>> host: joining us this week on "the communicators" is jeff

gardner is chairman of the u.s. telecom and president and ceo of the windsupreme corporation. tell us what u.s. telecom is and who you represent. >> guest: we remit the tornado - telephone companies in the united states from at and t to the shallest, and we put together ideas to take care of our consumers in a better way. >> host: how many are there here in the united states now? >> guest: there's thousands of telephone companies in the u.s. still. there's been consolidation, but there's a lot of small telephone companies. we have from verizon to small companies that are co-ops involved in the united states telephone association today. still, many different business issues as a part of that. we all try to work together to refuel solve common issues.

that's what the whole purpose of the association is. >> host: we want to get into the policy issues in a minute, but first of all, what is windstream p >> guest: it's a wonderful company. i may be biased in that review, but we're mainly focused in rural america providing local tfn service, triple play, if you will, voice, broadband, very rural stretching from new mexico to upstate new york serving 3 million customers. we're in very rural markets. some in the state of texas, the average access lines per square mile are eight. that's eight households in a per square mile, different than an urban telephone company, and we've done a good job getting service to the customers. we're also a story of two businesses, and then we'll also focused on the enterprise segment where we sell to medium and small businesses, telecom

services, cloud computing, to broadband to voice. >> host: who's your competitors and collaborators? >> guest: it's complicated; right? our friends are our competitors. we compete with the cable companies primarily. we compete with the wireless companies. those would be the principle competitors. >> host: do you ever collaborate with them? >> guest: all the time. today, i meet with at&t, verizon, other companies like them who we work together, and we compete against each other in ways, but we also work together to provide services to consumers in ways as well. >> host: here to help us explore the issues from bloomberg is paul barbagallo, a reporter, welcome. >> guest: thank you. hi, jeff, good to see you. >> guest: good to see you. >> guest: one of those that affected your company and

telephone companies represented by this is reform, and a year ago this month, the fcc put forth a major restructuring plan to revert a $4.5 billion subsidy fund that had focused mainly on helping -- helping companies pay for the cost ofñ!ó providing rul telephone service, and they converted this into a broadband subsidy fund. a year later, has the fcc achieved its goal? >> guest: there's two parts to that; right? huge changes in terms in which we pay one another, and there needed to be a great deal of clarification around that issue, and then the second part of that, and we've made a lot of progress taking the first steps there in process, and around universal service funding, we got it right. in terms of the focus needed to

change away from voice, consumers place much less value in utility in the voice and much more in broadband today. the usda, at exaibl companies, we have that right. we need more broadband into rural america so i think we've got it right for the most part. the challenge has been, as we look through those, there's significant financial consequences to the companies involved, and the idea was that these would be coincidence, that the icc or intercarrier conference would take place at the same time as universal service funding, and we're behind on the universal service funding side. we got it right, focusing on broadband. i think in large part, trying to make money available to carriers to build broadband out to consumers who can't get it today, but there's much to be done. there's work that needs to be

done, and then unfortunately, it's going to be behind the intercarrier compensation piece. that's what i say we have to get right. the fck is working hard on it. we have to be committed to work hard and get it done fast because one of the fundamental concerns about our members at the united states telephone association is we do it in a way that maintains the financial stability of our companies and in order to do that, you have to deal with the complicated issues at the same time. >> and this fund, this fund is one of the many policy initiatives to get broadband into rural areas; right?ñh4j4(p. it is. i'm very proud of our company, first of all, windstream, who even though we're in very rural markets, i mentioned earlier, 93% of the customers get broadband today, an incredible amount given the density in our

marketplace. the -- in terms of getting to that last 7% is very difficult. it's uneconomic. it's going to involve public private partnerships to make that happen, and that's the real challenge. >> host: well, mr. gardner, you talked about the 93%. have you partaken of the access america, the broadband act funds and how have they contributed to increasing that percentage? >> guest: a participant in a very small way. we're a price cap company as they call verizon, at&t, several of the large to mid-sized carriers, and the fcc wisely knew that to come up with the new model took time so they set aside $300 million to really a year annually to fund investment in rural america while we worked through the model, and windstream was eligible to take advantage of up to $60 million of that. the part that i think we got

slightly wrong with regards to that was setting a limit at 775. unless you could add a customer for an incremental 775, you can't take÷ the money. in a case like windstream where we built out so extensively in our networks with private money, we were unable to take, i think, we took about 1% of the that $60 million. the unfortunate part, we got the policy right. we got $300 million this year and $300 million next year, but with that limit, we'll use very little of that. that's why we've filed a waiver to ask the fcc to think about it in a different way. >> host: what's been the response so far from the fcc on that? >> guest: they filed a rule making, which is promising, on the waive request basically to understand let's look at the fact that 83% of those unserved customers today in america are served by mid sizedded --

mid-sized companies like windstream, and the fact that we made investments, made those low hanging fruit investments. the people we need to get today are in sparsely populated areas requiring much more investment today, and so recently, we have been in dialogue with the fcc on that. they are definitely listening to us, setting this out to rule making. i hope it happens fast enough. i mean, if you look at this, and this is how our association looks at it from the consumer perspective, let's get the policy right, but most importantly, let's get the broadband to the rural consumers as quickly as possible. i get letters every day from customers in unserved areas who are just dying to have a broadband at terntive. you can imagine living out in the middle of nowhere without access to broadband. we all have it. we take it for granted, but the reality is some people can't get

it today. >> host:ño' paul barbagallo. >> focusing on hastening the adoption of broadband, they found in areas where it had internet access available, some americans are not subscribing. at windstream, are you finding that to be the case? >> guest: i think that's the real issue; right? in some cases, there's affordability. we worked on that in determines of devising price plans at the low end to get low end services, but it is the reality. there's a number of people who are served today, but can't afford it. we have been working with the fcc, the usta on ways to help get access for those who cannot afford broadband. you can't give it away, but fundamentally, it's an empowering technology for these

people, especially the young people who are trying to find a way to build a life, and broadband is an enabler there. from a philanthropic perspective, we are directing efforts that way as well, but mostly, from a pricing perspective, we're trying to make it as affordable as possible for these people to get broadband. >> now, cost is one deterrent. is the lack of a computer, digital literacy, what are the other issues? >> guest: i think that's absolutely an issue. access to computers for young people in the home is a real issue. in some homes, in urban poor areas, they don't -- they don't have the digital literacy you talked about, and that's a broader issue. we've been working on more on a state-by-state basis within wind stream. the usta involved in that,

carrying on dialogue with the fcc on how we help there, but there's a lot of work to do that. >> host: paul gardner -- or jeff gardner, when it comes to mobile broadband, is that included in the access america plan, the broadband plan? >> guest: it is. i mean they contemplate all kinds of technology. i think that one of the mobile broadband is certainly going to play a big role as some of the advanced services. g4 is the latest you hear from the wireless companies improving the broadband capabilities, but i think that, you know, fundamentally everybody, i think, misses a couple points here often, and that is without a land line connection, there is no wireless because it's all going back to the public switch telephone network. it's very important to pay attention to both types of infrastructure, and just around

physics, i think of mobility as always going to be a compliment service. it's not a replacement for broadband. more and more people are going home and offloading from their wireless access to the wifi access they have through the wired provider. it's because of things like spectrum limitations, ect.. for that to work in concert, i think of mobility and wired broadband access as complementary. >> host: so much policy right now, or so much of the policy discussion is focused, though, on wireless and that mobility so what you said is a little off from what we're hearing here in washington. >> guest: well, i think there's definitely been a big focus on wireless, and what the capability is. we're out there in the world today and understand that the spectrum limitations are real. engineers tell you about that,

you just can't deliver the bandwidth we need to really accomplish the goals that businesses and consumers want in their homes, and so what we're trying to do at is constantly remind people without the wired network, you're not going to have the wireless network, and so the policymakers, i think, understand it better than ever that you need fiber facilities into these cell towers in order to enable them to carry broadband at fastst -- faster and faster speeds and capabilities in the home. >> host: jeff gardner is president and ceo of the windstream corporation, and he, this year is, chairman of the group u.s. telecom, and john barbagallo is with bloomberg. >> one issue is how to pay for

the fund going forward. there was a step in reorienting the fund to support broadband service rather than telephone service, and for years while the funds supported telephone service, it was paid for by telephone customers so going forward how should the fcc approach the issue? more importantly, who pays into the fund? >> guest: it's a real difficult issue. as you said, it's ironic it's funded by the part that is declining, which doesn't seem like it's going to be able to keep up with the need there, and so a broader technology, agnostic approach is probably called for. there, as you know, very well -- a lot of political implications, and sensitivity on taxing the internet. i suspect you heard that from time to time. i understand those issues, but i

do also -- just economically, and what -- with the friends we see in the country, you got to broaden the base somehow. i don't have the answers to that today, but i think that's something that we're going to really have to work together over the nextñhr several years o figure out because the reality is the world has changed. the wired telephone network is no longer going to be able to support the fund. it's going to take a broader base. that's going to be required. at the end of the day, there's no simple solutions here. these consumers live in areas for whatever reason, some by choice, some by that's where they grew up, an that's where they live today, but it is uneconomic for us to serve them. the broadband fund is absolutely necessary. there's no other way to get service.

we're public companies, we need to earn a decent return for the shareholders. we'll do everything possible, and i believe we've done that at windstream, proud of the members for what they've done. we spent $66 billion a year in each of the last five years to get to rural customers doing a good job doing that employing 500,000 people across the country in great jobs that pay 40% above the national average, but there's much more to be done, and so that's a tough question to be worked out, and that's why it's important in what happens in the next year in washington. it's on our agenda tonight at the board meeting. >> host: you talk about the next year in government, and there's an election coming up. this airs before the next election. would you favor any changes november 6th?

>> guest: without talking about whether i'd prefer one president over the other, i do favor changes. it's been a very for thing year, a frustrating time, not just a year, several years here where our policies are short term oriented, making long term decisions. i had a meeting with the team yesterday making investment decisions, and these are 10-20 year type investments, but we live in a country that has tax policy that maybe has a six month --ñhr look forward six mos and say we know big things happen on 12-31, and this fiscal cliff is something we're going to talk about. we're very, very worried about it, and so what i'm hopeful, regardless of who wins, that we find a way in this country to have better discourse between

both parties so that we can make progress. in the board room, we don't have the luck try -- luxury to sit there without making a conclusion. we have to make decisions on investing our shareholders' money, invest in the customers, for the good of the consumers, our businesses, and to get jobs growing again. i just hope whatever happens in this election that these -- that these debates, that this discussion fosters a more bipartisan approach. it's been prosecutorring. i told that to -- for thing. i told that to both the democratic senators and republican senators and congressmen that we just got to learn -- we got to get some things done. we got to give clarity to these issues in american business, and i'm especially concerned about the tax policy, and much of the companies in the industry pay a diff depped as you know, --

dividend as you know, and if left alone, the bush tax cuts expire 12-31, that tax rate goes up to over 40%. that has real implications, and at the same time, it becomes disconnected with the capital gains rate which i think is very, very important to keep both of those low and lean. it encourages investment with respect to dividends and matters a lot to our shareholders -- people think about dividends more from a corporate perspective. i just had a shareholder meeting in little rock two months ago, and there are people who are really living off these dividends. they are buying telecom stocks, relying on them to pay for their mortgage, their groceries every week. i had amazingly because shareholder meetings are getting

smaller and smaller, fewer people attend. one elderly couple came from kansas city, another fromñhr seattle, washington, and they said to me, i have one question. it's are you going to keep your dividends? because it -- it's just not big corporate america. i think we ghot to look at the people relying on these. the tax policy is very, very important. we got to get it right, get republicans and democrats working to the in this country so that we can get things done and create jobs and get this economy moving again. >> one issue beyond the fiscal cliff telephone companies face now is cybersecurity. how to secure networks, excuse me, your networks, and u.s. telecom advocated a position that congress should enable better sharing of information

between companies, telephone companies and the government. why -- why would this approach be better than regulation? >> guest: well, i think with regulation comes a concern that will be overregulated, and we won't be able to run our businesses the way that we need to, and i think the last thing that we need is another regulatory entity that's designed to oversee an industry. we can handle this ourselves. i think that we can -- we're the experts. we know what needs to be done. today, there is unprecedented cooperation between companies, and we want to work closely with the government. they are getting more of the cyberthreats or as many as business today. the cooperative way, without creating additional regulation, which, to us, translates to money and taxes, we think is a better way to handle p.

>> and right now, there's a number of legal considerations, too; right? companies cannot freely share information. if one company spots a cyber threat, then there's a number of legal issues that they can't say, hey, something's coming. >> guest: rightings right. that's something we have to deal with, and that's why so much time has been spent on this cybersecurity regulation so we feel more comfortable around sharing this without getting into difficulty around regulations. it's a real issue in this country today. >> host: we're talking with jeff gardner of u.s. telecom and windstream, and paul barbagallo of bloomberg. mr. gardner, with a new congress, how do you feel about a rewrite of some of the major telecommunications legislative pieces? 1996 telecom act.

do you think it's important to treat your business as one big whole, or do you think a piecemeal approach to legislative policy changes is the way to go? >> guest: well, i think 96 was a long time ago. there are some great parts of the 1996 act that i think encourage competition, which is very good for the consumer so we need to make sure that we pay attention to that, but let's face it, look what's happened with the internet between 1996 and 2012. the whole world's changing. that's what the inter-carrier compensation reform, cybersecurity, all the issues we've been talking about -- >> host: all piecemeal -- >> guest: i don't really think of it that way. this stuff is all happening realtime. i don't see a way to deal with them collectively in one big piece of legislation, but probably better to deal with each of these individually.

>> host: you call yourself still a telephone company, but is there such a thing anymore? >> guest: no. we're a communications company. i mean, the voice is still important to our customers, but mostly what we offer today isñ&r communications,ñhr broadband, children and texting and e-mails are much more valuable to customers, getting internet, entertainment, we're much more of a communications company today. so when we refer to windstream internally and externally, it's now as a communications and not a telephone company. >> host: should windstream, verizon, comcast, at&t, should they be regulated in the same way? >> guest: i think they should. i think they should. when you look at what we're doing, we're both trying to serve the same set of customers.

those businesses have changed very much in the last ten years in terms of the -- of the cable companies getting in the telephone business. we're getting into the video business, and so you have to take a look across, and we all need access to entertainment content, to play out our business models, and so i think you need a much broader look and not treat the telephone companies differently. >> host: paul barbagallo. >> as congress prepares for communications agent rewrites in the next year or so, what should be the guiding principle? we have an act that really was designed to open up competition and telecommunication markets so as we move forward, what -- i mean, what -- on a very high level, what should be the guiding principle? >> guest: if i were starting out today, i would use my

guiding principle as the consumer. really, how much progress have we made in terms of enabling them? especially with broadband. i think that should be the corner cornerstone. in terms of how congress talks about acceleration, and our ability to get broadband everywhere into america, which we can't today without -- without different programs, and i think that if you focus on the consumer you can't go wrong. >> what should be the role of fcc inw3 a new -- in a new futue regime? >> guest: well, i think the fcc, listen, they've tackled a big challenge in the last four years dealing with inter-carrier compensation and universal service reform. what they need to be focusedded on in the short run is executing on that. we got the inter-carrier comp piece done. the focus in the short term should be on universal service

reform, and really thinking about are we doing the best job possible, getting broadband out to rural america. >> host: jeff gardner, when you're working, how much of your time is spent worrying, talking about reacting to decisions made here in washington? >> guest: far more than i'd like. it's been very important. obviously, the inter-carrier compensation and universal service reform, my role, we've all had to come together as an organization. i'm very proud of the fact that we did and really worked with the fcc hand-in-hand in that, but it's very important. this policy is very important, but it does take away time that you should be spending focusing on customers and building the business plan. thank goodness i have competent people back at headquarters and all throughout the country.

we're in 48 states, worrying about our consumers, but it is very important. i'm going to continue to spend my time here because it matters. we've invested in our washington office here. i think decisions that we're going to make over the next four years will have profound implication on the health of our business, in that time period, and our ability to really accomplish what we want to which is to get to the rural customers. >> host: time for one more question, paul barbagallo. >> well, if you could -- if you could have a wish for the fcc to tackle any issue you want, what would it be? >> guest: i would really like for -- i'm going to give you two things. >> host: two wishes. >> guest: first to deal with the usf issue, the short run issue in the $300 million that they made available to the price cap carriers which was an excellent idea. unfortunately, only one-third of that is going to be