Senator Pryor, Commissioners Copps and Adelstein, ladies and gentlemen, I would like to welcome you to Little Rock, and to thank you for conducting this important field hearing here in our home town.  I appreciate your invitation to participate today, and am pleased and honored to discuss ways to sustain and promote the deployment of fixed and mobile broadband services, here in Arkansas and across the country.

 

Alltel provides leading-edge, digital mobile wireless services to nearly 12 million wireless customers in 35 states, including several hundred thousand here throughout virtually all of Arkansas.  We operate the nation's largest wireless network in terms of geographic area served, but our customer base is smaller than those of the larger carriers.  This is because we are one of the few major wireless operators to focus on serving the mid-size and smaller cities, as well as rural and more sparsely populated areas. 

 

We offer our customers a range of mobile broadband services that are increasingly important parts of our product mix.  A majority of our handsets, including nearly all of our newly launched devices, support wireless broadband.  Alltel is rapidly deploying network facilities that support EV-DO-based Axcess^SM Broadband service that provides average speeds of 400-700 kilobits per second with bursts up to 2.4 megabits per second.  These technologies support Web-based e-mail, text and photo-messaging, mobile game and ring-tone downloads, mobile music and video, and Internet access services for individual consumers.  In addition, we offer enterprise mobile data solutions used by government, public safety agencies, and industries as diverse as agriculture, education, finance, health care, and manufacturing. 

 

We provide these high-speed, advanced services in over 100 communities covering 44 million people across our 35-state footprint.  Here in our home state of Arkansas, we will provide access to these services to nearly 62 percent of the households by the end of this year. We are constantly building out broadband facilities and offering advanced services to additional communities. 

 

As you know, consumers increasingly demand higher-bandwidth services:  across the country, purchases of broadband lines increased by 52% from 2005 to 2006, according to recent FCC reports, including an increase from fewer than 400,000 wireless broadband lines in 2005 to over 11 million in 2006.  Through innovative service features and plans, wireless carries are bringing additional competition to the broadband marketplace and offering American consumers unique ways to stay connected to information.  Broadband services – both fixed and mobile – are absolutely vital for the 21st century economy.  But clearly much more needs to be done to bring broadband services out to consumers.  According to the latest FCC high-speed report, fewer than 13 percent of Arkansas residents had broadband service as of June 30, 2006.

 

Consumers also increasingly need and depend on mobile wireless services of all kinds, for voice as well as data.  Over the past five years, the number of mobile wireless subscribers has grown by 86%, from 118 million in June 2001 to 219 million in June 2006.  According to FCC data, mobile wireless service across the country has grown by 50% during the three years ending in December 2005, and consumers now use more wireless than wireline phone lines.  Here in Arkansas, Alltel’s mobile wireless customer base has grown by 24 percent over the past 3 years.  U.S. Department of Health and Human Services conducted a survey and found that over 12 percent of households in the country are using wireless as their only phone service.  And among consumers with more than one connection, a substantial proportion now use wireless as a primary means of communications.  Without question, wireless communications is the “lifeline” of today’s consumers. 

Rural consumers have the same interests in obtaining access to high-speed technologies and mobile services, and are demonstrating changes in demand that parallel those of consumers across the country.  If anything, mobile wireless services may be even more important to rural consumers than to those in urban areas.  People in rural areas often spend more time than their urban counterparts on the road.  For example, an entrepreneur may need to reach contacts when driving from one end of a large county to another for business; a parent may need access to telecommunications while driving children to and from relatively distant schools; and a farmer may need access to data on agricultural prices while working on a remote part of his or her property.  Wireless broadband is often the only means of high-speed access in many high-cost areas and is playing a major role in bridging the “broadband divide.” 

 

Rural residents and public safety “first responders” particularly value their mobile wireless services in emergency situations.  Mobile 911 and E-911 are vital health and safety services, especially for people who frequently have to travel long distances – and more than 240,000 wireless E-911 calls are made every day.  But they cannot be provided unless adequate infrastructure and service is available.  But due to the relatively high costs of deploying wireline and wireless networks in many rural areas, we all need to do more to make sure consumers in rural areas have access to these services.  In our state, the 86th General Assembly of the Arkansas legislature passed a bill last year to create the “Connect Arkansas” program and the Arkansas Broadband Advisory Council, which are working to monitor, educate, promote and facilitate the deployment and adoption of broadband Internet services.  Several members from this initiative are here today and I congratulate them for their efforts to bring advanced telecommunications services to our state Senator Pryor, I would like to commend you for your strong commitment to ensuring that citizens of rural parts of Arkansas and across the country have access to high-quality fixed and mobile broadband services, as well as other mobile wireless services.  The important legislation that you co-sponsored with Senators Smith and Dorgan – S.711, the “Universal Service for the 21st Century Act of 2007” – wisely recognizes that any technology, including wireless, can be included in the definition of “broadband communications service,” as long as it operates at the specified high speed and enables users to originate and receive high-quality voice, data, graphics, and video communications.  Your forward-thinking legislation also recognizes the importance of universal service funding to support and extend both broadband services and mobility to unserved and underserved rural areas.  Until just recently, only a negligible amount of universal service funding was going to support the deployment of wireless service to high-cost areas – even though consumers in those areas desperately need and want wireless technology and networks.  Of the $25 billion spent on high-cost universal service since 1996, only about $2 billion has gone to wireless carriers and other competitors.  Even today, less than 25% of universal service high-cost funds go to support the deployment of wireless service, even though there are now more wireless subscribers.  At the same time, wireless contributes more than twice the amount into the universal service fund than it receives out of the fund. 

 

The 1996 amendment to the Communications Act making non-wireline carriers eligible for universal service support has made possible a tremendous expansion of wireless service into rural areas.  With universal service support, Alltel and other wireless carriers are building facilities deep into rural areas, not just along major highways, and delivering service to consumers where they live and work.  According to the FCC, wireless penetration rates went up from 41% in 2001 to 68% in 2005 in the most sparsely populated areas with fewer than 100 residents per square mile. 

 

America is getting a great return on its investment in wireless universal service.  It’s true that support for wireless has increased over the past few years.  But that has come with a tremendous expansion of wireless service into rural areas.  In the past, many wireless companies were building cell sites only along major highways and population centers.  Now, with universal service support, we are building facilities deep into rural areas and getting service out to consumers who live and work there.  For example, on the Pine Ridge Reservation in South Dakota, the Tribe estimated that less than 30% of the population had telephone service prior to Alltel’s entry into the market as a wireless universal service provider.  Today more than 80% of the population on the Pine Ridge reservation has access to wireless telephone service.  The vast majority of these consumers are eligible for and receiving a discounted Lifeline service of only $1 per month.  This is the true meaning of universal service. 

 

We are concerned with short-sighted views that fail to recognize the importance of wireless universal service.  Support for rural wireless is not a problem – and an anti-competitive proposal to reduce universal service funding for wireless consumers is not the answer.  Alltel appreciates the letter that you submitted to the Federal State Joint Board on Universal Service, jointly with Senators Rockefeller, Dorgan, Klobuchar, and Smith, opposing the plan to restrict universal service funding for wireless carriers by imposing a cap exclusively on competitive eligible telecommunications carriers. 

We share your hope that the Joint Board and the FCC abandon counter-productive “interim measures.”  Instead, they should follow the lead of the Senate Commerce Committee, and turn their attention to equitable and sensible comprehensive reform of the universal service program.  Rather than continuing to target funds mainly to the traditional voice telephone services of the last century, the Universal Service Fund should be realigned to promote the services that consumers most need and demand going forward:  broadband and mobility. 

 

Senator Pryor, in your letter to the Joint Board, you said that long term universal service reform should result in a competitively neutral system, promote accountability in how the funds are used, and promote the build out of advanced services in rural regions through effective targeting of funds to high cost areas.  Alltel firmly agrees.  But we find it puzzling that some still argue that “universal service is not about competition.”  Ever since the adoption of the Telecommunications Act of 1996, our nation’s policy has been to favor competition for all communications services, in all markets.  Competition is the best way to assure high quality services, rapid advancement and deployment of new technologies, and low prices.  Why would anyone want to take away the benefits of competition from consumers in rural areas?

 

The FCC’s policies up to now have correctly attempted to promote both universal service and competition at the same time, by moving toward a system of funding portability.  Some argue, however, that portability and competitive neutrality are inappropriate.  We disagree.  The purpose of universal service is to benefit customers, not carriers, so high cost support should be directed to the services that customers decide to buy.  Providers should have to show that they are using the support for its intended purpose in order to receive funding; they shouldn’t retain funds when they are losing consumers.  Some components of today’s overall federal universal service funding system are fully portable, but others are not.  Under the non-portable funding mechanisms, certain carriers continue to receive universal service funding even when customers no longer want to buy service from them.  This makes no sense and is causing unnecessary increases in the size of the fund.  Wireless carriers, in contrast, lose support when they lose customers.  To protect consumer choice, accountability, and an efficient use of funding, this Committee should exercise its oversight over the FCC to ensure that the universal service system moves toward greater portability – not less.  Portability will ensure the steady deployment of basic and advanced services to rural consumers.  We fear that the Joint Board’s current drive toward moving wireless carriers to a “cost based” system will overlook the fundamental flaws with the current incumbent-biased funding system.  We look forward to helping you, Senator Pryor, to make sure that sensible and equitable long-term reforms are implemented instead of ones whose practical effect is to inoculate incumbent carriers from any and all form of the competitive pressures that wireless carriers like Alltel and others faces daily.

 

In sum, Alltel applauds this Committee’s emphasis on promoting universal access to both broadband and mobility services in rural America.  A reformed, pro-competitive universal service fund could be one of the most effective tools to achieve these twin objectives.  We look forward to working with this Committee, the Joint Board, and the FCC to advance the objective of promoting the deployment of both fixed and mobile communications technologies and services on a competitive basis in all parts of the country.

 

Thank you.