TESTIMONY OF 
JONATHAN S. ADELSTEIN 
COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION 
 
BEFORE THE 
U.S. SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 
 
SEPTEMBER 26, 2007 
 
Mr. Chairman, Senator Snowe, and members of the Committee, thank you for inviting 
me to testify about one of the most important infrastructure challenges confronting our 
Commission and the country: ensuring the ubiquitous deployment of affordable, high speed 
broadband to every small business that needs it.  Deploying broadband infrastructure is critical to 
promote the economic, cultural, and social well-being of our country, particularly for small 
businesses and entrepreneurs, who drive so much innovation and economic growth.   
 
Mr. Chairman, you have long recognized that broadband infrastructure is one of the best 
tools for promoting the entrepreneurial spirit that we have seen in our time.  Its availability is fast 
becoming one of the key factors in the success or failure of our small businesses.  I am deeply 
concerned about the speeds, prices, and availability of broadband services for American 
consumers and small businesses.  To ensure that broadband is available and affordable, we must 
engage in a concerted and coordinated effort to restore our place as the world leader in 
telecommunications.  This will require a comprehensive national broadband strategy that targets 
the needs of all Americans, including small businesses.   
 
Mr. Chairman, I want to commend you for your leadership on this issue, not only through 
convening this hearing but also by serving as Co-Chairman of the Senate Democratic High Tech 
Task Force.  Through these and many other efforts, you are drawing much-needed attention to 
the importance of promoting technological innovation and advanced telecommunications for 
providing good jobs and enhancing our standard of living.  Senator Snowe, I also commend your 
outstanding leadership in promoting broadband for schools, libraries and health centers, as well 
as for all consumers, including those in rural areas. 
 
The Role of Broadband in Promoting Economic Prosperity and Global Competitiveness 
 
Small businesses play a driving role in creating jobs and developing new technologies.  
Over the past decade, small businesses have created two out of every three new jobs, employed 
forty percent of high tech workers, and produced far more patents than similarly focused large 
firms.  Small businesses also purchase a massive amount of telecommunications services, 
spending approximately $25 billion each year, according to a recent Wall Street Journal report.   
 
 Unfortunately, the FCC collects little reliable data about extent of broadband services 
available to small businesses in the U.S., or the more general state of competition among 
providers of telecommunications services for businesses.  In a report released at the end of last 
year, the U.S. Government Accountability Office (GAO) recommended that the Commission 
collect additional data to monitor competition and to assess customer choice through, for 
example, price indices and availability of competitive alternatives.  GAO found that “without 
more complete and reliable measures of competition, [the] FCC is unable to determine whether 
its deregulatory policies are achieving their goals.”
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The good news is that small businesses are voraciously integrating new services and 
features into their business plans.  As I elaborate below, and as you will hear from the second 
panel, businesses of all sizes are increasingly tapping into broadband to reduce costs, increase 
productivity, and improve efficiency. 
 
The bad news is that what little data that we have suggests that small businesses are 
starved for telecommunications choice.  Many small businesses have only one choice of provider 
for broadband services, which deprives them of innovative alternatives and can result in higher 
prices.  Even where there are competitive options, alternative providers rely heavily on inputs 
from incumbents, highlighting the importance of pro-competitive policies.  GAO found that 
competitive providers serve, on average, less than six percent of the buildings with demand for 
dedicated access, leaving 94 percent of the market served by only incumbent providers.
2
  These 
inputs are used not only by large businesses, but also by other communications providers, 
including independent wireless, satellite, and long distance providers that serve small businesses.  
It is noteworthy that the U.S. Small Business Administration Office of Advocacy recently 
commented that “[t]he combination of high prices and few alternatives creates an insurmountable 
burden to small carriers trying to conduct business in the telecommunications market.”
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The lack of information about the small business market is particularly troubling because 
broadband creates economic opportunities that were previously unattainable, and the upside 
potential remains vast.  Broadband can connect entrepreneurs to millions of new distant potential 
customers, facilitate telecommuting, and increase productivity.  Much of the economic growth 
we have experienced in the last decade is attributable to productivity increases that have arisen 
from advances in technology, particularly in telecommunications.  These new connections 
increase the efficiency of existing business and create new jobs by allowing new businesses to 
emerge, and spur new developments such as remote business locations and call centers.   
 
Small businesses that have seized the initiative are witnessing tremendous growth.  With 
broadband, you need not have a global marketing department to be accessible to the world.  This 
capability is particularly potent for small businesses given that 52 percent are home-based.  In 
this way, broadband is an extension of the entrepreneurial spirit that has characterized our 
country from its earliest foundations.  Just as the Pilgrims used the Mayflower to reach the new 
opportunities in Plymouth Harbor and the 19
th
 century pioneers relied on stage coaches and 
railroads to settle the western U.S., entrepreneurs are using broadband infrastructure to reach 
beyond their current horizons. 
 
 Since I have joined the Commission, I have traveled across the country and seen 
broadband technologies harnessed in ways folks inside the Beltway might never have imagined.  
                                                 
1
 GAO, FCC Needs to Improve its Ability to Monitor and Determine the Extent of Competition in Dedicated Access 
Services, p. 15 (Nov. 2006). 
2
 Id. at 12. 
3
 U.S. Small Business Administration Office of Advocacy, Comments in WC Docket No. 05-25, p. 8 (2007). 
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For example, at auction houses across the Midwest, entrepreneurs are using broadband 
technologies to conduct real time cattle auctions over the Internet.  Ranchers from across the 
country can log in, watch real time video of the livestock and make purchases without leaving 
their ranches.  These auction houses bridge remote locations, expand potential markets for 
livestock, and cut costs for ranchers to reach their customers. 
 
Broadband can also unlock transformational opportunities through the cooperative nature 
of the Internet.  Companies of all sizes are tapping into the power of the Internet to gather and 
develop ideas for new products, and to interact with and solicit the views of influential 
customers.  The success of the on-line encyclopedia Wikipedia is just one example of how 
quickly open and accessible Internet-based models can outstrip their traditional predecessors.  
We are just scratching the surface of the opportunities that these technologies can bring. 
 
As small businesses are increasingly empowered to use broadband in newer, more 
creative ways, the stage on which we all must compete is also evolving into a global one.  New 
telecommunications networks are a key driver of this new global landscape.  They let people do 
jobs from anywhere in the world -- whether an office in downtown Manhattan, a home on the 
Cheyenne River Indian Reservation, or a call center in Bangalore, India.  This trend is a wake-up 
call for Americans to demand the highest quality communications systems across our nation, so 
that we can harness the full potential, productivity and efficiency of everyone in our own 
country.  If we fail in this, be assured, our competitors around the world will take full advantage 
of it. 
 
The Need for a National Broadband Strategy 
 
We must do far more to give our citizens, our small business, and our communities the 
tools they need to succeed.  We’ve made progress, many providers are deeply committed, and 
there are positive lessons to draw on.  Yet, I am increasingly concerned that we have failed to 
keep pace with our global competitors over the past few years when it comes to the speeds, 
prices, and availability of broadband services.   
 
For a long time, the U.S. was the undisputed world leader in communications technology. 
Yet, in recent years, we have tumbled from that historic position.  Each year, we slip further 
down the regular rankings of broadband penetration.  While some have questioned the 
international broadband penetration rankings, the fact is the U.S. has dropped year-after-year.  
This downward trend and the lack of broadband value illustrate the sobering point that when it 
comes to giving our citizens affordable access to state-of the-art communications, the U.S. has 
fallen behind its global competitors. 
 
There is no doubt about the evidence that citizens of other countries are getting a much 
greater broadband value in the form of more megabits for less money.  A recent OECD report 
ranked U.S. 12th in broadband value.  According to the ITU, the digital opportunity afforded to 
U.S. citizens is 21st in the world.  For small businesses, those in rural areas, and low income 
consumers, the problems are often even more acute.  This is more than a public relations 
problem. It is a major productivity problem, and our citizens deserve better.  Indeed, if we do not 
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do better for everyone in America, then we will all suffer economic injury.  In this broadband 
world, more than ever, we are truly all in this together and we need to tap all of our resources. 
 
Some have argued that the reason we have fallen so far in the international broadband 
rankings is that we are a more rural country than many of those ahead of us.  While this is 
debatable, even if it is the case, we should redouble our efforts and get down to the business of 
addressing and overcoming this challenge.   
 
I am concerned that the lack of a comprehensive broadband communications deployment 
plan is one of the reasons that the U.S. is increasingly falling further behind our global 
competitors.  Virtually every other developed country has implemented a national broadband 
strategy.  This must become a greater national priority for America than it is now.  We need a 
strategy to prevent outsourcing of jobs overseas by promoting the ability of U.S. companies to 
“in-source” within our own borders.  Rural America and underserved urban areas have surplus 
labor forces waiting to be tapped.  No one will work harder, or work more efficiently, than 
Americans.  But too many are currently without opportunities simply because their current 
communications opportunities are inadequate to connect them with a good job.  That situation 
must improve. 
 
The Elements of a National Broadband Strategy 
 
A true broadband strategy should incorporate benchmarks, deployment timetables, and 
measurable thresholds to gauge our progress.  We need to set ambitious goals and shoot for 
affordable, truly high-bandwidth broadband.  We should start by updating our current anemic 
definition of high-speed of just 200 kbps in one direction to something more akin to what 
consumers receive in countries with which we compete, speeds that are magnitudes higher than 
our current definitions.   
 
We must take a hard look at our successes and failures.  We need much more reliable, 
specific data than the FCC currently compiles so that we can better ascertain our current 
problems and develop responsive solutions.  The FCC should be able to give Congress and 
consumers a clear sense of the price per megabit, just as we all look to the price per gallon of 
gasoline as a key indicator of consumer welfare.  Giving consumers reliable information by 
requiring public reporting of actual broadband speeds by providers would spur better service and 
enable the free market to function more effectively.  Another important tool is better mapping of 
broadband availability, which would enable the public and private sectors to work together to 
target underserved areas.  Legislation under consideration by leaders in both the Senate and the 
House would enable us and other agencies like the Census Bureau to make enormous progress 
on this front. 
 
We must redouble our efforts to encourage broadband development by increasing 
incentives for investment, because we will rely on the private sector as the primary driver of 
growth.  These efforts must take place across technologies, so that we not only build on the 
traditional telephone and cable platforms, but also create opportunities for deployment of fiber-
to-the-home, fixed and mobile wireless, broadband over power line, and satellite technologies.   
 
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We must work to promote meaningful competition, as it is the most effective driver of 
innovation, as well as lower prices.  Only rational competition policies can ensure that the U.S. 
broadband market does not devolve into a stagnant duopoly, which is a serious concern given 
that cable and DSL providers now control approximately 96 percent of the residential broadband 
market.   
 
The Commission must also ensure the vitality of universal service as technology evolves.  
With voice, video, and data increasingly flowing to homes and businesses over broadband 
platforms, we’ve got to have ubiquitous high speed networks to carry these services everywhere, 
so that small business owners in all parts of our country can participate in this global economy.  
Universal service must evolve, as Congress intended, to cover broadband services sooner rather 
than later.  As elaborated upon below, we must also promote spectrum-based services that can 
play such an important role spurring both competition and greater availability of these services.   
 
There also is more Congress can do, outside of the purview of the FCC, such as providing 
adequate funding for Rural Utilities Service broadband loans and grants, and ensuring RUS 
properly targets those funds; establishing new grant programs supporting public-private 
partnerships that can identify strategies to spur deployment; providing tax incentives for 
companies that invest in broadband to underserved areas; devising better depreciation rules for 
capital investments in targeted telecommunications services; promoting the deployment of high 
speed Internet access to public housing units and redevelopments projects; investing in basic 
science research and development to spur further innovation in telecommunications technology; 
and improving math and science education so that we have the human resources to fuel 
continued growth, innovation and usage of advanced telecommunications services; and, of 
course, we need to make sure all of our children have affordable access to their own computers 
to take full advantage of the many educational opportunities offered by broadband. 
 
 What is sorely needed is real leadership at all levels of government, working in 
partnership with the private sector, to restore our leadership in telecommunications.  This 
Committee’s attention to this issue is exactly the kind of effort that is needed.  I also continue to 
believe that we need a National Summit on Broadband -- or a series of such summits -- mediated 
by the federal government, including Congress, the Executive Branch and independent agencies, 
and involving the private sector, which could focus the kind of attention that is needed to restore 
our place as the world leader in telecommunications. 
 
Wireless: A Critical Source of Broadband Services 
 
One of the best opportunities for promoting broadband, and providing competition across 
the country, is in maximizing the potential of spectrum-based services.  The Commission must 
do more to stay on top of the latest developments in spectrum technology and policy, working 
with both licensed and unlicensed spectrum.  Spectrum is the lifeblood for much of this new 
communications landscape.  The past several years have seen an explosion of new opportunities 
for consumers, like Wi-Fi, satellite-based technologies, and more advanced mobile services.  We 
now have to be more creative with what I have described as “spectrum facilitation.”  That means 
looking at all types of approaches – technical, economic or regulatory – to get spectrum into the 
hands of operators ready to serve consumers at the most local levels possible.   
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Of course, licensed spectrum has and will continue to be the backbone for much of our 
wireless communications network.  We are already seeing broadband provided over satellite, 
new wireless broadband systems in the 2.5 GHz band, and the increasing deployment of higher 
speed mobile wireless connections from existing cellular and PCS providers. 
 
During our review of the bandplan in advance of the auction last year of 90 MHz of new 
spectrum for the Advanced Wireless Service, I pressed for the inclusion of smaller blocks of 
licenses.  I thought that smaller license blocks would improve access to spectrum by those 
providers who want to offer service to smaller areas, while also providing a better opportunity 
for larger carriers to more strategically expand their spectrum footprints.  According to the U.S. 
Small Business Administration Office of Advocacy, which conducted a roundtable to discuss 
FCC spectrum policy, “small businesses identified the size of the license areas as the single 
greatest regulatory barrier to providing wireless service.”
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  Not surprisingly, our decision to 
adopt smaller license blocks was well received by a number of carriers and manufacturers. 
 
The Commission to some extent used the historic opportunity in the upcoming 700 MHz 
auction to facilitate the emergence of a “third” broadband platform.  This is the biggest and most 
important auction we will see for many years to come.  While the Commission recently adopted 
auction rules that reflect a compromise among many different competing interests, I am hopeful 
that there will be opportunities for a diverse group of licensees in the 700 MHz auction and that 
our more aggressive build-out requirements will benefit consumers across the country.  We also 
put in place a new approach to spectrum management by adopting a meaningful, though not 
perfect, open access environment on a significant portion of the 700 MHz spectrum.  This 
decision represents an honest, good faith effort to establish an open access regime for devices 
and applications that will hopefully serve consumers well and create opportunities for small 
providers for many years to come. 
 
I have been disappointed, however, with the way that the Commission has handled its 
designated entity (DE) program.  The bidding credits made available through this program can 
be a potent means of getting spectrum into the hands of small businesses and entrepreneurs.  Yet, 
the Commission has missed the chance, time and again, to craft rational DE rules.  So, I was 
again disappointed that, in the 700 MHz proceeding, we lost an opportunity to provide crucial 
bidding credits to designated entities that wholesale fully built-out network services.  I think it is 
essential that we revisit our policies in this respect to ensure that all bidders have opportunities to 
bid, particularly where wholesale service is a compelling option for new and diverse providers.   
 
Beyond the 700 MHz auction, there are other important opportunities for small 
businesses as both consumers and providers of broadband services.  Unlicensed broadband 
services are an intriguing avenue for many underserved communities because unlicensed 
spectrum is free and, in most rural areas, lightly used.  It can be accessed immediately, and the 
equipment is relatively cheap because it is so widely available.  I have also worked closely with 
the Wireless Internet Service Provider (WISP) community, which has been particularly focused 
on providing wireless broadband connectivity in rural and underserved areas.   
                                                 
4
 Letter from Eric E. Menge, U.S. Small Business Administration Office of Advocacy, to Ms. Marlene Dortch, FCC, 
WC Docket No. 06-150, p. 1 (Dec. 7, 2006). 
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But we can always do more for rural WISPs and other unlicensed users.  I have heard 
from operators who want access to additional spectrum and at higher power levels.  And the 
Commission has been doing just that.  We have opened up 255 megahertz of spectrum in the 5 
GHz band – more spectrum for the latest Wi-Fi technologies – and are looking at ways to 
increase unlicensed power levels in rural areas. 
 
I also have pushed for flexible licensing approaches that make it easier for community-
based providers to get access to wireless broadband opportunities.  We adopted rules to make 
spectrum in the 3650 MHz band available for wireless broadband services.  To promote interest 
in the band, we adopted an innovative, hybrid approach for spectrum access.  It makes the 
spectrum available on a licensed, but non-exclusive, basis.  I have spoken with representatives of 
the Community Wireless Network movement, and they are thrilled with this decision and the 
positive impact it will have on their efforts to deploy broadband networks in underserved 
communities around the country. 
 
We have also made spectrum available in the 70/80/90 GHz band for enterprise use.  
While you may not be familiar with this spectrum block, it can be used to connect buildings with 
gigabit-speed wireless point-to-point links for a mile or more.  Instead of digging up streets to 
bring fiber to buildings, licensees can set up a wireless link for a fraction of the cost -- and the 
spectrum is available to anyone holding a license.  While others supported an auction, I 
successfully argued against them in this unique case, because I was concerned that auctions 
would raise the price of access and shut out smaller licensees.  In fact, one company now is 
installing five links in my home state of South Dakota.  The links will be used for a number of 
city services, including public works, police and fire departments, as an alternative to fiber. 
 
Conclusion 
 
In order to maintain a vibrant environment for our nation’s entrepreneurs and small 
businesses, we need to maximize the availability of affordable, truly high-speed broadband 
services.  I look forward to hearing from the next panel of witnesses and working with you all to 
create a comprehensive policy framework that advances that goal.  Thank you for your 
leadership on this issue, and for inviting me to testify today. 
 
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