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Senate Panel Probes Rural Broadband

Senate Communications Subcommittee members probed rural
communications issues, specifically the efficacy of government broadband
subsidy policies, on Tuesday at its inaugural hearing of the new Congress.

New Subcommittee chair Mark Pryor (D-Ark.) pointed out it
was the first of a series of hearings on the communications marketplace,
signaling that he expects it to be an active subcommittee.

The witnesses, representing smaller and midsized cable and
telecom companies -- wired and wireless -- all agreed that getting broadband to
rural areas was an important government goal that requires subsidizing private
companies where the cost model is not there, but they disagreed on how well
government policies for handing out those subsidies were serving that goal.

They called on the Senators, who appeared to share many of
those concerns, to flex their oversight muscle.

Among the concerns raised:

Patricia Jo Boyers, president of BOYCOM Cablevision and
American Cable Association board member, said it was imperative that the
government not subsidize her competition, a point seconded by Sen. Kelly Ayotte
of New Hampshire.

Asked how the FCC might better monitor that, Boyers said she
wasn't sure, but that one answer might be the way she has to justify broadband
loans with invoices and other evidence at certain points throughout the

Boyers said that the keys to the FCC's dispensing of
hundreds of millions in rural broadband subsidies from the Universal Service
Fund's Connect America Fund (CAF), were not overbuilding, only subsidizing
service that meets the 4 Mbps/1 Mbps benchmark for high-speed broadband, and making
sure that cable operators were on equal footing when the FCC launces the
reverse auction through which it will dispense the next round of CAF funds.

John Strode, VP of broadband, cable and phone provider
Ritter Communications, told the Senators he thought the FCC's USF broadband
funding regime was working reasonably well, but took issue with the FCC's cap
on spending at the 90 percentile of fund recipients. He said that cap should
trigger further FCC investigation that would allow a company to justify why its
cost to reach rural, high-cost areas exceeded that cap.

Strode also had some complaints about the NTIA/FCC national
broadband map used to identify unserved and underserved areas. He said that
some areas that show up unserved are because there are no people there to
serve. Though he said the map fairly accurately represented his company, he was
worried that it was overestimating service others were delivering.

Steven Davis, executive VP of CenturyLink, continued to push
the FCC to raise its $775 per sub subsidy, saying that underestimated the cost
and helped lead to the result that only $115 million of the $300 million
available in the first tranche of CAF funding was applied for.

CenturyLink applied for only a portion of the money for
which it was eligible, and major incumbent telcos AT&T and Verizon did not
take any.

Davis argued that changing the benchmark would allow the FCC
to release more of that $300 million ASAP. "Timely FCC action could
significantly narrow the rural digital divide, and faster broadband speeds and
greater availability of broadband services will give rural consumers access to
new educational opportunities, cloud computing services, healthcare applications,
IP television and streaming video," he said.

U.S. Cellular chair Leroy Carlson Jr. talked a lot about the
upcoming incentive auctions, as well as a previous auction of wireless

He said more spectrum is the raw material of the wireless
business, and smaller companies like his must be able to compete for spectrum
against the larger companies. He argued for dividing the auctioned spectrum
into smaller geographic areas so that smaller companies would not be bidding
against the larger, as would be the case if spectrum was tied to larger urban

He said it was key for the FCC to establish interoperability
as a condition of the upcoming 600 MHz incentive auction of broadcast spectrum.
He pointed out that because the FCC did not set an interoperability condition
on the 700 MHz broadcast spectrum it reclaimed and re-auctioned as part of the
2009 DTV transition, many of the more popular handsets did not work on his

He said the Senate needed to pay "urgent
attention" to those issues so they could be addressed before the FCC comes
out with its auction rules later this year.

Sen. Mark Begich (D-Alaska) was sympathetic.
Saying he didn't want the committee to have to come back two years after the
600 MHz auction and be talking about the same interoperability problem, he
advised the committee to "dog this issue."