Internet access to 

conduct sales transactions, advertise their businesses, and monitor 

real-time changes in commodities markets, and tracking global crop 

prices. 

It is clear that broadband access is a necessary component for 

sustainable growth in rural communities. Small businesses are the 

engine of economic growth, and they just can’t make it without 

broadband today in rural America. So we need to make sure that 

small businesses in rural America have every bit as much access 

to broadband as those in any other parts of the country if our overall economy is to survive and to thrive and our growth is to be 

maximized. 

This isn’t just an issue for rural areas. The success of rural small 

business is an issue of concern to our overall economy. We are seeing jobs outsourced overseas at a time when they should be 

insourced to rural parts of the United States. That can’t happen if 

they have broadband in Korea, but they don’t have it in rural Alabama. We have to make sure that we do that. And the RUS I think 

is in a position to help. 

Since 1959 we have required that all new telecommunications capacity that we finance be broadband capable. Our Community Connect and Distance Learning and Telemedicine programs are examples of highly successful and oversubscribed programs that are key 

in the ability of rural areas to attract and retain small business. 

The USDA broadband loan program, which was created in the 2002 farm bill, has provided over $1.1 billion to more than 90 

broadband projects in rural communities spanning 42 States; 36 

percent of those loans have gone to startup companies, many of 

which, of course, are small businesses. So we know how to work 

with small business. We like to do it. We like to work with 

startups. And on top of that, we have provided $4.4 billion in loans 

since 2001 to our regular program for broadband-capable infrastructure. 

Now, the Recovery Act marks a huge new chapter for us in this 

effort. Since its enactment, we have worked side by side with our 

partners at NTIA, the White House, the FCC, and throughout the 

administration to fulfill the President’s vision of promoting 

broadband access to every part of the United States, and the collaboration we have seen has really been unprecedented. 

So the RUS and NTIA are now engaged in our respective reviews 

of applications for over $28 billion in funding requests, and we are 

using the 75 years’ experience that we have in lending to rural 

America. 

We have less than a 1 percent default rate for our telecommunications portfolio. So I think you had a hearing last week on capital, 

formation of capital availability, and we are—at a time when most 

lenders are reluctant to extend loans, we are looking at doubling 

our entire loan portfolio in 1 year with these Recovery Act funds. 

8 

We are a rural development bank and we are open for business. 

We want to provide those loans to these small businesses, and we 

are going to use the $2.5 billion in funding that Congress provided 

to leverage them to use our budget authority to provide loans, 

grants, and loan-grant combinations to prospective applications. 

We will stretch those $2.5 billion significantly to facilitate the deployment of broadband technology as far and wide as we can. 

We are now in the process of evaluating first-round applications 

and expect to begin issuing awards shortly. Our initial plan might 

have moved back by a few weeks, but we still hope to make announcements within a month of when we originally planned. 

Well over half of the investment we have is planned for the second round. So the concerns that you raised today and the changes 

we make can be applied in future rounds of funding. I think we 

should continue to plan to combine or plan for second or third 

rounds into a single round in order to give applicants additional 

time to create strong proposals and to ensure that we are able to 

meet the goal of obligating all funds by September 2010. And we 

certainly do need to streamline the process, as you indicated. 

We want to make this as easy for small business as we possibly 

can, and we understand some of the challenges that they face in 

the application process. So we will put forward an announcement 

soon about how we are going to move forward on these rounds. And 

we will certainly take to heart what we learned in the first round, 

some of the problems that small business have experienced. We 

want to listen to the concerns that have been raised. We are very 

aware of concerns that have been raised about a wide range of 

issues, not only the application process, but things like the definition of rural and remote areas, eligibility standards for unserved 

and underserved areas, scoring weights for various factors, and 

some concerns raised by satellite companies as well. 

Without speculating on specific changes we might make, we will 

certainly be guided by an evaluation of our experience in the first 

round and prepared to make changes accordingly. So we certainly 

welcome your input from this Committee on how we can best move 

forward and apply the lessons learned in round one toward the 

work ahead of us in the next round, which we anticipate in the 

coming months. 

Toward that end, the RUS and NTIA, as Assistant Secretary 

Strickling indicated, plan to seek formal written comments on ways 

to better meet the requirements of the Recovery Act very soon. We 

will release a request for information shortly to gather that information, and certainly welcome the Committee’s input on that. 

We will continue to assure that implementation of the broadband 

initiatives are a collaborative and coordinated effort with our partners at NTIA and throughout the administration. It is certainly an 

honor and a privilege to work with you on behalf of the 65 million 

Americans who live in rural America. We look forward to continue 

to work closely with Congress in making affordable broadband 

service widely available throughout the country. 

Thank you again for the opportunity to testify, and we would be 

happy to answer any questions you may have. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

[The statement of Mr. Adelstein is included in the appendix.] 

9 

Chairwoman VELA ́ ZQUEZ. In the first application period, you each 

took different approaches to evaluating applications by small businesses. Can you discuss that process and what steps are being 

taken to maximize participation by small firms? 

Mr. STRICKLING. I will start for NTIA. In our application process, 

we made it clear that applications brought by the SDBs, the socially disadvantaged businesses, would receive extra consideration. 

This appears in two parts of our evaluation. We have four areas 

in which we review applications, and in two of the areas, purpose 

and viability, the reviewers evaluating these applications are directed to give extra consideration in terms of extra scoring for 

projects where the applicant is an SDB or where the applicant has 

partnered with an SDB. Those two categories account for over 50 

percent of the total score of an application. So depending on how 

the reviewer evaluates the application, they can give substantial 

weight to that. In fact, in one of the categories they cannot even 

give a perfect score unless an SDB is actually part of the application. 

Chairwoman VELA ́ ZQUEZ. Mr. Adelstein. 

Mr. ADELSTEIN. We also provided advantage for small disadvantaged businesses in our application process. We did extensive outreach, along with the NTIA, throughout the country, particularly 

trying to reach out to small businesses. One of the problems we 

have had, of course, you talked about the application process being 

unwieldy. We did agree to have a two-step process so that rather 

than having to provide all the information in the first round, there 

would be a two-step application process where the applicant would 

give initial information and we would ask certain applicants that 

were to advance into the process for additional information so that 

a small business would not be burdened with the entire need to 

provide all the detailed financial information in the first round but, 

rather, we would give them a two-round process. 

And also during the application process we found some issues in 

the system that were making it difficult for businesses to get their 

applications in. We tried to respond to that by providing an extra 

week to respond, allowing applicants who were having issues to get 

us their applications through different media if it wasn’t working 

through our online intake system. 

Chairwoman VELA ́ ZQUEZ. You provided stats on a number of 

firms applying. Do you have any preliminary estimates of how 

much money will actually go to small firms? 

Mr. ADELSTEIN. We don’t know yet. We are still in the middle of 

the application process, and it is very difficult to predict who is 

going to end up with the awards. We know how many we got in, 

but we don’t necessarily know yet how many will go out to small 

businesses. 

Mr. STRICKLING. That is true for us as well. 

Chairwoman VELA ́ ZQUEZ. Mr. Strickling, the requirement that 

BTOP applicants provide matching funds of 20 percent could prove 

a major obstacle for small businesses, and especially now, given the 

economic climate and the fact that they are having so much trouble 

in accessing affordable capital. Given that the NTIA has the authority to grant waivers, how is your agency working to reduce this 

challenge for small companies? 

10 

Mr. STRICKLING. Well, you are correct that in the first instance 

we do have the waiver authority where an applicant can make a 

compelling case that they were unable to provide the full match. 

We can take that into consideration. We have not yet brought forward any of those requests for decision yet, and will only do so as 

projects go through the due diligence process. 

The other thing that I guess I would urge consideration of is the 

fact that one of the big benefits of this program, even in communities that don’t actually receive funding from us, is the discussions 

that this program has generated all across the country. And we are 

getting groups together who haven’t been talking to each other in 

the past, to talk about how can our community be served by the 

broadband grant program, and organizing themselves in partnerships and consortia in terms of putting applications together. 

So even if an individual small business might find the application process challenging, might have concerns about finding the 

matching dollars on its own, we are seeing case after case of groups 

of entities forming together, banding together to bring an application to us. We think that that is a very important and interesting 

development that the act has caused, without spending a single 

dollar, and we hope to see that sort of organizational activity continue on across the Nation as a way for people to kind of bring 

their demand, aggregate their demand together into a project that 

maybe we will be able to fund. But even if we are not, it becomes 

perhaps a more attractive project for private industry to fund. 

Chairwoman VELA ́ ZQUEZ. Thank you. You are supposed to announce grant and loan awards by November 7. Are you on schedule 

to meet this target? 

Mr. ADELSTEIN. We said no sooner than November 7. But we are 

really looking like it is more likely to be in December possibly. We 

may be able to get some out in November, not clear; but given the 

complexity and overwhelming demand for the program, it appears 

that that is slipping by at least a few weeks. 

Chairwoman VELA ́ ZQUEZ. So what type of updates have you given 

to the applicants regarding their pending applications. 

Mr. ADELSTEIN. Well, we are still evaluating most of the applications. We have sent some forward to due diligence and we have 

asked for that second round of information from a handful of applicants and we are considering asking for more of that information 

in the very near future. So we generally have not given them a lot 

of updates. We are still going through and processing this applications. 

Chairwoman VELA ́ ZQUEZ. Some small service providers, Mr. 

Adelstein, have been critical of the requirement giving the RUS an 

exclusive first lien on projects receiving Federal money. Many 

small firms have suggested that this was a detractor to even applying. Is anything being done to mitigate this challenge for small applicants? 

Mr. ADELSTEIN. Yes. We are looking at different legal opportunities for them. I actually spoke before the hearing with the representative who will testify this afternoon for the American Cable 

Association, who indicated for them it was a major hurdle, and we 

understand that. 

11 

Obviously we have a very long history in doing loans, that we 

tend to put a very strong first lien on the assets of the company 

in order to secure the position of the United States so that we can 

ensure that our position is protected. That is critical for a number 

of reasons, not only to protect the taxpayers but also to protect the 

program so that, going forward, we can continue to have that 1 

percent default rate I talked about. And to the extent we do get defaults, there is either a small or minimized loss to the United 

States. 

That being said, I understand that for small businesses they 

have a hard time because they may have financing out from a private bank or financier, and we come in and say we need to have 

the first lien. And that can create a conflict with their existing— 

Chairwoman VELA ́ ZQUEZ. Violating the terms of those loans that 

have been granted to them. 

Mr. ADELSTEIN. Exactly. So that requires a renegotiation with 

their existing financier or some fear about applying in the first 

place. Normally what we do in this situation is do an individualized custom mortgage and work with the other lenders to come up 

with an arrangement and accommodation. In the case of this program, our concern is that because of the size and the scope and the 

number of applications that are coming through in short order, 

that it is more difficult for us to do a custom mortgage for each one 

of the applicants, which makes it tougher basically to accommodate 

these concerns. 

Chairwoman VELA ́ ZQUEZ. So how can you mitigate that? 

Mr. ADELSTEIN. Our plan to mitigate—good question—is to think 

about are there some different options for mortgages that we can 

provide. We provided a model on our application portal so people 

can see what it would look like to have the first lien, which is a 

fairly strong one. I think might have scared away some applicants 

and understandably so. 

Now we are looking at coming up with maybe a variety of them. 

Rather than having custom ones for each applicant that comes in, 

maybe a small number, a limited number of different options that 

they could choose from, some of which may accommodate their existing financial arrangements. 

Chairwoman VELA ́ ZQUEZ. This is a very important issue for small 

companies, and I hope that you can get a way to mitigate such a 

requirement. 

Mr. ADELSTEIN. Thank you. We will try to do that. 

Chairwoman VELA ́ ZQUEZ. Mr. Graves. 

Mr. GRAVES. I appreciate it. I have a couple questions. The first 

one is what steps are your agencies going to take—and I kind of 

talked about this in my opening statement—but what steps are 

your agencies going to take to ensure that stimulus dollars are not 

used to duplicate or build existing infrastructure? Can you be the 

backstop to make sure that we are not going to be spending money 

going into areas that are already adequately served? And that is 

a pretty important question. 

Mr. STRICKLING. I will take the first response on that. 

For infrastructure projects, we will not award dollars unless the 

funds are going to a proposed service area that meets our definition 

of unserved or underserved. So in either situation, those would be 

12 

areas that by definition are not being adequately served by existing 

providers. So I think we meet your concern. 

Mr. GRAVES. What is that definition, just out of curiosity? 

Mr. STRICKLING. ′′Unserved′′ would be that 90 percent of the people living in the proposed service area do not have access to 

broadband service. For ′′underserved,′′ it is a three-part test—any 

part of which can be satisfied—to satisfy the definition, which 

would be that 50 percent or more of the residents do not subscribe—do not have it available, that 40 percent or more do not actually subscribe, or that there is not already an existing provider 

who advertises a service at three megabits per second or faster. If 

any of those conditions are met, then the area is deemed underserved for purposes of infrastructure projects. 

Mr. ADELSTEIN. We use the same definition of unserved. We 

have, as he said, a coordinated program. So the same definition of 

underserved and unserved. And we really try to target those most 

remote areas of the country that have no service at all. 

We are going to continue to figure out ways to even approve that 

process and target the funds towards unserved areas. It is really 

the mission of the USDA to get service to people who don’t have 

any at all. There are other important areas that are underserved 

that we are permitted and encouraged by the statute to serve as 

well. But I think we need to try to target our areas on the most 

remote areas. In fact, we have come under some criticism for going 

to too remote of an area, and we are thinking about ways that we 

can adjust that. But we do want to focus on unserved areas. 

Mr. GRAVES. That is extremely important. If anything, we want 

to make sure that those areas that don’t have any access at all are 

going to get it. In the future, at least with future funding rounds, 

are you all taking steps or trying to figure out ways to make this 

process easier or less costly? 

Mr. STRICKLING. Absolutely. And as we both indicated in our 

statements, we will be going out to the public very soon to get their 

input as to what changes they would like to see, and so that we 

are in a position to consider and accommodate as many of those 

concerns as we can for the second round. 

Mr. GRAVES. Okay. 

Chairwoman VELA ́ ZQUEZ. Would the gentleman yield? 

Mr. GRAVES. Absolutely. 

Chairwoman VELA ́ ZQUEZ. So you mentioned before, the second 

round will start at the beginning of the year? 

Mr. STRICKLING. We don’t have a firm date set, but today I would 

say I would expect it would start sometime in January. 

Chairwoman VELA ́ ZQUEZ. November is almost here. You will be 

listening to small businesses. This is a session that you are going 

to be conducting with those who applied for this, and then coming 

up with the recommendations or making the adjustment or the 

changes? 

Mr. STRICKLING. The RFI process is a paper process where people 

would submit written comments. We are still evaluating what 

other outreach we might conduct during that period. Certainly once 

our rules are issued to kick off the second round, just as we did 

for the first round, we will go around the country and conduct 

workshops, just as we did the last time, including some focused exVerDate Aug 31 2005 15:27 Dec 14, 2009 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52893.TXT DARIEN
13 

clusively on small business and socially disadvantaged businesses 

to help them work their way through the application process and 

explain ways that they can get through the system. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. GRAVES. I have got a letter I am putting together now with 

many suggestions, particularly for rural areas, which I am going to 

make available to all the members of the Committee if they want 

to sign on. But we will be sending that over right away with our 

suggestions. 

Chairwoman VELA ́ ZQUEZ. Ms. Dahlkemper. 

Mrs. DAHLKEMPER. Thank you, Madam Chair. And I thank the 

distinguished witnesses here for coming forward to this Committee, 

this very important topic. 

In July, Vice President Biden, Secretary Vilsack, Secretary 

Locke, and other top administrative officials actually traveled to 

Erie County in my district to highlight the role of the Recovery Act 

broadband programs. As I noted then, broadband access is critical 

to rural business competitiveness. 

Mr. Adelstein, can you highlight how some of the proposed 

projects you have seen address rural competitiveness issues particularly in the areas of education and health care? 

Mr. ADELSTEIN. We have seen a lot of that. Your district is where 

this whole thing kicked off and my boss, Secretary Vilsack, came 

out there and was thrilled to see the possibilities for Erie. 

We have been involved in a number of projects in the past, community connect projects that for what we call our distance learning—telemedicine program, and our community connect program— 

that fund educational and health care services that are really critical for sustainable growth in rural areas, and many people want 

to live there. 

We have seen great success in allowing remote clinics, for example, to be able to get access to specialty hospitals that have the expertise that can deal with emergency issues that come up in rural 

areas that otherwise they wouldn’t have available that kind of expertise in a rural clinic and they may not have time to get to the 

urban area. But because of the beauty of telemedicine, they can do 

that. 

But you can’t send these large data, radiographical information 

and instant communication with the specialty hospitals, to do the 

diagnostics they need to unless you have broadband. So for health 

care I think it is critical. 

I was in Alaska up in Kotzebue one time, and if you are out in 

the bush outside of Kotzebue, these villagers that can take 60 miles 

by dogsled is the only way to get to Kotzebue, just to even that 

health clinic. So we don’t have broadband out there, and they are 

using satellite now which has got issues in that particular community. They don’t have the ability to get the health care they need. 

So for education, for health care, I think you are exactly right 

that these are critical applications for small rural businesses and 

small rural areas. 

Mrs. DAHLKEMPER. I have a question regarding the actual process of determination of who actually receives these grants. I had 

one of the applicants come into my office actually this week, and 

they have come through highly recommended, but were not recVerDate Aug 31 2005 15:27 Dec 14, 2009 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52893.TXT DARIEN
14 

ommended by the State. How much is the State’s recommendation 

going to play in this? Because part of the question was, because the 

State is also applying for their own projects, you know, is there 

some waiting going on there within the State to try to make sure 

that their own projects are getting funded, and then recommending 

who gets funded and who does not? So I guess I am asking the 

question, you know, is there a fairness in this, and how much is 

at stake? 

Mr. STRICKLING. This is really unique to our program at the Department of Commerce. We did give each State an opportunity to 

provide input to us on the applicant pool. What we were primarily 

focused on was getting information from them in terms of what 

they would identify as the areas geographically that they viewed as 

priority areas for our project dollars. 

You are correct that in some cases States have applied directly 

themselves for grants. The statute, however, gives States the ability to provide this input to us. I think the conflict is out in the open 

for everyone to see. When we get these letters back, they are just 

another piece of input for our process. They are not determinative 

of anything. 

For an application to pass into due diligence, it is reviewed by 

three independent reviewers and it has to pass a threshold score 

from those reviewers to be passed into due diligence. The State 

cannot recommend a project and have it come into due diligence if 

it doesn’t otherwise merit that evaluation from our independent reviews. 

Mrs. DAHLKEMPER. So there were two projects, though, that were 

equal, and the State recommendations probably would have some 

weight in that? 

Mr. STRICKLING. It is another factor that we would look at, along 

with a host of other issues. 

Mrs. DAHLKEMPER. But I should be able to tell this applicant 

that they are not out of the picture because the State did not put 

them on the list? 

Mr. STRICKLING. That is correct. 

Mrs. DAHLKEMPER. I appreciate that. 

Mr. Adelstein, in testimony delivered earlier this year. NTIA’s 

Mark Seifert encouraged applicants that involved partnerships 

amongst small businesses and municipalities and others join together to promote broadband. In my own community, I have got 

these two applications who have joined together. What steps are 

being taken to encourage this partnership across the country and 

as we go into further application process? 

Mr. ADELSTEIN. It is great you raise that issue, because it is 

something we are thinking a lot about at USDA. Our Secretary, 

Secretary Vilsack, is very interested in regional economic development. Being any regions that are banding together to try to work 

towards the development of that area tend to be more successful 

historically than those that are operating on their own. 

So we are, in the RFI that we are going to put out, planning to 

ask questions about how can we encourage exactly those efforts? 

How can we look to regional planning that includes an element 

that would support broadband? How would broadband fit into that 

regional economic development plan to encourage these commuVerDate Aug 31 2005 15:27 Dec 14, 2009 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52893.TXT DARIEN
15 

nities to work together towards a comprehensive solution? It is not 

enough to get broadband into the community. We want them to 

have a broader economic development plan. 

Mrs. DAHLKEMPER. So do they get a higher score if this is included? I have seen great things happen in my own district where 

they are coming together, county governments, small businesses, 

other economic development engines. 

Mr. ADELSTEIN. That is sort of the options that we have for the 

next round. That is sort of the questions we are going to ask in this 

request for information: Should we award higher points to those 

that have regional development plans that include a broadband element? I think it is a good suggestion. 

Mrs. DAHLKEMPER. My time has expired. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Thompson. 

Mr. THOMPSON. Thank you, Madam Chairwoman. And thank you 

to those who are testifying today. I really appreciate it. 

As I travel throughout my district, which is the Pennsylvania 

Fifth, it is larger than eight States so it meets, I think, a fair 

amount of those definitions of remote or underserved or unserved 

in terms of broadband technology. The importance and the need for 

access to rural broadband is just really illustrated time and time 

again as I spend time throughout that district. Business and economic development, jobs, is a result of that, education and health 

care. And certainly within the Pennsylvania Fifth there are many, 

many communities and counties that are unserved or underserved 

with broadband technology. Communities like Renovo, Pennsylvania and Western Clinton County, where the small businesses, 

the school, the rural hospital, frankly, are very hopeful that this investment may at some point finally bring access to the broadband 

that they need, because it hasn’t—broadband has not been successful by conventional means for that area. 

I wanted to follow up on Mrs. Dahlkemper’s question, being a fellow Pennsylvanians, and in terms of—Mr. Strickling, what guidance of criterion were provided to the States such as Pennsylvania, 

ensuring that the projects that they recommended met the definition of unserved or underserved? Were there criterion or guidance 

provided, or this is just the wish lists that come from the States? 

Mr. STRICKLING. The States were given an opportunity to provide 

whatever input they wanted to us. We are not relying on them to 

tell us what is an underserved or unserved area. We wanted them 

to tell us what they view as a priority area for projects. 

Mr. THOMPSON. Priority based on? 

Mr. STRICKLING. Largely based on the absence of the service 

being in the community today. But we will make the judgment 

whether any particular application satisfies our test for unserved 

or underserved. We absolutely invited States to provide data that 

they might have to help us answer that question. But they won’t 

make that decision. We will. 

Mr. THOMPSON. Thank you. I understand there are about 2,200 

applications. Can you explain the process for reviewing those applications seeking Federal funds and your use of volunteers to helping 

the processes? 

Mr. STRICKLING. Sure. As I said yesterday, I prefer to call them 

independent experts, but in fact they are doing this at no cost to 

16 

the Federal Government. I like to say they are doing their patriotic 

duty to help us. And the pool is an impressive pool. We have folks 

who are volunteering their time, who have served as senior executives in telecommunications companies, people who have built 

these kinds of projects before but maybe they are retired and they 

just want to give back to the community. We have in one case the 

former chair of a State public utility commission who has dealt 

with these issues for years and years. 

So they are highly qualified people. Our pool of experts is over 

a thousand. Each of them was vetted for expertise. We reviewed 

their resumes and we also reviewed whether or not they might 

have a conflict of interest because they had worked on an application that had been filed or they worked for a company that either 

filed an application or might be competing with somebody who filed 

an application. So we eliminated about 300 people from the pool for 

conflicts or for lack of qualifications. 

So the process is that each application is reviewed by a panel of 

three of these experts, and they each individually provide us a 

score based on criteria that we provide them in a fairly voluminous 

manual to guide them through the process. 

All that is a screening, though. All that does is those scores come 

back, and those applications who have an average score above a 

certain threshold are then moved into due diligence. At that point, 

my staff, the professional staff, supported by experts from our contractor, Booz Allen, do a complete top-to-bottom scrub of the application and really look very carefully at do these people have the 

management capability to build a project? Does the budget make 

sense? Is this project sustainable? Meaning, will it still be operating 5 years from now when there is no Federal money to support 

it. Are the benefits that are claimed really real benefits that we can 

expect? So we do all that evaluation ourselves on the top applications, and then we will select from that pool based on the review 

that we do. 

So the first part of this is really just an initial screen to find the 

best applications in the pool. As I have said repeatedly, and I tell 

my staff every day, don’t worry. We are going to have good applications that don’t get funded because we were oversubscribed by 

seven times. 

What we need to do, though, is to make sure that every application we do fund is a good application and is one that 5 years from 

now will still be operating and still be providing service in their 

community. 

Mr. THOMPSON. Thank you, Madam Chairwoman. 

Chairwoman VELA ́ ZQUEZ. Mr. Michaud. 

Mr. MICHAUD. Thank you very much, Madam Chairwoman, for 

having this hearing. There has been—and I want to thank the panels as well for your testimony this morning. There has been more 

than approximately 830 parties that submitted applications jointly 

to RUS and NTIA. Has RUS gone through the projects and advised 

NTIA which ones that they will not fund? 

Mr. ADELSTEIN. We are still in the process of consultation with 

NTIA on that. There are large numbers, as you indicated, of joint 

projects and we are evaluating them simultaneously. At the same 

time, we are looking at them, NTIA is looking at them, so we are 

17 

not slowing one another down. Yet we haven’t made determinations 

as to which ones exactly we are or are not going to fund in most 

of these categories, so we are not yet in a position to indicate to 

NTIA which ones we are turning down. I can’t speak for Secretary 

Strickling, but I don’t think that is slowing them down in their 

evaluation. 

Mr. MICHAUD. And when do you plan on having your part of the 

process done? 

Mr. ADELSTEIN. Well, we have made a lot of progress and we are 

starting to wrap up in certain categories where we are in some of 

the remote projects. So I think this month we will have a much 

better sense—I should say November this coming month—of where 

we are. 

Mr. MICHAUD. Does NTIA plan on preserving any funds for jointly submitted projects that RUS decides not to fund? 

Mr. STRICKLING. Yes. Absolutely. We had indicated a total funding round of $1.4 billion to $1.6 billion, and we absolutely are interested in looking at the projects that RUS determines not to fund. 

And as Administrator Adelstein said, we are reviewing the applications in parallel, so we are not waiting to hear from the Department of Agriculture to actually initiate the review of a joint application. We are looking at them right now. 

Mr. MICHAUD. And if a project sponsor that has requested—submitted a project to RUS due to the rural nature of its proposed 

service area, if they haven’t heard anything back from RUS by now 

or NTIA, does mean that the project is no longer being considered? 

Mr. ADELSTEIN. No. Definitely not. We are considering a number 

of projects for which they haven’t heard back from us because we 

are still reviewing them. A number of them are live. And I know 

we have had some concern from some applicants that are wondering where they are at in the process, because they haven’t heard 

back from us but we are—because of the number of applications we 

received, we haven’t yet made those determination. So there is no 

need for concern. 

We have sent out a small handful of due diligence requests for 

a number of companies, but it is a very small number and we are 

going to be sending out many more. So just because somebody 

hasn’t heard from us doesn’t mean that, under any circumstance, 

they are not necessarily a live application. 

Mr. MICHAUD. Thank you. Mr. Strickling, in your testimony you 

mentioned that NTIA is considering the funding recommendation 

made by each State. How much weight does NTIA give to the 

State’s recommendation? 

Mr. STRICKLING. It is another factor for our evaluation. So we 

will look at it, we will take it into account. It doesn’t have any particular weight on its own. 

Mr. MICHAUD. And what about RUS? Does RUS give any weight 

to a State’s recommendation? 

Mr. ADELSTEIN. We don’t have a legislative requirement to create 

a formal State process like NTIA does. We do have a very good relationship with the States. And I think that to the degree that they 

have input, we are looking at what they have to say as a factor, 

but it is not something that we are required to do through a formal 

process like NTIA. 

18 

Mr. MICHAUD. Has RUS established any general guidelines to direct the first rounds of awards? Do you have anything in writing 

on your general guidelines? 

Mr. ADELSTEIN. We do. It is in the NOFA, very detailed requirements and very explicit criteria by which we are indicating what 

we are looking for in the funding pot. So we have been very clear, 

I think, about what the main criteria are by which we are going 

to judge applications in an objective way. 

Mr. MICHAUD. Will a greater amount of funding be committed to 

smaller-type projects over larger initiatives? 

Mr. ADELSTEIN. Well, we certainly hope so. We have a lot of applications from small businesses; 34 percent of our applications are 

for less than $1 million. So we traditionally, in our past experience, 

have given a lot of funding to small companies and startups, and 

we hope to continue down that path; and this process is really a 

good application and scores high in our objective criteria, we are 

going to look forward to funding a lot of them. 

Mr. MICHAUD. And you plan on utilizing all the funding that you 

have? I have heard some concerns about RUS, even though there 

is money appropriated, sometimes they don’t like to give all the 

money out. 

Mr. ADELSTEIN. We like to give the money out, but we won’t do 

it unless somebody reaches all the eligibility criteria and scores 

high enough. We will—we do think we will able to obligate all of 

the funding that was provided to us by September 30, 2010. 

Mr. MICHAUD. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Bright. 

Mr. BRIGHT. Madam Chair, thank you very much for this important timely meeting, and I promise never to speak out of turn 

again, much less since I am the last one to be called on, and I do 

appreciate your consideration. And let me thank the witnesses for 

being here. You have really given us some tremendous information 

today that we can take back to many of our constituents out there 

who are interested in these very valuable resources. 

And as we all acknowledge, America’s small businesses stand to 

benefit greatly from increased access to broadband. We know that 

while dial-up Internet services can provide some of the same applications and services, broadband services permit faster downloading 

and unloading of bandwidth rich applications: video, music, pictures, and data. And as consumers or producers of these services 

and applications, small businesses stand to benefit from broadband 

deployment and its use. 

One project, one particular project in my district does exactly do 

what you say, Mr. Strickling, and that is forge a relationship and 

a partnership between several different entities out there. And it 

would also do something that we are all trying to do, and that is 

to integrate the smart grid technology with the broadband in order 

to serve over 14,000 homes in my district and nearly 400 businesses in unserved and underserved areas of my district. 

I applaud these projects, and this project specifically, and others, 

and would ask that you seriously consider those applications or 

these applications or all these applications in awarding any of 

these resources to these particular areas. 

19 

And, Mr. Adelstein, you acknowledge that Alabama is in great 

need because we are a very rural area. My area is very rural, and 

we are really looking with great anticipation of where these resources can be applied in our district so that we can have access 

to this unique and very important service out there. 

Broadband development would be particularly beneficial in small 

businesses in my State, in Alabama. I have a large number of 

small businesses in my district that operate in rural areas, and 

studies indicate that this puts them at a further disadvantage 

when it comes to competing with other businesses out there. 

The Small Business Administration found that rural small businesses do not subscribe to broadband services as frequently as 

urban small businesses do, finding the difference in broadband use 

between rural and urban areas to be statistically different. 

I also know that rural small businesses tend to pay higher prices 

for broadband services than rural small businesses do, probably because of the cost associated with serving less populated areas and 

a lack of competition in rural areas. This fact highlights the importance of the $7.2 billion made available through the American—or 

the stimulus project legislation, and for increased deployment and 

adaptation of broadband technologies. 

Of further importance is ensuring that in the process of awarding 

these funds we get it right. I am appreciative of your willingness 

to do that. I look forward to working with you and working with 

your staff to make sure we do get it right. 

Many of my questions have already been asked and you have answered them. I am just really concerned with one area because we 

are so rural. And I guess, Mr. Adelstein, this question would go to 

you. And that is the definition of ′′remote′′ areas. I heard you mention that in your opening statement, and you really didn’t go into 

great detail. 

I would like for you to go into great detail as much as you can 

as defining and going through the procedure of determining what 

is a remote area or a rural area, if you would. 

Mr. ADELSTEIN. In the first round we defined ′′remote,′′ which we 

focused all of the grant funds on, as being 50 miles away from a 

town or 20,000, or urbanized area of 50,000 or more, and there was 

a circle around them which some have complained excluded too 

many communities. And we understand those concerns that have 

been raised, and we are really reconsidering whether that is the 

right way to go forward in the second round. 

We understand that a number of communities were excluded 

that, in fact, have very high costs of providing service that are 

truly underserved or unserved. And so we are looking at how we 

can alter that definition. We would certainly welcome your input 

on how best to define that going forward. 

You know, we really wanted to target the funds on the most remote areas and the most hard-to-serve areas. But maybe we didn’t 

draw the line exactly where we should have, and that is something 

that we are contemplating now and we are going to ask that question in the next round of funding. Where should we go? How should 

we define this? What are some of the other factors? 

Mr. BRIGHT. Do you intend to withdraw or remove that to definition at all, at this point in time in the new or the next round? 

20 

Mr. ADELSTEIN. We are completely open to changing it. I think 

we are finding that there are challenges associated with that that 

we haven’t fully anticipated, and we are doing a top-to-bottom review of whether or not it is a good idea to change that and, if so, 

how? What are the other factors we might look at besides simply 

distance from an urbanized area? 

So we are open to change and really welcoming all comments on 

that in the next week or two through our RFI to figure out how 

to address that going forward. 

Mr. BRIGHT. Thank you very much. My time has expired, and I 

will turn it back over to the Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Altmire, do you wish for time? 

Mr. ALTMIRE. No questions, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. I do have another question, Mr. 

Adelstein. Of the $2.5 billion being allocated for the bid program, 

2.4 has been set aside for this first round. Given the concerns about 

the application process, is your agency considering reallocating 

some of the funding towards the second round? 

Mr. ADELSTEIN. That is a very good question. Let me explain 

what we meant by the $2.4 billion, because we actually are able to 

leverage our budget authority provided by Congress to provide up 

to 7 to 9 billion in loans and grants. So the 2.4 billion is only the 

loan and grant amount combined, not just grant. So we anticipate 

that well over half of the amount is still left. 

I know the math doesn’t sound right with 2.4 versus 2.5, but that 

is because the 2.4 we anticipate includes a major loan component. 

So our total program amount being 7 to 9 billion, we are using only 

2.4 out of 7 to 9 total program level. So, in fact, upwards of twothirds of the funding remains for the following rounds of funding 

and will be available for any of the changed criteria that we use. 

Chairwoman VELA ́ ZQUEZ. Okay. Any other members who wish at 

this point? 

Well, thank you so very much for being here today, and we will 

continue this conversation with you, making sure that you are listening to small businesses and that in the second round some of 

the concerns that have been raised will be addressed so that we 

could have a more level playing field for small business. Thank 

you. 

Mr. ADELSTEIN. Thank you. 

Chairwoman VELA ́ ZQUEZ. You are excused at this time.RPTS 

MERCHANTDCMN NORMAN[11:49 a.m.] 

Chairwoman VELA ́ ZQUEZ. The Chair recognizes the Ranking 

Member for the purpose of introducing our next witness. 

Mr. GRAVES. Thank you, Madam Chair. Madam Chair, I would 

like to introduce Mr. James Gleason from Sikeston, Missouri. Mr. 

Gleason is the President and CEO of NewWave Communications 

and has served in this capacity since 2003. Mr. Gleason serves on 

the board of the American Cable Association and was formerly the 

chairman. It is an honor to have a fellow Missourian here before 

the Committee. And thanks for coming to Washington to participate in our hearing today. 

Mr. GLEASON. Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Mr. Gleason, you are recognized for 5 

minutes. 

21 

STATEMENT OF JAMES GLEASON 

Mr. GLEASON. Thank you Madam Chairwoman Ranking Member 

Graves and members of the Committee. The ACA based in Pittsburgh, Pennsylvania represents nearly 900 small- and mediumsized cable companies, providing Internet access to predominately 

rural and smaller markets in every State. 

My company NewWave serves 115,000 customers in Kentucky, 

Illinois, southeast Missouri, northeast Arkansas, west Tennessee 

and is headquartered in Sikeston, Missouri. Our members have 

historically invested in communities where the big guys find it unattractive to provide service. ACA members have built these networks without any direct Federal subsidy. We view the broadband 

stimulus program as an important investment to bore our networks 

deeper into rural communities so they can enjoy the benefits of access that many urban consumers take for granted. 

I am pleased to report that all 83 ACA members have applied for $1.3 billion in grants and loans. My company, NewWave, has applied for $10.1 million in funds to upgrade fiber and cable facilities 

in 11 needy communities in Illinois, Indiana, Missouri and South 

Carolina. The network upgrades will be state-of-the-art fiber-to-thecurb designs that will offer data speeds up to 100 megabits per second. 

While we are hopeful that our application will be accepted, the process costs us over $50,000 to complete with no guarantee on 

funding. The vast majority of these areas NewWave has applied for 

are currently unserved and would not have broadband access without this program. 

As companies with decades of experience in rural America, ACA 

members have a proud track record of achievement that demonstrates why they are ideal candidates to receive funding from 

NTIA and RUS. ACA is pleased with the $800 million that has 

been dedicated for middle-mile projects which are critical to the 

goal of speeding broadband deployment in rural areas. 

Our members have already upgraded their last-mile networks to 

provide faster broadband speeds. What is still needed is a better 

and more affordable middle-mile connection. That is the part of the 

network that runs between a cable broadband provider’s central office and an access point to the Internet’s backbone. Even though 

ACA members have upgraded their last-mile networks, the data 

chokepoint persists due to the lack of middle-mile facilities and insufficient capacity. End user speeds in rural areas suffer as a result of limited or nonexistent middle-mile capacity. 

Concerning the application process, there are many ACA members who would have applied for funding but were discouraged because of two specific requirements, both of which were discussed 

previously. And that is the first lien rule and the resale rule. The 

government’s insistence on holding a first lien would violate the 

terms and conditions of many of our bank loan agreements, making 

it impossible to apply for funds. 

Next, the resale rule prohibits the sale of a federally funded 

project for ten years. Such a restriction ignores that sometimes 

such transactions can be beneficial for consumers. 

While a company can seek a waiver, the standard to meet the 

waiver is very ambiguous. The application review process should be 

22 

streamlined and simplified too. Because the agencies have not vetted applications to determine whether a market is already served, 

every broadband provider, whether they apply for funds or not, is 

burdened with reviewing all of the applications. Otherwise the government could waste the limited resources, funding a project where 

we are already providing broadband service. NewWave alone is spending more than $30,000 just to prove to 

the government where we already provide broadband service. This 

process is burdensome and time-consuming. It is almost impossible 

for our members to fully respond to applications in our service 

areas within the 30-day deadline. 

As recently as yesterday, the mapping tool was down for significant periods of time, limiting the ability of existing service providers to respond. If no objections are filed, the agencies presume 

there is no existing service where the applicant applied for funds. 

The agency should confirm if an area is already served and therefore not eligible for funding. Such information is readily available. 

Our members are already required to report to the FCC the 

broadband areas we serve, along with the number of subscribers 

and speeds every year by census track location. At the very least, 

the agencies could eliminate those applications that clearly do not 

meet the minimum criteria before incumbents are expected to review applications. 

Finally, we believe applicants should be able to apply for funding 

through either RUS or NTIA. All rural applicants must first file 

with RUS. The definition of ′′remote,′′ as has been discussed here 

today, is so narrow that it is hard to find areas even in Iowa that 

meet that standard. Nonremote rural areas are only eligible for a 

50 percent loan grant combination. 

In conclusion, we believe that reasonable revisions to the funding 

programs will offer greater efficiency for all providers so rural communities receive the service they deserve. 

Thank you very much and I would be happy to answer questions 

you all may have. 

Chairwoman VELA ́ ZQUEZ. Thank you Mr. Gleason. 

[The statement of Mr. Gleason is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. You discussed the importance of the 

modern middle mile in providing a more robust, faster Internet. 

How can Congress, the FCC, or other agencies encourage greater 

investment in this critical infrastructure? 

Mr. GLEASON. Well, the middle-mile component is something that 

I think a lot of times gets missed in the discussion of fast Internet 

speeds. And as I mentioned, particularly in our company’s case, the 

last-mile component, the part that goes throughout the community 

and to the customer’s home, has been upgraded and is very capable 

of delivering very high data rates. 

What is missing in many cases is if you think of the interstate 

highway system, the broadband long-haul fiber network in this 

country is similar to the interstate’s. It goes to the big cities. What 

is different is there is not really off ramps to rural areas. 

And so I think the agencies have done a good job by dedicating $800 million to the development of open access middle-mile components so that there will be more competition in that area, bringing 

higher capacity lines out to rural areas. So we are very hopeful 

23 

that since they have done that, that after the funding period and 

after applicants are awarded grants, that that will begin to change. 

Chairwoman VELA ́ ZQUEZ. You raised the issue of the restriction 

preventing an award received from selling or leasing an award 

funding facility, and this has been raised by small business advocates as well. How does this requirement impact innovation and 

growth for small companies? 

Mr. GLEASON. In the first lien requirement? 

Chairwoman VELA ́ ZQUEZ. Yes. 

Mr. GLEASON. Well, I can tell you in our case we already have 

a bank and they already have a lien on the assets of our company 

in the systems that have not yet been upgraded, and that is due 

to the fact that they are remote and not commercially feasible. 

So I applaud what Mr. Adelstein said, that they are going to 

come up with five or six different options for applicants to apply 

for, or to try to buttonhole into options to where that first lien 

might be modified. I really think that they are a lender, so what 

they are going to have to do in order to get these funds out, they 

are going to have to be a flexible lender. Because you don’t want 

to eliminate incumbents in certain areas that already have customers. We are applying for an area in Cairo, Illinois, which is a 

very disadvantaged area and no broadband service exists today, 

but there is already a lien on those properties. So in order—and 

we already have 350 video customers there. So we would be a very 

qualified provider of broadband service in Cairo because we have 

an embedded customer base. But we have got to have them be 

flexible when it comes to lien requirements so that we can work 

around that. 

I know for a fact that in our membership’s case, we had a number of companies that would have applied but for the first lien rule 

and the 10-year hold. 

Chairwoman VELA ́ ZQUEZ. You heard that a lot of the members 

here raised the concern about the frustration with the application 

process to both gentlemen that were here because it is complex and 

it really discouraged participation. Of the information requested in 

the application, what were the most intensive to complete? 

Mr. GLEASON. The biggest part, the biggest problem that we 

found in the application process is that we were required to have 

complete design projects done for the communities we propose to 

serve. And by doing that, that meant we had to go and specifically 

walk out from pole to pole, house to house, provide measurements, 

do a complete system design project for every community. That cost 

somewhere in the neighborhood of at least $500 a mile. Even in a 

small town you are talking about 25 miles of cable to provide 

broadband service. So that was a very expensive and time-consuming proposal. 

What we would like to have seen would have the ability to say, 

look, we provide service to 250 communities and we propose to 

build a system in Cairo that looks just like this one, and the design 

we will warrant will look just like this design that currently provides broadband service. And I think if RUS would take a look at 

that, that would really lower the threshold and the expense in supplying an application. 

24 

Chairwoman VELA ́ ZQUEZ. If you had any question about the application, were you able to get a person on the phone to answer any 

questions? 

Mr. GLEASON. In the early parts of the application process we 

were, and they were helpful. But some of the rules are so specific 

that were set out in the process, like the one I just discussed, they 

weren’t able to say, well, here is a way around it, it just has to be 

that way. So while they were accessible, I am not sure exactly how 

helpful that was. 

Chairwoman VELA ́ ZQUEZ. Mr. Thompson. Thank you. 

Mr. THOMPSON. Thank you, Madam Chairwoman. And thanks, 

Mr. Gleason, for your testimony. 

I have a couple of questions, including a couple that Mr. Graves 

had left with me, that he wanted to make sure that we asked as 

well. First of all, just in general, what recommendations would you 

make to the Committee to improve the process and ensure that 

taxpayers are getting the most out of these provisions? 

Mr. GLEASON. Well, I have got a couple of issues I think that still 

exist. One, the application review process is very troublesome, particularly for small businesses. I had a fellow cable operator who is 

a small businessman in Missouri give me a call, and he is a company that has got 2,000 cable customers and 1,000 broadband customers. And the process is where all the applications have been put 

out on the Internet for incumbent operators to notify RUS of where 

broadband service already exists. And he called, and he said I am 

not sure what I am supposed to do, I don’t even know how to do 

this; have you hired help to go and get this done? We did and we 

spent in excess of $30,000 to show where our areas already serve. 

But many small business guys who were already providing 

broadband service have to do that. And the problem I see is that 

all 2,200 applications have been put out on the Web for incumbents 

to go look at and vet through. I think the organization should have 

done some pre-vetting of all those applications to say, look, these 

clearly don’t meet these criteria so we need to set those aside. 

Secondly, I am still concerned, even though it was mentioned 

earlier, that we are going to make sure we don’t duplicate service 

and provide money to duplicate service in underserved and 

unserved areas, I am not completely convinced that they are going 

to be able to do that. One reason is the mapping hasn’t been done, 

and, as it was said here today, the mapping won’t be done until 

2011. That is very concerning. 

And I have some follow-up concerns after the application review 

process goes forward as to what we are supposed to do to ensure 

that duplication doesn’t occur. So I am not completely convinced 

that we are real sure that we are going to keep from doing that. 

Mr. THOMPSON. Do you feel that you will have access to the adequate resources to refute applications that plan to service areas already served? 

Mr. GLEASON. Well, I hope so, although it is expensive. And that 

goes back to having to go through all 2,200 applications and see if 

any of them are in our current service areas. 

You know, we have launched, we have built thousands of miles 

of fiber optic cable just ourselves in the last 3 years and launched 

broadband service in more than 100 new communities, mostly very 

25 

rural small-town communities. And our take rates and our success 

has been wonderful. But we are trying to go out here with private 

capital and do that, and we want to make sure that we make sure 

we tell the government that those areas are already served. 

We provide, as I mentioned in my testimony, that data to the 

FCC every year. And I think on that Form 477 that we fill out, I 

think these agencies could use that data to pre-vet these applications. 

Mr. THOMPSON. You had mentioned that it cost approximately, your company specifically, $50,000 to apply within this process. 

Mr. GLEASON. Right. 

Mr. THOMPSON. With no guarantees. 

Mr. GLEASON. That’s right. 

Mr. THOMPSON. Going forward. Has the industry done any estimates of—if that is $50,000 just with your organization, your business—has any, across the industry, any projections of what the cost 

has been, the investment for applications? Because I assume there 

are a lot of applications that—I don’t know what percentage of applications will, on the final day, will be funded. 

Mr. GLEASON. We have not, but I would think that you could extrapolate that number pretty easily across the miles of last-mile 

cable and fiber optic cable to be built like ours. Of that $50,000 

about two-thirds of that was in the mapping and design process 

that had to be completed prior to filing your application. 

That kind of goes back to the suggestion of why don’t you say our 

design will be this type of design and here is a sample and here 

is exactly what it will look like; and, once granted, then we will go 

and design specifically that community. 

I think to a certain extent that process favors wireless providers 

over wire-line providers. Because a wireless distribution system is 

much easier to design; you just pick points on a map of where you 

are going to put towers—I may be oversimplifying a bit, but points 

on a map where towers are going to go and how you are going to 

communicate between those towers. 

But the broadband speeds that we currently offer and will offer, 

up to 100 megabits per second, are far and away in excess of what 

wireless communications can provide. So while the process is supposed to be tech-neutral, it doesn’t seem to be in the application 

process. 

Mr. THOMPSON. My final question is do your members plan on 

hiring more people if they are successful in obtaining stimulus dollars, or will the work be manageable at the current staffing levels? 

Mr. GLEASON. Absolutely we will hire additional people. And that 

is, I think, what the beauty of this program does, is not only does 

it provide economic advantages to these rural communities that we 

are going to provide, but also just in amongst our company we have 

hired hundreds more people over the last 3 years as we have developed our broadband infrastructure in our current operations. So 

these systems will do the same thing as we have done in our past 

operations. 

Mr. THOMPSON. Just a follow-up. Then are there folks out there 

with the skills available that you are—I am not sure what different 

type of positions you will need, but I mean are there people there 

in the qualified workforce to hire? 

26 

Mr. GLEASON. It is interesting, in a lot of cases we look kind of 

for two-fold people: one, technicians that are field-based people that 

do insulation work and maintenance work on broadband networks. 

And that is a little tougher to find, although we are working with 

community colleges and other institutions to help train that workforce. So, so far that is good. 

On the flip side where you use customer support personnel, and 

we are finding—you know, we operate our call center in Sikeston, 

Missouri, so it is a small community, rural community. And I worried about that when we established that call center there. But we 

have been pleasantly surprised at the abundance of people that can 

work on computers and know computer-related tasks and that sort 

of thing, particularly younger people who have been trained—and 

schools are doing a good job with that. So we have had a very— 

that has been a good opportunity for us and has worked out well 

for us actually. 

Mr. THOMPSON. That is good to hear. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Gleason, in August 2009 the USDA 

released a report that basically highlighted the relationship between farming and broadband. My question to you is for a small 

rural cable operator, how do you promote greater adoption among 

small businesses in your local community? 

Mr. GLEASON. That is a good question. And I think it is kind of 

two-fold, and I think our membership of our group is very similar 

to us. One, we have developed a complete business sales force that 

is different from our residential work. And that business sales 

force, we have done a lot of work because we are obviously 

incentivized to sell more services that we can. So that business 

sales force has done a good job of learning applications for 

broadband services. So we can go to an insurance business and say, 

Here is why you ought to buy our broadband service. We can go 

to an Ag, a grain elevator, and say, Here is why you ought to buy 

our broadband service. So that is one area where we have really 

gone to very, very small businesses, and we have come up with 

very, very affordable business rates for those businesses to get extremely fast data contentions. 

Then, secondly, we have done a lot of partnerships, particularly 

in this application. We have done a partnership with a local community college, we have done a partnership with school systems in 

these communities we have applied for, the city governments, the 

first responders’ groups, a mental health center, chambers of commerce. So we have really tried to be very broad in terms of reaching out to get organizations to support our application, but also to 

get out to those organizations to say here is why broadband is important to you. So we have conducted a lot of city-wide events, 

things like that, that really go a long ways, I think, to promote the 

adoption of broadband usage. 

Chairwoman VELA ́ ZQUEZ. Okay. Well, thank you. Do you have 

any other questions? 

Mr. THOMPSON. No. 

Chairwoman VELA ́ ZQUEZ. Well, thank you so very much for being 

here. You have shed a lot of light into the importance of expanding 

broadband deployment into rural areas. And at a time when our 

27 

economy is struggling to create jobs, this is a way to do it. So thank 

you so very much. 

Mr. GLEASON. Thank you for having me. 

Chairwoman VELA ́ ZQUEZ. I ask unanimous consent the members 

will have 5 days to provide materials and supporting materials for 

the record. Without objection, so ordered. 

Chairwoman VELA ́ ZQUEZ. This hearing is now adjourned. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.] 

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