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«Chairman Pryor, Ranking Member Wicker and members of the subcommittee, I am Ted Carlson, Chairman of United States Cellular Corporation. Thank you ...»

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Our position represents healthy competition policy because it extracts efficiency from the marketplace: The FCC should immediately do away with the RoFR and allow any carrier willing to take on the universal service obligations to compete for customers and support. If a competitor can deliver broadband to an area for less money than another carrier, why should the government fund the less efficient provider?

There is no valid public policy rationale supporting the FCC’s RoFR decision and we urge the committee to ask the FCC to reconsider this policy, as a way of stretching program dollars much farther in rural areas and ensuring that universal service mechanisms do not drive out competition in rural areas. The costs of imposing antiquated monopoly-era price regulation in areas where competition fails are very high and in the end consumers are not well-served.

Infrastructure Built With Support Can Be Leveraged to Accelerate Construction of a Nationwide Interoperable Public Safety Network.

Ex Parte Letter from David A. LaFuria, Counsel to U.S. Cellular, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 09-51, et al., filed Jan. 28, 2010, Enclosure, William P. Rogerson, “Problems with Using Reverse Auctions To Determine Universal Service Subsidies for Wireless Carriers,” Jan. 14, 2010 (prepared for U.S. Cellular) at 6-7 (emphasis in original). http://apps.fcc.gov/ecfs/document/view?id=7020384141 All of the above actions we recommend are intended to increase construction of new towers in rural areas. They will also accelerate deployment of a nationwide interoperable public safety network. For U.S. Cellular’s part, we want to see the public safety network constructed as soon as possible, and we can help. The FCC has mandated that all towers we build with support must be made available for collocation – that is – we must permit others to install antennas on our towers at a reasonable cost.

In rural areas, we can think of no better way to leverage the government’s investment in our towers through universal service than to collocate public safety transmitters that will enable first responders to deliver critical health and safety benefits to rural citizens.

In closing my testimony on universal service, we urge Congress to continue to support policies that promote access to high-quality mobile networks so that rural citizens receive the public safety and economic development benefits already available to urban citizens. Although we sometimes disagree with how the FCC has implemented the National Broadband Plan, we agree completely that federal universal service funds must be used to invest in our nation’s broadband infrastructure, both mobile and fixed.

With these investments, rural areas will have access to the most powerful economic development tools of the new century. Without them, there will be a flight of capital and talent toward only those areas that are connected.

Infrastructure Deployment is Critical to Rural Citizens.

The era of mobile broadband is now exploding upon us, with an incredible array of devices enabling our citizens to do truly amazing things. Throughout the country, wireless carriers are deploying 4G networks that enable our citizens to access email, applications and the Internet at download speeds that are supersonic compared to the 2G networks deployed a decade ago. Even faster speeds are on the near-term horizon.

Anyone who owns one of the latest 4G enabled smartphones knows how amazing they are at these speeds. But this growth in appeal and usage presents a critical challenge as well: In the U.S., wireless data traffic has increased by 486 percent from the second half of 2009 to the first half of 2012 and demands for capacity are going to continue to escalate, meaning we cannot rest on our current achievements or infrastructure. We must continually build and upgrade to keep the US consumer at the cutting edge of technology and innovation.

Smartphones are increasingly considered to be a necessity by consumers across the country. Over the past three years, American smartphone adoption has increased from 16.9 percent to 54.9 percent. and smartphones currently account for 133 million of these devices. By 2014, the number of smartphones used by consumers in the United States is projected to exceed the number of consumers’ personal computers by more than 200 million units.

Widespread consumer adoption of mobile broadband has also fueled rapid growth and innovation in mobile applications. For example, the number of applications available at the iPhone App Store has grown 1,900 percent from April 2009 to September 2012, and the number of Android applications reached 700,000 in the fourth quarter of last year. To take another example, a recent study forecasts that within the next five years about 50 percent of all new car radios sold in the North American market will feature downloadable apps.

Among low-income households, many of whom cannot afford multiple subscriptions, the primary means to access the Internet is a high-speed mobile device.

For example, the Center for Disease Control’s June 2012 report shows that 51.4% of adults living in poverty lived in households with only wireless telephones, compared with 39.6% of adults living near poverty and 28.9% of higher income adults.

These are startling facts which begs one of the main questions we confront as a company and government must confront in its policy analysis. How can we ensure that these high-speed networks and incredible devices are not available only in urban and suburban areas? I’m sure each member of this committee has traveled in rural areas within your respective states where coverage is lacking, service quality is poor, and modern 4G service is unavailable.

As you know, rural economic development increasingly depends upon the availability of high-speed mobile broadband. Just a few weeks ago at the Mobile World Congress in Barcelona, one of the keynote speakers reported that in developing countries a 10% increase in mobile data penetration is associated with a 1.21 to 1.38% increase in GDP. Every 4G cell we build multiplies economic activity and increases consumer welfare in its coverage area. In areas receiving improved coverage, E911 and location-based services save lives and enable critical communications. In areas where a competitor enters, consumers receive improved service and greater choices.

As shown in the FCC’s National Broadband Map, high-speed mobile wireless service (6 MBps) is now available in many urban areas, but not in most rural areas.

There remains a lot of work to do to provide rural citizens with service quality that is reasonably comparable to that which is available in urban areas, as envisioned by the 1996 Telecom Act. Many communities can receive service from only one wireless provider and citizens living in these areas do not receive the benefit of competitive choice. We therefore urge the adoption of policies that could increase competition and reduce the need for monopoly-era regulatory structures. These better policies include allocation of more spectrum, the use of small geographic license areas, promoting market-based universal service mechanisms, increasing interoperability of devices, as well as other reforms which we have not focused on here today but which are important, including interconnection rights and special access reform.

Conclusion In conclusion, the challenges that we face are not insurmountable. Companies like U.S. Cellular have it in their business DNA to bring great communications services to the people of rural America.. The issue is how we can ensure that the regulatory regime that governs the market place is sensitive to the business challenges of serving markets where a piece of equipment that might serve 250,000 people in an urban market may serve just a few thousand or a few hundred. Government support may be necessary in some instances where the economics will never work for the private sector to invest alone, but ensuring that rural service providers have meaningful access to spectrum, have interoperability standards that make devices truly affordable, and that middle mile and backhaul services are at reasonable rates, all play a critical role in maintaining a healthy and robust industry.

Your time and attention to each of these items is extremely important for your constituents and our consumers and I thank you for inviting me to appear before you today.



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