1 2 Commonwealth of Pennsylvania 3 House Of

1 1

2 COMMONWEALTH OF PENNSYLVANIA 3 HOUSE OF REPRESENTATIVES HOUSE CONSUMER AFFAIRS COMMITTEE 4

6 RYAN OFFICE BUILDING ROOM 205 7 HARRISBURG, PENNSYLVANIA

9 WEDNESDAY, FEBRUARY 11, 2009 10 9:15 A.M.

11 IN RE: INFORMATIONAL MEETING 12 TELECOMMUNICATIONS, CABLE AND WIRELESS 13 INDUSTRY

15 BEFORE: 16 HONORABLE JOSEPH PRESTON, JR., CHAIRMAN 17 HONORABLE ROBERT W. GODSHALL HONORABLE WILLIAM F. ADOLPH, JR. 18 HONORABLE BRYAN BARBIN HONORABLE SHERYL DELOZIER 19 HONORABLE EUGENE DePASQUALE HONORABLE FRANK FARRY 20 HONORABLE WILL GABIG HONORABLE MARC GERGELY 21

22 ______23

25 2 1 (CONT'D)

2 HONORABLE SETH GROVE 3 HONORABLE ROB W. KAUFFMAN HONORABLE WILLIAM C. KORTZ, II 4 HONORABLE BOB MENSCH HONORABLE NICK KOTIK 5 HONORABLE ROBERT MATZIE HONORABLE JOSEPH A. PETRARCA 6 HONORABLE TINA PICKETT HONORABLE HARRY READSHAW 7 HONORABLE DAVE REED HONORABLE CHRIS SAINATO 8

10 ALSO PRESENT: 11 GAIL DAVIS, MAJORITY EXECUTIVE DIRECTOR 12 JAKE SMELTZ, MINORITY EXECUTIVE DIRECTOR DAVID V. VITALE, ESQUIRE 13 TIM SCOTT, RESEARCH ANALYST BETH ROSENTEL, RESEARCH ANALYST 14 MARCI SANTORO, COMMITTEE LEGISLATIVE ASSISTANT

16 BRENDA S. HAMILTON, RPR REPORTER - NOTARY PUBLIC 17

25 3 1 INDEX

2 NAME PAGE

3 IRWIN "SONNY" POPOWSKY 3 CONSUMER ADVOCATE, PA OFFICE OF 4 CONSUMER ADVOCATE

5 TELECOMMUNICATIONS PANEL 6 STEVEN J. SAMARA, VICE PRESIDENT 22 7 PENNSYLVANIA TELEPHONE ASSOCIATION

8 FRANK P. BUZYDLOWSKI, DIRECTOR 36 STATE GOVERNMENT RELATIONS, VERIZON 9 COMMUNICATIONS

10 CABLE PANEL 11 BRIAN BARNO, VICE PRESIDENT 65 12 GOVERNMENT AFFAIRS, BROADBAND CABLE ASSOCIATION PA (BCAP) 13 JIM D'INNOCENZO, VICE PRESIDENT 71 14 LEGISLATIVE AFFAIRS, COMCAST

15 GALE GIVEN, PRESIDENT 76 VERIZON PENNSYLVANIA 16

17 WIRELESS PANEL

18 GARY HOREWITZ, MANAGER GOVERNMENT 96 AFFAIRS, SPRINT-NEXTEL 19 DAVID KERR, VICE PRESIDENT EXTERNAL 103 20 AFFAIRS, AT&T PENNSYLVANIA

21 DANIEL MULLIN, EXECUTIVE DIRECTOR 109 STATE PUBLIC POLICY, VERIZON 22 WIRELESS

25 4 1 P R O C E E D I N G S

2 - - -

3 CHAIRMAN PRESTON: The hour and time

4 of 9:15 having come and gone by, I'd like to

5 be able to call the meeting of the Consumer

6 Affairs Committee to order.

7 If we could, without an objection,

8 I'd like if the members introduce themselves

9 and their respective counties who they

10 represent. That will also stand for the

11 partial roll call for those members who are

12 here.

13 If I could start to my right and to

14 the audience's left.

15 REPRESENTATIVE KORTZ: Good morning.

16 Bill Kortz, Allegheny County, 38th District.

17 REPRESENTATIVE SAINATO: I'm

18 Representative Chris Sainato. I represent the

19 9th Legislative District, which is Lawrence

20 County and a small section of Beaver County.

21 REPRESENTATIVE READSHAW: Good

22 morning. I'm Harry Readshaw, Allegheny

23 County, 36th Legislative District.

24 REPRESENTATIVE GABIG: Good morning.

25 My name is Will Gabig. I'm from Cumberland 5 1 County.

2 REPRESENTATIVE BARBIN: Good

3 morning. I'm Bryan Barbin, the 71st

4 District. I represent Johnstown and Cambria

5 County.

6 REPRESENTATIVE FARRY: Frank Farry.

7 Represent the 142nd District in Bucks County.

8 REPRESENTATIVE PICKETT: Tina

9 Pickett, Bradford, Sullivan and Susquehanna

10 Counties.

11 REPRESENTATIVE REED: Dave Reed,

12 Indiana County.

13 REPRESENTATIVE KOTIK: Nick Kotik,

14 45th Legislative District, Allegheny County.

15 REPRESENTATIVE MENSCH: Bob Mensch,

16 Montgomery County.

17 REPRESENTATIVE GODSHALL: Bob

18 Godshall, Montgomery County.

19 CHAIRMAN PRESTON: And if we can have

20 the respective staff.

21 EXECUTIVE DIRECTOR DAVIS: Gail

22 Davis, Executive Director for the Committee

23 for the Democratic Caucus.

24 EXECUTIVE DIRECTOR SMELTZ: Jake

25 Smeltz, Committee Director for the Republican 6 1 Caucus.

2 MR. VITALE: Dave Vitale, legal

3 counsel for the Committee.

4 MR. SCOTT: Tim Scott, research

5 analyst for the Democratic Caucus.

6 MS. SANTORO: Marci Santoro,

7 Secretary for the Democratic Caucus.

8 REPRESENTATIVE ADOLPH: Bill Adolph,

9 also from Delaware County, is over here at the

10 table.

11 REPRESENTATIVE DELOZIER: Sheryl

12 Delozier, Cumberland County.

13 CHAIRMAN PRESTON: This is the

14 continuation of the series of informational

15 committee hearings that we've had for

16 discussions so that we'll get the respective

17 industries and tomorrow with the public

18 utility commissioners as far as where we've

19 been, where we're going, and some of the

20 issues that are pertinent to them.

21 And also I think for the benefit of

22 the members who were on the committee last

23 year, last term, and also for the new

24 members.

25 50 percent of our committee is 7 1 different than last term. I think this is

2 important that we be able to do this now so

3 that when we -- when we get into the --

4 further into the session, the members will --

5 in themselves will be able to have a better

6 understanding of what the -- some of the

7 things that are going on in the past, what's

8 happening -- what's happening in the future as

9 we catch up with future trends.

10 That being said, I'll also recognize

11 the minority chairman. Mr. Godshall, any

12 comments?

13 REPRESENTATIVE GODSHALL: Just very

14 briefly, there's a -- as the chairman said, a

15 series of meetings for information purposes

16 which I think will prove invaluable to the

17 committee.

18 I appreciate your attendance and I

19 appreciate everybody's participation that came

20 here today.

21 CHAIRMAN PRESTON: Our first person

22 to present is Sonny Popowsky who is the

23 consumer advocate, Pennsylvania Office of

24 Consumer Advocate, under the Attorney

25 General's Office. 8 1 We've asked Mr. Popowsky, I guess, to

2 attend most of the meetings because he is the

3 person who represents the consumer and the --

4 and the people.

5 He has been here for quite a while.

6 I guess you might say an expert in his own

7 way, and we're looking forward to hearing your

8 testimony, Sonny, as we go and then we'll be

9 able to hear some different panelists from the

10 industry's concerns.

11 MR. POPOWSKY: Thank you, Chairman

12 Preston, Chairman Godshall, members of the

13 committee.

14 I hope you're not yet tired of

15 hearing from me. I guess this is the third

16 time in about a week, but it is a great, great

17 pleasure always to work with the members of

18 this committee and I really look forward to

19 working with you, especially the new members,

20 because I know you have your work cut out for

21 you.

22 As in prior hearings on this subject,

23 that is, telecommunications, cable and -- and

24 wireless, I will focus my comments on matters

25 involving our traditional land line telephone 9 1 companies, because, as many of you know, our

2 office has no direct jurisdiction with respect

3 to cable or wireless communications

4 companies.

5 Nevertheless, as you also know, the

6 lines between these different types of

7 communications technologies have become

8 increasingly blurred, and I couldn't help but

9 notice that you have Verizon, for example, on

10 all three industry panels, wireless, telephone

11 and cable.

12 I think the convergence among the

13 forms of communication was illustrated last

14 year in the debates before the General

15 Assembly on Senate Bill 1000, which was

16 designed to prohibit regulation by the

17 Pennsylvania PUC, or other state agency --

18 agencies, over the technology known as Voice

19 Over Internet Protocol, or VoIP.

20 I initially opposed that legislation

21 as it came out of the Senate because I was

22 concerned that the way in which it was

23 originally drafted could ultimately lead to

24 the total deregulation of all telephone

25 service, including basic residential service, 10 1 if any part of that service utilized Internet

2 or any type of Internet protocol.

3 I was honored to work with the

4 members of this committee, Representative

5 Mensch and others, and -- and, in fact, the

6 bill was -- was amended by this committee to

7 address that specific concern and to make it

8 clear that nothing in the bill precluded the

9 PUC's continued regulation of basic protected

10 telephone service, regardless of the

11 technology used to provide that service.

12 And with that amendment, the bill

13 passed the House and Senate and was signed by

14 Governor Rendell.

15 Now, Senate Bill 1000 was also

16 amended or clarified to make it clear that

17 that bill did not modify the Pennsylvania's --

18 Pennsylvania PUC's authority with respect to

19 what are called access charges. That is the

20 charges that are paid to our incumbent local

21 telephone exchange companies by other

22 telecommunication companies, such as long

23 distance providers, in order for those

24 companies to connect interexchange calls to

25 customers on their networks. 11 1 Now, that issue was of particular

2 importance to Pennsylvania's smaller rural

3 telephone companies who rely in large part on

4 access charges from other telecommunications

5 companies to support the cost of their

6 network.

7 And I'm sure you'll hear it from

8 Mr. Samara on that in the next panel.

9 Now, I personally share or my office

10 shares the concern of the rural telephone

11 companies on this issue. From my perspective,

12 all parties who use the public switched

13 telephone network, the basic telephone network

14 that has been built over the decades, should

15 contribute to the support of that network and,

16 in my view, that includes the new

17 telecommunications companies that wish to gain

18 access to the customers of our existing rural

19 telephone companies.

20 Now, as I've testified before this

21 committee on many prior occasions, my primary

22 concern for telecommunication service in

23 Pennsylvania is the assurance of universal

24 service at reasonable and affordable rates for

25 every Pennsylvanian who wishes to have -- have 12 1 such service.

2 That's not just my goal, however. If

3 you look -- if you look at Chapter 30, the law

4 that governs Pennsylvania regulation --

5 Pennsylvania telecommunications regulation,

6 the very first sentence of the original

7 Chapter 30, the very first clause, says that

8 the General Assembly finds and declares that

9 it is the policy of this Commonwealth to

10 maintain universal telecommunications service

11 at affordable rates.

12 When Chapter 30 was re-enacted in

13 2004, that sentence was removed. It was moved

14 to the second sentence, but it is still the

15 second declaration of policy.

16 It's also the primary policy of the

17 Federal Telecommunications Act of 1934, which

18 again was revitalized, extended, and

19 strengthened by the communications act -- the

20 Telecommunications Act of 1996.

21 Now, why is universal service such a

22 fundamental telecommunications policy, not

23 just in Pennsylvania but throughout the

24 country?

25 One reason -- and I think this is 13 1 what diff -- maybe differentiates telephone

2 service from other utility services -- is that

3 the more people who are connected to the

4 telephone network the more everyone benefits

5 from the network.

6 So universal telephone service

7 benefits every telephone user, rich and poor,

8 urban or rural. It's not just important to

9 the parents and grandparents in Elk County so

10 they can call their family and business --

11 businesses in Pittsburgh. It's important so

12 that people and businesses in Pittsburgh can

13 connect with residents in Elk County.

14 Universal service is not just

15 important for the low income family so they

16 can call their child's doctor. It's important

17 so that the child's doctor can call back the

18 parents to let them know the results of their

19 children's medical tests.

20 Universal service provides a

21 reasonable level of access to affordable

22 telecommunications service for all

23 Pennsylvanians, including those who live in

24 our most rural and sparsely populated

25 communities where the cost of providing 14 1 service to each individual is the highest.

2 It's not a coincidence that the low

3 income universal service program to help low

4 income customers obtain affordable service is

5 called Lifeline. In today's society,

6 telephone is a lifeline for many consumers and

7 perhaps unique among utility service, it's a

8 two-way lifeline.

9 Now, I'm sure that you will hear

10 testimony at today's hearing about competition

11 in the telecommunications industry and the

12 benefits that such competition has provided to

13 Pennsylvania consumers.

14 I fully agree with that. Competition

15 has benefited many Pennsylvania consumers,

16 particularly those who can now buy

17 purchases -- who can now buy packages of

18 voice, video and data services from different

19 providers at economical bundled rates.

20 But in many parts of Pennsylvania,

21 there is little or no competition for

22 standalone basic telephone service on which

23 many Pennsylvanians continue to rely.

24 That's why, when our communications

25 framework was re-enacted in 2004, the General 15 1 Assembly maintained a carefully drawn category

2 of protected services -- that was the term

3 used -- protected services, including basic

4 residential service, that continue to be

5 subject to a higher level of commission

6 scrutiny and regulatory protection.

7 Specifically Act 183 of 2004, in that

8 Act, the General Assembly included

9 enhancements to the Lifeline program, as well

10 as protections for basic residential service

11 for both rural and nonrural incumbent local

12 exchange companies.

13 With respect to rural companies, the

14 most important protection contained in the

15 2004 Act was a provision that stated that any

16 rate change limitations that were contained in

17 the company's existing plans would continue

18 and would remain applicable and would be just

19 and reasonable.

20 Now, some of the members of this

21 committee -- I think particularly you,

22 Representative Adolph, will remember that one

23 of those protections that was in place at that

24 time was an $18 cap on -- on basic rates.

25 Is, if the price went above $18, 16 1 those rural companies would be able to draw

2 from the State Universal Service Fund.

3 And I've gone back and looked,

4 Representative Adolph, I think you probably

5 mentioned that four times in the -- in the --

6 in the debate in response to concerns by folks

7 like me that rates would -- would increase

8 substantially. You pointed to the $18 price

9 cap.

10 Now, I believe that that $18 cap can

11 be raised by the PUC after notice and

12 hearing. And we are having an investigation

13 right now as to whether or not that cap should

14 be raised.

15 But what concerns me is that the

16 whole concept of the rural rate cap, the whole

17 concept of the State Universal Service Fund,

18 is under attack, is under challenge by some of

19 our larger companies like Verizon and ATT.

20 My office has joined with the

21 Pennsylvania rural telephone companies, the

22 folks who are represented by Steve Samara, in

23 cases before the PUC and the Commonwealth

24 Court in defense of the rate cap and

25 particularly in defense of the State Universal 17 1 Service Fund.

2 We think that maintaining a cap at a

3 reasonable level and retaining the State

4 Universal Fund can help ensure that basic

5 residential rates of our most rural telephone

6 companies are affordable and those rates are

7 comparable to the rates charged by Verizon,

8 for example, in the remainder of the state.

9 And it's my hope that the PUC will

10 maintain the cap at some reasonable level in

11 order to help meet the universal service goals

12 of the -- of Chapter 30.

13 And, finally, I would like to discuss

14 the other major goal that was set forth in the

15 original enactment of Chapter 30 in 1993 and

16 its reenactment in 2004, which was accelerated

17 deploy -- deployment of high speed broadband

18 services throughout the Commonwealth.

19 While broadband is not a part of

20 basic universal service, the General Assembly

21 clearly found the availability of broadband is

22 a matter of vital importance to every urban,

23 suburban, and rural community in the

24 Commonwealth.

25 The companies in 19 -- in 2004 were 18 1 provided with a number of options as to when

2 they could complete broadband and based on

3 when they completed it they were given

4 different rate incentives.

5 Interestingly, all of the small rural

6 companies agreed to the -- to the most

7 accelerated deployment schedule, which was to

8 complete their deployment by 2000 -- by the

9 end of 2008.

10 I look forward -- I think we'll be

11 receiving reports from each of the companies

12 as to whether or not they were able to meet

13 that goal. But they all met -- they all

14 agreed to the 2008 goal for broadband

15 deployment throughout their territories.

16 The -- the larger companies generally

17 took the -- the later dates, 2013, 2015, but

18 they also agreed to a program, again, which

19 you'll recall, called the Bona Fide Retail

20 Request Program where, if enough customers in

21 a particular community stepped up and said we

22 would like your service and we're willing to

23 pay for it sooner rather than later, they

24 could get basically to the head of the line.

25 That program has been a great success 19 1 beyond anything I expected. In fact, there

2 are so many -- literally thousands of

3 customers have filed an -- have filed

4 individual requests for broadband service.

5 Only a small -- a relative -- a smaller number

6 of those have met the thresholds of -- I think

7 it's 50 customers or a certain percentage of

8 the customers in an area.

9 But we have worked with customers,

10 individual customers, to help them wind their

11 way through that process. We look forward to

12 continuing to work with customers to help them

13 get that bona fide -- their Bona Fide Retail

14 request and get broadband service in those

15 communities.

16 So if any members of the committee

17 are familiar with -- with people in your

18 service area who are trying to get broadband

19 service, please ask them to contact our office

20 and we will do everything we can to help them

21 get their message across and get that service

22 sooner than they might otherwise get it under

23 the statute.

24 So with that, I'll close. I want to

25 thank you for inviting me to participate in 20 1 the hearing, and I'll be happy to answer any

2 questions you have.

3 CHAIRMAN PRESTON: Thank you very

4 much, Sonny. Before I get to questions, I

5 want to make sure that the telecommunications

6 industry, who is our next panel up, that would

7 be an interesting question that they should

8 answer to give us a brief idea as far as the

9 Bona Fide Retail Request. Have they had any

10 and what is -- what is happening there? And I

11 think that that's one of the things we want to

12 have the experience about in dealing with this

13 committee.

14 I think the other thing is that maybe

15 a lot of committee members aren't -- sometime

16 aware that there are special rates, you know,

17 that we have certain caps on and certain

18 programs for senior citizens if people are

19 willing to be able to give up some of the

20 bells and whistles along with that.

21 And I want to be able to thank Sonny

22 because when we were going through an awful

23 lot over the years, in the last six or seven

24 years, whether it was -- whoever it was in the

25 majority at the time, we worked out an awful 21 1 lot of things to be able to help consumers.

2 It hasn't been the answer for

3 everything, but we're going to get there.

4 Are there questions from members?

5 There being none, thank you very much.

6 MR. POPOWSKY: Thank you.

7 CHAIRMAN PRESTON: We really

8 appreciate you. As Mr. Popowsky gets up, and

9 with our next panel will be Steven Samara,

10 vice president of Pennsylvania Tele --

11 Telephone Association, and Frank Buzydlowski,

12 director of state government relations for

13 Verizon Company.

14 As they are in the process of getting

15 theirselves set up, I'd like to also keep the

16 members aware. In the future, you know, we've

17 had one phrase that has been very

18 commonplace. That is infrastructure.

19 As we are -- as we are dealing with

20 the term of infrastructure, I want to bring up

21 another phrase sometime that we haven't really

22 connected. One on one everybody understands.

23 In today's world it is very commonplace.

24 We've been very used to dealing with water,

25 electric, wastewater as far as infrastructure 22 1 is concerned.

2 But when we sit down and think about

3 any community that must stabilize itself,

4 whether it's school districts, whether it's

5 hospitals, whether it's learning centers, or

6 whether it's a new company or a new business,

7 without telecommunications and the -- in

8 dealing with these -- with telecommunications,

9 the websites, and that is part of

10 infrastructure, too, and it has to be in the

11 form of planning.

12 As we go through these hearings,

13 hopefully in the next couple weeks, we will

14 also be dealing with the terminology as far as

15 customized job training.

16 I want to be able to bring that to

17 your attention because I think that's going to

18 be an area, very tantamount to all of you with

19 those directions.

20 Gentlemen, now that you're seated and

21 comfortable, you may proceed.

22 MR. SAMARA: Good morning. Thank

23 you, Mr. Chairman, Chairman Godshall. It's a

24 pleasure to be here before the House Consumer

25 Affairs Committee, or, as you guys may be 23 1 calling it by now, the House Committee on

2 Abbreviations, Acronyms and a Whole New

3 Language.

4 You've been through a bunch of

5 information hearings already with the

6 regulated utilities. We're guilty of doing

7 it. Chairman Preston has counseled me over

8 the years to keep it simple and try and steer

9 away from the abbreviations as much as

10 possible, but we all fall into that trap.

11 So just to give you an idea, I always

12 bring this, which is Newton's Telecom

13 Dictionary. It's not getting any thinner and

14 it's out of date as soon as it's printed.

15 So you get an idea of the lingo we

16 need to speak on a day-to-day basis. But

17 anybody -- I guess I should do this for effect

18 (drops book on table). Anybody wants a copy,

19 please -- please let me know.

20 But I'm delighted to be here. My

21 name is Steve Samara. I'm president of the

22 Pennsylvania Telephone Association.

23 We've been around for over a hundred

24 years. We represent the interests and

25 advocate on behalf of the rural local exchange 24 1 carriers or RLECs, which is the first one I'll

2 throw at you. It's your traditional local

3 phone companies essentially.

4 Shown here in the map on the colored

5 areas. You'll see. I'll get you all a copy

6 of this to decorate your offices as well.

7 But that gives you a geographic

8 depiction of who we are and what we do.

9 Companies range from a couple thousand or a

10 thousand access lines all the way up to

11 several hundred thousand access lines.

12 So it's -- it's a wide diversity of

13 companies throughout the state all serving the

14 rural parts of the Commonwealth.

15 But my member companies are in many

16 respects as advanced as any that will testify

17 before you today. We are truly

18 telecommunications companies as opposed to

19 telephone companies.

20 I realize, for the sake of the

21 hearing today, putting some traditional

22 boundaries on the panel made sense, but we are

23 all after the same customer. We are all after

24 the customer who wants video, who wants phone,

25 who wants wireless, who wants Internet, who 25 1 wants data services, and in that sense we are

2 much more similar than dissimilar.

3 In the brief time I have before you

4 today, I'd like to touch on a few areas that

5 should be of interest to you and your

6 constituents, including broadband deployment,

7 taxation of the telecommunications industry,

8 the regulatory environment we're facing, and

9 then the future of the rural telephone

10 companies in the state.

11 First, I want to talk a little bit

12 about Act 183, and the prime sponsor's sitting

13 in front of me. So we have a debt of

14 gratitude to Representative Bill Adolph and

15 many folks on this Committee for pushing that

16 bill through.

17 But Pennsylvania has the most

18 progressive broadband deployment statute in

19 the country. And I can say that without

20 impunity. I don't think you'll get any

21 argument from anyone about that.

22 You guys should be proud of the

23 effort that you put forward to get that

24 through and, as Congress continues to debate

25 the economic stimulus package they're looking 26 1 at right now, it should give you folks some

2 comfort and your constituents some comfort

3 that you are statutorily guaranteed broadband

4 to your constituents by a date certain.

5 It's interesting to hear all of the

6 other plans that are out there. You hear

7 about Connect Kentucky. You hear about all of

8 these other states that are doing -- having

9 some sort of public/private partnership to get

10 broadband deployed.

11 And we're doing it here without

12 government money. The companies are doing

13 it. They're statute -- statutorily required

14 to do it. And you're going to have a network

15 bill here that is quite phenomenal, quite

16 frankly, thanks to the efforts of the

17 legislature to get that done.

18 As of the end of last year, all but

19 two of the PTA member companies who fall under

20 Chapter 30 have constructed a network ensuring

21 that, within ten business days of a customer

22 request, broadband service can be supplied.

23 The two companies that are not 2008

24 companies are Windstream and Embarq. Dave

25 Bonsick was -- has submitted written testimony 27 1 to the committee. He was scheduled to be here

2 today, but for an accident could not be.

3 And Embarq and Windstream are around

4 the 86, 87 percent broadband completed range,

5 and so they are well ahead of the 80 -- 80

6 percent by 2010 benchmark in their network

7 modernization plan. So they'll -- they're

8 doing a very good job.

9 As most of you know, these deployment

10 figures must be supplied to the PUC, as

11 Mr. Popowsky alluded to, and I think the next

12 set and the final set for some is due to be

13 filed by the end of March.

14 The commission staff developed the

15 NMP reports in consultation with the industry,

16 and they are not static documents. They've

17 been modified over the years, and they are

18 designed to extract exactly what you'd expect

19 to extract from the companies that have agreed

20 to do this.

21 You know, specific detail and data

22 regarding where and what levels of deployment

23 they have achieved so far. So those will be

24 publicly available to you.

25 I want to talk a little bit about the 28 1 regulatory environment and Act 183. And as

2 similar as telecommunications providers are

3 with the array of services they offer, there

4 are marked differences from a regulatory

5 perspective. Act 183 established the

6 framework for a less onerous regulatory

7 environment for the RLECs in this state. For

8 all the LECs in this state.

9 To date, I'd tell you the results

10 have been mixed. Act 23 was to make us more

11 like our unregulated competitors and, quite

12 frankly, we're not quite there yet.

13 So that is an issue you will be

14 hearing about more from me as this session

15 progresses and -- because the longer it takes

16 for us to be an unfettered competitor, quite

17 frankly, the longer it takes for your

18 constituents to realize the benefits of -- of

19 competition.

20 So I look forward to engaging all of

21 you on the issues regarding the regulatory

22 environment we all face with you.

23 On telecommunications taxation,

24 several weeks ago the PTA joined with other

25 business organizations in a Capitol rotunda 29 1 press conference to talk about where we are

2 with the budget deficit, our fear that perhaps

3 we may be filling a hole on the backs of the

4 business community.

5 When we see a budget deficit of that

6 size, we're concerned, and those of us who

7 have been here long enough remember 1991 and

8 we get a little antsy about that, quite

9 frankly.

10 It's a lot of money to come up with.

11 We are so far liking what we're hearing from

12 the Governor in his budget address and from

13 folks in the legislature. But, like I said,

14 it's a sizable and significant problem and

15 we're concerned and want to kind of be

16 proactive as opposed to reactive on taxing the

17 business community generally and the telephone

18 communications specifically.

19 My -- my message that day was

20 twofold, and I'll reiterate it here today.

21 First of all, due to the recession and lots of

22 other reasons, the telecom industry is not

23 doing that well. We're bleeding jobs just

24 like -- like everyone else is. And the

25 short-term prognosis doesn't inspire much 30 1 confidence.

2 Xchange Magazine, as a sign of the

3 time, puts out a industry -- telecom industry

4 layoff tracker and the first 90 days of 2009

5 haven't been pretty. There's been about

6 22,000 jobs lost nationally.

7 And these are big companies. These

8 are the Googles. These are the Microsofts.

9 These aren't your -- just your traditional

10 phone companies. These are anyone involved in

11 the telecommunications industry.

12 So we're losing quite a bit -- quite

13 a bit of folks from the payrolls and, you

14 know, that -- that tracker is updated weekly,

15 quite frankly, you know, and no one -- no one

16 is immune from those types of -- those types

17 of bad things.

18 So, secondly, the telecom industry is

19 already heavily taxed. The report by the

20 Council on State Taxation shows that almost 19

21 percent of your constituents' phone bills are

22 devoted to state and federal taxes

23 And so we're particularly antsy

24 about, you know, those types of things. When

25 we start about taxes, we're already, you know, 31 1 in that boat where, you know, a big chunk of

2 your constituents' phone bills are going to

3 taxes. So we're very sensitive about that.

4 Finally I want to wrap up with the

5 future of the rural telecommunications

6 providers, and I'll invite you to get out your

7 violins before I start.

8 Unfortunately, I have -- I have to go

9 through this part of it as well because it's

10 exactly what's happening.

11 But I am mindful of a sign that one

12 of my Senate -- fellow Senate staffers several

13 years ago had prominently displayed in the

14 front of his office, and the sign simply said

15 death to crybabies.

16 So he didn't invite anyone in to

17 whine in front of him. So I'll try not to --

18 try not to whine too much.

19 But I do want to go through a couple

20 things. And, quite frankly, it's a very rare

21 occurrence that I can sit here and say ditto

22 to Sonny Popowsky's testimony, almost all of

23 it.

24 So I will offer that. He made many

25 excellent points, quite frankly, about -- 32 1 about access charges, intercarrier

2 compensation, and where the rural

3 telecommunications industry is in this state.

4 But for those of you who survived

5 both the Chapter 30 debate and the Senate Bill

6 1000 debate, you will know that access charges

7 specifically and intercarrier compensation

8 generally are of critical importance to the

9 rural phone companies in this Commonwealth.

10 Whether you like the process by which

11 phone companies pay each other for completing

12 calls or not, access charges represent on

13 average about half of my member companies'

14 revenue streams.

15 So any time you take a look at piece

16 parts of intercarrier compensation, you're

17 essentially affecting the bottom line and that

18 could be the --the rates that your

19 constituents pay for basic phone service.

20 So this state has been actively

21 reducing access rates. The PUC currently has

22 an open and active docket on access. The FCC

23 is in the midst of attempting, and has been in

24 the midst of attempting, to reform

25 intercarrier compensation for quite a while. 33 1 Almost entertaining a measure last year under

2 then FCC Chairman Kevin Martin, but they're

3 not quite there yet.

4 There was a study done a little while

5 ago by the Organization for the Promotion and

6 Advancement of Small Telephone Companies

7 called OPASTCO, one of our national

8 organizations, and the study was entitled The

9 Next Three Years: Likely Revenue Scenarios

10 for Rural Incumbent Local Exchange Carriers,

11 and that kind of sums up our short-term future

12 this way:

13 I quote, these are challenging times

14 for rural ILECs. Much of their traditional

15 revenue sources are threatened due to

16 technology, competition, and politics.

17 As they plan for the future, it is

18 important to have a realistic assessment of

19 what is likely to happen in the absence of any

20 particular policy change. Alternatives should

21 be compared to the likely baseline, not the

22 one that happens to exist today. Our forecast

23 consistently shows that there's likely to be a

24 revenue shortfall and it's likely to grow each

25 year. By 2010, it's expected to be on the 34 1 order of 13 percent. The potential to obtain

2 additional contributions from unregulated

3 services is real, but it is our belief that

4 the contribution margins on most unregulated

5 services are quite small. The challenge is to

6 increase these margins so that they can

7 replace the regulated revenue deficiency. The

8 longer-term goal is also to alter the

9 regulatory environment to produce a more

10 sustainable financial future for rural ILECs.

11 Essentially what that's saying is --

12 is to the point the consumer advocate made.

13 You know, this is -- this is a balloon that is

14 getting pressed. Competition is pressing

15 parts of it. Decreasing access charges are

16 pressing parts of it. The size of the

17 universal service fund to keep basic service

18 affordable is -- is pressing and there's --

19 you know, someone is going to get squeezed at

20 the end of the day.

21 So it's something we all -- we all

22 need to be mindful of.

23 Our battle is on many fronts. We're

24 losing access lines to competitors, we remain

25 more stringently regulated than our 35 1 competitors, and we need to invest in cutting

2 edge technology to hold -- hold on to the

3 customer base that we have.

4 To make a difficult situation

5 slightly more interesting, there are

6 competitors, none testifying before you today

7 and none in this room that I know of, who

8 refuse to pay access charges, period.

9 And it's a situation we're in the

10 midst of combating even as we speak. Again,

11 to Sonny's point about preserving our ability

12 to go after the lawful and rightful access

13 charges from competitors.

14 And, again, I'll reiterate, there's

15 no one here that is not -- is not paying

16 access. But there are out-of-state

17 competitors that they're actively involved in

18 that and have a business plan that revolves

19 around it and, you know, that's something that

20 we need to -- and are combating today.

21 So, in summary, Mr. Chairman,

22 Chairman Godshall, it's a pleasure to be here

23 before you today. You guys have your work cut

24 out for you on lots of issues, not just

25 telecom, wireless, and cable. 36 1 I wish you all the best and, as

2 always, PTA stands -- stands ready to assist

3 you in any -- any manner that you see fit.

4 CHAIRMAN PRESTON: Well, thank you.

5 Before -- Mr. Buzydlowski, before you begin,

6 let me let those members who've come in since

7 we started the proceedings to also introduce

8 themselves and the counties that they

9 represent and that's how we're taking the

10 attendance today.

11 So if you could.

12 REPRESENTATIVE GROVE: Seth Grove,

13 York County, 196th district.

14 REPRESENTATIVE ADOLPH: Bill Adolph,

15 Delaware County, 165th District.

16 REPRESENTATIVE GERGELY: Mark

17 Gergely, Allegheny County, 35th District.

18 REPRESENTATIVE MATZIE: Rob Matzie,

19 16th District. That's Beaver and Allegheny

20 County.

21 REPRESENTATIVE PETRARCA: Joe

22 Petrarca, Westmoreland County.

23 CHAIRMAN PRESTON: Thank you.

24 Mr. Buzydlowski.

25 MR. BUZYDLOWSKI: Thank you, 37 1 Mr. Chairman. Chairman Preston, Chairman

2 Godshall, members of the Committee, my name is

3 Frank Buzydlowski, and I serve as director of

4 state government relations for Verizon here in

5 Pennsylvania.

6 On behalf of our 15,400 Pennsylvania

7 employees and more than 20,000 retirees who

8 reside in this great state, I appreciate this

9 opportunity to share with you Verizon's

10 perspective on the Commonwealth's ever more

11 competitive telecommunications industry, and

12 to describe our efforts to deploy the most

13 advanced telecommunications network, a network

14 that empowers individuals and businesses to

15 succeed in these difficult economic times.

16 But first, I would like to take this

17 opportunity to mention the Verizon Foundation,

18 the philanthropic arm of Verizon

19 Communications, which supports the advancement

20 of literacy and K through 12 education through

21 its free educational website, thinkfinity.org,

22 and fosters awareness and prevention of

23 domestic violence.

24 Last year, Verizon contributed almost

25 two-and-a-half million dollars towards such 38 1 initiatives right here in Pennsylvania.

2 In addition, through the Verizon

3 volunteer program, our employees and retirees

4 volunteered more than 45,000 hours of

5 community service and raised over $2 million

6 for nonprofits in this Commonwealth and the

7 Verizon Check Into Literacy program provided

8 31 Pennsylvania nonprofits over $280,000 in

9 literacy grants in 2008 thanks to our

10 customers.

11 That's the program that you may

12 notice on your phone bill where you can check

13 a box and make a dollar tax deductible

14 donation and then we distribute those

15 donations to local literacy organizations.

16 In addition to being a corporate

17 leader in philanthropy, Verizon Communications

18 is the leader in its Pennsylvania service

19 territory in delivering broadband and other

20 communications innovations to residents,

21 businesses and government.

22 Our skilled and dedicated employees

23 build and operate the most reliable and

24 advanced network, serving more than four

25 million telephone lines statewide. 39 1 Verizon owns and operates an

2 expansive, robust global IP network and is

3 deploying the nation's most advanced

4 fiber-optic network.

5 In Pennsylvania, we have deployed 1.7

6 million miles of fiber-optic cable. One

7 hundred percent of our interoffice facilities

8 are fiber-optics, and we are continually

9 extending the reach of our fiber network,

10 connecting our central offices or wire centers

11 to remote terminals in the field.

12 And that is the backbone of our

13 network capital investments that have now

14 exceeded in Pennsylvania $12 billion,

15 including over 700 million invested just last

16 year alone.

17 This investment assures that Verizon

18 will continue to provide excellent service to

19 our customers and offer more innovative

20 products than ever before. Today's consumer

21 expects telecommunications to be reliable,

22 secure, easy to use, and supported by

23 responsive service.

24 Our customers are demanding ever

25 increasing speeds for Internet access, and 40 1 that requires ever increasing bandwidth.

2 For all the reasons I just mentioned,

3 we have been placing fiber-optics in our

4 network for over 15 years and extending it

5 closer and closer to our customers' homes and

6 businesses.

7 And the natural extension of that is

8 to run fiber to the premises and that allows

9 the deployment of FiOS, or fiber-optic

10 service, which can bring video as well as high

11 speed Internet services and telecommunications

12 to our customers.

13 And you will hear more about our FiOS

14 video service from our state president, Gale

15 Given, on the cable TV panel.

16 The magnitude of this investment

17 would not have been possible without the

18 forward-looking actions of this General

19 Assembly.

20 In 2004 you recognized the dramatic

21 and fundamental transformation that had

22 occurred in telecommunications from the highly

23 regulated, near-monopoly industry of

24 yesteryear to the highly competitive

25 marketplace of today that utilizes a myriad of 41 1 technologies, most notably high speed Internet

2 services.

3 So you passed House Bill 30, Act 183

4 of 2004, and last year you recognized the

5 further changes that occurred in the industry

6 so you passed Senate Bill 1000 to assure that

7 the Internet remained free from unnecessary

8 regulation and Voice Over Internet, or VoIP,

9 service development be incented.

10 Act 183 vaulted Pennsylvania to the

11 forefront of technological and economic

12 development by ensuring that all the citizens

13 of our Commonwealth will have modern,

14 up-to-date telecommunications services

15 available through the deployment of an

16 advanced high speed broadband network.

17 Pennsylvania is still the only state

18 in the nation that requires 100 percent

19 broadband deployment, and I am proud to report

20 to this committee that Verizon has met or

21 exceeded its broadband deployment --

22 deployment benchmarks. And we have

23 accomplished this in the face of fierce

24 competition and a weakening economy.

25 In recent years we have lost 42 1 approximately eight percent of our

2 Pennsylvania access lines annually as

3 residents and business customers have switched

4 to cable -- you've heard of Comcast digital

5 voice, big competitor to us; our largest

6 competitor -- wireless VoIP, CLEC competitors,

7 many dropping their second lines in the home

8 because the kids don't use the second line;

9 they're using a cell phone, and in many cases

10 there are households, especially in the

11 younger generation, that have stopped wireline

12 service altogether in favor of making their

13 wireless phone their only phone.

14 Yet today, 497 of our 504 wire

15 centers, or central offices, are equipped to

16 provide broadband high speed Internet

17 service. That is 98 percent of our centers

18 deployed, with our remaining seven scheduled

19 to be deployed at the end of this year.

20 But that's not the end of the story.

21 There are physical distance limitations to the

22 provisioning of high speed Internet service.

23 So in order to achieve the 100 percent

24 availability that Steven Samara and Sonny

25 Popowsky have talked about, using today's 43 1 technology, thousands of remote terminals must

2 be deployed.

3 As of this date, we have deployed

4 1,668 remote terminals. You'll see the list

5 of our central offices and next to the office

6 has how many remote terminals that have

7 already been deployed.

8 With all of that deployment, the

9 question that I am now most frequently asked

10 by members and staff is when a particular

11 constituent is going to be able to order high

12 speed Internet service. What does it mean to

13 you and your -- and your constituents?

14 Well, our engineers are working every

15 day to deploy additional broadband according

16 to a plan that will achieve 100 percent

17 deployment in the most efficient manner.

18 However, in order to accelerate high

19 speed Internet service availability for the

20 people who want it, there is a provision in

21 the act that allows groups of customers to

22 move to the front of the deployment line.

23 The Bona Fide Retail Request, or BFRR

24 program, as we affectionately call it at

25 headquarters, allows customers to petition 44 1 Verizon to expedite deployment in their

2 neighborhood. If either 50 customers, or 25

3 percent of our working lines in an area,

4 whichever is less, commit to purchase high

5 speed Internet service for a year, deployment

6 in that area is immediately accelerated by our

7 engineers.

8 This BFRR, or BFRR program, has been

9 an overwhelming success, as you've heard

10 talked about within the last few minutes.

11 Since its inception 108 communities have

12 completed its requirements -- 118 communities

13 have completed its requirements and already

14 have high speed Internet services up and

15 running in their areas. In other words, your

16 constituents in those areas can order it

17 today.

18 But there's more to our Pennsylvania

19 story than the foundation philanthropy and the

20 engineering and construction of our network.

21 Our commitment to this Commonwealth's economic

22 development and educational goals is second to

23 none.

24 The Broadband Outreach and

25 Aggregation Fund provides funding to DCED for 45 1 educational outreach to residential consumers,

2 health care facilities, economic development

3 entities, schools and businesses concerning

4 the procure -- procurement, use, and benefits

5 of broadband.

6 Verizon has contributed $4.8 million

7 to this fund to date.

8 Act 183 has also created the

9 economic -- the Education Technology Fund, or

10 E-Fund, that provides financial support for

11 the creation of broadband networks for

12 schools.

13 Under this provision of the act, K

14 through 12 schools and other educational

15 entities apply for grants and acquire

16 communication services and related hardware,

17 as well as technical assistance to deliver

18 high speed Internet services to the schools.

19 Verizon pays roughly $10 million into

20 this fund.

21 Looking to the future, we see the

22 further utilization of our broadband network

23 to facilitate the development of information

24 communications technology, ICT, to provide,

25 for example, remote sharing of medical records 46 1 which helps to control costs and reduce

2 errors.

3 In addition, ICT and broadband

4 technologies have the ability to reduce energy

5 consumption by way of teleworket --

6 teleworking to reduce auto and business energy

7 use;

8 Teleconferencing to reduce air and

9 auto travel;

10 Online commerce, like electronic

11 billing and online shopping, that reduces

12 miles driven and paper used for traditional

13 billing.

14 Electronic delivery to reduce

15 emissions and save plastic by eliminating CDs

16 and DVDs.

17 And we could go on and on. But I

18 won't.

19 In closing, the foresight of this

20 Committee has helped to unlock tremendous

21 telecommunications investment, innovation, and

22 competition in our Commonwealth.

23 Our ability to harness technology to

24 provide next-generation products, managed

25 services and global IP network helps business 47 1 and government operate more efficiently,

2 improves service to their customers and your

3 constituents, and stimulates economic growth.

4 But all of this is dependent upon

5 legislative and regulatory policies that

6 achieve parity in the marketplace.

7 Thus, in looking forward, we

8 encourage the members of this Committee to

9 continue to adopt policies that promote

10 further free market competition and further

11 reduce regulation of our industry.

12 Thank you for this opportunity to

13 appear before you. Steve and I will be happy

14 to answer any questions that you may have.

15 CHAIRMAN PRESTON: Okay. Questions

16 to the panel? I recognize the gentleman from

17 Cambria County, Mr. Barbin.

18 REPRESENTATIVE BARBIN: Mr. Samara, I

19 was listening to your testimony and I wondered

20 as you were going through your testimony about

21 the foreign corporations that weren't paying

22 access charges.

23 MR. SAMARA: Uh-huh.

24 REPRESENTATIVE BARBIN: Were those --

25 if you can, are those foreign corporations, 48 1 are they corporations that have just decided

2 not to pay or foreign corporations that have

3 gone to court and said they -- there's no

4 legal obligation to pay?

5 MR. SAMARA: Well, they're

6 out-of-state corporations, for one. They're

7 not foreign per se. Foreign to Pennsylvania.

8 REPRESENTATIVE BARBIN: I mean it

9 from a tax perspective.

10 MR. SAMARA: Yeah. Some have -- most

11 have just responded to our bills and said

12 either we don't owe this, our legal counsel

13 tell -- tells us we don't owe this, the FCC

14 tells us we don't need to pay you. And those

15 are the battles we're facing.

16 We have a court case going on with

17 one of our member companies now about it and

18 it's -- it's been an ongoing issue. And

19 the -- the response we get from these folks is

20 either I will pay a portion of this that I

21 think I owe you. Some of it is VoIP. We're

22 not paying you for VoIP. Even though it looks

23 to us like a regular call when it hits our

24 switch and we transport it as a regular call.

25 So they will vary from -- from simply 49 1 refusing to pay to citing some old shtick

2 to -- you know, the liberty of citing

3 something and -- and their interpretation of

4 what the FCC has said and conclude that we

5 don't owe you access charges.

6 REPRESENTATIVE BARBIN: Thank you.

7 CHAIRMAN PRESTON: Chairman Godshall.

8 REPRESENTATIVE GODSHALL: Steve --

9 excuse me. Steve, were these people part of

10 the negotiations when we did Senate Bill

11 1000? Because I thought this whole thing was

12 put to rest. I'm surprised to hear it, you

13 know, coming back again.

14 We worked months on this, as you well

15 know, and very successfully, I thought, to

16 everybody's satisfaction. You know, I -- were

17 they part of this situation in the beginning

18 or --

19 MR. SAMARA: No, Representative

20 Godshall, they were not. And you were

21 successful in preserving the opportunity for

22 my member companies to use the commission --

23 REPRESENTATIVE GODSHALL: Right.

24 MR. SAMARA: -- to try and extract

25 payment out of these folks. So you were 50 1 successful in doing that.

2 But these -- these folks were not at

3 the table for those discussions.

4 REPRESENTATIVE GODSHALL: Thank you.

5 I'm just surprised. You know, I thought that

6 was an issue that we -- you know, was put away

7 and I'm surprised to hear it reawaken again.

8 MR. SAMARA: Well, I think from your

9 perspective you can check that one off. I

10 mean you guys did the right thing.

11 I mean the language in the bill

12 allows us the opportunity to go after these

13 guys. There's nothing more, I don't think,

14 the legislature could have done.

15 So you guys did your job as far as

16 we're concerned. It's up to us now. The

17 burden is on us to use that opportunity to

18 extract payment out of these folks who aren't

19 paying.

20 REPRESENTATIVE GODSHALL: Thank you.

21 CHAIRMAN PRESTON: Representative

22 Grove.

23 REPRESENTATIVE GROVE: Thank you,

24 Mr. Chairman.

25 Mr. Buzydlowski, the BFRR program, is 51 1 that -- how does the individual go about

2 starting that up in their neighborhood? Is it

3 a form that they get from your office and is

4 it a -- some kind of contract where they would

5 go around and -- and get signatures from their

6 residents?

7 MR. BUZYDLOWSKI: Representative

8 Grove, there is a form. It's available on the

9 Internet. But I'll be happy to send it to

10 you.

11 Your district, any district office

12 can have them and disseminate to constituents

13 who ask.

14 One form allows a person to sign up

15 as a bona fide retail requester, and that's

16 then number one or whatever number it is in

17 that particular serving area.

18 But then there is an additional form

19 that expedites the process by which the person

20 can become an aggregator.

21 I like to compare it to like when one

22 of your volunteers or committee people

23 circulates nominating petitions. They can

24 take around the BFRR forms to the

25 constituent. 52 1 First of all, they would sign up. We

2 would give them a map so they -- because our

3 areas, of course, you know, are according to

4 the facilities that are there. So we give

5 them a map that outlines the boundaries, and

6 they can have that and go door to door and get

7 other people to sign the -- the BFRR forms.

8 And then when we achieve -- that area

9 achieves threshold, they're expedited.

10 They're on the -- they're moved up on -- to

11 the list to get done more quickly.

12 REPRESENTATIVE GROVE: Thank you.

13 MR. SAMARA: I'd also note,

14 Representative Grove and members of the

15 committee, customers -- customers of

16 Windstream and Embarq also have the BFRR

17 program available to them.

18 So any of you folks who represent

19 those territories, those were the non-2008

20 member companies under Chapter 30, under Act

21 183. So if you have customers from either

22 Embarq or Windstream and Verizon, they would

23 all be eligible to -- to sign up for the BFRR

24 program.

25 CHAIRMAN PRESTON: Representative 53 1 Mensch.

2 REPRESENTATIVE MENSCH: Gentlemen,

3 good morning.

4 MR. SAMARA: Good morning.

5 REPRESENTATIVE MENSCH: More a

6 comment than a question. Relating to the

7 access charges again, you know, Chapter 30

8 allows -- in -- in fact, it instructs that we

9 charge, that you guys charge for every service

10 that you can. And -- and a carrier is

11 obligated to pay that charge.

12 And we -- with the amendment, we

13 enabled you to be able to take legal relief

14 and -- and go after these so-called foreign

15 companies.

16 But it's important to note that, as

17 we have discussed at times, this is an FCC

18 issue more so than it is under the PUC

19 regulatory potential.

20 You know, the PUC doesn't have

21 interstate capability for that billing, and

22 the way a switch -- or a call can be routed

23 through the various switches puts it onto the

24 FCC requirements.

25 So I'm not sure what your -- what 54 1 your lawsuit is going -- so we've talked

2 before about you can -- you can track the

3 traffic if you originate. You can track the

4 traffic that you terminate.

5 Do you -- do you have an estimate of

6 how much is being uncollected at this point?

7 MR. SAMARA: I can tell you that one

8 of my smallest member companies, which I think

9 is a decent example, is several hundred

10 thousand dollars poorer today.

11 REPRESENTATIVE MENSCH: Monthly?

12 Annually? Cumulative?

13 MR. SAMARA: Total at this point in

14 time. It's -- it's -- for them, which is an

15 under 10,000 access line company, it's about

16 anywhere between 10 and $20,000 a month that

17 they're out.

18 And you're right about the

19 jurisdiction, Representative Mensch. We can

20 only go after the intrastate portion, whatever

21 we do here. You know, we can't -- we can't go

22 after the interstate portion of it. So we

23 need to break down and get as much as we can.

24 But, yeah. It's -- it's become --

25 when we first started discussing Senate Bill 55 1 1000, it was tens of thousands of dollars and

2 it's rapidly becoming larger than that. And

3 we're seeing call volume kind of -- kind of

4 move from the access charge payers to the

5 access charge nonpayers.

6 REPRESENTATIVE MENSCH: Yes.

7 MR. SAMARA: I mean you'll see that

8 type of movement as a business model when you

9 start looking at the calls that come into your

10 switch.

11 I mean those who have agreed to pay

12 it, all of a sudden their call volume drops

13 off the map and someone else has picked it up,

14 which we call phantom traffic for a good

15 reason. And -- so that's another issue we're

16 going to have to deal with. So...

17 REPRESENTATIVE MENSCH: The -- the

18 intrastate portion that you can go after, what

19 percent of that is the total uncollectible?

20 Do you have any idea?

21 MR. SAMARA: I don't. I'll -- I'll

22 have to get that for you. I'd be happy to.

23 REPRESENTATIVE MENSCH: Thank you.

24 CHAIRMAN PRESTON: Representative

25 Sainato. 56 1 REPRESENTATIVE SAINATO: Thank you,

2 Mr. Chairman.

3 My question is to Mr. Buzydlowski.

4 I'm looking at these remote terminals

5 that's -- that's been deployed. Could you

6 give us a little more explanation exactly what

7 they do?

8 Because I'm looking here. It has New

9 Castle has 19 remote terminals. And that's

10 pretty much more of an urban area in my

11 legislative district.

12 Is this encompassing the -- the rural

13 areas?

14 CHAIRMAN PRESTON: Mr. Sainato, let

15 me give you an example of what we went through

16 when we went through Chapter 30 and Senate

17 Bill 1000.

18 New Castle under the federal

19 guidelines is considered to be a rural area.

20 REPRESENTATIVE SAINATO: Okay.

21 CHAIRMAN PRESTON: Proportionately.

22 REPRESENTATIVE SAINATO: That's my

23 urban area in my legislative district.

24 CHAIRMAN PRESTON: All right.

25 REPRESENTATIVE SAINATO: Thank you, 57 1 Mr. Chairman, for that official

2 clarification.

3 But I know that -- that you have --

4 I -- I really thought there was broadband

5 throughout the whole city and going into some

6 of my townships and those areas.

7 But exactly what does the remote --

8 remote terminal do?

9 MR. BUZYDLOWSKI: Represent --

10 Representative Sainato, think of it in terms

11 of like a booster station. We have our

12 central offices, and you see the list of all

13 of those that are deployed.

14 And if you take a central office in

15 the city of Pittsburgh, it -- it covers

16 obviously many more consumers per square foot,

17 or whatever measurement you want to use, and,

18 therefore, they're closer to the office and,

19 therefore, we don't need, in some cases, any

20 or many remote terminals.

21 But there are distance limitations to

22 the transmission of data and voice. When we

23 get on the copper network, it will only go so

24 far. Just like you can only plug so many

25 extension cords together. You start -- not a 58 1 good idea to do too many.

2 Well, in the case of transmitting

3 data, if you get too far out on the copper

4 loop, the data gets corrupted and you don't

5 have high speed service. So what you have to

6 do is utilize a remote terminal or booster

7 station.

8 And they come in all sizes. I mean

9 some are almost as big as this room and others

10 are just a little pad that you won't even

11 notice is there sitting on a street corner.

12 And we run fiber-optics from the central

13 office or the wire center to that remote.

14 And now we utilize the copper loop to

15 go out to the -- the customers within a

16 distance of that terminal and thereby they get

17 high speed Internet service.

18 Now, in the case -- in -- in -- in

19 some of our -- in many of our areas -- you'll

20 hear about this more in the next panel --

21 we're running fiber all the way to customers'

22 premises and depending -- and providing or

23 offering FiOS, in which case we don't use the

24 remote terminals.

25 So what we're doing in our network is 59 1 many, many things to accomplish everything

2 that we have to do and that includes rural

3 Pennsylvania, even though I know your area --

4 and I've been there, so, as you know, it's --

5 it's not as rural as Somerset County where we

6 have 300 remote terminals and about 250 left

7 to build in that county right now.

8 So it's a logistical challenge, but

9 we're meeting it.

10 REPRESENTATIVE SAINATO: And one last

11 follow-up on FiOS. How is FiOS coming in

12 western Pennsylvania?

13 MR. BUZYDLOWSKI: I'm going to defer

14 to my boss who is on the next panel.

15 REPRESENTATIVE SAINATO: Okay.

16 MR. BUZYDLOWSKI: That's always a

17 good idea, right?

18 REPRESENTATIVE SAINATO: All right.

19 Thank you, Mr. Buzydlowski.

20 MR. BUZYDLOWSKI: Yes, sir.

21 REPRESENTATIVE SAINATO: And thank

22 you, Mr. Chairman.

23 CHAIRMAN PRESTON: And -- and I think

24 for the representatives' homework, it was a

25 very interesting question when we dealt with 60 1 the remotes, because several years ago, and I

2 go back to -- back to Chairman Bunt was the --

3 was the majority chairperson.

4 When we first started to look at

5 this, members who were on this committee

6 started to find out that if you were -- that

7 if you ordered your service and you were so

8 many feet away from the terminal, your -- your

9 speed dropped by 50 percent.

10 And now that they've put up an awful

11 lot of remote terminals, people don't see the

12 difference between someone next door to you or

13 across the street having different speeds than

14 what you do and that's part of what's also

15 happened with some of the deployment.

16 MR. BUZYDLOWSKI: Mr. Chairman, if I

17 may -- if I may, we had taken -- a few years

18 ago we took the committee on a tour of the

19 central office at 210 Pine Street and then out

20 to our remote terminal, which was an

21 underground, serving the hospital out

22 towards -- I guess it was the east end of

23 town.

24 Perhaps it's something that you want

25 to look to do. 61 1 CHAIRMAN PRESTON: We -- we will be

2 planning on doing that.

3 MR. BUZYDLOWSKI: I also -- also, if

4 I may take the opportunity, on some of these

5 remote terminals, we -- and this is the rural

6 challenge and all the companies have it -- we

7 have to lease or purchase land and construct

8 one.

9 So there's right-of-way issues,

10 zoning issues, and so on and so forth. So the

11 challenge is even bigger than just the numbers

12 that -- that we look at.

13 CHAIRMAN PRESTON: Okay.

14 Representative Adolph.

15 REPRESENTATIVE ADOLPH: Thank you,

16 Mr. Chairman.

17 Gentlemen, good morning.

18 MR. SAMARA: Good morning.

19 REPRESENTATIVE ADOLPH: It's hard to

20 believe that five years have gone by since

21 Chapter 30. But I -- I do remember the day

22 when a few legislators, some two decades ago,

23 would be walking around the Capitol with those

24 bag phones, okay, and -- weigh about 25 pounds

25 and -- and unscrewing other telephones from 62 1 their cars and so forth and so on.

2 So this industry is always changing

3 and so forth. And I remember those long

4 meetings and rewriting House Bill 30 and so

5 forth with the help of Chairman Preston and

6 Chairman Bunt. Okay. Many staff.

7 And we'd be struggling with the idea

8 of we're putting all this language in here, I

9 wonder how long this is going to last? Okay?

10 And when -- you know, now we have these

11 BlackBerries, okay, and everybody from

12 President Obama to -- to Bill Adolph is

13 playing with his BlackBerry 24/7.

14 When are we going to have wireless

15 televisions and wireless computers in the home

16 and all this deployment and broadband that we

17 worked so hard on is going to be ancient

18 history?

19 CHAIRMAN PRESTON: He fell into that,

20 didn't he?

21 MR. BUZYDLOWSKI: Coming -- coming

22 from the prime sponsor of House Bill 30, how

23 about all the above? I -- I -- where I think

24 and a lot of experts see the marketplace going

25 is a combination of -- of wireless -- and I'll 63 1 defer to my colleague, Dan Mullin, who is on

2 the third panel, wireless panel, wireless

3 communications.

4 You still have the traditional copper

5 network out there and billions and billions of

6 dollars in investment that we are utilizing

7 and then fiber-optics to the premises. And

8 they -- there's -- there's a combination

9 thereof that's going to be around for a very

10 long time.

11 But our fiber-optic network is at

12 this time the technology that's the fastest

13 and provides the greatest bandwidth and it's

14 really as a result of those two bills, House

15 Bill 30 and Senate Bill 1000, that we're

16 incented or incentivized to -- to deploy to do

17 those things.

18 And I think I can speak for Steve's

19 membership, the rural companies, too,

20 that's -- that's putting it out there and --

21 MR. SAMARA. Yeah. Representative

22 Adolph, if I may. There are some big

23 companies out there spending lots of money on

24 wireless broadband.

25 So you know it's -- it's coming and 64 1 the next generation of it is -- is coming and

2 hopefully there's -- there's a niche market

3 that's left for land line companies so we can

4 still provide service for those folks who

5 don't want to, you know, jump into the next

6 millennium with -- with advances in

7 technology.

8 And, you know, that's -- that's a

9 more sizeable group than you might expect.

10 But, yeah, it's -- it's -- the sky's

11 the limit. Like you said, it's changing every

12 day and it's changed dramatically since we

13 passed Act 183.

14 But there's some money being spent

15 on -- specifically on wireless broadband and

16 some trials going on and lots of that is

17 happening right now. So...

18 REPRESENTATIVE ADOLPH: Thank you.

19 CHAIRMAN PRESTON: Well, thank you

20 very much, gentlemen.

21 And I guess I want to try to get back

22 a little bit on schedule because I want to

23 finish before we're in session.

24 As they get up and we get ready for

25 our next panel to come forward, those members 65 1 who are -- have come in for the -- introducing

2 yourself and the company -- and the county you

3 represent, also will stand for checking you

4 off on attendance.

5 So for those members who are --

6 please introduce yourself.

7 REPRESENTATIVE KAUFFMAN:

8 Representative Rob Kauffman, Franklin and

9 Cumberland Counties.

10 REPRESENTATIVE DePASQUALE: Eugene

11 DePasquale, York County.

12 CHAIRMAN PRESTON: Thank you.

13 Our next panel will be Brian Barno,

14 vice president of governmental affairs for

15 Broadband Cable Association; Jim D'Innocenzo,

16 vice president of legislative affairs for

17 Comcast; and our newest resident to our state,

18 Gale Given, president of Verizon.

19 I'd like to welcome you, lady and

20 gentlemen, and you may proceed.

21 MR. BARNO: Mr. Chairman, good

22 morning. Chairman Preston, Chairman Godshall,

23 good morning.

24 I thought that Jim might sit in the

25 middle and we'd be added to the rose between 66 1 two thorns, but it's not appropriate either

2 way, so --

3 CHAIRMAN PRESTON: Well, be careful

4 now because the last panel almost agreed with

5 Sonny Popowsky, and I'm -- I'm still trying to

6 put that one down together.

7 MR. BARNO: I guess times they are

8 changing, right? The line.

9 I'm Brian Barno. I'm with the

10 Broadband Cable Association of Pennsylvania

11 where I serve as a vice president of

12 governmental affairs.

13 Cable leads the nation in residential

14 broadband deployment. BCAP members have made

15 a $7 billion investment in Pennsylvania since

16 the 1996 Telecommunications Act to allow us to

17 provide a high level of digital video, a high

18 speed Internet access, and competitive voice

19 products.

20 Not only at Comcast areas -- and Jim

21 can talk about that great work Comcast is

22 doing -- but with operators around the state,

23 we have 33 member companies and they range

24 from really small mom-and-pop companies like

25 Kuhn Communications in Walnut Bottom, 67 1 Pennsylvania to Beaver Valley Cable TV up in

2 Susquehanna and Bradford County.

3 Blue Ridge, which is the largest

4 employer in Carbon County, based out of

5 Palmerton, has operations all through the

6 Poconos and the northern tier.

7 Atlantic Broadband, although not a

8 Pennsylvania-based company, has operations in

9 Altoona and Johnstown and Warren, Bradford,

10 and Connellsville.

11 Service Electric in the Lehigh Valley

12 is one of the founding members, founding --

13 founding families of the cable industry.

14 In Mahanoy City, John Walson, back in

15 1948 putting an antenna up on his local

16 mountainside, strung the Army-surplus cable

17 down the hill, and hooked up his appliance

18 store so folks that wanted to buy TV's could

19 actually see a TV with a picture in it.

20 Folks wanted the signal. They went

21 over to the -- to Walson and said, Mr. Walson,

22 can you hook us up? And the cable industry

23 was born in Mahanoy City, Pennsylvania back in

24 1948.

25 This is again all post war. So talk 68 1 about economic development in the state and

2 building an industry, we've done that here

3 with the broadband cable industry.

4 Armstrong Cable in -- based out of

5 Butler, Pennsylvania which has operations in

6 Lawrence County, all through the northern

7 tier, they've done a great job with rural

8 broadband deployment.

9 These companies, again, have built

10 out broadband in small towns and rural

11 Pennsylvania without any government mandate,

12 without any guaranteed rate of return on

13 investment.

14 Pennsylvania has really -- cable has

15 been a great success story in this state.

16 Cable investment has given us over 17,000 jobs

17 in the state, although we were suffering a

18 little bit with some of our operations stuff,

19 but we're finding from a technical standpoint

20 we're still hiring people around the state.

21 So it's a growth industry.

22 That's our 33 member company, plus

23 operations like QVC, Motorola Broadband, which

24 does all their R and D for their high

25 technology stuff in Horsham, Pennsylvania. 69 1 Music Choice and TVC Communications based

2 locally which has international operations as

3 a reseller of cable supplies.

4 Today, in addition, companies like

5 MetroCast up in Berwick and Atlanta Broadband

6 in Johnstown are -- are taking jobs from other

7 states doing back office support and call

8 center support for Florida and South Carolina

9 and Texas, based in Pennsylvania now because

10 of the quality of the workforce here in our

11 state.

12 So we've got a lot to be proud of

13 here. We point to the 1996 Telecommunications

14 Act as something that lightened regulation and

15 freed up capital for our guys to go out and

16 invest and build broadbands.

17 On a statewide level, Senate Bill

18 1000, which passed last year, took the

19 regulatory burdens off of us for VoIP deregs

20 -- for VoIP regs and gave us the opportunity

21 to go out and expand the service throughout

22 the state to provide a competitive option to

23 local incumbent phone carriers.

24 Let me focus for a minute here on

25 voice communications. Even with the 1996 70 1 Telecom Act ten years ago voice communications

2 competition was almost nonexistent here in the

3 state for residential customers.

4 Today, BCAP members make voice

5 services available to approximately 80 percent

6 of the over 4 million homes that we pass.

7 Providing customers with a high quality,

8 competitive option to the incumbent phone

9 provider.

10 Broadband has been substantially

11 deployed by cable and with Act 183 by

12 telephone companies throughout the state.

13 It's difficult to imagine any type of

14 development in the last decade that's done

15 more to enhance our quality of life or done

16 more to enhance our business growth here in

17 the state than broadband.

18 It's difficult for my kids to go for

19 a day or hours in school without Facebook, and

20 it's difficult for folks here not to be on

21 their PDA for a few hours, to be

22 disconnected.

23 My mom and dad live in Susquehanna

24 County and I can't get cell phone service at

25 their house unless I go up on the hill and 71 1 kind of, you know, move the phone around. I

2 can get a couple bars and be able to call.

3 But we're all tied into the

4 electronic -- electronic age and to

5 broadband. However, even in areas where

6 broadband is available, there's a gap between

7 availability and take rates.

8 Surveys show that 20 percent of

9 households don't have a home computer. The

10 lost opportunities, particularly for students

11 being in a dial-up world today, are

12 staggering. The bottom line, too many of our

13 neighbors are not taking broadband.

14 BCAP is concerned about the digital

15 divide obviously from a business standpoint,

16 but also how it impacts the communities that

17 we live in.

18 We look forward to working with the

19 committee on that issue and on bridging the

20 digital divide to ensure the benefits of

21 broadband technology are more fully embraced

22 throughout the state.

23 Thank you again. I look forward to

24 your questions.

25 MR. D'INNOCENZO: Good morning, 72 1 Chairman Preston, Chairman Godshall, and

2 members of the House Consumer Affairs

3 Committee.

4 My name is Jim D'Innocenzo. I'm the

5 vice president of legislative affairs for

6 Comcast. Thank you for the opportunity to be

7 here with you today.

8 As mentioned earlier by Brian,

9 Pennsylvania is the proud birthplace of the

10 cable industry. Today -- and for the past 40

11 years -- it is Comcast's home and, as a

12 result, remains the birthplace of the latest

13 cutting-edge video, voice and Internet

14 technology.

15 Comcast, the largest corporation

16 headquartered in Pennsylvania, based on market

17 capitalization, is the leading provider of

18 cable, entertainment and communication

19 products and services in Pennsylvania and the

20 nation.

21 Primarily, we are involved in the

22 development, management, and operation of

23 broadband cable networks and the delivery of

24 programming content.

25 We continually develop and deploy a 73 1 range of new technologies and programming as

2 part of our ongoing effort to improve the

3 services we offer to our customers located in

4 39 states and the District of Columbia.

5 Here in Pennsylvania, we serve

6 customers in about 1375 Pennsylvania

7 municipalities in parts of 46 of

8 Pennsylvania's 67 counties.

9 We are at the center of the digital

10 home.

11 Our network is available to over 50

12 million U.S. households, offering a growing

13 variety of interactive, converged services to

14 consumers.

15 The Comcast programming group manages

16 the company's content networks with a focus on

17 building programming brands that leverage our

18 unique, multi-platform expertise to deliver

19 cable television programming and non-linear

20 content to targeted demographics.

21 Comcast Interactive Media develops

22 and operates Comcast's portfolio of Internet

23 businesses focused on entertainment,

24 information and communication.

25 I have had the opportunity to present 74 1 testimony to this committee on previous

2 occasions. During each of those times I

3 talked about the growth of our company and the

4 ever-increasing number of Pennsylvania

5 employees we are adding to our workforce.

6 Comcast is proud to be headquartered

7 here and to have a workforce of about 12,000

8 employees in the Commonwealth.

9 Unfortunately, I do not have a job

10 growth announcement to share with you today.

11 Although we've had some reduction in

12 forces, let me assure you, our customer-facing

13 employee workforce continues to grow.

14 In order to keep our people employed

15 and our company growing, we recognize that we

16 need to retain our customers who depend on us

17 for information, entertainment and

18 communications every day.

19 We aim to do everything we can to

20 keep our products working, acknowledge if

21 something goes wrong, and to fix it quickly.

22 We serve over 24-and-a-half million

23 customer households, the vast majority of

24 which receive service without issue year after

25 year. 75 1 However, we recognize that sometimes

2 things don't go as planned and when that

3 happens it's important for you to know what

4 you can expect from us.

5 We're listening to our customers, and

6 they tell us, quite frankly, that we need to

7 do a little bit better, which is why we are

8 fundamentally changing the way we do business

9 in order to improve customer satisfaction.

10 Although we're committed to improving

11 our customer's experience with us, this change

12 may take some time.

13 We believe this is a journey that

14 will continue into the future and against

15 which we will measure our success.

16 Our company-wide effort to improve

17 service and satisfaction is ongoing and is

18 focused on several key initiatives, including

19 our new customer guarantee, which lets our

20 customers know what they can and should expect

21 from us.

22 It outlines our promises to customers

23 if we don't live up to those expectations.

24 The guarantee, which will be

25 implemented throughout our service territory 76 1 in the coming months, is our unprecedented

2 public commitment to our customers.

3 We have 375 million customer

4 interactions a year. But it's our goal to get

5 it right every time.

6 Thank you, Mr. Chairman.

7 CHAIRMAN PRESTON: Ms. Given, welcome

8 to Pennsylvania.

9 MS. GIVEN: Thank you, Mr. Chairman.

10 Good morning, Chairman Preston, Chairman

11 Godshall, members of the House Consumer

12 Affairs Committee.

13 My name is Gale Given and I'm

14 president of Verizon Pennsylvania. I

15 appreciate having the opportunity, along with

16 my colleagues, Frank Buzydlowski and Dan

17 Mullin, on the other panels to share with you

18 Verizon's perspective on the state of the

19 competitive telecommunications and video

20 services industry in Pennsylvania and to

21 describe our efforts to deploy the most

22 advanced products and services that enhance

23 consumers lives and empower individuals for

24 success in today's challenging economy.

25 As many of you, I'm sure, are aware, 77 1 Verizon is spending $18 billion to build out

2 FiOS network in Pennsylvania and other areas

3 of its service territory by the end of 2010.

4 This is a massive investment and a totally

5 new, state-of-the-art network employing

6 thousands of Verizon union workers across the

7 country.

8 The roll-out of FiOS network in

9 Pennsylvania and other states is driven by

10 intense competition in the industry by many

11 different players, wireless, competitive local

12 carriers, Internet voice providers like Vonage

13 and especially cable TV providers.

14 The cable companies are now our main

15 competitors in the voice and Internet

16 markets. These companies have for some time

17 offered Internet access in addition to cable

18 TV service. As has been mentioned, they now

19 also provide voice service on the networks as

20 well.

21 This fierce competition across a

22 range of services is bringing more innovation,

23 better prices, and more robust offerings to

24 consumers.

25 Increasingly, voice service is just 78 1 another application riding on a multi-purpose

2 communications network. To compete in this

3 world, it's necessary for us to provide video

4 service, and we've decided to do that

5 primarily by deploying an end-to-end all-fiber

6 network, the only company to do so on a large

7 scale.

8 The tagline I'm sure many of you have

9 seen in our advertising, this is FiOS, this is

10 big, is not just a catchy slogan to Verizon

11 Pennsylvania's employee. To the contrary, it

12 reflects the pride and excitement we feel in

13 offering customers superior telecommunications

14 and video products delivered over the finest

15 network in the world.

16 As Mr. Buzydlowski explained, the use

17 of fiber all the way to the home in our FiOS

18 network provides a very big pipe with

19 virtually unlimited bandwidth that can readily

20 support Internet access service at speeds up

21 to 100 megabits downstream and 50 megabits

22 upstream.

23 To put that into perspective, that's

24 probably 20 to 100 times faster than what

25 you're getting today at home. The new 79 1 infrastructure provided on such a large scale

2 can be a major factor in the development and

3 growth of small business in Pennsylvania.

4 On the FiOS TV side, this network

5 enables us to provide a superior video

6 experience. Our high definition quality is

7 especially vivid because the capacity of an

8 all-fiber connection allow us to deliver that

9 high-def signal to the consumer just as we

10 receive them.

11 Many companies are forced to compress

12 the signal because of the network bandwidth

13 limitations, degrading the quality.

14 In addition, one FiOS installation

15 can support up to seven high-definition

16 televisions simultaneously, which should meet

17 the needs of those video devotees who want a

18 TV in virtually every room in your house. And

19 if you want more than seven, you can buy two

20 FiOS lines.

21 We provide more than 100

22 high-definition TV channels and we expect that

23 number to grow as new programming becomes

24 available. We offer over 50 all digital

25 musical -- music and radio channels and over 80 1 14,000 on-demand TV titles, including

2 approximately 1,500 high-def titles.

3 The FiOS home Media DVR provides --

4 performs all the usual DVR functions you're

5 used to, like recording your favorite

6 programs, pausing live TV, rewinding, but it

7 also has two groundbreaking new features.

8 The first is a multi-room

9 functionality permitting customers to watch

10 different recorded shows on up to three TV's

11 at the same time. Customers can pause a

12 recorded show in one room and continue

13 watching it in another.

14 The second is a media manager that

15 permits customers to access from their

16 television photographs or music that is stored

17 on your home computer.

18 Important to some of your

19 constituents, we also offer a diverse line-up

20 of realtime and on-demand programming,

21 including an all-Spanish package, La Conexion,

22 which includes over 60 channels which have

23 Spanish-language programming or are viewable

24 with Spanish audio, and an international

25 package that provides more than 60 channels of 81 1 programming in languages such as Chinese,

2 Filipino, French, Italian, Russian and

3 Arabic. And there are more.

4 We also have a functionality we call

5 widgets that permits customers to view such

6 things as traffic or weather reports on the

7 top of your screen without interrupting or

8 interfering with the morning news or whatever

9 you're watching.

10 In fact, we have a new widget that

11 allows you to track your NFL fantasy football

12 team at the top of the screen without turning

13 away from the World Champion Steelers, or the

14 maybe-next-year's World Champion Eagles.

15 Well, I'm president of Verizon

16 Pennsylvania. I have to cover both sides.

17 In communities where they are

18 provided under the terms of the franchise

19 agreement, we carry local public, education

20 and government or PEG channels. The

21 programming on these channels can be an

22 important part of the fabric of the community,

23 providing access to the public schools,

24 government, and exchange of local

25 information. 82 1 You don't have to take our word for

2 the fantastic quality of FiOS TV. It scored

3 highest in J.D. Power's 2008 Residential

4 Television Service Satisfaction Study for the

5 east region.

6 A leading consumer magazine gave FiOS

7 TV the top rating in its most recent survey of

8 television service, with top marks in all six

9 categories it measured: channel choice, image

10 quality, sound quality, reliability, value and

11 support.

12 In Pennsylvania we're currently

13 offering FiOS TV's to communities in central,

14 eastern and western Pennsylvania. We have

15 over 300 local franchises that [sic] are in

16 the process of seeking many more.

17 You may have heard that the

18 Philadelphia City Counsel just last week

19 approved a cable franchise that will enable us

20 to offer choice to city residents. We're

21 hoping Mayor Nutter approves that ordinance

22 soon.

23 Beyond all the exciting capabilities

24 and features of FiOS TV, the biggest advantage

25 it offers Pennsylvanians is something most of 83 1 them have never known, a choice of local TV

2 providers. Competition between the new kid on

3 the block, Verizon, and the cable companies,

4 which have enjoyed a monopoly for six decades,

5 greatly benefits Pennsylvania consumers, as

6 does the telephone competition that my

7 colleagues here on this panel have brought to

8 the marketplace.

9 As Mr. Popowsky noted, the focus of

10 competition between Verizon and the cable

11 companies now is the bundle, a package of

12 telecommunications, Internet and satellite or

13 cable TV services offered together for a

14 discounted price -- the so-called triple play.

15 Consumers like paying one price to

16 one provider on one bill for such a bundle

17 and, in fact, more than half of our customers

18 in Pennsylvania subscribe to one. These

19 bundles compete head-to-head with those

20 offered by cable companies.

21 This competition works best when all

22 providers are operating on a level playing

23 field. It does not work well when there are

24 restrictions or requirements placed on one

25 provider that not -- do not apply to the other 84 1 players.

2 While there has been great progress

3 on leveling this playing field through work

4 done by this legislature, there are still

5 inequities that need to be addressed. And my

6 friends here on the panel, I think, will be

7 relieved to know that we think that is best

8 done by removing unnecessary restrictions and

9 requirements from our operations, not by

10 adding those burdens to them.

11 As you will hear on the next panel,

12 one need only look at the amazing developments

13 and innovation in the wireless industry to see

14 the benefits of competition on the level

15 playing field with only a light touch from

16 government.

17 In closing, Verizon is very excited

18 and energized about bringing voice, Internet

19 and TV services on its cutting-edge FiOS

20 network to millions of customers all across

21 Pennsylvania.

22 We understand that every aspect of

23 our business is being contested in the current

24 competitive arena. In this new network

25 roll-out, and in meeting substantial pent-up 85 1 demand for FiOS services, we will continue to

2 be a fierce competitor to the cable companies

3 and expect them to defend their long-held turf

4 with equal vigor. Consumers can only win.

5 Thank you for this -- this

6 opportunity to appear before you, and I'll be

7 happy, along with the other panelists, to

8 answer any questions that you have.

9 CHAIRMAN PRESTON: Well, first, thank

10 you for all of your testimony. I'm very happy

11 that neither one of you decided to run a

12 commercial. It might have been interesting in

13 looking at it.

14 MR. D'INNOCENZO: That's for our

15 marketing departments.

16 CHAIRMAN PRESTON: I think that a lot

17 of members, you know, when you hear about the

18 history, so much has been going on here and

19 we've watched the changes, not just with

20 technology, and that's why it's important to

21 realize the issue about the infrastructure

22 being with economic development and job

23 training.

24 It's very important to be able to see

25 how far we've come with this and unfortunately 86 1 there -- there have been some companies that

2 might have gone through some very tough times,

3 but there are a lot of companies that are

4 thriving and hopefully with the stimulus

5 package we can look at more infrastructure

6 development and that's one of the things that

7 I think that you will play a part.

8 You're part of the learning process.

9 The health care process could not exist in

10 modern medicine today really without --

11 without you.

12 First, I'd like to -- first, since

13 Mr. Sainato asked the question and we were

14 delayed, you can ask your question now that

15 we're here.

16 REPRESENTATIVE SAINATO: Thank you,

17 Chairman Preston. Yes. I'm just wondering

18 how is roll-out of FiOS coming in western

19 Pennsylvania?

20 MS. GIVEN: As I'm sure you know, we

21 have been in negotiations with the city of

22 Pittsburgh. We've already deployed in some of

23 the suburbs. We've been in negotiation with

24 the city.

25 I think it's fair to say that we've 87 1 still got some -- some work to do there. I

2 hope that now that the Philadelphia franchise

3 has been completed that we'll be able to get

4 back to the table and get that -- get that

5 wrapped up in short order.

6 REPRESENTATIVE SAINATO: Thank you,

7 Mr. Chairman. Thank you.

8 CHAIRMAN PRESTON: Chairman Godshall.

9 REPRESENTATIVE GODSHALL: On a very

10 light and serious side, with all the programs

11 and all the technology available that we have

12 today and with -- in Pennsylvania, I and my

13 colleagues participate in the outdoor

14 activities in the state. With more than two

15 million fishing and hunting licenses sold in

16 the state of Pennsylvania, that is a

17 tremendous portion of our population.

18 I really wish there would be some

19 consideration for the Outdoor channel, which

20 is pretty well universal across the country

21 except in Pennsylvania where we sell over two

22 million licenses to hunt and fish.

23 You know, that's on the light and

24 serious side. Okay.

25 MS. GIVEN: I'm checking my 88 1 beautifully colored channel list. I'll see if

2 it's on there.

3 MR. BARNO: While President Given

4 does that, in a note, a light and serious

5 note, one of the amazing things that we can do

6 with our operations and Verizon FiOS can do

7 also is video on demand. And one of the

8 things that the Game Commission is trying to

9 do is to get more folks, more young people

10 involved in hunting and fishing and finding

11 ways so they can take the -- I think it's a

12 six- or eight-hour video Internet course on

13 video on demand and then go in for a three- or

14 four-hour session at the Game Commission with

15 the Game Commission-approved facility, it's a

16 way to get more -- like my kids were very,

17 very busy on weekends, give them an

18 opportunity to get their license without

19 spending two or three days going to classes.

20 So the technology can really work in

21 a lot of different ways which will -- I think

22 it will help the state.

23 MS. GIVEN: Okay. I see the World

24 Fishing Network in high def. So that's --

25 precisely which one did you want? 89 1 REPRESENTATIVE GODSHALL: Outdoor.

2 MS. GIVEN: The Outdoor channel?

3 Okay.

4 REPRESENTATIVE GODSHALL: Outdoor

5 channel.

6 MS. GIVEN: Okay. We will check on

7 that.

8 CHAIRMAN PRESTON: Okay.

9 Representative Barbin.

10 MR. D'INNOCENZO: Mr. Chairman, may I

11 address --

12 CHAIRMAN PRESTON: Oh, yes.

13 MR. D'INNOCENZO: -- Representative

14 Adolph's question from the last panel?

15 You asked about a converged world,

16 when we're going to see all these other

17 different wireless capabilities.

18 I was reading an article, which I

19 believe is in Xchange Magazine, which

20 Mr. Samara mentioned earlier and I'll get a

21 copy of it to you.

22 But there are folks out there that

23 believe that the white space that will be

24 freed after the digital transition, that there

25 are technologies available that will allow for 90 1 download speeds that reach cable modem speeds

2 by using that white space in rural areas and

3 that should help with your answer. And I'll

4 get you that article.

5 REPRESENTATIVE ADOLPH: Thank you.

6 MS. GIVEN: And if I could, I'm

7 sorry. I just looked down and found the

8 Outdoor channel. It's available with our

9 extreme high def sports channel and it's

10 channel 307.

11 CHAIRMAN PRESTON: In other words --

12 MS. GIVEN: So I hope you will sign

13 up.

14 CHAIRMAN PRESTON: -- that's a higher

15 tier. That's a higher tier?

16 MS. GIVEN: Yes, it's a higher tier,

17 but it is a higher calling.

18 CHAIRMAN PRESTON: Okay.

19 Representative Barbin.

20 REPRESENTATIVE BARBIN: This is --

21 this is a question to President Given.

22 Mr. Buzydlowski indicated before that the

23 speed is determined by the distance from the

24 remote terminals.

25 If -- if the burdens were lifted from 91 1 your industry as it relates to your other

2 competitors, do you believe that lifting those

3 restrictions would have significant impact on

4 immediate infrastructure development of those

5 remote terminals?

6 He indicated that in Somerset, which

7 is close to where I live, there were 300

8 terminals that were done but 250 left to do.

9 Would it have an impact on getting those

10 remote terminals out for your FiOS program?

11 MS. GIVEN: I think that it could.

12 Because many of the restrictions that are on

13 our companies that are not on the others cause

14 us to spend a lot of money on things that we

15 would not have to spend money on if those

16 restrictions were gone.

17 So it would free up capital, it would

18 free up expense dollars, and we could do other

19 things with it.

20 REPRESENTATIVE BARBIN: Thank you.

21 CHAIRMAN PRESTON: Representative

22 Mensch.

23 REPRESENTATIVE MENSCH: I need to

24 follow Chairman Godshall's theme and ask for a

25 German language channel as well. 92 1 No. No. No. I'm just kidding. I'm

2 just kidding.

3 And if I can comment on the -- on the

4 last question, DSL, which is what I believe

5 Mr. Buzydlowski was talking about, has a

6 distance limitation of one-and-a-half miles

7 and there's a technological phenomena called

8 quantization that happens with noise on -- on

9 a copper facility.

10 So that's why you need those

11 terminals and those boosters.

12 But I want to turn my attention

13 instead to something that, Jim, you provoked

14 in talking about Comcast being the most

15 heavily capitalized company in the state.

16 You know, we used to have a lot of

17 heavy capital industries here, with steel,

18 railroad, oil refining, chemical processing,

19 truck manufacturing. We're down to one or two

20 and you're one of those two.

21 This is a very difficult economic

22 time. Generally recessions, like we're

23 suffering today, are -- the recoveries are led

24 by new technology investment.

25 We -- Pennsylvania is going to be 93 1 turning a lot to your industry and saying,

2 help us.

3 What -- what's happening in the

4 capital markets? And this is a question for

5 any -- for anyone at all really, any of the

6 three of you.

7 What's happening in the capital

8 markets? Where are you financing? From

9 retained earnings or are you going to the

10 market? Are you taking debt? What are you

11 doing?

12 MR. D'INNOCENZO: I'm sorry, Bob, but

13 I don't have the wherewithal to answer that

14 question but I will get you an answer.

15 REPRESENTATIVE MENSCH: I'm just

16 wondering how your -- how your financing all

17 that growth because it's got to be very

18 difficult right now. We're hearing -- when we

19 talk about Marcellus shale and the new

20 development of that, we're hearing that those

21 companies are having a very hard time finding

22 the -- the necessary capital to -- to really

23 come into this state in a wholesale fashion.

24 So it's -- I think it's -- Jim, I

25 think it's a very serious question for all of 94 1 us and very problematic for us in our own

2 state's recovery.

3 MS. GIVEN: And I, too, will get a

4 more full answer. But I think it's fair to

5 say we do all of the above. We -- we do

6 self-finance a lot of things. We do have to

7 seek financing for other things.

8 So I will get you a more full

9 answer.

10 REPRESENTATIVE MENSCH: Very good.

11 MS. GIVEN: But I think we are in the

12 market.

13 REPRESENTATIVE MENSCH: And German

14 channel, too. Thank you.

15 MS. GIVEN: We have -- there are two

16 German channels.

17 REPRESENTATIVE MENSCH: Very good.

18 CHAIRMAN PRESTON: Very good answer.

19 Thank you very much. Thank you very much.

20 Like I said, you know, when we travel

21 and when we're dealing with the issue of

22 competition and now we're seeing competition,

23 and I think a lot of people need to realize

24 that 15 or 20 years ago a lot of parents

25 couldn't see their children's homework. Now 95 1 they can go home and see it on a television

2 screen so they can check their children's

3 assignments instead of trying to call the

4 teacher to see what the homework assignment

5 is.

6 And that's part of the change in the

7 modern day world. And I want to really thank

8 you. We look forward to seeing more

9 competition in the future. And it's very nice

10 to be seeing the two of you sitting side by

11 side.

12 MR. D'INNOCENZO: That's why I stayed

13 here.

14 CHAIRMAN PRESTON: Thank you very

15 much.

16 MS. GIVEN: Thank you.

17 CHAIRMAN PRESTON: The next panel is

18 for the wireless. We have David Kerr, vice

19 president of external affairs from AT&T

20 Pennsylvania; Gary Horewitz, manager of

21 government relations for Sprint-Nextel; and

22 Daniel Mullin, executive director of state

23 public policy for Verizon Wireless.

24 I'd like to think that you gentlemen

25 are in a sense the product of tomorrow and 96 1 also of today, where we need to go, since the

2 -- the younger generation now probably know

3 more about texting and -- than anybody else.

4 So when you are ready to go you

5 can -- is our stenographer -- are you okay?

6 When you're ready to go -- and for

7 everybody's information, this is being

8 recorded for PCN so that the general public

9 will also be able to understand, not just that

10 we are here learning but that they have a

11 chance to be able to learn just as well.

12 You may proceed.

13 MR. HOREWITZ: Good morning,

14 Mr. Chairman, Godshall as well. Thank you for

15 the opportunity to be here before you today.

16 My name is Gary Horewitz. I'm

17 government affairs with Sprint-Nextel, and my

18 colleague, Dave Kerr from AT&T and Dan Mullin

19 from Verizon Wireless.

20 And we are very pleased to present

21 some information specifically that was

22 provided from our wireless association and the

23 Federal Communications Commission about some

24 of the great things that are happening in the

25 wireless industry and also that was presented 97 1 by the association to President Obama's

2 transition team.

3 But I -- I'd like to start off my --

4 my portion to talk to you about tens,

5 thousands, hundreds of thousands, millions,

6 and trillions, and provide some important

7 numbers.

8 And the first one is a million

9 number. There are approximately now 262

10 million wireless subscribers in the United

11 States and almost -- almost 10 million of

12 those subscribers are here in Pennsylvania.

13 And that's up from another, just in 1999, from

14 three million.

15 So in less than a decade we're

16 talking about an increase from three million

17 wireless subscribers here in Pennsylvania to

18 almost ten million.

19 My colleague, Dave -- Dave Kerr, will

20 speak more about the change in the prices and

21 the dramatic reduction in prices that have

22 occurred in that same time. But what we see

23 consistently in the wireless industry is an

24 increase in subscribers, an increase in

25 offerings, an increase in -- in consumer 98 1 friendly policies, an increase in the minutes

2 used, and at the -- at the same time a

3 decrease in pricing.

4 But what hasn't changed

5 tremendously -- there have been changes -- but

6 what hasn't changed tremendously is the

7 wireless industry. Our friendliness, here

8 today aside, hasn't changed.

9 The wireless industry is one of the

10 most competitive industries in the United --

11 in the United States. Here in Pennsylvania,

12 there are actually 11 carriers, although four

13 national carriers have the majority of the

14 subscribers. There are actually 11 carriers

15 providing wireless service here in

16 Pennsylvania and amongst 150 overall wireless

17 companies providing service in the United

18 States.

19 Those wireless providers in the

20 United States employ approximately 267,000

21 employees in the United States. And almost

22 5,000 -- this does not even include direct --

23 indirect agents -- indirect agents and others

24 indirectly related to the industry, but almost

25 5,000 of those employees are right here in 99 1 Pennsylvania.

2 And that accounts for almost 300 --

3 here's another million number -- 300 million

4 in employee salaries and benefits.

5 The other number that I've been

6 wanting to use because I only hear this about

7 -- in the stimulus package, so I've been

8 wanting to use a trillion number. I've been

9 waiting to trot that out. I get to use -- I'm

10 the first one to get to use the trillion

11 number.

12 Two -- approximately -- I don't know

13 how you'd ever get an exact number, because

14 I'm sure it's floating all the time, but

15 approximately 2.1 trillion minutes of use per

16 year in the United States on wireless,

17 including voice, data, TV, including the World

18 Champion Steelers -- born and raised in

19 Fayette County; thank you -- and we're working

20 on NFL TV and we're working on the German

21 language -- language channel as -- as well --

22 as well as wireless -- wireless broadband and

23 third generation networks, fourth generation

24 networks that -- that are being rolled out

25 across the United States, but overall, while 100 1 there are changes, there are, of course, have

2 been tough times for -- for the companies,

3 including the companies that you see here, and

4 including my own.

5 But what you always see is that the

6 offerings, the technologies, the services, the

7 value proposition being offered to our

8 consumers and, most importantly, the consumers

9 in Pennsylvania is quite -- is quite

10 astounding.

11 And one of the things that we've

12 heard several times today, in questions as

13 well, is how do we do that? And that's

14 through our ever expanding infrastructure.

15 Wireless investment every year -- and

16 here's the billion number -- the wireless

17 industry spends about 24-and-a-half billion

18 per year in wireless infrastructure

19 improvements and network improvements.

20 Cell sites are increased. There's

21 about 220,000 currently but that's -- there's

22 an increase of about almost five percent every

23 year, year after year.

24 And yet we still want to do more.

25 Last year's Senate Resolution 206 and -- a 101 1 very in-depth study looking at ways to improve

2 wireless coverage and infrastructure here in

3 many of the counties had some interesting

4 recommendations and we think some very

5 positive ways that we can improve

6 infrastructure here in Pennsylvania.

7 But at the same time, it's

8 competition -- it's the competition, the

9 demands of our customers, and wanting to

10 provide the higher speeds, the fourth

11 generation broadband speeds that we are

12 consistently and continually trying to

13 increase our -- our infrastructure.

14 Representative Adolph asked about

15 some of the -- some of the key data, the data

16 that we want to provide, and wireless -- on a

17 wireless basis, providing infrastructure to

18 people -- people's homes.

19 My -- my -- my company in our

20 partnership has done that as well as -- as

21 other companies are beginning to wire -- offer

22 the highest possible speeds and competing --

23 competing with any wired speeds across our --

24 our networks, and we want to continue to do

25 that. 102 1 One note that I should -- should add

2 is that -- that costs money and we talked

3 about the capital -- capital here.

4 I do want to add, perhaps on -- on

5 behalf of Sprint only, but I do want to add

6 that when we talk about some of the capital

7 expenditures, and an important note for us and

8 for other companies trying to do -- build out

9 the infrastructure, is what we have to pay in

10 our costs.

11 And one of our biggest costs is those

12 access charges that were -- that were

13 mentioned today. And from -- from our

14 perspective a case on -- a case on -- open

15 case on access charges and -- and -- and

16 modification and making access charges more

17 reasonable, what we have to pay, we would --

18 we would actually say that's a little bit

19 different.

20 Our perspective is that the access

21 case -- cases are not -- not proceeding,

22 that -- that they've been stayed in the past,

23 perhaps awaiting FCC action that we are not

24 seeing.

25 And, in fact, we are trying -- we 103 1 have tried to move -- have access charge

2 reductions in pending rate cases and rate

3 increase cases and those pleas to the PUC have

4 been rejected.

5 So there are still costs that we can

6 address some of our costs, such as these

7 access charges, we want to put that money back

8 into our infrastructure. But whether it be

9 in -- in reducing our costs or through the

10 debt market and, again, through our direct

11 revenues, infrastructure and being able to

12 provide these continued services is what

13 we're -- what we're always going to do.

14 I'd like to turn it over to my

15 colleague to continue to talk about some of

16 our metrics.

17 MR. KERR: Thank you. As mentioned,

18 my name is David Kerr. I'm vice president for

19 External Affairs with AT&T Pennsylvania.

20 Chairman Preston and Chairman

21 Godshall, it's good to be with you here

22 today.

23 Representative Adolph, I can't

24 believe it's been five years for the Chapter

25 30, and, my, how times have changed for our 104 1 company and for the entire industry.

2 But one of the things in our short

3 time I want to talk about today is how the

4 United States measures up against the west

5 of -- the rest of the world in wireless

6 proliferation.

7 And one of the slides you have in

8 front of you is a slide that talks about how

9 the United States consumers are using more

10 wireless minutes at a lower effective rate

11 than consumers other countries.

12 The United State has 262 million

13 subscribers, as Gary mentioned. You know,

14 some of our competing nations economically,

15 Japan only has 107 million, the U.K. 74

16 million.

17 So we hear a lot about proliferation

18 of wireless in other countries, but I think

19 the most important stat of that is the average

20 revenue per minute.

21 If you look at your slide in front of

22 you, the average revenue per minute is a

23 measure of the effective price per voice

24 minute, and we had five cents per minute are

25 considerably lower than -- than many other 105 1 countries. So I think that's something we

2 need to really be -- really be proud of.

3 I also want to talk about wireless

4 broadband. In terms of competing and

5 measuring against other countries, U.S. has

6 over 60 million wireless broadband

7 subscribers, from our companies represented

8 here as well as the others that Gary

9 mentioned.

10 So Japan is ahead of us but we're

11 ahead of many of our competing countries that

12 we're in the market with.

13 One of the other measures that's very

14 critical in the -- in the wireless industry is

15 terminology, and I think -- I don't know if

16 this was in Steve's handbook or not, but we

17 call it ARPU, and it's average revenue per

18 user.

19 And it basically -- yeah, it's

20 ARPU -- measures the revenue per subscriber

21 and we track this in our industry very

22 closely.

23 One of the slides in front of you

24 really brings forward, like Gary had talked

25 about, in terms of the number and the 106 1 increased number of minutes and subscribers.

2 But the most important thing to note

3 is the average revenue per user, or ARPU, has

4 remained pretty much steady, if not declining

5 a little bit, right around the $50 mark.

6 CHAIRMAN PRESTON: Not to interrupt

7 you, but for the members, that's on Page 17 of

8 the handout.

9 MR. KERR: Thank you, Chairman

10 Preston.

11 So that's -- that's a very important

12 measure and something we continue to be very

13 proud of in the wireless industry. Value that

14 we bring to consumers continues to be in

15 place.

16 I also want to talk a little bit

17 about consumer policies and consumer practices

18 that the industry continues to adopt.

19 You know, it's 25 years ago last

20 month, or two months ago, when the first

21 wireless call was made. It was made from

22 Soldier Field in Chicago.

23 And the industry has really, as we've

24 talked about, grown and evolved in the last 25

25 years. Specifically with regard to consumer 107 1 de -- demand and plans and pricing. You know,

2 the first digital one rate plan was introduced

3 in 1999, and the slide on Page 19 shows the

4 additional minutes of use and some of the

5 continuing plan evolvement and other offerings

6 that we all have, whether it's free nights and

7 weekend minutes, mobile to mobile, mobile to

8 anyone plans, the continued evolution of

9 pro-rated early termination fees, contract

10 extension flexibility, unlimited calling

11 plans.

12 I think that's all coming about by

13 the competition that is in the marketplace

14 that Gary talked about.

15 The last thing I want to mention

16 before I turn it over to my colleague, Dan

17 Mullin, is to talk a little about the CTIA's

18 wireless consumer code.

19 This is a code that the industry

20 has -- has developed, has signed onto. It

21 requires a certification and recertification

22 process where we as companies sign on to this

23 code. It's in essence a self-policing

24 mechanism.

25 But it also reflects what our 108 1 consumers are really demanding. This is

2 basically a ten-point code that talks about

3 the principles, practices, and disclosures in

4 the wireless industry, whether it has to deal

5 with terms of service, coverage maps, and we

6 all, as the major providers, are very

7 interested in -- in informing our consumers on

8 the types of coverage that we have available.

9 We have interactive maps on our

10 websites, very similar to -- to Mapquest,

11 where you can go down to the street level and

12 view where coverage exists and where it

13 doesn't exist. And that's for basic wireless

14 coverage and it's also for wireless broadband

15 coverage as well.

16 The code also talks about contract

17 terms, trial periods for new services and

18 customer inquiries. And it's also an

19 important point to note while, you know,

20 the -- the subscribers have -- have increased

21 exponentially, the per capita wireless

22 complaints has fallen over the years.

23 So I think that's very important.

24 While the raw number of complaints have gone

25 up, they've dramatically increase -- decreased 109 1 over the last few years.

2 So with that I want to turn it over

3 to Dan Mullin from Verizon Wireless to talk a

4 little bit more about the competition.

5 MR. MULLIN: Could we switch?

6 MR. KERR: Yeah.

7 MR. MULLIN: Thanks. Good morning,

8 Chairman Preston, Chairman Godshall, members

9 of the committee.

10 My name is Dan Mullin. I'm executive

11 director of state public policy for Verizon

12 Wireless. I cover the territory throughout

13 the northeastern United States and I'll have

14 to say I really appreciate the opportunity to

15 address the committee this way.

16 I have not seen a committee have an

17 industry come in like this in any of the other

18 states I'm involved in, and it's really nice

19 to have an opportunity to come in early in

20 this session and talk about the industry and

21 let folks know where our industry stands.

22 I'm going to talk about the portion

23 of the wireless industry dealing with the

24 competitive marketplace and where our wireless

25 stands in the global marketplace. Sort of 110 1 following on the slides that Dave had

2 mentioned to you all.

3 The first slide is the mobile

4 telephone competition and roll-out slide. If

5 you want to follow along with me, I'm going to

6 be talking about each of these slides.

7 If you go to the bottom of that

8 slide, it talks about at least four providers

9 in 90-plus percent of the population. I think

10 that is extremely significant and an

11 indication of what the competitive marketplace

12 have done -- has done.

13 Of course, you'll see there are some

14 areas where there are three, two, and one

15 providers. There's always at least one

16 provider sort of pushing the envelope and

17 entering new territory and -- and sort of

18 inviting other competitor carriers to come in

19 and compete in those areas.

20 But significant coverage.

21 There are constant new entrants to

22 the marketplace. MetroPCS is a company some

23 of you probably have been hearing about that

24 have entered portions of the northeast and

25 other parts of the United States. 111 1 In addition to what's shown here and

2 not reflected is -- is the reseller market.

3 Some of you have gone in stores and seen

4 Tracfone and Virgin Mobile, folks that utilize

5 our network as their backbone but come up with

6 their own plans. They compete with us

7 directly and very effectively in many cases.

8 The -- the next slide sort of gets to

9 broadband coverage. It's very dramatic, I

10 think, if you take a look at the 2005 slide

11 and the 2008 slide to show the differences in

12 mobile broadband. It's very, very

13 significant.

14 What do we mean by mobile broadband?

15 What has this brought to the consumer? We're

16 looking at pictures, text, video, e-mail, web,

17 music, a lot of great added benefits, and I'll

18 say significant benefits for -- for public

19 safety.

20 I know a lot of us think of our kids

21 when we think of this. I know my own are very

22 significant texters.

23 But, in the event of an emergency,

24 there's nothing like a text to get an

25 important message through to somebody or a 112 1 picture of a significant event.

2 And, by the way, we're not stopping

3 here. I think if you were to take a look at

4 the 2010 and beyond slide, you're going to see

5 not only more of the United States covered but

6 it's going to be covered by significantly

7 better service.

8 Some -- some of us have announced

9 platforms for our next sort of 4G technology.

10 Verizon has announced LTE introduction in

11 2010. That's going to only increase the

12 capabilities of the system of the network and

13 people will be able to do more and more on a

14 mobile basis.

15 The next slide is -- shows sort of

16 the New York/Pennsylvania/New Jersey area and

17 just -- here I'll just point out that this

18 shows the majority of the population also

19 being covered by four or more competitive

20 wireless providers.

21 The following slide, this is sort of

22 an interesting slide when we take a look at

23 other parts of the world. Average minutes of

24 use per month and price per minute, very

25 significant. 113 1 This was not -- this is not an

2 accident. In 1993, there was the passage of

3 the Federal Omnibus Budget Act which created

4 more spectrum for wireless providers. That

5 brought not only new entrants to the

6 marketplace but more spectrums so that the

7 data services that we just talked about could

8 be provided.

9 That has brought about more services,

10 lower prices as -- as -- which comes with more

11 competition.

12 The next slide, growth in mobile

13 messaging, here again, as I mentioned with

14 the -- with the kids, we often think of kids

15 with mobile messaging and photo and video,

16 but, again, tremendous public safety

17 benefits.

18 So I think a lot of people said to

19 themselves, what am I going to do with a

20 camera phone? But once you get a camera

21 phone, you find plenty of uses for it.

22 And then, finally, on the last slide,

23 I think this slide is really our bottom line

24 for consumer benefits. You'll see sort of on

25 the -- on the voice front number of 114 1 subscribers are up significantly over the last

2 three years. Number of minutes of use up

3 significantly.

4 But you can see where the real growth

5 is on the text and picture -- picture

6 messaging. A lot of consumer demand for that

7 and yet at the same time the price has gone

8 down.

9 The other thing I want to mention

10 here that Gary had mentioned, I want to tie

11 this back to industry employment.

12 In the same period where these have

13 gone up employment has increased from 225,000

14 nationwide to 268,000 nationwide.

15 So as these services grow and

16 flourish in this competitive marketplace,

17 employment increases as well.

18 And with that we'll leave it for any

19 questions you may have. Thank you.

20 CHAIRMAN PRESTON: Chairman Godshall.

21 REPRESENTATIVE GODSHALL: I for one

22 appreciate all the information we received

23 today. I think it was quite informative.

24 I've only been on the committee, at

25 this point, two years and I appreciate, you 115 1 know, the info that you came forward with

2 today.

3 The one thing I wanted to ask you I

4 know is the cell towers. Why can't we share

5 cell towers?

6 I know what it costs on a rental

7 basis to put out a single cell tower, so for

8 Verizon -- for a -- Company A to put up one,

9 Company B to put one right alongside of it,

10 and Company C, it would be simpler if Company

11 A has one and we pay a portion of that cost

12 for Company B and Company C, because they're

13 going to put their cell towers up anyway and

14 at a full cost of per cell tower rather than

15 sharing costs.

16 Why -- you know, it would seem to

17 help to spread -- to spread the tower coverage

18 a lot quicker if we do a lot more sharing than

19 what we are today.

20 MR. MULLIN: I can -- on behalf of

21 Verizon Wireless, we -- we do support

22 co-location where it's technologically

23 feasible. As you suggested, it does provide

24 lower cost.

25 If there are specific instances 116 1 you're interested in knowing about, we'd be

2 happy to react to those, but we, as a matter

3 of policy, support co-location.

4 There are times when depending on the

5 way our cell grid is laid out that the --

6 the -- the optimum location of a cell tower

7 doesn't match up with -- with that of our

8 competition and in those cases there may

9 need -- need to be one, maybe not right next

10 door, but, you know, within -- within a mile

11 or two and -- and we can't always be on the

12 exact spot we need to be.

13 I'll let the others comment.

14 CHAIRMAN PRESTON: Gentlemen,

15 unfortunately, under the rules, the Speaker

16 has just -- being a former attorney -- has

17 banged his gavel, which means we are starting

18 our official session.

19 I'm very sorry to have to cut this

20 short because it -- again, we will be more

21 than happy to -- there will be other forums

22 that we will be able to deal with.

23 But I want to thank everybody for

24 attending, and I think that this has been a

25 very informative meeting. It's unfortunate 117 1 that we ran out of time, but we are going on

2 the floor right now.

3 So with that being said, this

4 committee is so adjourned.

5 (The hearing was adjourned at

6 11:09 a.m.)

25 118 1

2 I hereby certify that the proceedings

3 and evidence are contained fully and

4 accurately in the notes taken by me on the

5 within proceedings and that this is a correct

6 transcript of the same.

9 ______Brenda S. Hamilton, RPR 10 Reporter - Notary Public