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Remarks of Rachelle Chong, Special Counsel, Advanced Information and Communications Technologies, Office of the CIO, State of California

at Rural Telecom Congress November 11, !1! "updated# $The Secret Sauce to Rural %roadband& Thank you very much for inviting me to speak today. Now when you think of California, usually you think of our famous cities: San Francisco and Los ngeles. !ut actually, California is a "ig state with many rural areas. From our "road"and mapping e#ercise that "egan in $%%& in our State, ' know that the far north, the Central (alley, the )astern Sierras, the Central Coast and the far southeast areas of California have slow or no "road"and. nd we know why: there are fewer consumers out there and so the *eturn on 'nvestment often does not +pencil out, for the "road"and providers usually rural telcos and rural ca"le companies . in these regions. Further, in my state, the dated regulatory scheme reim"ursed cost of service telephone companies for voice service only, not "road"and. So the regulatory incentives were wrong. So what can a state do to try and "ring "road"and to rural areas/ California has "een working on this challenge since $%%0 and today, ' am going to suggest some ingredients that might turn into a recipe for success to get !road"and to your rural areas. ' want to "e clear that ' don1t have any surefire recipe for success. )very state is different "ut we have tried a lot of things in California .. "efore there was a "allyhooed National !road"and 2lan3 .. and may"e some of this may work for you. 1' (ou )ight Tr* +orming a %roadband Task +orce or a State %roadband ,eadership Council 'n California, state leadership made all the difference. 4e were lucky in that we had a rare convergence of leadership on "road"and in the 5overnor1s 6ffice, the state Legislature and the California 2u"lic 7tilities

Commission. ' cannot emphasi8e enough how much that leadership made all the difference. 'n $%%0, 5overnor Schwar8enegger formed a "lue ri""on !road"and Task Force in $%%0 to make recommendations to him on how to improve "road"and in the state. 9e felt it was critical to economic development and it was infrastructure that had "een not keeping pace with other glo"al economies. ' was privileged to serve on that Task Force, and to "e one of the state officials charged with implementing those recommendations in the last four years, "oth at the California 27C and then at the 6ffice of the C'6. 7nder the Task Force, California issued two reports on what to do a"out "road"and. 6ur reports are on the 6ffice of the C'6, State of California we"site, and ' urge you to look at them for ideas. The great thing a"out the Task Force is it put focus on the pro"lem and united leaders in the state to try and solve it. Then the 5overnor assigned implementation of the report1s recommendations to particular state agencies. *ecently, a "ill was passed to create a California !road"and Council. :S! ;<0$= 't esta"lishes in state government a council to ma#imi8e California1s opportunities for federal funds under the new National !road"and 2lan released "y the FCC, to increase coordination in !road"and deployment and adoption "y state agencies. 't "rings together secretaries of key state agencies, the pu"lic utilities commission, the legislature, the 5overnor1s 6ffice, and the California )merging Technology Fund :a non profit organi8ation formed whose mission is to close the digital divide in our state=. ' (ou -ant to %e Sure To .o (our %roadband )apping 6ne of the things the Task Force did in $%%& was to perform the State1s first.ever "road"and mapping. 4e learned a"out mapping from a field trip to Connect >entucky in $%%0. ' always give Connect >entucky credit "ecause they inspired us on "road"and mapping, the importance of leadership, and community."y.community involvement of key players.

The Task Force had to ca?ole the traditional telephone and ca"le companies to give us the availa"ility information a"out their "road"and coverage. 't wasn1t easy3 2hone calls "y regulators to senior company personnel had to occur, if you get my drift. !ut in their infinite wisdom and in the spirit of cooperation, the ma?or phone companies and ca"le companies agreed to give us their data voluntarily which was a huge win. 'nterestingly, later on, the telcos and ca"le companies said they were glad they did. 6ne, they "enefitted from the mapping results. 'n fact those early maps revealed a lot of things that surprised them, they said. nd second, when the de"ate a"out the national "road"and mapping took place, they had some e#perience with it from the California e#perience. nd they later admitted to me, it wasn1t as "ad to get California this data as they thought. The reason this is so important is to nail down with particularity where the real "road"and gaps e#ist. 'f you can get the local communities to verify this data, that1s even "etter. 4hy/ This helps you avoid all the +waste, fraud and a"use, arguments later when you are proposing infrastructure pro?ects .. "ecause you can prove the areas are unserved or underserved. !y the way, the California 27C defined +underserved, areas as places with speeds "elow @ A"ps download and ; A"ps upload. Later the C27C revised its definition to 0 A"ps download and $ A"ps upload. /' (ou )ight Set 0p a Non 1rofit Organi2ation -hose Sole 3ob is the Narro4ing the .igital .ivide

'n $%%B, two C27C commissioners, Aike 2eevey and Susan >ennedy, had the foresight to put some focus and muscle on the pro"lems "y forming a non profit organi8ation, the California )merging Technology Fund, whose ?o" is to close the digital divide. Cuite a mission statement. The California )merging Technology Fund :C)TF= was funded using D0% million in seed money donated "y TET and (eri8on in relationship to two mergers in $%%B. C)TF matches this seed money in a @:; ratio to leverage it into D$<% million.

C)TF has performed much of the work in rural demand aggregation, which ' will discuss more a "it later. ' urge you to look at their scope of work on its we"site at www.cetfund.org. 5' (ou )ight Set the Regulator* Table for broadband' The California regulatory environment prior to $%%0 was not very pro. "road"and. )verything was regulated in silos: Telephone, ca"le and wireless. 'n $%%0, the California 27C approved significant deregulation of telephone company rules that put them on a more level playing field with their competitors. This helped encourage the two ma?or landline phone companies, TET and (eri8on, to invest their "road"and dollars in our state and "ring our consumers 7verse and F'6S services. 4e understood we were competing to "ring those products to our state first. 6' (ou )ight Tr* +inding ,egislative Champions 9aving a legislative champion really helps. 'n $%%0, we had a few enlightened legislators who understood the need to rela# old rules that did not recogni8e the convergence of voice, video and 'nternet. 'n $%%0, the State Legislature passed a state (ideo Franchise law that allowed ca"le companies to o"tain state wide franchises :instead of local franchises=, allowed telephone companies to enter the video "usiness, and imposed non redlining restrictions on "oth. This encouraged ca"le companies such as Comcast, Time 4arner, Co#, Charter and !righthouse, to "ring faster "road"and to our state. 0. (ou )ight Tr* Creating a State %roadband Infrastructure 1rogram' 'n the state1s !road"and Task Force made its report in $%%F, one of the key recommendations it had was to ensure "road"and infrastructure was "uild to places that were unserved or underserved. 'n $%%&, the California 27C created a D;%% million California dvanced Services Fund so "road"and providers could apply to serve any unserved or underserved area of California. The C SF is funded "y a surcharge rate on revenues collected "y telecommunications carriers from end.users

for intrastate telecommunications services. The surcharge "egan at .$BG and has recently "een ad?usted down to .;<G. . The C27C opened filing windows to apply for the money, first for unserved areas which were processed first, and then second for underserved areas. 4e pu"lished criteria that had to "e met and funds were availa"le was on a first.come, first.serve "asis. 'nformation a"out the C SF can "e found here: http:HHwww.cpuc.ca.govH27CHTelcoH'nformationIforIprovidingIserviceHC SFH The Legislature helped the C27C "y "lessing the C SF and putting it into law with a "ill S!;;J@ :codifying the C SF program in California 2u"lic 7tilities Code Section $F;=. 't classified the program in a way to protect it similar to the high cost funds used "y telephone companies. 4hen !road"and ** came to "e, the C27C acted swiftly to allow ** applicants to o"tain C SF funds to serve an unserved or underserved area for up to ;%G of the pro?ect. 9aving this additional ;%G matching money towards their pro?ects helped give California applicants a leg up in the application process for "road"and ** grants. 'n $%;%, a legislative champion, state Senator le# 2adilla of 2acoima, authored and got passed a "ill .. S!;%<% .. to e#tend the C SF for another five years for another D;$B million. 'n $%;@, Senator 2adilla passed another "ill S!&<% to add another DJ% million to the C SF, while a second "ill !;$JJ authored "y ssem"ly mem"er Steven !radford authori8es the 27C to appropriate D$% million from the !road"and 'nfrastructure 5rant ccount to award grants to connect "road"and networks to pu"licly supported multi tenant afforda"le housing units. &. (ou )ight Tr* Creating a Ne4 %roadband Infrastructure Revolving ,oan Account' 'n S!;%<%, Senator 2adilla put in a new D;B million for a !road"and *evolving Loan ccount. This account provides another source of funding for the portion of "road"and deployment capital costs not covered "y a grant :say from ** or the C27C1s C SF program=.

F. (ou )ight %uild A Telehealth Net4ork' The !road"and Task Force report recommended we "uild a telehealth network. So when the FCC put out calls for applications for a *ural 9ealth Care 2ilot 2rogram grant, California ?umped on it. 4ith the "lessing of the 5overnor1s office, we leveraged our 7C Kavis system1s telemedicine group to organi8e a statewide application which we hoped would ultimately "e F0@ sites connected "y secure, medical grade, ro"ust "road"and. The C)TF provided the ;BG match money for the successful FCC grant of D$%.; A. Lou may read more a"out the CTN1s work here: http:HHwww.caltelehealth.orgH *ecently the California Telehealth Network applied for a !road"and ** S! grant and received DJ.;A to create ten e9ealth model communities to demonstrate telehealth applications. Now why is the telehealth system particularly important for our rural "road"and goals/ Like many of you, California did not get as many !road"and ** grants as it would have liked for its vast rural areas. !ut through our telehealth network, we will push infrastructure to hundreds of rural areas throughout our state. 4e e#pect that our contracted "road"and provider, TET, will "uild enough capacity to serve others in those communities. Further, the FCC rules allow the telehealth network to sell e#cess capacity to others in the rural areas "y paying their fair share of the network costs. Sustaina"ility is the key Muestion for our telehealth network. 'n addition to selling "road"and connectivity, we e#pect the network to offer uniMue applications to health care providers that will provide valua"le to them and for which they will pay. )#amples of these applications include medical continuing education, store and forward applications, remote patient monitoring, health information e#change and electronic medical records capa"ilities. 7' (ou )ight ,everage Tele8education, 1ublic ,ibrar* and .igital ,iterac* 9fforts'

nother idea is to try and leverage any tele.education, ST)A :Science, Tech, )ngineering and Aath= or digital literacy efforts going on in your state. So for e#ample, if you have tele.education pro?ects going on through ** grants, can you open the school1s tech center to the general pu"lic after school or on weekends to make the 2Cs availa"le to the pu"lic/ s to pu"lic li"raries who are natural pu"lic access points for 2Cs and who are digital literacy training centers, can you take their "road"and signal and throw it via 4iFi into the parking lot or an outdoor patio to provide after hours "road"and access for a rural community/ 'f you are lucky enough to have a 5ates Foundation 6pportunity 6nline !road"and 6pportunity grant for your li"raries, this will help your rural li"raries increase their "road"and speeds to ;.B A"ps and upgrade their 2Cs. s to digital literacy training you might have going on due to !road"and ** or pu"lic li"rary efforts, can you leverage them particularly in the rural areas/ 1!' (ou might Tr* C9T+:s Secret Sauce; Rural and 0rban Regional Consortias ' want to hone in what C)TF tried to do to "ring "road"and to our rural areas of California. C)TF1s +secret sauce, is the process of reaching out and truly engaging the regional leaders as true partners in an agreement to achieve a specific set of outcomes with accounta"ility. 4e have found that "y doing this, there is a dynamic relationship that has several components that are mutually reinforcing, driving continuously to clear outcomes. First, California divided our rural areas into groups of 0.& rural counties in geographic areas that made sense. 4e had seven groups that we formed and called them our *ural *egional 2artners. 'n each *ural *egion, we looked for organi8ations to partner with in order to match C)TF seed money at least ;:;. For e#ample, in our *edwood

Coast *egion, the 9um"oldt rea Foundation stepped forward to partner with C)TF. The California 2artnership for the San NoaMuin (alley matched the C)TF money to plan a regional telemedicine network. Aost recently, the AcConnell Foundation has "ecome an investment partner with a ;:; match in a strategic ?oint venture in North California. 9ere are some key pro?ect phases we went through with each *ural *egion. Initial +act +inding < 1lanning 1hase " 8/ months# -ork 1roduct; .etailed 1ro=ect -ork 1lan First, perform initial fact finding to listen to regional leaders and stakeholders a"out three things: ;. Their perception of the challenges of getting "road"and to their regionO $. 4ho needs to "e involved. 4e have found it very important to create a critical mass of civic leaders. These civic leaders should includes folks like the heads of the schools, li"raries, cham"er of commerce, mayor, heads of city counsels or "oards of supervisors, pu"lic safety, community colleges, universities, and heads of community "ased organi8ations. @. Find out in this process which entity is the most trusted and logical to "e the +fiscal agent, or +managing partner, of the "road"and pro?ect. The 2lanning 2hase takes a"out $.@ months to gather input in order to formulate this work product: detailed pro?ect 4ork 2lan for that rural region. Keveloping a Ketailed 4ork 2lan: 9ave the group develop a letter of agreement that is accepta"le to all. 9old a ma?or planning meeting among all the counties and key stakeholders to develop a detailed work plan and investment proposal. The work plan should have specific plans to ;. Mualify and Muantify the prospective demand for "road"and service and, $. identify a preferred infrastructure scenario in a multi.county region.

Aggregation of .emand 1hase "1 months# Ne#t, we would gather and analy8e data a"out potential aggregated demand "y the user sector, including an assessment of telemedicine, pu"lic safety and emergency response opportunities. To "e specific, we set forth "y category or sector of prospective "road"and users to "e interviewed or surveyed and the proposed timeta"le "y county. This should include outreach to: all pu"lic agency groups :law enforcement and pu"lic safety including prisons, emergency response and services, >.;$ education, higher education and research, li"raries, general government services from fedHstateHlocal agencies, pu"lic health and medical care, and nationalHstate parks= and key "usiness sectors :at least the top ten employer groupings=. !e sure to develop the interview or survey instruments to "e used to Muantify or Mualify prospective !! users and su"scri"ers. Lou might look at *edwood Coast, Connect>entucky and other aggregation of demand pro?ects to see what is the "est availa"le practice. 4e have found that the interview or survey documents need to ascertain demand "y purpose, speed of communications and afforda"ility. Kevelop the process and format to track the potential demand "y user category in order to Muantify the potential aggregated demand "y community and county. 'dentify the specific personnel who will "e involved in interview and surveys. Kescri"e the outreach and engagement plan to local, state and federal elected officials. Identif* the 1referred Infrastructure Scenario; -ork 1roduct; Investment 1rospectus Ne#t identify what is e#isting "road"and infrastructure in the rural region, and identify a preferred scenario of where to "ring in "road"and.

The work product of this aggregation of demand phase is to have an 'nvestment 2rospectus on potential aggregation of demand for "road"and and preferred infrastructure scenario to attract "road"and providers. Negotiation for %roadband .eplo*ment and Services "> months# Ne#t, we take the investment prospectus that we have developed and meet and negotiate with "road"and providers that C)TF and the local partners have convened. 4e show the "road"and providers the demand from the stakeholders and our preferred scenario for new infrastructure. 6ur goal and work product for this phase is to have an agreement from a "road"and provider:s= to deploy "road"and in the region. Annual ,earnings -orkshops )ach year, C)TF convenes the rural consortia folks in person to share lessons learned and tackle common challenges. These annual meetings are pivotal in getting the *egional consortia and leaders to "e responsi"le for and accounta"le to each other to demonstrate progress. 't has fostered tremendous colla"oration and an esprit d1corps that adds +magic, to the +secret sauce,. power learning tool is to introduce a discipline of feed"ack using performance data. The C)TF president says that its success comes from putting +dedicated people together with an agenda and then relentlessly pursing it. She emphases regular reporting and monitoring of progress and results. C)TF uses Muarterly progress reports, annual visits and pu"lic reporting at annual workshops and peer reviews of final reports to create esta"lished mechanisms of disciplined accounta"ility. ' have given you as "est ' can the recipe for "road"and success in the 5olden State. 4e were fortunate to have strong leadership, "ut much of our success is setting goals and pursued them in relentlessly with non traditional, out of the "o# ways of thinking. ' strongly encourage you to think outside of the "o# as you promote rural "road"and. Thank you and good luck3