Access to Broadband Technologies in Rural Areas May 17, 2001 ACCESS TO BROADBAND TECHNOLOGIES IN RURAL AREAS: TESTIMONY OF MARVIN IMUS, VICE PRESIDENT, PAW PAW SHOPPING CENTER, PAW PAW, MI, ON BEHALF OF THE FOOD MARKETING INSTITUTE BEFORE THE SUBCOMMITTEES ON RURAL ENTERPRISE AND TECHNOLOGY POLICY AND REGULATORY REFORM AND OVERSIGHT OF THE HOUSE SMALL BUSINESS COMMITTEE Chairman Thune, Chairman Pence and Members of the Subcommittees: Good afternoon. My name is Marvin Imus. I am the Vice President of Paw Paw Shopping Center, a family-owned supermarket in Paw Paw, MI. I also serve on the Food Marketing Institute’s (FMI) Independent Operators Committee. I want to thank you for the opportunity to testify not only on behalf of my business, but on behalf of all independent operators of retail food stores represented by FMI. We appreciate the work this Committee is doing to try to ensure access to broadband technologies in rural areas. I would like to take a moment to tell you about my business and my community. Paw Paw Shopping Center was started in 1947 by my father as a hometown, community neighborhood store. Paw Paw is a town of 4,000 in southwest Michigan. Our store is currently 41,000 square feet offering 30,000 products in store and a historical database of 75,000 products. We have created a database of every item sold to every customer since 1995. We use this information to put items on the shelf based on customer preferences, not just what the manufacturer wants to move. This is the most important asset of our company, and it has required a significant investment in technology. It will never be possible to build a store big enough to house all of the products available. Our historical database of transactions helps us to “mine” the data to find the items important to our customers and then base our offers on what they want. With this technology and information, we are starting to work toward target marketing and true one to one communication. Both rely, however, on a broadband backbone in order to proceed. We have a website, www.pawpawshop.com, which offers our weekly specials, wine ordering, gift baskets, weekly recipes and meal solutions as well as household tips and consumer alerts. We also have a weekly newsletter that we e-mail to customers who request it. Approximately, 10 percent of our customers visit the web site. We see the Internet as being the facilitator of commerce for the future and potentially for providing a competitive advantage for small businesses like ours. Broadband access is important for both small businesses and consumers in rural America. Broadband access is not currently available in Paw Paw. If it were available, we would use it to enhance our business. Currently, we utilize a frame relay connection for our Internet usage. It is better than a dial up 56k modem as it is always on, however it is not that much faster than a dial-up modem. Broadband would allow multi-task and multi-station access with one line. Many people have 56k modems to increase the speed of their home computers. In actuality, you rarely get the advertised 56k speed. Usually, you are lucky to get 28k speed due to old equipment and old phone lines. The modem must adjust and slow down due to the line quality. Currently, information coming from customers is much too slow. We offer on-line shopping now, but find it is not being used because it is too slow. Broadband access could dramatically increase the speed by which information is delivered between my site and my customer’s computer dramatically increasing my Internet shoppers and future Internet capabilities. I have an analogy I like to use describing the importance of broadband access. Imagine you are standing on the ground floor of a building and need to get to the third floor. There is an escalator. If the escalator is like a 56k modem, it is one person wide. You could ride it to the second floor but you would have to get off while the escalator reverses to take people or information, down. After it reversed again, you could get back on and take it to the next level, stopping and starting and waiting until you reached your destination. You can imagine the frustration of my customers who would like to shop on-line. With broadband, you not only get speed, but volume too. Using our example, on the ground floor, there would be an UP and a DOWN escalator and they could hold 3 or more people on each step. Also there may be an express elevator that moves extremely fast. While the 56k escalator gets you where you want to go eventually, the time involved is too great. Additionally, broadband provides TV-like quality audio and visual that consumers expect and demand. Until I can get to that point, my penetration of consumers will remain small and will not attain the critical mass needed for effective marketing. Included in my testimony is a chart highlighting the number of years it has taken for major technologies that we depend on each day to reach mass market. Electricity took over 40 years, telephones over 30, while Internet access has reached over 25% of the population in less than 10 years. Imagine where this technology can be in 10 more years. The potential is tremendous, but without broadband access, small businesses like mine may fall behind. Already, Internet usage is distributed widely among age categories, with 19% of “web heads” in the 50+ age group. Fifty percent of users fall into the 30-something and 40-something groups with the remaining 31% in the 18-29 age group. We have invested significantly in technology to improve efficiency and customer service. It is expensive and sometimes frustrating to try to stay up to date technologically with my competitors. As a small business, I have to wait for a local phone company or perhaps a cable company to offer broadband access. My competition may be able to install a satellite when they need to enhance communications, something I simply cannot afford. Certainly, the work of this Committee in conjunction with the Commerce Committee, is important to ensuring that broadband access is available in the near future to businesses and customers in rural areas at a reasonable cost. I understand that this is no easy charge, but I for one believe that the competitiveness of my business depends on it. Thank you for the opportunity to testify and I would be pleased to answer any questions you may have.