<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:20750.wais]
HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF
COMMUNICATIONS: A VIEW FROM GOVERNMENT OFFICIALS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 27, 2005
__________
Serial No. 109-4
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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------------------------------
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications and the Internet
FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida Ranking Member
PAUL E. GILLMOR, Ohio ELIOT L. ENGEL, New York
ED WHITFIELD, Kentucky ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming MIKE DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois CHARLES A. GONZALEZ, Texas
HEATHER WILSON, New Mexico JAY INSLEE, Washington
CHARLES W. ``CHIP'' PICKERING, RICK BOUCHER, Virginia
Mississippi EDOLPHUS TOWNS, New York
VITO FOSSELLA, New York FRANK PALLONE, Jr., New Jersey
GEORGE RADANOVICH, California SHERROD BROWN, Ohio
CHARLES F. BASS, New Hampshire BART GORDON, Tennessee
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE FERGUSON, New Jersey BART STUPAK, Michigan
JOHN SULLIVAN, Oklahoma JOHN D. DINGELL, Michigan,
MARSHA BLACKBURN, Tennessee (Ex Officio)
JOE BARTON, Texas,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Billings, Hon. Lewis K., Mayor, Provo City, Utah............. 4
Davidson, Charles M., Commissioner, Florida Public Service
Commission................................................. 33
Fellman, Hon. Kenneth, Mayor, Arvada, Colorado, on Behalf of
National Association of Telecommunications Officers and
Advisors Board of Directors................................ 20
Munns, Diane, Commissioner, Iowa State Utilities Board, on
Behalf of National Association of Regulatory Utility
Commissioners.............................................. 28
Perkins, John R., Iowa Consumer Advocate, President, National
Association of State Utility Consumer Advocates............ 44
Quam, David C., Director, Federal Relations, National
Governors Association...................................... 48
Strauss, Karen Peltz, KPS Consulting, on Behalf of Alliance
for Public Technology...................................... 52
Material submitted for the record by:
Billings, Hon. Lewis K., Mayor, Provo City, Utah, letter
dated May 26, 2005, enclosing response for the record...... 81
Davidson, Charles M., Commissioner, Florida Public Service
Commission, letter dated May 27, 2005, enclosing response
for the record............................................. 85
Fellman, Hon. Kenneth, Mayor, Arvada, Colorado, on Behalf of
National Association of Telecommunications Officers and
Advisors Board of Directors, letter dated May 27, 2005,
enclosing response for the record.......................... 94
Munns, Diane, Commissioner, Iowa State Utilities Board, on
Behalf of National Association of Regulatory Utility
Commissioners:
Letter dated May 17, 2005, enclosing response for the
record................................................. 96
Letter dated May 27, 2005, enclosing response for the
record................................................. 98
Perkins, John R., Iowa Consumer Advocate, President, National
Association of State Utility Consumer Advocates, letter
dated May 17, 2005, enclosing response for the record...... 147
Quam, David C., Director, Federal Relations, National
Governors Association, letter dated May 27, 2005, enclosing
response for the record.................................... 150
Strauss, Karen Peltz, KPS Consulting, on Behalf of Alliance
for Public Technology, letter dated May 27, 2005, enclosing
response for the record.................................... 152
(iii)
HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF
COMMUNICATIONS: A VIEW FROM GOVERNMENT OFFICIALS
----------
WEDNESDAY, APRIL 27, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Telecommunications
and the Internet,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:22 p.m., in
room 2322 of the Rayburn House Office Building, Hon. Fred Upton
(chairman) presiding.
Members present: Representatives Upton, Stearns, Gillmor,
Whitfield, Shimkus, Pickering, Bass, Terry, Blackburn, Markey,
Engel, Wynn, Gonzalez, Inslee, Boucher, Gordon, Rush, and
Stupak.
Staff present: Howard Waltzman, Chief Counsel; Neil Fried,
Counsel; Will Norwind, Policy Coordinator; Jaylyn Jensen,
Senior Legislative Analyst; Anh Nguyen, legislative clerk;
Johanna Shelton, Telecommunications Counsel; Peter Filon,
Counsel; and Alec Gerlach, Staff Assistant.
Mr. Upton. Sorry about the delays. I think most of you
know, we had a series of votes that started right about the
time that we were supposed to be here, so I appreciate you all
waiting patiently.
Today's hearing is entitled ``How Internet Protocol-Enabled
Services are Changing the Face of Communications: A View from
Government Officials.'' This hearing is a finale of sorts in a
series of hearings that this subcommittee has held in regard to
IP-enabled services. Previous hearings have explored how,
without a doubt, IP-enabled services are dramatically changing
the face of communications.
Many of these hearings have underscored the need for
Congress to modernize our communications laws in order to
account for this new technology and to ensure its speediest
deployment as widely as possible, and bring true intermodable
facilities based competition to the American consumer.
At the close of this hearing, it is my intention to get to
the business of legislating along those very lines, which
brings us to why we are here today. The FCC has held that
Internet services are inherently interstate in nature, and that
even if there is also an intrastate component, it is not
technologically feasible to separate it for purposes of State
versus Federal jurisdiction. So Federal jurisdiction and the
unified Federal broadband policy trumps State jurisdiction.
I have to say that I agree with that approach to creating a
Federal policy for IP-enabled voice, video, and data services,
and that that will serve as my guiding principle for
legislating in this arena. What that means for how we approach
the traditional role of State public utility commissions and
local franchise authorities in an IP-enabled world is what we
will be exploring today.
I want to thank today's distinguished panel of witnesses
for being with us this afternoon to help us explore that very
important subject, and I will yield to Mr. Gordon for an
opening statement.
Mr. Gordon. Thank you, Mr. Chairman, and thanks again for
these continuing very informational hearings you are having.
First, let me take just a moment. I would like to recognize
a friend from Tennessee, Ms. Debbie Tate. She is the chairman
of our Tennessee Regulatory Commission. More importantly, a
native of Murfreesboro, Tennessee, often thought of as a dead
hole in the universe by many folks.
As we consider legislation to create a Federal framework
for regulating IP-enabling services, it is critically important
for us to consider what role State and local governments have
to play in this new scheme. State and local governments have
traditionally implemented and enforced issues such as consumer
protection, CLEA, and the 911. While the technology may have
changed, consumers and providers will continue to expect full
government--local governments to fulfill these functions. I am
particularly interested in hearing from the panel on the 911
issue. I am working with my colleague, Chip Pickering, on 911
legislation for IP-based services.
I look forward to hearing from the panel, how they think
the States can partner with the Federal Government to make sure
that all IP-enabled telephony providers can provide full 911
services as quickly as possible.
I yield back my time. Thank you.
Mr. Upton. Mr. Stupak for an opening statement.
Mr. Stupak. Thank you, Mr. Chairman. Thanks for holding
this hearing in the series that you have held on--in-depth
hearings on the IP-enabled services. I think the committee now
has a better understanding of where both the opportunities and
challenges lie as we look at the Telecommunications Act.
There are opportunities to update the Act to recognize and
promote the promise of IP-enabled services, but we must do so
with an eye on rural America, and with an understanding that
these services can only go where broadband takes them.
We heard last week that the U.S. has fallen further behind
the industrialized world with regard to the deployment of
broadband. Yes, new technologies will stimulate demand for and
deployment of broadband in the U.S., and yes, regulatory
certainty will help with the deployment of broadband as well.
But will the market alone get broadband to rural America? I
think this is a central question this committee needs to
address. We need to draft our telecom laws in a way that
embraces these new technologies, while helping all communities
become connected to the future.
Broadband is coming to my district by cable, DSL, wireless,
and satellites. It is being provided by national companies,
locally owned companies, local governments, and public
utilities. For instance, the city of Gladstone in my district,
with a population of 5,000, offers wireless broadband. The
citizens of Gladstone benefit; so do those who live outside the
city in very rural areas. They receive their broadband through
a privately owned wireless system that connects to the
Gladstone system. Other municipal utilities in my district may
soon be offering DSL quality satellite broadband.
Some have suggested that local government should not have
the ability to offer broadband, and several states have
implemented laws prohibiting it. I look forward to hearing from
the witnesses today about what role they think local government
should play in broadband deployment.
I am also very interested in hearing from local governments
about local franchise agreements for cable providers. We heard
at last week's hearing that cable franchise must meet a series
of local obligations, and I look forward to hearing from you
why these obligations are necessary, especially the build-out
requirements.
I look forward to hearing from today's distinguished panel.
As this distinguished panel knows, you do very hard, often
thankless work, including answering consumer complaints,
arbitrating disputes, and maintaining critical infrastructure.
There is a reason why the Act gives State and local governments
the responsibility they have today, and the committee needs to
tread carefully when looking at moving some of the
responsibilities to the Federal level.
With that, I will yield back, Mr. Chairman. Thank you.
Mr. Upton. Thank you.
Mr. Inslee.
Mr. Inslee. I just want to thank you for being so great at
serving the local government. We are Congressmen and we don't
have that kind of pull.
Mr. Upton. Mr. Gonzalez.
Mr. Gonzalez. Waive opening. Thank you.
Mr. Upton. Thank you. There are a number of subcommittees
that are meeting today. I have talked to a number of members
that I know that are going to be coming for this hearing.
Again, I apologize it is starting on a delayed basis. But at
this point, we are prepared to listen to our witnesses.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Mr. Chairman, thank you for holding this hearing. During the past
several months, this subcommittee has conducted three hearings on how
Internet Protocol technology is revolutionizing communications. Today,
we will hear from state and local officials, and other interested
parties, who hold views regarding the proper distribution of authority
over Internet services among federal, state, and local governments.
Given the global reach of the Internet, Internet services are
inherently interstate in nature. Even if Internet services have
intrastate and interstate components, the FCC has determined that it is
not possible to separate those components for jurisdictional purposes.
As a result, states cannot regulate Internet services without
conflicting with federal policy over the Internet and interstate
services.
And a federal policy for Internet services is critical. We cannot
expect new entrants to succeed in the Internet market if they have to
comply with 52 different jurisdictions, not to mention if they have to
comply with rules set by thousands of local franchising authorities.
We need a federal policy with federal rules. There may be a
constructive role for States and localities to play in implementing
national rules, a role that I hope we examine fully in this hearing.
But the Internet has thrived because it has been largely free from
regulation. Burdening the Internet with multiple layers of bureaucracy
will slow down its growth and slow down the deployment of innovative
new services to consumers.
I look forward to today's testimony, and welcome our witnesses'
help in examining the proper distribution of authority over Internet
services among federal, state, and local officials.
Today we stand on the threshold of a new age in communications. The
1996 Telecommunications Act served an important purpose, but technology
has moved on. This year, one of my high priorities is to update the old
act and to do it well. The right approach will invigorate the tech
sector and produce jobs, growth and opportunity for its workers.
American consumers will get an array of services and choices that were
unimagined just a few years ago. I can't wait to get started.
I yield back.
Mr. Upton. We are joined by a distinguished panel, as all
of us have indicated. We will start with the Honorable Lewis
Billings, the Mayor of Provo City, Utah. Honorable Ken Fellman,
Mayor of Arvada, Colorado, on behalf of the National
Association of Telecommunications Officers and Advisors Board
of Directors. We will hear from Ms. Diane Munns, Commissioner
of the Iowa State Utilities Board. Mr. Charles Davidson,
Commissioner of the Florida Public Service Commission. Mr. John
Perkins, Iowa Consumer Advocate, President of the National
Association of State Utility Consumer Advocates. Mr. David
Quam, Director of Federal Relations, the National Governors
Association; and Ms. Karen Peltz Strauss, KPS Consulting, on
behalf of the Alliance for Public Technology.
I want to start off by saying we appreciate you submitting
your testimony in full so we could take it home last night.
Your statements are made as part of the record in their
entirety, and we would like to limit your remarks now to no
more than 5 minutes. And I believe--I think there is a clock.
Do you all have--is there a clock that you all see in front of
you? No. Well, I have one, so when you hear this, that means
your 5 minutes is done, and there is a clock in these lights
above that clock that will tick down as well. So we apologize
you don't have a clock to see, but I will try to signal you in
there. If you can wrap up at that point, that would be
terrific.
We will start with you, Mr. Billings. Welcome.
STATEMENTS OF HON. LEWIS K. BILLINGS, MAYOR, PROVO CITY, UTAH;
HON. KENNETH FELLMAN, MAYOR, ARVADA, COLORADO, ON BEHALF OF
NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND
ADVISORS BOARD OF DIRECTORS; DIANE MUNNS, COMMISSIONER, IOWA
STATE UTILITIES BOARD, ON BEHALF OF NATIONAL ASSOCIATION OF
REGULATORY UTILITY COMMISSIONERS; CHARLES M. DAVIDSON,
COMMISSIONER, FLORIDA PUBLIC SERVICE COMMISSION; JOHN R.
PERKINS, IOWA CONSUMER ADVOCATE, PRESIDENT, NATIONAL
ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES; DAVID C. QUAM,
DIRECTOR, FEDERAL RELATIONS, NATIONAL GOVERNORS ASSOCIATION;
AND KAREN PELTZ STRAUSS, KPS CONSULTING, ON BEHALF OF ALLIANCE
FOR PUBLIC TECHNOLOGY
Mr. Billings. Thank you, Chairman Upton, members----
Mr. Upton. Use that mic for everyone, sir.
Mr. Billings. Is that better?
Mr. Upton. That is much better. Thank you.
Mr. Billings. Thank you, Chairman Upton, members of the
subcommittee. As has been said, I am Lewis Billings. I am the
Mayor of Provo, Utah. Thank you for the opportunity to appear
before you today on behalf of the American Public Power
Association, APPA, to discuss the important role public power
systems are playing in the deployment of affordable broadband
services.
APPA is the national service organization representing the
interest of the Nation's more than 2,000 State and community-
owned electric utilities that serve over 43 million Americans.
The vast majority of these utilities serve communities with
populations of 10,000 people or less. Provo is one of APPA's
larger members with approximately 33,000 metered customers, and
a population of 113,000.
Many of these public power systems were established largely
due to the failure of private utilities to provide electricity
to smaller communities, which were viewed as unprofitable. In
these cases, communities formed public power systems to do for
themselves what they viewed to be of vital importance to their
quality of life and economic prosperity. Today, many public
power systems are meeting the new demands of their communities
by providing broadband services where such service is
unavailable, inadequate, or too expensive. Over 600 public
power systems now provide some kind of advanced communication
service, whether for internal or external purposes. This is a
10fold increase since Congress enacted the Telecommunications
Act of 1996, and the number of public power systems providing
or planning to provide services continues to increase. Using
technologies such as fiber to the subscriber, hybrid fiber
coaxial broadband over power lines, and wireless, community-
owned electric utilities provide a wide variety of services to
their residents, either directly or in partnership with private
sector providers.
The types of services APPA members provide fall into two
categories. The first is internal service, which is usually a
municipal data network that connects municipal governmental
entities to each other. As of the end of 2004, 247 public power
systems offered municipal data networking.
The second category is external service that is offered to
individuals or entities outside of the utility and municipal
government. External services include fiber lacing, high speed
Internet access, broadband resell, cable television, local and
long distance telephoning, and VoIP. As of the end of 2004, 102
systems were providing cable television service, 167 were
lacing fiber, 128 were Internet service providers, 42 provided
long distance telephone, and 52 provided local phone service. A
handful of systems are either providing or testing voice-over
Internet protocol service. In addition, public power has been a
leader in BPL, with Manassas, Virginia, being the first city in
the Nation to provide broadband over the power line service.
Based on the success of Manassas' project, other APPA members
are now testing that technology, including Hagerstown,
Maryland; Princeton, Illinois; and Rochester, Minnesota.
Many communities have decided to provide residents and
businesses with critical broadband infrastructure because they
recognize the growing importance of broadband for commerce,
healthcare, education, and improved quality of life. Looking to
early pioneers of municipal broadband that have been models to
other communities, they have seen the many benefits of
providing access to an essential 21st century service. Some of
the key benefits of municipally provided broadband service
include lower prices, increased competitiveness in the
communications marketplace, responsiveness to local needs,
economic development, and universal access.
Local governments are not the only entities that recognize
the benefits of municipal broadband systems. A large number of
organizations representing private industry, educational
interests, and consumers support the availability of
municipalities to provide broadband services. Included with my
testimony are the statements of support from such organizations
as the High Tech Broadband Coalition, Consumer Federation of
America, the Free Press, Educause, and New America Foundation,
as well as Intel. The United Tele Council and Fiber to the Home
Council also plan to express their support by sending a letter
to the subcommittee for inclusion in the record.
The story of Provo's entry into the communications
marketplace is similar to those of other municipalities across
the country, which my written testimony discusses in more
depth. Eight years ago, we undertook a careful study to
determine how we could use technology to benefit our residents.
After our thorough analysis, we decided we need to reconstruct
our traffic control signal systems, make major upgrades to our
utility monitoring and control systems, and bring about
broadband interconnectivity between all city owned and operated
facilities. As it turned out, all of these initiatives would be
dependent upon our ability to obtain high speed data
interconnectivity at various locations throughout our city. As
we launched this--is my time up?
Thank you. I will be happy to respond to questions.
[The prepared statement of Lewis K. Billings follows:]
Prepared Statement of Hon. Lewis K. Billings, Mayor, Provo, Utah, on
Behalf of the American Public Power Association
Chairman Upton, Ranking Member Markey, and members of the
subcommittee, my name is Lewis Billings, and I am the Mayor of Provo,
Utah. Thank you for the opportunity to appear before you today on
behalf of the American Public Power Association (APPA) to discuss the
important role public power systems are playing in the deployment of
affordable broadband services.
APPA is the national service organization representing the
interests of the nation's more than 2,000 community-owned electric
utilities that serve over 43 million Americans. The utilities include
state public power agencies, municipal electric utilities, and special
utility districts that provide electricity and other services to some
of the nation's largest cities such as Los Angeles, Seattle, San
Antonio, and Jacksonville, as well as some of its smallest towns. The
vast majority of these utilities serve small and medium-sized
communities, in 49 states, all but Hawaii. In fact, 75 percent of
publicly-owned electric utilities are located in communities with
populations of 10,000 people or less. Provo is considerably larger than
the average public power community, with approximately 33,000 metered
customers and a population of 105,166.
Many of these public power systems were established largely due to
the failure of private utilities to provide electricity to smaller
communities, which were viewed as unprofitable. In these cases,
communities formed public power systems to do for themselves what they
viewed to be of vital importance to their quality of life and economic
prosperity. Today, public power systems are meeting the new demands of
their communities by providing broadband services where such service is
unavailable, is inadequate, or too expensive.
Over 600 public power systems now provide some kind of advanced
communications service, whether for internal or external purposes. This
is a ten-fold increase since Congress enacted the Telecommunications
Act of 1996, and the number of public power systems providing or
planning to provide services continues to increase. The services
delivered by public power systems include high-speed Internet access,
voice-over-Internet protocol (VoIP), cable television, and local and
long distance telephony.
As this committee begins to formulate policies that would best
foster a thriving, competitive communications marketplace, where
affordable broadband service is available to all Americans as rapidly
as possible, it should recognize the important role publicly owned
electric utilities can play in achieving President Bush's goal of
universal broadband deployment by 2007. Public power systems are
providing a wide array of advanced communications services in
underserved areas using a wide variety of platforms--fiber-to-the-
subscriber, broadband over power lines, hybrid fiber-coaxial, and
wireless. They are also fostering a competitive marketplace where
consumers are benefiting from the availability of advanced
communications services that are the lifeblood of economic development
and can support rich educational and employment opportunities, advanced
health care, regional competitiveness, public safety, homeland
security, and other benefits that contribute to a high quality of life.
My testimony will provide an overview of why public power systems
are providing advanced services over broadband networks, how they are
providing those services, and the types of services being provided. It
will also provide an overview of the campaigns waged against public
power systems by the opponents of municipal broadband and the legal
barriers to entry APPA's members face at the state level. In addition,
my testimony will discuss the policy justifications for allowing
municipalities to meet the needs of their communities by providing
affordable broadband services and refute the arguments made by the
opponents of municipal broadband.
HISTORY IS REPEATING ITSELF: THE PARALLELS BETWEEN THE ELECTRICITY
MARKETPLACE A CENTURY AGO AND THE BROADBAND MARKETPLACE TODAY
Before I address the reasons why community-owned electric utilities
are providing broadband services, I think it is important to look
briefly at the history of the electric utility industry and public
power. There are many similarities between the early days of
electrification at the turn of the 19th century and broadband
deployment today.
The electric utility industry is 125 years old. When
electrification first began, many argued that electricity was a luxury.
While that notion was quickly rebuked and it became widely recognized
that electricity was a necessity for economic development, public
health and safety, and quality of life, many smaller and rural
communities were left behind. Private sector providers rushed to wire
highly profitable urban areas, but failed to provide service to
communities that were not attractive investments for private
enterprise. Because of market failures such as lack of providers, poor
service, and high prices, communities began creating their own electric
utilities at a frantic pace.
The community leaders who proposed public power did not regard this
as an ideological choice between public versus private, but a pragmatic
choice between providing this new utility or watching their communities
fall by the wayside. Private providers saw things somewhat differently.
Alarmed by the growth of municipal electric utilities, they conducted
campaigns to erect barriers to entry. Some of their tactics included:
(1) advocating a ``natural monopoly'' theory and calling for state-
regulated monopolies that would preclude direct competition between
public and private utilities; (2) creating political opposition at the
local level; and (3) engaging in anti-competitive practices such as
denial of transmission access and predatory pricing. While private
providers had some limited success in these efforts, public power
survived and continues to thrive today.
The similarities between the electricity marketplace a century ago
and the broadband marketplace today are striking. Broadband access has
many of the same fundamental dynamics and characteristics as
electricity at the end of the 19th century. First, broadband is
essential for economic development. Businesses must have affordable
access to it to compete both regionally and globally in the 21st
century. They will locate and expand where access is available and
avoid cities and towns where it is not available. Second, broadband
supports rich educational and employment opportunities, advanced health
care, and other benefits that contribute to a high quality of life.
Third, broadband has the same market failures today as electricity
had--a lack of providers in some areas, or poor service and high cost
in other areas. Public power systems began stepping in to address these
market failures at the request of their towns and cities.
WHY PUBLIC POWER SYSTEMS ARE PROVIDING ESSENTIAL BROADBAND SERVICES
It is a natural progression for communities that own their own
electric utilities to expand their services to include broadband. While
public power communities are not the only communities providing
broadband service, they have resources that make offering such service
easier. Electric utilities use advanced communications technologies for
internal purposes, such as monitoring electric distribution networks,
automated meter reading, and internal wireline and wireless
communications. It is not very difficult for such utilities to expand
their communications capabilities to provide external, community-wide
services when requested to do so by their residents.
Community demand for services is usually driven by the failure of
the market to provide specific services at reasonable prices that the
community needs to grow and prosper. For many APPA members, the reason
the utility even explored entering the communications marketplace was
that businesses and residents came to them asking for service. In
Scottsburg, Indiana, for example, the municipal electric utility
deployed a wireless broadband network in order to prevent a Chrysler
repair shop from leaving the town due to a lack of affordable
broadband. Before pursuing this course of action, the local government
first asked Verizon to provide the service. Verizon refused because the
town was too small for the company to justify the investment. Had the
municipally-owned utility not provided the service, at least 60 jobs
would have been lost.
Eight years ago in Provo, the city government undertook a careful
study to determine how it could use technology to benefit its
residents. Local officials decided to reconstruct Provo's traffic
control systems, significantly upgrade its electric utility monitoring
and control systems, and bring about broadband interconnectivity
between all city-owned and operated facilities. As it turned out, all
of these initiatives depended upon Provo's ability to obtain broadband
at various locations throughout the city.
The city approached five private sector companies that held
franchise rights to provide fiber optic data connectivity. As part of
their franchise agreements, all of the companies agreed to provide such
service to all city owned facilities. None of them ever did. Ultimately
Provo determined the best option would be to build its own city-wide
fiber optic backbone. Soon after it was completed, local schools, small
businesses, and others in our community asked to be connected. After
careful study and analysis, the Provo City government decided to
provide true high speed data access to the community at large. Our
motivation for providing broadband was very similar to the motivations
of other public power broadband communities.
Economic development is a key reason for public power entry into
the communications marketplace. The availability of affordable
broadband service is critical to retaining existing businesses as well
as attracting new businesses in today's highly competitive global
marketplace. In many public power communities, business leaders and
locally elected officials have approached the private sector about
providing essential broadband services at affordable rates. In many
cases, the private sector has responded that it did not have immediate
plans to provide broadband service or upgrade existing services to meet
the bandwidth needs of businesses and residents.
Smaller communities have two choices--wait until an incumbent
provider decides to provide service, if it does so at all, or build the
network themselves. Many APPA members have decided to deploy broadband
networks because they understand that access to advanced services helps
retain and attract new businesses, creates new jobs, increases
productivity, allows for telemedicine and telecommuting, and improves
the quality of life for residents. These communities have recognized
that if they waited for the private sector to provide affordable
broadband service, they would fall behind and not be able to compete in
today's information age.
Public power systems throughout the United States have seen direct
economic benefits from deploying broadband networks. They have
attracted new businesses as well as retained existing businesses
because of their broadband networks. In Cedar Falls, Iowa, the Mudd
Group, a marketing, advertising, and public relations firm specializing
in the automotive industry would have left the city if affordable
broadband services were not available. Because the municipal electric
utility constructed a fiber-to-the-business network, Mudd expanded its
business and soon plans to break ground on a studio to produce digital
media. TEAM Technologies, a web hosting and data management company,
moved to Cedar Falls in 1996 because of the city's communications
infrastructure. In 2004 TEAM finished construction of a multi-million
dollar data center that provides highly reliable and secure data
services, including bandwidth and back up storage service for corporate
clients.
A 2004 report entitled The Economic and Community Benefits of Cedar
Falls, Iowa's Municipal Telecommunications Network by Doris Kelly of
Black and Veatch, which analyzed the economic growth of Cedar Falls and
the neighboring city of Waterloo, attributed Cedar Falls' higher tax
base and job growth to the presence of a municipal broadband
network.<SUP>1</SUP> Waterloo and Cedar Falls are very similar
communities. What distinguishes them from each other is the presence of
a municipal broadband network. Similarly, a recently published study
involving Lake County, Florida, showed that public communications
projects can have a very significant positive impact on the economic
development of an area.<SUP>2</SUP> Clearly, the availability of
affordable broadband service is an important factor in businesses'
decisions to locate to an area, and a driver of economic development.
---------------------------------------------------------------------------
\1\ See Doris Kelly, The Economic and Community Benefits of Cedar
Falls, Iowa's Municipal Telecommunications Network, Black and Veatch,
July 6, 2004.
\2\ George S. Ford and Thomas M. Koutsky, Broadband and Economic
Development: A Municipal Case Study from Florida, http://
www.aestudies.com/library/econdev.pdf.
---------------------------------------------------------------------------
TECHNOLOGIES USED BY PUBLIC POWER TO PROVIDE ESSENTIAL BROADBAND
SERVICES
Public power systems that are providing broadband services are
using a wide variety of technologies to do so. Publicly owned electric
utilities such as Provo, Utah, Bristol, Virginia, Kutztown,
Pennsylvania, Jackson, Tennessee, Grant County Public Utility District,
Washington, and Dalton, Georgia have built fiber-to-the-subscriber
networks. These ultra-high-speed fiber systems provide users with
voice, video, and data services as well as give them the ability to
utilize high bandwidth applications such as real-time video
conferencing, IP video, and rich multimedia activities such as
interactive games.
Other communities such as Wyandotte and Coldwater, Michigan,
Glasgow, Kentucky, and Muscatine, Iowa provide broadband service over
hybrid fiber-coaxial networks similar to those used by cable companies.
This type of network can provide residents with high-speed Internet
access using a cable modem, as well as cable television and VoIP
service.
More recently, APPA members have been using wireless technology to
provide broadband service. Scottsburg, Indiana, Owensboro, Kentucky,
Coldwater, Michigan, and Spencer, Iowa are just a few of the systems
providing wireless broadband. Provo has also embraced this technology
as our businesses and residents see this as an important and expected
infrastructure in the community.
In addition, APPA members are also starting to provide broadband
service using broadband over power line (BPL) technology. Manassas,
Virginia, is the first municipality in the country to provide its
residents with BPL service. This technology allows electric utilities
to use their power lines to provide high-speed Internet access service
comparable to DSL service, with equal download and upload speeds. This
exciting technology not only allows public power systems to provide
affordable Internet access service, but also allows utilities to
improve the monitoring of their electric distribution networks, which
increases electric reliability and helps detect outages in real time
without the need to hear from customers about power outages. Other APPA
members testing BPL include Hagerstown, Maryland, Princeton, Illinois,
and Rochester, Minnesota.
ADVANCED SERVICES PROVIDED BY PUBLIC POWER SYSTEMS
Community-owned electric utilities provide a wide variety of
services to their residents either directly or in partnership with
private-sector providers. The types of services APPA members provide
fall into one of two categories. The first is internal service, which
is usually a municipal data network that connects municipal
governmental entities to one another. As of the end of 2004, 247 public
power systems offered municipal data networking.
The second category is external service. These services are offered
to individuals or entities outside of the utility and municipal
government. External services include fiber leasing, Internet access
(both high-speed and dial-up), cable television, broadband resale,
local and long-distance telephony, and VoIP. As of the end of 2004, 102
systems were providing cable television service, 167 were leasing
fiber, 128 were Internet service providers, 42 provided long-distance
telephone, and 52 provided local-phone service. A handful of systems
are either providing or testing VoIP service.
THE MANY BENEFITS OF PUBLIC POWER BROADBAND
Many communities have decided to provide residents and businesses
with critical broadband infrastructure because they recognize the
growing importance of broadband for commerce, health care, education,
and improved quality of life. Looking to the early pioneers of
municipal broadband that have been models to other communities, they
have seen the many benefits of providing access to an essential 21st
century service. Some of the key benefits of municipally provided
broadband service include lower prices, increased competitiveness in
the communications marketplace, responsiveness to local needs, economic
development, and universal access.
In many cities and towns across America, broadband service is too
expensive for businesses and residents. In Iowa for example, the Iowa
Utility Board has reported that many communities are charged up to $169
a month for 1 mega-bits-per-second DSL service.<SUP>3</SUP> However, in
public power communities that are providing broadband service,
consumers are paying lower rates for such service. In Manassas,
Virginia, residents can get BPL service for $28.95 a month. In response
to the presence of a third provider of broadband service (the City of
Manassas in partnership with COMTek, a telecommunications and
information systems technology company) both Comcast and Verizon
lowered their prices in Manassas. Consequently, even those residents
who have not switched to Manassas' BPL service have received a direct
economic benefit from the introduction of a third provider in the form
of lower prices from the incumbent providers.
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\3\ See Connecting the Public: The Truth About Municipal Broadband,
Media Access Project, Consumer Federation of America, Free Press
available at http://www.mediaaccess.org/MunicipalBroadband--
WhitePaper.pdf (citing http://www.iowatelecom.com/residential services/
article.asp?id=220&PID&GPID).
---------------------------------------------------------------------------
The presence of municipal broadband providers has also resulted in
a more competitive communications marketplace. Many public power
broadband networks provide open access to other private sector
providers. Competitive local exchange carriers and other competitive
communications companies use municipal networks to deliver services to
businesses and residents. In fact, the presence of a municipal provider
can actually increase the number of competitive providers in a
marketplace. An economic analysis by George Ford of Applied Economic
Studies found that in Florida, localities that owned their own
broadband network had more competitive local exchange carriers in the
marketplace than localities that did not have municipal broadband
networks.<SUP>4</SUP> Rather than crowding out investment, as asserted
by the opponents of municipal broadband, it appears that the presence
of such a system actually increases the number of communications
providers in the market.
---------------------------------------------------------------------------
\4\ See George S. Ford, ``Does Municipal Supply of Communications
Crowd Out Private Investment? An Empirical Study,'' Applied Economic
Studies (February 2005) at http://www.aestudies.com/.
---------------------------------------------------------------------------
In addition, municipal broadband providers are highly responsive to
local needs. Residents can have a direct say in the types of services
provided over broadband networks. Utility managers and locally elected
officials are available to the public at open meetings to discuss their
concerns and seek input on how to improve or expand service. Also,
customer service is locally available to help individuals with setting
up their service or fixing problems.
Universal access is another benefit of municipal broadband. Public
power systems providing broadband services ensure that all residents
can receive such services and at an affordable rate. Low-income
neighborhoods are not passed by. Schools and hospitals are provided
with significant bandwidth to enable rich multimedia applications that
improve education and health care. For example, in Leesburg, Florida,
public hospitals can send medical images such as MRIs and x-rays to
doctors' offices in seconds over the city's optical network.
Economic development is yet another benefit of municipal broadband.
As stated earlier, local governments recognize the importance of
broadband for commerce, education, health care, and quality of life.
The availability of affordable broadband helps retain and attract
businesses, leading to more jobs and stimulation of the local economy.
In Kutztown, Pennsylvania, Saucony Book Shop moved its business from
Allentown, Pennsylvania, because of the borough's fiber-to-the-
subscriber network. Paisley & Company bath shop also moved to Kutztown,
opening a shop downtown and advertising its products online. In Provo,
Riverwoods Medical Imaging Center employs state-of-the-art software to
deliver hundreds of digital images to doctors quickly over the
Internet. Without the bandwidth available over Provo's fiber network,
Riverwoods would not have been able to provide its digital imaging
services.
Local governments are not the only entities that recognize the
benefits of municipal broadband systems. A large number of
organizations representing private industry, educational interests, and
consumers support the ability of municipalities to provide broadband
services and have publicly expressed so. Included with this testimony
are statements of support from such organizations as the High Tech
Broadband Coalition, Consumer Federation of America, Free Press,
Educause, and New America Foundation as well as Intel. The United
Telecom Council and Fiber to the Home Council also plan to express
their support by sending a letter to the subcommittee for inclusion in
the record.
LEGAL BARRIERS TO ENTRY FACED BY MUNICIPAL PROVIDERS OF BROADBAND
SERVICES AT THE STATE LEVEL
Just as there was fierce opposition from private enterprise to
publicly owned electric utilities 125 years ago, today there is fierce
opposition to publicly owned broadband networks from private
enterprise. Opponents of municipal broadband have used a variety of
tactics to undermine, discredit, or block the deployment of broadband
by public power systems. Threatened by the prospect of a public
provider that is responsive to community needs and charges affordable
rates, telephone and cable companies, many of which have no plans to
provide service themselves, have aggressively pushed for legislation in
state legislatures across the country that would either prohibit
municipalities from providing broadband services or significantly limit
their ability to do so by erecting barriers to entry.
Currently 14 states have enacted laws that either prohibit
municipalities from providing telecommunications, cable, and/or
broadband services or limit their ability to do so through barriers to
entry. This year alone, bills have been introduced in 14 states that
would restrict the ability of municipalities to provide advanced
services to their communities either directly or in partnership with
other private sector providers.<SUP>5</SUP> In all instances, these
measures have been pushed by incumbent telephone and cable companies
seeking to eliminate potential competitors.
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\5\ In 2005, legislation has been introduced in Colorado, Florida,
Illinois, Indiana, Iowa, Louisiana, Michigan, Nebraska, Ohio, Oregon,
Tennessee, Texas, Virginia and West Virginia. In Virginia and West
Virginia, pro-municipal broadband bills were amended to limit the
ability of localities to provide service.
---------------------------------------------------------------------------
Early measures pushed by the opponents of municipal broadband
advocated prohibiting municipalities from providing telecommunications
and other services. Texas, Missouri, and Nebraska enacted laws
prohibiting municipalities from providing telecommunications services.
Arkansas enacted legislation prohibiting local governments from
providing local exchange service and Nevada precludes municipalities
with populations larger than 25,000 from providing retail
telecommunications service.
Other states have not enacted outright bans, but have instead
adopted laws that create barriers to entry by significantly restricting
the ability of municipal entities to provide advanced communications
services. These statutes impose burdensome procedural and accounting
requirements, such as referenda, the imputation of certain costs not
actually incurred, and public disclosure of information to which
private sector providers are not subject. States that have adopted such
approaches include Florida, Minnesota, South Carolina, Tennessee,
Virginia, Wisconsin, and Utah. In addition, Utah and Washington have
adopted wholesale-only models, which prevent a municipal entity from
directly providing service to the public.
The latest approach advocated by opponents of municipal broadband
is probably the one most familiar to members of this subcommittee--the
right of first refusal--which was adopted by Pennsylvania late last
year. It requires local governments to ask the permission of incumbent
providers as a condition precedent to providing broadband services to
the community. If the incumbent telephone or cable company indicates
that it will provide the service within a certain time frame, the
municipality is precluded from ever providing the service itself. This
may appear reasonable at first glance, but as usual, the devil is in
the details. The law makes data speed the only criteria and thus makes
no provision for price, quality of service, consumer choice, mobility,
symmetry, or any other factor, however significant it might be to the
local community. In other words, nothing in the law provides a remedy
if the incumbent provider states it will provide the requested service
in the statutory time period, yet does not build or upgrade a network
that provides the capabilities and services the community wanted.
CAMPAIGNS WAGED BY OPPONENTS OF MUNICIPAL BROADBAND AGAINST PUBLIC
POWER AND OTHER MUNICIPAL PROVIDERS
In addition to pushing for anti-municipal broadband legislation at
the state level, incumbent telephone and cable companies have utilized
a variety of tactics to undermine and discredit community-owned
broadband networks. Working with corporate-funded think tanks,
opponents have maligned municipal broadband projects, asserting they
are destined to fail, are subsidized by taxpayers, and/or crowd out
private investment with little to no empirical basis for such
assertions. In communities where local governments have asked their
citizens to vote to go forward with projects, incumbent providers have
spent significant amounts of money on anti-municipal broadband
campaigns with the knowledge that municipal governments are legally
precluded from spending any funds to promote projects. For example, in
the tri-cities area of St. Charles, Batavia, and Geneva, Illinois, the
Kane County Chronicle (IL) reported that Comcast and SBC spent over
$300,000 on mailers, push-surveys, full-page newspaper ads, and local
radio spots full of misinformation on municipal broadband
projects.<SUP>6</SUP>
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\6\ See http://www.kcchronicle.com/SportsSection/
310254315460507.php.
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Representatives of incumbent companies have also employed scare
tactics to dissuade local citizenry from supporting community-owned
broadband projects. At a Lafayette, Louisiana, city-parish council
meeting, a representative of Cox Communications suggested that if
Lafayette Utilities Systems (LUS), the city's municipal electric
utility, went forward with its fiber-to-the-premises project, it could
invade the privacy of its subscribers by ``allow[ing] LUS to monitor
people's private phone, Internet or television viewing.'' <SUP>7</SUP>
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\7\ See 2theadvocate.com Durel Defends LUS Plan (May 1, 2004) at
http://www.2
theadvocate.com/cgi-bin/printme.pl
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ARGUMENTS MADE AGAINST MUNICIPAL BROADBAND
As was briefly discussed above, opponents of municipal broadband
have asserted a variety of arguments for why local governments should
not provide broadband service. Many of these arguments aver that
municipalities have an unfair advantage because of their position as
both competitive providers and regulators of services and that public
entry is contrary to ``level playing field'' principles. Opponents also
claim that municipal communications systems are failures and that
municipal governments are too incompetent to operate such
``complicated'' technologies. A closer look at these arguments reveals
these claims are false.
One common argument made by opponents of municipal broadband is
that localities providing such service are competing against the
private sector companies they regulate. This assertion is quite
misleading. Municipalities do not, and cannot, favor their own
municipal service entities. Municipalities do not regulate
telecommunications service providers or Internet access providers. Such
regulation occurs at the federal and state levels, and even there, it
is disappearing rapidly. Municipalities do issue franchises to cable
operators, but cable franchising is governed by detailed federal
standards, and when municipalities provide cable services themselves,
they typically assume regulatory burdens that are as extensive, or more
extensive, than the private sector's.
Municipalities also manage public rights of way and other public
facilities. But federal and most state laws require municipalities to
act in a nondiscriminatory, competitively-neutral manner. In short, the
premise underlying this myth--that municipalities have power to
regulate in favor their own services--is simply false.
A second common argument made by the opponents of municipal
broadband is that localities have an unfair advantage against private
sector communications providers because they do not pay taxes. It is
true that public power systems are treated the same way as other
governmental and non-profit entities under federal and state tax law--
they do not pay income taxes because they do not earn profits. At the
local level, public power utilities are routinely required to make
payments in lieu of taxes to the local government that are often higher
in amount than what investor owned electric utilities pay in taxes.
Evidence in Florida and other states indicates that the same is likely
true of the payments made to local governments by public power
broadband systems and private sector communications providers.
Furthermore, public power utilities do not have access to the wide
variety of tax benefits, such as accelerated depreciation and
investment tax credits, available to the private sector. In Florida,
for example, Bell South paid an effective state/local tax rate of 3.4%
and Verizon paid 3.6%. Florida's municipal electric utilities paid an
effective rate of 14.6%.<SUP>8</SUP> It is difficult to see how private
providers can complain about the tax exempt status of public power
systems that pay more to state and local governments than the private
providers do.
---------------------------------------------------------------------------
\8\ See ``The Case for Municipal Broadband in Florida: Why Barriers
to Entry Stifle Economic Development, Disadvantage School Children, and
Worsen Health Care,'' Florida Municipal Electric Association (citing
FMEA and FCC ARMIS 43-03 (2003)).
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A third common argument asserted against municipal broadband is
that localities have access to low-cost financing. The use of tax-
exempt financing is a perfectly legitimate practice for pubic
improvement projects. However, in today's market, tax-exempt financing
is not always available and comes with many onerous burdens. While
there is some advantage to tax-exempt financing, it may not be terribly
significant because incumbent cable and telephone companies have access
to the best commercial rates.
The opponents of public power broadband also argue that localities
cross-subsidize communications services at the expense of electric rate
payers. State and local enterprise laws prohibit municipal electric
utilities from cross-subsidizing communications and other services with
electric revenues. Such an argument is also disingenuous when the
private sector is free to engage in cross-subsidization and routinely
does so. Predatory pricing by incumbents in communities with municipal
broadband networks is regional cross-subsidization. They are
subsidizing service to the residents of those communities where
competition exists at the expense of customers in localities that do
not have community-owned broadband networks.
Yet another claim made against municipal broadband projects is that
most are financial failures. Think tanks funded by incumbent telephone
and cable companies have released papers claiming that various
municipal broadband systems have failed. These ``studies'' are simply
incorrect. Using flawed analyses, the authors of these ``studies''
apply performance criteria applicable to the private sector to
municipal projects even though municipal projects have fundamentally
different objectives. Public power systems are not trying to maximize
profits. Instead, local governments set rates at the lowest level
possible that will allow the utility to recover its costs and save
their customers money. Some reports have also analyzed projects not
operating long enough to generate meaningful data. Opponents routinely
cite Cedar Falls, Iowa as a failure in spite of the empirical evidence
to the contrary. Copies of numerous studies providing point-by-point
rebuttals to industry claims of municipal ``failures'' are available at
http://www.baller.com/barriers.html.
Closely related to the failure argument is the claim that broadband
networks are too complex a business for public power utilities. To
assert that 100-year old entities with a long history of running highly
complex electric systems cannot operate broadband networks is absurd.
Public power systems that choose to provide broadband service are well
prepared to provide such service. Many have used communications
networks to provide internal services and monitor their electric
distribution systems. In addition, several APPA members have been
providing cable television service for over 20 years. Frankfort Plant
Board in Kentucky has been providing cable service since 1954.
Muscatine, Iowa, was one of the first cable TV operators in the country
to deploy video on demand service in 2003. Frankfort Plant Board and
Coldwater, Michigan, both deployed VoIP service in the summer of 2003,
prior to when many cable MSOs began offering service. Assertions of
municipal incompetence or lack of ability to manage broadband networks
are clearly without merit.
CONCLUSION
Public power systems throughout the country are meeting their
communities' needs by providing access to affordable broadband
services. Recognizing the importance of broadband for commerce, health
care, education, and improved quality of life, underserved communities
are constructing their own networks to compete and thrive in today's
information age. Many benefits accrue from community-owned
communications systems including lower prices for consumers, increased
competitiveness in the marketplace, responsiveness to local needs,
universal access, and economic development. In spite of the obvious
benefits of municipal broadband, incumbent telephone and cable
companies have opposed such projects, pushing for legislation at the
state level to prevent municipalities from providing broadband. Rather
than work with local governments to provide service or acknowledge that
municipalities that choose to provide broadband have legitimate reasons
to do so, incumbent private providers assert disingenuous claims and
unsubstantiated arguments. As this subcommittee begins to formulate
policy on how best to promote a competitive communications marketplace
where customers have access to a wide variety of Internet protocol-
enabled services, APPA hopes the committee will see through the
baseless assertions of incumbent providers and recognize the important
role that public power systems can play in providing such services to
underserved communities.
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Mr. Upton. Man, if everyone was that responsive, that would
be terrific. Thank you. You went a little bit long, but it was
good. Thank you. Again, your full statement is part of the
record.
Mr. Fellman.
STATEMENT OF KENNETH FELLMAN
Mr. Fellman. Thank you, Chairman Upton, Ranking Member
Markey, members of the subcommittee. Thank you for the
opportunity to testify this afternoon.
I am the mayor of Arvada, Colorado, a city of 104,000
people located just outside of Denver, and I appear today as a
representative of the Nation's local elected leaders and their
advisors. Because many local elected officials serve with
little or no compensation, I have another job as well. In my
professional capacity, I am an attorney and I work with local
governments on a wide variety of communications and other
issues.
I am also here today, like you, as an elected official who
looks at new technology with a great deal of excitement, and
one whose constituents and businesses want more choices at
lower prices. And like all of you, I am seeking the best
balance for our citizens, our economy, and our local
communities.
Today, on behalf of local governments, I ask this committee
for three things.
First, recognize the inherent police powers of local
government, and its right to manage and charge for the use of
public rights of way.
Second, please take a deliberative approach as you consider
the appropriate scheme for addressing IP services, and ensure
that any new regulatory regime recognizes the core social
obligations of our service providers.
And third, appreciate the unique neighborhood-by-
neighborhood expertise that local government has to oversee
these social obligations, which include public safety,
broadband deployment, and preventing economic red-lining.
Additionally, because I know this committee has heard some
negative characterizations of the franchising process, I draw
the committee's attention to the detailed written testimony
which we believe demonstrates a more accurate representation.
We support a technology neutral approach that promotes
broadband deployment and competitive service offerings. But
Internet innovations are meaningless if the networks used to
deliver them are not widely available to our citizens. As
technology improves, most of the infrastructure for these new
services resides in the public rights of way. Local officials
must ensure that the infrastructure does not interfere with
other infrastructure, is safe, and we must preserve fair
opportunities for all competitors who use the rights of way. As
fiduciaries, we must make sure that the public is compensated
when private actors use public land.
To exercise our core police powers, local government must
manage the right of way, and we thank Chairman Barton for his
historic work in support of the existing Section 253, which
preserves local authority and control over the public rights of
way.
We believe that Federalization of all IP services would not
serve the public interest, and would violate the principle of
technology neutrality. It would create disparate treatment of
entities, solely on the nature of the services provided.
Functionally equivalent services that compete with one another
in the eyes of consumers should face the same government
obligations. Local governments want to ensure that we can
continue to require that social obligations of providers be
met, and that consumers be protected.
There are several important obligations of today's video
providers that are enforced at the local level. These include
access channels, institutional networks, and prohibitions on
economic redlining. Many Members of Congress are frequent
guests or hosts on cable access channels. Congressman Markey
is, Congresswoman Myrick is, my own Congressman, Bob Oprey, has
his show appearing on access channels in Colorado's seventh
district. Access programming serves a vital role in our
communities. Institutional networks provide redundancy in terms
of emergencies. For example, in New York City's network
remained operational during the events of September 11, 2001.
And as this committee has noted, prohibitions on economic
redlining are critical to ensure all citizens will benefit from
competition.
Finally, I would like to briefly explain the current
franchising process, which unfortunately, is misunderstood by
many. Cable franchising is essentially a light touch national
regulatory framework with local implementation. The Cable Act
authorizes local governments to negotiate for a relatively
limited range of obligations imposed upon cable operators, and
virtually none of those obligations are mandatory. The
framework for economic regulation of video providers utilizes
that light touch economic regulation that the telephone
companies seek. And while the current economic regulation is
limited, it still plays an important consumer protection role.
Recently, it disclosed a $5 million overcharge by one cable
operator.
My written testimony covers franchising in more detail.
In conclusion, we believe that any new national
communications policy should preserve local government's
authority to ensure public health, safety, and welfare, allow
us to support important policy goals, enable us to address our
communities' communications needs. What this means is that we
are asking you to preserve our local control and management of
the public rights of way, and the ability to impose and collect
taxes and fees necessary to fund essential services. Please
take a deliberate approach, even as you seek to update economic
rules, and do not eliminate the core social obligations of
video programmers, regardless of the technologies they use. We
urge you to appreciate and preserve the neighborhood-by-
neighborhood expertise that local government brings to
overseeing these social obligations, like public safety,
broadband deployment, and the prohibition of economic
redlining.
And I thank you, and look forward to answering your
questions.
[The prepared statement of Kenneth Fellman follows:]
Prepared Statement of Hon. Kenneth Fellman, Mayor, Arvada, Colorado on
Behalf of The National Association of Telecommunications Officers and
Advisors, The National League of Cities, The United States Conference
of Mayors, and The National Association of Counties
Chairman Upton, Ranking Member Markey, and members of the
subcommittee.
Thank you for the opportunity to testify this afternoon. I am the
Mayor of Arvada Colorado, a municipality incorporated in 1904, and the
site of Colorado's first documented gold strike. We have a population
of approximately 104,000, and are located on the northwest side of
Denver. I appear today as a representative of local elected leaders and
their technical advisors. I play a key role in several national
organizations representing local government interests and speak today
on behalf of National Association of Telecommunications Officers and
Advisors (``NATOA''), the National League of Cities (``NLC''), the
United States Conference of Mayors (``USCM'') and the National
Association of Counties (``NACo'').<SUP>1</SUP>
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\1\ Mayor Fellman is a member of the NATOA Board, and Chair of its
Convergence Committee; Chair of the Information Technology and
Communications Steering and Advocacy Committee of the National League
of Cities and as such represents NLC at the NGA-led tax negotiations;
Vice Chair of the Communications Task Force and a member of the
Communications and Transportation Standing Committee of the U.S.
Conference of Mayors; Local Elected Official Member of the Department
of Homeland Security's SAFECOM Executive Committee; Former Chair of
Local State Government Advisory Committee to the FCC; and a practicing
attorney representing local governments.
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I have the great pleasure today of being authorized to speak here
on behalf of all of these prestigious organizations that represent
thousands of local elected officials and their advisors throughout the
country. I am also here today, like you, as an elected official who
looks at new technology with a great deal of excitement. Like you,
every day I hear from my constituents who want more choices for
communications services with a full range of competitive prices. Like
you, I hear from small, medium and large businesses that want to
receive communications products and services to enable them to remain
competitive or to offer more products and services to their customers.
Like you, I hear from my first responders that they lack some essential
communications tools to protect public safety. Like you, I hear the
concerns of citizens who want technology to improve their interaction
with their elected officials and their government. Like many
businesses, local governments are significant and sophisticated users
of telecommunications technology. And, like all of you, I am seeking
the best balance for our citizens, our economy, and our local
communities.
Because many local elected officials serve with little or no
compensation, I have another job as well. In my professional capacity I
am an attorney, and I work with local governments nationally on a wide
variety of communications and other issues.
Local governments embrace the technological innovation that this
Committee has been hearing about over the last several months. We want
and welcome real communications competition in video, telephone and
broadband services. And, I am here to commit that we support a
technology-neutral approach that promotes broadband deployment and
competitive service offerings. Local governments have been managing
communications competition for many years now ( it is not new. What is
exciting is the presence of a few well-funded and dominant players who
appear to have finally made a commitment to competition in the video
arena. We look forward to developing an even more successful
relationship in bringing these competitive services home to America.
I also want to emphasize at the outset the close working
relationship and shared views among the national organizations
representing local and state government. The local organizations I
represent today have been working together with the National Governors
Association and National Association of Regulatory Utility
Commissioners and are unified in our support of the principles of state
and local authority, public safety, universal access to
telecommunications, use of public property and rights-of-way, consumer
protection, competition and taxation. State and local governments'
interests are closely aligned on the topics that NGA and NARUC will
cover today, particularly in the area of universal service, access to
E911, public safety and CALEA. And, as you've heard (or will hear) from
Mayor Billings today on behalf of the public power community, we stand
in support of the ability of local governments to serve their
constituents' needs and interests by self-provisioning, especially at
times when the traditional industry providers are unwilling or unable
to do so.
LOCAL GOVERNMENT ASKS THREE THINGS OF CONGRESS
Today, on behalf of local government, I ask this Committee for
three things. First, recognize the inherent police powers of local
government including its right to manage and charge for the use of
public right-of-way. Second, take a deliberative approach as you
consider the appropriate scheme for addressing IP services which
recognizes the core social obligations of service providers. And third,
appreciate the neighborhood-by-neighborhood expertise local government
brings to overseeing these social obligations, including public safety,
broadband deployment, and prohibiting economic redlining.
THE USE OF INTERNET PROTOCOL TO DELIVER SERVICES
Internet protocol was developed almost 40 years ago, at the time
the original Internet was being developed. Its use today to deliver
data, telephone and video, is something that has evolved and improved
over time, and is now so prevalent as to warrant congressional
attention. The promise of competitive services being delivered through
the use of IP is exciting and challenging--it's just not necessarily
new. The communications tools we use every day have all evolved under
the careful eye of federal, state and local governments, as should the
communications tools of the future. These Internet innovations are
meaningless if the networks used to deliver them are not widely
available to all of our citizens. Deployment of the infrastructure used
to deliver these services is of specific interest and concern to those
of us who manage the physical property where this infrastructure
resides and will be installed. This is why local government has long
promoted the efficient and effective deployment of infrastructure
within and through our communities.
LOCAL GOVERNMENT HELPS ENSURE BROADBAND DEPLOYMENT
We all share the concern of a lack of broadband access throughout
America, in urban and rural areas alike. Regardless of the locality, it
is likely that communications technologies will be a driving force in
the economic opportunities enjoyed by the communities that have access
to advanced services. I believe that the Cable Act has provided
significant benefits to consumers and communities alike, and I believe
that local government should be applauded for ensuring those benefits
were provided in a timely, fair and efficient manner. Under the current
regulatory regime, cable enjoys the highest deployment rate of
broadband in this nation, with over 105 million homes having access to
cable modem service. The cable industry is now reaping the economic
benefits of an infrastructure that is capable of providing broadband
access to all of our citizens. It is local government's oversight and
diligence, through the franchise process, that has ensured that our
constituents are not deprived of these services. Local government is
the only entity that can adequately monitor and ensure rapid, safe and
efficient deployment of these new technologies when they are being
installed on a neighborhood-by-neighborhood level in our local rights-
of-way.
MANAGEMENT OF THE PHYSICAL RIGHT-OF-WAY IS A CORE FUNCTION OF LOCAL
GOVERNMENT
Even as technologies change, certain things remain the same. A
central fact remains' most of the infrastructure being installed or
improved for the provision of these new services resides in the public
right-of-way. Elected officials are the trustees of public property and
must manage it for the benefit of all. We play a critical role in
promoting competition by ensuring that all competitors have fair access
to needed physical space and ensure they do not interfere with each
other. In addition, we impose important public safety controls to
ensure that communications uses are compatible with water, gas, and
electric infrastructure also in the right-of-way. Keeping track of each
street and sidewalk and working to ensure that installation of new
facilities do not cause gas leaks, electrical outages, and water main
breaks are among the core police powers of local government. And while
it seems obvious, these facilities are located over, under or adjacent
to property whose primary use is the efficient and safe movement of
traffic. It is local government that best manages these competing
interests. In any reform of the current law, it is vital that our
property rights and interests in the management and control of the
public rights-of-way are respected and preserved.
TO PROPERLY EXERCISE ITS FIDUCIARY OBLIGATIONS, GOVERNMENT MUST HAVE
THE RIGHT TO OBTAIN COMPENSATION FOR PUBLIC PROPERTY USED FOR PRIVATE
GAIN
At the same time that we manage the public right-of-way, local
government, acting as trustees on behalf of our constituents, must
ensure the community is appropriately compensated for use of the public
space. In the same way that we charge rent when private companies use a
public building to make a profit, and the federal government auctions
spectrum for the use of public airwaves or requires compensation when
communications towers are located on federal lands, we ensure that the
public's assets are not wasted by charging reasonable compensation for
use of the right-of-way. Local government has the right to require
payment of just and reasonable compensation for the private use of this
public property--and our ability to continue to charge rent as a
landlord over our tenants must be protected and preserved.
SOCIAL OBLIGATIONS REMAIN CRITICAL REGARDLESS OF TECHNOLOGICAL
INNOVATION
Communications companies are nothing if not innovative. When you
think back over the course of just the past 100 years, the changes in
technology are mind-boggling. At the same time, the social obligations
developed over the last 60 years have endured. I strongly urge the
Committee to engage in a deliberative process, and take the time
necessary to engage in dialogue and debate, to ensure that any
legislative changes adopted this year will be as meaningful 20 years
from now as two years from now.
While last year some questioned the need for any regulation of
Voice over Internet Protocol services, this year the Committee heard
the chilling story of a family who could not use E911 to reach the
police on their VoIP phone while a gunman prowled their home. The
Committee's understanding of the need for regulations has evolved based
on experience with the technology and careful study and deliberation.
The same careful study and deliberation is needed with respect to video
services. Local government believes that federalization of all IP
services would not serve the public interest, and would violate the
principle of technology neutrality. Such action would create disparate
treatment of entities premised solely upon the nature of the service
being provided, and create an entirely new form of regulatory
arbitrage. Rather, we believe that like services should be treated
alike and certainly services that compete with one another in the eyes
of the consumer should face the same government obligations. Local
governments want to ensure that we can continue to require that social
obligations of providers be met, and that consumers are protected.
CONGRESS MUST TAKE THE TIME TO CONSIDER THE NEW SOCIAL OBLIGATIONS IN
AN IP WORLD
In the past, we have determined that those who use public property
for private commercial purposes have an obligation to the ``public
interest'' in exchange for this privilege. As a result, a sort of
social contract has evolved with each such entity, based on the
particular service or technology being utilized. For voice, we
recognize that E911, universal service, law enforcement access through
CALEA, are social obligations to be required of companies providing
voice services. As consideration for the otherwise free use of the
public spectrum, broadcasters are obligated to serve their communities'
interests and to provide critical safety of life information on demand.
For direct broadcast satellite, there is payment for the use of the
spectrum and a public interest set-aside of 4% of capacity. For video,
a public interest set aside designates capacity for community channels,
institutional networks and a requirement to pay rent for the use of the
public's property. Compliance with these obligations is not
appropriately left to the marketplace.
HISTORICAL AND CURRENT ROLE OF SOCIAL OBLIGATIONS
Thus, I welcome this opportunity to discuss with you the important
social obligations inherent in current video regulation, and to explain
why these core functions must be preserved, no matter the technology
used to provide them. These include the allocation of capacity for the
provision of public, education and government access channels,
prohibitions on economic redlining, and a basic obligation that local
government evaluates and the provider meets the needs of the community,
including public safety needs.
PEG Channels
Historically and today, locally produced video programming performs
an important civic function by providing essential local news and
information. Under the existing law, local government can require that
a certain amount of cable system capacity and financial support for
that capacity be set aside for the local community's use. This capacity
is most often used in the form of channels carried on the cable system
and are referred to as PEG for public, educational and governmental
channels. Once the local franchise authority has established the
required number of channels and amount of financial support required to
meet community needs, they then determine the nature of the use, which
may be mixed between any of the three categories. Public channels are
set aside for the public and are most often run by a free-standing non-
profit entity. Educational channels are typically reserved for and are
managed by various educational institutions. Government channels allow
citizens to view city and county council meetings, and watch a wide
variety of programming about their local community that would otherwise
never be offered on commercial or public television. Whether it is
video coverage of the governmental meetings, information about
government services or special programs, school lunch menus, homework
assignments or classroom instruction, the video programming used to
disseminate this information allows all of us to better serve and
interact with our constituents. Government continues to make innovative
uses of this programming capacity as new interactive technology allows
even better information to be available to our constituents.
But this is information that many of you know quite personally--for
instance Congressman Markey has appeared many times as a featured guest
on access programming on a regular basis throughout the State of
Massachusetts. And many other members, including Representative
Dingell, represent communities whose PEG programming has won national
acclaim. And my own Congressman Bob Beauprez has his own show
``Washington Report'' distributed on many of the government access
channels throughout Colorado's 7th Congressional District. Many of you
and your peers use this vital resource as a means to report back and to
interact with your constituents at home. Local and state officials also
use this important medium, and we want to ensure that it continues to
be available now and in the future.
It may be possible that through deliberative processes such as this
hearing, we will identify new technological opportunities to assist us
in our outreach to our citizens, but I suggest to the Committee today
that these public interest obligations continue to serve an important
purpose and must be preserved, regardless of the technology that allows
us to make the programming available. I hope that you'll join with me
in calling for the continuation of such opportunities in the new
technologies that are evolving today. Certainly I should hope that you
would not follow the tantalizing concept of reducing obligations on
providers without careful consideration.
Economic Redlining
One of the primary interests of local government is to ensure that
services provided over the cable system are made available to all
residential subscribers in a reasonable period of time. These franchise
obligations are minimal in light of the significant economic benefits
that inure to these businesses making private use of public property.
While there may be those who find this provision unreasonable--we find
it to be essential. Those who are least likely to be served, as a
result of their economic status, are those who we need most to protect.
This deployment helps to ensure that our citizens, young and old alike,
are provided the best opportunities to enjoy the highest quality of
life--regardless of income. The capacity that broadband deployment
offers to our communities is the ability of an urban teen to become
enriched by distance education opportunities that until recently
couldn't possibly capture and maintain the interest of a teen (much
less many adults). And, that's just the beginning--the possibilities
are endless, as is the creativity of those in local government on
making the most they can with the least they have.
Public Safety & Community Needs
Local leaders often focus on the needs of their first responders
when evaluating community needs. The current law provides that local
governments may require the development of institutional networks as
part of the grant of a franchise. This network is specifically for the
purpose of serving non-residential areas such as government facilities
including police, fire, schools, libraries and other government
buildings. This infrastructure is typically designed to use state of
art technology for data, voice, video and other advanced communications
services. It has proven effective not only for day to day training and
operations--but essential in emergencies, including the events of
September 11, 2001.
For example, the City of New York uses an INET for distance
learning among city educational institutions, for city-wide computer
network connectivity, for criminal justice applications (video
arraignments), for employee training including first responder
training, and for ensuring redundant intelligent communications
capabilities for all of its police, fire and first responder needs.
This network is constantly being improved upon, but functioned in many
important capacities during the losses suffered on September 11, 2001.
This network not only offers capacity for the city all year round, but
redundancy in times of an emergency.
Again, many Members of Congress live in communities that have
required the deployment of these services, and are planning and using
this infrastructure and the services to protect and serve the needs of
their citizens. For instance the communities of Palo Alto, California,
Marquette, Michigan, Laredo, Texas and Fairfax County, Virginia are all
examples where the local government has determined that use of an
institutional network is in the best interests of their community.
NEITHER FRANCHISING, NOR CURRENT REGULATION, IS A BARRIER TO
COMPETITION
The concept of franchising is to manage and facilitate in an
orderly and timely fashion the use of property. For local governments,
this is true regardless of whether we are franchising for the provision
of gas or electric service, or whether we are providing for multiple
competing communications services--all of which use public property. As
the franchisor--we have a fiduciary responsibility that we take
seriously, and for which we are held accountable.
I began my testimony commiserating with you about constituent
demands for better services at competitive prices. As you are no doubt
aware, our constituents demand real competition to increase their
options and improve the quality of services. As you know, a GAO study
showed that in markets where there is a wire-line based competitor to
cable that cable rates were, on average, 15% lower.-- Please understand
that local governments are under plenty of pressure every day to get
these agreements in place and not just from the companies seeking to
offer service. I know this committee has heard some unflattering
descriptions of the franchise process. I would like to discuss with you
the reality of that process.
Franchising is a National Framework with an Essential Local Component
Franchising is essentially a light touch national regulatory
framework with local implementation. The 1992 Cable Act authorizes
local governments to negotiate for a relatively limited range of
obligations that are imposed upon cable operators. Virtually none of
these obligations are mandatory. Each one is subject to decision-making
at a local level. The current legal structure provides for something I
hope we would all agree is important in this nation--local decisions
about local community needs are made locally. While some communities
will require significant capacity for education, government and public
channels or INET use, others will seek little or none. The ideologies
and the values of each local community guide their elected leaders.
And, in many cases, even where the state has determined that a
state-wide franchise process is appropriate, they require the local
community and the provider to work out the details, consistent with the
state guidelines. This is because a one-size fits all approach is not
the most efficient or reasonable means of achieving deployment of
communications services. Moreover, a one-size fits all approach can
penalize communities with differing needs. For example, no one would
claim that the community of Ann Arbor, MI needs the exact same services
as Detroit or Kalamazoo, or Mackinaw City in the Upper Peninsula.
Neither would impose on the other each other's desires--and yet, both
should have the ability to ascertain their individual needs and work
with the providers accordingly. Further, in some states where home rule
has been adopted, the state doesn't have the authority to address these
issues, as that authority resides at the local level.
Local Franchising is Comparatively Efficient, and Must Be Fair to
Protect All Competitors
Franchising need not be a complex or time-consuming process. In
some communities the operator brings a proposed agreement to the
government based on either the existing incumbent's agreement or a
request for proposals, and with little negotiation at all an agreement
can be adopted. In other communities, where the elected officials have
reason to do so, a community needs assessment is conducted to ascertain
exactly what an acceptable proposal should include. Once that
determination is made, it's up to the operator to demonstrate that they
can provide the services needed over the course of the agreement.
Furthermore, while some of the new entrants have asserted that
franchise negotiations have not proceeded as fast as they would like,
it is important to recognize that every negotiation has two parties at
the table. Some new entrants have proposed franchise agreements that
violate the current state or federal law and open local franchise
authorities to liability for unfair treatment of the incumbent cable
operator vis-a-vis new providers. Some also seek waiver of police
powers as a standard term of their agreement. Local government can no
more waive its police powers to a private entity than the federal
government can waive the constitutional rights its citizens.
As far as I know, everywhere that Verizon has applied for a
franchise it insists that the community use Verizon's own model
franchise, without regard to the terms and conditions of the
community's incumbent franchise agreement. In other words, Verizon is
seeking unilaterally to impose its own very aggressive nationwide
franchise on all local communities. While Verizon may have the right to
attempt such an approach, it can't fairly complain about delays
resulting from its own, self-interested negotiating strategy. Rather,
if Verizon would simply work from the community's existing franchises
that actually reflect the community's needs and interests, I believe
they'd find it much faster and easier to obtain a franchise agreement.
And I can speak from personal experience that this is what Qwest is
doing in Colorado, and the franchise negotiating process has been both
easy and timely. Unlike other business contracts that are confidential
or proprietary, local government franchise agreements are readily
available as public record documents, so a new provider knows the terms
of the incumbent's agreement well before they approach a local
government about a competitive franchise.
Many states have level playing field statutes, and even more cable
franchises contain these provisions as contractual obligations on the
local government. So when a new provider comes in and seeks a
competitive cable franchise, there is not much to negotiate about. If
the new competitor is seriously committed to providing as high a
quality of service as the incumbent, the franchise negotiations will be
neither complicated nor unreasonably time consuming. Indeed, I recently
negotiated a competitive cable franchise for the City of Lone Tree,
Colorado. Qwest Broadband sought a franchise to provide competitive
video programming through its fiber to the home architecture. Because
Lone Tree has an existing cable franchise with Comcast, and the City
cannot grant a competitive franchise that on the whole is more
favorable to the new entrant, we had a very short and relatively simple
negotiation.
Moreover, local government has absolutely no desire to make new
entrants change their current network topologies to meet the cable
infrastructure design. Local government's most significant concern is
that it treat all providers fairly, as required by current franchising
agreements and by federal law.
Franchising Provides for Reasonable Deployment Schedules
Nothing in franchising or current federal law requires a new video
entrant to deploy to an entire community immediately. Local government
has been negotiating franchise agreements with new entrants for many
years. In these cases, greenfield developments may have one schedule
while existing areas are built out over a period of time ranging from
eighteen months to five years. These same standards apply when an
incumbent provider is seeking a renewal and needs to upgrade the
capacity of its system to provide new services.
By managing the deployment as we do, we protect the incumbent's
investment in existing infrastructure, we protect the public from
unnecessary disruption to private business and to their safe use and
enjoyment of the public right-of-way, and we ensure that new entrants
are provided with unfettered access in a reasonable and timely fashion,
while ensuring that they comply with all safety requirements. This
system has worked well for cable, traditional phone and other providers
for many years, and is necessarily performed by the local government.
Congressmen Barton and Stupak successfully fought to maintain the
federalist, decentralized partnership that has served our country well
for 200 years when they authored the provisions of the Act which
preserve to local government this authority. We trust that under their
continued leadership and guidance these important principles of
federalism will be maintained.
The Current Framework Safeguards Against Abuse and Protects Competition
The current framework ensures that all competitors face the same
obligations and receive the same benefits, ensuring a fair playing
field. Federal safeguards protect against abuse. Local government is
generally prohibited from requiring a provider to use any particular
technology or infrastructure such as demanding fiber or coaxial cable.
They can require that certain minimum technical standards be adhered to
and that systems are installed in a safe and efficient manner. Local
government ensures compliance with the National Electric Safety Code to
protect against threat of electrocution or other property damage. Local
rules can also require that signal quality be up to federal standards,
and that systems are maintained to provide subscribers with state of
the art transmissions. Similarly, it is local government that inspects
the physical plant and ensures compliance on all aspects of operations.
We work closely with our federal partners and cable operators to ensure
that cable signal leaks are quickly repaired before there is disruption
or interference with air traffic safety or with other public safety
uses of spectrum.
Current Law Provides Light Touch Economic Regulation for Cable Services
While there may be limited regulation of cable rates on the books
today, telephone companies should celebrate entering the cable
business, which utilizes the light touch economic regulation they seek.
That regulation, which is employed in relatively few communities, is
now purely a consumer protection tool to retard abuse of overcharging
on basic service and equipment. As limited as the current regime is, a
recent review of one company's national FCC rate filing disclosed
overcharges in the amount of $5 million in equipment charges in one
year to the one million subscribers covered by the review. While the
regulations may be minimal, their use in protecting subscribers should
not be lightly tossed aside--and the role of the local government in
uncovering and prosecuting such protections should be applauded, not
undermined.
Finally, where cable operators are subject to effective
competition, currently defined as 15% DBS penetration, they can use a
very simple process to petition the FCC to remove themselves from the
extremely limited rate regulation currently in place. While we do not
think that the current standard contained in the law and enforced by
the FCC is adequate, nonetheless, Title VI does not impose anything
like the regulatory structure applied to telephone services.
CONCLUSION
Local government is enthusiastic about the benefits that Internet
protocol may offer our constituents. We strongly support competition,
the rollout of new services, and the economic growth that accompanies
new technological developments. The history of the Communications Act
is in some ways, a success story. In a dynamically changing world of
technology, the Act has restrained monopoly power, extended services,
required socially responsible actions by providers and supported the
fundamental democratic and economic underpinnings of our democracy.
Certainly the importance of choice, competition and opportunity of our
citizens demands a well conceived and thoughtful deliberative process,
and not a rush to cure an illness that is yet unproven.
We also believe that any new national communications policy should
preserve local government's authority to ensure public health, safety
and welfare; allow local governments to support important policy goals
as described here; and enable local governments to serve its
community's communications needs. What this means is that we are here
today asking you to preserve our police powers, our ability to control
and manage of our rights-of-way, and our ability to impose and collect
taxes and fees necessary to fund our essential services. We ask that
you continue to support our goals of enhanced economic development
through the use of new technologies, competitive access to products and
services and the assurances that all of our citizens and businesses
will be provided the opportunity to participate in this technological
revolution. We ask that you remember the important social obligations
that fall uniquely on the shoulders of local governments to provide for
homeland security and emergency communications services to and for our
citizens. To facilitate our communications with our citizens we seek
legislation that authorizes locally adopted capacity requirements on
new communications technologies. Finally, while others will speak more
specifically to this point, we support the ability of local government
and the citizens they serve to have self determination of their
communications needs and infrastructure. Where markets fail or
providers refuse, local governments must have the ability to ensure
that all of our citizens are served, even when it means that we have to
do it ourselves.
In our rush to embrace technological innovation, we, as elected
leaders, are deeply cognizant of our responsibility to ensure that the
citizens of our communities are protected and public resources are
preserved. We engage in deliberative processes, such as this hearing
today, to be sure that we are accumulating verifiable data and are
making informed decisions. Local control and oversight has served us
well in the past and should not be tossed out simply as the ``old
way.'' This year as the discussion of the delivery of services over the
Internet includes not just voice but video and other potential
services, I strongly encourage this Committee to proceed carefully. The
Committee should continue to continue its excellent work thus far of
accumulating information and ensuring a strong record in support of any
decisions to change to the law.
Thank you. I look forward to answering any questions you may have.
Mr. Upton. Thank you very much.
Ms. Munns.
STATEMENT OF DIANE MUNNS
Ms. Munns. Thank you. Mr. Chairman----
Mr. Upton. I think you have to hit that button.
Ms. Munns. Technology. Mr. Chairman, Ranking Member Markey,
and members of the subcommittee, thank you for the opportunity
to testify today. My name is Diane Munns and I am the President
of the National Association of Regulatory Utility
Commissioners. NARUC represents State public utility
commissions in all 50 States and U.S. territories, with
oversight over telecommunications, electricity, gas, water, and
other utilities.
Since the Telecommunications Act of 1996, the Federal and
State governments have been involved in a cooperative effort to
bring local competition to markets. There have been dramatic
technological changes that have strained in the interstate
distinctions on which regulations have been based. The State
commission tasks have also changed from primarily economic
regulators to facilitating wholesale markets and local
competition.
With the changes in technology, we are being asked ``What
is the function and relevancy of State commissions in today's
telecommunications market? Is there any role or need for State
regulation? And won't 50 different regulatory bodies with
authority over new services impede rather than enhance the
delivery of services?'' These are fair questions as we must
continually ask whether government oversight or regulation is
necessary, and second, what level of government stands in the
best position to deliver value?
We believe the States have core competencies that are
necessary in this new world. State commissions excel at
delivering responsive consumer protection, assessing market
power, setting just and reasonable rates with markup power, and
providing fact-based arbitration and adjudication. States are
also laboratories of democracy for encouraging the availability
of new services and fashioning workable remedies for abuses and
market failures.
State experiments are often the basis for Federal policy.
While competitive new technology, such as Voice-over Internet
Protocol, are hesitant to be classified as telecommunications
service providers because of regulatory requirements, in order
to do business and compete against incumbent services, many
seek the rights that that classification confers: guarantees of
non-discrimination, interconnection rights to the public switch
network, rights to interconnect for e911 delivery, local number
portability, access to pole attachments, receipts of universal
service funds. While the rights are granted under a national
framework, enforcement of the rights requires a fact-intensive
adjudicatory capability, and State commissions offer a timely,
cost effective forum for resolution of these disputes. The
State of Maryland handled 40 interconnection and inter-carrier
disputes last year alone.
Consumer issues is another area where State capabilities
are relevant. No one disputes that State commissions or that
level of government stands in the best position to answer
complaints or inquiries about service. Our citizens call us,
not Washington, for information. If services do not meet
expectations, or when a new abuse arises, we know first. The
debate goes to the discretion that States should have to
fashion consumer protections outside a Federal framework or
outside laws of general applicability. Companies rightfully
argue that different requirements cause transaction costs that
impede competition. For example, different bill formats raise
prices and do not bring additional value to customers. They
argue for national standards with no discretion at the State
level.
I would like to raise the other side of the issue and use
the example of slamming and cramming. After passage of the 1996
Act, the new, unprecedented practice of slamming and cramming
began. States were first aware as their customer hotlines
became loaded with complaints. States began to experiment with
remedies for these abuses, which eventually resulted in a
national approach. This practice is under control today, but
the answer to consumers had been, we must seek a rule at the
Federal level before we can act, or act through general
consumer protection rules, many more people would have been
harmed individually and it would have taken much longer to
control this abuse. Confidence in competitive processes would
also have been harmed. Just last week, my commission
successfully addressed a novel cable modem hijacking complaint.
In addition, sometimes raising issues through State
processes spurs voluntary industry solutions where if hands
were tied while a lengthy Federal process ensued, incentives to
find solutions would be significantly reduced. Finally, some
issues are local and do not need national attention.
We need to have discussions on processes that can be used
so States can effectively protect consumers, while not creating
a patchwork of requirements that slow down competitive
offerings and offer no value to consumers.
We look forward to continuing this dialog, and are hopeful
that the benefits of these new technologies will bring our
States and believe practical pragmatic regulation must be
employed at each level of government to achieve that end.
Thank you.
[The prepared statement of Diane Munns follows:]
Prepared Statement of Hon. Diane Munns, Commissioner, Iowa Utilities
Board and President, National Association of Regulatory Utility
Commissioners
Mr. Chairman, Ranking Member Markey and members of the
Subcommittee, thank you for the opportunity to testify today on behalf
of the National Association of Regulatory Utility Commissioners
(NARUC). NARUC represents State public utility commissions in all 50
states and the US territories, with oversight over telecommunications,
electricity, gas, water and other utilities.
Just like the members of this Subcommittee, NARUC's members are
continually seeking the best solutions to the policy issues that impact
our nation's evolving telecommunications markets. While there is
significant diversity of opinion and thought among State commissioners,
my testimony today is intended to present the consensus positions that
have emerged from NARUC's internal discussions and also highlight the
challenges we face together as Federal and State policymakers seeking
to protect consumers, facilitate competition, promote universal service
and otherwise encourage a reliable, dynamic, effective communications
system for the 21st Century.
Legislative principles and federalism:
In response to congressional interest in reexamining the Telecom
Act, NARUC formed a Telecom Legislative Task Force in 2004 and approved
a resolution at our February 2005 meeting suggesting key features we
believe any revision of the Act should include:
Promote innovative platforms, applications and services in a
technology-neutral manner;
Consider the relative interests and abilities of the State and
federal governments when assigning regulatory functions.
Preserve the States' particular abilities to ensure their core public
interests;
Preserve customer access to the content of their choice without
interference by the service provider;
Ensure timely resolution of policy issues important to consumers and
the market;
Protect the interests of low income, high cost areas, and customers
with special needs;
Provide responsive and effective consumer protection; and
Focus regulation only on those markets where there is an identified
market failure.
An area of particular concern has been the evolving nature of
federalism. While telephone customers have been making calls across
state lines since at least 1884, the role of State commissions has
evolved over time to match the structure of the market and the needs of
consumers. For many decades, a primary State commission task was to
restrain the market power of a single national phone company
(presumably with many centralized functions) by holding down local
rates, preventing harmful cross-subsidies and requiring equitable
build-out of facilities. More recently, States played a central role in
facilitating wholesale markets for incumbent phone loops and other
essential facilities for local competition, and developed sophisticated
consumer hotlines to provide a human voice and individual attention to
frustrated consumers.
As the communications market shifts again, NARUC has explored a
pragmatic analysis that looks to the core competencies of agencies at
each level of government--state, local and federal. While some State
oversight roles will undoubtedly diminish where local competition
grows, others will remain essential, especially as large parts of the
market, including VOIP, still seek access to the Public-Switched
Telephone Network (PSTN). In many cases, State jurisdiction need not
rely on a readily separable ``intrastate'' component of a service. For
example, effective consumer protection depends largely on where the
consumer is domiciled, regardless of whether calls are placed to in-
state or out-of-state destinations. Requests to interconnect depend on
where the relevant facilities are located. Requests to receive
universal service funds or to be designated as an Eligible Telecom
Carrier (``ETC'') for such funds depend on the geographic study area
where service will be provided.
Ultimately, decisions about jurisdiction and oversight should be
linked not to the particular technology used, but to the salient
features of a particular service, such as whether it is competitive and
how consumers and small businesses depend on it. States commissions
excel at delivering responsive consumer protection, assessing market
power, setting just and reasonable rates for carriers with market
power, providing fact-based arbitration and adjudication. States are
also the ``laboratories of democracy'' for encouraging availability of
new services and meeting policy challenges at the grassroots level. An
effective, pragmatic approach to federalism, in the IP world or
otherwise, should recognize those strengths.
Consumer protection:
Even in an IP world, consumers will hesitate to depend solely on
faraway federal agencies for consumer protection when they encounter
disputes or frustrations with their service provider. State commissions
operate sophisticated consumer hotlines that handle tens of thousands
of consumer complaints every year, providing a live human voice on the
other end of the line and individualized assistance each time there is
a problem. In many case, our representatives need only provide an
explanation to address a consumer's concerns, letting them know what
``SLC'' stands for on their bill or explaining an E911 assessment's
purpose. Failing that, a State commission can mediate with the carrier
or, if necessary, adjudicate a dispute.
Because we are on the proverbial front lines by handling so many
complaints, State commissions are often the first to hear about new
abuses or particular business practices that distress consumers.
Effective consumer protection requires the authority and the
flexibility to address those concerns as they arise. This was the case
with ``slamming'' and ``cramming'' on phone bills, which first became
an issue at the State level and eventually became the subject of
federal rules. A recent internal survey of NARUC's Consumer Affairs
Committee revealed that State commissions in just 20 states handled
over 233,000 complaints in 2004.
In some cases, VOIP services could actually raise new issues. For
example if a customer of an unaffiliated VOIP provider experiences a
service outage, and the VOIP provider and broadband provider are
pointing fingers at each other, who will sort it out? The FCC is ill-
equipped to remedy individual service outages and the customer is
hardly in the position to solve it herself. State commissions have
handled similar provisioning issues between CLECs and ILECs for years.
Emergency dialing--911 and E-911:
As more families replace their traditional phones with VOIP service
to take advantage of the pricing advantages and features, it is
particularly important to make sure these services include reliable
emergency dialing functionality that will route calls to the nearest
Public Safety Answering Point (PSAP), indicate the caller's location
and allow the 911 operator to call back if the call is disconnected.
Such services should also be subject to the fees that support the
modern PSAP network, especially as PSAPs undertake massive technology
upgrades to accommodate IP and wireless services.
Unfortunately, thanks to a series of legal challenges and the FCC's
ruling last year in the Vonage petition, there is currently no
requirement for VOIP services to provide a 911 or E911 solution, and
the right of VOIP services to interconnect to PSAP trunk lines is
unclear. NARUC is encouraged by the progress that VON Coalition members
and other VOIP providers have shown in beginning to provide 911
functionality, and we are engaged with both the industry and the public
safety community in clearing away obstacles to a ubiquitous E911
deployment.
Ultimately, the appropriate regulatory treatment and classification
should allow VOIP providers to avail themselves of the interconnection
and arbitration procedures in Section 252 of the Telecom Act, with
timely arbitration and reasonable pricing of those network elements
necessary to provide E911 service, such as access to the selective
router and appropriate databases.
The future of competition:
When Congress considered VOIP legislation in 2004, many suggested
that competition oversight was unnecessary wherever Internet Protocol
was used, averring that to broadband providers, ``a bit is a bit.''
Unfortunately, the opposite proved true earlier this year when Madison
River Communications deliberately blocked ports for customers of Vonage
Holdings Corporation. The March 2, 2005 issue of Internet Week quoted
Vonage CEO Jeffrey Citron as saying that:
``The advanced features of network analyzers already allow
administrators to look not only at what types of packets are
traversing their networks, but into the actual content of the
packets.''
Far from anonymizing competing providers, IP technologies may
actually increase the ability to discriminate against particular
traffic, or favor a partner's bits over those of an unaffiliated
provider. While the FCC acted quickly with an enforcement action and a
consent agreement with Madison River, such redress was only available
because the company was offering a DSL service, and would not
necessarily be available for a cable modem provider. In fact, if DSL is
ultimately classified as an information service, such remedies will
become even weaker.
Many of us are putting high hopes on all these new technologies and
services to bring fresh competition to telecommunications. At the same
time, the industry is experiencing a breathtaking run of mergers, with
firms like AT&T and MCI--once bastions of local competition--now being
absorbed by the Baby Bells they competed against, and there is
significant consolidation in the wireless and cable industries as well.
With so much restructuring, market power could increase in some
geographic markets, even as it decreases in others. State commissions
have extensive expertise in assessing market power in a local basis,
providing relief where appropriate but able to reimpose oversight in
the event of ``backsliding.''
If there is one thing we know, it is that the communications
landscape of ten years from now will look vastly different than
today's. Broadband connections might become commoditized as consumers
seek their voice and other value-add services from unaffiliated firms
like Vonage, Pulver, Skype and Microsoft, or those same providers could
find themselves squeezed out by facilities-owners' ``bundles'' that
include voice as a no-cost fringe benefit. Wireless broadband
technologies might democratize the last mile and eliminate the
traditional barriers to competition, or we could be left with a
powerful duopoly that new entrants are hard pressed to compete against.
And even as affluent early adopters flock to sophisticated new
services, many consumers will continue to prefer a simple, basic phone
connection that is not a part of any ``bundled'' package.
In all of this, it falls to policymakers not to forecast the next
wave of innovation but to look out for consumers and set fair rules of
the road that foster competition and allow the market to allocate
resources efficiently. Our task is to be both optimistic and vigilant,
letting innovation take its course, but demanding that our constituents
are protected. While competitive VOIP companies are hesitant to be
classified as ``telecom service'' providers, many are seeking the
rights that Title II of the Telecom Act confers on telecom services:
Guarantees of non-discrimination;
Interconnection rights to the PSTN;
Rights to interconnect to PSTN trunk lines to Public Safety Answering
Points (PSAPs);
Access to NANP telephone numbering resources;
Local number portability;
Access to pole attachments and rights-of-way; and
Receipt of Universal Service Funds.
Many of these rights are adjudicated or otherwise facilitated by
State commissions. In fact, if VOIP providers are unable to avail
themselves of the State commission arbitration procedures of Section
252 of the Telecom Act, they will actually have inferior rights to
those of their traditional competitors.
Universal service:
Voice over IP services also benefit from our nation's ubiquitous
phone network supported by State and Federal universal service programs
over the past several years. As a general matter, the only VOIP
services that fetch a fee in the markeplace are those that exchange
traffic with the PSTN--the ones that don't are usually free. In other
words, at least in today's market, the majority of VOIP services are
really offering a new way to call and be called by the traditional PSTN
phones that most of us still use. That is why NARUC supports a broad
and equitable contribution base to state and federal universal service
programs so all service providers that rely on a ubiquitous telecom
network--including VOIP providers--help maintain the universality of
the network, with a similar spectrum of services at comparable rates in
urban and rural areas.
State commissions help administer the federal USF, by designating
Eligible Telecommunications Carriers (ETC) in each state, by regulating
the cost recovery of many rural carriers that depend heavily on
universal service, and by offering policy input through the Federal-
State Joint Board on Universal Service. About 24 states also run their
own intrastate universal service funds, addressing about $2 billion in
high cost, low income and other needs that would otherwise be short-
changed by federal formulas, or that simply don't require the
interstate transfers that the federal USF was created to accommodate.
Any universal service reform should either preserve those State funds
or find a way to make consumers in those 24 states whole. By limiting
the fees to customers domiciled in a particular state, a State fund can
localize both the burden and the benefits, as opposed to further
burdening customers in Mississippi or Arkansas to meet needs in
California or New York.
Intercarrier compensation:
VOIP services must also pay their fair share, just as all other
carriers do, when exchanging traffic with the PSTN. NARUC supports
efforts to develop a rational, technology-neutral intercarrier
compensation system that includes all carriers, including VOIP
providers, avoids regulatory arbitrage and allows carriers to recover
an appropriate portion of network costs. At the same time, State
commissions should retain a role in this process reflecting their
unique insight as well as substantial discretion in developing retail
rates for carriers of last resort. NARUC is leading an intensive
dialogue among the states and with the industry stakeholders to seek a
consensus solution.
Video over IP
Because ten State commissions have jurisdiction over cable
franchising, NARUC is in the process of examining the appropriate
regulatory treatment of the IP video offerings by SBC and Verizon. As a
legal matter, the individual State commissions will make determinations
about whether those services must comply with Title VI franchising
requirements as appropriate. As a policy matter in the context of
federal legislation, NARUC members will go back to first principles, as
we have with Voice over IP, and examine how to encourage innovation
while preserving core public interests.
Conclusion:
We look forward to the continuing dialogue with the members of this
Subcommittee, with federal regulators and with all the stakeholders
about the future of telecom regulation. I am happy to answer any
questions from membrs of the Subcommittee.
Mr. Upton. Thank you. Mr. Davidson.
STATEMENT OF CHARLES M. DAVIDSON
Mr. Davidson. Thank you, Chairman, Ranking Member Markey,
representatives. It is an honor to be here today, and I
appreciate the opportunity.
During these discussions, you often hear that the 1996 Act
was a failure and it needs to be reformed. I don't think it
should be viewed as such. Congress should be proud of the 1996
Act and stand behind what it did. Competition is here. It may
be outside the context of the ILEC versus CLEC competition
anticipated, but it is here.
But for the 1996 Act, we might not have seen DSL come off
the Bell's shelves as quickly as it did. We might not have seen
the tremendous investment in the cable infrastructure that we
have seen. We might not be the beneficiaries of probably the
most robust, dynamic, competitive wireless network in the
world.
The 1996 Act had a purpose and many positive effects, but
the world in 2005 is very different from the world even in
2000. Just since 2000, the telecom sector, as you know, has
lost some $2 trillion in market capitalization, and hundreds of
thousands of jobs. Other platforms are aggressively competing
with wire line for market share. Estimates are that by 2006,
cable captures 7 percent of wire line customers, and 20 percent
over the next decade. On the flip side, traditional telecoms
have a very real potential to compete with cable and the
delivery of video. All of this is great news for consumers and
all of this might not have occurred but for the Act.
Getting the model right going forward is critically
important to the economic and social advancement of the Nation.
One, it is important to both--it is important to help the
telecom sector recover, and it is also important to encourage
these new entrants to come into the market and deliver their
services and invest in these new technologies for consumers.
Regulatory reform means jobs. The wireless industry generates
more than $9 million a year in payrolls. We need to patent that
formula, somehow. Getting the model right means billions of
dollars in new capital spending and new choices for customers.
Getting the policy right means a stronger America.
In deregulating VoIP in Florida and in providing that
broadband shall not be subject to a patchwork of local
government regulations, Florida is hoping that Brighthouse
Cable will compete with Verizon in the voice segment, and that
Verizon will compete with Brighthouse in the video segment.
This competition that we hope for in this building out of
networks is extremely capital intensive. Cable has invested
some $95 billion in the past decade to build out its networks.
Verizon is currently spending over $60 million in 1 year alone
to build out fiber networks to bring video to customers in
Florida. Wireless has invested some $175 billion in its
networked, and reinvests, as CTI estimates, about $20 billion a
year for upgrades.
We need a new regulatory paradigm. The current model is
focused on the wire line market, on the ILEC versus CLEC
debate. The rules distinguish between telecom and everything
else. Existing rules that served a very valid purpose when the
market was just telecom and the providers were just the phone
companies doesn't work in this new market.
In crafting sort of a new regime, the first question that
often arises is ``What are the respective roles of State and
Federal Government?'' I respectfully submit that this is not
the first question to ask. Far more often than I hear the
question of ``How do we maximize consumer welfare? How do we
bring these new technologies to customers?'' I hear the
question ``How do we make sure States continue to have a role
in regulating these issues?'' States will have a role. They
should have a role. But our first concern ought to be bringing
these new technologies to customers.
Chairman Upton, despite Michigan beating Florida in the
broadband survey, and despite Michigan actually kicking the
Gators' tail a few weeks ago in lacrosse, you represent----
Mr. Upton. We won a big ballgame against Florida.
Mr. Davidson. I am leaving that out.
But you represent me as a citizen of the United States.
Representative Stearns represents me. Representative Markey,
you represent me. We are not just a loose coalition of States;
we are a Nation with sort of a shared interest in economic and
social advancement. And just like with the airlines industry or
the shipping industry or the railroad industry, we truly need a
national policy.
Some of the core ingredients that ought to be included in
that national policy, a clear and simple quid pro quo, an
articulation of what a social contract is to provide certainty
to market participants, and a clear benchmark for regulators. A
straightforward social pact might be, if you use North American
numbering resources, for example, you are going to be subject
to certain obligations. It doesn't matter whether you are pure
VoIP, cable telephony, wire line, wireless. If you use a North
American number, you are going to have to meet certain social
obligations. That keeps the model platform agnostic, and
everyone clearly knows, okay, if we go get a number, we are
going to have this universal service commit, we are going to
have an inter-carrier comp issue, we are going to have to
provide 911. There are certain things we do.
We also need a truly national set of rules to govern terms
and conditions of service. A patchwork of potentially 50
different State rules in this emerging IP market will deter
some entrants from entering the market, and it will also cost a
lot of money for folks already in the market to comply with
those rules. States have a lot of good ideas. Let us
nationalize those ideas and bring them forward at a Federal
level.
And finally, one final point, if I may, tax reform. The
sectors that are driving the economy are being taxed at double-
digit rates. Let us put some of this money back in the hands of
consumers. Let us do something to create jobs and encourage
investment and innovation.
Thank you, Chairman.
[The prepared statement of Charles M. Davidson follows:]
Prepared Statement of Charles M. Davidson, Commissioner, Florida Public
Service Commission
I. INTRODUCTION
Thank you, Mr. Chairman, for inviting me here to testify. I am a
Commissioner at the Florida Public Service Commission, the agency with
regulatory jurisdiction over Florida's investor-owned telephone,
electric, natural gas, and water utilities. My comments here today are
those of an individual Commissioner. I am also before you as a consumer
who has not had telephone service for over a year. I use a wireless
phone, VoIP service over my cable modem, Blackberry data service and
wireless broadband when traveling--but I have no telephone.
I would like to thank the Committee for its ongoing efforts to
ensure that consumers in Florida and across the country benefit from
policies to promote the development and deployment of advanced
communications technologies. I would also like to thank the Florida
delegation represented on this Committee for its consultation with the
Florida Commission on energy and communication issues important to the
State of Florida.
Under the leadership of Governor Bush and the Florida Legislature,
Florida leads the nation in policies focused on bringing new
technologies to all Floridians. Florida was the first state in the
nation to provide that VoIP shall not be subject to regulation. Florida
was the first state in the nation to provide that broadband, regardless
of the provider or platform, would not be subject to a patchwork of
local government regulations. As a result of forward looking policies,
companies like Vonage as well as cable companies are competing with
established telecom providers for a share of the voice market. On the
video side, Verizon is gearing up to compete with cable though its
build out of a robust video over fiber network in central Florida.
Competition is occurring in Florida, and it is occurring outside of
``the regulated space.''
II. THE 1996 ACT: INSIDE AND OUTSIDE THE REGULATED SPACE
A. The Traditional Telecom Sector
The U.S. Chamber of Commerce recently reported on the state of the
wireline telephony sector. From March 2000 to July 2004, market
capitalization in the telecom sector plummeted from $1,135 billion to
$375 billion (a 67% decline). The communications equipment-
manufacturing sector experienced a 74% decline in market capitalization
(from $1,282 billion to $338 billion) for the same period.<SUP>1</SUP>
Some 380,500 jobs were lost between March 2001 and May 2004 in telecom
service, Internet service, and equipment manufacturing.<SUP>2</SUP> The
Yankee Group projects that U.S. landline revenue will fall from $63.2
million in 2004 to $47.4 million in 2008.<SUP>3</SUP>
B. Innovation, Investment and Competition Outside the Box
Other sectors are flourishing under the regulatory policies
established by Congress. The extent of innovation and investment
``outside the box'' is perhaps best demonstrated by the success of the
wireless industry. The industry has, for example: invested more than
$174 billion (1983 to 2004) in wireless networks and reinvested some
$20 billion annually for upgrades and expansions;<SUP>4</SUP> directly
employed 226,016 people as of December 2004 and generated more than $9
billion in annual payrolls; <SUP>5</SUP> and increased subscribership
to over 182 million while reducing per minute prices.<SUP>6</SUP>
While occurring outside the ILEC vs. CLEC competition envisioned by
the 1996 Act, competition is occurring. Research firm IDC predicts, for
example, that by 2009, some 27 million consumers will subscribe to
VoIP.<SUP>7</SUP>
Cable is competing with traditional wireline telephony. Raymond
James reported that Wall Street ``expects between 1.5 million and 2.5
million cable telephony net adds by the public MSOs in
2005.<SUP>8</SUP> Goldman Sachs estimates that telephone companies
could lose 7% of residential lines to cable by 2006, and nearly 20% in
the next 10 years.<SUP>9</SUP> Another estimate is that more than half
of all 110 million households in the U.S. will have the option of
getting phone service from their cable companies by the end of 2006 and
that by 2008, cable companies will be selling phone service to 17.5
million subscribers.<SUP>10</SUP>
Wireless is also competing with wireline telephony. According to
the FCC's September 2004 report, the number of mobile wireless
subscribers nationwide has grown 5% since 2002, with subscribership at
54% of the U.S. population as of December 31, 2003.<SUP>11</SUP> In
contrast, local exchange companies saw a 6.1 million drop in access
lines nationwide in 2003.<SUP>12</SUP> According to a 2004 study issued
by In-Stat/MDR, 14.4% of U.S. consumers currently use a wireless
telephone as their primary telephone. Of the remaining 85.6%, 26.4% of
those would consider replacing their wireline telephone with wireless
service. In-Stat/MDR predicts that by 2008, nearly a third of all U.S.
wireless subscribers will no longer have a landline in their
homes.<SUP>13</SUP>
Wireless is also competing for a share of the enterprise market. In
a recent In-Stat survey of more than 300 mid-size businesses and large
enterprises, nearly \1/4\th of respondents stated that their firm had
already deployed wireless VoIP. Approximately \1/3\rd of the
respondents indicated that their firm was planning or evaluating the
implementation of the technology within the next six to 12
months.<SUP>14</SUP>
Internet-enabled communications are also competing with traditional
voice. A 2003 J.D. Power and Associates study found that among high-
speed Internet users, instant messaging displaced 20% of local calls,
and email displaced 24% of such calls. Among dial-up Internet users,
the study concluded that instant messaging displaced 18% of local
calls, and email displaced 23% of local calls.<SUP>15</SUP>
III. THE BENEFITS AND COSTS OF BROADBAND
A. The Importance of Broadband
Broadband is critically important to the economic well being of the
country--and of the states. Like with many states, Florida's economic
and social development--including its skills and job training,
education and health care services,<SUP>16</SUP> and the recruitment
and retention of businesses--is increasingly linked to an advanced
communications infrastructure.
In their seminal study, Crandall and Jackson conclude that
ubiquitous adoption of current generation technologies would generate
some $63.6 billion in capital expenditures over the next 19
years.<SUP>17</SUP> They further estimate a cumulative increase in GDP
of $179.7 billion and an additional 61,000 jobs created. The impact of
more advanced technologies, such as fiber to the home, would generate
an additional net $82.8 billion in capital spending ($4.34 billion per
year) for a total of $146.4 billion in new capital spending over 19
years, which would result in a total of 140,000 new jobs. Broadband
enabled activities have the potential to spur new rounds in capital
spending (on research, development, and deployment) and consumer
spending (on content, software and applications, and devices).
B. Bringing Broadband to Consumers Takes Capital
Realization of broadband's full economic potential will require
billions in additional up-front investments in technology, networks,
and deployment. To upgrade systems and make cable broadband service
more widely available to homes passed by its network, cable operators
have invested almost $95 billion between 1996, when cable pricing was
deregulated, and 2004.<SUP>18</SUP> ILECs are responding to FCC rulings
that new build would not have to be unbundled or shared with
competitors by making significant investments in fiber. For example,
Verizon states that is spending an estimated $3 billion on fiber
deployment in 2004 and 2005. In 2004 alone, Verizon announced that it
was spending $60 million to deliver fiber technology to customers in
Florida.<SUP>19</SUP> Additionally, SBC has recently announced that it
is accelerating its fiber deployment and plans to invest approximately
$4 billion to $6 billion to deploy some 38,800 miles of fiber to reach
19 million homes by the end of 2007.<SUP>20</SUP>
Estimates by research firms on the potential for additional
broadband investment are abundant. For example, one such estimate by
InStat concludes that a $3 billion investment would be necessary to
deploy a WiMAX-based network that reaches 98% of U.S.
homes.<SUP>21</SUP>
C. Florida's Focus on Promoting Competition
Florida is promoting the deployment of new technologies in the
state. In addition to not regulating wireless carriers,<SUP>22</SUP>
Florida was the first state in the nation to deregulate
VoIP.<SUP>23</SUP> The Legislature also freed broadband and information
services generally from a potential patchwork of local government
regulation that could hinder its deployment.<SUP>24</SUP>
Currently, the Florida Legislature is considering companion bills
in the House and Senate <SUP>25</SUP> to further promote advanced
communications technologies in the state. If ultimately enacted into
law, the legislation would expressly:
Encourage consistency with federal law.
Exempt broadband services, regardless of the provider, platform or
protocol, from state commission jurisdiction.
Ensure that emerging technologies like VoIP, while not subject to
traditional regulation, are ``subject to [Florida's] generally
applicable business regulation and deceptive trade practices
and consumer protection laws, as enforced by the appropriate
state authority [or in court].''
Floridians are the beneficiaries. For example, over 20 wireless
competitors serve over 10 million Florida subscribers,<SUP>26</SUP> and
77% of Floridians have a choice of five or more wireless carriers.
Wireless carriers employed 13,893 Floridians in 2003. VoIP providers,
including Vonage, AT&T, and Bright House Networks are competing with
traditional telecommunications providers. In terms of broadband access,
Florida had over 1.76 million high-speed lines in service to residences
and small businesses by December 2003--up from 254,000 lines just three
years prior.<SUP>27</SUP> In 2004, Verizon began deploying fiber to the
premises (FTTP) technology. Verizon plans to pass more than 100,000
Florida homes and small businesses, and is set to launch its first
television services on its new FTTP network this year.<SUP>28</SUP>
Florida's approach provides a model worthy of consideration at the
national level. In exempting new technologies from old regulation,
Florida has paved the road for delivering new technologies to
consumers. At the same time, providers of new technologies remain
subject to the state's aggressive, generally applicable consumer
protection regime.
IV. A NEW, NATIONAL POLICY FRAMEWORK IS NEEDED
Policymakers should avoid casting the issue as one of states'
rights versus federal preemption. State and federal policymakers are
pursuing the same core goal--that being to promote investment in the
development and deployment of broadband infrastructure.
At a time when some states are focused on harnessing the benefits
of competitive new technologies for its consumers, other states are
attempting to burden the new technologies with old rules designed to
forge competition in the monopolized wireline telephony market. Fifty
states with potentially fifty different regulatory policies will not
further that goal.<SUP>29</SUP> A new, national policy is needed to
both (a) help the telecom sector recover <SUP>30</SUP> and (b) ensure
that consumers reap the benefits of advanced technologies.
A. IP Challenges the Existing Regulatory Regime
Current telecommunications regulation has its genesis in the
economic regulation of monopoly providers of wireline telephony.
Economic regulation acts as a proxy for competition. The 1996 Act
intended to spur competition by encouraging CLEC market entry. The
regulatory approach is fundamentally grounded in a wireline paradigm,
presupposes that the relevant market is local telephony, and is focused
on the terms/conditions of market access. Consumer choice is a function
of the ILEC vs. CLEC competition. The Act is not focused on other
categories of competitors or technologies that may be competing with
traditional telephony.
Further, under existing law, classification of a service as
``telecommunications'' or ``information'' is critical in that it
determines the rights and obligations to which a provider will be
subjected. In the IP world, the line between ``telecommunications
services'' and ``information services'' is murky at best. VoIP
represents the convergence of voice and information. Some would force
IP-enabled voice services into the ``telecommunications'' service box
or some similar definition under state law. In doing so, they are
seeking to preserve a regulatory model that is increasingly obsolete
and that was not intended to encompass such technologies.
Uncertainty as to the regulatory treatment of IP-enabled
technologies, and efforts to pigeonhole new technologies into old
regulatory constructs, will serve primarily to delay the development
and deployment of these technologies for consumers.
B. Rationales for a National Policy Framework
1. Intent of the 1996 Act
A national policy framework for IP-enabled services (and broadband
generally) is fundamentally consistent with (if not required by) the
Telecommunications Act of 1996, which was designed ``to provide for a
pro-competitive, de-regulatory national policy framework designed to
accelerate rapidly private sector deployment of advanced
telecommunications and information technology and services . .
.'').<SUP>31</SUP>
2. Interstate Nature of the Market
IP-enabled technologies and platforms exist and function without
regard to state boundaries and as part of a national (indeed, global)
communications infrastructure. Such technologies are ``borderless'' in
nature. Unlike with the circuit-switched network, which developed
within states and then between states, traffic over an IP network does
not follow any prescribed geographic path. IP traffic cannot be readily
defined as within the jurisdiction of states.<SUP>32</SUP> The
interstate nature of IP-enabled services and the need to avoid a
patchwork of potentially fifty different state policies argue strongly
for regulation at the national level.
1. Costs for Consumers of a State-Centric Approach <SUP>33</SUP>
National regulation of IP-enabled services would provide greater
regulatory certainty than would a patchwork of fifty potentially
different state policies. An industry that faces potentially divergent
or unknown regulatory regimes would have less of an incentive to invest
risk capital than would an industry facing a more uniform, predictable
national policy. With Congressional assurances of regulatory clarity,
VoIP providers would likely be more willing to expand services, even in
states like California that are considered riskier regulatory
environments
A patchwork of various state regulations all aimed at the same
service would likely result in additional costs to the consumer. If 10
of the 50 states each have good (but different) ideas for regulation
and each of those 10 good approaches would cost on average $2M for the
providers to comply, the overall costs of service would increase. This
additional level of state regulation would have resulted in $20M in
additional regulatory costs that will, in a competitive market, be
socialized amongst the customers of the services. The costs of state
specific regulation by Florida, California and New York would likely be
borne by consumers in every jurisdiction represented in Congress.
C. Core Components of a National Policy
1. No Economic Regulation
Economic regulation is a proxy for competition. It includes the
regulation of prices and of other terms and conditions of service that
would otherwise be determined by the market. While economic regulation
of monopoly providers of a service is certainly warranted, such
regulation is a certain disincentive to investment in competitive
markets. Unlike the market for wireline telephony in 1996, the market
for IP-enabled services is competitive. Even in the face of regulatory
uncertainty, IP-enabled technologies are spurring robust price and
service competition from a host of established firms and new entrants
alike--and this competition is occurring across platforms. Consumers
have far more choices than existed 5 years ago.
2. Focus on Social Regulation
While IP-enabled technologies should not be subject to economic
regulation, ``social regulation'' is necessary to meet key societal
objectives that may not be fully or properly addressed by the market
(e.g., 911/e911).
Uncertainty currently exists as to the scope of providers/
technologies to which social regulation would apply. In considering the
appropriate regulatory regime, Congress has the unique opportunity to
articulate a clear quid pro quo for the regulation at issue. One
technologically agnostic option might be for Congress to provide that
any provider seeking to use North American Numbering Plan resources is
subject to some universe of generally applicable social regulations as
articulated by Congress (or the FCC by delegation). Tying social
regulation to the use of a public resource would (a) provide certainty
to providers relying on public numbering resources to deliver services,
(b) offer a safe harbor to entities that are not relying on such
resources, and, perhaps most importantly, (c) provide a clear benchmark
for use by state and federal policymakers.
3. Regulatory Parity and Technologically Agnostic Rules
Competition is not sustainable in the long run where substitutable
products are subject to asymmetrical regulation. In deciding where to
invest, the market will compare the anticipated return on capital
invested in a more regulated sector to capital invested in a less
regulated sector. A rational investor seeking a maximum return on its
investment would, all else equal, choose the less regulated sector.
As such, the ultimate policy regime should not discriminate based
on the underlying technology or platform used for the delivery of
services: technological parity should result in regulatory parity. From
the vantage of the consumer, there is no reason for regulating
substitutable products differently. If, for example, Video over IP and
Video over FTTH are substitutes from a consumer vantage, a similar
regulatory regime should apply. From the vantage of the market,
regulatory symmetry works to send accurate price signals, maintain a
level playing field, and promote competition based on the merits. The
best way to ensure regulatory parity is for Congress to set national
policy with respect to competing technologies.
As Congress considers a rewrite of the 1996 Act, two avenues exist
for achieving regulatory parity: ``regulating up'' or ``deregulating
down.'' The market for IP-enabled services is competitive, and
consumers have more choices than at any point in the past. As such,
regulating similarly situated platforms down to the point of regulatory
symmetry would likely do more to encourage investment and bring new
choices to consumers than would regulating up.
4. Jurisdiction & Process: Cooperative Federalism
In assigning jurisdictional responsibilities, future legislation
ought to reflect that states and the federal government share certain
interests and responsibilities. For example, both levels of government
share an interest in ensuring a ubiquitous, reliable and affordable
911/e911 emergency services network. One cannot credibly argue,
however, that the 50 states should have independent jurisdiction to set
911/e911 standards. Similarly, the states and the federal government
share interests in protecting consumers against unscrupulous practices,
in ensuring that networks interconnect, and in curbing abuses of market
power.
The issue is not one of states versus federal rights and should not
be cast as that. The issue is one of articulating a rational policy
framework such that core public policy objectives are met, providers
are not deterred from investing in and deploying new technologies to
consumers, and consumers are protected against unscrupulous practices.
Federal statutory reform should focus on the skill sets of state
and federal governments before delineating regulatory duties. The
nation--its consumers as well as those investing in new technologies--
would be best served by a set of national rules that could be
aggressively enforced by the states (or federal agencies as the case
may be). States have numerous ``enforcement'' vehicles already
established. For example, states have substantial experience enforcing
federal rules that provide for interconnection and intercarrier
compensation, rules that establish 911 obligations, and rules that
prohibit slamming or cramming. Going forward:
Federal law could establish consistent requirements for platform
interoperability and interconnection, with state commissions
serving as arbitrators of disputes.
Federal rules could establish the parameters for the use of North
American Numbering Plan resources, while vesting states with
enforcement authority (e.g., denial of right to use numbers
upon findings of misconduct).
Comprehensive national truth-in-billing rules could be policed by
state commissions (or other bodies deemed appropriate by a
state, such as a state Attorney General).
V. KEY POLICY AREAS
A. Consumer Protection
States and the federal government share a common goal of ensuring
that consumers are protected against unscrupulous companies and
fraudulent practices. That shared goal could best be met by a national
consumer protection regime with the following elements: (a) national
rules specifically relating to the terms and conditions of
communications services; (b) joint state and federal enforcement of
such rules; (c) continued application of ``generally applicable'' state
consumer protection, fraud and deceptive business practice laws; and
(d) recognition of industry self-policing.
National rules would prevent potentially conflicting (albeit well-
meaning) state regulations. For example, California, in a consumer
``bill of rights'' issued by the state utility commission, dictated the
font size to be used in the contracts of national providers. Twenty
states requiring twenty different font sizes would be costly for
consumers. Requiring that the contracts of national providers comply
with a patchwork of state-specific terms and conditions would
substantially increase transaction costs (which, in a competitive
market, will undoubtedly be paid by consumers). Further, having to
comply with potentially 50 sets of state-specific rules may simply
deter some providers from even offering service in certain areas. In
either case, the consumer loses.
Joint state and federal enforcement of national rules would ensure
that the consumers have institutions in their states to which they can
turn for assistance. As states have existing enforcement mechanisms
(e.g., to address cramming and slamming), the enforcement of consumer
rights claims should, to the extent practicable, occur at the state
level. Burdening a state consumer with a requirement to enforce his or
her claim in a federal forum would be unreasonable in most instances.
Notwithstanding national rules focused on the communications
sector, states should continue to have the right to continue to enforce
their generally applicable consumer protection, anti-fraud, and
deceptive trade practices statutes.
Where possible, public policy should give weight to meaningful
self-policing initiatives such as CTIA's Voluntary Consumer Code.
Wireless carriers have demonstrated a realization that proper billing
practices and consumer satisfaction are important objectives. The Code
is designed to encourage greater wireless carrier communication and
disclosure to consumers on a voluntary basis.<SUP>34</SUP> Such
initiatives should be encouraged and afforded a reasonable opportunity
to address the particular issues at hand. If demonstrated to be
effective, such efforts could serve as the basis for national rules or
to establish liability of non-conforming providers.
B. Public Safety
Public policy argues for a ubiquitous, reliable and affordable
public safety communications network. While market forces will likely
encourage competitors to provide functional 911/e911 services over
time, the issue should not be left solely to the market.
Congress (directly or via delegation to the FCC) should establish
clear 911/e911 mandates for IP-enabled voice technologies. As was the
case with the wireless industry, policymakers should afford a
reasonable opportunity for providers of IP-enabled voice services to
develop compliant systems to meet mandatory standards.<SUP>35</SUP>
Market forces (i.e., consumer demand for 911 service) and a pending
government mandate should motivate effective solutions. As voice
traffic migrates from the PSTN to new networks, all segments of the
industry have an incentive to provide 911/e911 services sooner rather
than later.
In the meantime, VoIP providers using public numbering resources
should be required to fully inform consumers regarding the extent to
which their service does (or does not) offer 911 service that is
functionally equivalent to that provided by traditional telephone
providers. To avoid a patchwork of potentially conflicting state
regulations, which could chill the rollout of new services to
consumers, Congress could provide for uniform, national disclosure
guidelines to which VoIP providers using public numbering resources
would have to comply in order to provide service.
Finally, all providers utilizing the 911 system (i.e., those
routing calls to the 911 system) should bear their ``fair share'' of
the costs of maintaining the system. Regulatory parity argues that
those who use the system should, regardless of the platform used,
support the system.
C. Taxation
In competitive markets, taxation increase prices, lowers demand,
and reduces the amount of funds otherwise available for capital
investment. Despite being drivers of the economy, the advanced
communications services are generally taxed at rates far above
generally applicable business tax rates. As more traffic moves to IP
networks, some may argue that existing tax regimes should apply. Where
and when possible, the disproportionate tax burden faced by various
segments of the advanced communications industry should be addressed.
Taxation of the wireless sector highlights the problem. ``States
are taxing wireless customers at steep rates of up to 22%-an amount
typically reserved for activities such as gambling and alcohol
consumption.'' <SUP>36</SUP> Estimates are that a typical consumer
faces a nearly 17% total tax on wireless service.<SUP>37</SUP> In
contrast, the average tax rate for other goods and services is 6.93%.
Between January 2003 and April 2004, the effective rate of taxation on
wireless service increased nine times faster than the rate on other
taxable goods and services. According to a recent study, each 1%
increase in the price of service reduces demand by an estimated 1.12 to
1.29%.<SUP>38</SUP> In Florida and New York, high taxes arguably reduce
customer demand by about 20%.
Reducing an excessive tax burden on the nation's advanced
communications platforms is essential if the nation is to maximize its
economic development potential. Economist Gregory Sidak estimates that
reducing wireless taxes to the prevailing general business tax rates
would increase GDP by $53.6 billion to $65.6 billion over ten years and
that a one percent decrease in wireless prices would ``increase U.S.
GDP by between $6.8 billion and $7.8 billion within two years of the
tax reduction.'' <SUP>39</SUP>
Last year, Congress took the important step of banning Internet
access taxes for an additional four years. It is respectfully submitted
that this temporary ban should be made permanent.<SUP>40</SUP> A
permanent ban would ensure that Internet access remains affordable for
all Americans, regardless of the platform used to access the Internet
(dial-up, DSL, cable modem, Wi-Fi, etc.). Since 1998, the moratorium
has contributed significantly to the development of the industry (and
to economic development generally). Ubiquitous access to the Internet
contributes positively to educational achievement, economic development
and the delivery of governmental services by Florida and other states.
Taxing Internet access would represent a tremendous transfer of wealth
from the private sector to government. Such taxation would only make it
more difficult for consumers with lower incomes to afford the Internet.
D. Universal Service
Universal service has proved an important tool in helping bring
telecommunications services to economically disadvantaged consumers, to
consumers with special needs, and to consumers in rural or high cost
areas of the country. As consumers increasingly turn to substitutes for
a taxed service, not subjecting those substitutes to USF obligations
results in regulation picking market winners and losers. Some
competitors, but not others, would bear the brunt of funding the
program. In reforming the USF program, Congress (or the FCC under the
authority delegated to it) should subject some ``appropriate'' universe
of participants to non-discriminatory, technology neutral USF funding
obligations.
While reform of USF is a complicated issue involving numerous
policy choices and many stakeholders, it is respectfully suggested that
any reform of USF recognize certain core principles, including the
following:
USF obligations ought to reflect, to the extent possible, a clear
social contract or quid pro quo that exists without regard to
technology or platform (e.g., any provider that utilizes North
American numbering resources shall be responsible for USF
contributions regardless of the technology or platform used to
provide service). <SUP>41</SUP>
The extension of USF obligations to new providers or platforms ought
not constitute simply a new tax. Rather, such extension should
reflect a reallocation of planned costs amongst some group of
similarly situated competitors.
Providers that are required to share in the USF burden ought to, at
some equitable level, be considered for USF distributions.
Reform of the USF should also strive to tackle distribution issues.
For example, wireless providers (serving 182 million) contributed
almost 33% of the total universal service fund in 2004 (approximately
$2 billion) but received only about 7% (approximately $390 million) in
distributions. In comparison, ILECs contributed about 26% of the total
USF last year, but received almost 81% of the fund. Long distance
providers contributed 37% of the total USF last year, and received
about 2% of the fund. While parity in contributions and distributions
across platforms may not be attainable, the cost benefit relationship
is worthy of consideration.
D. Content
As the use of new technologies and new types of IP-enabled devices
increases, so does the risk that that minors may be exposed to
inappropriate content. Consider the following:
Porn on mobile phones could grow into a $5-billion market by
2010.<SUP>42</SUP>
Playboy Enterprises announced today that the company is set
to offer nude and non-nude photo galleries that have been
specifically formatted for viewing on Sony's PSP
handheld.<SUP>43</SUP>
In the home, access to the Internet is under the supervision of the
parents or guardian, who can block access to content inappropriate for
minors. Wireless technologies and portable devices make parental
supervision substantially more difficult. Parents may not realize that
inappropriate content might be accessible on the devices or may have no
idea how to block access to age inappropriate content on a child's
device (even assuming that blocking is possible). Exacerbating the
issue is the fact that younger consumers tend to be the early adopters
of new technologies. How many members of Congress own Sony's new PSP?
As this Committee is aware, efforts to regulate Internet content
face a host of complex technical and constitutional challenges.
Protecting the nation's youth from age inappropriate content, however,
requires that policymakers and industry work collectively toward
solutions notwithstanding those hurdles.
Aggressive industry self-regulation may preempt the need for
legislation in certain instances. For example, the Cellular
Telecommunications Industry Association (``CTIA'') is leading an effort
designed to restrict the access of minors to age inappropriate
content.<SUP>44</SUP> The guidelines include the following provisions:
(a) development of a voluntary industry-wide consumer content
classification system; (b) requirements that users register and provide
proof of age for accessing certain content <SUP>45</SUP> and
requirements of subscriber consent to receipt of certain unsolicited
commercial content; (c) controls to restrict access to content based on
content classifications and a process to update the classification
system in consultation with responsible stakeholders as appropriate;
and (d) obligations to ensure compliance with applicable laws regarding
the protection of minors and cooperation with appropriate law
enforcement agencies.
VII. CONCLUSION
The communications world of today is characterized by a host of new
technologies and services that are empowering consumers, that are
strengthening the nation's education and health care systems, and that
are enabling government to be more responsive to the citizenry. The
advanced communications sectors are driving, in large part, the
country's economic growth.
Advocates for a national policy argue that the full potential for
broadband to serve as the engine for the nation's economic and social
advancement is not yet being met. My policy views are based on a
fundamental belief in markets and a fundamental belief that the
beneficiaries of a robust broadband market are the consumers.
Those entrusted with making public policy decisions must
aggressively pursue policies to ensure that we--as a nation--
expeditiously provide consumers with more choices of innovative
technologies at the most efficient prices.
Endnotes
<SUP>1</SUP> ``Sending the Right Signals: Promoting Competition
Through Commerce. October 6, 2004.
<SUP>2</SUP> In fact, 29% of jobs lost during this period were in
telecommunications. ``Sending the Right Signals: Promoting Competition
Through Telecommunications Reform.'' U.S. Chamber of Commerce. October
6, 2004.
<SUP>3</SUP> http://www.yankeegroup.com/public/products/
decision_note.jsp?ID=12911
<SUP>4</SUP> ``CTIA's Semi-Annual Wireless Industry Survey
Results.'' CTIA. 2005. This investment includes a 7.8% increase in cell
sites in service from year-end 2003 to year-end 2004.
<SUP>5</SUP> ``CTIA's Semi-Annual Wireless Industry Survey
Results.'' CTIA. 2005. This number does not include related jobs, such
as independent third-party retailers, construction, manufacturing, or
research and development jobs with other companies. According to the
Bureau of Labor Statistics data, the wireless industry (cellular and
other wireless carriers) employed more than 13,893 people in the state
of Florida during 2003.
<SUP>6</SUP> ``Innovation: The Keystone of the Commercial Mobile
Wireless Experience.'' Cellular Telecommunications & Internet
Association (CTIA) Presentation to FCC. April 2004. http://
files.ctia.org/pdf/CMRSINNOVATIONmar04.pdf
<SUP>7</SUP> http://www.internetnews.com/stats/article.php/3495076
<SUP>8</SUP> Raymond James Equity Research: Wireline: Industry
Brief: Cable's Impact Factored Into Estimates, December 14, 2004, Frank
G. Louthan IV, Raymond James.
<SUP>9</SUP> Brown, Ken. ``Cablevision to Offer Internet Phone-Call
Bundle.'' The Wall Street Journal. June 21, 2004.
<SUP>10</SUP> Grant, Peter. ``Here Comes Cable...and it Wants A Big
Piece Of The Residential Phone Market.'' The Wall Street Journal.
September 13, 2004. p. R6.
<SUP>11</SUP> FCC Annual Report and Analysis of Competitive Market
Conditions with Respect to Commercial Mobile Radio Services, Ninth
Report. FCC 04-216. Released September 28, 2004.
<SUP>12</SUP> FCC Report on Local Telephone Competition: Status as
of December 31, 2003. Released June 2004.
<SUP>13</SUP> Skedd, Kirsten. ``Landline Displacement to Increase
as More Wireless Subscribers Cut the Cord.'' InStat/MDR Press Room.
February 25, 2004. <http://www.instat.com/press.asp?
Sku=IN0401644MCM&ID=895>. Accessed May 3, 2004.
<SUP>14</SUP> http://www.tr.com/online/tr/2005/tr031505/tr031505-
17.htm#TopOfPage
<SUP>15</SUP> J.D. Power & Associates. ``2003 Residential Internet
Service Provider Study (August 2003).''
<SUP>16</SUP> Broadband technologies make distance irrelevant for
many rural patients by providing access to out-of-area physicians and
health care resources. High-speed networks allow health care
professionals to deliver medical care more efficiently.
<SUP>17</SUP> R.W. Crandall and C. L. Jackson, et al, The Effect of
Ubiquitous Broadband Absorption on Investment, Jobs, and the U.S.
Economy, Criterion Economics New Millennium Research Council (2003).
Based on $0.97B per year on residential DSL and $2.38B per year on
residential cable broadband for a total of some $3.35B per year.
<SUP>18</SUP> http://www.ncta.com/Docs/PageContent.cfm?pageID=37
<SUP>19</SUP> http://www22.verizon.com/about/community/fl/news/
alan_opinion.html
<SUP>20</SUP> http://www.sbc.com/gen/press-
room?pid=4800&cdvn=news&newsarticleid=21427
<SUP>21</SUP> http://www.instat.com/
press.asp?ID=1221&sku=IN0401183WN
<SUP>22</SUP> Section 364.01(1), Florida Statutes, grants the
Florida Public Service Commission jurisdiction over
``telecommunications companies,'' and Section 364.02(13)(c), F.S.,
excludes CMRS providers from the definition of a ``telecommunications
company.''
<SUP>23</SUP> Florida law provides that VoIP is ``free of
unnecessary regulation, regardless of the provider'' and exempt from
the definition of ``service'' for purposes of state commission
regulation Sections 364.01(3) and 364.02(12), Florida Statutes. In
filings with the FCC, the Florida Public Service Commission
distinguished between traditional economic regulation and social policy
regulation is discussing necessary versus unnecessary regulation.
<SUP>24</SUP> Section 364.0361, Florida Statutes.
<SUP>25</SUP> Florida Legislature, 2005 Session, SB 2068 and HB
1649, as of April 25, 2005.
<SUP>26</SUP> FCC Report on Local Competition:-- Status as of
December 31, 2003. Released June 2004.
<SUP>27</SUP> FCC report on ``High-Speed Services for Internet
Access: Status as of December 31, 2003.'' Table 7.
<SUP>28</SUP> Verizon corporate news releases, July 19, 2004 and
April 20, 2005. http://news
center.verizon.com/
<SUP>29</SUP> The reasoning Justice Scalia, a states rights
advocate, on the local competition issue supports having a national
policy to govern IP-enabled services and broadband generally. As
Justice Scalia has stated, ``[T]he question . . . is not whether the
Federal Government has taken the regulation of local competition away
from the states. With regard to the matters addressed by the 1996 Act,
it unquestionably has. The question is whether the state commissions'
participation in the administration of the new federal regime is to be
guided by federal agency regulations. If there is any presumption
applicable to this question, it should arise from the fact that a
federal program administered by 50 independent state agencies is
surpassing strange.''
<SUP>30</SUP> The U.S. Chamber of Commerce estimates that reforming
telecom laws would add 212,000 jobs over a five-year period and lead to
$58 billion in new investment.
<SUP>31</SUP> See H.R. Conf. Rep. No. 104-458, at 1, reprinted in
1996 U.S.C.C.A.N. 10 (emphasis added).
<SUP>32</SUP> An IP voice ``call'' between individuals in the same
might carom between servers or gateways in different states.
Determining the topography of such traffic--ahead of time--is often not
possible.
<SUP>33</SUP> States can and should work to remove unnecessary
barriers to broadband deployment. In particular, states can work with
local governments on rights-of-way access and permitting issues. To
address the supply side, states can also create financial and non-
financial incentives for build-out of the broadband network. To address
the demand side, states can offer e-learning applications and other e-
government initiatives to promote the value of using broadband
technology to carry out day-to-day functions.
<SUP>34</SUP> According to the CTIA website, 33 carriers, including
all of the national carriers, have adopted the Code For the complete
list of the 33 wireless carriers that have adopted the CTIA Consumer
Code, please see: http://www.ctia.org/wireless--consumers/
consumer_code/index.cfm.
<SUP>35</SUP> A similar approach was adopted for wireless 911
services. Initially, the ability to pinpoint the location of a caller
was not imposed. The industry was given a reasonable opportunity to
develop a solution.
<SUP>36</SUP> http://www.yankeegroup.com/custom/research/decision _
note.jsp?ID=12704&PID=6DD2924
EE68446BB
<SUP>37</SUP> This total represents a 6.05% federal tax and a
10.74% state/local tax.
<SUP>38</SUP> http://www.pacificresearch.org/events/2003/wireless/
SidakFactsheet.pdf
<SUP>39</SUP> http://www.pacificresearch.org/events/2003/wireless/
SidakFactsheet.pdf
<SUP>40</SUP> A permanent ban Internet access taxes does not have
to preempt state and local taxation of online commerce; impact state
and local taxation of traditional telecommunications services or long-
distance service that are not solely used to provide Internet access;
impact state sovereignty over taxation, except to the extent that
taxing interstate service of Internet access is prohibited; affect the
State Streamlined Sales Tax Project; impact a state or local
government's ability to collect any corporate, property, or income
taxes; or prevent taxation of products or services that are otherwise
taxable just because they are bundled together with Internet access
services.
<SUP>41</SUP> Defining the ``proper pool'' might consider factors
such as: the share of the voice market held by the provider (so as to
exclude providers with but a negligible share of the market); whether
the VoIP is a computer-to-computer application (such as Skype); or
whether the VoIP does not ``touch'' the PSTN at either end
<SUP>42</SUP> http://www.redherring.com/
Article.aspx?a=11541&hed=Mobile+porn%3A+Moving+fast
<SUP>43</SUP> http://news.gaminghorizon.com/media2/
1114012080.741.html
<SUP>44</SUP> http://www.wirelessweek.com/article/
CA506391?spacedesc=Departments&stt=001
<SUP>45</SUP> Compare http://www.theregister.co.uk/2005/02/14/
orange_adult_filter/ (Wireless company Orange UK has started blocking
the delivery of adult content to users not registered as over 18).
Mr. Upton. Mr. Perkins.
STATEMENT OF JOHN R. PERKINS
Mr. Perkins. Thank you, Chairman Upton, Ranking Member
Markey. My name is John Perkins. I am the consumer advocate
from the State of Iowa. I am also currently the President of
the National Association of State Utility Consumer Advocates.
The NASUCA is an organization comprised of 42 States whose
consumer advocates are generally--and the District of
Columbia--whose consumer advocates are generally charged with
representing their individual residents in their States before
their public utilities commissions. As such, we also usually
have the authority to appear in State and Federal courts, to
appear before Federal agencies, such as the FCC and FERC, and
also to appear before legislative bodies, such as Congress and
our State legislatures.
As you look at this new legislation involving new
technologies, I think there are a couple of issues--a couple of
points I would like to make for you to keep in mind. And maybe
they don't need to be said, but as a consumer advocate, I guess
we feel we need to keep making those points as often as
possible. The first is that the overarching--the overriding
principle behind all telecom legislation historically and into
the future is that the public interest has to be the
overarching principle that we reach for. We have to make sure
that telecommunications are made as widely as accessible, as
accessible as possible at the most reasonable cost that we can.
That should govern any legislation, whether it is Federal
legislation or State legislation, and it is as applicable to
the old POTS network as it is to our new Internet
telecommunications that we are looking at.
I think the other issue that I would like the
subcommittees--and this is not just this subcommittee, but the
subcommittees that are also looking at the competition issues,
the merger issues, universal service funding, those issues,
should keep in mind that IP doesn't necessarily mean it is on
the Internet. Just because it is called Internet Protocol
doesn't mean that it is--somehow should become an information
service, and deregulated or unregulated. A lot of the new
switching that the LECs are using, so-called IP switching, the
so-called soft switching, those are Internet protocols, but
they still use the public switch telephone network. My
telephone call using my wire line Quest telephone may go
through an IP-enabled switch, but it doesn't make it an
Internet-based telephone. So as this committee looks at
definitions of IP, I hope it keeps in mind that just because IP
is attached to a phrase, that it is not defined so broadly that
the LECs are going to be able to come in later and say ``We
have IP switching. We are an information service. You can't
regulate us.'' I think that is an important issue.
I think another point that should be made is if we follow
the media and advertisements, it would appear that every
American has a computer, and probably most of us have a
broadband connection to that computer, and that is just not
true. The latest figures that I have seen show that 30 million
Americans have a broadband connection, but 170 million
Americans have wire line access. That is not a very big
percentage of people that have a broadband connection. And when
the LECs start saying well, broadband bypasses 70 to 80 percent
of the American homes. That is a fine statistic, but it is
really meaningless, because the simple fact of the matter is,
broadband connections are still expensive, and many Americans
can not afford a broadband connection. So to say that a cable
runs right outside their home doesn't mean a thing. They are
still not going to buy a computer. They are still not going to
get a broadband access because it is too expensive.
I think that the last thing was one that was touched on by
Chairman Munns, and that is the issue of preempting States'
rights. I think the States have a very legitimate interest in
consumer protection issues and safety issues, and the Internet
is really no different than an interstate highway. We have--
States have the ability to regulate the speed and size of
traffic on its interstate highways. They need that same
ability. These new technologies are going to be a trap for the
unwary by the unscrupulous, and State consumer protection
statutes are uniquely designed to protect their citizens from
any type of action in that regard.
We have attached a VoIP resolution that our association did
a year and a half ago, and I think that the points in that
resolution are still applicable today.
Thank you, Chairman.
[The prepared statement of John R. Perkins follows:]
Prepared Statement of John R. Perkins, Consumer Advocate of Iowa, and
President, National Association of State Utility Consumer Advocates
Chairman Upton and members of the House Subcommittee on
Telecommunications and the Internet: Thank you for the opportunity to
speak to you today on the important issues surrounding how IP-enabled
services are changing how we communicate.
My name is John R. Perkins. I am the Consumer Advocate for the
state of Iowa and am currently serving as the president of the National
Association of State Utility Consumer Advocates. NASUCA is an
association whose members are, for the most part, the statutorily
authorized state officials who are responsible for representing their
citizens in utility matters before their state public utility
commissions, as well as before state and federal courts, federal
agencies and Congress. They operate independently from their state
PUCs. NASUCA currently has members from 42 states and the District of
Columbia.
The rapidly changing face of telecommunications has made it
necessary to reexamine some of the precepts behind the
Telecommunications Act of 1996, passed less than a decade ago by
Congress. Wireless and the Internet have provided diverse new ways to
communicate with one another, making instantaneous contact over great
distances no longer the exclusive province of the public switched
telephone network it was just several decades ago. The technology is
mind-boggling to the average consumer over the age of eighteen. While
pre-teens to college students want the most advanced abilities to
communicate with each other from their telephones, including sending
pictures and text messages, many of the rest of us just want to be able
to pick up a telephone, hear a dial tone, have a call completed to the
number we dial and be able to hear the voice on the other end--all at a
reasonable price. We don't care through what magic that is
accomplished. The challenge for Congress is to devise legislation that
balances that need, with the need to make sure those magicians who
continue to dazzle us with their seemingly daily new methods of
communications, have the proper incentives to continue that progress.
As always, there is a natural tension between the two--and some of that
can and should be handled by the market place between competitors.
However, there are some issues that are too important to be left to
the competitors and entrepreneurs to work out and should continue to be
regulated by government, both state and federal.
For example, while most people now agree the Internet is truly an
interstate phenomenon and individual states should not be in the
business of regulating the rates charged for Internet service, there
are important consumer protection and safety issues in which states
have a legitimate interest. States should be allowed to apply their
individual state consumer protection laws to insure their residents are
not the victims of those providers who, in their competitive zeal, may
take unfair advantage of those consumers who are unfamiliar with this
new technology.
Another broad consideration we feel Congress should keep in mind is
that many local exchange carriers, such as the four regional Bell
operating companies, will soon be using IP to carry calls by replacing
their state of the art circuit switches from 10 years ago with new IP
soft switches. The reason is simple: the new IP soft switches are more
efficient. But the customers may never realize as they use their old
telephones and old services that the digital magicians have a more
efficient way to provide the same old POTS. These customers should also
not be subjected to lesser consumer protections just because their
local exchange carrier--who they have dealt with for years ``is
changing its technologies in ways the customer will likely never
notice.
When defining what is an IP for telephony, Congress should take
care not to define it in such a way that ILECs can claim their use of
IP on their old networks now would avoid all state regulation. If it
walks like a duck . . .
Another consideration we feel it would be appropriate for this
subcommittee to examine overlaps with those Congressional subcommittees
reviewing competition in the telecommunications industry as well as
those examining the recently announced mergers between SBC and AT&T and
between Verizon or Qwest and MCI. Fully one-third of the broadband
connections (in the form of DSL) are supplied by incumbent local
exchange providers, such as the four RBOCs. Of the four, only Qwest has
announced it will voluntarily allow its subscribers to purchase its
broadband without the necessity of also purchasing its local exchange
service. The other three RBOCs require their customers to purchase
their local exchange service in order to obtain their broadband
connection.<SUP>1</SUP> Such a tying arrangement stifles competition
for Internet telephony. Customers should be free to use their own
equipment, and access software and services freely on their broadband,
the so called ``net freedoms'' concept espoused by former FCC Chairman
Michael Powell.
---------------------------------------------------------------------------
\1\ Verizon's recent announcement it will provide stand-alone DSL
in some limited circumstances is so constricted as to be an essentially
worthless concession.
---------------------------------------------------------------------------
E911 capability is essential for Internet telephone providers. As
vividly brought home by the recent tragic event in Houston, Texas, many
people who purchase an Internet telephone product don't realize their
local law enforcement agencies no longer have the ability to determine
their address when they call 911 on an Internet based telephone, such
as voice over IP (VoIP). The providers must be forced to rapidly
develop the capability for VoIP to allow E911 service. The technology
is available, but not all companies are using it.<SUP>2</SUP> In fact,
earlier this month Canada required Internet telephone carriers to
immediately provide basic E911 service. Two large providers--Primus
Telecommunications Canada, Inc. and Vonage Canada-- said they supported
the government's position. CALEA and TTY face the same access issues as
E911.
---------------------------------------------------------------------------
\2\ Another problem is that VoIP providers are having problems
gaining access to incumbent carriers' E911 trunk lines. Vonage recently
struck a deal with Qwest for access, but has complained that BellSouth,
Verizon and SBC--who allow their own VoIP service to access their E911
trunks--are balking at providing access.
---------------------------------------------------------------------------
Finally, despite news articles that would lead one to believe
everyone in the United States has a computer with a broadband
connection, the simple fact is only 30 million Americans have
broadband. Compared to the 170 million access lines of the traditional
telephone companies, the number of people who have the ability to use
Internet telephony is still quite small. As you and other Congressional
committees examine the entire gamut of issues related to
telecommunications, it is essential not to forget the vast of majority
of Americans, especially those in rural areas, who still rely on POTS
to communicate. In our rush to embrace these new technologies, we
should keep them in mind.
Companion issues relate to the Universal Service Fund and access
charge payments. Currently, Congress is studying the USF funding base
and how to best handle the continued availability of telephone access
in high-cost areas. As calls are routed over the Internet to one degree
or another, providers are refusing to pay into the fund, even though
their customer may use part of the PSTN to complete a call. The same
issues arise with access charges. Congress should look carefully at
these issues when considering any legislation on Internet telephony.
NASUCA passed a resolution on November 16, 2003 at its Annual
Meeting dealing with VoIP service, a copy of which is attached to my
testimony.
Again, thank you for the opportunity to appear before you to give
our perspective on this sea-change in telecommunications. I would be
happy to address any questions of the committee members.
Resolution on Voice Over Internet Protocol Service
WHEREAS, the widespread availability of affordable, reliable, high
quality voice telecommunications service is essential to the public
health, safety and welfare and is required by federal law;
WHEREAS, 47 U.S.C. 153 (48) defines telecommunications as ``the
transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received'';
WHEREAS, 47 U.S.C. 153 (51) defines a telecommunications service as
``the offering of telecommunications for a fee directly to the public,
or to such classes of users as to be effectively available directly to
the public, regardless of the facilities used'';
WHEREAS, incumbent local exchange companies, competitive local
exchange carriers and interexchange carriers are modifying their
networks so that they may provision telecommunications services
utilizing voice over Internet protocol (VoIP) technology;
WHEREAS, VoIP services may be offered to the public as either a
voice telecommunications service or a substitute for voice
telecommunications service;
WHEREAS, VoIP providers have argued that they provide only
information services and do not provide telecommunications services;
WHEREAS, carriers are increasingly migrating their traffic to a
packet-switched basis like that used for VoIP;
WHEREAS, the migration of service to VoIP and VoIP-like services
raises concerns about universal service and universal service support;
WHEREAS, VoIP and VoIP-like services raise concerns about access to
E9-1-1 emergency services and financial support for E9-1-1 emergency
services;
WHEREAS, regulation of VoIP and VoIP-like services may be better
accomplished under Title II of the Communications Act;
WHEREAS, both state and federal regulators are responsible for
ensuring the continued widespread availability of reliable, affordable
and high quality telecommunications services, and for ensuring
continued access to E9-1-1 emergency services for customers of such
telecommunications services;
THEREFORE BE IT RESOLVED, that the Federal Communications
Commission (FCC) should not define VoIP services to be exempt from
regulation, universal service support obligations or E9-1-1 access so
that states are preempted from properly exercising their authority to
ensure the continued provision of reliable, affordable, high quality
voice telecommunications services, including access to E9-1-1 emergency
services;
BE IT FURTHER RESOLVED, that the Telecommunications Committee of
NASUCA, with the approval of the Executive Committee of NASUCA, is
authorized to take all steps consistent with this Resolution in order
to secure its implementation.
Approved by NASUCA:
Place: Atlanta, Georgia
Date: November 16, 2003
Mr. Upton. For not looking at the clock, you did exactly
perfect, so----
Mr. Perkins. I have got my watch right here.
Mr. Upton. Oh, is it? All right. Mr. Quam.
STATEMENT OF DAVID C. QUAM
Mr. Quam. Mr. Chairman, members of the committee, thank you
very much for the opportunity to testify.
This is a topic of great interest to Governors, both IP-
enabled services and really the future of communications. But
as we look at it, sometimes it helps to step back. And one way
I can view communications and where we stand is to actually
look at what has happened to coffee. Back in 1984, coffee was
just that. It was coffee. Today's consumers must pick size,
tall, grande, bente, roast, light or dark, caffeine or no
caffeine, drip, latte, espresso, Americano, frappachino, milk
or soy, fat or no fat, foam or no foam.
Communications service today is much the same. Before 1984,
a phone was a phone. Today, it is analog or digital, landline,
wireless, or VoIP, text messaging, paging, e-mail, worldwide
web, call waiting, caller ID, dial-up or broadband, cable, DSL,
or Y-fi, IP video, satellite, cable, or broadcast. And who
knows what is to come. That is the challenge that is before
Governors. It is before Congress. It is before local elected
officials. How are we going to set up a regulatory scheme that
fits that world of consumer choice?
The bottom line for NGA: full and robust competition
requires a light touch approach that ensures nondiscriminatory
access to essential facilities, to acknowledging neutral
policies, and consumer protection safeguards to serve the
public interest. This can only be effectively accomplished by
having the Federal Government partner with and grant State and
local governments the authority to promote competition and
innovation, encourage economic development, protect the public
safety, and ensure consumer protections.
As Congress works to reform the Nation's communications
laws, Governors encourage this committee to work with State and
local governments to create a regulatory framework that does
several things.
First, one that would employ a balanced federalism approach
that grants States, territories, and localities the authority
to protect the interest of their constituencies.
Second, would create a level playing field for all industry
participants in any given service area, regardless of the
nature of the technology used to provide that service.
Third, it would be sufficiently flexible and technology
neutral to respond to any new developments in the industry. It
would also continue to emphasize reliability standards on all
communications systems, ensure that States, territories, and
localities retain the authority to manage public rights of way
consistent with State laws and policies, support States'
abilities to provide for all their citizens with access to
communications services, and it would not preempt the
sovereignty to determine their own tax policies.
As I have stated before and it has been stated repeatedly
by this distinguished panel, any rewrite of the communications
laws should recognize and retain an active role for State and
local governments in communications policy. In particular,
Congress should preserve State and local authority in the
following key areas: public safety would be the first. State
and local law enforcement and public safety agencies rely
heavily on communications services and operators to protect the
public interest. States must continue to have the authority to
collect these, and run a ubiquitous e911 system within their
borders. In addition, national communications policies should
not hinder law enforcement efforts by creating technological
safe havens to communicate or plot criminal activity.
Consequently, Governors support Congressional efforts to extend
necessary components of COLEA to all advanced communications.
Second, consumer protection. Consumers require a practical
way to resolve common complaints, service outages, and
deceptive behavior. States have a long track record of serving
that role. States should retain the regulatory flexibility in
enforcement authority to effectively and creatively respond to
consumer concerns.
With regard to access, the value of the network--and that
is what we are talking about, a communications network--is
directly related to the number of people who use it. Twenty-
four States have instituted their own State universal service
funds to help ensure that all their citizens can access
communications services. Governors feel that any changes to
Nation's communications laws should not hamper a State's
ability to continue its state universal service fund or prevent
States from developing new programs to supplement any
corresponding Federal plan.
And finally, with regards to competition. Governors welcome
and support competition. Communications networks are the next
great economic driver for States and for the Nation, but when a
competitive market does not exist, States should still retain
the authority to manage communications infrastructure and
competition in local markets.
The 1996 Act ushered in a new era of cooperative federalism
in communications. This framework took into account the
responsibilities of each level, based on their core
competencies. Federal Government used its authority to develop
national communications goals. States were given regulatory
flexibility and enforcement powers to promote competition,
manage public safety networks, protect consumers, and help
ensure access to communications services. Governors look
forward to working with the Congress to buildupon our Federal/
State partnership and use our collective strengths as a basis
for any new regulatory structure.
Thank you, Mr. Chairman.
[The prepared statement of David C. Quam follows:]
Prepared Statement of David Quam, Director, Federal Relations, National
Governors Association
Mr. Chairman and members of the committee, my name is David Quam,
and I am the Director of Federal Relations for the National Governors
Association (NGA). I appreciate the opportunity to appear before you
today on behalf of NGA to discuss the role of states in the future of
communications policy.
OVERVIEW
The Internet has changed everything. While only a generation ago
most people had not even heard of the Internet, today they go online to
conduct business transactions, purchase goods and services, trade
stocks and bonds, and make phone calls. The Internet has also spurred
competition. Every week another company seems to announce a new service
for consumers that breaks with the existing regulatory framework of one
delivery platform-one service. Telephone companies are rolling out IP
video services; cable companies are offering Voice-over-Internet-
Protocol phone services; and wireless providers allow a person to surf
the World-Wide-Web while picnicking on the National Mall. The
beneficiaries of this revolution are consumers, individuals, and
businesses that rely on communications services to conduct business,
purchase goods and services, send and receive information, and reach
emergency services. The innovators are the companies and entrepreneurs
who are constantly pushing to find new ways to communicate and to
improve existing systems. The regulators are the federal, state, and
local government officials who must now decide how to best work
together to maximize the benefits for consumers, foster innovation and
investment, promote competition, protect the public safety, and ensure
consumer protection in an IP-enabled world.
THE PUBLIC POLICY CHALLENGE
The remarkable revolution in communications technology since the
1996 Act could have not been anticipated by lawmakers. Current federal
and state communications policies call for a distinct regulatory
treatment for telephone, cable, satellite, wireless, and Internet
services industries. Under this ``vertical silo'' approach, each
segment is treated differently based on its core service. The 1996 Act,
which focused on promoting competition within these silos, did little
to prepare for the development and maturation of new platforms and
services that are not bounded by technology. It is these new
innovations, including IP-enabled services, that are creating
advantages and disadvantages for both incumbents and new entrants, and
challenging state and federal policymakers to rethink communications
laws to better reflect the way services are delivered in a digital age.
Governors welcome this challenge and are committed to working with
Congress, industry and local governments to modernize the nation's
communications laws in a way that supports continued growth of a
competitive industry for the benefit of consumers and the national
economy. NGA has been working with other state and local organizations
to find common ground and align our interests and policies. Governors
encourage Congress to work with state and local governments to create a
regulatory framework that:
employs a balanced federalism approach that grants states,
territories, and localities the authority to protect the
interests of their constituencies, particularly as it relates
to promoting local competition, encouraging economic
development, protecting public safety, and ensuring consumer
protection;
creates a level playing field for all industry participants in any
given service area, regardless of the nature of the technology
used to provide that service;
is sufficiently flexible and technology-neutral to respond to new
developments in the industry;
continues to emphasize service reliability standards on all
communications systems;
ensures states, territories, and localities retain the authority to
manage public rights-of-way consistent with state laws and
policies; and
does not preempt the states' sovereignty to determine their own tax
policies.
While Governors look forward to modernizing our nation's
communications laws in a way that promotes further economic development
and innovation, any new regulatory structure must also give states,
territories, and localities the ability to maintain state services and
roles consumers have come to expect.
STATE ROLES IN COMMUNICATIONS POLICY MUST BE MAINTAINED
States play a major role in the nation's communications system as
regulators, service providers, and consumers of communications
services. State governments have the responsibility to ensure the
public interest is being served by all businesses in our states,
including communications providers. Consumers expect states to ensure
certain public goods and social goals. These include maintaining the
public safety, consumer protection, universal service, and consumer
choice. While Governors understand that these state roles may change as
technology develops and communication services converge, they still
believe the states are best suited to perform these essential roles
consumers have come to expect. States have more resources, as well as a
better understanding of local markets and day to day issues related to
communications services, than the federal government, thereby making
them better suited to carry out and enforce these important public
services. At the same time, Governors recognize the benefits working
together within a national communications framework to accomplish
common goals in protecting the public interest. Specifically, Governors
feel states must maintain their roles in the following key areas.
Public Safety
State and local law enforcement and public safety agencies rely
heavily on communications services and operators to protect the public
interest. In particular, the ability to receive E911 calls and direct
emergency services to a caller's location is vital for first
responders. States must continue to have the authority to collect fees
and run a ubiquitous E911 system within their borders.
Currently, states and localities have the sole responsibility for
funding, managing, and upgrading state wireline and wireless 911
services. States and localities collect E911 fees on wireline and
wireless phone services, which is the only source of funding for state
E911 systems. Without the authority to collect E911 fees on new
services, funding for E911 systems may be jeopardized as consumers
shift to new technologies. This potential decrease in funds will place
a strain on legacy E911 systems and increase the cost burden on
citizens who use wireline and wireless services.
Moreover, it is states that ensure all wireline and wireless phone
companies have access to phone trunks and customer databases, which is
a critical part of maintaining a ubiquitous and functional E911 system.
Even though some VoIP services are working to voluntarily implement
E911 services, they are finding it increasingly difficult to
interconnect with incumbent phone companies' trunks, making it
virtually impossible to implement a workable E911 service. The
Telecommunications Act of 1996 gave states the regulatory authority to
make certain that wireline and wireless carriers have access to the
necessary information and infrastructure to provide E911 service.
States must continue to have this authority over VoIP providers, in
order to ensure Internet phone services can provide E911 services.
Moreover, if VoIP providers develop their own E911 systems that do not
properly connect with each state E911 system, the nation could end up
with a patchwork of E911 systems that do not interconnect. To maintain
a seamless and ubiquitous national E911 system, states must have
regulatory authority to collect E911 fees on Internet phone services
and make certain all voice services can interconnect with the state's
E911 system.
In addition, state and local law enforcement agencies rely heavily
on electronic surveillance to investigate and prosecute criminals.
National communications policy should not unwittingly hinder law
enforcement efforts by creating technological safe havens to
communicate and plot criminal activity. Consequently, Governors support
congressional efforts to extend necessary components of the
Communications Assistance for Law Enforcement Act of 1994 (CALEA) to
all advanced communications.
Consumer Protection
Before consumers fully accept, adopt, and substitute Internet-
enabled services for traditional phone and video services, they must
feel confident and trust these new services. This confidence and trust
can only grow if consumers have a practical way to resolve common
complaints, service outages, and deceptive behavior. States have a long
track record for ensuring consumer protection and are more accessible
to businesses, consumers, and communications companies than are federal
officials. States have quickly responded to consumer complaints on
traditional phone services by developing innovative programs, like the
``do not call list,'' which became widely popular and was eventually
implemented on the federal level. States should retain the regulatory
flexibility and enforcement authority to effectively and creatively
respond to consumer concerns.
Universal Service
In order for states and the nation to take full advantage of new
Internet-enabled services, affordable broadband access must be
available in all ``corners of a state.'' Twenty-four states have
instituted their own state universal service funds that now total $1.9
billion. States collect state universal service funds fees on
intrastate phone services to help keep phone costs down in rural and
urban areas, and make broadband connections more affordable where
competition does not exist. Governors feel that any changes to the
communications law should not hamper a state's ability to continue its
state universal service fund or prevent states from developing new
state universal service programs to supplement the federal plan.
Competition
Governors welcome and support competition in local communications
markets. When a competitive market does not exist, states should retain
the authority to ensure nondiscriminatory access to essential
facilities, prevent incumbents from using market power to stifle
competition and innovation, and maintain safeguards when market forces
fail. Recently, the Federal Communications Commission overturned four
states' actions aimed at allowing consumers to purchase broadband
Digital Subscriber Line (DSL) service from a telecommunications company
without also requiring the consumer to purchase traditional voice
service from the same provider. Known as ``naked DSL,'' these state
actions would have added to consumer choice. After all, why would
consumers who are required to buy traditional phone service with their
broadband access then purchase Internet phone service?
States have the resources and expertise to quickly respond to
situations where access to local networks is used to stifle new
technologies from taking root. Over the past eight years, states have
used their resources and expertise to monitor and ensure fair
competitive behavior in local markets. Governors feel states should
continue to have flexible regulatory authority to promote competition
within local markets and protect nascent technologies form anti-
competitive behavior.
CONCLUSION
The 1996 Act ushered in a new era of cooperative federalism in
communications. This framework took into account responsibilities based
on competencies. The federal government was given the authority to
develop national communications goals, while states were given
regulatory flexibility and enforcement powers to quickly respond to
consumer complaints, manage public safety networks, protect consumers
when market forces fail, and help ensure universal and affordable
access to communications. Governors look forward to working with
Congress to build upon our federal-state partnership and use our
collective strengths as a basis for a new regulatory structure.
Thank you for the opportunity to share NGA's position on the state
role in the future of communications policy. I would be happy to
respond to any questions you may have.
Mr. Upton. Thank you. Ms. Strauss.
STATEMENT OF KAREN PELTZ STRAUSS
Ms. Peltz Strauss. Thank you. Good afternoon, Mr. Chairman,
Ranking Member Markey, and members of the subcommittee. My name
is Karen Peltz Strauss, and I am pleased to appear today before
you to talk about disability issues on behalf of Communication
Services for the Deaf and the Alliance for Public Technology,
on whose board I serve. In addition, I am privileged to have
this testimony endorsed by a number of disability organizations
that represent millions of Americans of a vital interest in
making sure that the new regulatory structure adopted for
Internet-enabled technologies will meet their communication
needs. We thank you for this opportunity to present our views.
The last time that this disability community came before
your committee was when you were considering the
Telecommunications Act of 1996. That Act put into place various
requirements for access to telecommunications and television,
culminating nearly 30 years worth of efforts to secure equal
access. Through this and other laws that your committee was
instrumental in passing over the past few decades, people with
disabilities now have greater access than ever before to
communication. These laws and new mainstream technology, such
as paging and text messaging, have made a dramatic difference
in the lives of people with disabilities by opening up new
opportunities to employment, education, and commerce, and
making it easier for these individuals to become productive
members of our society.
As IP technology has changed the way our Nation
communicates, people with disabilities are again presented with
remarkable opportunities to enhance their independence and
productivity, but consumers will only be able to reap these
benefits if these technologies are made accessible through
universal design. People with disabilities don't want to be
relegated to obsolete technologies or depend on specialized
devices that are hard to find. They want an equal opportunity
to benefit from the full range of functions and features of
mainstream products that the rest of our community enjoy.
I just refer to people with disabilities as ``they'', but
really, I should be saying ``we''. We, as a Nation, are living
longer, and as we do, building products and services to be
accessible are taking on an even greater significance.
According to the U.S. census, 42 percent of people aged 65 to
74 report having some type of disability. This number jumps to
64 percent for people over 75. Many of us are already finding
out that advanced years brings reduced vision and hearing.
Unfortunately, history tells us that without clear directives
from Congress to provide access, the companies developing IP
services are unlikely to make their products accessible. This
is because competitive market forces have not been responsive
to the needs of people with disabilities. Your response to
these market failures has been a string of legislative acts,
the Telecommunications for the Disabled Act, the Hearing and
Compatibility Act, the ADA, the Decoder Circuitry Act. You have
seen the need to impose these disability safeguards, even where
you have otherwise sought to apply a light regulatory touch in
order to foster competition and innovation.
Now, to highlight a few areas where specific legislative
action is needed. First, we ask that you extend the access
provisions of the 1996 Act to IP technologies now, when it easy
to do so, rather than later, when retrofitting is expensive and
burdensome. An accessibility mandate is needed to ensure that
IP communications services are inter-offerable, so that people
using text and video have the same ability to talk to each
other as voice telephone users do. The deaf community has
already faced problems with instant messaging and video relay
services not being inter-offerable. Video relay allows people
who are deaf to talk directly to hearing people with
interpreters over the Internet. In addition, companies that are
making IP technologies need to ensure that the interfaces used
with these products are accessible. Last week, this committee
watched demonstrations of innovative IP TV systems that would
allow viewers to scroll through various channels, use Internet
services, and make the TV experience truly interactive. But
think for a minute how a blind person can know which channel is
on, or how to choose among menu options if onscreen menus are
used. I will tell you, they can't, at least not now. But if a
speech-enabled chip and an output device are used to connect
the TV to a PC, the blind person could use a handheld device to
control the menus with the assistance of a screen reader. If a
device requires one sense, such as hearing, sight, or voice to
control its operation, it should offer the option of using
other senses.
Second, universal service programs need to be reformed to
address the needs of people with disabilities in the IP-enabled
environment. Right now, only common carriers are required to
fund relay services. Contributions from IP service providers
are also needed to sustain the viability of these services.
Conversely, as people with disabilities migrate from using the
public switch network to IP telecommunications, they should be
able to use USF subsidies that go directly to end users, for
example through Lifeline and Link-up programs, to help defray
the costs of broadband or high priced specialized devices.
Third, Congress needs to take measures to expand access to
television programming, first by extending closed captioning
obligations to IP TV providers, and second, by restoring the
FCC's rules on video description. And we wish to thank
Congressman Markey for introducing a bill to achieve just this.
Finally, we urge that State governments be permitted to
retain some authority over telecommunications relay programs,
even where these programs use IP services. Several local
programs have been directly responsive to the needs of their
communities in ways that can't be matched by a Federal agency
located across the country.
In conclusion, mandates are critically needed to preserve
the extraordinary gains achieved by more than two decades of
Congressional efforts to promote full telecom access as our
Nation now migrates from legacy technologies to more versatile
and innovative IP technologies. All of the prior mandates were
created with the understanding that the costs to society of not
providing access in terms of unemployment, dependence, and
isolation would far exceed the cost of providing such access.
We look forward to working with your committee to carry the
legislative progress made in the past into the IP-enabled world
of the future.
Thank you.
[The prepared statement of Karen Peltz Strauss follows:]
Prepared Statement of Karen Peltz Strauss, Legal Advisor, Communication
Service for the Deaf, Member, Board of Directors, Alliance for Public
Technology
Good afternoon, Mr. Chairman, Congressman Markey and members of the
Subcommittee. My name is Karen Peltz Strauss, and I am pleased to
appear today on behalf of Communication Service for the Deaf, for whom
I serve as legal advisor, and the Alliance for Public Technology, for
whom I serve on the Board of Directors. In addition, I am privileged to
have this testimony endorsed by a number of national organizations that
advocate on behalf of people with disabilities, including the American
Association of People with Disabilities, the American Foundation for
the Blind, Association of Late-Deafened Adults, the Deaf and Hard of
Hearing Consumer Action Network, the National Association of the Deaf,
Self Help for Hard of Hearing People, and Telecommunications for the
Deaf, Inc.<SUP>1</SUP> These organizations represent millions of
Americans with disabilities who have a vital interest in making sure
that the new regulatory structure adopted for Internet-enabled services
will meet their communication needs. We thank you for this opportunity
to present our views.
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\1\ A brief description of each of these organizations is attached.
---------------------------------------------------------------------------
Members of the Committee, the last time that the disability
community came before you was during consideration of legislation that
became the Telecommunications Act of 1996. Sections 251, 255, and 305
of that Act, requiring telecommunications products and services to be
accessible by people with disabilities and creating mandates for
television captioning, were the culmination of a nearly thirty-year
effort to secure equal access by people with disabilities to the
telephone network and television programming. We call upon Congress now
to carry these mandates forward with respect to IP-enabled services and
the equipment used to access those services.
As new Internet technologies change the way our nation communicates
and receives information, people with disabilities may be presented
with remarkable opportunities to enhance their independence and
productivity . . . but only if legislative safeguards are put into
place to ensure that accessibility features are built into IP services
and products at the time that they are designed, and only if these
mandates follow the principles of universal design to which the 1996
Amendments adhered. People with disabilities wish not to be relegated
to obsolete technologies, nor become dependent on adaptive or
difficult-to-find ``specialized'' equipment not needed by the general
public. They want an equal opportunity to benefit from the full range
of features and functions of mainstream IP products, as these new
innovations rapidly become deployed throughout their communities.
Improvements in our nation's communications technologies over the
past ten years already have made a dramatic difference in the lives of
people with disabilities. New forms of telecommunications relay
services, enhanced mandates for television captioning, and enhanced
mainstream technologies, including paging, text messaging and Internet
services, have had a liberating effect on the lives of people with
disabilities and have opened up new opportunities in and access to
employment, education, commerce, entertainment, and government. This
Committee is to be thanked for many of these opportunities. Through the
various laws that you have passed--legislation mandating hearing aid
compatibility, nationwide relay services, and as mentioned earlier,
mandates for captioning and general telecommunications access--
individuals with disabilities now have greater access than ever to
communication and video programming services.
But many of the gains already made will be lost if the needs of
these individuals are not again considered as our nation migrates to
Internet-enabled technologies. The disability community is excited
about the marvelous and diverse innovations now being developed. The
ability to select from among many communication modes--voice, text, or
video--can enable users with disabilities who are able to perform some
functions but not others, to choose the telecommunication mode best
suited to their needs and circumstances. IP-enabled services also have
the capacity to enable individuals to use multiple conversational modes
during a single conversation, and to even change modes mid-
transmission, if the need arises. But just as easily as new IP
innovations can offer significant promise, so, too, can they result in
isolation and disenfranchisement if they are not designed to be
accessible.
History tells us that without clear directives from Congress to
provide accessibility, the companies developing these services are
unlikely to meet the challenge of doing so. Traditionally, competitive
market forces alone have proven insufficient to ensure the accessible
design and manufacture of products and services. There are a number of
reasons for this. Although it is estimated that nearly 54 million
Americans have one or more disabilities--collectively comprising a
significant portion of the American marketplace--when divided by
disability, it is difficult for any one disability group to create
enough pressure to influence market trends. In addition, people with
disabilities on average earn lower incomes than the general public,
translating to fewer spending dollars capable of impacting competition.
Finally, people with disabilities are often deterred from purchasing
mainstream communications products and services because they need, but
cannot afford, expensive adaptive equipment to make these work for
them.
Pressures on company executives to bring profits to their
businesses in the highly competitive communications industry can be
overwhelming. Diverting resources to incorporate accessible design is
risky for one company when access is not required of that company's
competitors. As a consequence, even an internal advocate for disability
access within a company may have a tough time selling access
initiatives to that company's executives, in the absence of laws
requiring accessibility.
The unfortunate truth is that without market pressures, the
telecommunications industry has typically failed to address the needs
of people with disabilities, except when specifically ordered to do so
by Congress or the FCC. For example, in the 1970s and 1980s, when
telephone manufacturers began introducing new phones that were no
longer accessible to people who used certain hearing aids, consumers
needed legislative assistance to restore their lost access. Both the
Telecommunications for the Disabled Act of 1982 and the Hearing Aid
Compatibility Act of 1988 were needed to order the full restoration of
hearing aid compatible phones. Similarly, it took an Act of Congress--
Title IV of the Americans with Disabilities Act of 1990--to require all
common carriers to provide telecommunications relay services, ending
nearly a century during which deaf, hard of hearing, and speech
impaired people scarcely had any access to the telephone network. That
Congress understands the need for disability safeguards even when it
otherwise seeks to apply a ``light regulatory touch'' to foster
competition and innovation, was also reflected by the 1996 Act's
various requirements for telecommunications and television captioning
access.
Many of the above legislative mandates rested upon the well-
established universal service obligation set forth in the
Communications Act of 1934: to ``make available, so far as possible to
all the people of the United States . . . a rapid, efficient, Nation-
wide, and world-wide wire and radio communication service.'' All were
undertaken with the recognition that the costs to society of not
providing communications access to modern innovations--in terms of
unemployment, dependence, and isolation--would far exceed the costs
associated with providing such access.
The FCC, too, has needed to take affirmative steps to remedy the
failure of market forces to bring about disability access. For example,
when the explosive growth of digital wireless telephone services in the
1990s threatened to eliminate TTY and hearing aid users' access to
these services, the FCC mandated access solutions. Similarly, multiple
FCC reports on the deployment of high speed Internet access have
acknowledged that market forces are not enough to guarantee timely
access to broadband services for Americans with disabilities. For
example, the second of such reports identified persons with
disabilities as a category of Americans ``who are particularly
vulnerable to not having access to advanced services.''
So what do people with disabilities want in the new regulatory
scheme that will govern the world of IP-enabled services? Congress must
act to ensure that IP-enabled products and services offer the same
wonderful benefits for people with disabilities that they offer to the
general public. Most importantly, mandates are needed to ensure that
IP-enabled technologies incorporate features that permit disability
access now, while these products and services are still being
developed, rather than later, when retrofitting them will become
burdensome and expensive. If access features are considered and
incorporated while a product is being designed, the associated costs
become a mere fraction of the overall costs of producing that product
for the general public, and the resulting access is far more effective.
By contrast, if a product is designed without addressing access needs,
it is not only more costly to later revise the product to include that
access, but typically the result is not as well-suited to the
population in question. For example, the initial failure to incorporate
access in digital wireless phones resulted in an eight year delay in
making those phones accessible to TTY users, and to this day, the
digital wireless industry has not been able to effectively retrofit
these phones for hearing aid users.
Fortunately, the beauty of IP-enabled technologies is that they use
software-based solutions that make it easier to implement access
features than had been possible with many previous telecommunications
technologies. If incorporated early enough, software changes in
mainstream products can be tailored to address a broad range of
disabilities. And once implemented, most, if not all accommodations are
likely to benefit large numbers of individuals without disabilities,
the same way that closed captions--originally intended for use by
people with hearing loss--are now enjoyed by members of the general
public in bars, exercise facilities, and airports.
To achieve the goals of full accessibility by people with
disabilities, we make the following recommendations:
1. Extend the Accessibility Safeguards of Sections 255 and 251 of the
Communications Act to IP-Enabled services.
It is critical to extend the accessibility safeguards of Sections
255 and Section 251 (requiring telecommunications carriers to install
network features, functions or capabilities that comply with Section
255 guidelines) to communications taking place over the Internet. The
following are examples of the objectives that such accessibility
mandates can achieve:
First, in order to ensure a seamless communications network that is
equally accessible to all Americans, IP services must be interoperable
and reliable, so that individuals using text or video have the same
ability to talk to each other as do people using voice. As providers
begin to offer new and improved IP services, each is likely to
independently introduce an array of services designed to expand upon
our nation's communications networks. But in the effort to get a jump
on the marketplace, some companies may accidentally or intentionally
ignore the need to make their products and services interoperable with
those of their competitors. The result can be confusion and disorder
for consumers, especially those with disabilities, who may find they
are able to contact some individuals over a service they have
purchased, but not other individuals using the same kind of service.
The deaf community has already seen this occur with respect to
instant messaging and video relay services. With video relay service,
people who are deaf and hard of hearing can, for the first time in
their lives, converse naturally in American Sign Language with hearing
people via connections made over the Internet and the PSTN. But because
not all video relay services are interoperable with one another, people
using this form of communication are not able to enjoy the same
seamless access that is available to Americans using voice telephone
services. Interoperability of networks and equipment that provide the
same functions is not only important for day-to-day affairs; in an
emergency or national crisis, all Americans need to be able to obtain
assistance, regardless of the communication networks or devices that
they use.
Second, within the IP environment, there also needs to be a common
protocol for text that is easily combined with other media. At present,
multiple industry standards exist for text transmissions over the
Internet and for other kinds of text messaging, many of which are not
compatible with each other. A single, reliable text standard needs to
be supported by all systems, so that text transmissions can get through
to their destinations to the same extent as voice transmissions,
enabling deaf and hard of hearing people to enjoy the same integrated
system of communication that is available to voice users.
Third, IP-enabled services must have electronic interfaces that are
accessible to people with disabilities. In the 1990s, the increasing
use of graphical user interfaces almost took the power of computers and
information networks out of the hands of people who are blind or
visually impaired, because these interfaces could not be read by screen
reader software. Similarly, as traditional telephone and television
technologies are replaced by IP-enabled technologies, many applications
are becoming available only through graphical, touch screen, ``soft-
button'' or ``on-screen'' interfaces that are not accessible to people
who do not have the ability to see. Last week, this Committee watched
demonstrations of innovative IPTV systems that will allow viewers to
scroll through various channels, access personalized Internet services,
and make the TV experience truly interactive. The advantages of
accessing multiple functions--telephony, TV, Internet--through a single
piece of equipment are enticing to people with disabilities, who may
benefit from having a single connection for data, video, and voice
connections. But blind people need to know which channel is on, ways to
choose among menu options, how to turn on accessibility features, and
how to operate controls independently. The only means of accessing
these various features should not be through inaccessible on-screen
menus. Similarly, blind people may not be able to use IPTV technologies
if the remote controls used to operate these devices have ``soft
dynamic buttons'' that change with each press of a button. Touch-
screens, too, can pose problems: first, an individual cannot feel where
the buttons are, and second, he or she cannot identify what the buttons
do because they may change as the screens change.
Mandates are needed to require IP-enabled service providers to
provide multiple--or redundant--means of controlling applications on IP
devices. If a device's operations require one sense or physical
ability--for example, hearing or touch--the user should be able to use
other senses or abilities to control the equipment, to prevent creating
new disability barriers.
2. Improve Enforcement of Accessibility Obligations.
Access obligations need not only be in place; they need to be
properly enforced. Informal FCC complaints have proven to be
ineffective as a means of enforcing compliance with rights associated
with Section 255, closed captioning, and other disability issues. Over
the past decade, only two formal FCC accessibility complaints have been
filed, largely because of the burden and expense associated with filing
one of these complaints. Reform of the Communications Act should add a
private right of action allowing people with disabilities to enforce
their rights to accessibility under Section 255, as well as any new
accessibility mandates. This right properly exists for various sections
of the Americans with Disabilities Act, the nation's primary statute
mandating an end to discrimination on the basis of disability.
3. Reform Universal Service Programs to Address the Needs of People
with Disabilities in an IP-Enabled Environment.
At present, only common carriers providing telephone voice
transmission services are required to contribute to intra- and inter-
state funds supporting telecommunications relay services. As we migrate
away from traditional telephone services, contributions from IP-enabled
services providers are sorely needed to both sustain the viability of
these services, and to distribute costs fairly among all subscribers of
communication services. Similarly, IP providers should have to
contribute to other universal service (USF) funds that are used to
support the Lifeline and Link-Up programs. Because the incidence of
unemployment is so high among people with disabilities, it is more than
likely that this population would also be affected by any cutbacks in
those programs.
Conversely, USF monies should also be available to support IP
services and specialized communications devices that may be required by
people with disabilities. Some deaf individuals no longer purchase PSTN
service, having already discarded their TTYs for webcams and computers
that enable video communications. People with disabilities that rely
exclusively on IP-enabled communication technologies should be
permitted to choose whether they want universal service subsidies that
go directly to end users--e.g., through the Lifeline or Link-up
programs--to be used as partial payment for their broadband service and
equipment, rather than payment for PSTN service.
4. Video Access: Extend Obligations That Currently Apply to Video
Program Providers to IPTV Providers; Restore Video Description
Rules.
The closed captioning mandates enacted in the 1996 Amendments have
successfully brought television programming to millions of deaf and
hard of hearing Americans. Just as the FCC extended these mandates to
services and equipment needed for digital television programming,
mandates are critically needed to ensure the continued benefits of
captioning as IPTV technologies take center stage.
In addition, as Congress goes about reforming the Communications
Act, we request that it restore the FCC's rules on video description.
Video description is a technology that inserts narrative verbal
descriptions into the natural pauses of television programs to enhance
television accessibility for blind and visually impaired persons.
Although, in July 2000, the FCC tried to use authority assigned to it
in the 1996 Telecommunications Act to promulgate rules on video
description, that authority was deemed insufficient to support those
rules by the U.S. Court of Appeals for the D.C. Circuit in November of
2002. While a few television providers still voluntarily provide this
form of programming access, these rules need to be restored to provide
blind and visually impaired Americans with greater access to television
programming.
5. States need to be able to retain some authority over
telecommunications relay programs.
Under Section 225 of the Communications Act, states are able to
receive certification from the FCC to operate their own relay programs.
Several of these locally operated programs have been directly
responsive to the needs of their residents in ways that cannot be
matched by a federal agency located across the country. Considerable
innovation and improvements in relay services, including video relay
services and speech-to-speech services for people with speech
impairments, originated through state relay programs in response to the
needs of their populations. If the jurisdiction for IP-related services
generally becomes federal, states need to have the option of retaining
oversight over their own relay programs, even where these programs
utilize IP-enabled services.
CONCLUSION
Only Congress can ensure that people with disabilities--including
the rapidly growing population of senior citizens whose advancing years
often bring reduced vision and hearing--are not left behind as our
nation migrates from legacy technologies to more versatile and
innovative Internet-enabled methods of communication. For people with
disabilities, communication access means the ability to compete on an
equal basis for employment opportunities, benefit from educational
programs, make sound financial and medical decisions, fulfill civic
duties, and actively contribute to society as productive participants.
Those who have the ability to obtain and use information have the power
to make choices and enhance their opportunities for self-sufficiency.
Mandates are critically needed to preserve the extraordinary gains
achieved by more than two decades of Congressional efforts to promote
full telecommunications access. We look forward to working with your
Committee to carry this progress forward into the IP-enabled world.
Description of Organizations
Testimony Presented on Behalf of:
Communication Services for the Deaf--CSD is a private, non-profit
organization of, by, and for deaf and hard of hearing people that
provides direct assistance through education, counseling, training,
communication assistance, and telecommunications relay services, to
more than three million people with hearing loss in more than thirty
states across the nation. Established in 1975, CSD's objective has
always been to increase the communication, independence, productivity,
and self-sufficiency of all individuals who are deaf and hard of
hearing.
Alliance for Public Technology--APT is a nonprofit organization of
public interest groups and individuals, working together to foster
broad access to affordable, usable information and communications
services and technology, for the purpose of bringing better and more
affordable health care to all citizens, expanding educational
opportunities for lifelong learning, enabling people with disabilities
to function in ways they otherwise could not, creating opportunities
for jobs and economic advancement, making government more responsive to
all citizens and simplifying access to communications technology.
Testimony Endorsed by:
American Association of People with Disabilities--AAPD is the
largest cross-disability membership organization in the U.S. With more
than 110,000 members across the country, AAPD is a national nonpartisan
non-profit organization advocating for the political and economic
empowerment of the more than 54 million children and adults with
disabilities in America. AAPD promotes policies that support the goals
of the Americans with Disabilities Act: equality of opportunity, full
participation, independent living, and economic self-sufficiency.
American Foundation for the Blind--AFB is a national nonprofit
whose mission is to ensure that the ten million Americans who are blind
or visually impaired enjoy the same rights and opportunities as other
citizens. AFB promotes wide-ranging, systemic change by addressing the
most critical issues facing the growing blind and visually impaired
population--employment, independent living, literacy, and technology.
In addition to its New York City headquarters, the AFC maintains 4
national centers in cities across the U.S. and a governmental relations
office in Washington, D.C.
Association of Late-Deafened Adults--Formed in Chicago, Illinois in
1987, ALDA works collaboratively with other organizations around the
world serving the needs of late-deafened people. Through its chapters
and groups around the country, ALDA promotes public and private
programs designed to alleviate the problems of late-deafness and for
reintegrating late-deafened adults into all aspects of society.
Deaf and Hard of Hearing Consumer Advocacy Network--Established in
1993, DHHCAN serves as the national coalition of organizations
representing the interests of deaf and/or hard of hearing citizens in
public policy and legislative issues relating to rights, quality of
life, equal access, and self-representation. The member organizations
of DHHCAN include the American Association of the Deaf-Blind, the
American Deafness and Rehabilitation Association, the Association of
Late-Deafened Adults, the American Society for Deaf Children, the
Conference of Educational Administrators of Schools and Programs for
the Deaf, Communication Service for the Deaf, Deaf Seniors of America,
Gallaudet University, Gallaudet University Alumni Association, National
Association of the Deaf, National Black Deaf Advocates, National
Catholic Office of the Deaf, Registry of Interpreters for the Deaf,
Telecommunications for the Deaf, Inc., USA Deaf Sports Federation, and
The Caption Center/WGBH.
National Association of the Deaf--Established in 1880, the NAD is
the oldest and largest consumer-based national advocacy organization
safeguarding the civil and accessibility rights of 28 million deaf and
hard of hearing individuals in the U.S. The mission of the NAD is to
promote, protect, and preserve the rights and quality of life of deaf
and hard of hearing individuals in America. Primary areas of focus
include grassroots advocacy and empowerment, captioned media, deafness-
related information and publications, legal rights and technical
assistance, policy development and research, and youth leadership
development.
Self Help for Hard of Hearing People--SHHH is the nation's foremost
consumer organization representing people with hearing loss. SHHH's
national support network includes an office in the Washington D.C.
area, 13 state organizations, and 250 local chapters. The SHHH mission
is to open the world of communication to people with hearing loss
through information, education, advocacy, and support. SHHH provides
cutting edge information to consumers, professionals and family members
through their website, www.hearingloss.org, their award-winning
publication, Hearing Loss, and hearing accessible national and regional
conventions. SHHH impacts accessibility, public policy, research,
public awareness, and service delivery related to hearing loss on a
national and global level.
Telecommunications for the Deaf, Inc.--Established in 1968, TDI is
a national advocacy organization that seeks to promote equal access in
telecommunications and media for the 28 million Americans who are deaf,
hard-of-hearing, late-deafened, or deaf-blind.
Mr. Upton. Thank you all. Thank you all for your testimony.
At this point, we will do questions from members of the
subcommittee, under the 5-minute rule as well.
Any idea how many different franchises there might be out
there, Mr. Fellman? I have a guess, but I don't know if anybody
really knows.
Mr. Fellman. Are you talking about cable franchises, Mr.
Chairman? You know, I----
Mr. Upton. Franchise authorities.
Mr. Fellman. Oh, franchising authorities. You know, I know
that there are 36,000 units of local government in this
country, approximately. I know a number of States, I think
about 10, franchise through the State, many of which still give
local authorities some role in the process. But I couldn't tell
you how many actually do the franchising itself.
Mr. Upton. My guess is there is probably about 10,000.
Might be a little bit more, might be a little bit less.
What does the average franchise agreement cover? What type
of different arrangements do they have?
Mr. Fellman. Average cable franchise, again, you know, I
will tell you some things that I think most cable franchises
cover, but in some ways, they are as different as the community
needs that the address.
Many cable franchises cover right of way access kinds of
requirements. Oftentimes, in my experience, those are
regulations that one finds in a local ordinance addressing
rights of way, as well as in the cable franchise. Many will
contain access requirements for public education or government
access channels. Some will have requirements for institutional
networks that I mentioned briefly in my testimony. There will
be internal uses of that institutional network for various
local government-related issues, public safety, communications
internally and otherwise. There are public safety related
concerns in a franchise requirement for emergency alert systems
on the local level. General categories of programming, the
Cable Act, as you know, precludes the requirement of individual
channels, but does allow a local franchising authority to
address community needs by requiring categories of programming.
Franchise fees for the use of the public property are covered.
Bonding requirements so that damages costs to public property
can be replaced without cost to local taxpayers. Most good
franchises will have some enforcement mechanisms in there. In
the last 10 years, I am very happy to say that many franchises
have provisions for addressing transfers and mergers, so that
the local community knows the company that they are dealing
with, because many of these have turned over a few times.
So a lot of different things, but those are just a few of
the major ones.
Mr. Upton. Mr. Billings would you expand on that at all,
based on your mayorship in Provo?
Mr. Billings. I would agree that the things he has touched
on. I guess for us, as a community, we look at what are the
goals? What is it we are trying to bring about in our
community, and certainly as we have negotiated those kinds of
agreements, we have sought to have universal access. We want
everyone in our community to be able to be serviced. We have
talked about what is important in public safety kinds of
settings, and what needs to be done to serve those needs. And
then we have talked about other things we want to accomplish,
and have tried to factor those in. And I think that our focus
of legislation, perhaps even at the Federal level a lot of
focus on those broader goals in trying to do things that allow
those goals to be fulfilled as we do whatever it is we do.
I just think we have to remember that it is going to be a
little bit different in every community. Those subsets of
undergoals will be a little bit different in every community,
and we need to accommodate that.
Mr. Upton. It is different. I am aware of one community,
not in my district, by the way, or even in my State, that is
currently negotiating an agreement, and they are trying to look
at a number of different channels. I think they are actually
looking at 2 or 3 of the public education governmental
channels. They are looking for equipment that they can,
themselves, use to broadcast. They actually are also trying to
get a calling center located within the jurisdiction of the
community, and it is just difficult for--help me through this
argument. If you have got a wireless provider that is going to
compete with that same cable company that is not going to use
the same right of way. They are not going to need poles or dig
up streets, yet they want to compete, offering the same
services. What are your thoughts as to whether they will have
to comport with the same types of arrangements that that cable
company will be for that particular village, in terms of the
services that Brecken-Morter Building personnel, a whole host
of things that otherwise they, frankly, wouldn't need as they
look to expand their services and actually compete to bring
down some of the costs of the services that they would
otherwise provide?
And I am out of time, so I will let you answer before I
pass to Mr. Markey.
Mr. Billings. I am sure that--there is a long answer and a
short answer, and my attempt to the short answer would be that
it is true that they are different. But even those wireless
providers still have to have access to our rights of way to
connect up that equipment that provides that wireless
connectivity.
And so while there are differences, there are some very
similar components to that as well.
Mr. Upton. Mr. Fellman.
Mr. Fellman. Mr. Chairman, if I could add to that.
I think the particular specific rights of way obligations,
obviously, you couldn't apply to a company that doesn't use the
rights of way, at least on the same level. But the social
obligations of providing government, public, and educational
access, there already are set-aside requirements for the
satellite companies. I think Congress ought to extend the
public, educational, government access requirement to
satellite, so like you say, they are all playing by the same
set of rules, and the community can get the benefit of that
local programming, regardless of whether they are a satellite
subscriber or a cable subscriber.
Mr. Upton. Mr. Markey.
Mr. Markey. Thank you.
Ms. Strauss, in closed captioning, back in the early
1990's, the industry opposed closed captioning. They said it
would be too much of a burden on them. We said well, we need it
to help out those 10 or 20 million people who are hard of
hearing in America who use the TV as to--so we mandated it out
of this committee, and the television industry did its best.
Who would have thought the greatest use for it is people in bar
rooms just watching basketball or football games?
But unintended consequences of sometimes Congress acting,
and in fact, it turns out that most immigrant families turn on
the TV with closed captioning so that their children can see
the language, because the parents can't speak it. So there are
tens of millions of others that use it in different ways. So it
is a real burden. We had to mandate that. And then there is
others where we created a readily achievable standard for the
industry to meet in different areas.
What would you recommend for the IP services? Which
approach should we take?
Ms. Peltz Strauss. Well, I would recommend the approach of
an undue burden standard, which is the standard that is used
with closed captioning. And the reason for this is that we are
now at the outset. We are at the beginning of a new technology,
and with the new technology, it is much easier to incorporate
access, rather than retrofitting it later on.
The readily achievable standard was originally created in
the Americans With Disabilities Act to make it easier for mom
and pop in small stores not to have to retrofit with their--to
put in elevators, to put in stairs. Not to have to incur great
expenditures in retrofitting small establishments.
The undue burden standard, which basically says that an
accessibility feature has to be incorporated, unless it is
undue burden, is easier to meet when you are at the outset of a
technology. And here, we have software-based technologies that
are very easy to incorporate access.
Mr. Markey. Thank you. With the municipalities, back in
1992 when this subcommittee--we actually had to pass a law
because cable companies were coming to communities and saying,
you have got to give us an exclusive contract. If you want us
to come to your community, the promise is you will never have
another cable company in town but us. And so 95 percent of all
municipalities had guaranteed a monopoly in perpetuity to the
cable companies. So our subcommittee had to void all of those
monopolies so that we could have some competition.
Now, we come to 2005, and a lot of people are now saying,
well, maybe we should pass a law prohibiting the local
communities from actually providing telecommunications services
to their own community, in competition with the cable company,
the telephone company, or whomever.
Can you give us your views on the appropriateness of
Congress telling you that you can not have your own system to
compete with a cable company or telecommunications company, as
long as you provide equal access to everyone that would want to
use it?
Mr. Billings. I am a private sector player, came out of the
private sector. Believe government shouldn't go where the
private sector will go, and as I have in my testimony said, 8
years ago we set out to do a number of things. I said we wanted
to bring about the benefits of technology to bless our
residents' lives. And we fully expected and fully intended to
use private sector provided connectivity. We had five franchise
agreements in place with fiber providers. When it came time to
hook up our traffic lights and our scada and our buildings,
none would do it.
Mr. Upton. No.
Mr. Billings. None would do it. None would step up. And so
we did. And I hope----
Mr. Upton. You did it? The city did it?
Mr. Billings. I would hope that you wouldn't preclude
cities, especially small cities, especially rural cities, from
being able to do what they need to do when others are unwilling
or unable to do it.
Mr. Markey. I agree with you. Mr. Mayor--Mr. Fellman.
Mr. Fellman. Congressman, thank you for asking that
question. Let me talk about a legal issue that piggybacks. I
agree with everything that Mayor Billings said. In the existing
Telecom Act in 1996, you have got language in Section 253 that
says ``States and localities shall not pass any laws
prohibiting any entity from providing telecommunications
services.'' And a number of States have passed laws, and in my
opinion, in violation of the Act, by prohibiting their units of
local government from providing telecommunication services. The
FCC ruled that while municipalities are creatures of the
States, they can do to them what they want, that case, as you
know, got to the U.S. Supreme Court and the United States
Supreme Court said that Congress was not clear on what it meant
by any entity. So we thought that it was clear that ``any''
meant ``any'', but the U.S. Supreme Court did not agree, and--
--
Mr. Markey. I drafted, the provision, so you can tell them
I meant ``any''----
Mr. Fellman. Okay.
Mr. Markey. [continuing] in its usual use of the term.
Mr. Fellman. Had we known that, we would have brought you
to the oral argument, but there is an opportunity this year to
fix that problem, because the court would have ruled the other
way if there was clearer language in the statute and clearer
legislative record that ``any'' meant ``any''. So I would
encourage Congress to fix that problem in the next iteration.
Mr. Markey. We will pay tribute to all of the municipal
light companies across the country. We will pay tribute to the
Bonneauville Power Company, to the Tennessee Valley Authority.
There is a lot of times when they want to do it, the government
can do it well. But if you don't do it well, they can vote you
out of office, too. Okay? So you try to do this and it doesn't
work, you have an accountable, you know, job that the voters
can exercise their right. But I don't think it should be this
Congress that tells you, our running municipalities that you
shouldn't try to undertake these endeavors.
I thank you, Mr. Chairman.
Mr. Upton. Ms.Blackburn.
Ms. Blackburn. Thank you, Mr. Chairman, and I want to say
thank you to each of you for taking the time to come and----
Mr. Upton. Could you just put the mic a little closer?
Great.
Ms. Blackburn. These chairs are bigger than I am, Mr.
Chairman.
Mr. Upton. You are correct. A lot bigger.
Ms. Blackburn. Yes.
And while I do have the microphone, since I was in a
meeting downstairs, I do want to recognize Debbie Tate, who is
out of Tennessee. I think she was recognized a little earlier
by my colleague from across the way, but she does a great job
and I am proud to have her here.
I have got a series of questions. I am going to try to clip
through these as quickly as I possibly can.
I think, Mr. Perkins, I am going to start with you. Or let
me ask all of you this by Mr. Perkins' testimony. And I am on
page four of his testimony. This is what he says. ``Most people
now agree the Internet is truly an interstate phenomenon, and
individual States should not be in the business of regulating
the rates charged for Internet services.'' Do any of you
disagree with that statement, and if so, why? Go ahead.
Mr. Fellman. I will jump in.
Ms. Blackburn. Thank you.
Mr. Fellman. Congresswoman, I think that when you say
Internet services, I am not clear on exactly what that means.
Cable services today are regulated in a very limited way for
basic cable. If video programming is provided over Internet
protocol, I would take the position that it is a cable service,
and therefore, would be subject to regulations.
Ms. Blackburn. All right. I am reading from his testimony,
and that is why I wanted to see where you all stand on this,
you know. Internet service is anything that is going to come
over the Internet, and as we look at the Telecom Act, one of
the things I look in terms of is we talk voice-over IP. We also
know that everything is going to come over IP, and I just
wanted to see if you all were in agreement or disagreement. It
sounds like looking at your faces in the response--and knowing
we are short on time now, that you probably would rather
respond to that later. Am I reading that right from you all?
And that maybe you would like to give me a written response? Am
I reading that right from you all?
Mr. Davidson. I will jump in, Charles Davidson with the
Florida Commission.
I agree with the statement that States should not be in the
business of regulating the rates charged for Internet service--
--
Ms. Blackburn. Okay.
Mr. Davidson. [continuing] so I would agree wholeheartedly
with that statement.
Ms. Blackburn. Okay. Thank you. Mr. Perkins also--in the
same paragraph a little bit further down, you--to allow the
rates----
Mr. Perkins. Clearly, offers made about the technology of
why a person should switch to VoIP and get rid of their wire
line, you hare going to have VoIP providers coming in with the
new technology advertising and saying you should chuck your old
wire line. You should have voice-over Internet. It is the new
wave of the future. There will be advertisements for that.
People who are unfamiliar with the technology, you may end up
with the tragedy that you had in Houston, Texas.
Ms. Blackburn. Okay.
Mr. Perkins. They simply didn't realize the limitations.
Consumer protection laws are needed--are in place and can cover
this new technology to make sure that those ads are not
promising more or less than they should.
Ms. Blackburn. Okay, excellent.
And Mr. Chairman, with that, I will yield back since we are
in the middle of a vote.
Mr. Stearns [presiding]. Gentlelady yields back.
Mr. Stupak.
Mr. Stupak. Thanks.
Mr. Stearns. I think what we are going to do, my colleagues
are just going to continue here, and if Chairman Upton comes
back, he will take it. So if you want to come vote and come
right back, we would like to seamlessly go through.
Mr. Stupak. Very good.
The two mayors there, you talked about local governments
providing broadband services you have, and we do it in my
district quite a bit, because we are the only ones who will do
it.
But do you have any opinions on a private public
partnership for broadband deployment, and where a local unit
government would give rights of way to private companies to
offer broadband? Have you been approached with anything like
that or any opinions on that? Mr. Fellman.
Mr. Fellman. Congressman, I think that happens all the
time, and again, that is one of those areas that there is as
many different variations of that as the creativity of cities
and the private sector can come up with.
I have a client in Colorado, a municipality, who is
negotiating presently with a wireless provider to put wireless
broadband throughout a very large city, many square miles. The
city council is fairly conservative. They believe the city
should not be in the business of providing service, but the
city clearly wants to find a partner in the private sector to
come in and get the city wired for wireless broadband. They are
doing it in such a way where it is not exclusive. Anybody else
can come in. They have looked at competing companies to see who
they could get the best deal with. They have regular rights of
way regulations so the next company that comes in will still
have access to the poles. So it is not, by any stretch of the
imagination, putting a stop to future competition, but it is a
city that is saying we don't want to be in the business, but we
want to find an industry partner who can come in and provide
these additional broadband services to our community.
Mr. Stupak. Anything you want to add, Mr. Billings?
Mr. Billings. I was just going to say, in Utah, our State
legislature has not caused it to be so that municipalities can
not be in the business of deploying broadband, but we are not
allowed to deploy the retail service ourselves. We provide the
pipe, and then we enter into retail provider partner contracts.
And so while it is a little different----
Mr. Stupak. Right.
Mr. Billings. [continuing] I think we are specifically
touching on--that is how it is currently being done in Utah.
Mr. Stupak. Okay.
Ms. Munns, what do you think would be the role of the
States in a universal service reform? Can you speak to that a
little bit about what role USF funds and a need for Congress to
take those funds into account?
Ms. Munns. Yes, I think that there are things, again, that
we have particular capabilities. We know the networks in our
States, we are pretty good at knowing who needs what. We are
good at accountability and doing auditing and that kind of
thing. We recognize the issues with the universal service funds
and we want to be a part of giving them out where they need to
be.
Mr. Stupak. Do you think VoIP and broadband should be part
of the USF?
Ms. Munns. I think, you know, that is something you are
going to have to struggle with as you look at the size of the
fund.
Mr. Stupak. Just thought I would ask.
Can anyone give me a real world example of why it may be
necessary for there to be State consumer protection laws until
there is a Federal law? I am talking about, you know, the
States have over VoIP or anything else to deploy that. Do you
think States should be getting involved in this until there is
a Federal law to sort of smooth this thing all out or mark it
up even more?
Ms. Munns. I will take that.
You are talking with respect to----
Mr. Stupak. Yes.
Ms. Munns. [continuing] consumer protection----
Mr. Stupak. Yes.
Ms. Munns. [continuing] issues, and that gets back to what
I was talking about before, which is when consumers are harmed
when their expectations are not met, we find out about that
first. They come to us for relief. To have to say we need to
forward that to Washington so they can look at it, to the FCC
or whoever to fashion a remedy for this. A lot of the
experimentation, a lot of dealing with it, trying to find
something that works is done first at the State level, and then
the Federal Government acts. I don't think you want to take
away the capability to address those things and find a solution
that works. It may be something that you want to Federalize,
but to say that you can't do that and that it has to start at
the Federal Government, I think is backwards.
Mr. Stupak. Okay.
Mr. Fellman. Congressman, there is a great example of that
today that is pending that consumers are hanging out there, and
that is do customer service standards and privacy protections
apply to a cable modem service? And when the FCC decided a few
years ago that cable modem service was not a cable service, but
was an information service, one of the questions was ``What
about our customer service standards?'' And at first, the FCC
said well, we said it was an information service, so send your
complaints to us. They quickly realized they didn't have the
staff to deal with consumer complaints at the FCC, so they said
no, continue sending them to your local governments, but it was
not clear.
They have had a pending proceeding at the Commission for, I
believe, it is over 2 years to determine whether customer
service standards, either of the Federal standards that the FCC
adopts, or local customer service standards, apply to consumer
protection and privacy rights on cable modem service. It has
been open for 2 years. Now, some communities have taken the
issue into their own hands. Montgomery County, Maryland, is
working on it, the city of Seattle has very robust standards
that protect the privacy of their consumers on cable modems.
But the industry, the cable industry, is fighting it, and they
are saying you have got to wait for Washington to come up with
an answer. We don't think you have legal authority. So
consumers are hanging out there on privacy protection related
to cable modem.
Ms. Peltz Strauss. If I can add for disability issues,
States have been very responsive to the needs of their specific
communities, especially on relay services and designing
services specifically for people with speech disabilities and
people who are deaf who use sign language interpreters.
And that is not to say that the Federal Government
shouldn't have a role in setting some standards. Right now, we
have a dual system where States are allowed to set standards
that exceed Federal minimums, and that would be the best
result.
Mr. Stearns. I thank the gentleman. I think we have about 6
minutes left. I will take the liberty to ask a few questions
here. If the chairman doesn't come back, then we will adjourn
temporarily the subcommittee.
Mr. Davidson, we appreciate you being here. You have been
kind enough to work with myself and my staff, and of course,
from Florida, we appreciate your input. You have some very good
ideas.
I noticed in your statement, you said ``Efforts to
pigeonhole new technologies into regulatory constructs will
service primarily to delay the development and deployment of
these technologies for the consumer.'' I think that is
something I wouldn't mind you elaborating on. You know, I think
it has been reported the United States has dropped from 13th to
16th in broadband penetration, and one of the main reasons was
lack of competition, vibrant competition. But the term
``pigeonhole technology'' might just elaborate, if you could.
Mr. Davidson. Well, I will. That new statistic is
troubling. I sometimes think, though, as a country we are not
as bad as sometimes it is portrayed. We have an absolute sort
of high level of penetration in terms of people, and when you
compare the U.S. to China, they have got a lot more people, so
the percentages are going to be off.
When I said ``pigeonhole'', the regime that exists was
designed around telecommunications, and it distinguished
between telecom and just everything else. And everything else
includes, according to some, cable modem service. Some will
argue that as a telecommunications component, it would include
the VoIP service that I use at home. I don't have a telephone;
haven't for a year. And when you tell sort of these new
entrants, whether it be Vonage or someone else, that you are
going to have to comply with the telecommunications
obligations, the regime that exists now, I think they are not
going to be able to raise the capital. They are not going to
offer the service. It won't come to market. There may be some
providers, really large, established providers, who may vary an
offer and say you know what? We can comply with the
telecommunications regulations and we will do that. But we want
sort of the dynamism that we see with a lot of folks out there
competing with their services and offerings in the market. And
we need to somehow encourage that and we need to empower the
consumers to be able to make the choices they want for their
new technologies.
I, as a consumer, made a choice. I do not want a telephone,
so I made a choice to go with VoIP service. I might not have
had that option. I might have had such a really low bill for my
voice service at home had the company been pigeonholed into the
telecom box.
Mr. Stearns. I think I am going to have to go vote, so I
think I will temporarily suspend the committee, and the
chairman should be here and we will resume. So I appreciate
your patience here.
[Brief recess.]
Mr. Upton. When we left, there were going to be two votes,
and they changed it to one. So if it is two, we are going to be
running pretty fast, so I told the other members that, but in
order to keep going, we will go a little bit out of turn, I
guess, and go to Mr. Bass for questions.
Mr. Bass. Thank you, Mr. Chairman, and I want to first
apologize for--I assume obviously everybody has given their
testimony. I am not familiar with everything that you have
said, but I understand the gist of the subject matter here
today. And I just want to ask one question.
I think that there were some that talked about the issue of
core social obligations. Maybe it was you, Mr. Fellman. And I
guess the question is core social obligation or economic
redlining, I think you mentioned--I don't know whether you
mentioned it or not, but 911 consumer advocacy, and so on.
Local PUC's and local communities have traditionally had the
responsibility of monitoring these functions. Is there any
problem with having that responsibility handled on the Federal
level? Universal service might be another issue, I think,
because 911 in community A is no different from 911 in
community B or in State A versus State B and so forth. Is that
a--do you understand that question?
Mr. Fellman. I understand the question and I think for each
of the core social values, you have to look at them
differently. Some may make more sense to be dealt with on the
State level, and I am not an expert in telling you whether 911
would be negatively impacted if it was all Federal versus all
State. I would tell you, particularly with respect to the
access channels, which is a core social obligation, in my
opinion, there is no way that the needs of Detroit are the same
as the needs of Kalamazoo or the needs of some small community
in the upper peninsula of Michigan. And to have a Federal rule
that says here is what the local needs are and here is what the
obligation of a video provider is going to be, there is just no
way to have that work on the Federal level.
Customer service standards, which I mentioned briefly while
you were out of the hearing room, again are something that some
communities are active in the way they enforce them. Others
have a much lighter touch. In large part, they are a function
of the history of the service providers in the community and
what kinds of problems they have had, which is why I think the
system we have today with cable and customer service works. We
have Federal standards that communities can adopt and in fact,
most do. They just adopt the Federal standards. But they also
have the ability, if there are particular problems in
particular communities, to adopt different, and in some cases,
more stringent local standards that can be enforced at the
local level.
Mr. Bass. Make it quick, because I want to ask one more
question before--go ahead.
Ms. Munns. Well, I think, you know, who should be subject
to e911 is certainly a Federal decision, because you don't want
that to differ from State to State. But it is something that
should be clarified is of these services, who has to provide
e911, so that we all know.
With respect to complaints, we did a quick survey of 20
States who processed over 200,000 complaints in 2004. That was
20 States, not including California. This is something that I
don't think the Federal Government really has the capability to
do.
Mr. Bass. Different question.
What is your--what are your observations concerning
government action, if any, when the day comes that non-cable
providers start providing cable services in communities without
paying franchises, if that happens? Franchise fees.
Mr. Fellman. Well, I guess that can't happen unless
Congress changes the law, because the way video programming is
defined in Title VI of the Communications Act right now, when
non-cable providers begin providing video programming over
facilities that are located in the rights of way by statutory
definition, that becomes a cable system and they are prohibited
from providing those services unless they have a cable
franchise. So clearly, Congress could, if it chooses, change
that system and eliminate cable franchising. I think that would
be a terrible mistake, again, for the reasons that I went into
in great detail in my written testimony, because there are so
many elements of cable which are purely local, and community
needs on a local level will not be met if cable franchising is
taken away or general national rules are imposed at the Federal
level.
Mr. Bass. Okay. Chairman, I don't have any other questions.
Thank you.
Mr. Upton. Mr. Boucher.
Mr. Boucher. Thank you very much, Mr. Chairman. I want to
extend thanks to our witnesses for their illuminating testimony
today.
I was particularly pleased to hear the comments of Mr.
Fellman and Mr. Billings concerning the appropriateness of
community networks, just as electric utility service was
provided by municipal utilities beginning in the 1880s, because
the commercial providers bypassed a lot of communities.
We have a parallel situation today with regard to
broadband. We saw a disturbing report this week that says that
the United States has now dropped two more positions from 13th
to 15th in ranking internationally among nations in broadband
penetration, measured as a percent of the population using
broadband. We stand at 11 point something percent of our
population currently using broadband, and we are now 15th in
the world. And I think local governments have a role to play,
particularly as you suggested, Mr. Fellman, in rural areas and
in some cities which have small populations in offering a
service that the commercial sector either has not provided or
only provides at such a high price that it is effectively
unavailable for residents and much of the business community.
I have two municipalities that I represent that have
deployed fiber optic networks, and these are very popular
services with my constituents. One of those only provides
broadband high speed Internet access. The other one provides
comprehensive telecommunications services. And both are
treasured in the communities where they are located. And the
penetration rates for broadband there are higher than the
national average. So I think there is a role to play. I was
glad to hear your testimony.
I want to follow up on the inquiry that I believe Mr. Bass
was opening. I didn't hear all of what he said, but we need to
have a delicate and serious conversation about franchising. And
let me sort of state a couple of principles.
First of all, there are a lot more franchising authorities
than I think we are acknowledging. In the Verizon service
territory alone, I am told there are 10,000.
And so the real number nationally is some multiple of that.
And Mr. Fellman, I think you suggested 36,000 local franchising
authorities across the country. That is probably a more
accurate figure. Let us say 40,000 for sake of conversation. If
a company like Verizon, that has to get 10,000 franchises in
order to offer video, whether it is IP-based or whether it is
just digital cable, is able to average one franchise a day, it
would take about 40 years in order to get them all. This is
every business day of the week getting one. Now maybe they
could do a little better than that, but I kind of doubt it,
given the necessity of devoting a lot of manpower to the
effort, and whatever the cost of that might be.
And I think, you know, to the extent we have delays,
consumers in these communities are denied the benefits of
competition, more varied services, the pricing competition that
inevitably comes when you bring new providers into the market.
And that is an undeniable benefit for residents across the
Nation.
In addition to that, the local governments are denied that
second or third or fourth franchise fee, which would multiply
by orders of magnitude the amount of revenue that you get from
your franchise. And I am just wondering if we can't embark on a
conversation. I don't have a fully formed view of this. If I
did, I would announce it and tell you what it is. But I am
persuaded that we need to do something different than what we
are doing. The opportunity for telephone companies to get into
the market, for fixed wireless providers to get into the
market, I think really argues for a new construct.
So let me just try out on you a set of principles, and I
would like your response to this potential.
Let us suppose that we had a national franchise, and it
contained certain elements to be discussed and agreed upon. But
among those elements would be that you get paid, that whenever
a multi-channel video provider offers a service in your
community, you get an amount of money tantamount to the
existing franchise fee. So we take money off the table; you get
paid, and you get paid every time another provider comes in.
Let us also assume that one of the elements of this
national franchise is public access channels. So public
educational, governmental access would be afforded by the new
entrants just as it is by existing cable.
Now if we do this, I mean, first of all, you get a lot more
money real fast. The companies are able to roll out their
services very fast. Your consumers get a lot of advantages very
quickly, in terms of competition, new kinds of video being
offered, better pricing.
What would you think about that, just for starters. What is
your response?
Mr. Fellman.
Mr. Fellman. Thank you, Congressman.
You had said that you don't have a fully formed opinion. I
have a partially formed opinion.
Mr. Boucher. Okay. That is better than fully formed.
Partially formed on both sides is good.
Mr. Fellman. You know, I think it is a conversation worth
having. I am not in a position today to say this is a great
idea, or this is a lousy idea. I think the conversation would
have to try to define what are those elements that are purely
local. What are the local police powers? But I think if there
is a way to streamline the process, it is absolutely
appropriate to be talking about it.
There is an analogy that is taking place right now, which
is an initiative started by the National Governors Association.
It talks about telecommunications taxation where the Governors
and the State legislators and local mayors and the
telecommunications industry are talking about telecom tax
reform. I think that has been a good process yet, and I hope it
will be successful at some point.
On the issue of franchising, however, I think there is a
lot of people that need to be at the table and discussing it.
And I want to make one clarification when I said 36,000. It is
units of local government. Not all of those are franchising
authorities, so I am not sure that I would agree with you that
we have got 40,000 franchising----
Mr. Boucher. I don't know either. I am just taking a number
I know to be reasonably accurate in the Verizon territory and
extrapolating from that.
Mr. Fellman. You have mentioned two key issues, the
compensation for the public rights of way and the PEG channels,
and if those were guaranteed to address local issues or local
needs in some way, you know, that is a great start. I think
there is--the only problem with public access issue that you
mentioned that jumps right out at me, that when you say it
would be guaranteed at the Federal level. Again, what is
necessary in a small municipality that you represent may not be
the same thing that is needed in a larger municipality. So
somehow, there has got to be that local negotiation for what
community needs are. Otherwise, in order to protect local
franchising authorities, you have to error on the high side.
And that is something that is not fair to the industry.
Mr. Boucher. Well, this is open for discussion. I mean,
obviously we would have to learn a lot more than we know today
before we go forward. But I am encouraged by your response. I
mean, it sounds like this is a conversation we might be able to
have, and I look forward to working with you.
Mr. Chairman, with your indulgence, let me just ask Mr.
Billings, and then I see Mr. Davidson wants to respond, too.
Mr. Billings. Thank you very much. I believe it is a
conversation that if you do have it, we want to be a part of
it. I guess I am sitting here in my mind wondering if there
isn't sufficient manpower commitment to come into my community
and negotiate a franchise agreement with me, is there going to
be sufficient H.R. commitment to put in a system and service
that system once it is franchised and be responsive to my
customers.
So I see your point and I know what you are driving at, but
I think it is one we would thoughtfully want to reflect upon
and be a part of the conversation as well.
Mr. Boucher. Let me just add one more element to this. This
could go on until dark, and I am not going to carry it on until
dark, but it wouldn't upset me at all if you came back with a
proposition that said we love being paid, we love the idea of
PEG channels, but clarify our authority to offer community
networks at the same time and now we might have a deal.
And so if you came back with that kind of response, you
wouldn't upset me in the slightest.
Mr. Davidson.
Mr. Davidson. Thank you, Congressman.
Conversation is a great idea that has to occur. I also
think that national rules would provide certainty to a whole
host of new entrants who are wondering what is going to happen
in various States. The government getting paid is a good thing.
State and local governments need money.
My concern is if right now in a region, hypothetically, a
franchise fee revenue is $1 million. If new entrants come in to
offer services, any sort of extension in franchising fee
payment obligations, in my view, ought not reflect the new tax.
The revenue ought not go up to $2 million; rather, it ought to
be some allocation of that $1 million across a pool of
similarly situated participants, unless the actual cost of
local government goes up.
Another sort of challenging area is you have got
traditional cable, video-over IP, which has a capacity to
compete with cable, and you have video-over fiber to the home
or fiber to the node, which cable will say is closer to cable.
What do we do, for example, when turn key programming--and it
is out there, sort of full programming comes just over the IP
network and it is not based upon any sort of location of
facilities in an area, and there is just a company that is
providing programming over the Internet.
Mr. Boucher. I think we impose the same rules. I mean, that
is my initial response to you.
And by the way, let me add, I believe that whatever we do
for telephone companies, we also have to do for cable. We have
to be even handed about this.
So there are real challenges in this subject matter. This
may prove to be one of the most interesting and challenging
aspects of our reform effort, but it is one I am sure we are up
to, particularly with your participation.
Mr. Chairman, my time expired a long time ago.
Mr. Upton. Yes.
Mr. Boucher. Thank you very much.
Mr. Upton. And for a little while you were safe, because
the other members hadn't returned, but they now have. And I
would recognize Mr. Inslee for 5 minutes.
Mr. Inslee. Thank you.
Mr. Fellman, I just came in the last part of your answer to
Mr. Boucher's question. I just wonder if you can flesh out a
little bit for me, if we were going to go to, let us say, you
knew today there was going to be a statewide or national kind
of franchise standard. What are the parameters of where you
would put in how many access channels, how many hours, how
many, you know, build-outs, how many miles--I mean, what
parameters would you have to have to meet sort of the menu item
of where you are right now?
Mr. Fellman. Congressman Inslee, your question, I think,
discloses why this would be so hard to accomplish. Because the
answer is different in every different community, so I don't
know.
Congressman Boucher asked if we can start that discussion,
and I think I am always willing to talk about anything, you
know. ``No'' is always an appropriate answer in any kind of
debate or discussion, but I think it is inherently difficult,
extremely difficult to come up with a national rule on how to
meet the local needs of every municipality and county in this
Nation.
Mr. Inslee. So I am trying to get a flavor of how far the
spread is, like in your State, what is the smallest number of--
let us start with number of access channels in a franchise----
Mr. Fellman. That is easy, zero.
Mr. Inslee. Zero.
Mr. Fellman. Right.
Mr. Inslee. Okay. So zero in your State? There is no access
channels in----
Mr. Fellman. Well, no, the smallest number.
Mr. Inslee. Smallest number.
Mr. Fellman. There are communities in my State that have no
access channels.
Mr. Inslee. And what is the highest number?
Mr. Fellman. Well, I think Denver has eight or nine. Some
of them are used internally for internal communications. It is
somewhere in that range, maybe a few more or maybe a few less.
Mr. Inslee. If you went around the country--I am just
brainstorming here. I haven't thought through this. It doesn't
mean I have bought any of this Kool-Aid at all, but I mean, if
you were to go through and say well, if you looked at
communities based on population size, when you get over a
million you have--I wonder if you would find sort of fairly
consistent patterns between population bases and number of
access channels. Do you think you would, or not?
Mr. Fellman. I don't think you would, and here is why:
because it is not simply a function of population. And the
example that I can give you from my State is the city of
Durango in southwestern Colorado. A stand alone city, about
40,000 people. They are out there by themselves. They are the
big metropolitan area in southwestern Colorado. They have an
incredibly robust government access and public access broadcast
operation. They get private donations as well as city money and
cable money that promotes this kind of programming, and it is
widely watched in that community.
The city of Lewisville, Colorado, same population, about,
in metropolitan Denver. A very different community; part of a
much, much larger metro area of 2 to 3 million people and
growing, and the needs in that community are different. So the
number of channels, the amount of money that you would want for
equipment, the type of programming that you would want to be
producing, you know, you can say that all councils are going to
want to broadcast their city council meetings and their
planning commission meetings, but beyond that, it changes
dramatically from community to community, regardless of the
population.
Mr. Inslee. In the States, I am told that some States have
statewide franchising protocols now. How would you characterize
the differences there than other States that have really local
decisionmaking? Is there any way to generalize there or not?
Mr. Fellman. A little bit. But now, we are getting a little
bit out of my area of expertise. I know some States have more
control in their local franchising. Others, like New York and
New Jersey, the State will approve the franchise but the local
government is allowed to and does, indeed, do the community
needs assessment and negotiate based upon their local needs and
ultimately, it just is given to the State to be adopted in
accordance with State rules. So there are some heavy State
control operations, and there are some partnerships where the
local governments have a lot more control. So it just varies
from State to State.
Mr. Inslee. Does anyone else want to add to that at all?
Ms. Munns. I will just add. I have a list of the States
that do that. I know that they have varying models, and we
would happy, if it would help the subcommittee, to try to
provide that information.
Mr. Inslee. That would be interesting. Thank you.
Mr. Upton. Mr. Gonzalez is recognized for 8 minutes.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
Let us see if I can try to make sense of it all. Well, that
is kind of impossible in Congress, but technology moves
forward. Old technology is replaced or augmented or whatever by
the new technology, and that is what we are really facing here.
In the old days, what was a telephone company, what was a
Bell, what was a cable company, and they call this--they had
all these fancy names about convergences and such. But we have
to find some answers working with the States and localities
that have very legitimate interests.
My concern is it really a monetary interest, the fees in
any kind of form, or is it really what you all have referred
to, public requirements, social needs, social regulations. And
some of it can be very reasonable and legitimate, and others
can really be quite burdensome and really interfere with what
we have to do in this country in order to utilize that
technology to its fullest and its greatest advantages.
So I guess my question--and Mr. Fellman and Mr. Davidson in
particular, because I was reading your testimony. I think you
all touched on it more than anyone else. Is it--when you say
local needs, social needs, social requirements, is that really
the main consideration, or is it really one of fees? In other
words, revenue sources. Because it is--I don't know how we
reconcile some things, to be real honest with you. So that is
the first question.
And the second one, because what happens is time gets all
used up, except I did get 8 minutes here. Second question would
be to Mr. Fellman. You said something that was really
interesting, and I believe before we broke for votes, something
to the effect that, I guess, if it is video coming in on IP,
then it is cable. In other words, what is the final product
that is being delivered or whatever it is, determines its
nature, not the means or the method or whatever.
And so when you all get through the first question about
not the competing, but what weight do you put on fees, revenue
sources, than these other needs, social needs and requirements?
Mr. Fellman. Congressman Gonzalez, thank you.
You know, I could be flippant and say the answer to your
first question is yes, because they are both important.
Clearly, if my city were to lose the franchise fees that we
generate from cable, basically the rent that we charge private
entities who use public property in order to generate a profit,
it would be a huge hit on our general fund. It translates into
police officers, it translates into library hours and rec
centers and it would be a real hit on the local essential
services that we provide. And frankly, I think it would be
analogous, too, if the Congress said, you know, if it is all
just about money, maybe we shouldn't option spectrum anymore.
We want these services, maybe we should just give it away to
the companies. It is the same thing. We are talking about our
local public property; you are talking about Federal public
property that the Congress has responsibility for. So the money
is very, very important.
But the social obligations are, as well, and I am intrigued
by your comment that there are some that are very, very
burdensome, and I think if we are going to have a discussion, a
conversation going forward, I would be interested in if you
have more specific questions of what those are and how they
work, we would be happy to follow up with you and get you and
the subcommittee more additional information.
I think cable has been very successful. There is more
broadband through cable systems than any other method, and they
are the ones that have been following and abiding by these
social obligations for many years, and yet, they have more
penetration than any other source of broadband, as far as I am
aware, in this country. So I don't think that they are too
burdensome in order to allow our consumers to utilize these
technologies.
You have got to remember, cities and counties are some of
the more larger and sophisticated users of these technologies
as well. We don't want to slow down the process. We want the
competition and the new technologies in as quickly as we can
get them, but we think it is also important to maintain these
social obligations. And I think they are all equally important,
but would be happy to get more details to you if you have
questions about specific ones.
Mr. Gonzalez. Mr. Davidson.
Mr. Davidson. Thank you.
On the social requirements, my answer too would be yes to
the question. But on the social requirements, I think what
Congress has to ask itself is okay, what is the social pact
that we are engaging into? Certainly, a 911 obligation or
certain consumer protection regime wouldn't necessarily apply
to a sky technology that you and I might just download on our
computers to chat. But society has determined aside from the
fact that telecommunications was provided by monopolies, that
911 service is important. It is an important component of our
society, so going forward, for those providers that may engage
in a social contract may use North American numbers or do
something else that is utilizing a public resource, it is fair
to say, you know what, you probably need to come with a way to
comply with a 911 standard.
I think the money issue is very important, and I look at
that from two angles. One angle, in Florida, State and local
governments--local governments are scared to death that as
these new technologies emerge and as customers move to these
new technologies, they are going to lose revenue. They want--
many want to be able to tax VoIP that is a substitute for plain
old telephone service, because they are afraid they are going
to lose the revenue from that. Cable franchising authorities
are really concerned about losing the franchising-free revenue
as video over IP rolls out. If I disconnected my cable, and
lots of folks in my area disconnected their cable because they
could get the programming they want, whether it is all sports,
all entertainment, whatever, over their IP network, that scares
folks because cable is going to have a hard time competing. And
if these new providers aren't paying the funds, government
loses.
But I look at the money issue from another angle as well.
That, to me, is one compelling reason why we need a national
policy on these issues.
California just went through what, in my view, is a failed
experiment with their California Bill of Rights. With all the
best intentions, they came up with this regime that went all
the way down to the detail of saying you must put your contract
in 12 point Times Roman font. If every State engages in that
type of regulation, well intentioned, you are going to have
millions, if not billions, of additional costs that in a
competitive market will get passed on to the consumer. It is
going to come out of our pockets. I don't want my bills to go
up because States have lots of good ideas. If we have good
ideas, let us nationalize those. Let us have the conversation,
talk about what the good ideas are, move forward with those,
and perhaps have a safety valve so that when unanticipated
situations come up, States do have the flexibility to address
those issues.
Mr. Gonzalez. Thank you. It is only 1 minute, and I can
talk to Mr. Fellman later about the cable and voice and such,
but I think I have other witnesses that wish to respond.
Ms. Munns. I would just like to respond to what
Commissioner Davidson just said about the failed experiment in
California with the Bill of Rights.
California began looking at a Bill of Rights for wireless
because of the significant increase in complaints that they
had. Their customer expectation was not being met, and they
started looking at a Bill of Rights in order address this. As a
result of that, the industry came forward and said let us take
a crack at getting this solved voluntarily, and made
significant strides to addressing some of the issues that had
been raised. That Bill of Rights, that idea I don't think is
going forward in California. And to that extent, I think that,
you know, you can call it a failed experiment, but it did have
a good result, and we didn't have to go to national standards
to get some voluntary compliance on behalf of the industry.
Mr. Gonzalez. Thank you all very much.
Mr. Upton. Mr. Engel.
Mr. Engel. Thank you, Mr. Chairman. Before I ask my
question, I would like to acknowledge that Tom Dunlevey of the
New York State Public Service Commission is in the room. I
would like to welcome him.
Obviously, we are soon moving to draft legislation to
update our telecommunications laws, and as new technologies
have made older ones obsolete, the rules and regulations that
govern this industry need to be updated as well.
The introduction of VoIP has really made a profound change
in the industry and it is introducing rapidly a new level of
competition to the voice market. Now soon, we will have a new
level of competition in the video services market as well, and
I am committed to personally getting this new competition
swiftly into the market. But I believe that we need to ensure
that there is a level playing field, a fair and level
regulatory playing field, such as must carry public access
channels and franchise fees and rates. I believe very strongly
that consumers will benefit when there are multiple entrants
into the market for communications services, whether it is
voice or video. Cable is the dominant provider of video, and
telephone companies are the dominant power of voice.
So in line with that, I have a question I would like as
many people who would like to answer it as possible to answer.
So any of you see where we can streamline the process for
getting more competitors into the voice and video markets, and
specifically, what steps are your States or organizations
taking, and what should we and the FCC--we meaning Congress and
the FCC should be doing? If anybody would care to answer that,
I would be grateful.
Mr. Davidson. I will jump in just briefly on Florida's
approach.
Florida has taken the approach that if we remove some of
these regulatory hurdles that market conditions will be created
and folks will be encouraged to enter. So Florida has
deregulated VoIP as provided that broadband, regardless of the
provider platform is not subject to local government control.
Recent legislation that is sort of making its way through both
chambers makes clear that both of those platforms, however,
remain subject to the State's generally applicable deceptive
trade practices, consumer business protection, statutes, fraud
statutes, so that customers sort of are protected and have a
remedy.
But what we have seen with that now is that the State is a
target market for Verizon to come in and build out fiber to the
home to deliver video. It is one of the largest markets for
Vonage. We have numerous cable companies offering telephony, so
we are trying to just sort of as a market principle, remove
some of those hurdles to competition, and we are seeing in
Florida that that competition is, in fact, occurring. And I
know everyone would like to have it all here immediately, but
there are clearly progressive steps that are occurring in
Florida, and the competition is coming.
Mr. Engel. Thank you.
Mr. Perkins. Congressman. I am sorry.
Mr. Engel. Go ahead.
Mr. Perkins. I think as we pursue that area, we need to
keep in mind that there are large rural areas in this country,
including Iowa, where it is not economically feasible for cable
providers or telephone providers to come in and put in DSL. In
Iowa, we recently--our legislature passed legislation that
deregulated over time the rates that Quest could charge for its
residential phone rates, but as a quid pro quo, Quest was told
you have to get DSL into a lot of different exchanges where you
don't have it. Quest wouldn't go in there. It wasn't
economically feasible.
So while it is great to say in some of these areas, large
metropolitan areas where everybody wants in, there are a number
of areas where nobody wants in. The cable provider doesn't want
to extend its cable out for four customers out in the
countryside. DSL has limitations on how far it can go. I live
in the city of Des Moines and I can't get DSL because I am more
than 3 miles from a switch, but I am not certainly out in rural
Iowa.
So I think as the committee looks--the subcommittee looks
at legislation, it is important to keep in mind that there are
economies that these providers look at that dictate how much
they want to do, and there needs to be incentives, I think,
such as the Iowa legislature just provided to Quest, if you
want this extra money, you better get your DSL in all of the
exchanges in Iowa, rather than just the ones that you think you
can make a lot of money at.
Mr. Engel. Thank you.
Mr. Fellman.
Mr. Fellman. Congressman, I would like to give you an
anecdotal example of what doesn't work, and then give you--
reiterate something that I said earlier that I think will.
In Colorado in 1996, the same year that the Telecom Act was
passed, our general assembly passed legislation that prohibited
local governments in Colorado from being in the franchise
business, if you will, with respect to any communications
service other than cable television. No franchises on any kind
of communications service other than cable, no charges for
permit fees, other than the actual cost of administering the
permit process. No requirements. Companies had the right to be
basically on public property for free. Do we have more
broadband in Colorado today than you have in New York or that
you have in Iowa? Of course not, we don't. The market is going
to dictate where these services are deployed, and rural
Colorado ain't the market where they are being deployed first.
Even outside of the highly concentrated metro area, that is not
where they are. So to simply say we have got to make
franchising go away is not going to solve the problem, because
the companies are going to go where they can make a profit.
And that brings me back to what Mayor Billings talked
about, what I mentioned earlier. One way to encourage more
deployment and more competition is for Congress to make
absolutely clear in the next piece of legislation that comes
out of this city that no legislation shall be passed that
prohibits States or their political subdivisions from
participating in a provision of telecommunications
infrastructure and services. And when smaller rural communities
start getting into the business and showing that it can be done
and it can be done profitably, then the industry will follow.
Mr. Engel. Thank you.
Unless there is anybody else who cares to do----
Mr. Upton. If you have another question, go ahead.
Mr. Engel. Well, let me ask Mr. Quam.
In your testimony, you mentioned the 911 systems and the
need for new services to work with them. We all agree. I don't
think there is anyone on this subcommittee or committee who
wouldn't agree.
But I want to ask you about the allowing the States to
impose a fee on these services to support the 911 services. We
had a situation in New York, you know, Congress has passed
legislation to clean up the abusive 911 funds, but States can
opt out if they forego Federal funding.
So I would like to know, what are the States doing to
ensure that taxes collected on these existing technologies are
actually going to upgrade the 911 networks? Has the National
Governors Association undertaken any kind of creating a
transparent audit process for States to use? There was an
instance in New York, actually, where I am from in the Bronx
where there were four young boys who drowned off City Island.
They called 911 on their cell phones, but they got through to
911 but the center couldn't locate them because the 911 funds
weren't used for their intended purpose. And so that is why I
am asking this question. Have there been any studies or
anything you can care to shed some light on this?
Mr. Quam. The 911 services are absolutely critical to
Governors and States and having systems that work so when a
consumer calls, they actually find an emergency provider that
can find them. I think it is a priority issue for all
Governors.
The National Governors Association, although we haven't
taken on anything like auditing authority or that type of
oversight, because these really are State programs, we have
partnered with the FCC to try to help build some best practices
and have e911 operators and implementers really talking to each
other and see if we can't get these programs going.
With regard to some of the issues regarding the fees that
are collected, because they are State issues, really those
decisions for the levels and the fees need to be made by the
State. I do know that several States have made attempts to
streamline that process or simplify those systems to make sure
the money that they are collecting is the money that is needed
to implement those systems. But from a national Governor's
perspective, the most important thing is actually getting
systems up and running that work. And that is where most of the
focus is.
I think last year's legislation sent an important message
from Congress regarding the use of those 911 fees. I think
Governors are on board with that being a real priority to have
a system that is up and running, and that works.
Mr. Engel. Thank you. Thank you, Mr. Chairman.
Mr. Upton. Mr. Bass, you don't have further questions?
Mr. Bass. Can I ask one more?
Mr. Upton. Yes, you can.
Mr. Bass. This may be pretty fundamental.
Why do we need franchising for new cable services when we
don't seem to need it for anything else that we provide, for
example, wireless voice data? Anybody have some observation?
What is the difference?
Mr. Fellman. Congressman, the primary difference in at
least some of the examples you just--comparison examples you
mentioned are the use of public rights of way. We need to
remember that the facilities that most of the cable systems are
located on public property whose primary purpose is to safely
and efficiently move traffic of all kinds. And when streets are
dug up and not repaired properly, there is a whole host of
problems from the surface problems with traffic safety issues
to the problems caused by cuts in electric lines and gas and
water pipes. So there is a whole lot of regulatory oversight
inherent in the use of public rights of way for a private
company to operate its business, when that clearly is not the
primary use that that property was intended for.
The other issues--and we have talked about them, so I don't
want to be redundant----
Mr. Bass. Yes.
Mr. Fellman. [continuing] but the 5 percent franchise fee
is not the only compensation for the use of that rights of way.
I think Congress has, for a long time, recognized whether it be
broadcasting where there were public interest obligations in
return for use of the public airwaves, or the public set asides
for satellites now, or the social obligations I have talked
about and some of the other witnesses have talked about. With
cable, a part of this is compensation and a recognition and a
policy in this Nation that these media are essential tools for
the use of our democracy by our citizenry. And I think that is
an important concept to remember and to ensure that it
continues with the new technologies we are going to be
utilizing in the future.
Mr. Bass. Okay.
Mr. Upton. Well thank you. Thank you all for your
testimony. We have had a number of hearings on this issue, as
you and certainly those in the press know, but others that have
watched. I think we have had four lengthy hearings over the
last 2 months. I think that the record is a good one. Our goal
is to have a bipartisan effort for sure, and continues that we
will try to get this legislation to the House floor by our
August break. I am committed to seeing that we do that in a
timely manner. And we appreciate your thoughts and interests,
and the participation of all the members of this subcommittee.
And with that, we stand adjourned.
[Whereupon, at 4:19 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
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