DOCUMENT RESUME ED 334 045 RC 018 249 TITLE Bringing the Information Age to Rural America. Hearings before the Government Information, Justice, and Agriculture SubcommitteP of the Committee on Government Operations. House of Representatives, One Hundred First Congress, First and Second Sessions (June 14, 1989; October 12, 1989; and February 7, 1990). INSTITUTION Congress (Jf the U. S., Washington, D. C. House Committee on Government Operations. PUB DATE 91 NOTE 404p.; Some pages contain small or light type. AVAILABLE FROM Superintendent of Documents, Congressional Sales Office, U.S. Government Printing Office, Washington DC 20402. PUB TYPE Legal/Legislative/Regulatory Materials (090) EDRS PRICE MF01/PC17 Plus Postage. DESCRIPTORS *Distance Education; Elementary Secondary Education; Federal Aid; Federal Regulation; *Futures (oi Society); Government Role; Hearings; *PI llic Policy; Rural Areas; *Rural Development; Rural Education; *Technological Advancement; *Telecommunications IDENTIFIERS Congress 101st; Deregulation ABSTRACT Ir. 1989-90 three Congressional hearings received testimony on the need for modern telecommunications infrastructure in rural areas and the ways arch infrastructure could foster rural economic development. A researcher on rural development reported findings that deregulation policies had removed incentives for telecommunications companies to serve rural areas, and that government assistance in rural telecommunications development would be necessary for rural areas to have equal access to information services and to compete in the riational economy. Testimony by Congressmen and representatives of telecommunications companies and federal and state regulatory agencies d!scussed: (1) competition versus monopoly in public utilities, and the effects of each on the consumer; (2) the Rural Electrilication Administration's Telephone Loan Program and rural cooperatives; (3) improving rural eoucational opportunities through telecommunications technology; (4) regulation of cable television complinies; (5) the conditions under which rural customers receive telecommunications services; and (6) specific recommendatioAs for legislation. An extensive presentation by Bell Atlantic describes how a public broadband network integrating audio, visual, and computer technologies could affect the everyday lives of future American consumers. 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BRINGING THE INFORMATION AGE TO RURAL AMERICA HEARINGS RRPORIR GOVERMENT DIFORMATION, JUSTICE, AND AGRICULTURE SUI3COMMITTEE OP TI1R COMMITTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED FIRST CONGRESS FIRST AND SECOND SESSIONS JUNE 14; OCTOBER 12 1989; AND FEBRUARY 7, 1990 Printed for the use of the Committee on Government Operations GOVERNMRNT PRINTING OFFICI 26-920ft WASHINGTON : 1991 For sale by the Superintendent of Documents. Congressional Soles Office U.S. Government Printing Office. Washington. DC 20402 3 CDMMITTEE ON GOVERNMENT OPERATIONS JOHN CONYERS, Ja., Michigan, amirman FRANK HORTON, New York CARDISS COLLINS, Illinois WILLIAM F. ?LINGER, Ja., Pennsylvania GLENN ENGLISH, Oklahoma AL MCCANDLESS, California HENRY A. WAXMAN, Califonda HOWARD C NIELSON, Utah TED WEISS, New York RICHARD K. ARMEY, Texas MIKE SYNAR, Oklahoma DONALD E. "BUZ" LUKENS, Ohio SIEPHEN L NEAL, North Carolina J. DENNIS HASTERT, Illinois DOUG BARNARD. JR., Georgia JON L. KYL, Arizona BARNEY FRANK, Maisschusetts CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California PETER SMITH, Vermont ROBERT E. WISE, JL, West Virginia STEVE1 SCHIFF, New Mexico BARBARA BOXER, California CHUCK DOUGLAS, New Hampshire MAJOR R. OWENS, New York C. CHRISTOPHER COX. California EDOLPHUS TOWNS, New York CRAIG THOMAS, Wyoming JOHN M. SPRATT, Ja., South Carolina ILEANA ROS-LEHTINEN. Florida BEN ERDREICH, Alabama GERALD D. LUECZKA, Wisconsin ALBERT G. BUSTAMANTE, Tema MATTHEW G. MARTINEZ, California NANZY PEWSI, California DONALD M. PAYNE, New Jersey JIM BATW, California GARY A. CONDIT, California DENNIS E. ECKART, Ohlo ahrLIAN EPargiri, Staff Director DONALD W. UreoN, Minority Staff Director GOVERNMENT INFORMATION, JUSTICE, AND AGRICULTURE SUBCOMMITTEE Ja., West Virginia, Chairman ROBERT E. WISE, AL McCANDLMS, California GLENN ENGLISH, Okiahoma STEVEN SCHIFF, New Mexico EDOLPHUS TOWNS. New York CRAIG THOMAS, Wyoming 4 JOHN M. SPRATT, JIL, South Carolina ILEANA ROS-LEHTINEN, Florida I LOUISF M. SIAUGHTER, New York 1 BARBARA BOXER, California GARY A. OONDIT, California Ex OFFICIO FRANK HORTON, New York JOHN CONYERS. JR.. Michigan Lgt GODOWN, Staff Director Aware A. BASHIGN, Professional Staff Member SusAN CnAnturenow, Clerk Atraou Ono, Clerk Below R. LOCKWOOD, Minority Prafewional Staff Mown TRIPP, Minority Professional Staff Reaigned from corn. 'toe July 25, 1989. Appointed to subcommittee November 16, 198:1. Appointed to subcomndttee November 16, 1989. 4 Resigned from subcommittee November 16, 1989. ' Appointed to subcommittee November 16, 19 01) 4 CONTENTS Page Hearings held on: June 14, 1989 1 October 12, 1989 177 February 7, 1990 245 Statement of: Boucher, Hon. Rick, a Representative in Congress from the State of Virginia 190 Bresnan, William J., president, Bresnan Communications Co., represent- ing the National Cable Television Association 324 Coleman, Hon. Thomas, a Representative in Congress from the State of Miesouri 192 Collins, A. Gray, Jr., senior vice president, external affairs, Bell Atlantic, representing the U.S. Telephone Aseociation 56 Cooper, Hon. Jim, a Representative in Congress from the State of Tennes- see 199 Goatcher, Margaret, president, Cimarron Telephone Co., representing the Organization for the Protection and Advancement of Small Telephone Companies 149 Gregg, Billy Jack, director, consumer advocate division, West Virginia Public Service Commission 247 Greytok, Marta, chairman, Public Utility Cammission of Texas, repre- senting the National Association of Regulatory Utility Commissioners 17 Griffith, Boyce, chairman, Public Service Comnussion of West Virginia 31 Gunderson, Hon. Steve, a Repreeentative in Congrees from the State of Wisconsin 184 Kimmelman, Gene, Legislative Director, Consumer Federation of Amer- ica 263 Kiidak, Jonathan I., Deputy Under Secretary, Small Community and Rural Development, accompanied by Jack Van Mark, Acting Adminis- trator, Rural Elec. rification Administration; and Neal Sox Johnson, Acting Administrator, Farmers Home Administration 210 Lein, Kenneth L., general manager, Winnebago Cooperative Telephone Association, representing the Organization for the Protection and Ad- vancement of Small Telephone Qompanies 294 Maher, William F., Associate Administrator, Office of Policy Analysis and Development, National Telecommunications and Information Ad- ministration 347 Parker, Edwin B., president, Parker Telecommunications 3 Robinson, Kenneth, Senior Advisor to the Chairman, Federal Communi- cations Commission 362 Sampson, Curtis A., president and chief executive officer, Communica- tions Systems, hut, repreeenting National Rural Telecom Association 162 Skelton, Hon. Ike, a Representative in Congress from the State of Missou- ri 177 South, Gene, executive vice president, Panhandle Telephone Cooperative, Inc., representing U.S.Telephone Association 304 Thomas, Hon. Craig, a Representative in Congress from the State of Wyoming 206 Welch, Dwight, general manager, Hardy Telephone Co., representing the National Telephone Cooperative Association 45 Wise, Hon. Robert E., Jr., a Representative in Congress from the State of West Virginia, and chairman, Government Information, Justice, and Agriculture Subcommittee: Opening statement 1 IV Page Letters, statements, etc., submitted for the reevrd by: Bresnan, William J., preeident, Bresnan Communications Co., represent- ing the National Cable Television Association: Prepared statement 329 Coleman, Hon. Thomas, a Representative in Congresa from the State of Missouri: Prepared statement 195 Collins, A. Gray, Jr., senior vice president, external affairs, Bell Atlantic, representing the U.S. Telephone Association: Bell Atlantic study entitled "Deliverying the Promise" 58 Prepared statement 138 Cooper, Hon. Jim, a Representative in 0:ingress from the State of Tennes- see: Prepared statement 202 Goatcher, Margaret, president, Cimarron Telephone Co., representing the Organization for the Protection and Advancement of Small Telephone Companies: Prepared statement 152 Gregg, Billy Jack, director, consumer advocate division, West Virginia Public Service Commission: Prepared statement, and survey of basic 250 cable television rates Greytok, Marta, chairman, Public Utility Commission of Texas, repre- senting the National Association of Regulatory Utility Commissioners: Prepared statement 21 Griffith, Boyce, chairman, Public Service Commission of West Virginia: Prepared statement 34 Gunderson, Hon. Steve. a Representative in Congress from the State of Wisconsin: Prepared statement 186 Kimmelman, Gene, Legislative Uirector, Consumer Federation of Amer- ica: Prepared state. ment 267 Kislak, Jonathan I., Deputy Under Secretary, Small Community and Rural Development: Prepared statement 213 Lein, Kenneth L.. general mana,ger, Winnebago Cooperative Telephone Association, representing the Omanization for the Protection and Ad- vancement of Small Telephone Companies: Prepared statement 298 Maher, William F., Associate Administrator, Office of Policy Analysis and Development, National Telecommunications and Information Ad- ministration: Prepared statement 350 Parker, Edwin B., president, ?arker Telecommunications: Prepared state- ment Robinson, Kenneth, Senior Advisor to the Chairman, Federal Communi- cations Commission: Prepared statement 364 Submissions to Chairman Wise's questions 381 Sampson, Curtis A., president and chief executive officer, Communica- tions Systems, Inc., representing National Rural Telecom Association: Prepared statement 165 Skelton, Hon. Ike, a Representative in Congress from the State of Missou- ri: Prepared statement 180 South, Gene, executive vice president, Panhandle Telephone Cooperative, Inc., representing U.S.Telephone Association: Prepared statement 306 Van Mark, Jack, Acting Administrator, Rural Electrification Administra- tion: Authority for REA electric borrowers to invest funds, make loans, or loan guarantees 221 Welch, Dwight, general manager, Hardy Telephone Co. representing the National T'elephone Cooperative Association: Preparea statement 48 APPENDIX Prepared statement of David Herron, manager. West Carolina Rural Tele- phone Cooperative 393 6 BRINGING THE INFORMATION AGE TO RURAL AMERICA WEDNESDAY, JUNE 14, 1989 HOUSE OF REPRESENTATIVES, GOVERNMENT INFORMATION, JUSTICE, AND AGRICULTURE SUBCOMMITTEE OF THE Comm I'm ON GOVERNMENT OPERATIONS, Washington, DC. The subcommittee met, pursuant to notice, at 1 p.m., in room 2247, Rayburn House Office Building, Hon. Robert E. Wise, Jr. (chairman of the subcommittee) presiding. Present: Representatives Robert E. Wise, Jr., Glez.n English, Al McCandless, and Steven Schiff. Also present: Lee Godown, staff director, Audrey A. Bashkin, professional staff member; Susan Chadderdon, clerk; and Brian Lockwood, minority professional staff, Committee on Government Operations. OPENING STATEMENT OF CHAIRMAN WISE Mr. WISE. The Government Information, Justice, and Agriculture Subcommittee will come to order. The title of this hearing is Bringing the Information Age to Rural America. Recent years have brought major changes to the telecommunica- tions industry. The breakup of the Bell System has transformed the way we think about the telephone network and the way we regulate telecommunications providers. During the same period, we have witnessed the advent of technological miracles such as satel- lite, optical fiber, and microwave transmission. Many of us have come to regard fax machines, personal computers, and computer- ized data bases as essential tools of the workplace. But not all of us. For some rur al Americans, single line tele- phone service is still not yet a reality. Because of the comparative expense of bringing new telecommtmications services to smalltown America, there is a danger that it will be many years before the entire county will fully enjoy the technological advances of recent times. As a Nation, we can't afford to let the information age pass rural America by. While the telecommunications industry has been booming, small town America has been in a state of decline. The rural economy has shifted away from its traditional mainstaysag- riculture, mining, and manufacturingand turned instead to serv- ice industries. Deregulation of the transportation industry has (I) 2 meant that buses and trucks run less oftenactually they don't run at allin rural iaarts of the country and make fewer stops. Rail and air travel have become much more costly. As a result, residents are leaving the less populous regions of America to make their fortunes in our increasingly congested and polluted metropol- itan areas. Bringing the information age to rural America sooner rather than later is a major key to reversing this trend. Modern telecom- munications can help replace the buses, trucks, and trains that businesses, such as mail order pass the small towns by. It can allow companies and airline reservation services, to locate in rural areas. And it can make sophisticated educational and medical services available throughout the countryside. In my own experience, I note modern telecommunications can do have the ca- mean a source of many, many new joba because we pacity to be the reference center, the airlines reservation center. Indeed, in our area, our major telephone company is now providing directory information service for the Washington, DC area. When operator in West you call to get that number, you are talking to an Virginia. So the rural areas of our country have much to offer, as- suming we can build that telecommunications infrastructure that is so vital. In some cases, we may be able to pass by the highways to contin- massive highways ue with the roads we have and not depend on coming to our area as long as we have a modern telecommunica- tions structure. Incidentally, we would still like the highways also. We won't be able to touch upon all the issues today, but m this hearing and others to follow, we will be examining some of the regulatory climate, and more significant problems, looking at the addressing sometimes conflicting policy concerns. We will hear first from Dr. Edwin Parker, coauthor of the newly published Aspen Institute study entitled "Rural America in the In- formation Age: Telecommunications Policy for Rural Develop- ment." Next, we will have testimony from the chairmen of the Texas Public Utility Commission and the West Virginia Public Services Commission. And last, we will hear from spokespersons for the four major associations that represent rural telecommunica- tions concerns. I want to express my appreciation to those of you who have apologize in ad- come, some of you, from long distances. I want to from time vance because I suspect this hearing will be broken up to time by votes on the floor which will be necessary to go to, but we look forward to having a good hearing. Mr. McCandless, anlylsarementa? k you, Mr. Chairman. I do not have an Mr. MCCANDLF.BS. opening statement. I welcome our panel and look forward to their testimony. Mr. WISE. Thank you. Mr. WOE. The first witness then will be Dr. Edwin Parker with Parker Telecommunications. Dr. Parker, if you would care to take down, if I could your place at the witness table. Before you sit swear you in. [Witness sworn.] 3 Mr. WIER. Thank you very much. Please proceed. Dr. Parker, in your case, as with all witnesses, your written testimony is being made a part of the recotd. It will be printed as such, so please feel free to summarize. STATEMENT OF EDWIN 13. PARKER, PRESIDENT, PARKER TELECOMMUNICATIONS Dr. PARKER. Thank you. It is a pleasure to be here today. My name is Ed Parker. I am president of Parker Telecommuni- cations, a consulting firm in rural Oregon. I am a coauthor, as you said, of "Rural America in the Information Age: Telecommunica- tions Policy for Rural Development," published by the Aspen Insti- tute and University Press of America. That report was sponsored and paid for by the Ford Foundation with support from the rural economic policy program of the Aspen Institute. What I would like to do is just summarize briefly some of the comments and conclusions in that report. Rural America, as you know, has been in economic distress through most of this decade. Rural jobs in agriculture, mining and manufacturing have been in decline. Only 9 percent of rural jobs are now in agriculture. Service jobs have been increasing and now account for 65 percent of rural jobs. However, the rural service sector is growing at only two-thirds of the rate of the urban areas. Further, the service jobs in rural areas are mostly in wholesale and retail trade, private services and Gov- ernment, primarily local school systems. In contrast, the urban areas are capturing a disproportionate share of the producer and export services which have the gr*?atest potential for economic growth. Modern telecommunications infrastructure is one key to rural economic development. I say one key because it is not a panacea, we do need other things also. The ability to attract traditional industries, as well as footloose businesses not dependent on geographic location, such as software development, telemarketing, mail order financial services, some of the things that you cited in your remarks, are increasingly depend- ent on modern telecommunications, including touch tone digital service, facsimile transmission, and data services. Communities with access to these modern services have opportu- nities for survival and growth. Those without are doomed to eco- nomic stagnation and decline. Telecommunications networks are today's highways. They offer development opportunities to rural areas that railroads and high- ways once brought. Rural areas not integrated into a modern digi- tal telecommunications network will suffer the same economic fate as towns bypassed by the Federal highway system. By thinking of telecommunications systems as highways, we can illustrate the extent to which rural areas are falling behind. Nearly 12 percent of rural households have no roads at all, that is no telephone service; another 7 percent have only multiparty serv- ice incapable of accessing modern telecommunications services, which is like having a dirt road suitable only for an all terrain ve- hicle. Approximately 12 percent of rural telephone lines are below 9 4 the specifications set by the Rural Electrification Administration. These lines can be thought of rural electronic highways with pot holes making them questionable for fax machines and data modems. Most rural single party service does not yet have the touch-tone service which we take for granted, and is essential for most busi- ness information transactions. Currently only 30 to 35 percent of rural communities have access to digital services made possible by replacing the old analog switches, with modern switching digital capability. The remaining 65 to 70 percent could be upgraded by the year 2000 with a modest increase in Federal loan programs and some changes in regulatory policy. Providing digital information access would be like upgrading narrow, winding two lane roads to modern interstate highways over which the economic transactions of the information age take place. If the rural areas are to prosper or in some cases even sur- vive, telecommunications facilities suitable for reliable facsimile and data transmission, as well as voice, are essential. absolutely Rural telecommunications infrastructure fell behind as urban areas leaped forward into the information age for a variety of rea- sons, many related the dramatic changes in the telecommunica- to tions regulatory environment. National telecommunications policy continues to move toward less regulation and more competition. In urban areas, competitive telecommunications services ranging from competitive long-dis- tance carriers to easy access to fax machines for rapid document delivery have mushroomed, but the new competition did not bring these changes to rural communities. Under the prior regulatory structure, rural areas benefited from nationwide rate averaging and the resulting subsidy from interur- ban and long-distance service. Now most rural areas don't have competitive long-distance services or the other benefits of competi- tion, but they do share the higher phone prices, the access charges that were part of that regulatory change, and they are vulnerable to higher prices and relatively lower quality because each piece of the telecommunications business is now under pressure to stand on its own. Small rural carriers surviving on the fringes of the national tele- phone network compare their plight to the last person in the chil- dren's game of "crack the whip,' policies which ripple past those in the middle of the market have whiplash effects on those at the end. The Federal telecommunications policy goal of the past 50 years, universal telephone service, is nearly fulfilled. It is now time to change that goal to universal information access. Information serv- ices are among the fastest growing segments of the United States and the global economy. Reliable, efficient access to information services are increasirgly critical to the success of any economic en- terprise. Rural areas without access are doomed to be uncompeti- tive; rural areas with efficient access to thc same information serv- ices available in urban areas can bridge the traditional, rural bar- rier of distance and compete on a level field with urban businesses. Our report concluded that government assistance in rural tele- communications development is needed at this time for three rea- sons. First, to achieve improved economic performance in rural to