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My name is Terry Addington and I serve as President and CEO of First Cellular
of Southern Illinois. I have served in this capacity since 1994. I also hold
positions on the Boards of Directors of RCA, The Rural Cellular Association,
CTIA, The Cellular Telecommunications and Internet Association, and ITA, the
Illinois Telecommunications Association. I am a past president of RCA and am
currently sitting as Vice-Chairman of CTIA.
I am here today speaking only on behalf of my company, First Cellular of
Southern Illinois. I am simply a small business owner and operator from Middle
America. I am not a lobbyist nor am I an experienced "Washington
insider". I have no Washington office nor do I have any regulatory staff. A
lawyer or a consultant did not write my testimony and written statement. My
"special agenda" is only that of a business trying to stay in business
and deliver a fair return to my shareholders. The perspective I share with you
is from one carrier and is one person's opinion based on my experiences in
trying to implement phase II of the E-911 mandate.
First Cellular is a small rural wireless carrier servicing the lower 24
Counties of Illinois. We cover about 10,000 rural square miles and have a
population density of approximately 50 people per square mile. We sit between
St. Louis, Missouri and Evansville, Indiana. Our largest city is Carbondale,
Illinois at about 30,000 people when the University is in session. The rest of
our coverage area is made up of small towns, farmland, freeways and very rural
back roads. I employ 150 people. We are represented by Congressman John Shimkus
and are proud of him as our Congressman and appreciate his efforts for the
people of Southern Illinois. It is my privilege to be able to publicly thank
Congressman Shimkus. We appreciate him and his leadership.
I am here today to discuss the pending legislation on wireless E-911. I
support this legislation and thank the committee for considering it. It will
assist wireless carriers in a variety of areas. I especially support the review
of the accuracy requirements in rural areas and the provision that requires
states to certify that they are not diverting E-911 funds collected from the
public. In my case, these two requirements are paramount and key to this
legislation in their benefit to First Cellular of Southern Illinois and other
rural wireless carriers.
I also believe there is value to the creation of "An Office for E-911
Coordination" as many of the issues causing delays for my deployment are a
result of communications, coordination and compatibility issues with vendors.
Unlike other carriers, vendors have been my biggest obstacle to a timely
deployment, not the PSAP's. In my area the PSAP's have been a joy to work with.
Of all the government mandates we are trying to support at this time, this is
the one that saves lives. I made the decision in 2001 that we would not only
comply with this mandate; we would get behind it with all of our resources and
even included it in our 2002 and 2003 marketing plans. We wanted to be first to
market and tout the life saving commitment this technology provides to our
customers. We were first to deploy phase I of E-911 by many months, being in
full compliance for eleven out of thirteen PSAPs by June of 2002 with the other
two not capable of accommodating our data at that time. Because phase II offers
an incredible improvement to the safety of our customers, we felt an early
deployment was best for First Cellular and for our customers. We budgeted almost
22% of our capital budget for a solution and were prepared to deploy it even
without a State of Illinois law providing phase II cost recovery.
We began exploring solutions in 2001 and hoped to initiate a contract by mid
to late 2002 for a 2Q 2003 in-service deployment. Things have not gone as we
planned, or hoped, or wanted. We feel a network solution works best for our
customers because of the choices the competitive marketplace has allowed them to
make. A handset solution is a fine solution, and I'm sure will work wonderfully
for many carriers and their customers. First Cellular made a commitment to
ourselves, for our customers, to not only meet the letter of the mandate, but to
meet the intent of the mandate. I believe the intent of the mandate is to
provide enhanced safety and security to as many subscribers as possible. In our
marketplace, over 15,000 subscribers have made the decision, over time, to
continue their analog service. In fact, I recently received E-mail from a
gentleman quite angry about rumors he has heard about the discontinuation of
analog service. After several years of incentives and promotions designed to
move people off analog and into digital, 15,000 of my customers and citizens of
Southern Illinois have said, "no thank you", analog is fine. Also, I
serve about 100,000 roamers a month. A network solution serves all my customers,
digital, analog and roamers. A handset solution requires a handset swap-out and
cannot serve all my roamers unless they just happen to have a compatible system.
The marketplace has spoken. 20+ % of my customers want to keep their analog
service; I think they deserve phase II service with E-911.
Additionally, to prop up declining roaming revenues, we have decided to
deploy a GSM overlay on our current CDMA and analog system. I'm sure you are
aware there is not a handset solution for GSM. By deploying a network solution
we can offer one solution for our whole marketplace thereby avoiding the need to
deploy a handset solution for our CDMA network and a network overlay for our GSM
system. It makes sense operationally and it makes sense economically.
I mentioned earlier that my biggest issue with obtaining a deployable
solution was because of vendors. As you are well aware, First Cellular is just a
cellular service provider. In order to deliver a phase II solution, two things
were needed, cooperative PSAPs and a phase II solution from a vendor. Our
relationship with our PSAPs has been wonderful. Early on we established a
relationship with the unofficial PSAP area coordinator. With regular and honest
dialogue we kept them informed of our progress every step of the way. They have
been patient, understanding and easy to work with. I applaud the efforts and
attitude of our local PSAPs led by Mr. Ken Smith, PSAP administrator of
Williamson County, Illinois. We have letters of request for phase II service
from 5 PSAPs of which only 3 are capable of accepting data at this time. Those
PSAPs have worked with us and have been patient as we have searched for a
solution that will work for all our customers.
The Creation of an "E-911 Implementation Coordination Office"
The creation of an "E-911 Implementation Coordination Office" has
the potential to assist all stakeholders in early coordination of E-911
implementation and accountability. If carriers are to be held accountable for
deploying a phase II solution, why are some suppliers of those services not held
accountable for performance and follow through? If carriers are bound by a
Federal mandate, why is the switch manufacturer not required to provide
compatibility to the solutions that are generally available in the marketplace?
It seems to me the onus is solely on the carriers, PSAPs, and, to a lesser
degree, the LECs.
I began contacting location vendors in late 2001. Calls were placed to the
two network location providers, Grayson Wireless (now Andrew) and TruePosition.
Both were invited to make presentations on their products. Our first meeting was
with Grayson Wireless on March 11, 2002. After many unsuccessful attempts to get
TruePosition on site we decided to move forward with Grayson. Soon after this
decision was made, it was discovered Motorola had certified interoperability
with only 1 of the 2 network providers, TruePosition. We finally established
dialogue with TruePosition and on August 26, 2002 were able to get the full
presentation of their product.
Shortly after our meeting in August we initiated contract negotiations. To
say this was an arduous undertaking would be a gross understatement. After
months of difficult communications we finally received a contract for execution
at the end of February 2003. First Cellular executed the agreement on February
24, 2003 and sent the document to TruePosition to do the same. For the next 60
days the contract was mired at TruePosition and communications virtually ceased
unless we called or E-mailed repeatedly. During the middle of March 2003, First
Cellular was assured, repeatedly, that a contract would be in our hands within
"a few weeks". It was at the end of those "few weeks", on or
about April 23 that we learned TruePosition had developed a new version of their
product, and, the new equipment was now not compatible with our Motorola switch
and they refused to sell us the version of their product that is compatible.
Our Motorola switch remains incompatible with both current versions of the
TruePosition and Grayson solutions. In fact, in a letter from Motorola, dated
August 4, 2003, they state, "In early June of 2003, Grayson and Motorola
entered into discussions regarding the feasibility of offering a Network-Based
Wireless E-911 Phase II compliant solution. A technical exchange meeting was
conducted to discuss the inter-operability capabilities of both Vendors'
platforms. After reviewing all documentation presented and information
exchanged, it was concluded that, with the current product offerings of both
companies, a product that would meet the technical specifications of the
Wireless E-911 Phase II standards could not be provided."
To rectify this situation, Motorola states that they will require enormous
research and development resources and considerable time. In a presentation to
First Cellular on September 5, 2003, they conclude that their portion of a
solution, to deliver the proper messaging to one of the two location vendors,
would cost between $2.5M and $3.3M dollars, just to develop, and would only be
valid for one carrier, First Cellular. The Motorola estimated schedule for the
earliest possible deployment was first quarter of 2005. Clearly this would not
serve the intent of our initiative to enhance public safety with an early
deployment. Motorola also states the cost from TruePosition to merge their
narrow and wide band products on a common platform is estimated to be $2.4M!
This is in addition to the $2.5 to $3.3M cost from Motorola. So, for a network
solution from TruePosition, First Cellular would have to pay between $4.9M and
$5.7 for development costs in addition to the over $1M originally quoted as
purchase and deployment costs. A total of $5.3 to $7.1M for a network based
solution from TruePosition.
First Cellular has an annual budget of approximately $7M each year, give or
take, depending on the projects and their scope and size. If the same was true
of Grayson, it was clear we had no choice but to pursue a handset solution.
While acceptable to meet the specific requirements of the mandate, we remained
concerned about falling short of the true intent, real enhancements to public
safety to all our customers, including roamers.
In the last few weeks, Grayson has stepped up and are telling us they have
found a way to work around the Motorola shortfall and for a much more modest
development fee, can deliver a solution in about 6 months. Their solution would
provide one solution for our CDMA network and our soon to be installed GSM
network and would serve our analog subscribers and all First Cellular roaming
customers as well. We hope to be online by 4/1/04 or preferably before.
I believe there must be more accountability for all parties involved. I have
heard many anecdotes about the failure of the wireless carriers to implement
this mandate. I have heard the PSAPs are to blame. In my case, the PSAPs have
been a joy to work with, and, I feel, we have expended tremendous amounts of
time, energy and management resources in a sincere and almost desperate effort
to not only meet this mandate, but also meet its true intent and truly work to
save lives. In my case, the roadblock was from the vendor community. Where was
their accountability during this process? As for Motorola, why are they allowed
to not support a standard that is required for a mandate we must deliver? Their
response was to tell me to adopt a handset solution. It would work, but was it
the right solution for my customer. Unequivocally, no!
I would hope, with this legislation, and the creation of an office to oversee
the deployment of this life saving service, accountability for all, rather than
some, would result. Misinformation could be challenged, performance claims could
be verified and success stories could be shared. I do not regularly support the
creation of new bureaucracies, but after my experience, I can only conclude,
somebody needs to manage the multiple facets of meeting the mandate and provide
leadership and accountability to the process.
Diversion of E-911 Funds
The availability of cost recovery is a major incentive to deploy advanced
E-911 services. I truly believe government, both at the state and federal level,
does not completely comprehend the viciousness of competition and the impact it
has on the abilities of carriers, especially the small carrier, to provide a
consistent return to shareholders. Risk is inherent in this industry because of
the capital-intensive nature of the business and the competitive environment we
perform in. If economic uncertainty is added into the mix, as is currently the
case, risk multiplies. Risk rises and competition is threatened when costly
government mandates enter into the mix.
Some mandates make great sense, like Wireless E-911, because it saves lives.
Others, like Wireless Local Number Portability (WLNP), simply cost money and
drain resources. A typical new cell site costs First Cellular in the
neighborhood of $250,000 to deploy. To implement CALEA with a Motorola solution
costs $605,000, and I have never, in 13 years of operations, had even one
request for a wiretap.
So far, WLNP has cost me $790,600 with an estimated $210,000 of annual
operating costs. E-911 phase II will cost me $2M. That is 14 cell sites I will
not be able to build. While I fully support E-911, the diversion of capital,
including human capital, is significant. All this comes at a time when
competitive pressures are causing cash flows and profitability to decrease; all
this at a time of economic uncertainty and difficult capital markets.
In 2004, First Cellular will experience our first decline of cash flows in
our history at approximately 19%. At the same time, 20% of my debt is coming
due. Since shareholder value will decline, capital expenditures will have to be
cut. No new cell sites will be scheduled for construction in 2004. If the impact
of WLNP is significantly higher churn as some project, then this model I've just
described becomes much worse. Un-funded mandates truly impact the business
model, for all carriers, but probably more dramatically for the small rural
carriers. We have less access to capital and much lower buying power for phones,
network equipment and enhanced service platforms and, something people never
consider, we have far fewer human resources and expertise to develop, test, and
support any new service, mandate or not. The quest for an acceptable E-911
solution has taken many thousands of man-hours of time over the last couple of
years, time we could've spent bringing other services and higher quality to my
customer.
This legislation calls for an amendment to the Communications Act of 1935 to
include a provision that requires states to certify they are not diverting E-911
funds. I support this wholeheartedly. Cost recovery on E-911 is an incentive to
overcome all the obstacles and devote the resources necessary to get the job
done. With cost recovery, I can rest assured my capex will be protected and that
money can go to the deployment of additional cell sites for better coverage, and
that is what customers ask for everyday, better coverage. With cost recovery, I
can recoup my operating expenses and offset further declines in company value
and negate any risk I might have with lenders and shareholders.
I am thankful that as of August 11, 2003 the Governor of the State of
Illinois signed a law that provided for the recovery of costs for phase II of
E-911. Unfortunately, rumors are already rampant that prior to its effective
date of 1/1/04, the E-911 fund will be raided to provide funds for the state
general fund. This must not happen! The funds were collected, at a rate of $.75
per month from every wireless subscriber in the state since August of 2000 under
the premise that these funds were destined to enhance their safety by funding
the deployment of wireless enhanced E-911 and nothing else. In my opinion, the
use of these funds for anything other than for what it is intended would
constitute a fraud upon the wireless customers of the State of Illinois.
Curiously, another anomaly arises that makes one wonder what is truly driving
this process. As soon as the State of Illinois reimbursement legislation was
passed and we were finally offered an acceptable solution from our new vendor of
choice, Andrew Corporation, we began the process of issuing a purchase order to
move forward on deployment. We began paving the way for cost recovery on costs
already incurred for phase II (mainly legal costs) and were told by an
administrator with the State Central Management Services (the agency that
administers the fund) that since the law was not effective until 1/1/04, any
expenses incurred before 1/1/04 were not cost recoverable. So, the federal
government tells me I must deploy and that I must deploy soon and if you fail
you could be fined, while the state government gives me a clear signal that if
you want to be paid you need to wait. This makes no sense to me and is a clear
disincentive to deployment.
This aspect of the legislation is critical. As an industry, we need cost
recovery. In states where cost recovery exists I would suspect deployment would
be expedited. In states that have funds already in place it is crucial they are
not diverted for uses other then what they are intended for. Wireless carriers
will meet the mandates, funds or not, but the damage to a competitive business
will be less and the customer will benefit sooner from enhanced E-911, as well
as more and improved coverage if the funds are not diverted.
FCC Review of Accuracy Reauirements In Rural Areas
For rural carriers, this is a critical provision of this legislation. Next to
cost recovery, this is probably the most critical element of the legislation
because it could be the difference between reasonable investment and an
investment that makes no sense at all.
Rural networks are different than networks in urban areas. In urban areas you
have a density that requires many cell sites in a grouped configuration to be
mutually supportive. They overlap and are densely packed. As such, they provide
a superior backbone to overlay technology on. The ability of multiple cell sites
to "see" the subscriber and thus be able to locate them by
triangulation is high.
Rural markets are different in that population centers usually follow
freeways or major highways. As such, it is not unusual to see a network that is
strung out along a road, hence the phrase "a string of pearls". The
network of First Cellular is somewhat different in that early on we decided to
overbuild the network so even rural roads and many of the smaller towns have
coverage. In our small coverage area of 24 counties and approximately 10,000
square miles we deploy over 80 sites today. A more typical build for this area
would normally be around 50 to 60 sites. Even with our large build and dense
rural coverage we still have at least one area that will be a significant
challenge to meet the current accuracy standards. In the county where we have
this significant technical challenge, First Cellular has only has one main site,
supplemented with peripheral service from two others. Therefore, it is
conceivable, under the current guidelines, one or two additional sites may have
to be built to meet the accuracy standards. Customers have simply not demanded
additional coverage or quality in this area. However, if the accuracy standards
are to be met, then towers may have to be built, at a significant cost solely to
meet the 911 mandate.
It is very likely, even with reduced accuracy standards, a customer needing
their location to be identified could be located. The rural nature of the area
does not require the customer to be pinpointed with an accuracy that is needed
in a densely populated area. I would argue it is necessary to locate someone in
an office building at a particular address in the City of St. Louis, but getting
within a few hundred feet of someone in need on a rural road would be more than
enough to locate that person. Many rural carriers have this problem in an
exaggerated fashion. They cover very remote areas that only have highways
running through them with very low population densities. The need and ability to
meet the accuracy standards in these areas do not balance against the cost,
especially without cost recovery. The "cookie cutter" approach of a
"one-size fits all" solution does not make sense for rural America. It
is not good business and I am not sure if public safety will be enhanced. I
would ask for your support of this provision of the legislation. It is a
critical issue for all providers of service to rural America, small and large.
Other Issues of Concern
I sincerely applaud this legislation; I support it and ask for your
endorsement. Do I think legislation could and should address other issues? I
think it could, but let me emphasize how grateful I am to its sponsors and
supporters for listening to us and giving us legislation that really does help
the wireless community and public safety.
I would recommend these additional measures be considered:
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Cost recovery is the most critical issue. I
don't understand why federal legislation cannot be enacted, similar in
nature to USF fees, which mandate the collection of E-911 fees from all
wireless customers, superceding the states, thereby insuring funds for all
critical entities and no diversion of funds by the states.
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Many rural carriers have networks with obsolete
technology. In the early days of digital deployment many small and rural
carriers deployed the TDMA standard. This standard was cheaper and easier to
deploy over legacy analog networks. With no future migration path this
technology is now obsolete. Changing out a complete network from one
technology to another is a massive and expensive undertaking. Delaying the
E-911 deployment requirements until the new network technology is installed
will ultimately aid the implementation of E-911. It will insure the correct
E-911 solution is deployed for the right network and that it will work the
way it is intended to work the first time.
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Finally, I would ask that the waiver process
currently in place today with the FCC which is, at least to this date,
working effectively, continue. I applaud the FCC in this effort. They have
given carriers, like First Cellular, a venue to explain their circumstances
and ask for relief from deadlines. So far, at least from my perspective, the
FCC has been sensitive to our issues, granting extensions where warranted.
We truly appreciate this.
Thank you for allowing me to air my views and to submit to you my story.
Again, I would ask for your support.
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